A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Our business, liquidity,
financial condition, and results of operations could be adversely affected, and even materially so, if any of the risks described below
occur. As a result, the trading price of our securities could decline, and investors could lose all or part of their investment. This
Annual Report including the consolidated financial statements contains forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially and adversely from those anticipated, as a result of certain factors, including the risks facing
the Company as described below and elsewhere in the Annual Report. You should carefully consider the risks and uncertainties included
herewith. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware
of, or that we currently believe are not material, may also become important factors that adversely affect our business. Material risks
that may affect our business, operating results and financial condition include, but are not necessarily limited to, those relating to:
● Our ability to maintain and expand sales of our commercial products portfolio in the United States and ex-U.S. markets is critical to our growth, profitability and financial stability.
● Our business is currently highly concentrated on our three leading products, KEDRAB, GLASSIA and CYTOGAM. Additionally, a significant portion of our sales and financial results for the years ended December 31, 2025, 2024 and 2023 was driven by royalty income generated from sales of GLASSIA by Takeda. Any adverse market event affecting such products or revenue derived from such products could have a material adverse effect on our business and financial condition.
● A significant portion of our net revenue has been and will continue to be driven from sales of our Proprietary Products, and in our largest geographic region, the United States. Any adverse market event with respect to some of our Proprietary Products or the United States would have a material adverse effect on our business.
● Our long-term continued growth is dependent, in part, on our ability to continue to effectively utilize and continue to increase our manufacturing plant capacity and introduce new and more efficient production technologies.
1
● Our long-term continued growth is dependent on our ability to engage in additional strategic transactions to acquire products or businesses, or engage in in-licensing transactions. Our inability to secure such transactions on cost-effective terms or our inability to realize the anticipated benefits from these transactions, may negatively affect our projected growth and operating results, dilute our shareholders’ ownership or cause us to incur debt or significant expense.
● We have invested, and intend to continue to invest, in ramping up our U.S. plasma collection operations in order to reduce our dependency on third-party suppliers in terms of hyper-immune specialty plasma supply required for manufacturing of our Proprietary Products needs, as well as to generate sales from commercialization of collected normal source plasma, and our ability to successfully enhance this operation is important to support our future growth and profitability.
● In our Proprietary Products segment, we rely on Kedrion for the sales of our KEDRAB product in the United States, and any disruption to our relationships with Kedrion would have an adverse effect on our future results of operations and profitability.
● Sales of CYTOGAM, WINRHO SDF, HEPAGAM B and VARIZIG in the U.S. market are important in order to support future growth, future results of operations and profitability.
● Continued availability of CYTOGAM, WINRHO SDF, VARIZIG and HEPAGAM B worldwide is dependent on our ability to maintain continuous plasma supply and maintain our relationship with third-party contract manufacturers and suppliers, and any disruption to such relationship could have an adverse effect on the availability of these products, as well as our future results of operations and profitability.
● We rely in large part on third parties for the sale, distribution and delivery of our Proprietary Products, and any disruption to our relationships with these third-party distributors would have an adverse effect on our future results of operations and profitability.
● Our Proprietary Products segment operates in a highly competitive market and could be negatively impacted by new competitors or the adoption of new methods of administration.
● Manufacturing of new plasma-derived products in our manufacturing facility, or the manufacture of Proprietary Products by third parties, requires a lengthy and challenging development project and/or technology transfer project as well as regulatory approvals, all of which may not materialize.
● We could become supply-constrained, and our financial performance could suffer, if we were unable to obtain adequate quantities of specialty plasma, plasma derivatives or specialty ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the regulatory authorities in Israel, or if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of source plasma or plasma derivatives were to rise significantly.
● Our Distribution segment is dependent on key suppliers, and any disruption to our relationship with these suppliers, or their inability to supply us with the products we sell, in a timely manner, in adequate quantities and/or at a reasonable cost, would have a material adverse effect on our business, financial condition and results of operations.
● In recent years we entered into agreements for future distribution in Israel of several biosimilar product candidates, and the successful future distribution of these products, which is important for the continued growth of the Distribution segment as a whole, is dependent upon several factors some of which are beyond our control.
● Laws and regulations governing the conduct of international operations may negatively impact our development, manufacture, and sale of products outside of the United States and require us to develop and implement costly and time-consuming compliance programs.
2
● If our manufacturing facility in Beit Kama, Israel were to suffer a serious accident, contamination, force majeure event (including, but not limited to, a war, terrorist attack, earthquake, major fire or explosion, etc.) materially affecting our ability to operate and produce saleable plasma-derived therapeutics, all of our manufacturing capacity could be shut down for an extended period.
● While we have been profitable in recent years, we have incurred significant losses since our inception and we may incur losses in the future.
● Our manufacturing operations require significant ongoing capital investments, upgrades and large scale projects, which may require us to incur debt or issue additional equity and may not deliver expected returns.
● Our business could be adversely affected by political, economic and military instability in Israel and its region.
● Our business and operations would suffer in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security measures.
Risks Related to Our Business
Our ability to maintain and expand sales
of our commercial products portfolio in the United States and ex-U.S. markets is critical to our growth, profitability and financial stability.
Our portfolio of products
in our Proprietary Products segment (which we refer to as our Proprietary Products), comprising of KEDRAB, GLASSIA, CYTOGAM, WINRHO SDF,
VARIZIG and HEPAGAM B, are currently distributed in the U.S. market, where we market and distribute some of these products directly based
on our sales and marketing personnel, and in approximately 30 additional ex-U.S. international markets. Our future growth, profitability
and financial stability depend on our ability to successfully maintain and expand our U.S.-based commercial and distribution infrastructure,
as well as our ex-U.S. commercialization efforts. While we continuously seek to leverage our existing strong international distribution
network to increase our commercial revenue in the existing markets in which we sell our products and to expand to geographic markets in
which these products are not currently sold, we may not be successful in growing our sales in existing markets or developing additional
markets for these products. Given continued market dynamics and competition in the markets we operate, as well as other operational, technical,
regulatory, financial and compliance challenges, we may not be able to maintain or continue to expand our existing commercial operations,
which may materially adversely affect our business and financial condition.
Our business is currently highly concentrated
on the sales of our three leading products, KEDRAB, GLASSIA and CYTOGAM. Additionally, a significant portion of our
sales and financial results for the years ended December 31, 2025, 2024, and 2023 was driven by royalty income generated from GLASSIA
sales by Takeda. Any adverse market event affecting such products or revenue derived from such products could have a material adverse
effect on our business and financial condition.
Our business currently relies
on the sales of KEDRAB, our Human Rabies Immune Globulin (HRIG), GLASSIA, our intravenous AAT product, CYTOGAM, our Cytomegalovirus Immune
Globulin Intravenous (Human) (“CMV-IGIV”), and royalty income from sales of GLASSIA by Takeda. Revenue generated by these
products comprised approximately 30%, 11%, 9% and 9%, respectively (59% in total), of our total revenues for the year ended December 31,
2025. In the event that any of these products were to lose significant sales or were to be substantially or completely displaced in the
market, we would lose a significant and material source of our total revenues. Similarly, if these products were to become the subject
of litigation and/or an adverse governmental action or ruling causing us to cease the manufacturing, export or sales of these products,
our business and financial condition would be adversely affected.
3
We are entitled to royalty
payments from Takeda on GLASSIA sales in the United States and Canada (as well as in Australia and New Zealand, to the extent GLASSIA
will be approved and sales will be generated in these other markets) at a rate of 12% on net sales through August 2025, and at a rate
of 6% thereafter until 2040, with a minimum of $5 million annually, for each of the years from 2022 to 2040. For the years ended December
31, 2025, 2024, and 2023, we accounted for $15.8, $16.9, and $16.1 million, respectively, of sales-based royalty income from Takeda, and
based on forecasted future growth, we project receiving royalties from Takeda in the range of $10 million to $20 million per year during
2026 to 2040. Any reduction in sales of GLASSIA by Takeda or reduction in the manufacturing and marketing of GLASSIA by Takeda for any
reason (including due to the inability to adequately or sufficiently manufacture GLASSIA, regulatory limitations, difficulties in marketing,
reduction in market size, or changes in corporate focus), would adversely impact our future expected royalty income from Takeda’s
sales of GLASSIA, which would have an adverse effect on our revenues and profitability.
A significant portion of our net revenue
has been and will continue to be driven from sales of our Proprietary Products, and in our largest geographic region, the United States.
Any adverse market event with respect to our Proprietary Products or the United States would have a material adverse effect on our business.
A significant portion of our
revenue has been, and will continue to be, derived from sales of our Proprietary Products, including those of KEDRAB, GLASSIA, CYTOGAM,
WINRHO SDF, HEPAGAM B and VARIZIG, as well as royalty income from GLASSIA sales by Takeda. Revenue from our Proprietary Products comprised
approximately 87%, 88% and 81% of our total revenues for the years ended December 31, 2025, 2024 and 2023, respectively. If any of our
Proprietary Products were to lose significant sales or were to be substantially or completely displaced in the market, we would lose a
significant and material source of our total revenues. Similarly, if any of these Proprietary Products were to become the subject of litigation
and/or an adverse governmental action or ruling causing us or third parties to cease the manufacturing, export or sales of these products,
our business and financial condition would be adversely affected.
A significant portion of our
sales and income are generated in the United States, comprising approximately 55%, 62% and 52% of our total revenues for the years ended
December 31, 2025, 2024 and 2023, respectively. If our sales or income generated in the United States were significantly impacted by material
changes to government or private payor reimbursement, other regulatory developments, competition or other factors, then our business and
financial condition would be adversely affected.
Our long-term continued growth is dependent,
in part, on our ability to continue to effectively utilize and continue to increase our manufacturing plant capacity.
Our manufacturing facility
is currently utilized to manufacture several of our Proprietary Products, including KEDRAB/KAMRAB, GLASSIA and CYTOGAM, as well as our
anti-snake venom products. In the future, we may expand the utilization of our manufacturing facility to include the manufacturing of
WINRHO SDF, VARIZIG and HEPAGAM B, which would require certain changes to manufacturing processes, potential amendments to the contract
manufacturing agreement with Emergent, and the receipt of required regulatory approvals. In addition, we may also consider utilizing our
plant in the future for the manufacturing of products for other companies as a contract manufacturing organization (CMO). While we have
the know-how and expertise to support the manufacturing of additional products at our facility, we may not be able to complete the required
development process and/or technology transfers or obtain the required regulatory approvals in the expected timeline, or at all. Further,
we may not be able to increase the manufacturing capacity at our facility, even if there is increased market demand for these products
at a profitable market price in the markets in which we distribute our products or other markets. Our inability to effectively utilize
and continue to increase our manufacturing plant capacity may limit our ability to continue to grow our business and result in a loss
of commercial opportunities. Failure to adequately or timely adapt our manufacturing volume, or that of our CMOs, as needed, may lead
to an inability to supply products, could cause substantial harm to our business reputation, result in breach of our sales agreements
or the loss of future customers and orders, which may have an adverse effect on our business. In addition, the risk of not adequately
managing plant utilization could result in inefficiencies, reduced profitability and operating losses. See also “—Manufacturing
of new plasma-derived products in our manufacturing facility requires a lengthy and challenging development project and/or technology
transfer project as well as regulatory approvals, all of which may not materialize.”
4
Our long-term continued growth is dependent
on our ability to engage in additional strategic transactions for the acquisition of products or businesses, or engage in in-licensing
transactions. Our inability to secure such transactions on cost-effective terms or our inability to realize the anticipated benefits from
these transactions, may negatively affect our projected growth and operating results, dilute our shareholders’ ownership or cause
us to incur debt or significant expense.
As part of our business development
and growth strategy, we have in the past, and are actively, exploring potential strategic transactions to acquire products or businesses,
or engage in in-licensing transactions, or enter into other strategic alliances or collaborations for both our Proprietary Products and
Distribution segments. These opportunities may involve the acquisition or in-licensing of new products for commercialization (with or
without manufacturing), as well as in-licensing agreements to manufacture plasma-derived or other products for other companies, which
can provide additional revenue streams and leverage our biopharmaceuticals and plasma-derived manufacturing expertise. We may not identify
additional suitable transactions, or complete such transactions in a timely manner, on a cost-effective basis, or at all. Moreover, we
may devote resources to potential opportunities that are never completed, or we may incorrectly judge the value or worth of such opportunities.
Even if we successfully execute a strategic transaction, we may not be able to realize the anticipated benefits of such transaction, may
dilute our shareholders’ ownership, incur debt or assume unknown or contingent liabilities in connection therewith, and may experience
losses related to our investments or dispositions. Integration of an acquired company or assets into our existing business or a transition
of an asset to an acquirer or partner may not be successful and may disrupt ongoing operations, require the hiring of additional personnel
and the implementation of additional internal systems and infrastructure, and require management resources that would otherwise focus
on developing our existing business. Even if we are able to achieve the long-term benefits of a strategic transaction, our expenses and
short-term costs may increase materially and adversely affect our liquidity. Any of the foregoing could have a material effect on our
business, results of operations and financial condition.
We have invested, and intend to continue
to invest, in ramping up our U.S. plasma collection operations in order to reduce our dependency on third-party suppliers in terms of
plasma supply needs as well as to generate sales from commercialization of collected normal source plasma, and our ability to successfully
enhance this operation is important to support our future growth and profitability.
We currently have three plasma
collection centers in the United States. We acquired our first FDA-licensed plasma collection center in Beaumont, Texas in March 2021,
which specializes in the collection of hyper-immune plasma to be used in the manufacture of WINRHO SDF, KAMRAB and KEDRAB. In 2024, we
opened our second plasma collection center in Houston, Texas, which received FDA approval in 2025. In addition, in 2025, after completing
construction and obtaining the required site registration, we commenced operations at our third plasma collection site in San Antonio,
Texas, for which an FDA site audit was completed in February 2026 and we expect to receive FDA approval during the first half of 2026.
We intend to seek a subsequent inspection and approval by the EMA of both our Houston and San Antonio sites. Both centers are expected
to become two of the largest hyper-immune plasma collection sites in the United States and will also collect normal source plasma for
sale to third parties. We may, in the future, leverage our experience with plasma collection to establish additional plasma collection
centers in the United States; however, the success of these operations depends on factors beyond our control, including but not limited
to the availability and eligibility of donors, regulatory requirements, macroeconomic conditions and competitive dynamics in the plasma
collection industry.
We believe that the ramping
up of our plasma collection operations will allow us to better support our hyperimmune plasma needs and reduce our dependency on third-party
suppliers, as well as generate revenues through sales of collected normal source plasma. However, given our limited prior experience in
managing plasma collection operations and the complexities in negotiating third-party agreements, as well as the overall conditions of
the plasma collection industry, we may not be able to fully realize our investment or maximize the anticipated benefits of such activities.
5
Our
ability to collect sufficient quantities of plasma may be adversely affected by reductions in the donor pool resulting from public health
developments, changes in donor eligibility criteria, regulatory actions, immigration policies or enforcement, or shifts in macroeconomic
conditions that reduce the financial incentive for individuals to donate plasma or impair our ability to staff plasma collection centers.
Further, even if we are able to collect sufficient quantities of plasma, the cost of plasma may increase significantly due to increased
competition for donors, industry consolidation or vertical integration among plasma-derived product manufacturers, changes in regulatory
requirements, or supply disruptions. In addition, we may not be able to adequately collect sufficient quantities of specialty plasma through
our plasma collection operations to support our specialty plasma sourcing needs, including due to a lack of appropriate or sufficient
donors, which would result in continued dependency on third-party suppliers and expose us to supply constraints or unfavorable pricing.
Even if we are successful in the collection of sufficient quantities of such plasma, there can be no assurance that we will be able to
reduce the cost of plasma through our collection operations, as compared to costs associated with procuring plasma from third parties.
In addition, there can be no assurance that we will be able to collect adequate quantities of normal source plasma, successfully commercialize
such plasma, secure supply agreements with customers at adequate prices, or that there will be sufficient or sustained demand for normal
source plasma. Any failure to achieve the anticipated operational, cost or revenue benefits from our plasma collection strategy could
materially adversely affect our business, financial condition and results of operations. See also “—We could become supply-constrained,
and our financial performance could suffer, if we were unable to obtain adequate quantities of source plasma, plasma derivatives or specialty
ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the regulatory authorities in Israel, or
if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of source plasma or plasma derivatives
were to rise significantly”; and “—Our long-term continued growth is dependent on our ability to engage
in additional strategic transactions to acquire assets, businesses, products or technologies or engage in in-license or out-license transactions
of products or technologies or form collaborations. Our inability to secure such transactions on cost-effective terms or our inability
to realize the anticipated benefits from these transactions, may negatively affect our projected growth and operating results, dilute
our shareholders’ ownership or cause us to incur debt or significant expense.”
Risks Related to Our Proprietary Products Segment
In our Proprietary Products segment, we
rely on Kedrion for the sales of our KEDRAB product in the United States, and any disruption to our relationships with Kedrion would have
an adverse effect on our future results of operations and profitability.
Pursuant to the strategic
distribution and supply agreement with Kedrion for the marketing of KEDRAB in the United States, Kedrion is the sole distributor of KEDRAB
in the United States. Sales to Kedrion accounted for approximately 30%, 31% and 23% of our total revenues in the years ended December
31, 2025, 2024 and 2023, respectively. We are dependent on Kedrion for its marketing and sales of KEDRAB in the United States. Under the
strategic distribution and supply agreement, as amended in January 2025, which superseded and memorialized the terms of a binding memorandum
of understanding with Kedrion for the amendment and extension of the distribution agreement between the parties, entered into in December
2023, Kedrion committed to purchasing minimum quantities of KEDRAB during the first four years (i.e., 2024 through 2027) of the eight-year
term, that began in January 2024, generating projected minimum aggregate revenues for us of approximately $180.0 million over such four-year
period, of which a minimum of approximately $90.0 million is to be acquired during the remaining two years of such four-year period (i.e.,
2026 through 2027). According to the distribution agreement, Kedrion shall have the right to extend the agreement by written notice no
later than December 31, 2030, for an additional two years, until December 31, 2033.
We currently also purchase
from a subsidiary of Kedrion, KedPlasma LLC (“Kedplasma”), a large portion of the hyper-immune plasma, which is used for the
production of KEDRAB/KAMRAB. See “—We could become supply-constrained, and our financial performance could suffer, if we
were unable to obtain adequate quantities of source plasma, plasma derivatives or specialty ancillary products that meet the regulatory
requirements of the FDA, the EMA, Health Canada or the regulatory authorities in Israel, or if our suppliers were to fail to modify their
operations to meet regulatory requirements or if prices of source plasma or plasma derivatives were to rise significantly.”
6
If we do not maintain the
distribution relationship with Kedrion, we would be required to assume the sales and marketing activities of KEDRAB, or we would need
to engage a replacement distributor for the product in the United States. Further, if we fail to maintain the plasma supply agreement
with Kedplasma we would need to meet such plasma supply quantities from our own plasma centers and/or find a replacement supplier of the
hyper-immune plasma, which is used to manufacture KEDRAB/KAMRAB. Establishing a relationship with a new distributor or supplier or fully
internalizing those activities could lead to a decrease in KEDRAB/KAMRAB sales and a deterioration in our market share. Any of the foregoing
developments could have an adverse effect on our sales, margins and profitability.
Sales of CYTOGAM, WINRHO SDF, HEPAGAM B and
VARIZIG in the U.S. market are important in order to support future growth, future results of operations and profitability.
Sales of CYTOGAM, VARIZIG,
HEPAGAM B and WINRHO SDF in the U.S. market represented approximately 19%, 24% and 21% of our Proprietary Product segment sales for the
years ended December 31, 2025, 2024 and 2023, respectively. To facilitate the sale and distribution of these products in the U.S. market,
the Company established commercial operations in the United States at the beginning of 2022, which included contracting with a third-party
logistics (3PL) provider, contracting with pharmaceutical wholesalers and regional distributors, hiring sales, medical, trade and market
access professionals, establishing relationships with key opinion leaders (“KOLs”), supporting health care professionals in
conducting investigator-initiated trials and publishing new data in support of the Company’s portfolio of products, mainly CYTOGAM.
Given the continued challenges in directly managing U.S. commercial and medical operations and the operational, technical, regulatory
and compliance challenges in maintaining such activity, as well as the significant costs involved in such operations, we may not be able
to continue to realize the anticipated benefits of such activities, and may not be able to adequately maintain or expand market demand
and continued product sales, which may result in a significant reduction in sales, increased operating costs and reduced profitability
and may adversely impact our future growth. See “— Our ability to maintain and expand sales of our commercial products
portfolio in the U.S. and ex-U.S. markets is critical to our profitability and financial stability.” See also – “Item
4B. Information on the Company — Business Overview — Proprietary Products Segment.”
Continued availability of CYTOGAM, WINRHO
SDF, VARIZIG and HEPAGAM B worldwide is dependent on our ability to maintain continuous plasma supply and maintain our relationship with
third-party contract manufacturers and suppliers, and any disruption to such relationship could have an adverse effect on the availability
of these products, as well as our future results of operations and profitability.
CYTOGAM is manufactured at
our facility in Beit Kama, Israel since 2023. To manufacture CYTOGAM, we engaged Prothya Biosolutions Belgium (“Prothya”)
as a third-party contract manufacturer to perform certain manufacturing activities required for the manufacturing of the product. In addition,
CMV hyper-immune plasma for the manufacturing of CYTOGAM is supplied by CSL Behring Ltd. (“CSL Behring”) through a dedicated
plasma supply agreement. We have limited control and supervision over the operational processes of these organizations, which could affect
our ability to maintain quality standards and could lead to business or legal disputes with these organizations. If we fail to maintain
our relationship with these entities, or if these entities fail to operate in compliance with regulatory and compliance requirements,
we could face supply shortages, which could adversely impact our ability to manufacture and supply CYTOGAM and could incur increased costs
in finding replacement vendors. Delays in establishing a relationship with new vendors could lead to a decrease in CYTOGAM sales and a
deterioration in our market position. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability.
WINRHO SDF, VARIZIG and HEPAGAM
B are currently manufactured by Emergent under a contract manufacturing agreement, which was assigned to us by Saol upon the consummation
of the acquisition. We are currently partially dependent on Emergent to secure the supply of adequate quantities of plasma needed to timely
manufacture these products and we rely on their manufacturing, quality and regulatory systems to ensure that the manufacturing process
complies with current Good Manufacturing Practice (“cGMP”) standards and any other regulatory requirements, and that each
product manufactured meets its specifications and is appropriately released for human consumption.
7
If we are unable to maintain
our relationship with Emergent, if Emergent fails to operate in compliance with cGMP and other regulatory requirements, or if we do not
extend our agreement with Emergent beyond its current expiration in September 2027 and lack sufficient product inventory to bridge the
gap until manufacturing begins at our facility or at a replacement manufacturer’s facility, we could face supply shortages and may
not be able to supply these products. In addition, such failure may result in increased costs and delays in transferring the manufacturing
of the products to our plant in Beit Kama, Israel, or in finding a replacement manufacturer for these products and we might be required
to identify a replacement supplier of the plasma which is used to produce these products. Delays in internalizing the production or establishing
a relationship with a new manufacturer could lead to a decrease in these products’ sales and a deterioration in our market share.
Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability. See also “—Manufacturing
of new plasma-derived products in our manufacturing facility requires a lengthy and challenging development project and/or technology
transfer project as well as regulatory approvals, all of which may not materialize.”
Certain of our sales in our Proprietary
Products segment rely on our ability to win tender bids based on the price and availability of our products in public tender processes.
Certain of our sales in our
Proprietary Products segment rely on our ability to win tender bids in certain markets, including those of the World Health Organization
(“WHO”) and other similar health organizations. Our ability to win bids may be materially adversely affected by competitive
conditions in such bid processes. Our existing and new competitors may have significantly greater financial resources, broader product
availability, and a more diverse commercial infrastructure, which may better position them to win more tenders and adversely affect our
ability to win tenders, and which in turn would reduce our total revenues or decrease our profit margins.
We rely in large part on third parties for
the sale, distribution and delivery of our Proprietary Products, and any disruption to our relationships with these third-party distributors
would have an adverse effect on our future results of operations and profitability.
We engage third party distributors
to distribute and sell our Proprietary Products in ex-U.S. markets (other than the Israeli market). Sales through such distributors accounted
for approximately 28%, 22% and 26% of our total revenues in the years ended December 31, 2025, 2024 and 2023, respectively, and we expect
such sales to increase in 2026 and beyond. We are dependent on these third parties for successful marketing, distribution and sales of
our Proprietary Products in these markets. If such third parties were to breach, terminate or otherwise fail to perform under our agreements
with them, our ability to effectively distribute our Proprietary Products would be impaired and our business could be adversely affected.
Moreover, circumstances outside of our control, such as a general economic decline, market saturation or increased competition, may influence
the successful renegotiation of our contracts or the securing of favorable terms.
In addition to distribution
and sales, these third-party distributors are, in some cases, responsible for the regulatory registration of our products in the local
markets in which they operate, as well as responsible for participation in tenders for sale of our products. Failure of these third-party
distributors to obtain and maintain such regulatory approvals and/or win tenders or provide competitive prices to our products may adversely
affect our ability to sell our Proprietary Products in these markets, which in turn will negatively affect our revenues and profitability.
In addition, our inability to sell our Proprietary Products in these markets may reduce our manufacturing plant utilization and effectiveness
and may lead to additional reduction of profitability.
In the U.S. market we utilize
a 3PL provider in connection with the distribution of CYTOGAM, VARIZIG, HEPAGAM B and WINRHO SDF, which provides complete order to cash
services. If such 3PL provider were to breach, terminate or otherwise fail to adequately perform under our agreement with it, including
inadequate inventory management, transportation delays and incorrect temperature control during storage and handling, fails to issue invoices
correctly or on a timely basis and/or fails to collect payments due to us from our U.S. customers, our ability to effectively distribute
such products would be impaired, which could negatively impact our business operations and financial performance.
8
Disputes with distributors
have arisen in the past and disputes may arise in the future, which could cause the delay or termination of the manufacturing, supply
or commercialization of our product, or could result in costly litigation or arbitration that diverts management’s attention and
resources. For example, in May 2022, we terminated a distribution agreement with a third-party engaged to distribute our Proprietary Products
in Russia and Ukraine (the “Distributor”) and a power of attorney granted in connection with such distribution agreement to
an affiliate of the Distributor (the “Affiliate”). On June 13, 2023, the Affiliate filed its Statement of Claim with the tribunal
of first instance in Geneva, seeking alleged damages in the total amount of $6.7 million. We filed a motion with the tribunal of first
instance in Geneva challenging its jurisdiction over the Affiliate’s claims, submitting that such claims should have been brought
before an arbitral tribunal, as contractually agreed between the parties. On April 22, 2025, the tribunal of first instance in Geneva
dismissed the Distributor’s action and declared it inadmissible due to a lack of jurisdiction in Switzerland. On May 27, 2025, the
Distributor challenged the decision rendered by the tribunal of first instance, claiming that the tribunal of first instance wrongly declined
jurisdiction. The allegations raised by the Distributor in the appeal are largely reiterations of what it argued in front of the tribunal
of first instance. The Company submitted its response to the appeal in September 2025. In October and November 2025, two further briefs
(one from each party) were exchanged. The Court of Appeals will now decide on the appeal; a ruling on the appeal is expected later in
2026. At this time, it is not possible to assess the prospects of the claim against us and any potential liabilities and impact on our
business. See “Item 4B. Information on the Company — Business Overview — Legal Proceedings.”
Our Proprietary Products segment operates
in a highly competitive market and could be negatively impacted by new competitors or the adoption of new methods of administration.
Our Proprietary Products compete
with products distributed by well-established biopharmaceutical companies, including several large competitors in the plasma industry.
These large competitors include CSL Behring, Takeda, and Grifols S.A. (“Grifols”), which acquired a previous competitor, Talecris
Biotherapeutics, Inc. (“Talecris”) in 2011, Octapharma, Kedrion (other than for KEDRAB), Biotest AG and ADMA Biologics Inc.
(“ADMA”). We compete against these companies for, among other things, licenses, expertise, and third-party strategic partners.
We also compete with these companies for market share for certain products in the Proprietary Products segment. Our large competitors
have advantages in the market because of their size, financial resources, markets and the duration of their activities and experience
in the relevant market, especially in the United States and countries of the European Union. These competitors may also be able to sustain
longer periods of substantial reduction in the price of their products or services. These competitors also have an additional advantage
regarding the availability of raw materials, as they own or control large networks of plasma collection centers and/or plasma fractionation
facilities.
In addition, our plasma-derived
protein therapeutics face, or may face in the future, competition from existing or newly developed non-plasma products and other courses
of treatments. New treatments, such as antivirals, gene therapies, small molecules, correctors, monoclonal or recombinant products, may
also be developed for indications for which our products are now used, as well as courses of treatment such as subcutaneous treatment.
Our hyper-immune IgG products
in the Proprietary Products segment face competition from several competing plasma derived products and non-plasma derived pharmaceuticals,
mainly anti-viral. See “Item 4B “Information on the Company — Business Overview— Competition — Proprietary
Products Segment.”
In the AAT market, our two
main competitors are Grifols and CSL Behring. For details regarding their competing products, see “Item 4B “Information on
the Company — Business Overview— Competition — Proprietary Products Segment.” In addition, each of Grifols and
CSL Behring owns more than 300 operating plasma collection centers located across the United States.
Furthermore, several of our
competitors are conducting preclinical and clinical trials for the development of gene therapies, recombinant AAT, small molecule treatments
or correctors for AATD, which, if successfully developed and launched, could adversely affect our revenue and the growth of GLASSIA sales
or GLASSIA-related royalties. For example, in January 2024, Inhibrx and Sanofi announced that they had entered into a definitive agreement
under which Aventis Inc., a subsidiary of Sanofi, would acquire all assets and liabilities associated with INBRX-101, which was in a registrational
trial for the treatment of patients with AATD. On May 30, 2024, Sanofi completed the acquisition, and INBRX-101 was subsequently added
to Sanofi’s rare disease pipeline under the program identifier SAR447537 (also referred to by Sanofi as efdoralprin alfa). In October
2025, Sanofi announced positive Phase 2 results from the ElevAATe study in AATD emphysema, reporting that efdoralprin alfa met all primary
and key secondary endpoints and demonstrated superiority to a standard plasma-derived augmentation therapy in a head-to-head comparison,
with three- to four-week dosing regimens. Sanofi also initiated an open-label extension for long-term follow-up. These developments may
intensify competition in AATD. If Sanofi successfully completes late-stage development, secures regulatory approvals, and launches efdoralprin
alfa, such a recombinant therapy could reduce demand for plasma-derived AAT products, shift prescriber and payor preferences, and increase
pricing pressure on GLASSIA. The impact could be material, depending on the product’s ultimate efficacy, safety, dosing convenience,
pricing, reimbursement, as well as the timing of any regulatory clearances in the geographies where we market plasma-derived AAT.
9
Similarly, if a new AAT formulation
or a new route of administration with significantly improved characteristics is adopted (including, for example, self-administering by
way of subcutaneous route of administration), the market share of our current AAT product, GLASSIA, could be negatively impacted.
Our products generally do
not benefit from patent protection and compete against similar products produced by other providers. Additionally, the development by
a competitor of a similar or superior product or increased pricing competition may result in a reduction in our net sales or a decrease
in our profit margins.
Our products involve biological intermediates
that are susceptible to contamination and the handling of such intermediates and our final products throughout the supply chain and manufacturing
process requires cold-chain handling, all of which could adversely affect our operating results.
Plasma and its derivatives
are raw materials that are susceptible to damage and contamination and may contain microorganisms that cause diseases in humans, commonly
known as human pathogens, any of which would render such materials unsuitable as raw material for further manufacturing. Almost immediately
after collection from a donor, plasma and plasma derivatives must be stored and transported at temperatures that are at least -20 degrees
Celsius (-4 degrees Fahrenheit). Improper storage or transportation of plasma or plasma derivatives by us or third-party suppliers may
require us to destroy some of our raw material. In addition, plasma and plasma derivatives are also suitable for use only for certain
periods of time once removed from storage. If unsuitable plasma or plasma derivatives are not identified and discarded prior to release
to our manufacturing processes, it may be necessary to discard intermediate or finished products made from such plasma or plasma derivatives,
or to recall any finished product released to the market, resulting in a charge to cost of goods sold and harm to our brand and reputation.
Furthermore, if we distribute plasma-derived protein therapeutics that are produced from unsuitable plasma because we have not detected
contaminants or impurities, we could be subject to product liability claims and our reputation would be adversely affected.
Despite overlapping safeguards,
including the screening of donors and other steps to remove or inactivate viruses and other infectious disease-causing agents, the risk
of transmissible disease through plasma-derived protein therapeutics cannot be entirely eliminated. If a new infectious disease was to
emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the
disease that would impair our ability to manufacture our products. Such precautionary measures could be taken before there is conclusive
medical or scientific evidence that a disease poses a risk for plasma-derived protein therapeutics. In recent years, new testing and viral
inactivation methods have been developed that more effectively detect and inactivate infectious viruses in collected plasma. There can
be no assurance, however, that such new testing and inactivation methods will adequately screen for, and inactivate, infectious agents
in the plasma or plasma derivatives used in the production of our plasma-derived protein therapeutics. Additionally, this could trigger
the need for changes in our existing inactivation and production methods, including the administration of new detection tests, which could
result in delays in production until the new methods are in place, as well as increased costs that may not be readily passed on to our
customers.
Plasma and plasma derivatives
can also become contaminated through the manufacturing process itself, such as through our failure to identify and purify contaminants
through our manufacturing process or failure to maintain a high level of sterility within our manufacturing facilities.
Once we have manufactured
our plasma-derived therapeutics, they must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third
parties that supply, ship, store or distribute our products, to properly care for our plasma-derived products, may result in the requirement
that such products be destroyed.
While we expect work-in-process
inventories scraps in the ordinary course of business because of the complex nature of plasma and plasma derivatives, our processes and
our plasma-derived therapeutics, unanticipated events may lead to write-offs and other costs in amounts materially higher than our expectations.
We have, in the past, experienced situations that have caused us to write-off the value of inventories. Such write-offs and other costs
could materially adversely affect our operating results. Furthermore, contamination of our plasma-derived protein therapeutics could cause
consumers or other third parties with whom we conduct business, to lose confidence in the reliability of our manufacturing procedures,
which could materially adversely affect our sales and operating results.
10
Our ability to continue manufacturing and
distributing our plasma-derived therapeutics depends on continued adherence by us and contract manufacturers to current Good Manufacturing
Practice regulations.
The manufacturing processes
for our products are governed by detailed written procedures and regulations that are set forth in cGMP requirements for blood products,
including plasma and plasma derivative products. Failure to adhere to established procedures or regulations, or to meet a specification
set forth in cGMP requirements, could require that a product or material be rejected and destroyed. There are relatively few opportunities
for us or contract manufacturers to rework, reprocess or salvage nonconforming materials or products. Any failure in cGMP inspection will
affect marketing in other territories, including the United States and Israel.
The adherence by us and our
contract manufacturers to cGMP regulations and the effectiveness of applicable quality control systems are periodically assessed through
inspections of the manufacturing facility, including our manufacturing facility in Beit Kama, Israel, by the FDA, the IMOH and regulatory
authorities of other countries. Such inspections could result in deficiency citations, which would require us or our contract manufacturers
to take action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If serious deficiencies are
noted or if we or our contract manufacturers are unable to prevent recurrences, we may have to recall products or suspend operations until
appropriate measures can be implemented. The FDA could also stop the import of products into the United States if there are potential
deficiencies. Such deficiencies may also affect our ability to obtain government contracts in the future. We are required to report certain
deviations from procedures to the FDA. Even if we determine that the deviations were not material, the FDA could require us or our contract
manufacturers to take certain measures to address the deviations. Since cGMP reflects ever-evolving standards, we regularly need to update
our manufacturing processes and procedures to comply with cGMP. These changes may cause us to incur additional costs and may adversely
impact our profitability. For example, more sensitive testing assays (if and when they become available) may be required or existing procedures
or processes may require revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of a
product or launch of a new product.
We may face manufacturing stoppages and
other challenges associated with audits or inspections by regulatory agencies.
The regulatory authorities
may, at any time and from time to time, audit the facilities in which our products are manufactured. If any such inspection or audit of
such facilities identifies a failure to comply with applicable regulations, or if a violation of our product specifications or applicable
regulations occurs independently of such an inspection or audit, the relevant regulatory authority may require remedial measures that
may be costly or time consuming for us to implement and that may include the temporary or permanent suspension of commercial sales or
the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or with whom we contract, could materially
harm our business.
Manufacturing of new plasma-derived products
in our manufacturing facility, or the manufacture of Proprietary Products by third parties, requires a lengthy and challenging development
project and/or technology transfer project as well as regulatory approvals, all of which may not materialize.
The manufacturing of newly
marketed or investigational plasma-derived products in our plant, or the manufacture of Proprietary Products by third parties, requires
a lengthy and challenging development project and/or technology transfer project, which involves the transfer of the know-how and capabilities
to manufacture the new product. Such projects are usually complex and involve investment of significant time (approximately four to five
years) and resources. There is no assurance that such development and/or technology transfer projects will be successful and will allow
us to manufacture the new product according to its required specifications.
Such development and/or technology
transfer projects require regulatory approval by the FDA and/or EMA and/or Health Canada or other relevant regulatory agencies. Obtaining
such regulatory approval may require activities such as the manufacturing of comparable batches and/or performing comparability non-clinical
and/or clinical studies between the product manufactured by its existing manufacturer and the product manufactured at our manufacturing
facility. There is no assurance that we will be able to provide supporting comparability results that meet all regulatory requirements
needed to obtain the regulatory approval required to be able to commence commercial manufacturing of new plasma-derived products in our
manufacturing plant. For example, the transfer of the manufacture of WINRHO SDF, VARIZIG or HEPAGAM B to our manufacturing facility, would
require certain changes to manufacturing processes, potential amendments to the contract manufacturing agreement with Emergent, and the
receipt of required regulatory approvals.
11
Additionally, development
and technology transfer projects may be adversely affected by a lack of cooperation from third-party manufacturers, potentially leading
to delays, budget overruns, or gaps in knowledge transfer. Such lack of cooperation could hinder our ability to effectively transfer necessary
know-how and capabilities, complicating the development and technology transfer process.
If we are unable to adequately
complete the required development and/or technology transfer projects or subsequently obtain the required regulatory approvals, we will
not be able to meet commercial demand, incur additional costs and may suffer reduced profitability or operating losses.
We could become supply-constrained, and
our financial performance could suffer, if we were unable to obtain adequate quantities of specialty plasma, plasma derivatives or specialty
ancillary products that meet the regulatory requirements of the FDA, the EMA, Health Canada or the regulatory authorities in Israel, or
if our suppliers were to fail to modify their operations to meet regulatory requirements or if prices of source plasma or plasma derivatives
were to rise significantly.
While we own and operate our
own plasma collection centers in the United States, our Proprietary Products continue to depend, to a large degree, on our access to U.S.,
hyper-immune plasma or plasma derivatives, such as fraction IV. Despite expanding and further establishing our U.S. plasma collection
operations in order to reduce our dependency on third-party suppliers in terms of plasma supply needs, we currently purchase plasma from
third-party licensed suppliers, some of which are also responsible for the plasma fractionation process, pursuant to multiple purchase
agreements. We have entered into (and in connection with our acquired four FDA approved products, we assumed) a number of plasma supply
agreements with various third parties in the United States. These agreements contain various termination provisions, including upon a
material breach of either party, force majeure and, with respect to supply agreements with strategic partners, the failure or delay on
the part of either party to obtain the applicable regulatory approvals or the termination of the principal strategic relationship. If
we are unable to obtain required quantities of source plasma or fraction IV plasma that meet the regulatory requirements of the FDA, the
EMA, Health Canada or the regulatory authorities in Israel from these providers, we may be unable to find an alternative cost-effective
source.
In order for plasma and fraction
IV plasma to be used in the manufacturing of our plasma-derived protein therapeutics, the individual centers at which the plasma is collected
must be registered with and meet the regulatory requirements of the relevant regulatory authorities, such as the FDA, the EMA, Health
Canada or the regulatory authorities in Israel. When a new plasma collection center is opened, and on an ongoing basis after its registration,
it must be inspected by the applicable regulatory authority for compliance with cGMP and other regulatory requirements. An unsatisfactory
inspection could prevent a new center from being established or lead to the suspension or revocation of an existing registration. If relevant
regulatory authorities determine that a plasma collection center did not comply with cGMP in collecting plasma, we may be unable to use
and may ultimately destroy plasma collected from that center, which may impact our ability to timely meet our manufacturing and supply
obligations. Additionally, if noncompliance in the plasma collection process is identified after the impacted plasma has been pooled with
compliant plasma from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted, such
as through product destruction or rework. Consequently, we could experience significant inventory impairment provisions and write-offs,
which could adversely affect our business and financial results.
In addition, the plasma supplier’s
fractionation process must also meet standards of the FDA, the EMA, Health Canada or the regulatory authorities in Israel. If a plasma
supplier is unable to meet such standards, we will not be able to use the plasma derivatives provided by such supplier, which may impact
our ability to timely meet our manufacturing and supply obligations.
12
The plasma collection process
is dependent on donors arriving in plasma collection centers and agreeing to donate plasma. Factors such as changes in reimbursement rates,
competition for donors, and declining donor loyalty may lead to a decrease in the number of donors, which may negatively impact our ability
to obtain adequate quantities of plasma. During major healthcare events (such as during the COVID-19 pandemic) the number of donors attending
plasma collection centers decreases, which may adversely affect the availability of plasma and its derivatives. A significant shortage
in plasma supply may adversely affect our ability to continue manufacturing our products, may result in shortages in our products in the
market, and may result in reduced sales and profitability.
To the extent that we were
unable to obtain required quantities of specialty plasma or plasma derivatives that meet the regulatory standards of the FDA, the EMA,
Health Canada or the regulatory authorities in Israel, we could be limited in our ability to maintain or increase current manufacturing
levels of our plasma derived commercial products and product candidates. As a result, we could experience a substantial decrease in total
revenues or profit margins, a potential breach of distribution agreements, a loss of customers, a negative effect on our reputation as
a reliable supplier of plasma derivative products or a substantial delay in our production and strategic growth plans.
The ability to increase plasma
collections may be limited, our supply of plasma and plasma derivatives could be disrupted or the cost of plasma and plasma derivatives
could increase substantially, as a result of numerous factors, including a reduction in the donor pool, increased regulatory requirements,
decreased number of plasma supply sources due to consolidation and new indications for plasma-derived protein therapeutics, which could
increase demand for plasma and plasma derivatives and lead to shortages.
We also continue to be dependent
on a number of suppliers who supply specialty ancillary products used in the production process, such as specific gels and filters. Each
of these specialty ancillary products is provided by a single, exclusive supplier. If these suppliers were unable to provide us with these
specialty ancillary products, if our relationships with these suppliers deteriorate, if these suppliers fail to meet our vendors qualification
processes, or if these suppliers’ operations are negatively affected by regulatory enforcement due to noncompliance, the manufacture
and distribution of our products would be materially adversely affected, which would adversely affect our sales and results of operations.
See “—If we experience equipment difficulties or if the suppliers of our equipment or disposable goods fail to deliver
key product components or supplies in a timely manner, our manufacturing ability would be impaired, and our product sales could suffer.”
Some of our required specialty
ancillary products and other materials used in the manufacturing process are commonly used in the healthcare industry worldwide. If the
global demand for these products increases due to healthcare issues, epidemics or pandemics, our ability to secure adequate supply at
reasonable cost of such products may be negatively affected, which would materially adversely affect our ability to manufacture and distribute
our products, which would adversely affect our sales and results of operations.
In addition, regulatory requirements,
including cGMP regulations, continually evolve. Failure of our plasma suppliers to adjust their operations to conform to new standards
as established and interpreted by applicable regulatory authorities would create a compliance risk that could impair our ability to sustain
normal operations.
In addition, if the purchase
prices of the source plasma or plasma derivatives that we use to manufacture our Proprietary Products were to rise significantly, we may
not be able to pass along these increased plasma and plasma-derivative prices to our customers. Prices in many of our principal markets
are subject to local regulation and certain pharmaceutical products, such as plasma-derived protein therapeutics, are subject to price
controls. Any inability to pass costs on to our customers due to these factors or others would reduce our profit margins. In addition,
most of our competitors have the ability to collect their own source plasma or produce their own plasma derivatives, and therefore their
products’ prices would not be impacted by such a price rise, and as a result any pricing changes by us in order to pass higher costs
on to our customers could render our products noncompetitive in certain territories.
13
Disruption of the operations of our current
or any future plasma collection center due to regulatory impediments or otherwise would cause us to become supply constrained and our
financial performance would suffer.
We currently have three plasma
collection centers in the United States. In March 2021, we acquired our first FDA-licensed plasma collection center in Beaumont, Texas,
which specializes in the collection of hyper-immune plasma to be used in the manufacture of WINRHO SDF, KAMRAB and KEDRAB. In 2024, we
opened our second plasma collection center in Houston, Texas, which received FDA approval in August 2025. In March 2025, we opened our
third plasma collection site in San Antonio, Texas, for which an FDA site audit was completed in February 2026 and we expect to receive
FDA approval during the first half of 2026. We intend to seek a subsequent inspection and approval by the EMA of both our Houston and
San Antonio sites. In the future we may leverage our experience with plasma collection to establish additional plasma collection centers
in the United States, with the intention of collecting normal source plasma to be sold for manufacturing by third parties, as well as
hyper-immune specialty plasma required for manufacturing of our Proprietary Products.
In order for plasma to be
used in the manufacturing of our products, the individual centers at which plasma is collected must be registered with and meet the regulatory
requirements of the regulatory authorities, such as the FDA and the EMA, of those countries in which we sell our products. When a new
plasma collection center is opened, it must be inspected on an ongoing basis after its approval by the FDA and the EMA for compliance
with cGMP and other regulatory requirements, and these regulatory requirements are subject to change. An unsatisfactory inspection could
prevent a new center from being established or risk the suspension or revocation of an existing registration. In order for a plasma collection
center to maintain its governmental registration, its operations must continue to conform to cGMP and other regulatory requirements or
recommendations which may be applicable from time to time.
If it would be determined
that any of our plasma collection centers did not comply with cGMP, or other regulatory requirements in collecting plasma, we may be unable
to use and may ultimately be required to destroy plasma collected from that center, which would be recorded as a charge to cost of goods.
Additionally, if noncompliance in the plasma collection process is identified after the impacted plasma has been pooled with compliant
plasma from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted. Consequently,
we could experience significant inventory impairment provisions and write-offs.
We plan to increase our supplies
of plasma for use in our manufacturing processes through collections at our plasma collection centers. This strategy is dependent upon
our ability to successfully establish and register any new center, to maintain compliance with all FDA and other regulatory requirements
in all centers and to attract donors to our centers.
Our ability to increase and
improve the efficiency of plasma collection at any current or future plasma collection center may be affected by: (i) changes in the economic
environment and population in selected regions where we operate plasma collection centers; (ii) the entry of competitive centers into
regions where we operate; (iii) our misjudging the demographic potential of individual regions where we expect to increase production
and attract new donors; (iv) unexpected facility related challenges; (v) unexpected management challenges at select plasma collection
centers; or (vi) changes to regulatory requirements.
Our strategy to expand the sale of normal
source plasma to third-party manufacturers of plasma-derived medicinal products exposes us to risks related to customer concentration,
pricing volatility, and significant regulatory and product liability.
As part of our growth strategy,
we are expanding our plasma collection operations in the United States to support the sale of normal source plasma to third-party plasma-derived
medicinal products manufacturers. This activity is subject to various risks that could materially and adversely affect our ability to
implement this strategy and our business, financial condition, and results of operations:
The global plasma-derived
medicinal products industry is highly consolidated and dominated by a few large companies, such as CSL Behring, Grifols, and Takeda. We
may become dependent on a small number of these companies for a significant portion of our third-party plasma sales. The loss of one of
these customers, a significant reduction in their purchase volumes, or their decision to increase their own internal collection capacity
(vertical integration) could result in a substantial decrease in our revenues. Additionally, normal source plasma is often traded as a
commodity, and its market price is subject to significant fluctuations based on global supply and demand, changes in clinical trial results
for alternative recombinant or gene therapies and shifts in the standard of care for immunology and hematology. If market prices for plasma
fall below our collection and overhead costs, our margins will be compressed.
If we are unable to successfully
manage these risks, our strategy to expand the sale of normal source plasma to third-party manufacturers may not yield the anticipated
financial returns and could affect our overall profitability.
14
The biological properties of plasma and
plasma derivatives are variable, which may impact our ability to consistently manufacture our products in accordance with approved specifications.
While our manufacturing processes
were developed to meet certain product specifications, variations in the biological properties of plasma or plasma derivatives, as well
as inherent complexities in the manufacturing processes, may result in out-of-specification results during the manufacturing of our products.
While we expect certain work-in-process inventory scrap in the ordinary course of business due to the complex nature of plasma and plasma
derivatives, our processes, and our plasma-derived protein therapeutics, unanticipated events may lead to write-offs and other costs in
amounts that are materially higher than our expectations. Additionally, we may not be able to fulfill orders on a timely basis, the total
capacity of product that we are able to market could decline, and our cost of goods sold could increase, thus reducing our profitability.
We have, in the past, experienced situations that have caused us to write off the value of our products. Such write-offs and other costs
could materially adversely affect our operating results.
The biological properties of plasma and
plasma derivatives are variable, which may adversely impact our levels of product yield from our plasma or plasma derivative supply.
Due to the nature of plasma,
there will be variations in the biological properties of the plasma or plasma derivatives we purchase that may result in fluctuations
in the obtainable yield of desired fractions, even if cGMP is followed. Lower yields may limit production of our plasma-derived protein
therapeutics because of capacity constraints. If these batches of plasma with lower yields impact production for extended periods, we
may not be able to fulfill orders on a timely basis and the total capacity of product that we are able to market could decline and our
cost of goods sold could increase, thus reducing our profitability.
Usage of our products may lead to serious
and unexpected side effects, which could materially adversely affect our business and may, among other factors, lead to our products being
recalled and our reputation being harmed, resulting in an adverse effect on our operating results.
The use of our plasma-derived
protein therapeutics may produce undesirable side effects or adverse reactions or events. For the most part, these side effects are known,
are expected to occur at some frequency and are described in the products’ labeling. Known side effects of several plasma-derived
therapeutics include headache, nausea and additional common protein infusion related events, such as flu-like symptoms, dizziness and
hypertension. The occurrence of known side effects on a large scale could adversely affect our reputation and public image, and hence
also our operating results.
In addition, the use of our
plasma-derived protein therapeutics may be associated with serious and unexpected side effects, or with less serious reactions at a greater
than expected frequency. This may be especially true when our products are used in critically ill patient populations. When these unexpected
events are reported to us, we typically make a thorough investigation to determine causality and implications for product safety. These
events must also be specifically reported to the applicable regulatory authorities, and in some cases, also to the public by media channels.
If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with one of our products,
we would be obligated to withdraw the impacted lot or lots of that product or, in certain cases, to withdraw the product entirely. Furthermore,
it is possible that an unexpected side effect caused by a product could be recognized only after extensive use of the product, which could
expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation.
15
We are subject to several existing laws
and regulations in multiple jurisdictions, non-compliance with which could adversely affect our business, financial condition and results
of operations, and we are susceptible to a changing regulatory environment, which could increase our compliance costs or reduce profit
margins.
Any new product must undergo
lengthy and rigorous testing and other extensive, costly, and time-consuming procedures mandated by the FDA and similar authorities in
other jurisdictions, including the EMA and the regulatory authorities in Israel. Our facilities and those of our contract manufacturers
must be approved and licensed prior to production and remain subject to inspection from time to time thereafter. Failure to comply with
the requirements of the FDA or similar authorities in other jurisdictions, including a failed inspection or a failure in our reporting
system for adverse effects of our products experienced by the users of our products, or any other non-compliance, could result in warning
letters, product recalls or seizures, monetary sanctions, injunctions to halt the manufacture and distribution of products, civil or criminal
sanctions, import or export restrictions, refusal or delay of a regulatory authority to grant approvals or licenses, restrictions on operations
or withdrawal of existing approvals and licenses. Furthermore, we may experience delays or additional costs in obtaining new approvals
or licenses, or extensions of existing approvals and licenses, from a regulatory authority due to reasons that are beyond our control,
such as changes in regulations or a shutdown of the U.S. federal government, including the FDA, or similar governing bodies or authorities
in other jurisdictions.
In addition, while we have
established three plasma collection centers in the United States, we continue to rely on Kedrion, CSL Behring, Emergent, Takeda and additional
plasma suppliers, for plasma collection or sourcing required for the manufacturing of KEDRAB, CYTOGAM, GLASSIA, WINRHO SDF, VARIZIG and
HEPAGAM B, and in the case of Kedrion and Takeda, for the distribution of these products in the United States (and in the case of Takeda,
commencing in 2024, also in Canada and potentially in Australia and New Zealand). In performing such services for us, these plasma suppliers
are required to comply with certain regulatory requirements. Any failure by these plasma suppliers to properly advise us regarding, or
properly perform tasks related to, regulatory compliance requirements, could adversely affect us. Any of these actions could cause direct
liabilities, a loss in our ability to market each of KEDRAB, GLASSIA, CYTOGAM, WINRHO SDF, VARIZIG and HEPAGAM B, and/or other Proprietary
Products, or a loss of customer confidence in us or in our Proprietary Products, which could materially adversely affect our sales, future
revenues, reputation, and results of operations.
Similarly, we rely on other
third-party vendors and sub-distributors, for example, in the testing, handling, and distribution of our products. Our contractual audit
and oversight rights may be limited or difficult to enforce in practice. If such third-party vendors or sub-distributors engage in non-compliant
activities, fail to meet quality or cold chain standards, do not timely fulfill adverse event or complaint reporting obligations, or otherwise
incur enforcement action from regulatory authorities due to noncompliance, this could negatively affect product sales, our reputation,
and results of operations.
In addition, we rely on other
distributors of our other Proprietary Products, or our sub-distributors distributing other manufacturers’ products in the MENA region,
for purposes of our distribution-related regulatory compliance for the products they distribute in the territories in which they operate.
Any failure by such distributors or sub-distributors to properly advise us regarding, or properly perform tasks related to, regulatory
compliance requirements could adversely affect our sales, future revenues, compliance with agreements with Distribution products’
manufacturers, our reputation, and results of operations.
Changes in our production
processes for our products may require supplemental submissions or prior approval by the FDA and/or similar authorities in other jurisdictions.
Failure to comply with any requirements as to production process changes dictated by the FDA or similar authorities in other jurisdictions
could also result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt the manufacture and distribution
of products, civil or criminal sanctions, refusal or delay of a regulatory authority to grant approvals or licenses, restrictions on operations
or withdrawal of existing approvals and licenses.
In addition, we rely on Takeda,
as the U.S. BLA holder, to share with us any relevant information with respect to changes in the manufacturing of GLASSIA or its usage
which may be applicable in order to update the products registration file in certain ex-U.S. markets in which it is currently registered
and/or distributed or may be registered and/or distributed in the future.
16
Furthermore, changes in the
regulation of our activities, such as increased regulation affecting quality or safety requirements or new regulations such as limitations
on the prices charged to customers in the United States, Israel or other jurisdictions in which we operate, could materially adversely
affect our business. In addition, the requirements of different jurisdictions in which we operate may become less uniform, creating a
greater administrative burden and generating additional compliance costs, which would have a material adverse effect on our profit margins.
See also – “Regulatory approval for our products is limited by the FDA, EMA, the IMOH and similar authorities in other
jurisdictions to those specific indications and conditions for which clinical safety and efficacy have been demonstrated, and the prescription
or promotion of off-label uses could adversely affect our business.”; and “—Laws and regulations governing the
conduct of international operations may negatively impact our development, manufacture, and sale of products outside of the United States
and require us to develop and implement costly compliance programs.” and “—Uncertainty surrounding and future
changes to healthcare law in the United States and other United States Government related mandates may adversely affect our business.”
If we experience equipment difficulties
or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a timely manner, our manufacturing
ability would be impaired, and our product sales could suffer.
For certain equipment and
supplies, we depend on a limited number of companies that supply and maintain our equipment and provide supplies such as chromatography
resins, filter media, glass bottles and stoppers used in the manufacture of our plasma-derived protein therapeutics. If our equipment
were to malfunction, or if our suppliers stop manufacturing or supplying such machinery, equipment or any key component parts, the repair
or replacement of the machinery may require substantial time and cost and could disrupt our production and other operations. Alternative
sources for key component parts or disposable goods may not be immediately available. In addition, any new equipment or change in supplied
materials may require revalidation by us or review and approval by the FDA, the EMA, the IMOH or other regulatory authorities, which may
be time-consuming and require additional capital and other resources. We may not be able to find an adequate alternative supplier in a
reasonable time period, or on commercially acceptable terms, if at all. As a result, shipments of affected products may be limited or
delayed. Our inability to obtain our key source supplies for the manufacture of products may require us to delay shipments of products,
harm customer relationships and force us to curtail operations.
The nature of producing and developing plasma-derived
protein therapeutics may prevent us from responding in a timely manner to market forces and effectively managing our production capacity.
The production of plasma-derived
protein therapeutics is a lengthy and complex process. Our ability to match our production of plasma-derived protein therapeutics to market
demand is imprecise and may result in a failure to meet the market demand for our plasma-derived protein therapeutics or potentially in
an oversupply of inventory. Failure to meet market demand for our plasma-derived protein therapeutics may result in customers transitioning
to available competitive products, resulting in a loss of segment share or distributor or customer confidence. In the event of an oversupply
in the market, we may be forced to lower the prices we charge for some of our plasma-derived protein therapeutics, record asset impairment
charges or take other action which may adversely affect our business, financial condition and results of operations.
We have been required to conduct post-approval
clinical trials of GLASSIA and KEDRAB as a commitment to continuing marketing such products in the United States, and we may be required
to conduct post-approval clinical trials as a condition to licensing or distributing other products.
When a new product is approved,
the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase 4 clinical trials. For example,
the FDA has required that we conduct Phase 4 clinical trials of GLASSIA and for KEDRAB. Such Phase 4 clinical trials are aimed at collecting
additional safety data, such as the immune response in the body of a human or animal, commonly referred to as immunogenicity, viral transmission,
levels of the protein in the lung, or epithelial lining fluid, and certain efficacy endpoints requested by the FDA. If the results of
such trials are unfavorable and demonstrate a previously undetected risk or provide new information that puts patients at risk, or if
we fail to complete such trials as instructed by the FDA, this could result in receiving a warning letter from the FDA and the loss of
the approval to market the product in the United States and other countries, or the imposition of restrictions, such as additional labeling,
with a resulting loss of sales. Furthermore, there can be no assurance that the FDA will accept the results of any post-marketing commitment
study, such as the results of the KEDRAB study, and under certain circumstances the FDA may require a subsequent study. Other products
we develop may face similar requirements, which would require additional resources and which may not be successful. We may also receive
approval that is conditioned on successful additional data or clinical development, and failure in such further development may require
similar changes to our product label or result in revocation of our marketing authorization.
17
Risks Related to Our Distribution Segment
Our Distribution segment is dependent on
a few suppliers, and any disruption to our relationship with these suppliers, or their inability to supply us with the products we sell,
in a timely manner, in adequate quantities and/or at a reasonable cost, would have a material adverse effect on our business, financial
condition and results of operations.
Sales of products supplied by Biotest AG, Kedrion, Chiesi Farmaceutici S.p.A, Bio Products Laboratories (“BPL”) Valneva SE and Mabxience, which are
sold in our Distribution segment, together represented approximately 9%, 8%, and 18% of our total revenues for the years ended December
31, 2025, 2024 and 2023, respectively. While we have distribution agreements with each of our suppliers, these agreements do not obligate
these suppliers to provide us with minimum amounts of our Distribution segment products. Purchases of our Distribution segment products
from our suppliers are typically on a purchase order basis. We work closely with our suppliers to develop annual forecasts, but these
forecasts are not obligations or commitments. However, if we fail to submit purchase orders that meet our annual forecasts or if we fail
to meet our minimum purchase obligations, we could lose exclusivity or, in certain cases, the distribution agreement could be terminated.
These suppliers may experience
capacity constraints that result in their being unable to supply us with products in a timely manner, in adequate quantities and/or at
a reasonable cost. Contributing factors to supplier capacity constraints may include, among other things, industry or customer demands
in excess of machine capacity, labor shortages, changes in raw material flows or shortages in raw materials, which may result from different
market conditions including, but not limited to, shortages resulting from increased global demand for these raw materials due to global
healthcare issues, epidemics and pandemics. These suppliers may also choose not to supply us with products at their discretion or raise
prices to a level that would render our products noncompetitive. Any significant interruption in the supply of these products could result
in us being unable to meet the demands of our customers, which would have a material adverse effect on our business, financial condition
and results of operations as a result of being required to pay fines or penalties, be subject to claims of breach of contract, loss of
reputation or even termination of agreement.
If our relationship with these
suppliers were to deteriorate, our distribution sales could be adversely affected.
Additionally, our future growth
in the Distribution segment is dependent on our ability to successfully engage other manufacturers for distribution in Israel of other
products. Failure to engage new suppliers may have an adverse effect on our revenue growth and profitability.
Certain of our sales in our Distribution
segment rely on our ability to win tender bids based on the price and availability of our products in annual public tender processes.
Certain of our sales in our
Distribution segment rely on our ability to win tender bids during the annual tender process in Israel, as well as on sales to Health
Maintenance Organizations (HMOs), hospitals and to the IMOH. The prices we can offer, as well as the availability of products, are key
factors in the tender process. If our suppliers in the Distribution segment cannot sell us products at a competitive price or cannot guarantee
sufficient quantities of products, we may lose the tenders. In addition, our ability to win bids may be materially adversely affected
by competitive conditions in a bid process. Existing and new competitors may also have significantly greater financial resources than
us, which they could use to promote their products and business. Greater financial resources would also enable our competitors to substantially
reduce the price of their products or services. If our competitors are able to offer prices lower than us, our ability to win tender bids
during the annual tender process will be materially affected and could reduce our total revenues or decrease our profit margins.
The challenges we face in
winning tender bids in the Distribution segment are compounded by historical price fluctuations of certain of our products in the segment
as a result of changes in the production capacity available in the industry, the availability and pricing of plasma, development of competing
products and the availability of alternative therapies. Higher prices for plasma-derived protein therapeutics have traditionally spurred
increases in plasma production and collection capacity, resulting over time in increased product supply and lower prices. As demand continues
to grow, if plasma supply and manufacturing capacity do not commensurately expand, prices tend to increase. Additionally, consolidation
in plasma companies has led to a decrease in the number of plasma suppliers in the world, as either manufacturers of plasma-based pharmaceuticals
purchase plasma suppliers or plasma suppliers are shut down in response to the number of manufacturers of plasma-based pharmaceuticals
decreasing, which may lead to increased prices. We may not be able to pass along these increased plasma and plasma-derivative prices to
our customers, which would reduce our profit margins.
18
Our Distribution segment is dependent on
a few customers, and any disruption to our relationship with these customers, or our inability to supply, in a timely manner, in adequate
quantities and/or at a reasonable cost, would have a material adverse effect on our business, financial condition and results of operations.
The Israeli market for drug
products includes a relatively small number of HMOs and several hospitals. Sales to Clalit Health Services, Israel’s largest HMO,
accounted for approximately 50%, 48% and 34% of our Distribution segment revenues in the years ended December 31, 2025, 2024 and 2023,
respectively.
If our relationship with any
of our Israeli customers deteriorated, our distribution sales could be adversely affected. Failure to maintain our existing relationships
with these customers could lead to a decrease in our revenues and profitability.
Before we may sell products in the Distribution
segment, we must register the products with the IMOH or any other local health ministry and there can be no assurance that such registration
will be obtained.
Before we may sell products
in the Distribution segment in Israel or other territories, mainly in the MENA region, we must register the products, at our own expense,
with the IMOH. We cannot predict how long the IMOH registration process may take or whether any such registration will ultimately be obtained.
The IMOH has substantial discretion in the registration process, and we can provide no assurance of successful registration. In the MENA
region, such process may be conducted by our sub-distributor in the relevant country. Our business, financial condition, or results of
operations could be materially adversely affected if we, or our sub-distributor, fail to receive registration for the products in the
Distribution segment from the applicable regulatory authority.
Our Distribution segment has historically
been, and may continue to be, a low-margin business, and our profit margins may be sensitive to various factors, some of which are outside
our control.
Our Distribution segment has
been, and may continue to be, characterized by high volume sales with relatively low profit margins. Volatility in our pricing may have
a direct impact on our profitability. Prolonged periods of product cost inflation may have a negative impact on our profit margins and
results of operations to the extent we are unable to pass on all or a portion of such product cost increases to our customers. In addition,
if our product mix changes, we may face increased risks of compression of our margins, as we may be unable to achieve the same level of
profit margins as we are able to capture on our existing products. Our inability to effectively price our products or to reduce our expenses
due to volatility in pricing could have a material adverse impact on our business, financial condition or results of operations.
We may be subject to milestone payments
in connection with our Distribution segment products irrespective of whether the commercialization is successful.
Certain of our agreements
in the Distribution segment, including agreements for distribution of biosimilar product candidates, require us to make milestone payments
in advance of product launch. In some cases, we may not be able to obtain reimbursement for such payments. To the extent that we are not
ultimately able to recoup these payments, our business, financial position and results of operations may be adversely affected.
We face significant competition in our Distribution
segment from companies with greater financial resources.
In the Distribution segment,
we face competition for our distribution products that are marketed in Israel and compete for market share. We believe that there are
several companies active in the Israeli market distributing the products of several manufacturers whose comparable products compete with
the products we distribute as part of our Distribution segment. In the plasma area, these manufacturers include Grifols, Takeda and CSL
Behring. In other specialties and biosimilar products, we compete with products produced by some of the largest pharmaceutical manufacturers
in the world, such as Novartis AG, AstraZeneca AB, Sanofi and GlaxoSmithKline. Each of these competitors sells its products through a
local subsidiary or a local representative in Israel. Our existing and new competitors may have significantly greater financial resources
than us, which they could use to promote their products and business or reduce the price of their products or services. If we are unable
to maintain or increase our market share, we may need to reduce prices and may suffer reduced profitability or operating losses, which
could have a material adverse impact on our business, financial condition or results of operations.
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In recent years we entered into agreements
for future distribution in Israel of several biosimilar product candidates, and the successful future distribution of these products,
which is important for the continued growth of the Distribution segment as a whole, is dependent upon several factors some of which are
beyond our control.
Over the past several years
we entered into agreements with respect to planned distribution in Israel of certain biosimilar product candidates. Biosimilar products
are highly similar to biological products already licensed for distribution by the FDA, EMA or any other relevant regulatory agency, notwithstanding
minor differences in clinically inactive components, and that they have no clinically meaningful differences, as compared to the marketed
biological products in terms of the safety, purity and potency of the products. The similar nature of a biosimilar and a reference product
is demonstrated by comprehensive comparability studies covering quality, biological activity, safety and efficacy.
In order to launch biosimilar
products in Israel, we need to obtain marketing authorization from the IMOH, which is subject to prior authorization obtained by the manufacturer
of the biosimilar product from the FDA or the EMA. Even if FDA or EMA authorization is provided, there can be no assurance that the IMOH
will accept such authorization as a reference and will grant us the authorization to distribute such biosimilar products in the Israeli
market. In the event we are unable to obtain the necessary marketing authorization to launch the products, we may not generate the expected
sales and profitability from these products, which could have a material adverse impact on our business, financial condition or results
of operations. Delays in the commercialization of such biosimilar products, including due to patent expirations of the reference biological
products or delays in completion of the manufacturer’s development process or obtaining marketing authorization, may expose us to
increased competition due to the entry of new competitors into the market, and may also reduce our ability to capture expected market
opportunities upon launch due to intensified price competition and/or reduced demand, which may adversely impact our potential sales and
profitability from these products.
Innovative pharmaceutical
products are generally protected for a defined period by various patents (including those covering drug substance, drug product, approved
indications, methods of administration, methods of manufacturing, formulations and dosages) and/or regulatory exclusivity, which are intended
to provide their holders with exclusive rights to market the products for the life of the patent or duration of the regulatory data protection
period. Biosimilar products are intended to replace such innovative pharmaceutical products upon the expiration or termination of their
exclusivity period or in such markets whereby such exclusivity does not exist. The launch of a biosimilar product may potentially result
in the infringement of certain IP rights and exclusivity and be subject to potential legal proceedings and restraining orders affecting
its potential launch. Such intellectual property threats may preclude the commercialization of such biosimilar product candidates, limit
the indications for which they can be marketed, and may result in incurring significant legal expenses and liabilities. Consequently,
we may not generate the expected sale and profitability from these products, which could have a material adverse impact on our business,
financial condition or results of operations.
In addition, the commercialization of biosimilars
includes the potential for steeper than anticipated price erosion due to increased competitive intensity, and lower uptake for biosimilars
due to various factors that may vary for different biosimilars (e.g., anti-competitive practices, physician reluctance to prescribe biosimilars
for existing patients taking the originator product, or misaligned financial incentives), all of which may affect our potential sales
and profitability from these products which could have a material adverse impact on our business, financial condition or results of operations.
20
Risks Related to Development, Regulatory Approval
and Commercialization of Product Candidates
Drug product development, including preclinical
and clinical trials, is a lengthy and expensive process and may not result in receipt of regulatory approval.
Before obtaining regulatory
approval for the sale of our product candidates, or for the marketing of existing products for new indications, we must conduct, at our
own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals and clinical trials to demonstrate
the safety and efficacy of our product candidates in humans. We cannot predict how long the approval processes of the FDA, the EMA, the
regulatory authorities in Israel or any other applicable regulatory authority or agency for any of our product candidates will take or
whether any such approvals ultimately will be granted. The FDA, the EMA, the regulatory authorities in Israel and other regulatory agencies
have substantial discretion in the relevant drug approval process over which they have authority, and positive results in preclinical
testing or early phases of clinical studies offer no assurance of success in later phases of the approval process. The approval process
varies from country to country and the requirements governing the conduct of clinical trials, product manufacturing, product licensing,
pricing and reimbursement vary greatly from country to country.
Preclinical and clinical testing
is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to its outcome. A failure of one
or more of our clinical trials can occur at any stage of testing. For example, in December 2025, the independent Data and Safety Monitoring
Board (DSMB) advised the Company that, based on a prespecified interim futility analysis, the Phase 3 InnovAATe trial of Inhaled AAT for
the treatment of AATD is unlikely to demonstrate a statistically significant benefit in its primary endpoint - lung function measured
by FEV1 and consequently, we reported on our decision to discontinue the trial. The decision to discontinue was based solely on the low
probability of achieving the efficacy endpoint and was not related to any identified safety concerns.
We rely, from time to time, on third parties
to conduct our preclinical and clinical trials. Any failure by these parties to properly perform their obligations could adversely affect
the development of our product candidates.
From time to time, we engage
third-party contractors, including study sites, university researchers, preclinical service providers, physicians and contract research
organizations (“CROs”), to support our development programs. Following our December 2025 decision to discontinue the clinical
trial of our inhaled AAT product candidate, the scope of such outsourced activities has been significantly reduced; however, we continue
to rely on third parties for certain remaining development, regulatory and preclinical activities, as well as for any future clinical
studies.
Although we oversee these
activities, we do not control all aspects of the performance of such contractors. We and our CROs must comply with applicable regulatory
requirements, including current Good Clinical Practices (“GCP”). Regulatory authorities may determine that studies conducted
on our behalf do not comply with GCP, which could require us to repeat studies, delay development or impact potential regulatory submissions.
Because these contractors
are not our employees, we cannot guarantee that they will devote adequate resources to our programs or perform in accordance with our
expectations or applicable requirements. If any third-party contractor fails to fulfill its obligations, does not meet expected timelines,
or produces data that are inaccurate or unreliable, our development efforts could be delayed or otherwise adversely affected. Despite
the reduced scope of outsourced clinical activities, continued reliance on such third parties presents risks that could negatively impact
our business, financial condition and results of operations.
From time to time, we participate in Investigator-Initiated
Clinical Trials, which are conducted and managed independently by external investigators or academic institutions. Any failure by investigators
or institutions to properly conduct these trials could restrict our ability to fully leverage clinical insights gained from such studies
and impede our product commercialization efforts
In addition to company-sponsored
studies, we from time to time participate in Investigator-Initiated Clinical Trials (“IITs”), which are conducted and managed
independently by external investigators or academic institutions. In IITs, we may provide study drug, limited funding, scientific input,
or other non-operational support; however, we do not control the design, conduct, data collection, analysis or reporting of such studies.
Because these studies are not sponsored by us, we have limited ability to ensure that they adhere to applicable regulatory requirements,
including GCP, data integrity standards or appropriate oversight and monitoring procedures. Any failure by investigators or institutions
to properly conduct these trials could result in unreliable data, negative clinical observations, publication of unfavorable results,
or safety findings that could adversely impact our ability to use the results of such IITs for the purpose of generating additional data
assisting us in our product commercialization efforts.
21
Furthermore, under typical
IIT arrangements, all intellectual property generated in the course of the study, including discoveries, know-how, data, and inventions,
remains with the principal investigator or the institution conducting the research. As a result, we may not obtain rights to potentially
valuable IP arising from the use or evaluation of our products in these studies. Our inability to secure access to IP developed in IITs
may therefore restrict our ability to fully leverage clinical insights gained from such studies and impede our product commercialization
efforts.
We may encounter unforeseen events that
delay or prevent us from receiving regulatory approval for our product candidates.
We have previously experienced
unforeseen events that delayed our ability to obtain regulatory approval for certain of our product candidates and may encounter similar
challenges in the future. These may include delays in the supply of clinical materials, slower-than-expected patient enrollment, inconclusive
or negative clinical results, or the need for additional studies requested by regulators. In some cases, we or our partners may determine
to suspend or discontinue clinical trials due to lack of efficacy, safety concerns, or other operational or strategic considerations.
For example, in December 2025, the independent DSMB advised the Company that, based on a prespecified interim futility analysis, the Phase
3 InnovAATe trial of Inhaled AAT for the treatment of AATD is unlikely to demonstrate a statistically significant benefit in its primary
endpoint - lung function measured by FEV1 and consequently, we reported on our decision to discontinue the trial. The decision to discontinue
was based solely on the low probability of achieving the efficacy endpoint and was not related to any identified safety concerns.
Regulatory authorities may
also require modifications to our clinical trial designs, impose additional requirements, or delay authorization to initiate or continue
trials. Moreover, audits or inspections by regulatory agencies could identify compliance issues that may require corrective action or
additional testing. If we experience delays or setbacks in our clinical development programs, we may be unable to obtain regulatory approval
on our anticipated timelines, or at all. Such delays could increase development costs, shorten the period of market exclusivity, or allow
competitors to advance their products more rapidly, which could adversely affect our ability to commercialize our product candidates and
our overall business prospects.
We may not be able to commercialize our
product candidates in development for numerous reasons.
Even if preclinical and clinical
trials are successful, we still may be unable to commercialize a product because of difficulties in obtaining regulatory approval for
its production process or problems in scaling that process to commercial production. In addition, the regulatory requirements for product
approval may not be explicit, may evolve over time and may diverge among jurisdictions and our third-party contractors, such as CROs,
may fail to comply with regulatory requirements or meet their contractual obligations to us.
Even if we are successful
in our development and regulatory strategies, we cannot provide assurance that any product candidate we may seek to develop or
are currently developing, will ever be successfully commercialized. We may not be able to successfully address patient needs, persuade
physicians and payors of the benefit of our product, and lead to usage and reimbursement. If such products are not eventually commercialized,
the significant expense and lack of associated revenue could materially adversely affect our business.
We may not be able to successfully
build and implement a commercial organization or commercialization program, with or without collaborating partners. The scale-up from
research and development to commercialization requires significant time, resources, and expertise, which will rely, to a large extent,
on third parties for assistance to help us in our efforts. Such assistance includes, but is not limited to, persuading physicians and
payors of the benefit of our product to lead to utilization and reimbursement, developing a healthcare compliance program, and complying
with post-marketing regulatory requirements.
22
The commercial success
of the products that we may develop, if any, will depend upon the degree of market acceptance by physicians, patients, healthcare payors,
opinion leaders, patients’ organizations, and others in the medical community that any such product obtains.
Following our December 2025
decision to discontinue the clinical trial of our inhaled AAT product candidate, our potential investigational products are at early stages
of development. Any product candidates that we may successfully develop, seek regulatory approval for, and bring to market may not achieve
meaningful market acceptance. Lack of market acceptance could prevent us from generating significant product revenues, impair our ability
to recover our research and development investments, and adversely affect our long-term growth strategy. The degree of market acceptance
of any future product candidates, if approved, will depend on numerous factors, many of which are outside our control, including:
● the prevalence and severity of any side effects;
● the efficacy, safety, and timing of introduction of alternative treatments;
● our ability to offer competitive pricing;
● the relative convenience and ease of administration of our products;
● the willingness of physicians to prescribe, and of patients to use, our products;
● the strength of our marketing, medical, and distribution support; and
● the availability of third-party coverage and reimbursement.
In addition, recommendations
or guidelines issued by governmental agencies, medical societies, patient advocacy groups, or other industry bodies that restrict or discourage
the use of a particular therapy could reduce the market potential of any future products, whether or not such recommendations are widely
adopted. Failure to achieve adequate market acceptance for any newly introduced products could materially and adversely impact our business,
financial condition and results of operations.
Risks Related to Our Operations and Industry
Regulatory approval for our products is
limited by the FDA, EMA, the IMOH and similar authorities in other jurisdictions to those specific indications and conditions for which
clinical safety and efficacy have been demonstrated, and the prescription or promotion of off-label uses could adversely affect our business.
Regulatory approval of our
Proprietary Products and Distribution products is limited to those specific diseases and indications for which our products have been
deemed safe and effective by the FDA, EMA, the IMOH or similar authorities in other jurisdictions. In addition to the regulatory approval
required for new formulations, any new indication for an approved product also requires regulatory approval. Once we produce a plasma-derived
therapeutic, we rely on physicians to prescribe and administer it as the product label directs and for the indications described on the
labeling. Although physicians may prescribe our product for off-label uses (i.e., uses and indications not described in the product’s
labeling as approved by the applicable regulatory authority) in their independent medical judgment, such off-label uses may result in
different safety and efficacy outcomes. If off-label use of our products is associated with adverse effects, safety concerns, lack of
efficacy, negative publicity, or other undesirable outcomes, the reputation of our products and our business may be harmed, demand for
our products may decline, and we may face increased regulatory scrutiny. Under certain circumstances, off-label use of our products may
increase the risk of product liability claims, which are expensive to defend and could divert our management’s attention, result
in substantial damage awards against us, and harm our reputation.
Furthermore, while physicians
may choose to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those approved
by regulatory authorities, our ability to promote the products is limited to those indications that are specifically approved by the FDA,
EMA, the IMOH or other regulators. Although regulatory authorities generally do not regulate the behavior of physicians, they do restrict
communications by manufacturers on the subject of off-label use. If our promotional activities fail to comply with these regulations or
guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, failure to follow FDA, OIG,
EMA, the IMOH or similar authorities in other jurisdictions rules and guidelines relating to promotion and advertising can lead to other
negative consequences, such as the suspension or withdrawal of an approved product from the market, enforcement letters, restrictions
on marketing or manufacturing, injunctions, and corrective actions. Other regulatory authorities may separately impose penalties including,
but not limited to, fines, disgorgement of money, suspension of ongoing clinical trials, refusal to approve pending applications or supplements
to approved applications submitted by us; restrictions on our or our contract manufacturers’ operations; product seizure or detention,
refusal to permit the import or export of products or criminal prosecution.
23
Regulatory inspections or audits conducted
by regulatory bodies and our partners may lead to monetary losses and inability to adequately manufacture or sell our products.
The regulatory authorities,
including the FDA, EMA, and IMOH, as well as our partners, may, at any time and from time to time, audit or inspect our facilities and
operations. Such audits or inspections may lead to disruption of work, and if we fail to pass such audits or inspections, the relevant
regulatory authority or partner may issue inspectional observations or findings that require us to implement corrective actions or other
remedial measures that may be costly or time-consuming. If we fail to maintain compliance or adequately remediate any findings, we could
be subject to regulatory or contractual actions that could limit, delay or prevent the manufacture, sale, and distribution of our products,
as well as cause damage to our reputation in the industry.
Laws and regulations governing the conduct
of international operations may negatively impact our development, manufacture, and sale of products outside of the United States and
require us to develop and implement costly compliance programs.
We must comply with numerous
laws and regulations in Israel and in each of the other jurisdictions in which we operate or plan to operate. The creation and implementation
of any required compliance programs is costly, and the programs are often difficult to enforce, particularly where we must rely on third
parties.
For example, the U.S. Foreign
Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, authorizing payment or offering
anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act
or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also requires
companies whose securities are listed in the United States to comply with certain accounting provisions. For example, such companies must
maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and
devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the
FCPA are enforced primarily by the U.S. Department of Justice, and the U.S. Securities and Exchange Commission (the “SEC”)
is involved with enforcement of the books and records provisions of the FCPA.
Compliance with the FCPA and
similar laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA
presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and
doctors and other hospital employees are considered as foreign officials. Additionally, pharmaceutical products are usually marketed by
the local distributors through government tenders, and the majority of pharmaceutical companies’ clients are HMOs which are foreign
government officials under the FCPA. Certain payments to hospitals in connection with clinical trials and other work, and certain payments
to HMOs have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.
The failure to comply with
laws governing international business practices may result in substantial penalties, including suspension or debarment from government
contracts. Violation of the FCPA can result in significant civil and criminal penalties. Indictment alone under the FCPA can lead to suspension
of the right to do business with the U.S. government until the pending claims are resolved. Conviction of a violation of the FCPA can
result in long-term disqualification as a government contractor. The termination of a government contract or relationship as a result
of our failure to satisfy any of our obligations under laws governing international business practices would have a negative impact on
our operations and harm our reputation and ability to procure government contracts. Additionally, the SEC also may suspend or bar issuers
from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.
24
If our manufacturing facility in Beit Kama,
Israel were to suffer a serious accident, contamination, force majeure event (including, but not limited to, a war, terrorist attack,
earthquake, major fire or explosion, etc.) materially affecting our ability to operate and produce saleable plasma-derived protein therapeutics,
all of our manufacturing capacity could be shut down for an extended period.
We rely on a single manufacturing
facility in Beit Kama, which is located in southern Israel, approximately 20 miles east of the Gaza Strip. A significant part of our revenues
in our Proprietary Products segment were derived and are expected to continue to be derived from products manufactured at this facility
and some of the products that are imported by us under our Distribution segment are packed and stored in this manufacturing facility.
Furthermore, our plans to expand the use of this facility to include the future production of WINRHO SDF, HEPAGAM B, and VARIZIG, which
are currently manufactured by Emergent, would, if implemented, further increase the criticality of this facility to our operations. If
this facility were to suffer an accident or a force majeure event, such as war, terrorist attack, earthquake, major fire or explosion,
major equipment failure or power failure lasting beyond the capabilities of our backup generators or similar event, or contamination,
our revenues would be materially adversely affected. For more information regarding the current security situation in Israel, see –
Risks Relating to Our Incorporation and Location in Israel – “Our business could be adversely affected by political, economic
and military instability in Israel and its region.” In such a situation, our manufacturing capacity could be shut down for an
extended period, we could experience a loss of raw materials, work in process or finished goods and imported products inventory and our
ability to operate our business would be harmed. In addition, in any such event, the reconstruction of our manufacturing facility and
storage facilities, and the regulatory approval of the new facilities could be time-consuming. During this period, we would be unable
to manufacture our plasma-derived protein therapeutics.
Our insurance against property
damage and business interruption insurance may be insufficient to mitigate the losses from any such accident or force majeure event. We
may also be unable to recover the value of the lost plasma or work-in-process inventories, as well as the associated sales opportunities
for products we are unable to produce or distribute, and we could experience the loss of customers during such period.
If our shipping or distribution channels
were to become inaccessible due to an accident, war, act of terrorism, strike, epidemic or pandemic or any other force majeure event,
our supply, production and distribution processes could be disrupted.
Most of our Proprietary Products
and Distribution products as well as most of the raw materials we utilize, including plasma and plasma derivatives, must be transported
under controlled temperature conditions, including temperature of -20 degrees Celsius (-4 degrees Fahrenheit), to ensure the preservation
of their proteins. Not all shipping or distribution channels are equipped to transport products or materials at these temperatures. If
any of our shipping or distribution channels become inaccessible because of a serious accident, war, act of terrorism, strike, epidemic
or pandemic or any other force majeure event, we may experience disruptions in continued availability of plasma and other raw materials,
delays in our production process or a reduction in our ability to distribute our Proprietary Products and Distribution products to our
customers in the markets in which we operate.
Failure to maintain the security of protected
health information or compliance with security requirements could damage our reputation with customers, cause us to incur substantial
additional costs and become subject to litigation.
Pursuant to applicable privacy
laws, we must comply with comprehensive privacy and security standards with respect to the use and disclosure of protected health information
and other personal information. If we do not comply with existing or new laws and regulations related to protecting privacy and security
of personal or health information, we could be subject to litigation costs and damages, monetary fines, civil penalties, or criminal sanctions.
We may be required to comply with the data privacy and security laws of other countries in which we operate or from which we receive data
transfers.
For example, the General Data
Protection Regulation (“GDPR”) has broad application and enhanced penalties for noncompliance. The GDPR, which is wide-ranging
in scope, governs the collection and use of personal data in the European Union and imposes operational requirements for companies that
receive or process personal data of residents of the European Union. The GDPR may apply to certain aspects of our operations, including
our clinical development related activities, which are currently limited following our decision to discontinue the Phase 3 InnovAATe trial
of Inhaled AAT for the treatment of AATD, as well as to other activities in which we hold or process personal data of residents of the
European Union.
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In addition, the Israeli Privacy
Protection Regulations (Information Security), 2017 as well as the recent and comprehensive Amendment No. 13 to the Privacy Protection
Law, which entered into effect in August 2025, now impose enhanced data protection, governance and security obligations on organizations
operating in Israel. Following the effective date of the amendment, the Israeli Privacy Protection Authority has expanded enforcement
powers, including the ability to issue administrative orders and monetary sanctions for noncompliance. As a result, our operations that
involve the processing of personal data in Israel are now subject to a stricter regulatory regime and increased exposure to enforcement
actions.
Furthermore, U.S. federal
and state regulators continue to adopt new, or modify existing laws and regulations addressing data privacy and the collection, processing,
storage, transfer and use of data, including the U.S. Health Insurance Portability and Accountability Act of 1996, as amended, and implementing
regulations (“HIPAA”) and other sector specific requirements. These evolving privacy, security and data protection laws and
regulations may impose increased business operational costs, require changes to our business, require notification to customers or workers
of a security breach, or restrict our use or storage of personal information. Our efforts to implement and maintain programs and controls
that comply with applicable data protection requirements are likely to impose additional costs on us, and we cannot predict whether the
interpretations of the requirements, or changes in our practices in response to new requirements or interpretations of the requirements,
could have a material adverse effect on our business.
We rely upon our CROs, third
party contractors and distributors to process personal information on our behalf, and we control only certain aspects of their activities.
Nevertheless, we are responsible for ensuring that their activities are conducted in accordance with privacy regulations and our reliance
on such CROs, third-party contractors and distributors does not relieve us of our regulatory responsibilities. While we take reasonable
and prudent steps to protect personal and health information and use such information in accordance with applicable privacy laws, a compromise
in our security systems that results in personal information being obtained by unauthorized persons or our failure to comply with security
requirements for financial transactions, could adversely affect our reputation with our clients and result in litigation against us or
the imposition of penalties, all of which may adversely impact our results of operations, financial condition and liquidity. In addition,
given that the privacy laws and regulations in the jurisdictions in which we operate are new and subject to further judicial review and
interpretation, it may be determined at a future time that although we take prudent measures to comply with such laws and regulations,
such measures will not be sufficient to meet future elaborations or interpretations of such laws and regulations.
If we are unable to successfully introduce
new products and indications or fail to keep pace with advances in technology, our business, financial condition and results of operations
may be adversely affected.
Our continued growth depends,
to a certain extent, on our ability to develop and obtain regulatory approvals of new products, new enhancements and/or new indications
for our products and product candidates. Obtaining regulatory approval in any jurisdiction, including from the FDA, EMA or any other relevant
regulatory agencies, involves significant uncertainty and may be time consuming and require significant expenditures.
The development of innovative
products and technologies that improve efficacy, safety, patients’ and clinicians’ ease of use and cost-effectiveness, involve
significant technical and business risks. The success of new product offerings will depend on many factors, including our ability to properly
anticipate and satisfy customer needs, adapt to new technologies, obtain regulatory approvals on a timely basis, demonstrate satisfactory
clinical results, manufacture products in an economic and timely manner, engage qualified distributors for different territories and establish
our sales force to sell our products, and differentiate our products from those of our competitors. If we cannot successfully introduce
new products, adapt to changing technologies or anticipate changes in our current and potential customers’ requirements, our products
may become obsolete, and our business could suffer.
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Product liability claims or product recalls
involving our products, normal source plasma we sell to third parties, or products manufactured by third parties that we distribute could
have a material adverse effect on our business.
Our business exposes us to
the risk of product liability claims that are inherent in the manufacturing, distribution and sale of our Proprietary Products, normal
source plasma, Distribution products and other drug products. We face an inherent risk of product liability exposure related to the testing
of our product candidates in human clinical trials and an even greater risk when we commercially sell any products, including those manufactured
by others that we distribute in Israel and in other territories. If we cannot successfully defend ourselves against claims that our product
candidates or commercial stage products, including our Proprietary Products, normal source plasma and Distribution products, caused injuries,
or if the indemnities we have negotiated do not adequately cover losses, we could incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in:
● decreased demand for our Proprietary and Distribution products and any product candidates that we may develop;
● injury to our reputation;
● difficulties in recruiting new participants to our future clinical trials and withdrawal of current clinical trial participants;
● costs to defend the related litigation;
● substantial monetary awards to trial participants or patients;
● difficulties in finding distributors for our products;
● difficulties in entering into strategic partnerships with third parties;
● diversion of management’s attention;
● loss of revenue;
● the inability to commercialize any products that we may develop;
● higher insurance premiums;
● suspension or termination of purchases by significant plasma customers;
● costs and losses associated with “lookback”/“traceback” investigations and potential withdrawals or destruction of intermediates or finished plasma-derived medicinal products manufactured from our plasma; and
● adverse findings in quality or regulatory audits by customers or regulators leading to sales holds or contract termination.
Plasma is biological matter
that is capable of transmitting viruses, infections and pathogens, whether known or unknown. Therefore, plasma derivative products, if
not properly tested, inactivated, processed, manufactured, stored and transported, could cause serious disease and possibly death to the
patient. Further, even when such steps are properly performed, viral and other infections may escape detection using current testing methods
and may not be susceptible to inactivation methods. Any transmission of disease using one of our products (including plasma supplied by
us as raw material) or third-party products sold by us could result in claims against us by or on behalf of persons allegedly infected
by such products.
In addition, we sell and distribute
third-party products in Israel, and the laws of Israel could also expose us to product liability claims for those products. Furthermore,
the presence of a defect (or a suspicion of a defect) in a product could require us to carry out a recall of such product. A product liability
claim, or a product recall could result in substantial financial losses, negative reputational repercussions, loss of business and an
inability to retain customers. Although we maintain insurance for certain types of losses, claims made against our insurance policies
could exceed our limits of coverage or be outside our scope of coverage. Additionally, as product liability insurance is expensive and
can be difficult to obtain, a product liability claim could increase our required premiums or otherwise decrease our access to product
liability insurance on acceptable terms. In turn, we may not be able to maintain insurance coverage at a reasonable cost and may not be
able to obtain insurance coverage that will be adequate to satisfy liabilities that may arise.
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In addition, our contracts
with other product manufacturers and with our sub-distributors distributing their products in the MENA region or other countries may not
be fully back-to-back with respect to warranties, quality obligations, recall responsibilities, pharmacovigilance, intellectual property
indemnities, or liability caps. In addition, our insurance or that of our partners may exclude or limit recovery for certain losses. As
a result, product liability claims, recall costs, regulatory penalties, or third-party claims may not be reimbursed or may exceed available
coverage, which could materially adversely affect our business, financial condition, and results of operations.
Moreover, contractual indemnities
owed to or claimed by third party plasma-derived medicinal products manufacturers in connection with plasma we supply may not be fully
covered by our insurance, and recall or withdrawal costs initiated by such manufacturers could materially increase our uninsured exposure.
Uncertainty surrounding and future changes
to healthcare law in the United States and other United States Government related mandates may adversely affect our business.
In the U.S. and in some foreign
jurisdictions there has been, and continues to be, significant legislative and regulatory changes and proposed changes regarding the healthcare
system that could prevent or delay marketing approval of product candidates, restrict or regulate post-approval activities, and affect
the profitable sale of product candidates. This legislation and regulatory activity, as well as the proposed changes, have created uncertainty
as to whether the industry will continue to experience fundamental change as a result of regulatory reform or legislative reform. There
is significant interest among legislators and regulators in promoting changes in healthcare systems with the stated goals of containing
healthcare costs, improving quality and/or expanding access. In the United States, for example, the pharmaceutical industry has been a
particular focus of these efforts and has been significantly affected and continues to face major uncertainty due to the status of legislative
initiatives surrounding healthcare reform. The Patient Protection and Affordable Care Act of 2010, as amended by the Healthcare and Education
Reconciliation Act of 2010, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly
affected the pharmaceutical and healthcare industries. On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was
signed into law. The IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending
by the federal government. Implementation of novel and seminal provisions in the IRA related to prescription drug pricing and spending
will continue over the next several years and could impact our operations and could have an adverse impact on our ability to generate
revenues in the United States. Although these provisions of the IRA have been challenged in court, largely on constitutional grounds,
by multiple pharmaceutical manufacturers, to date, the majority of these challenges have been unsuccessful. However, these suits will
likely continue and the ultimate effects of such legal challenges are unclear.
In the coming years, additional
changes could be made to U.S. governmental healthcare programs and U.S. healthcare laws that could significantly impact the success of
our products. There has been heightened governmental scrutiny in recent years over the manner in which manufacturers set prices for their
marketed products and the cost of prescription drugs to consumers and government healthcare programs, which have resulted in several recent
Congressional inquiries and proposed and enacted bills designed to, among other things, reduce the cost of prescription drugs, bring more
transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for products. In addition, the federal government has shown significant interest in implementing cost containment
programs, including price-controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription
drugs to limit the growth of government paid health care costs.
In addition, individual states
have enacted drug price transparency laws that may impact our decision-making about price increases, including the rate and frequency
of such increases. The requirements under these laws vary state-by-state and include obligating manufacturers to provide advance notice
of planned price increases, increase amounts and factors considered for those amounts, wholesale acquisition costs, as well as additional
information for new drugs. Many states may impose penalties for noncompliance with these requirements, including for failure to report
or submission of inaccurate or late reports.
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We cannot predict what other
legislation relating to our business or to the health care industry may be enacted, or what effect such legislation or other regulatory
actions may have on our business, prospects, operating results and financial condition.
Recent public health emergencies
and national security concerns shined a spotlight on the supply chain for essential medical products, medical countermeasures, and critical
inputs to those products and raised legislative and regulatory interest in creating more resiliency in the supply chain, including more
domestic manufacturing of essential medical products, medical countermeasures, and critical inputs. There has been significant congressional
interest in oversight of pharmaceutical supply chain resiliency as well as several legislative proposals to create incentives for domestic
manufacturing. There has also been significant executive branch activity to encourage American manufacturing, which may impact FDA-related
products. In November 2023, President Biden announced a new White House Council on Supply Chain Resilience to advance a government-wide
strategy to build supply chain resilience in critical industries such as essential medical products and countermeasures. This Council
was later formalized by Executive Order 14123 titled “White House Council on Supply Chain Resilience” on June 14, 2024. As
part of that effort, on December 27, 2023, President Biden issued a Presidential Determination under the Defense Production Act (DPA)
to enable the Department of Health and Human Services to increase investment in domestic manufacturing of essential medicines, medical
countermeasures, and critical inputs deemed as essential to the national defense. Also, in May 2025, Executive order 14293 titled
“Regulatory Relief to Promote Domestic Production of Critical Medicines,” directs federal agencies to identify and reduce
regulatory barriers to expanding U.S. manufacturing capacity for critical medicines. In addition, we expect there will continue to be
legislative and regulatory efforts to increase domestic manufacturing, including potentially efforts to expedite drug approvals for products
that could be competitors to ours. We cannot predict what effect such legislation or regulatory actions, or implementation of the supply
chain resiliency measures and DPA authorities, may have on our business, prospects, operating results and financial condition.
Our products and any future approved products
remain subject to extensive ongoing regulatory obligations and oversight, including post-approval requirements, that could result in penalties
and significant additional expenses and could negatively impact our and our collaborators’ ability to commercialize our current
and any future approved products.
Any product that has received
regulatory approval remains subject to extensive ongoing obligations and continued review from applicable regulatory agencies. These obligations
include, among other things, drug safety reporting and surveillance, submission of other post-marketing information and reports, compliance
with promotional requirements, manufacturing processes and practices, product labeling, confirmatory or post-approval clinical research,
import and export requirements, record keeping and reporting. Compliance with these obligations may result in significant expense and
limit our ability to commercialize our current and any future approved products. Any violation, by us or our partners, of ongoing regulatory
obligations could result in restrictions on the applicable product, including the suspension or withdrawal of the applicable product from
the market.
If FDA approval is granted
via the accelerated approval pathway or a product receives conditional marketing authorization from another comparable regulatory agency,
we may be required to conduct a post-marketing confirmatory trial in support of full approval and to comply with other additional requirements.
An unsuccessful post-marketing study or failure to complete such a study with due diligence could result in the withdrawal of marketing
approval. Post-marketing studies may also suggest unfavorable safety information that could require us to update the product’s prescribing
information or limit or prevent the product’s widespread use. Under the Food and Drug Omnibus Reform Act of 2022 (“FDORA”),
FDA is permitted to require accountability and enforce the post-marketing requirements and commitments associated with accelerated approval.
FDA has also continued to update its accelerated approval policies, including expectations for clinical trial endpoints. Furthermore,
under FDORA, FDA can issue fines against companies that fail to conduct due diligence on any post-approval confirmatory trial or do not
submit timely reports to the agency on their progress. There can be no assurance that FDA would allow any of our product candidates to
proceed on an accelerated approval pathway, and even if FDA did allow such pathway, there can be no assurance that any expedited development,
review, or approval will be granted on a timely basis, or at all.
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We and the manufacturers of
our current and any future approved products are also required, or will be required, to comply with cGMP, regulations, which include requirements
relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation. Further, regulatory
agencies must approve these manufacturing facilities before they can be used to manufacture our products and product candidates, and these
facilities are subject to ongoing regulatory inspections. In addition, any approved product, its manufacturer and the manufacturer’s
facilities are subject to continual regulatory review and inspections, including periodic unannounced inspections. Failure by us or our
partners to comply with applicable FDA and other regulatory requirements may subject us to administrative or judicially imposed sanctions
and other consequences, including:
● issuance of Form FDA 483 notices or Warning Letters by the FDA or other regulatory agencies;
● imposition of fines, civil penalties, or other monetary sanctions;
● criminal investigations or prosecutions;
● injunctions, suspensions, or revocations of regulatory approvals or marketing authorizations;
● suspension or termination of any ongoing clinical trials;
● total or partial suspension of manufacturing;
● delays in regulatory approvals and commercialization;
● refusal by the FDA to approve pending applications or supplements to approved applications submitted by us;
● refusals to permit drugs to be imported into or exported from the United States and certain jurisdictions;
● restrictions on operations, including costly new manufacturing requirements;
● product holds, recalls, seizures, detention, or withdrawal of the affected product from the market; and
● reputational harm.
The policies of the FDA and
other regulatory agencies may change, and additional laws and regulations may be enacted that could prevent or delay regulatory approval
of our product candidates or of our products in any additional indications or territories, or further restrict or regulate post-approval
activities. Any problems with a product or any violation of ongoing regulatory obligations could result in restrictions on the applicable
product, including the withdrawal of the applicable product from the market. If we or our partners are not able to maintain regulatory
compliance, we might not be permitted to continue commercializing our current products or to successfully commercialize any future approved
products and our business, financial condition, and operations could be adversely affected.
Laws pertaining to health
care fraud and abuse could materially adversely affect our business, financial condition and results of operations.
The laws governing our conduct
in the United States are enforceable by criminal, civil, and administrative penalties. Violations of laws such as the Federal False Claims
Act (the “FCA”), the Physician Payments Sunshine Act or a provision of the U.S. Social Security Act known as the “federal
Anti-Kickback Statute,” or any regulations promulgated under their authority may result in jail sentences, fines or exclusion from
federal and state health care programs, as may be determined by the Department of Health and Human Services, the Department of Defense,
other federal and state regulatory authorities and the federal and state courts. There can be no assurance that our activities will not
come under the scrutiny of regulators and other government authorities or that our practices will not be found to violate applicable laws,
rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws.
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For example, under the federal
Anti-Kickback Statute, and similar state laws and regulations, even common business arrangements, such as discounted terms and volume
incentives for customers in a position to recommend or choose drugs and devices for patients, such as physicians and hospitals, can result
in substantial legal penalties, including, among others, exclusion from Medicare and Medicaid programs, if those business arrangements
are not appropriately structured to be compliant with the applicable legal requirements. Also, certain business practices, such as payment
of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare
providers that prescribe products for uses not approved by the FDA and financial support for continuing medical education programs, must
be conducted within narrowly prescribed and controlled limits to avoid the possibility of wrongfully influencing healthcare providers
to prescribe or purchase particular products or as a reward for past prescribing. Under the federal Anti-Kickback Statute, a person or
company need not have actual knowledge or specific intent to violate the Statute in order to have committed a violation. Therefore, our
arrangements with potential referral sources must be structured with care to comply with applicable requirements. Manufacturers like us
can be held liable under the False Claims Act if they are determined to have caused the submission of false or fraudulent claims to the
government for reimbursement. This can result from prohibited activities such as off-label marketing, providing inaccurate billing or
coding information to healthcare providers and other customers, or violations of the federal Anti-Kickback Statute Significant enforcement
activity has been the result of actions brought by relators, who file complaints in the name of the United States (and if applicable,
particular states) under federal and state False Claims Act statutes and can be entitled to receive a significant portion (often as great
as 30%) of total recoveries. Also, violations of the False Claims Act can result in treble damages, and each false claim submitted can
be subject to a penalty of up to $28,619 per claim. Transfers of value to certain healthcare practitioners and institutions must be tracked
and reported in accordance with the Physician Payments Sunshine Act and various state laws. The Physician Payments Sunshine Act imposes
reporting and disclosure requirements for pharmaceutical and medical device manufacturers with regard to a broad range of payments, ownership
interests, and other transfers of value made to certain physicians, physician assistants, nurse practitioners, clinical nurse specialists,
certified registered nurse anesthetists, certified nurse-midwives and certain teaching hospitals. A number of states have similar laws
in place and often require reporting for other categories of healthcare professionals, such as nurses. Additional and stricter prohibitions
could be implemented by federal and state authorities. Where practices have been found to involve improper incentives to use products,
government investigations and assessments of penalties against manufacturers have resulted in substantial damages and fines. Many manufacturers
have been required to enter into consent decrees, corporate integrity agreements, or orders that prescribe allowable corporate conduct.
Failure to satisfy requirements under the FDCA can also result in penalties, as well as requirements to enter into consent decrees or
orders that prescribe allowable corporate conduct. On November 16, 2020, the U.S. Health and Human Services (HHS) Office of Inspector
General (OIG) issued a Special Fraud Alert discussing the fraud and abuse risks associated with payments to physicians related to speaker
programs sponsored by pharmaceutical and medical device companies. OIG expressed skepticism regarding the educational value of these industry-sponsored
speaker programs and warned of the inherent fraud and abuse risks of these programs. Efforts to ensure that our business arrangements
with third parties, including payments to healthcare providers and entities, comply with applicable healthcare laws and regulations involve
substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current
or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. Any action
against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses
and divert our management’s attention from the operation of our business.
To market and sell our products
outside the United States, we must obtain and maintain regulatory approvals and comply with regulatory requirements in such jurisdictions.
The approval procedures vary among countries in complexity and timing. We may not obtain approvals from regulatory authorities outside
the United States on a timely basis, if at all, and in such case, we would be precluded from commercializing products in those markets.
In addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals. In
these countries, pricing discussions with governmental authorities can take considerable time after the receipt of marketing approval
for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares
the cost-effectiveness of our product candidate to other available therapies. Such trials may be time-consuming and expensive and may
not show an advantage in cost-efficacy for our products. If reimbursement of our products is unavailable or limited in scope or amount,
or if pricing is set at unsatisfactory levels, in either the United States or the European Union, we could be adversely affected. Also,
under the FCPA, the United States has regulated conduct by U.S. businesses occurring outside of the United States, generally prohibiting
remuneration to foreign officials for the purpose of obtaining or retaining business. Additionally, similar to the Physician Payments
Sunshine Act, there are legal and regulatory obligations outside the United States that include reporting requirements detailing interactions
with and payments to healthcare practitioners. See — General Risks – “We are subject to risks associated with doing
business globally”.
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To enhance compliance with
applicable health care laws, and mitigate potential liability in the event of noncompliance, regulatory authorities, such as the HHS OIG,
have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the elements
of an effective compliance and ethics program described in Section 8B2.1 of the U.S. Sentencing Commission Guidelines Manual. Increasing
numbers of U.S.-based pharmaceutical companies have such programs. We have adopted U.S. healthcare compliance and ethics programs that
incorporate the HHS OIG’s recommendations; however, there can be no assurance that following the adoption of such programs we will
avoid any compliance issues.
In addition to the federal
fraud, waste, and abuse laws noted, there are analogous U.S. state laws and regulations, such as state anti-kickback and false claims
laws, and other state laws addressing the medical product and healthcare industries, which may apply to items or services reimbursed by
any third-party payor, including commercial insurers, and in some cases may apply regardless of payor (i.e., even if reimbursement is
not available). Some state laws are constructed in accordance with certain industry voluntary compliance guidelines (e.g., the PhRMA or
AdvaMed Codes of Ethics), or the relevant compliance program guidance promulgated by the federal government (HHS-OIG) in addition to other
requirements, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance
efforts.
Compliance efforts related
to such laws are costly, and failure to comply could subject us to enforcement action. The shifting compliance environment and the need
to build and maintain a robust and expandable systems to comply with multiple jurisdictions with different compliance and/or reporting
requirements increases the possibility that we may run afoul of one or more of the requirements.
Finally, regulations in both
the U.S. and other countries are subject to constant change. There can be no assurance that we can meet the requirements of future regulations
or that compliance with current regulations assures future capability to distribute and sell our products.
We could be adversely affected if other
government or private third-party payors decrease or otherwise limit the amount, price, scope or other eligibility requirements for reimbursement
for the purchasers of our products.
Prices in many of our principal
markets are subject to local regulation and certain pharmaceutical products, such as our Proprietary and Distribution products, are subject
to price controls. In the United States, where reimbursement levels for our products are substantially established by third-party payors,
a reduction in the payors’ amount of reimbursement for a product may cause groups or individuals dispensing the product to discontinue
administration of the product, to administer lower doses, to substitute lower cost products or to seek additional price-related concessions.
These actions could have a negative effect on our financial results, particularly in cases where our products command a premium price
in the marketplace or where changes in reimbursement rates induce a shift in the site of treatment. In the United States, third-party
payors are increasingly challenging prices charged for drug products. In addition, payors are also increasingly refusing to provide coverage
for products. No uniform policy for coverage and reimbursement for products exists among third-party payors in the United States. Coverage
and reimbursement for products can differ significantly among payors, and one third-party payor’s determination to provide coverage
for a product candidate does not assure that other payors will also provide coverage for the product candidate. As a result, the coverage
determination process can be a time consuming and costly process. Further, a payor’s decision to provide coverage for a product
does not imply that an adequate reimbursement rate will be available. Additionally, coverage policies and third-party reimbursement rates
may change at any time. The existence of these certain direct and indirect price controls and pressures over our products has affected,
and may continue to materially adversely affect, our ability to maintain or increase gross margins.
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Also, the intended use of
a drug product by a physician can affect pricing. Physicians frequently prescribe legally available therapies for uses that are not described
in the product’s labeling and that differ from those tested in clinical studies and approved by the FDA or similar regulatory authorities
in other countries. These off-label uses are common across medical specialties, and physicians may believe such off-label uses constitute
the preferred treatment or treatment of last resort for many patients in varied circumstances. Reimbursement for such off-label uses may
not be allowed by government payors. If reimbursement for off-label uses of products is not allowed by Medicare or other third-party payors,
including those in the United States or the European Union, we could be adversely affected. For example, Centers for Medicare and Medicaid
(“CMS”) could initiate an administrative procedure known as a National Coverage Determination (“NCD”), by which
the agency determines which uses of a therapeutic product would be reimbursable under Medicare and which uses would not. This determination
process can be lengthy, thereby creating a long period during which the future reimbursement for a particular product may be uncertain.
If we fail to comply with our obligations
under U.S. governmental pricing programs, we could be required to reimburse government programs for underpayments and could pay penalties,
sanctions, and fines.
In the United States, pricing
and reimbursement for our products depend in part on government regulation. Any significant efforts at the federal or state levels to
reform the healthcare system by changing the way healthcare is provided or funded or more directly impose controls on drug pricing, government
reimbursement, and access to medicines on public and private insurance plans could have a material impact on us. In addition, in order
to have our products covered by Medicaid, we must offer discounts or rebates on purchases of pharmaceutical products under various federal
and state laws and programs. We also must report specific prices to government agencies. The calculations necessary to determine the prices
reported are complex and the failure to do so accurately may expose us to enforcement measures that could negatively affect our results,
our business operations, and our continued participation in government healthcare programs, like Medicaid.
Changes to the Medicaid program
or the federal 340B drug pricing program, which imposes ceilings on prices that drug manufacturers can charge for medications sold to
certain health care facilities, could have a material impact on our business. Additional changes to the 340B program are undergoing review
and their status is unclear. The HHS has sent letters to numerous manufacturers that have implemented contract pharmacy integrity initiatives
expressing the view that their programs are in violation of the 340B statute and referring those programs for potential enforcement action.
Several manufacturers have challenged HHS’s enforcement letters in federal court and litigation is ongoing in those cases. We believe
that our program is consistent with the statute. However, the end-result of HHS’s efforts and the result of the legal challenges
to such efforts are unclear. Additional legal or legislative developments at the federal or state level with respect to the 340B program
may have an adverse impact on our integrity initiative, and we may face enforcement action or penalties that could negatively impact our
results, depending upon such developments.
We are subject to extensive environmental,
health and safety, and other laws and regulations.
Our business involves the
controlled use of hazardous materials, various biological compounds and chemicals. The risk of accidental contamination or injury from
these materials cannot be eliminated. If an accident, spill or release of any regulated chemicals or substances occurs, we could be held
liable for resulting damages, including for investigation, remediation and monitoring of the contamination, including natural resource
damages, the costs of which could be substantial. In addition, some of the licenses and permits granted to us may be suspended or revoked,
resulting in our inability to conduct our regular business activity, manufacture and/or distribute our products for an extended period
of time or until we take remedial actions. We are also subject to numerous environmental, health and workplace safety laws and regulations,
including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials and chemicals.
Although we maintain workers’ compensation insurance to cover the costs and expenses that may be incurred because of injuries to
our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities.
Additional or more stringent federal, state, local or foreign laws and regulations affecting our operations may be adopted in the future.
We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these or certain
other laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs
to install new or updated pollution control equipment, modify our operations or perform other corrective actions at our respective facilities.
In addition, fines and penalties may be imposed for noncompliance with environmental, health and safety and other laws and regulations
or for the failure to have, or comply with the terms and conditions of, required environmental or other permits or consents. We are subject
to future audits by the Environmental Health Department of the Regional Health Bureau of the IMOH and the Ministry of Environmental Protection
of Israel and may be required to perform certain actions from time to time in order to comply with these guidelines and their requirements.
We do not expect the costs of complying with these guidelines to be material to our business. See “Item 4. Information on the Company
— Business Overview — Environmental.”
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Under the Israeli Economic
Competition Law, 5758-1988, as amended (the “Competition Law”), a company that supplies or acquires more than 50% of any product
or service in Israel in a relevant market may be deemed to be a monopoly. In addition, any company that has “significant market
power” (within the meaning of the Competition Law), even if it does not hold market share that is greater than 50%, shall be deemed
to be a monopolist under the Competition Law. A monopolist is prohibited from participating in certain business practices, including unreasonably
refusing to sell products or provide services over which a monopoly exists, charging unfair prices for such products or services, and
abusing its position in the market in a manner that might reduce business competition or harm the public. In addition, the General Director
of the Israeli Competition Authority may determine that a company is a monopoly and has the right to order such company to change its
conduct in matters that may adversely affect business competition or the public, including by imposing restrictions on its conduct. Depending
on the analysis and the definition of the different products we distribute in the markets in which we operate, we may be deemed to be
a “monopoly” under the Competition Law with respect to certain of our products. Furthermore, following an amendment to the
Competition Law that became effective in August 2015, which repealed the statutory exemption that existed under the Competition Law for
restrictive arrangements that were mutually exclusive arrangements, we may face difficulties in certain cases negotiating distribution
agreements with foreign pharmaceutical manufacturers.
We have entered into a collective bargaining
agreement with the employees’ committee and the Histadrut (General Federation of Labor in Israel), and we have incurred and could
in the future incur labor costs or experience work stoppages or labor strikes as a result of any disputes in connection with such agreement.
In December 2013, we
signed a collective bargaining agreement with the employees’ committee established by our employees at our Beit Kama
production facility in Israel and the Histadrut (General Federation of Labor in Israel) (“Histadrut”), which expired in
December 2017. In November 2018, we signed a further collective bargaining agreement with the employees’ committee and the
Histadrut, which expired in December 2021. In July 2022, we signed a new collective agreement with the Histadrut; while the
agreement will be effective through the end of 2029, certain economic terms may be renegotiated by the parties following the lapse
of the four-year anniversary of the agreement by January 1, 2026. In September 2025, we entered into a negotiation process with the
employees’ committee and the Histadtrut related to the economic terms under the collective bargaining agreement, and such
process is still ongoing. We have experienced labor disputes and work stoppages in the past at our Beit Kama facility. For example,
in March 2022, during our negotiations with the Histadrut and the employees’ committee on the renewal of the collective
bargaining agreement, the employee’s committee declared a labor dispute, and in April 2022, a strike was initiated by the
employee’s committee, which continued until the new agreement was signed in July 2022. As a result of the labor strike, in the
year ended December 31, 2022, our gross profit was impacted by a $4.3 million loss associated with the effect of the work-stoppage
at the Israeli plant. In addition, in December 2020, during the course of our negotiations with the Histadrut and the
employees’ committee on severance remuneration for employees who may be laid-off as part of the workforce down-sizing as a
result of the transfer of GLASSIA manufacturing to Takeda that we implemented during 2021, the employee’s committee declared a
labor dispute, which was subsequently concluded during February 2021 following the execution of a special collective bargaining
agreement governing such severance terms. In March 2023, we entered into an additional special collective bargaining agreement with
the employees’ committee and the Histadtrut governing severance remuneration terms for employees who may be laid off in
connection with the potential staff reductions, when needed, in order to adjust to lower plant utilization. Any future disputes with
the employees’ committee and the Histadrut over the implementation or the interpretation or the renewal of the collective
bargaining agreement may lead to additional labor costs and/or work stoppages, which could adversely affect our business operations,
including through a loss of revenue and strained relationships with customers.
Following the establishment of our U.S.
commercial operations through our subsidiaries Kamada Inc. and Kamada Plasma LLC, we have entered into intercompany agreements for the
transfer of products, which require us to meet transfer pricing requirements under both Israeli and U.S. tax legislation.
Following the establishment
of our U.S. commercial operations through our subsidiaries Kamada Inc. and Kamada Plasma LLC, we have entered into intercompany agreements
for the transfer of products. Our intercompany agreements for the sale of products or provision of services are required to be made on
an arms-length basis and must comply with transfer pricing provisions of tax laws in Israel and the U.S. In order to determine the adequate
transfer pricing arrangement, we are required to perform a transfer pricing study to compare the contemplated intercompany transaction
with similar transactions entered into amongst non-related parties. There can be no assurance that the Israeli and/or tax authorities
would accept such transfer pricing study when determining our, or any of our subsidiary’s income, profitability and tax assessment.
Failure to comply with transfer pricing rules may result in increased tax expenses, penalties and legal actions against us, our subsidiaries
or our executive officers.
34
We may be exposed to tax reporting requirements
and tax expense in multiple jurisdictions in which our products are being distributed.
We are incorporated under
the laws of the State of Israel and some of our subsidiaries are organized under the laws of Delaware and Ireland and as a result, we
are subject to local tax requirements and potential tax expenses in these territories. We store, distribute and sell our Proprietary products
in multiple other countries in which we do not have any subsidiaries or physical presence; nevertheless, in some of these countries, pursuant
to local legislation, we may be considered as “conducting business activities” which may expose us to certain reporting requirements
and potential direct or indirect tax payments. Failure to comply with such local legislation may result in increased tax expenses, penalties
and legal action against us, our subsidiaries or our executive officers.
Increasing use of artificial intelligence
and new technologies could give rise to liability, breaches of data security, or reputational damage.
We and our employees increasingly
utilize artificial intelligence (“AI”) tools to support various business functions. While these tools offer efficiencies,
they may also result in potential inaccuracies and miscommunications leading to misunderstandings with stakeholders, such as customers
and regulatory entities.
Furthermore, the use of AI
solutions by our employees or third parties on which we rely, may lead to the public disclosure of confidential information (including
personal data and proprietary information) in contravention of our internal policies, data protection laws, or contractual requirements.
In the future, we may consider
the use of additional AI tools for various aspects of our business. While these advancements could provide significant benefits, they
also present new risks. The integration of new AI technologies could lead to unforeseen technical challenges, increased reliance on AI
systems, and potential disruptions in our operations. Additionally, the rapidly evolving nature of AI may necessitate continuous updates
to our risk management strategies and compliance frameworks to address emerging ethical and regulatory concerns. As we expand our use
of AI, we are committed to mitigating these risks through robust data protection measures, regular monitoring, and ongoing employee training;
however, there can be no assurance that these measures will fully mitigate the associated risks.
Risks Related to Intellectual Property
Our success depends in part on our ability
to obtain and maintain protection in the United States and other countries for the intellectual property relating to or incorporated into
our technology and products, including the patents protecting our manufacturing process.
Our success depends in large
part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering
or incorporated into our technology and products, especially intellectual property related to our manufacturing processes.
However, the patent landscape
in the biotechnology and pharmaceutical fields is highly complicated and uncertain and involves complex legal, factual and scientific
questions. Changes in either patent laws or in the interpretation of patent laws in the United States and other countries may diminish
the value and strength of our intellectual property or narrow the scope of our patent protection. In addition, we may fail to apply for
or be unable to obtain patents necessary to protect our technology or products or enforce our patents due to lack of information about
the exact use of our processes by third parties. Even if patents are issued to us or to our licensors, they may be challenged, narrowed,
invalidated, held to be unenforceable or circumvented, which could limit our ability to prevent competitors from using similar technology
or marketing similar products, or limit the length of time our technologies and products have patent protection. Additionally, many of
our patents relate to the processes we use to produce our products, not to the products themselves. In many cases, the plasma-derived
products we produce or intend to develop in the future will not, in and of themselves, be patentable. Since many of our patents relate
to processes or uses of the products obtained therefrom, if a competitor is able to utilize a process that does not rely on our protected
intellectual property, that competitor could sell a plasma-derived product similar to one we have developed or sell it without infringing
these patents.
35
Patent rights are territorial;
thus, any patent protections we have will only be enforceable in those countries in which we have issued patents. In addition, the laws
of certain countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and the European Union.
Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents, or produce drugs
in countries where we have not applied for patent protection or that do not recognize or provide enforcement mechanisms for our patents.
Furthermore, it is not possible to know the scope of claims that will be allowed in pending applications or which claims of granted patents,
if any, will be deemed enforceable in a court of law.
Due to the extensive time
needed to develop, test and obtain regulatory approval for our therapeutic candidates or any product we may sell or market, any patents
that protect our therapeutic candidates or any product we may sell, or market may expire early during commercialization. This may
reduce or eliminate any market advantages that such patents may give us. Following patent expiration, we may face increased competition
through the entry of recombinant or generic products into the market and a subsequent decline in market share and profits.
In some cases, we may rely
on our licensors or partners to conduct patent prosecution, patent maintenance or patent defense on our behalf. Therefore, our ability
to ensure that these patents are properly prosecuted, maintained, or defended may be limited, which may adversely affect our rights in
our therapeutic candidates and potential approved for marketing products. Any failure by our licensors or development or commercialization
partners to properly conduct patent prosecution, maintenance, enforcement, or defense could materially harm our ability to obtain suitable
patent protection covering our therapeutic candidates or products or ensure freedom to commercialize the products in view of third-party
patent rights, thereby materially reducing our potential profits.
Our patents also may not afford
us protection against competitors or other third parties with similar technology. Because patent applications worldwide are typically
not published until 18 months after their filing, and because publications of discoveries in scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that we or they were the first to file for protection of the inventions set forth
in such patent applications. As a result, the patents we own and license may be invalidated in the future, and the patent applications
we own and license may not be granted. Moreover, in the US, during 2012, the Leahy-Smith America Invents Act (“AIA”) created
a new legal proceeding, the inter partes review petition, that allows third parties to challenge the validity of patents before
the Patent Trials and Appeals Board.
The costs of these proceedings
could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated patent position. In addition,
if a third party prevails in such a proceeding and obtains an issued patent, we may be prevented from practicing technology or marketing
products covered by that patent. Additionally, patents and patent applications owned by third parties may prevent us from pursuing certain
opportunities such as entering into specific markets or developing or commercializing certain products or reducing the cost effectiveness
of the relevant business as a result of needing to make royalty payments or other business conciliations. Finally, we may choose to enter
into markets where certain competitors have patents or patent protection over technology that may impede our ability to compete effectively.
36
Our patents are due to expire
at various dates between 2027 and 2044. However, because of the extensive time required for development, testing and regulatory review
of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain
in force for only a short period following commercialization, thereby limiting advantages of the patent. Our pending and future patent
applications may not lead to the issuance of patents or, if issued, the patents may not be issued in a form that will provide us with
any competitive advantage. We also cannot guarantee that: any of our present or future patents or patent claims or other intellectual
property rights will not lapse or be invalidated, circumvented, challenged or abandoned; our intellectual property rights will provide
competitive advantages or prevent competitors from making or selling competing products; our ability to assert our intellectual property
rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;
any of our pending or future patent applications will be issued or have the coverage originally sought; our intellectual property rights
will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or we will not lose the ability
to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments. In
addition, our competitors or others may design around our patents or protected technologies. Effective protection of our intellectual
property rights may also be unavailable, limited or not applied in some countries, and even if available, we may fail to pursue or obtain
necessary intellectual property protection in such countries. In addition, the legal systems of certain countries do not favor the aggressive
enforcement of patents and other intellectual property rights, and the laws of foreign countries may not protect our rights to the same
extent as the laws of the United States. As a result, our intellectual property may not provide us with sufficient rights to exclude others
from commercializing products similar or identical to ours. In order to preserve and enforce our patent and other intellectual property
rights, we may need to make claims, apply certain patent or other regulatory procedures or file lawsuits against third parties. Such proceedings
could entail significant costs to us and divert our management’s attention from developing and commercializing our products. Lawsuits
may ultimately be unsuccessful and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed,
invalidated or held to be unenforceable.
Additionally, unauthorized
use of our intellectual property may have occurred or may occur in the future, including, for example, in the production of counterfeit
versions of our products. Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials,
and the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have
no control. Although we have taken steps to minimize the risk of unauthorized uses of our intellectual property, including for the production
of counterfeit products, any failure to identify unauthorized use of, and otherwise adequately protect, our intellectual property could
adversely affect our business, including reducing the demand for our products. Additionally, any reported adverse events involving counterfeit
products that purported to be our products could harm our reputation and the sale of our products in particular and consumer willingness
to use plasma-derived therapeutics in general. Moreover, if we are required to commence litigation related to unauthorized use, whether
as a plaintiff or defendant, such litigation would be time-consuming, force us to incur significant costs and divert our attention and
the efforts of our management and other employees, which could, in turn, result in lower revenue and higher expenses.
In addition to patented technology, we rely
on our unpatented proprietary technology, trade secrets, processes and know-how.
We rely on proprietary information
(such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable, or that we
believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by
entering into confidentiality agreements, or consulting, services, material transfer agreements or employment agreements that contain
non-disclosure and non-use provisions, as well as ownership provisions, with our employees, consultants, service providers, contractors,
scientific advisors and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements
may be breached or otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information,
may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information.
We have limited control over the protection of trade secrets used by our third-party manufacturers, suppliers, other third parties which
are granted with license to use our know-how and former employees and could lose future trade secret protection if any unauthorized disclosure
of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed by our competitors
or other third parties. To the extent that our employees, consultants, service providers, contractors, scientific advisors and other third
parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how
and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights,
and failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position.
Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets.
37
We also rely on physical and
electronic security measures to protect our proprietary information, but we cannot provide assurance that these security measures will
not be breached or provide adequate protection for our property. There is a risk that third parties may obtain and improperly utilize
our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information
or take appropriate and timely steps to enforce our intellectual property rights. See “—Our business and operations would
suffer in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security measures.”
Changes in either U.S. or foreign patent
law or in the interpretation of such laws could diminish the value of patents in general, thereby impairing our ability to protect our
products.
Our success, like the success
of many other biotechnology companies, is heavily dependent on intellectual property and on patents in particular. The procurement and
enforcement of patents in the biotechnology industry is complex from a technological and legal standpoint, and the process is therefore
costly, time-consuming and inherently uncertain. In addition, on September 16, 2011, the AIA was signed into law, introducing significant
changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted. An important change introduced
by the AIA is that, as of March 16, 2013, the United States 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 with the United States Patent and Trademark Office (“USPTO”) after that date but 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.
As a result of this change of law, if we do not promptly file a patent application at the time of a new product’s invention, and
if a third party subsequently invented and patented such product, we would lose our right to patent such invention.
The AIA also introduced new
limitations on where a patentee may file a patent infringement suit and new opportunities for third parties to challenge any issued patent
in the USPTO. Such changes apply to all of our U.S. patents, even those issued before March 16, 2013. Because of a lower evidentiary
standard necessary to invalidate a patent claim in USPTO proceedings compared to the evidentiary standard in U.S. federal court, 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.
Depending on decisions by
the U.S. Congress, federal courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations governing patents
could change in unpredictable ways that would weaken our ability to obtain new patents and enforce our existing and future patents.
We may be subject to claims that we infringe,
misappropriate or otherwise violate the intellectual property rights of third parties.
The conduct of our business,
our Proprietary Products and/or Distribution products or product candidates may infringe or be accused of infringing one or more claims
of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued
and to which we do not hold a license or other rights. For example, certain of our competitors and other third parties own patents and
patent applications in the realm of our biosimilars distribution products, or in areas relating to critical aspects of our business and
technology, including the separation and purification of plasma proteins, the composition of AAT, the use of AAT for different indications,
and the distribution or use of recombinant or biosimilar pharmaceutical products, and these competitors may in the future allege that
we are infringing on their patent rights. We may face claims alleging that we are infringing, misappropriating, or otherwise violating
the intellectual property rights of third parties, including trademarks, copyrights, or trade secrets. If such claims are brought against
us, our strategic partners, or our manufacturing suppliers for Distribution products, we could incur significant legal expenses and, if
unsuccessful in our defense, be required to pay substantial damages. Additionally, such claims could result in injunctions or other remedies
that may force us or our partners to cease or delay the manufacturing, exportation, or sale of the affected products or product candidates,
which could materially impact our business and operations. See also “In recent years we entered into agreements for future distribution
in Israel of several biosimilar product candidates, and the successful future distribution of these products is dependent upon several
factors some of which are beyond our control.”
38
In addition, we are a party
to certain license agreements that may impose various obligations upon us as a licensee, including the obligation to bear the cost of
maintaining the patents subject to the license and to make milestone and royalty payments. If we fail to comply with these obligations,
the licensor may terminate the license, in which event we might not be able to market any product that is covered by the licensed intellectual
property.
If we are found to be infringing,
misappropriating or otherwise violating the patent or other intellectual property rights of a third party, or in order to avoid or settle
claims, we or our strategic partners may choose or be required to seek a license, execute cross-licenses or enter into a covenant not
to sue agreement from a third party and be required to pay license fees or royalties or both, which could be substantial. These licenses
may not be available on acceptable terms, or at all. Even if we or our strategic partners were able to obtain a license, the rights may
be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we 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
claims, we or our strategic partners are unable to enter into licenses on acceptable terms.
There have been substantial
litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries.
In addition, to the extent that we gain greater visibility and market exposure as a public company in the United States, we face a greater
risk of being involved in such litigation. In addition to infringement claims against us, we may become a party to other patent litigation
and other proceedings, including interference, opposition, cancellation, re-examination and similar proceedings before the USPTO and its
foreign counterparts and other regulatory authorities, regarding intellectual property rights with respect to our 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.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect
on our ability to compete in the marketplace or to conduct our business in accordance with our plans and budget, and patent litigation
and other proceedings may also absorb significant management time.
Some of our employees, consultants
and service providers, were previously employed or hired at universities, medical institutes, or other biotechnology or pharmaceutical
companies, including our competitors or potential competitors. While we take steps to prevent them from using the proprietary information
or know-how of others in their work for us, we may be subject to claims that we or they have inadvertently or otherwise used or disclosed
intellectual property, trade secrets or other proprietary information of any such employee’s former employer or former ordering
service or that they have breached certain non-compete obligations to their former employers. 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, 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
certain of our products, our business name and our logo, and have registered these trademarks in certain key markets. 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. Even if trademarks are issued to us or to our licensors, they may be challenged, narrowed, cancelled, or held to be unenforceable
or circumvented.
Additionally, in some jurisdictions,
our sub-distributors may register trademarks, trade names, or product labeling in their own name or control local regulatory filings and
artworks. Disputes regarding ownership, assignment or use of such rights can complicate transitions to alternative partners and may require
costly negotiations or proceedings to regain control. Any inability to secure, enforce, or transition these rights on acceptable terms
could materially adversely affect our business, financial condition and results of operations.
39
Risks Related to Our Financial Position and
Capital Resources
While we have been profitable in recent
years, we have incurred significant losses since our inception and may incur losses in the future.
While we were profitable in
the years ended December 31, 2025, 2024 and 2023, we have incurred significant losses since inception and as of December 31, 2025, we
had an accumulated deficit of $17.1 million.
The acquisition of the portfolio
of four FDA-approved products in November 2021 resulted in the recognition of significant balances of intangible assets, as well as contingent
consideration and other long-term liabilities. The recognized value of the intangible assets is amortized over their expected useful lives,
resulting in significant amortization expenses included in costs of goods sold and sales and marketing expenses. For each of the years
ended December 31, 2025, 2024 and 2023, such amortization expenses totaled $7.1 million. The contingent consideration and other long-term
liabilities are remeasured at the end of each reporting period, which may result in significant revaluation gains or losses recognized
in financial income (expenses). For the years ended December 31, 2025, 2024 and 2023, we recognized financial expenses of $2.7 million,
$8.1 million and $1.0 million with respect to such revaluation, respectively. We expect to continue to incur these significant amortization
expenses for the foreseeable future, and our financial income (expenses) may continue to be affected by future remeasurement of contingent
consideration and other long-term liabilities.
While the acquisition of our
portfolio of four FDA-approved plasma-derived hyperimmune commercial products represented an important growth driver and revenue source,
there can be no assurance that we will be able to continue to reap the benefits of such acquisition and any other future acquisitions,
and we may not be able to generate or sustain profitability in future years.
Our financial position and operations may
be affected as a result of the indebtedness we may incur and the liabilities we assumed in connection with the acquisition of the portfolio
of four FDA-approved products.
We have a NIS 35 million on-call
credit facility with Bank Hapoalim, with each loan thereunder bearing interest at a rate of 6.3% per annum. In connection with this facility,
we have undertaken not to create a floating charge over all or substantially all of our assets. Borrowings under the on-call credit facility
may have adverse consequences on our business, including:
● expose us to the risk of increased interest rates;
● prevent us from pledging our assets as collateral, which could limit our ability to obtain additional debt financing;
● place us at a competitive disadvantage compared to our competitors that have less debt, better debt servicing options or stronger debt servicing capacity; and
● increase our cost of borrowing.
In addition, as part of the
acquisition of the portfolio of four FDA-approved products, we agreed to pay and assumed the following liabilities:
● Up to $50 million of contingent consideration subject to the achievement of sales thresholds through December 31, 2034. As of December 31, 2025, the Company had paid the first three sales milestone payments on account of the contingent consideration and the fourth sales threshold is expected to be achievable and the related payment milestone payment is expected to be paid during 2026.
● A total amount of $14.2 million on account of acquired inventory to be paid in ten equal quarterly instalments of $1.5M each (or the remaining balance at the final instalment). As of December 31, 2025, we had paid all such instalments.
● Future payment of royalties (some of which are perpetual) and milestone payments to third parties subject to the achievement of corresponding CYTOGAM related net sales thresholds and milestones.
40
The future payments of such
obligations may have a significant effect on our cash availability in future periods and may potentially require us to assume more debt.
For additional information, see Note 13 in our consolidated financial statements included in this Annual Report.
Our manufacturing operations require significant
ongoing capital investments, upgrades and large-scale projects, which may require us to incur debt or issue additional equity and may
not deliver expected returns.
Our manufacturing facility
requires continued investment and upgrades. For example, we are currently establishing a new filling line and a filling suite at our Beit
Kama, Israel facility. Moreover, any enhancements to our manufacturing facilities necessary to obtain FDA or EMA approval for product
candidates or new indications for existing products could require large capital projects. We may also undertake such capital projects
in order to maintain compliance with cGMP or expand capacity. Capital projects of this magnitude involve technology and project management
risks. Technologies that have worked well in a laboratory or in a pilot plant may cost more or not perform as well, or at all, in full
scale operations. Projects may run over budget or be delayed. We cannot be certain that any such project will be completed in a timely
manner or that we will maintain our compliance with cGMP, and we may need to spend additional amounts to achieve compliance. Additionally,
by the time multi-year projects are completed, market conditions may differ significantly from our initial assumptions regarding competitors,
customer demand, alternative therapies, reimbursement and public policy, and as a result capital returns may not be realized. In addition,
to fund large capital projects, we may similarly need to incur debt or issue additional dilutive equity. A failure to fund these activities
may harm our growth strategy, competitive position, quality compliance and financial condition.
Our current working capital may not be sufficient
to support our growth strategy, including any future M&A or similar transactions.
As of December 31, 2025, we
had cash and cash equivalents of $75.5 million. We intend to fund our future operations through continued sales and distribution of our
Proprietary Products and Distribution products and, as required, by raising additional capital through the sale of equity and/or debt
securities. These amounts may not be sufficient to support our growth strategy, including potential future mergers, acquisitions or similar
transactions, and there can be no assurance of the financial success of our commercialization activities or our ability to access equity
or debt capital markets on terms acceptable to us, or at all.
We are subject to foreign currency exchange
risk.
We receive payment for our
sales and make payments for resources in a number of different currencies. While our sales and expenses are primarily denominated in U.S.
dollars, our financial results may be adversely affected by fluctuations in currency exchange rates as a portion of our sales and expenses
are denominated in other currencies, including the NIS and the Euro. Market volatility and currency fluctuations may limit our ability
to cost-effectively hedge against our foreign currency exposure and, in addition, our ability to hedge our exposure to currency fluctuations
in certain emerging markets may be limited. Hedging strategies may not eliminate our exposure to foreign exchange rate fluctuations and
may involve costs and risks of their own, such as devotion of management time, external costs to implement the strategies and potential
accounting implications. Foreign currency fluctuations, independent of the performance of our underlying business, could lead to materially
adverse results or could lead to positive results that are not repeated in future periods.
Events in global credit markets may impact
our ability to obtain financing or increase the cost of future financing, including interest rate fluctuations based on macroeconomic
conditions that are beyond our control.
During periods of volatility
and disruption in the U.S., European, Israeli or global credit markets, obtaining additional or replacement financing may be more difficult,
and the cost of debt could be high. The high cost of debt may limit our ability to have cash on hand for working capital, capital expenditures
and acquisitions on terms that are acceptable to us.
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To service any future indebtedness and other
obligations, we may require a significant amount of cash and our ability to generate cash depends on many factors beyond our control.
The capability to pay and
refinance any future indebtedness and to fund working capital requirements and planned capital expenditures will depend on our ability
to generate cash in the future. A significant reduction in our operating cash flows resulting from changes in economic conditions, increased
competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could have
a material adverse effect on our business, financial condition, results of operations, prospects and our ability to service any future
debt and other obligations. If we are unable to service any future indebtedness through sufficient cash flows from operations, we will
be forced to shift to alternative strategies, which may include the reducing of capital expenditures, the sale of assets, the restructuring
or refinancing of debt (if any) or the seeking of additional equity. We cannot assure that these alternative strategies, if any, could
be implemented on satisfactory and commercially reasonable terms, that they would provide sufficient funds to make the required payments
on our debt or to fund our other liquidity needs.
Risks Related to Our Ordinary Shares
The requirements of being a public company
in the United States, as well as in Israel, may strain our resources and distract our management, which could make it difficult to manage
our business and could have a negative effect on our results of operations and financial condition.
As a public company whose
shares are traded on the Nasdaq Global Select Market (“Nasdaq”) and the Tel Aviv Stock Exchange (the “TASE”),
we are required to comply with various regulatory and reporting requirements, including those required by the SEC. Complying with these
reporting and regulatory requirements is time consuming, and may result in increased costs to us and could have a negative effect on our
business, results of operations and financial condition. As a public company in the United States, we are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the requirements of the Sarbanes-Oxley Act of
2002 (“SOX”). These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual
and current reports, and file or make public certain additional information, with respect to our business and financial condition. SOX
requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting. To maintain and
improve the effectiveness of our disclosure controls and procedures, we may need to commit significant resources, hire additional staff
and provide additional management oversight. These activities may divert management’s attention from other business concerns, which
could have a material adverse effect on our business, financial condition and results of operations. Furthermore, as our business changes
and if we expand either through acquisitions or by means of organic growth, our internal controls may become more complex and we will
require significantly more resources to ensure our internal controls remain effective. Failure to implement required new or improved controls,
or difficulties encountered in their implementation, could impact our financial information and adversely affect our operating results
or cause us to fail to meet our reporting obligations. If we identify material weaknesses, the disclosure of that fact, even if quickly
remediated, could require significant resources to remediate, expose us to legal or regulatory proceedings, and reduce the market’s
confidence in our financial statements and negatively affect our share price.
Our share price may be volatile.
The market price of our ordinary
shares is highly volatile and could be subject to wide fluctuations in price as a result of various factors, some of which are beyond
our control. These factors include:
● actual or anticipated fluctuations in our financial condition and operating results;
● overall conditions in the specialty pharmaceuticals market;
● loss of significant customers or changes to agreements with our strategic partners;
● changes in laws or regulations applicable to our products;
● actual or anticipated changes in our growth rate relative to our competitors;
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● announcements of clinical trial results, technological innovations, significant acquisitions, strategic alliances, joint ventures or capital commitments by us or our competitors;
● changes in key personnel;
● fluctuations in the valuation of companies perceived by investors to be comparable to us;
● the issuance of new or updated research reports by securities analysts;
● disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual property protection for our technologies;
● announcement of, or expectation of, additional financing efforts;
● sales of our ordinary shares by us or our shareholders;
● share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;
● the outcomes of litigation proceedings involving us;
● share price analyses or other information disseminated by analysts, influencers, and bloggers on social media platforms;
● recalls and/or adverse events associated with our products; and
● general political, economic and market conditions.
Furthermore, the stock markets
have experienced extreme price and volume fluctuations that have affected and continue to affect the market price of equity securities
of many companies. Broad market and industry fluctuations, as well as general economic, political and market conditions, may negatively
impact the market price of our ordinary shares.
In the past, companies that
have experienced volatility in the market price of their shares have been subject to securities class action litigation or derivative
actions. We, as well as our directors and officers, may also be the target of these types of litigation and actions in the future. Securities
litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which
could seriously harm our business.
If securities or industry analysts do not
publish or cease publishing research or reports about us, our business, or our market, or if they adversely change their recommendations
or publish negative reports regarding our business or our shares, our share price and trading volume could be negatively impacted.
The trading market for our
ordinary shares may be influenced by research and reports that industry or securities analysts may publish about us, our business, our
market, or our competitors. We do not have any control over these analysts, and we cannot provide any assurance that analysts will cover
us or, if they do, provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding
our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst
who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could negatively impact our share price or trading volume.
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Information published by influencers and
bloggers on various social media platforms can cause significant volatility in our share price and trading volume, impacting investor
perception and market stability.
The increased use of social
media platforms and the influence of online content creators, such as influencers and bloggers as tools for analyzing and recommending
investments in the securities market, present risks to the stability and valuation of our share price. Social media content can rapidly
disseminate information, opinions, and rumors about our company and our securities, which may not always be accurate or based on verified
facts and may be misleading. This can lead to several potential risks, including: (i) social-media-driven trends and sentiments can cause
significant fluctuations in our share price, as evidenced by recent coverage of us by a social media influencer that resulted in an increase
in our share price and trading volume; (ii) negative or misleading information spread through social media can harm our reputation or
lead to a loss of investor confidence, thereby adversely affecting our share price and market capitalization; (iii) attracting regulatory
attention which could lead to investigations or actions by regulatory authorities, potentially resulting in fines, sanctions, or other
legal consequences; (iv) sudden surges in buying or selling activity driven by social media trends can lead to short-term price spikes
or drops, which may not reflect our long-term value or strategic direction; and (v) the need to monitor and respond to social media content
can divert management’s attention and resources from core business operations, resulting in significant costs and negatively impacting
operational efficiency.
Our shareholders may experience significant
dilution as a result of any additional financing using our equity securities or may experience a decrease in the share price due to sales
of our equity securities.
To the extent that we raise
additional funds to fund our activities through the sale of equity or securities that are convertible into or exchangeable for, or that
represent the right to receive, ordinary shares or substantially similar securities, your ownership interest will be diluted. Any additional
capital raised through the sale of equity securities will likely dilute the ownership percentage of our shareholders. For example, in
September 2023, we consummated a $60.0 million private placement of approximately 12.6 million ordinary shares to FIMI Opportunity Funds.
Future sales of ordinary shares by affiliates
could cause our share price to fall.
The FIMI Opportunity Funds
collectively own 22,084,287 of our outstanding ordinary shares (representing an ownership percentage of 38.28% of the outstanding shares
and 37.25% on a fully diluted basis as March 1, 2026). Pursuant to a registration rights agreement entered into with FIMI Opportunity
Funds on January 20, 2020, as amended on May 23, 2023, they have “demand” and “piggyback” registration rights
covering the ordinary shares of our company held by them. All shares of FIMI Opportunity Funds sold pursuant to an offering covered by
a registration statement would be freely transferable. Sales of a substantial number of shares of our ordinary shares, or the perception
that the FIMI Opportunity Funds may exercise their registration rights, could put downward pressure on the market price of our ordinary
shares and could impair our future ability to raise capital through an offering of our equity securities.
The significant share ownership positions
and board representation of the FIMI Opportunity Funds and Leon Recanati may limit our shareholders’ ability to influence corporate
matters.
The FIMI Opportunity Funds
(three of whose partners are members of our board of directors, one of which serves as our chairman) and Leon Recanati, a member of our
board of directors, beneficially owned, directly and indirectly, approximately 38.28% and 6.03% of our outstanding ordinary shares, respectively,
as of March,1 2026. For additional information, see “Item 6. Directors, Senior Management and Employees — Share Ownership”
and “Item 7. Major Shareholders and Related Party Transactions — Major Shareholders.” Accordingly, the FIMI Opportunity
Funds and Leon Recanati, through their equity ownership and board representation, individually and collectively, have significant influence
over the outcome of matters required to be submitted to our shareholders for approval, including decisions relating to the election of
directors (other than our external directors, for whose election the approval of the majority of shares held by non-controlling shareholders
and non-interested shareholders is required under Israeli law) and the outcome of any proposed acquisition, merger or consolidation of
our company. Their interests may not be consistent with those of our other shareholders. In addition, these parties’ significant
interest in us may discourage third parties from seeking to acquire control of us, which may adversely affect the market price of our
shares. This concentration of ownership may also cause a decrease in the volume of trading or otherwise adversely affect our share price.
44
Our ordinary shares are traded on more than
one market and this may result in price variations.
Our ordinary shares have been
traded on the TASE since August 2005, and on Nasdaq since May 2013. Trading in our ordinary shares on these markets takes place in different
currencies (U.S. dollars on Nasdaq and NIS on the TASE), and at different times (as a result of different time zones, trading days and
public holidays in the United States and Israel). The trading prices of our ordinary shares on these two markets may differ due to these
and other factors. Any decrease in the price of our ordinary shares on the TASE could cause a decrease in the trading price of our ordinary
shares on Nasdaq, and a decrease in the price of our ordinary shares on Nasdaq could likewise cause a decrease in the trading price of
our ordinary shares on the TASE.
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, (i) at least 75% of our gross income is passive income or (ii) at least 50% of the value of our assets is attributable to assets
that produce passive income or are held to produce passive income, we would be characterized as a passive foreign investment company (“PFIC”)
for U.S. federal income tax purposes. 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 capital gain, the loss of the preferential
rate applicable to dividends received on our ordinary shares, and having interest charges apply to distributions by us and the proceeds
of share sales. See “Item 10. Additional Information — E. Taxation — United States Federal Income Taxation.”
Based upon the value of our
assets and the nature and composition of our income and assets, we do not believe that we were a PFIC for the taxable year ended December
31, 2025, however, no assurances can be made in that regard. The determination of whether we are a PFIC is a fact-intensive determination
made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation.
We are a “foreign private issuer”
and have disclosure obligations that are different from those of U.S. domestic reporting companies. As a result, we may not provide you
the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult
for you to evaluate our performance and prospects.
We are a foreign private issuer
and, as a result, are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we are subject to reporting
obligations that, in certain respects, are less detailed and/or less frequent than those of U.S. domestic reporting companies. For example,
we are not required to issue quarterly reports or proxy statements that comply with the requirements applicable to U.S. domestic reporting
companies, our principal shareholders are not required to report beneficial holdings under Section 16(a) of the Exchange Act and our directors,
officers and principal shareholders are exempt from the short-swing profit rules under Section 16(b) of the Exchange Act, and we are not
required to disclose individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies.
We also have four months after the end of each fiscal year to file our annual reports with the SEC and are not required to file current
reports as frequently or promptly as U.S. domestic reporting companies.
As a foreign private issuer,
we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of
investors are not privy to specific information about an issuer before other investors. However, we are still subject to the anti-fraud
and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on
us as a foreign private issuer differ from those imposed on U.S. domestic reporting companies, you should not expect to receive the same
information about us and at the same time as the information provided by U.S. domestic reporting companies.
As we are a “foreign private issuer”
and follow certain home country corporate governance practices instead of otherwise applicable Nasdaq corporate governance requirements,
our shareholders may not have the same protections afforded to shareholders of domestic U.S. issuers that are subject to all Nasdaq corporate
governance requirements.
As a foreign private issuer,
we have the option to, and we do, follow Israeli corporate governance practices rather than certain corporate governance requirements
of Nasdaq, except to the extent that such laws would be contrary to U.S. securities laws, and provided that we disclose the requirements
we are not following and describe the home country practices we follow instead. We have relied on this “foreign private issuer exemption”
with respect to all the items listed under the heading “Item 16G. Corporate Governance,” including with respect to shareholder
approval requirements in respect of equity issuances and equity-based compensation plans, the requirement to have independent oversight
on our director nominations process and to adopt a formal written charter or board resolution addressing the nominations process, the
quorum requirement for meetings of our shareholders and the Nasdaq requirement to have a formal charter for the compensation committee.
We may in the future elect to follow home country practices in Israel with regard to other matters. As a result, our shareholders may
not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
See “Item 16G. Corporate Governance.”
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We may not pay dividends in the future.
While we have
historically retained our earnings to finance operations and expand our business, on March 5, 2025, we announced a special cash
dividend of $0.20 per share (approximately $11.5 million in the aggregate), with a record date (ex-dividend date) of March 17, 2025,
which was paid on April 7, 2025. On March 10, 2026, our board of directors adopted, by resolution, a dividend policy pursuant to
which we currently intend to distribute to our shareholders an annual cash dividend at a rate of at least 50% of our annual net
income, subject to the Board of Directors’ discretion at the time of any such distribution and satisfaction of the applicable
dividend distribution tests under the Israeli Companies Law at the time of distribution. Accordingly, pursuant to such annul cash
dividend policy, on March 11, 2026, we announced a cash dividend of $0.25 per share (approximately $14.4 million in the aggregate),
with a record date (ex-dividend date) of March 23, 2026, and a payment date of April 6, 2026.
Any dividends must be
declared by our Board of Directors, which will take into account various factors, including our financial condition, operating
results, capital requirements and other factors that the Board of Directors considers relevant. Accordingly, the actual payout may
fluctuate depending on our cash flow needs and such other factors. There can be no assurance that dividends will be declared in
accordance with our annual cash dividend policy or at all, and our Board of Directors may decide, in its discretion, at any time and
for any reason, not to pay dividends, to reduce the amount of dividends paid, to pay dividends on an ad-hoc basis or to take other
actions, which could include share buybacks, instead of or in addition to the declaration of dividends. Accordingly, we expect that
the amount of any cash dividends we distribute will vary significantly as a result of such factors. Our ability to pay dividends is
limited by Israeli law, which permits the distribution of dividends only out of distributable profits (subject to limited
exceptions) and only if there is no reasonable concern that such distribution will prevent us from meeting our existing and future
obligations when they become due. See “Item 8.A - Consolidated statements and other financial information - Dividends and
dividend policy.”
Risks Relating to Our Incorporation and Location
in Israel
Our business could be adversely affected
by political, economic and military instability in Israel and its region.
We
are incorporated under Israeli law, and our principal offices and internal manufacturing facilities are located in Israel. In addition,
most of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the
surrounding region may directly affect our business.
Since
the establishment of the State of Israel in 1948, and in recent years, armed conflicts have occurred between Israel and its neighboring
countries and terrorist organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations, terrorism
against civilian targets in various parts of Israel, and the abduction of soldiers and citizens.
46
On
October 7, 2023, Hamas terrorists infiltrated Israel’s border from the Gaza Strip and conducted a series of attacks on civilian
and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers. These attacks resulted
in extensive deaths, injuries, and the kidnapping of civilians and soldiers. Following the attacks, Israel’s security cabinet declared
war against Hamas and as a result, the Israeli military began to call-up reservists for active duty. See also “— Our operations
may be disrupted by the obligations of personnel to perform military service.” Israel has subsequently been involved in military
conflicts with Hamas, Hezbollah (a terrorist organization based in Lebanon), and Iran, both directly and through Iranian proxies such
as the Houthi movement in Yemen and armed groups in Iraq and other terrorist organizations. Additionally, following the fall of the Assad
regime in Syria, Israel conducted limited military operations targeting the Assad-led Syrian army, Iranian military assets, and infrastructure
linked to Hezbollah and other Iran-supported groups. In November 2024, a ceasefire agreement was reached with Hezbollah in Lebanon.
In
June 2025, in light of continued nuclear threats and intelligence assessments, Israel launched a military operation directly targeting
military and nuclear infrastructure inside Iran, aimed at disrupting Iran’s capacity to coordinate or launch further hostilities
against Israel and to degrade its nuclear program. In response, Iran launched multiple waves of drones and ballistic missiles at Israeli
cities. While most of these attacks were intercepted, several caused civilian deaths and casualties, as well as some damage to infrastructure
and property. A ceasefire was declared between Israel and Iran in June 2025 after 12 days of hostilities; however, the situation remains
volatile.
In
October 2025, a ceasefire in the conflict with Hamas came into effect; however, the situation remains fragile, with isolated incidents
of fighting.
On February 28, 2026, Israel and the United States commenced coordinated
military strikes against targets in Iran, including military and strategic infrastructure in response to ongoing regional tensions and
recent escalations involving Iran’s nuclear and military activities. In response, Iran launched a series of retaliatory attacks
against Israel, targeting major cities and strategic sites, which are ongoing. While most of these attacks have been intercepted to date,
some resulted in civilian casualties and damage to property. Subsequently, Hezbollah launched attacks against Israel in retaliation for
the killing of Ali Hosseini Khamenei, the former Supreme Leader of Iran, and in response, Israel launched attacks against Lebanon and
Israeli ground forces have entered into Southern Lebanon, and hostilities between Israel and Hezbollah are ongoing. Iran subsequently
began launching retaliatory strikes against U.S. and other targets in the Gulf region. The Israeli government has raised its alert level
nationwide, and the situation remains highly unstable, with ongoing exchanges of fire and heightened risk of further escalation. Regional
and international responses are ongoing, and the risk of broader conflict in the Middle East has increased.
While
we have not been materially impacted during these conflicts to date, and we successfully managed our business and operational continuity
throughout the entire period since October 7, 2023, hostilities continue to exist, and the situation in Israel and the region remains
volatile with the potential for further escalation or deterioration of regional conditions. We cannot predict if and how such conflicts
will ultimately affect our business and operations (including our manufacturing facility in Beit Kama, which is located in southern Israel,
approximately 20 miles east of the Gaza Strip, and our supply chains) or Israel’s economy in general. These events could lead to
increased costs, risks to employee safety, and potential challenges to business continuity, potentially resulting in financial losses.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war. Losses resulting from acts of terrorism
may be partially covered under certain circumstances. Although the Israeli government is currently committed to covering a certain portion
of direct damages caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or
that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our
business.
In
addition, the war led to a deterioration of certain indicators of Israel’s economic standing, for instance, a downgrade in Israel’s
credit rating by rating agencies such as by Moody’s, S&P Global, and Fitch.
The
global perception of Israel and Israeli companies may lead to sanctions or other measures against Israel and Israeli companies, including
boycotts of Israeli goods and services or restrictions on doing business with Israel and Israeli companies. These restrictions may materially
limit our ability to obtain raw materials from these countries or sell our products to companies in these countries.
Any
hostilities involving Israel, the interruption or curtailment of trade between Israel and its present trading partners, or a significant
downturn in the economic or financial condition of Israel, could adversely affect our operations, cause our sales to decrease, and adversely
affect the share price of publicly traded companies having operations in Israel, such as ours.
47
Furthermore, political conditions
within Israel may affect our operations. Israel held five general elections between 2019 and 2022, with the next general election scheduled
for October 27, 2026. Prior to October 2023, the Israeli government pursued extensive changes to Israel’s judicial system and has
recently renewed its efforts to effect such changes. In response to these developments, certain individuals, organizations, and institutions,
both within and outside of Israel, voiced concerns that such proposed changes, if adopted, may negatively impact the business environment
in Israel. Such proposed changes may also lead to political instability or civil unrest. Actual or perceived political instability in
Israel or any negative changes in the political environment may, individually or in the aggregate, adversely affect the Israeli economy
and, in turn, our business, financial condition, results of operations, and growth prospects, as well as the market price of our shares
and our ability to raise additional capital, if deemed necessary by our management and board of directors.
Our operations may be disrupted by the obligations
of personnel to perform military service.
As of December 31, 2025, we
had 393 employees based in Israel. Certain of our Israeli employees may be called upon to perform up to 36 days (and in some cases more)
of annual military reserve duty until they reach the age of 40 (and in some cases, up to 45 or older) and, in emergency circumstances,
could be called to active duty. In connection with the Israeli security cabinet’s declaration of war against Hamas in October 2023
and subsequent hostilities with other organizations and jurisdictions, several hundred thousand Israeli military reservists were drafted
to perform immediate military service. While we have not been impacted to date by any absences of our personnel, our operations could
be disrupted by the absence of a significant number of our employees related to their, or their spouse’s, military service or the
absence for extended periods of one or more of our key employees for military service. Such disruption could materially adversely affect
our business and results of operations. Additionally, the absence of a significant number of the employees of our Israeli suppliers and
contractors related to military service or the absence for extended periods of one or more of their key employees for military service
may disrupt their operations, in which event our ability to deliver products to customers may be materially adversely affected.
The tax benefits under Israel tax legislation
that are or may be available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which
could increase our costs and taxes.
On June 9, 2025, we obtained
a tax ruling from the Israel Tax Authority (“ITA”), according to which, among other things, our activity is qualified as an
“industrial activity,” as defined in the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment
Law”), and our income from sales of our Proprietary Products (including royalty-based income) is deemed “Preferred Income”,
or “Preferred Technology Income” (in each case, within the meaning of the Investment Law), to the extent we meet the requirements
of being a Preferred Technology Enterprise. The tax ruling is valid for the years 2024 through 2028 (inclusive). There can be no assurance
that we will comply with the conditions required to remain eligible for benefits under the Investment Law in the future, including under
the tax ruling, or that we will be entitled to any additional benefits thereunder. If we do not fulfill these conditions in whole or in
part, the benefits may be canceled and we may be required to refund the amount of the benefits, linked to the Israeli consumer price index,
with interest.
In order to remain eligible
for the tax benefits under the Investment Law, we must continue to meet certain conditions stipulated in the Investment Law and its regulations,
as amended, and must also comply with the conditions set forth in the tax ruling (if obtained). These conditions may include, among other
things, that the production, directly or through subcontractors, of all our products should be performed within certain regions of Israel.
If we do not meet these requirements, the tax benefits would be reduced or canceled and we could be required to refund any tax benefits
that we received in the past, in whole or in part, linked to the Israeli consumer price index, together with interest. Further, these
tax benefits may be reduced or discontinued in the future. If these tax benefits are canceled, our Israeli taxable income would be subject
to regular Israeli corporate tax rates. The standard corporate tax rate for Israeli companies is 23% since 2018.
Additionally, in the event
of a distribution of a dividend from the abovementioned tax exempt income, in addition to withholding tax at a rate of 20% (or a reduced
rate under an applicable double tax treaty), we will be subject to tax on the otherwise exempt income (grossed-up to reflect the pre-tax
income that we would have had to earn in order to distribute the dividend) at the applicable corporate tax rate, which would have been
applied had we not benefited from the exemption. Similarly, in the event of our liquidation or a share buyback, we will be subject to
tax on the grossed-up amount distributed or paid at the corporate tax rate which would have been applied had we not benefited from the
exemption. For more information about applicable Israeli tax regulations, see “Item 10. Additional Information —
E. Taxation — Israeli Tax Considerations and Government Programs.”
48
Tax matters, including changes in tax laws,
adverse determinations by taxing authorities and imposition of new taxes, could adversely affect our results of operations and financial
condition. Furthermore, we may not be able to fully utilize our net operating loss carryforwards.
We are subject to the tax
laws and regulations of the State of Israel and numerous other jurisdictions in which we do business. Many judgments are required in determining
our provision for income taxes and other tax liabilities, and the applicable tax authorities may not agree with our tax positions. In
addition, our tax liabilities are subject to other significant risks and uncertainties, including those arising from potential changes
in laws and/or regulations in the State of Israel and the other countries in which we do business, the possibility of adverse determinations
with respect to the application of existing laws, changes in our business or structure and changes in the valuation of our deferred tax
assets and liabilities. As of December 31, 2025, we had net operating loss carryforwards (“NOLs”) for Israeli tax purposes
of approximately $12.1 million. If we are unable to fully utilize our NOLs to offset taxable income generated in the future, our future
cash taxes could be materially and negatively impacted. For further details regarding our NOLs, see Note 21 in our consolidated financial
statements included in this Annual Report.
It may be difficult to enforce a U.S. judgment
against us and our officers and directors in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve
process on our officers and directors.
We are incorporated in Israel.
All of our directors and most of our executive officers and the Israeli experts named in this Annual Report reside outside the United
States. The majority of our assets and the assets of these persons are located outside the United States. Therefore, it may be difficult
for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S.
federal securities laws against us or any of these persons in a U.S. or Israeli court, or to effect service of process upon these persons
in the United States. Additionally, it may be difficult for an investor, or any other person or entity, 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 on the grounds that Israel is not the most appropriate forum in which to bring such a claim. 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 proved 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 addressing the matters described above.
Moreover, an Israeli court
will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli
courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if
it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same
matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel
at the time the foreign action was brought.
Your rights and responsibilities as our
shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S.
corporations.
Since we are incorporated
under Israeli law, the rights and responsibilities of our shareholders are governed by our articles of association and Israeli law. These
rights and responsibilities differ in some respects from the rights and responsibilities of shareholders of U.S.-based corporations. 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 the general meeting of shareholders on certain matters, such as an amendment to the company’s articles
of association, an increase of the company’s authorized share capital, a merger of the company and approval of related party transactions
that require shareholder approval. A shareholder also has a general duty to refrain from discriminating against other shareholders. In
addition, a controlling shareholder or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote,
or who has the power to appoint or prevent the appointment of an office holder in the company or has other powers towards the company,
has a duty to act in fairness towards the company. However, Israeli law does not define the substance of this duty of fairness. See “Item
6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Specified Related Party Transactions under Israeli
Law — Duties of Shareholders.” 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 our shareholders
that are not typically imposed on shareholders of U.S. corporations.
49
Provisions of Israeli law and our articles
of association may delay, prevent or make undesirable an acquisition of all or a significant portion of our shares or assets.
Certain provisions of Israeli
law and our articles of association could have the effect of delaying or preventing a change in control and may make it more difficult
for a third party to acquire us or for our shareholders to elect different individuals to our board of directors, even if doing so would
be beneficial to our shareholders, and may limit the price that investors may be willing to pay in the future for our ordinary shares.
For example, Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage
of shares in a public company are purchased. Under our articles of association, a merger shall require the approval of two-thirds of the
voting rights represented at a meeting of our shareholders and voting on the matter, in person or by proxy, and any amendment to such
provision shall require the approval of 60% of the voting rights represented at a meeting of our shareholders and voting on the matter,
in person or by proxy. Further, Israeli tax considerations may make potential transactions undesirable to us or to some of our shareholders,
including such shareholders whose country of residence does not have a tax treaty with Israel granting tax relief to 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. Further,
with respect to certain mergers, while Israeli tax law permits tax deferral, the deferral is contingent on certain restrictions on future
transactions, including with respect to dispositions of shares received as consideration, for a period of two years from the date of the
merger. Moreover, with respect to a certain share swap transaction, 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. See Exhibit 2.1, “Description of Securities —Acquisitions
Under Israeli Law,” incorporated herein by reference.
General Risks
The loss of one or more of our key employees
could harm our business.
We depend on the continued
service and performance of our key employees, including Amir London, our Chief Executive Officer, and our other senior management staff.
We have entered into employment agreements with all of our senior management, including Mr. London, and other key employees. Either party,
however, can terminate these agreements for any reason. The loss of key members of our executive management team could disrupt our operations,
commercial and business development activities, or product development and have an adverse effect on our ability to meet our targets and
grow our business.
Our ability to attract, recruit, retain
and develop qualified employees is critical to our success and growth.
We compete in a market that
involves rapidly changing technological and regulatory developments that require a wide-ranging set of expertise and intellectual capital.
In order for us to successfully compete and grow, we must attract, recruit, retain and develop the necessary personnel who can provide
the expertise needed across the entire spectrum of our intellectual capital needs. While a number of our key personnel have substantial
experience with our operations, we must also develop and exercise our personnel to provide succession plans capable of maintaining continuity
in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive, and we may
not succeed in recruiting additional experienced or professional personnel, retaining current personnel or effectively replacing current
personnel who depart with qualified or effective successors. Many of the companies with which we compete for experienced personnel have
greater resources than us.
Our effort to retain and develop
personnel may also result in significant additional expenses, which could adversely affect our profitability. There can be no assurance
that qualified employees will continue to be employed or that we will be able to attract and retain qualified personnel in the future.
Failure to retain or attract qualified personnel could have a material adverse effect on our business, financial condition and results
of operations.
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We are subject to risks associated with
doing business globally.
Our operations are subject
to risks inherent in conducting business globally, including increased complexity and cost of compliance with various laws, regulations
and customs of multiple jurisdictions. Key risks include currency exchange fluctuations, changes in exchange controls, loss of business
in government and public tenders, governmental actions such as nationalization or expropriation, energy price volatility, raw material
availability changes in taxation regimes, import and export restrictions, and evolving trade policy. We also face risks related to anti-bribery
and anti-corruption laws, such as the FCPA and the U.K. Bribery Act of 2010, which impose significant compliance obligations and penalties
for non-compliance. Additional challenges include pricing restrictions, economic and political instability, cultural differences, intellectual
property protection issues, and operational disruptions due to war, terrorism, public health emergencies or social unrest.
Recent changes and ongoing uncertainty in U.S.
and international trade policies, export controls, sanctions, tariffs, and industrial policy measures could further impact our operations.
Since early 2025, the U.S. government has continued to expand and modify trade restrictions affecting range of countries, industries and
products, including measures targeting supply chains, critical materials and cross-border manufacturing. Our products WINRHO SDF, HEPAGAM
B and VARIZIG, are manufactured in Canada and imported to the United States; therefore, the imposition, expansion or reimposition of tariffs,
duties, export controls or other trade restrictions applicable to Canada or any of our manufacturing or sourcing jurisdictions could cause
the costs of these products to increase materially. Additionally, retaliatory tariffs imposed by other countries, restrictions on cross-border
payments or logistics, changes in trade agreements, or additional trade restrictions could further impact our sales, supply chain reliability
and profitability. We may not be able to pass these increased costs onto our customers or otherwise mitigate these risks effectively,
which could result in reduced profit margins and negatively affect our financial performance. These trade policy changes could also disrupt
our supply chain, delay regulatory approvals or product availability, require changes to sourcing or manufacturing arrangements, and necessitate
strategic adjustments to maintain operational efficiency and stability. See “— Developments in the global economic
climate may adversely impact our business.”
We must also comply with trade
restrictions and economic sanctions, including restrictions on sales to parties that are listed on (or are owned or controlled by one
or more parties listed on) denied party watch lists or that are subject to comprehensive or sector-specific sanctions, as well as restrictions
on sales in certain regions. Sanctions laws pose potential, business interruption, liabilities, penalties and reputational risks. The
dynamic nature of sanctions and geopolitical developments may necessitate suspending, modifying, withdrawing from or limiting exposure
to certain markets. Despite having compliance policies in place, we may face liabilities due to actions by employees or third parties,
such as sub distributors, agents, and other intermediaries over whom we do not have complete control. Insurance companies’ risk
assessments regarding sanctions and geopolitical risk may limit our ability to obtain insurance in certain markets in which we operate.
For example, while our operations have not been materially impacted by Russia’s actions in Ukraine to date, we may face challenges
in supplying products to our Russian distributor or receiving payments or may be required to cease such activities entirely due to Russian
government actions or changes in applicable sanctions regimes. Non-compliance or changes in applicable laws or their interpretation or
enforcement could have an adverse effect on our business, financial condition or results of operations.
As a result of our increased global presence,
we face increasing challenges that could adversely impact our results of operations, reputation and business.
In light of our global presence,
especially following our entry into new international markets and particularly in the MENA region, we face a number of challenges in certain
jurisdictions that provide reduced legal protection, including poor protection of intellectual property, inadequate protection against
crime (including bribery, corruption and fraud) and breaches of local laws or regulations, unstable governments and economies, governmental
actions that may inhibit the flow of goods and currency, challenges relating to competition from companies that already have a local presence
in such markets and difficulties in recruiting sufficient personnel with appropriate skills and experience.
Local business practices in
jurisdictions in which we operate, and particularly in the MENA region, may be inconsistent with international regulatory requirements,
such as anti-corruption and anti-bribery laws and regulations (including the FCPA and the U.K. Bribery Act of 2010) to which we are subject.
Although we implement policies and procedures designed to ensure compliance with these laws, we cannot guarantee that none of our employees,
contractors, service providers, partners, distributors and agents, will violate our policies or applicable laws. Any such violation could
have an adverse effect on our business and reputation and may expose us to criminal or civil enforcement actions, including penalties
and fines.
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In addition, local legal systems
in countries in which we operate may present challenges in enforcing contractual rights, audit provisions, ownership of intellectual property,
and post-termination restrictive covenants. Courts may be slow or unpredictable, and local registration of agency/distributorship arrangements
may supersede or complicate contractual terms. Even where disputes are subject to arbitration, enforcement of awards locally may be time-consuming
or uncertain. Such factors could increase legal costs, prolong disputes, and adversely affect our business, financial condition, and results
of operations.
Developments in the global economic and
geopolitical climate may adversely impact our business.
Our operating and financial
performance may be adversely affected by volatile and uncertain global economic conditions and geopolitical developments, including developments
in the United States, Europe, the Middle East (including Israel), Russia, Latin America, Asia, and other territories. Adverse macroeconomic
factors, such as global or local economic slowdowns, persistent inflation, instability in financial markets, periodic stress in the banking
and financial services sectors, and concerns regarding sovereign debt or fiscal policy, may negatively impact our performance. Many of
our key markets, including the United States, Latin America, and member states of the Commonwealth of Independent States, have in the
past experienced, and may again experience, significant economic downturns characterized by declines in housing markets, high levels of
unemployment and underemployment, reduced consumer spending, and lower corporate earnings or losses across multiple industries, leading
to reduced investment in growth. In particular, global economic and financial conditions may be adversely affected by increased trade
protectionism and economic fragmentation, including U.S. tariff policies, export controls, and potential retaliatory measures by other
countries. Such developments could heighten the risk of a global trade war, disrupt international supply chains, contribute to higher
inflation, and negatively affect global economic growth, potentially resulting in recessionary conditions. The extent, duration, and ultimate
impact of tariffs and related trade measures on macroeconomic conditions and on our business remain uncertain and depend on various factors,
including the pace and outcome of ongoing negotiations between the United States and affected countries, retaliatory actions by other
governments, changes in trade agreements, and the scope of tariff exemptions.
A recessionary or inflationary
economic environment may adversely affect demand for our plasma-derived protein therapeutics. As a result of job losses or rising living
costs, patients in the U.S. and other markets may lose medical insurance and be unable to purchase needed medical products or may be unable
to pay their share of deductibles or co-payments. Hospitals may steer patients adversely affected by the economy to less costly therapies,
resulting in a reduction in demand, or demand may shift to public health hospitals, which purchase our products at a lower government
price. A recessionary economic environment may also lead to increased pricing scrutiny and pressure for reimbursement of new drugs, which
may adversely affect the demand for our current and future plasma-derived protein therapeutics.
A breakdown in our information technology
(IT) systems could result in a significant disruption to our business.
Our operations are highly
dependent on our information technology (IT) systems. If we were to suffer a breakdown in our systems, storage, distribution or tracing,
we could experience significant disruptions affecting all our areas of activity, including our manufacturing, research, accounting and
billing processes and potentially cause disruptions to our manufacturing process for products currently in production. We may also suffer
from partial loss of information and data due to such disruption.
Our business and operations would suffer
in the event of computer system failures, cyber-attacks on our systems or deficiency in our cyber security measures.
Despite the implementation
of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer
viruses, unauthorized access, malware, natural disasters, fire, terrorism, war and telecommunication, electrical failures, cyber-attacks
or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside
our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer
hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks
and intrusions from around the world have increased. To the extent that any disruption or security breach results in a loss of or damage
to our data or applications, or inappropriate disclosure of confidential or proprietary information and personal information, we could
incur liability due to lost revenues resulting from the unauthorized use or theft of sensitive business information, remediation costs,
and litigation risks including potential regulatory action by governmental authorities. In addition, any such disruption, security breach
or other incident could delay the further development of our future product candidates due to theft or corruption of our proprietary data
or other loss of information. Our business and operations could also be harmed by any reputational damage with customers, investors or
third parties with whom we work, and our competitive position could be adversely impacted.
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Tax legislation in the United States may
impact our business.
Changes to tax legislation
in the United States, as well as the issuance of administrative rulings or court decisions, could impact our business. Tax legislation
enacted in recent years made significant and wide-ranging changes to the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
Many aspects of such legislation that could affect our business remain subject to considerable uncertainty. Further, it is impossible
to predict the occurrence or timing of any additional tax legislation or other changes in tax law that materially affect our business
or investors.
H.R. 1., also known as the
One Big Beautiful Bill Act (the “OBBBA”), was enacted on July 4, 2025. The legislation includes several provisions that may
impact the timing and magnitude of certain tax deductions with respect to U.S. research and development costs, business interest expense,
in addition to other tax changes with effective dates beginning in 2025. We are currently evaluating the provisions of the OBBBA to assess
their potential impact on our financial position, results of operations and cash flows.
Current and future accounting pronouncements
and other financial reporting standards, especially but not only concerning revenue recognition, might negatively impact our financial
results.
We regularly monitor our compliance
with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of
new standards, changes to existing standards, including but not limited to IFRS 18, which is expected to be effective for annual reporting
periods beginning on or after 1 January 2027, as well as changes in these standards interpretation, we might be required to change our
accounting policies, particularly concerning revenue recognition. In addition, we may be required to alter our operational policies to
reflect new or amended financial reporting standards, or to restate our published financial statements. Such changes might have an adverse
effect on our reputation, business, financial position, and profit, or cause an adverse deviation from our revenue and operating profit
targets.
Sustainability
and environmental, social, and governance (“ESG”) initiatives could increase our costs or otherwise adversely impact our business.
In
recent years, public companies have faced scrutiny related to ESG practices and disclosures from certain investors, capital providers,
shareholder advocacy groups, other market participants, and other stakeholder groups. Such scrutiny may result in increased costs, enhanced
compliance or disclosure obligations, or other adverse impacts on our business, financial condition, or results of operations. In 2025,
we issued our first ESG report. Although the costs we incurred in the process were not material, future initiatives in connection with
ESG practices and disclosures may be costly and may not achieve the desired effect. If our ESG practices and reporting do not meet investor
or other stakeholder expectations, we may be subject to investor or regulator engagement regarding such matters. Our failure to comply
with any applicable ESG rules or regulations could lead to penalties and adversely impact our reputation, access to capital, and employee
retention. Such ESG matters may also impact our third-party contract manufacturers and other third parties on which we rely, which may
augment or cause additional impacts on our business, financial condition, or results of operations.