Kamada Ltd.
Annual Report 2022

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report: Not applicable For the transition period from ____ to _____ Commission file number 001-35948 Kamada Ltd. (Exact name of registrant as specified in its charter) N/A (Translation of Registrant’s name into English) State of Israel (Jurisdiction of incorporation or organization) 2 Holzman St. Science Park P.O Box 4081 Rehovot 7670402 Israel (Address of principal executive offices) Amir London, Chief Executive Officer 2 Holzman St., Science Park Rehovot 7670402, Israel +972 8 9406472 (Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of Each Class Ordinary Shares, par value NIS 1.00 each Trading Symbol KMDA Name of Each Exchange on which Registered The Nasdaq Stock Market LLC Securities registered or to be registered pursuant to Section 12(g) of the Act. None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. As of December 31, 2022, the Registrant had 44,832,843 Ordinary Shares outstanding. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Emerging growth company ☐ If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐ † The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐ If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Item 17 ☐ Item 18 ☐ ☐ Yes ☒ No PART I Item 1. Item 2. Item 3. Item 4. Item 4A. Item 5. Item 6. Item 7. Item 8. Item 9. Item 10. Item 11. Item 12. Item 13. Item 14. Item 15. Item 16. Item 16A. Item 16B. Item 16C. Item 16D. Item 16E. Item 16F. Item 16G. Item 16H. Item 16I. Item 17. Item 18. Item 19. TABLE OF CONTENTS Identity of Directors, Senior Management and Advisers Offer Statistics and Expected Timetable Key Information Information on the Company Unresolved Staff Comments Operating and Financial Review and Prospects Directors, Senior Management and Employees Major Shareholders and Related Party Transactions Financial Information The Offer and Listing Additional Information Quantitative and Qualitative Disclosures About Market Risk Description of Securities Other Than Equity Securities Defaults, Dividend Arrearages and Delinquencies Material Modifications to the Rights of Security Holders and Use of Proceeds Controls and Procedures [Reserved] Audit Committee Financial Expert Code of Ethics Principal Accountant Fees and Services Exemptions from the Listing Standards for Audit Committees Purchase of Equity Securities by the Issuer and Affiliated Purchasers Change in Registrant’s Certifying Accountant Corporate Governance Mine Safety Disclosure Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Financial Statements Financial Statements Exhibits i 1 1 1 45 81 81 105 126 128 128 128 137 137 138 138 138 138 138 138 139 139 139 139 140 140 140 141 141 142 In this Annual Report on Form 20-F (this “Annual Report”), unless the context indicates otherwise, references to “NIS” are to the legal currency of Israel, “U.S. dollars,” “$” or “dollars” are to United States dollars, and the terms “we”, “us”, the “Company”, “our company”, “our”, and “Kamada” refer to Kamada Ltd., along with its consolidated subsidiaries. This Annual Report contains forward-looking statements that relate to future events or our future financial performance, which express the current beliefs and expectations of our management in light of the information currently available to it. Such statements involve a number of known and unknown risks, uncertainties and other factors that could cause our actual future results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements include all statements that are not historical facts and can be identified by words such as, but without limitation, “believe”, “expect”, “anticipate”, “estimate”, “intend”, “plan”, “target”, “likely”, “may”, “will”, “would”, or “could”, or other words, expressions or phrases of similar substance or the negative thereof. We have based these forward-looking statements largely on our management’s current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs. Forward-looking statements include, but are not limited to, statements about: ● our continued focus on driving profitable growth through expanding our growth catalysts which include: investment in the commercialization and life cycle management of our commercial Proprietary products led by CYTOGAM and KEDRAB sales in the U.S. market; continue growing our Proprietary hyper-immune – portfolio’s revenues in existing and new geographic markets through registration and launch of the products in new territories; expanding sales of GLASSIA in ex-U.S. markets; generating royalties from GLASSIA sales by Takeda; expanding our plasma collection capabilities in support of our growing demand for hyper-immune specialty plasma as well as sales of normal source plasma to the market; continued increase of our Distribution segment revenues specifically through launching the eleven biosimilar products in Israel; and leveraging our U.S. Food and Drug Administration (“FDA”)-approved hyperimmune immunoglobulins (“IgG”) platform technology, manufacturing, research and development expertise to advance development and commercialization of additional product candidates including our Inhaled Alpha-1 antitrypsin (“AAT”) product candidate and identify potential commercial partners for this product; ● our current exception to generate fiscal year 2023 total revenues at a range of $138 million to $146 million and EBITDA in the range of $22 million to $26 million; and that the mid- range points of the projected 2023 revenue and EBITDA forecast would represent a 10% and 35% growth over fiscal year 2022, respectively; ● our belief that sales of CYTGOM and KEDRAB in the U.S. market will continue to increase in the coming years and will be a major growth catalyst for the foreseeable future; ● our expectation to receive FDA approval for manufacturing of CYTOGAM and initiate commercial manufacturing of the product in our manufacturing facility in Beit Kama, Israel by mid 2023; ● our expectation to receive the Canadian health authorities' approval for manufacturing of CYTOGAM in our manufacturing facility in Beit Kama, Israel by the third quarter of 2023; ● our expectation that based on current GLASSIA sales in the U.S. and forecasted future growth, we will receive royalties from Takeda in the range of $10 million to $20 million per year for 2023 to 2040; ● our expectation to supply CYTOGAM, HEPAGAM, VARIZIG and WINRHO SDF to Canadian Blood Services (CBS) for an additional three years, commencing on April 1, 2023, for an approximate total value of $22 million; ● our expectation that VARIZIG's supply to Pan American Health Organization (“PAHO”) will continue through the first half of 2023; ● our expectation to continue manufacturing HEPAGAM B, VARIZIG and WINRHO SDF at Emergent BioSolutions Inc. (“Emergent”) in the foreseeable future, and, upon decision to do so, initiate in parallel a technology transfer project for transitioning the manufacturing of these products to our manufacturing facility in Beit Kama, Israel, subject to executing a new amended manufacturing services agreement with Emergent covering operational aspects and the technology transfer related services and scope, and our anticipation that if initiated, such a technology transfer may be completed within four to five years; ● our intention to expand our Proprietary plasma-derived products business, including that of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF, by maximizing the market potential of our existing Proprietary products portfolio; ii ● our expectation that, subject to European Medicines Agency (“EMA”) and subsequently the Israeli Ministry of Health (“IMOH”) approvals, we will launch in Israel eleven biosimilar products through 2028 and that sales generated by the launch of the biosimilar products portfolio will become a major growth catalyst, and our estimate that the potential aggregate peak revenues, achievable within several years of launch, generated by the distribution of all eleven biosimilar products will be approximately $40 million annually; ● our ability to procure adequate quantities of plasma and fraction IV from our suppliers, which are acceptable for use in our manufacturing processes; ● our plans to significantly expand our hyperimmune plasma collection capacity by investing in our plasma collection center in Beaumont, Texas, and leveraging our FDA license to establish a network of new plasma collection centers in the United States, with the intention to collect normal source as well as hyperimmune specialty plasma required for manufacturing of some of our other Proprietary products including KEDRAB/KAMRAB during 2023; and our expectation that the expansion of our plasma collection capabilities will allow us to better support our plasma needs as well as generate additional revenues through sales of collected normal source plasma; ● our intention to seek new long-term supply agreements for hyper-immune plasma with additional plasma-collection companies; ● our intention to enhance our current manufacturing capabilities; ● our intention to implement staff reductions when needed in order to adjust to lower plant utilization; ● our expectations regarding the potential market opportunities for our products and product candidates; ● our belief that the acquired inventory of CYTOGAM which we acquired from Saol is sufficient to meet market demand through the second part of 2023; ● our belief that the administration of CYTOGAM together with the available antivirals may provide additional protection in preventing cytomegalovirus (“CMV”) disease for certain high-risk transplant populations, such as lung and heart transplant; ● our belief that there is an under-utilization of CYTOGAM as prophylaxis to CMV in high risk populations within Solid Organ Transplants ("SOT") due to a lack of new data and awareness regarding the benefits of combination CYTOGAM and antiviral therapy, and by addressing these deficits, higher usage rates can be supported; ● our intention to seek registration of CYTOGAM in various other territories as well as explore label expansion of CYTOGAM to be used in other indication; ● our belief that anti-rabies products based on equine serum are inferior to products made from human plasma; ● our belief that the exit of Sanofi S.A. from the U.S anti-Rabies IgG market, as well as some additional international markets, creates an opportunity for us to expand KEDRAB’s U.S. market share; ● our belief that as WINRHO SDF is the only Rho (D) product positioned in the U.S. for ITP, and that maintaining awareness of the product will continue to support ongoing usage rates; ● our belief that given the expected continued increase in liver transplants in ex-U.S. countries, and with our planned direct marketing efforts HEPAGAM usage may grow; ● our expectation to launch and sell GLASSIA in some of the additional countries where it is currently registered during 2023-2024; ● our belief that our relationships with our strategic partners, including with Kedrion, Takeda and PARI, will continue without disruption; iii ● our belief that we will be able to register our proprietary products, including CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF, in additional countries where they are not currently registered, and our belief that this would lead to additional sales worldwide; ● our belief that we will be able to continue to meet our customers demand for our proprietary products; ● our expectations regarding the potential actions or inactions of existing and potential competitors of our products, including our belief that there will be no new supplier of AAT by infusion in the U.S. market in the near future; ● our expectation that key U.S. physicians will publish new clinical data related to our portfolio, and our belief that the educational symposiums that they conduct will have a positive impact on the understanding of our portfolio and thereby contributing to continued growth in demand; ● the legislation or regulation in countries where we sell our products that affect product pricing, reimbursement, market access or distribution channels may affect our sales and profitability; ● our projection that changes in the product sales mix and geographic sales mix may have an effect on our sales and profitability; ● our expectation of launching one of Alvotech's biosimilar products in Israel during 2023 and two others during 2024, and that following receipt of the EMA marketing approval by Alvotech, and subject to subsequent approval by the IMOH, the remaining Alvotech products will be launched in Israel through 2028; ● our expectation of launching three additional biosimilar products of two undisclosed international pharmaceutical companies in Israel through 2026; ● our ability to identify growth opportunities for existing products and our ability to identify and develop new product candidates; ● our belief that the market opportunity for AAT products for the treatment of AATD will continue to grow; ● our expectation that the AATD's diagnosis will continue to increase going forward as awareness of AATD increases; ● our plan to continue to develop our pipeline, primarily focusing on the pivotal Phase 3 InnovAATe clinical trial of Inhaled AAT for the treatment of Alpha-1 Deficiency (AATD) and to explore new strategic business development opportunities; ● our ability to attract partners for development programs for Inhaled AAT for AATD in the United States and the European Union, and to maintain such partnerships, if we decide to pursue such direction, as well as the impact on our business resulting from such partnerships, or from a failure to form such partnerships or fully realize the benefits of such partnerships; ● our intention to meet with the FDA and EMA during the first half of 2023 to discuss the InnovAATe clinical trial progress and potential opportunities to shorten the regulatory pathway; ● our belief that Inhaled AAT for AATD will increase patient convenience and reduce the need for patients to use intravenous infusions of AAT products, thereby decreasing the need for clinic visits or nurse home visits and reducing medical costs; ● our belief that Inhaled AAT for AATD will enable us to treat significantly more patients from the same amount of fraction IV and production capacity and therefore increase our profitability; ● our belief that the inhaled formulation of AAT would be more effective in reducing inflammation of the lung tissue and inhibiting the uncontrolled neutrophil elastase that causes the breakdown of the lung tissue and emphysema; iv ● our intention to conduct a sub-study in North America in which approximately 30 patients will be evaluated for the effect of ADA on AAT levels in plasma with Inhaled AAT and IV AAT treatments; ● our ability to obtain and/or maintain regulatory approvals for our products and new product candidates, the rate and degree of market acceptance, and the clinical utility of our products; ● our ability to maintain compliance with government regulations and licenses; ● our intention to vigorously defend ourselves against any claims if and when they arise from the matters of the termination of the distribution agreement in Russia and Ukraine; ● our belief that our current cash and cash equivalents and expected future cash to be generated by our operational activities will be sufficient to satisfy our liquidity requirements for at least the next 12 months; ● our expectation that our capital expenditures will increase in the coming years mainly due to the planned expansion of our plasma collection operations as well as potentially to facilitate the transition of manufacturing of HEPGAM B, VARIZIG and WINRHO SDF to our manufacturing facility in Beit Kama, Israel; ● our expectations to pay approximately $24.9 million on account of contingent consideration, inventory related liability and the assumed liabilities, during the next 12 months; ● our ability to obtain and maintain protection for the intellectual property, trade secrets and know-how relating to or incorporated into our technology and products; ● our expectations regarding our ability to utilize Israeli tax incentives against future income; and ● our expectations regarding taxation, including that we will not be classified as a passive foreign investment company for the taxable year ending December 31, 2023. All forward-looking statements involve risks, assumptions and uncertainties. You should not rely upon forward-looking statements as predictors of future events. The occurrence of the events described, and the achievement of the expected results, depend on many events and factors, some or all of which may not be predictable or within our control. Actual results may differ materially from expected results. See the sections “Item 3. Key Information — D. Risk Factors” and “Item 5. Operating and Financial Review and Prospectus,” as well as elsewhere in this Annual Report, for a more complete discussion of these risks, assumptions and uncertainties and for other risks, assumptions and uncertainties. These risks, assumptions and uncertainties are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. All of the forward-looking statements we have included in this Annual Report are based on information available to us as of the date of this Annual Report and speak only as of the date hereof. We undertake no obligation, and specifically decline any obligation, to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Annual Report might not occur. The audited consolidated financial statements for the years ended December 31, 2022, 2021 and 2020 included in this Annual Report have been prepared in accordance with the international financial reporting standards (“IFRS”) as issued by the international accounting standards board (“IASB”). None of the financial information in this Annual Report has been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Unless otherwise noted, NIS amounts presented in this Annual Report are translated at the rate of $1.00 = NIS 3.519, the exchange rate published by the Bank of Israel as of December 31, 2022. v Item 1. Identity of Directors, Senior Management and Advisers Not applicable. Item 2. Offer Statistics and Expected Timetable PART I Not applicable. Item 3. Key Information 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 business is currently highly concentrated on our two leading products, CYTOGAM and KEDRAB, as well as on royalty income generated from GLASSIA sales by Takeda. Any adverse market event with respect to such products and income would 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 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 ● We have excess manufacturing plant capacity in our manufacturing facility, which may result in reduction in operating profits, if not effectively managed. ● We recently established our U.S. plasma collection operations and have invested and intend to continue to invest in expanding this activity 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 expand this operation is important to support our future growth and profitability. ● We have several product development candidates, including our Inhaled AAT for AATD, as well as several other early-stage development projects. There can be no assurance that the development activities associated with these products will materialize and result in the FDA, EMA or any other relevant agencies granting us marketing authorization for any of these products. ● In our Proprietary Products segment, continued availability of CYTOGAM is dependent on FDA approval of the technology transfer of its manufacturing to our manufacturing facility in Beit Kama, Israel as well as our ability to maintain continuous plasma supply. ● 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. ● We rely in large part on third parties for the sale, distribution and delivery of our 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. 1 ● In our Proprietary Product segment, we rely on Contract Manufacturing Organizations (“CMO”) to manufacture some of our products and any disruption to our relationship with such manufacturers would have an adverse effect on the availability of products, our future results of operations and profitability. ● Our Proprietary Product segment operates in a highly competitive market. ● We would become supply-constrained and our financial performance would suffer if we were unable to obtain adequate quantities of source plasma or plasma derivatives or specialty ancillary products that meet the regulatory requirement of the FDA, 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 the source plasma or plasma derivatives were to raise significantly. ● 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. ● 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. ● 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. ● 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. ● 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. ● We have incurred significant losses since our inception and while we were profitable in the three years ended December 31, 2020, we incurred operating losses in the last two fiscal years and may not be able to achieve or sustain profitability. ● Our business requires substantial capital, including potential investments in large capital projects, to operate and grow and to achieve our strategy of realizing increased operating leverage. Despite our indebtedness, we may still incur significantly more debt. ● Our share price may be volatile. ● Conditions in Israel could adversely affect our business. Risks Related to Our Business Our business is currently highly concentrated on our two leading products, CYTOGAM and KEDRAB, as well as on royalty income generated from GLASSIA sales by Takeda. Any adverse market event with respect to such products and income would have a material adverse effect on our business and financial condition. Our business currently relies on the sales of CYTOGAM, our Cytomegalovirus Immune Globulin Intravenous (Human) (CMV-IGIV), and KEDRAB, our Human Rabies Immune Globulin (HRIG), as well as royalty income on sales of GLASSIA, our intravenous AAT product, by Takeda. Revenue from sales of these products and royalties comprised approximately 17%, 13% and 9%, respectively (39% in total), of our total revenues for the year ended December 31, 2022. 2 In the event that CYTOGAM or KEDRAB 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. We are entitled to royalty payments from Takeda on GLASSIA sales in the United States (as well as in Canada, 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 period between March and December 2022, we accounted for $12.2 million 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 from 2023 to 2040. However, any reduction in sales of GLASSIA by Takeda or should Takeda reduce its manufacturing and marketing of GLASSIA for any reason (including but not limited to inability to adequately or sufficiently manufacture GLASSIA, regulatory limitations, difficulties in marketing, reduction in market size, or changes in corporate focus), our future expected royalty income from Takeda’s sales of GLASSIA would be adversely impacted, 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 some of our proprietary products or the United States would have a material adverse effect on our business. A significant portion of our revenues has been, and will continue to be, derived from sales of our proprietary products, including those of CYTOGAM, KEDRAB, HEPGAM B, VARIZIG, WINRHO SDF and GLASSIA, as well as royalty income from GLASSIA sales by Takeda. Revenue from our Proprietary products comprised approximately 79%, 73% and 76% of our total revenues for the years ended December 31, 2022, 2021 and 2020, respectively. If some 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 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. A significant portion of our sales and income are generated in the United States and comprised approximately 51%, 48% and 63% of our total revenues for the years ended December 31, 2022, 2021 and 2020, 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 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. Our Proprietary commercial products portfolio, comprising of CYTOGAM, KEDRAB, WINRHO SDF, VARIZIG, HEPGAM B and GLASSIA, as well as KAMRAB, KAMRHO (D) and two types of equine-based anti-snake venom (ASV) products, 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, including the Middle East and North Africa (“MENA”) region, where we had little to no prior sales and operational experience. While we intend to leverage our existing strong international distribution network to grow our commercial revenue in the existing markets in which we sell our products, we also plan to expand to geographic markets in which these products are not currently sold, and we may not be successful in developing additional markets for these products. Our ability to successfully maintain and expand our recently established U.S. based commercial and distribution infrastructure, maintain and expand ex-U.S. commercialization, is critical for our future growth, profitability and financial stability. Given our limited prior experience in some of the required activities and responsibilities, including operation of direct sales in the U.S. market, knowledge and experience in the MENA region, as well as other operational, technical, regulatory, financial and compliance challenges, we may not be able to continue to expand our existing commercial operation, which may materially adversely affect the operating results of our business as well as our financial condition. 3 We have excess manufacturing plant capacity in our manufacturing facility, which may result in a reduction in operating profits, if not effectively managed. Following the transition of GLASSIA manufacturing to Takeda in 2021, we have been and may continue to be affected by reduced efficiency of our manufacturing facility, which resulted and may continue to result in increased manufacturing costs per vial, reduced gross profitability and potential operating losses. We plan to utilize the excess manufacturing capacity in our manufacturing plant to manufacture our proprietary products, including KEDRAB/KAMRAB and GLASSIA (which are currently manufactured in our facility) and CYTOGAM (subject to obtaining required regulatory approval). We are also currently manufacturing at our plant small quantities of KAMRHO and anti-snake venom products as well as clinical lots needed for the Inhaled AAT clinical study. We might also potentially in the future use the existing capacity for the manufacturing of HEPGAM B, VARIZIG and WINRHO SDF, which would be subject to a technology transfer and regulatory approvals and the execution of a new revised contract manufacturing agreement with Emergent. 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 knowhow and expertise to support the manufacturing of additional products in our facility, we may not be able to complete required technology transfers or obtain required regulatory approvals in the expected timeline, or at all. Further, while we are capable of increasing the manufacturing capacity at our facility, there is no assurance that there will be increased market demand for these products at a profitable market price in the markets in which we distribute our products or other markets. The manufacturing of excess quantities of products, which may not be sold due to lower demands, may result in the need to write-down the value of inventories, which may result in significant 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.” While we would expect to implement staff reductions when needed in order to adjust to lower plant utilization, the risk of not adequately adjusting to lower plant utilization could result in inefficiencies, reduced profitability or operating losses. Staff reductions have in the past, and may in the future, require us to pay excess severance compensation and may lead to labor disputes and strikes, which could affect our ability to continue to manufacture products and may lead to increased costs, reduced profitability and operating losses. For labor related risk see “—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.” Failure to adequately or timely adapt our manufacturing volume or our CMOs supplies as needed may lead to an inability to supply products, may have an adverse effect on our business and could cause substantial harm to our business reputation and result in breach of our sales agreements and the loss of future customers and orders. We recently established our U.S. plasma collection operations and have invested, and intend to continue to invest, in expanding this activity 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 expand this operation is important to support our future growth and profitability. In March 2021, we acquired the plasma collection center of B&PR in Beaumont, Texas, which primarily collects hyper-immune plasma used in the manufacture of our KAMRHO (D). We are in the process of significantly expanding our hyperimmune plasma collection capacity in this center. We registered with the FDA the collection of hyper-immune plasma to be used in the manufacture of KEDRAB/KAMRAB and plan to start collections of such plasma during 2023. We also intend to leverage our experience with plasma collection to establish additional plasma collection centers in the United States, with the intention of collecting normal source plasma, as well as hyper-immune specialty plasma required for manufacturing of our proprietary products. To that end, during March 2023, we entered into a lease for a new plasma collection center in Uvalde, Houston, Texas and expect to commence operations at the new center following the completion of its construction and obtaining the required regulatory approvals. However, given our limited prior experience in managing plasma collection operations, the operational, technical, and regulatory challenges in establishing and maintaining plasma collection operations, as well as the challenges in screening locations, in negotiating the lease and other third party agreements required for the ongoing operations of the centers, the financial investment required to expand our collection capabilities and open new collection centers and the management of an expanded scope of plasma collection operations, we may not be able to realize our investment and the anticipated benefits of such activities. Further, we may not be able to adequately collect sufficient quantities of plasma through our plasma collection operations to support our plasma sourcing needs, which will result in continued dependency on third party suppliers; and even if we are successful in collection sufficient quantities, 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 could be no assurance that we will be able to collect adequate quantities of normal source plasma as well as secure supply agreements with customers at adequate prices See also “—We would become supply-constrained and our financial performance would suffer if we were unable to obtain adequate quantities of source plasma or plasma derivatives or specialty ancillary products approved by 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 the source plasma or plasma derivatives were to raise significantly”; and “—We may in the future engage in additional strategic transactions to acquire or sell assets, businesses, products or technologies or engage in in-license or out-license transactions of products or technologies or form collaborations that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense.” 4 We have several product development candidates, including our Inhaled AAT for AATD as well as several other early stage development projects. There can be no assurance that the development activities associated with these products will materialize and result in the FDA, EMA or any other relevant agencies granting us marketing authorization for any of these products. We are engaged in research and development activities with respect to several pharmaceutical products candidates, including Inhaled AAT for AATD, which is our lead product development candidate. During December 2019, the first patient was randomized in Europe into our pivotal Phase 3 InnovAATe clinical trial evaluating the safety and efficacy of our proprietary Inhaled AAT therapy for the treatment of AATD. The study was initiated following extensive discussions with both the FDA and EMA regarding the trial’s design as well a thorough analysis of a prior pivotal Phase 2/3 clinical trial for Inhaled AAT for AATD conducted in Europe, which did not meet its primary or other pre-defined efficacy endpoints, and a prior Phase 2 clinical trial conducted in the U.S which met its pharmacokinetic endpoint. In addition to the pivotal study and based on feedback received from the FDA regarding anti-drug antibodies (“ADA”) to Inhaled AAT, we intend to concurrently also conduct a sub-study in North America in which approximately 30 patients will be evaluated for the effect of ADA on AAT levels in plasma with Inhaled AAT and IV AAT treatments. While a recent routine and planned meeting of the independent Data and Safety Monitoring Board (“DSMB”) supported an expansion to the inclusion criteria of the trial and recommended it continue without modification, there can be no assurance that we will be able to complete this trial successfully or that the trial results will be sufficient for obtaining FDA and EMA approval. See also “As a result of the COVID-19 pandemic we encountered delays in patient recruitment into our pivotal Phase 3 InnovAAT clinical study conducted at a first study site in Europe and it impacted our ability to open additional study sites in the United States and Europe. COVID-19 may in the future affect our ability to conduct the study.” In addition, we are currently engaged in the early stage development of other product candidates, including a recombinant AAT product candidate, and in 2022, we initiated three additional early-stage development programs, all of which are associated with plasma derived product candidates. There can be no assurance that the development activities associated with these products will materialize and result in the FDA, EMA or any other relevant agencies granting us marketing authorization for any of these products. For additional information, see — “Item 4. Information on the Company — Our Development Product Pipeline.” There can be no assurance that the development activities associated with these products will materialize and result in the FDA, EMA or any other relevant agencies granting us marketing authorization for any of these products. See also “—Research and development efforts invested in our pipeline of specialty and other products may not achieve expected results” and “—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.” We may in the future engage in additional strategic transactions to acquire or sell assets, businesses, products or technologies or engage in in-license or out-license transactions of products or technologies or form collaborations that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense. As part of our business development strategy, we have in the past, and may in the future engage in strategic transactions to acquire or sell assets, businesses, or products; or otherwise engage in in-licensing our out-licensing transactions with respect to products or technologies; or enter into other strategic alliances or collaborations. 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 incur additional 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. The COVID-19 pandemic may continue to impact our business, operating results and financial condition. The outbreak of the COVID-19 pandemic in January 2020 and its spread throughout the world has led to a global health and economic crisis and had an effect on most of the countries in the world. In response, governments around the world, including Israel, announced defensive measures such as restrictions on travel between countries, isolation measures and limitations on gatherings and movement, lockdowns, restrictions on operating private businesses and government and municipal services. Commencing in the second quarter of 2021, the Israeli economy showed an evident trend of recovery from the COVID-19 crisis as a result of the high vaccination rate of the population, which made it possible to ease travel restrictions at various destinations around the world and to return to normal business activity. The trend of recovery continued to increase, and it appears that the effect of the COVID-19 pandemic in Israel and in many other places around the world is fading. While we maintained ongoing operations with no material affect during the pandemic to date and believe that we will be able to continue operating normally in the future, there is still some level of uncertainty regarding the reinstatement of restrictions as a result of the discovery of additional coronavirus variants and fear of further spread. 5 The COVID-19 pandemic and the volatile global economic conditions stemming from it may precipitate or amplify the other risks described in this “Risk Factors” section of this Annual Report, which could materially adversely affect our business, operations and financial conditions and results from operations. Risks Related to Our Proprietary Products Segment Sales of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF in the U.S. market are critical in order to support future growth, future results of operations and profitability. Sales of CYTOGAM, HEPGAM B, VARIZIG and WINRHO SD in the U.S. market represented approximately 30% of our Proprietary Product segment sales for the year ended December 31, 2022. Following the acquisition of these products in November 2021, we established a U.S. based commercial and sales team which gradually assumed the U.S. commercial responsibility for these products. Such activities included hiring employees with relevant U.S. commercial experience, engaging wholesalers, customers, and a U.S. third-party logistics (“3PL”) provider, and understanding market landscape and trends for these products through market research and discussions with physicians and key opinion leaders, as well as medical affairs activities which include educating physicians, supporting medical publications and collecting new clinical data associated with these products. However, given our limited prior experience in directly managing U.S. commercial and medical operations and the operational, technical and regulatory challenges in maintaining such activity, as well as the significant costs involved in such operations, we may not be able 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 significant reduction in sales, increased operating costs and reduced profitability. 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 4. Information on the Company — Proprietary Products Segment.” Continued availability of CYTOGAM is dependent on FDA approval of the technology transfer of its manufacturing to our manufacturing facility in Beit Kama, Israel as well as our ability to maintain continuous plasma supply. As part of the acquisition of the four FDA approved plasma-derived hyperimmune commercial products from Saol, we acquired inventory of CYTOGAM which is sufficient to meet market demand through the second part of 2023. During 2019, pursuant to an earlier engagement with Saol, we initiated technology transfer activities for transitioning CYTOGAM manufacturing to our manufacturing facility in Beit Kama, Israel. As a result of the consummation of the IgG portfolio acquisition, which included the acquisition of all rights relating to CYTOGAM, the previous contract manufacturing engagement with Saol with respect to this product expired. During December 2022, we submitted a prior approval supplement (“PAS”) to the FDA for approval to manufacture CYTOGAM at the Beit Kama facility and subject to the results of an FDA audit of our facility, we expect to receive FDA approval for manufacturing of CYTOGAM and initiate commercial manufacturing of the product by mid-2023. A similar application to the Canadian health authorities was submitted in January 2023, with approval expected by the third quarter of 2023. Failure to obtain the required regulatory approvals, in a timely manner, may affect product availability, result in a decrease in sales and a deterioration in our market position, and could have an adverse effect upon our sales, margins and profitability. As part of the initiation of the CYTOGAM technology transfer process, we engaged Prothya Biosolutions Belgium (“Prothya”) as a third-party contract manufacturer to perform certain manufacturing activities required for the manufacturing of CYTOGAM. In addition, we assumed a plasma supply agreement with CSL for the continued supply of required plasma for the manufacturing of the product. If we fail to maintain our relationship with these entities, 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 the product’s sales and a deterioration in our market position when compared with one or more of our competitors. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability. 6 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 clinical development and marketing in the United States of KEDRAB, Kedrion is the sole distributor of KEDRAB in the United States. Sales to Kedrion accounted for approximately 13%, 12% and 14% of our total revenues in the years ended December 31, 2022, 2021 and 2020, respectively. We are dependent on Kedrion for its marketing and sales of KEDRAB in the United States. The term of the agreement is for six years commencing on the date by which KEDRAB U.S. launch was feasible (i.e., until March 2024) and Kedrion has an option to extend the term by two additional years (i.e., until March 2026). 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 would become supply-constrained, and our financial performance would suffer if we were unable to obtain adequate quantities of source plasma or plasma derivatives or specialty ancillary products approved by 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 the source plasma or plasma derivatives were to raise significantly.” 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 increase supply from other available sources 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 internalizing those activities could lead to a decrease in KEDRAB/ KAMRAB sales and a deterioration in our market share when compared with one or more of our competitors. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability. In our Proprietary Products segment, we currently earn royalties on GLASSIA sales by Takeda in the United States (and in the future may earn royalties on GLASSIA sales by Takeda in Canada, Australia and New Zealand, to the extent GLASSIA will be approved for sale and sales will be generated in these other markets), and any reduction in sales of GLASSIA by Takeda would have an adverse effect on our future expected royalty income and profitability. Commencing in March 2022, we are entitled to royalty payments from Takeda on GLASSIA sales in the United States (and in the future we may earn royalties on GLASSIA sales by Takeda in Canada, 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 period between March and December 2022, we accounted for $12.2 million 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 for 2023 to 2040. However, any reduction in sales of GLASSIA by Takeda or should Takeda reduce its manufacturing and marketing of GLASSIA for any reason (including but not limited to inability to adequately or sufficiently manufacture GLASSIA, regulatory limitations, difficulties in marketing, reduction in market size, or changes in corporate focus), our future expected royalty income from Takeda’s sales of GLASSIA would be adversely impacted, which would have an adverse effect on our results of operations and profitability. In our Proprietary Products segment, we rely on Contract Manufacturing Organizations to manufacture some of our products and any disruption to our relationship with such manufacturers would have an adverse effect on the availability of products, our future results of operations and profitability. HEPAGAM B, VARIZIG and WINRHO SDF are currently manufactured by Emergent under a contract manufacturing agreement which was assigned to us from Saol following the consummation of the acquisition. We are 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 the manufacturing process complies with current Good Manufacturing Practice (“cGMP”) standards and any other regulatory requirements and that each product manufactured meets its specification and is appropriately released for human consumption. 7 If we fail to maintain our relationship with Emergent, or if Emergent fails to operate in compliance with cGMP and other regulatory requirements, 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 replacement supplier of the plasma which is used for the production of 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 when compared with one or more of our competitors. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability. We have also engaged Prothya as a third-party contract manufacturer to perform certain manufacturing activities required for the manufacturing of CYTOGAM. If we fail to maintain our relationship with Prothya, or if Prothya fails to operate in compliance with cGMP and other regulatory requirements, we could face supply shortages, which could adversely impact our ability to manufacture and supply CYTOGAM, and could incur increased costs in finding a replacement manufacturer for this product. Delays in establishing a relationship with a new manufacturer could lead to a decrease in this product sales and a deterioration in our market share when compared with one or more of our competitors. Any of the foregoing developments could have an adverse effect upon our sales, margins and profitability. 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 process. Our 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 tender process will be materially affected and could 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 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), including the recently acquired products CYTOGAM, HEPGAM B, VARIZIG and WINRHO SDF. Sales through such distributors accounted for approximately 25%, 17% and 10% of our total revenues in the years ended December 31, 2022, 2021 and 2020, respectively and we expect such sales to increase in 2023 and beyond. We are dependent on these third parties for successful marketing, distribution and sales of our 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 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 to us 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, HEPGAM B, VARIZIG 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. Disputes with distributors have arisen in the past and disputes may arise in the future that cause the delay or termination of the development, manufacturing, supply or commercialization of our product candidates, or could result in costly litigation or arbitration that diverts management’s attention and resources. In May 2022, we terminated a distribution agreement with a third-party engaged to distribute our propriety 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”). In July 2022, the Affiliate filed a request for a conciliation hearing with the Court in Geneva relying on the terminated power of attorney and seeking damages for the alleged inability to sell the remaining product inventory previously acquired from the Company and compensation for the lost customer base. The conciliation hearing was scheduled for March 17, 2023, and, at this time, it is not possible to assess the prospects and scope of any claims against us and any potential liabilities and impact on our business. See “Item 4. Information on the Company — Legal Proceedings.” 8 Our Proprietary Products segment operates in a highly competitive market. 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 Ltd. (“CSL”), 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, clinical trial patients and investigators, consultants 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. As a result, they may be able to devote more funds to research and development and new production technologies, as well as to the promotion of their products and business. 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 multiple 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. 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 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. CYTOGAM. To our knowledge, CYTOGAM is the sole plasma derived CMV IgG product approved for sale in the United States and Canada. Based on available public information, the FDA approved the following antiviral drugs for the prevention of CMV infection and disease: Letermovir (Prevymis), developed by Merck & Co., and for treatment of refractory/resistant infection, Maribavir (Livtencity), developed by Takeda, which may result in the loss of market share for CYTOGAM. Currently, treatment guidelines state that combination therapy with standard antiviral can be considered for certain solid organ transplant recipients. The most commonly used antivirals are Ganciclovir (Cytovene-IV Roche) and Valganciclovir (Valcyte Roche). Patients treated with antiviral agents for a long time can develop resistance and will require a second-line treatment such as Foscarnet (Foscavir Pfizer) or Cidofovir (Gilead Sciences). In rest of the world (“ROW”) markets, Cytotec CP (Biotest), a plasma derived competing product is available. KEDRAB/KAMRAB. We believe that there are two main competitors for KEDRAB/KAMRAB, our anti-rabies products worldwide: Grifols, whose product we estimate comprises approximately 70% of the anti-rabies IgG market in the United States, and CSL, which sells its anti-rabies product in Europe and elsewhere. Sanofi Pasteur, the vaccines division of Sanofi S.A., recently exited the U.S anti-rabies IgG market as well as some additional international markets, however, may still be competing in other markets or in the future could return to exited markets. Bio Products Laboratories Ltd. (“BPL”), which has an anti-Rabies IgG product for the UK market, has developed it also for the U.S market, including performing a clinical trial, but to our knowledge the program is currently paused. There are several local producers in other countries that make anti-rabies IgG products, mostly based on equine serum. Over the past several years, several companies have made attempts, and some are still in the process of developing monoclonal antibodies for an anti-rabies treatment. These products, if approved, may be as effective as the currently available plasma derived anti-rabies IgG and may potentially be significantly cheaper, and as such may result in loss of market share of KEDRAB/KAMRAB. WINRHO SDF. In the United States, WINRHO SDF competes with corticosteroids (oral prednisone or high-dose dexamethasone) or intravenous immune globulin (“IVIG”) (Grifols, CSL and Takeda are the main manufacturers and suppliers in the U.S.) as first line treatment of acute ITP, with IVIG or WINRHO SDF recommended for pediatric patients in whom corticosteroids are contraindicated. IVIG has similar efficacy to WINRHO SDF, and ITP is its labeled indication for IVIG. Rhophylac (CSL Behring) is also approved for ITP treatment, but we believe it is mostly used for Hemolytic Disease of the Newborn (“HDN”), due to its comparatively small vial size. For HDN indication, the market is usually led by tenders, where key indicators are registration status and price, and the main multiple competitors in Canada and ROW countries are RhoGAM (Kedrion), Hyper RHO (Grifols) and Rhophylac (CSL Behring) and our KAMRHO (D). HEPAGAM B. To our knowledge, in the United States, HEPAGAM B is the only approved HBIG with an on-label indication for Liver Transplants. To our understanding, HEPAGAM B holds the majority market share for the indication, while another HBIG (Nabi-HB manufactured and supplied by ADMA) is being used off-label by some medical centers for the indication. In recent years, duration of treatment has been reduced by physicians. New generation antivirals are considered effective for preventing HBV reactivation post-transplant, hence limiting HBIG use. Post-exposure prophylaxis (“PEP”) indication in the United States is covered almost totally by Nabi-HB (ADMA) and HyperHEP (Grifols). In Canada, main competition in national tenders is HyperHEP. In ROW countries such as Turkey, Saudi-Arabia and Israel, HEPATECT and Zutectra (Biotest AG) represent the primary competition. 9 VARIZIG. In the United States, incidence of Varicella Zoster Virus (“VZV”) infection has decreased dramatically since the introduction of the varicella vaccine in 1995. Two vaccines containing varicella virus are licensed for use in the United States. Varivax is the single-antigen varicella vaccine. ProQuad is a combination measles, mumps, rubella, and varicella (MMRV) vaccine. Although the use of the vaccine has reduced the frequency of chickenpox, the virus, has not been eradicated. Moreover, incidence of Herpes Zoster, also caused by VZV, is increasing among adults in the United States. Suboptimal vaccination rates contribute to outbreaks and increased risk of VZV exposure. Immunocompromised population and other patient groups are at high risk for severe varicella and complications, after being exposed to VZV. In the United States market VARIZIG is the single FDA-approved product and recommended by the Centers for Disease Control (“CDC”) for post-exposure prophylaxis of varicella for persons at high risk for severe disease who lack evidence of immunity to varicella. Alternative, CDC recommendations include IVIG if VARIZIG is unavailable and some experts recommend using Acyclovir, Valacyclovir, although published data on the benefits of acyclovir as post-exposure prophylaxis among immunocompromised people is limited. In ROW markets, several plasma derived competitor products are available, such as VARITECT (Biotest) and others. KAMRHO (D). We manufacture and market KAMRHO (D) for HDN in a few markets outside of the US, mainly in Russia, Israel, Argentina and Brazil. Kedrion is one of our competitors for KAMRHO(D) in some of those international markets. We believe there are currently two additional main suppliers of competitive products, Grifols and CSL. There are also local producers in other countries that make similar products mostly intended for local markets. Our market share of the AAT product could be negatively impacted by new competitors or adoption of new methods of administration. We believe that our two main competitors in the AAT market are Grifols and CSL. We estimate that Grifols’ AAT by infusion product for the treatment of AATD, Prolastin A1PI, accounts for at least 50% market share in the United States and more than 70% of sales in the worldwide market for the treatment of AATD, which also includes sales of Prolastin in different European countries. To the best of our knowledge, since 2018, Grifols sell Prolastin Liquid, a ready-to-infuse solution of AAT, in the United States. Apart from its sales through Talecris’ historical business, Grifols is also a local producer of the product in the Spanish market and operates in Brazil. CSL’s intravenous AAT product, Zemaira, is mainly sold in the United States. In 2015, CSL’s intravenous AAT product, Respreeza, was granted centralized marketing authorization in Europe and CSL has launched the product in a few European countries since 2016. There is another, smaller local producer in the French market, LFB S.A. In addition, we estimate that each of Grifols and CSL owns more than 300 operating plasma collection centers located across the United States. Several of our competitors are conducting preclinical and clinical trials for the development of gene therapy, recombinant AAT, small molecule treatment or correctors for AATD. While these products are not yet in pivotal trial or in late stages of development, they may eventually be successfully developed and launched, and could adversely impact our revenue and growth of sales of GLASSIA or GLASSIA-related royalties as well as affect our ability to launch our Inhaled AAT product, if approved. Similarly, if a new AAT formulation or a new route of administration with significantly improved characteristics is adopted (including, for example, aerosol inhalation), the market share of our current AAT product, GLASSIA, could be negatively impacted. While we are in the process of developing Inhaled AAT for AATD, our competitors may also be attempting to develop similar products. For example, several of our competitors may have completed early-stage clinical trials for the development of an inhaled formulation of AAT for different indications. While these products are in the early stages of development, they may eventually be successfully developed and launched. Furthermore, even if we are able to commercialize Inhaled AAT for AATD prior to the development of comparable products by our competitors, sales of Inhaled AAT for AATD, subject to approval of such product by the applicable regulatory authorities, could adversely impact our revenue and growth of sales of GLASSIA or GLASSIA -related royalties. 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. 10 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. 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 U.S. 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 bodies. The regulatory authorities may, at any time and from time to time, audit the facilities in which the product is manufactured. If any such inspection or audit of our 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 with whom we contract could materially harm our business. 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. The manufacturing of newly marketed or investigational plasma-derived products in our plant, including our Proprietary Products currently manufactured by third parties, requires a lengthy and challenging development project and/or technology transfer project through which we transfer the know-how and capabilities to manufacture the new product. Such projects are usually complex and involve investment of significant time (approximately three to four 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. 11 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. 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, utilize the excess capacity of our manufacturing plant, incur additional costs and may suffer reduced profitability or operating losses. We would become supply-constrained and our financial performance would suffer if we were unable to obtain adequate quantities of source plasma or plasma derivatives or specialty ancillary products that meet the regulatory requirement of the FDA, 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 the source plasma or plasma derivatives were to raise significantly. Our proprietary products depend on our access to U.S., European or other territories’ hyper-immune plasma or plasma derivatives, such as fraction IV. We purchase these plasma products 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 with respect to the recently acquired four FDA approved products, we assumed) a number of plasma supply agreements with various third parties in the United States and Europe. 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 adequate quantities of source plasma or fraction IV plasma that meet the regulatory requirements of the FDA, the EMA 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 and EMA. When a new plasma collection center is opened, and on an ongoing basis after its registration, it must be inspected by the FDA, the EMA or the regulatory authorities in Israel 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 on 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 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 on our ability to timely meet our manufacturing and supply obligations. If we were unable to obtain adequate quantities of source plasma or plasma derivatives that meet the regulatory standards of the FDA, the EMA or the regulatory authorities in Israel, we would be limited in our ability to maintain or increase current manufacturing levels of our plasma derivative products, as well as in our ability to conduct the research required to maintain our product pipeline. 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. 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 the recent 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. 12 We are also 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 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 world-wide. If the global demand for these products increases due to healthcare issues, epidemics or pandemics, such as the coronavirus (COVID- 19) pandemic, 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. 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. In March 2021, we completed the acquisition of the FDA licensed plasma collection center and certain related assets from the privately held B&PR based in Beaumont, Texas, which currently specializes in the collection of hyper-immune plasma used in the manufacture KAMRHO(D). We are in the process of significantly expanding our hyperimmune plasma collection capacity in this center. We registered the collection of hyper-immune plasma to be used in the manufacture of KEDRAB with the FDA and plan to start collections of such plasma during 2023. We also intend to leverage our experience with plasma collection to establish additional plasma collection centers in the United States, with the intention of collecting normal source plasma, as well as hyper-immune specialty plasma required for manufacturing of our Proprietary Products. To that end, during March 2023, we entered into a lease for a new plasma collection center in Uvalde, Houston, Texas and expect to commence operations at the new center following the completion of its construction and obtaining the required regulatory approvals. In order for plasma to be used in the manufacturing of our products, the individual centers at which the 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 (e.g., in January 2022, the FDA issued guidance providing recommendations to blood establishments on collection of convalescent plasma during the public health emergency). If it would be determined that our plasma collection center 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 if it was determined that our plasma collection center did not comply with cGMP in collecting plasma. We plan to increase our supplies of plasma for use in our manufacturing processes through collections at our existing plasma collection center and through the establishment of new plasma collection centers. This strategy is dependent upon our ability to successfully establish and register new centers, 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 our current or any 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. 13 The biologic properties of plasma and plasma derivatives are variable, which may impact our ability to consistently manufacture our products in accordance with the approved specifications. While our manufacturing processes were developed to meet certain product specifications, variations in the biologic properties of the plasma or plasma derivatives as well as the manufacturing processes themselves may result in out of specification results during the manufacturing of our products. While we expect certain 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 protein therapeutics, unanticipated events may lead to write-offs and other costs in amounts that are materially higher than our expectations. 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 biologic 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 biologic 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. 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 recently entered the U.S. plasma collection market with our recent acquisition of a plasma collection center in the United States, we continue to rely on, Kedrion, CSL, Emergent, Takeda and additional plasma suppliers, for plasma collection required for the manufacturing of KEDRAB, CYTOGAM, HEPGAM B, VARIZIG, WINRHO SDF, GLASSIA and other Proprietary products, and in the case of Kedrion and Takeda, for the distribution of these products in the United States (and in the case of Takeda, also potentially in Canada, 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, CYTOGAM, HEPGAM B, VARIZIG,WINRHO SDF, GLASSIA and/or other Proprietary products, or a loss of customer confidence in us or in GLASSIA and/or KEDRAB and/or other Proprietary products, which could materially adversely affect our sales, future revenues, reputation, and results of operations. Similarly, we rely on other third-party vendors, for example, in the testing, handling, and distributions of our products. If any of these companies 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, 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 to properly advise us regarding, or properly perform tasks related to, regulatory compliance requirements, could adversely affect our sales, future revenues, reputation and results of operations. 14 Changes in our production processes for our products may require supplemental submissions or prior approval by 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. Pursuant to the amendment to the GLASSIA license agreement with Takeda, entered into in March 2021, we agreed to transfer the BLA to Takeda. Following the effectiveness of such transfer, we will rely on Takeda to share with us any relevant information with respect to changes in the manufacturing of the product or its usage which may be applicable in order to update the products registration file in certain ROW markets in which it is currently registered and/or distributed or may be registered and/or distributed in the future. In addition, 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. 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. 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. 15 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 A.G., Kedrion, Chiesi Farmaceutici S.p.A, BPL and Valneva SE, which are sold in our Distribution segment, together represented approximately 20%, 26% and 24% of our total revenues for the years ended December 31, 2022, 2021 and 2020, 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, such as the COVID-19 pandemic. 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 of fines or penalties, be subject to claims of reach of contract, loss of reputation or even termination of agreement. If our relationship with either distributor deteriorated, our distribution sales could be adversely affected. If we fail to maintain our existing relationships with these suppliers, we could face significant costs in finding a replacement supplier, and delays in establishing a relationship with a new supplier could lead to a decrease in our sales and a deterioration in our market share when compared with one or more of our competitors. 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 made to Health Maintenance Organizations (HMOs), hospitals and to the IMOH. Our ability to win bids may be materially adversely affected by competitive conditions in such bid process. Our 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. Certain of our products in both segments have historically been subject to price fluctuations 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. Sales of our Distribution segment products are made through public tenders of Israeli hospitals and HMOs on an annual basis or in the private market based on detailing activity made by our medical representatives. 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. 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, an Israeli HMO, accounted for approximately 46%, 42% and 41% of our Distribution segment revenues in the years ended December 31, 2022, 2021 and 2020, respectively. 16 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 and there can be no assurance that such registration will be obtained. Before we may sell products in the Distribution segment in Israel, we must register the products, at our own expense, with the IMOH. We cannot predict how long the registration process of the IMOH may take or whether any such registration ultimately will be obtained. The IMOH has substantial discretion in the registration process and we can provide no assurance of success of registration. Our business, financial condition or results of operations could be materially adversely affected if we fail to receive IMOH registration for the products in the Distribution segment. Our Distribution segment is a low-margin business and our profit margins may be sensitive to various factors, some of which are outside of our control. Our Distribution segment is 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. 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. We recently 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. 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 would need to obtain IMOH marketing authorization, which will be subject to prior authorization to be obtained by the manufacturer of the biosimilar product from the FDA or the EMA. Even if an 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 will not be able to obtain the necessary marking authorization to launch the products, 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. Delays in the commercialization of such biosimilar products, including due to delays in obtaining marketing authorization, may expose us to increased competition, such as due to the entry of new competitors into the market, 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 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 effecting its potential launch. Such intellectual property threats may preclude commercialization of such biosimilar product candidates, may result in incurring significant legal expenses and liabilities and 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. 17 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. 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, including Inhaled AAT for AATD, 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 outcome. A failure of one or more of our clinical trials can occur at any stage of testing. For example, the Phase 2/3 clinical trial in Europe for Inhaled AAT for AATD did not meet its primary or secondary endpoints and we subsequently withdrew the Marketing Authorization Application (“MAA”) in Europe for our Inhaled AAT for AATD. As a result of the COVID-19 pandemic we encountered delays in patient recruitment into our pivotal Phase 3 InnovAAT clinical study conducted at a first study site in Europe and it impacted our ability to open additional study sites in the United States and Europe. COVID-19 may in the future affect our ability to conduct the study. During December 2019, we announced that the first patient was randomized in Europe into our pivotal Phase 3 InnovAATe clinical trial, a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial designed to assess the efficacy and safety of Inhaled AAT in patients with AATD and moderate lung disease. Under the study design, up to 220 patients will be randomized 1:1 to receive either Inhaled AAT at a dose of 80mg once daily, or placebo, over two years of treatment. Enrolment into the trial continued through February 2020, however, thereafter was temporarily halted due to the impact of COVID-19 pandemic on healthcare systems. Although during 2022, we resumed and accelerated patient recruitment to the study and expanded the study to additional sites across Europe, the COVID-19 pandemic may continue to slow down the rate of recruitment, and may cause a material delay in completing this study, or otherwise may require us to halt the study completely or reduce the overall size of the study, which might not be acceptable by the FDA and/or EMA. These circumstances may affect our ability to complete the study successfully or may prevent us from having sufficient information to file for and obtain regulatory approval for this product by the FDA, EMA or any other relevant regulatory agency. Each inhaled formulation of AAT, including Inhaled AAT for AATD, is being developed with a specific nebulizer produced by PARI, and the occurrence of an adverse market event or PARI’s non-compliance with its obligations would have a material adverse effect on the commercialization of any inhaled formulation of AAT. We are dependent upon PARI GmbH (“PARI”) for the development and commercialization of any inhaled formulation of AAT, including our Inhaled AAT for AATD. We have an agreement with PARI, pursuant to which it is required to obtain the appropriate clearance to market PARI’s proprietary eFlow® device, which is a device required for the administration of inhaled formulation of AAT, from the EMA and FDA for use with Inhaled AAT for AATD. See “Item 4. Information on the Company — Strategic Partnerships — PARI.” Failure of PARI to achieve these authorizations, or to maintain operations in regulatory compliance, will have a material adverse effect on the commercialization of any inhaled formulation of AAT, including Inhaled AAT for AATD, which would harm our growth strategy. Additionally, pursuant to the agreement, PARI is obligated to manufacture and supply all of the market demand for the eFlow device for use in conjunction with any inhaled formulation of AAT and we are required to purchase all of our volume requirements from PARI. Any event that permanently, or for an extended period, prevents PARI from supplying the required quantity of devices would have an adverse effect on the commercialization of any inhaled formulation of AAT, including Inhaled AAT for AATD. Lastly, we rely on PARI to ensure that the eFlow device is not violating or infringing on any third party intellectual property or patents. PARI’s inability to ensure its freedom to operate may have a significant effect on our ability to continue the development of our Inhaled AAT product candidate as well as potentially commercializing it. 18 We rely on third parties to conduct our preclinical and clinical trials. The failure of these third parties to successfully carry out their contractual duties or meet expected deadlines could substantially harm our business because we may not obtain regulatory approval for, or commercialize, our product candidates in a timely manner or at all. We rely upon third-party contractors, such as university researchers, study sites, physicians and contract research organizations (“CROs”), to conduct, monitor and manage data for our current and future preclinical and clinical programs. We expect to continue to rely on these parties for execution of our preclinical and clinical trials, and we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol and legal, regulatory and scientific standards, and our reliance on such third-party contractors does not relieve us of our regulatory responsibilities. With respect to clinical trials, we and our CROs are required to comply with current Good Clinical Practices (“GCP”), which are regulations and guidelines enforced by the FDA, the EMA and comparable foreign regulatory authorities for all of our products in clinical development. Regulatory authorities enforce these GCP through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements. These third-party contractors are not our employees, we cannot effectively control whether or not they devote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs, and except for remedies available to us under our agreements with such third-party contractors, we may be unable to recover losses that result from any inadequate work on such programs. If such third-party contractors do not successfully carry out their contractual duties or obligations or meet expected deadlines or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our development efforts and clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed. To the extent we are unable to successfully identify and manage the performance of such third-party contractors in the future, our business may be adversely affected. We have initiated the development of a recombinant AAT product candidate; however, any continued development of this product will be dependent on our ability to attract a suitable development/commercialization partner for this project, and we may not be able to successfully complete its development or commercialize such product candidate for numerous reasons. During 2020, we initiated the development of a recombinant version of AAT, through external services of a contract development and manufacturing organization (“CDMO”). See “Item 4. Information on the Company — Our Development Product Pipeline — Recombinant AAT.”. The main advantage of recombinant AAT is its potentially wider availability, and ease of large-scale manufacturing. However, continued investment in the development of this product will be subject to identifying a suitable development and commercialization partner, and we may not be able to identify such a suitable partner or be successful in entering into an agreement with any particular partner on acceptable terms or at all. Further, even if we are successful in entering into an arrangement with such a partner, we may not be able to successfully develop or commercialize a recombinant product for numerous reasons. We may encounter unforeseen events that delay or prevent us from receiving regulatory approval for our product candidates. We have experienced unforeseen events that have delayed our ability to receive regulatory approval for certain of our product candidates, and may in the future experience similar or other unforeseen events during, or as a result of, preclinical testing or the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including the following: ● delays may occur in obtaining our clinical materials; ● our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or to abandon strategic projects; ● the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower or more difficult than we anticipate (due to various reasons including challenges that may be imposed as a result of events outside our control, such as the COVID-19 pandemic which resulted in a significant slow-down in patient recruitment to our on-going Inhaled AAT Phase 3 study), or participants may withdraw from our clinical trials at higher rates than we anticipate; ● delays may occur in reaching agreement on acceptable clinical trial agreement terms with prospective sites or obtaining institutional review board approval; ● our strategic partners may not achieve their clinical development goals and/or comply with their relevant regulatory requirements, which could affect our ability to conduct our clinical trials or obtain marketing authorization; ● we may be forced to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any participant experiences an unexpected serious adverse event; ● regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; 19 ● regulators may not authorize us to commence or conduct a clinical trial within a country or at a prospective trial site, or according to the clinical trial outline we propose; ● undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies, and result in the recall of any approved product distributed pursuant to data determined to be fraudulent; ● the cost of our clinical and preclinical trials may be greater than we anticipate; ● an audit of preclinical tests or clinical studies by the FDA, the EMA, the regulatory authorities in Israel or other regulatory authorities may reveal noncompliance with applicable regulations, which could lead to disqualification of the results of such studies and the need to perform additional tests and studies; and ● our product candidates may not achieve the desired clinical benefits, or may cause undesirable side effects, or the product candidates may have other unexpected characteristics. If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if safety concerns arise, we may: ● be delayed in obtaining regulatory or marketing approval for our product candidates; ● be unable to obtain regulatory and marketing approval; ● decide to halt the clinical trial or other testing; ● be required to conduct additional trials under a conditional approval; ● be unable to obtain reimbursement for our products in all or some countries; ● only obtain approval for indications that are not as broad as we initially intend; ● have the product removed from the market after obtaining marketing approval from the FDA, the EMA, the regulatory authorities in Israel or other regulatory authorities; and ● be delayed in, or prevented from, the receipt of clinical milestone payments from our strategic partners. Our ability to enroll patients in our clinical trials in sufficient numbers and on a timely basis is subject to several factors, including the size of the patient population, the time of year during which the clinical trial is commenced, the hesitance of certain patients to leave their current standard of care for a new treatment, and the number of other ongoing clinical trials competing for patients in the same indication and eligibility criteria for the clinical trial. For example, during 2020 and 2021, we encountered challenges to recruit patients to our ongoing pivotal Phase 3 InnovAAT clinical study as a result of the COVID-19 pandemic, resulting in significant delays in recruitment. In addition, patients may drop out of our clinical trials at any point, which could impair the validity or statistical significance of the trials. Delays in patient enrollment or unexpected drop-out rates may result in longer development times. Our product development costs will also increase if we experience delays in testing or approvals. There can be no assurance that any preclinical test or clinical trial will begin as planned, not need to be restructured or be completed on schedule, if at all. Because we generally apply for patent protection for our product candidates during the development stage, significant preclinical or clinical trial delays also could lead to a shorter patent protection period during which we may have the exclusive right to commercialize our product candidates, if approved, or could allow our competitors to bring products to market before we do, impairing our ability to commercialize our products or product candidates. For example, in the past, we have experienced delays in the commencement of clinical trials, such as a delay in patient enrollment (including as a result of the COVID-19 pandemic) for our clinical trials in Europe and the United States for Inhaled AAT for AATD. Pre-clinical studies, including studies of our product candidates in animal models of disease, may not accurately predict the result of human clinical trials of those product candidates. In addition, product candidates studied in Phase 1 and 2 clinical trials may be found not to be safe and/or efficacious when studied further in Phase 3 trials. To satisfy FDA or other applicable regulatory approval standards for the commercial sale of our product candidates, we must demonstrate in adequate and controlled clinical trials that our product candidates are safe and effective. Success in early clinical trials, including Phase 1 and 2 trials, does not ensure that later clinical trials will be successful. Initial results from Phase 1 and 2 clinical trials also may not be confirmed by later analysis or subsequent larger clinical trials. A number of companies in the pharmaceutical industry, including us, have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials. 20 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 candidates we may seek to develop or are currently developing, such as Inhaled AAT for AATD, 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. Research and development efforts invested in our pipeline of specialty and other products may not achieve expected results. We must invest increasingly significant resources to develop specialty products through our own efforts and through collaborations with third parties in the form of partnerships or otherwise. The development of specialty pharmaceutical products involves high-level processes and expertise and carries a significant risk of failure. For example, the average time from the pre-clinical phase to the commercial launch of a specialty pharmaceutical product can be 15 years or longer, and involves multiple stages: not only intensive preclinical, clinical and post clinical testing, but also highly complex, lengthy, and expensive regulatory approval processes as well as reimbursement proceedings, which can vary from country to country. The longer it takes to develop a pharmaceutical product, the longer it may take for us to recover our development costs and generate profits, and, depending on various factors, we may not be able to ever recover such costs or generate profits. During each stage of development, we may encounter obstacles that delay the development process and increase expenses, leading to significant risks that we will not achieve our goals and may be forced to abandon a potential product in which we have invested substantial amounts of time and money. These obstacles may include the following: preclinical-study failures; difficulty in enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application for approval; adverse reactions or other safety concerns arising during clinical testing; insufficient clinical trial data to support the safety or efficacy of a product candidate; other failures to obtain, or delays in obtaining, the required regulatory approvals for a product candidate or the facilities in which a product candidate is manufactured; regulatory restrictions which may delay or block market penetration and the failure to obtain sufficient intellectual property rights for our products. Accordingly, there can be no assurance that the continued development of our Inhaled AAT and any other product candidate will be successful and will result in an FDA and/or EMA approvable indication. Because of the amount of time and expense required to be invested in augmenting our pipeline of specialty and other products, including the unique know-how which may be required for such purpose, we may seek partnerships or joint ventures with third parties from time to time, and consequently face the risk that some or all of these third parties may fail to perform their obligations, or that the resulting arrangement may fail to produce the levels of success that we are relying on to meet our revenue and profit goals. We may not obtain orphan drug status for our products, or we may lose orphan drug designations, which would have a material adverse effect on our business. One of the incentives provided by an orphan drug designation is market exclusivity for seven years in the United States and ten years in the European Union for the first product in a class approved for the treatment of a rare disease. Although several of our products and product candidates, including Inhaled AAT for AATD, have been granted the designation of an orphan drug, we may not be the first product licensed for the treatment of particular rare diseases in the future or our approved indication may vary from that subject to the orphan designation, or our products may not secure orphan drug exclusivity for other reasons. In such cases we would not be able to take advantage of market exclusivity and instead another sponsor would receive such exclusivity. Additionally, although the marketing exclusivity of an orphan drug would prevent other sponsors from obtaining approval of the same drug compound for the same indication, such exclusivity would not apply in the case that a subsequent sponsor could demonstrate clinical superiority or a market shortage occurs and would not prevent other sponsors from obtaining approval of the same compound for other indications or the use of other types of drugs for the same use as the orphan drug. In the event we are unable to fill demand for any orphan drug, it is possible that the FDA or the EMA may view such unmet demand as a market shortage, which could impact our market exclusivity. The FDA and the EMA may also, in the future, revisit any orphan drug designation that they have respectively conferred upon a drug and retain the ability to withdraw the relevant designation at any time. Additionally, the U.S. Congress has considered, and may consider in the future, legislation that would restrict the duration or scope of the market exclusivity of an orphan drug, and, thus, we cannot be sure that the benefits to us of the existing statute in the United States will remain in effect. Furthermore, some court decisions have raised questions about FDA’s interpretation of the orphan drug exclusivity provisions, which could potentially affect our ability to secure orphan drug exclusivity. 21 If we lose our orphan drug designations or fail to obtain such designations for our new products and product candidates, our ability to successfully market our products could be significantly affected, resulting in a material adverse effect on our business and results of operations. 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. Any products that we bring to the market may not gain market acceptance by physicians, patients, healthcare payors, opinion leaders, patients’ organizations and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate material product revenue and we may not sustain profitability. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including: ● the prevalence and severity of any side effects; ● the efficacy, potential advantages and timing of introduction to the market of alternative treatments; ● our ability to offer our product candidates for sale at competitive prices; ● relative convenience and ease of administration of our products; ● the willingness of physicians to prescribe our products; ● the willingness of patients to use our products; ● the strength of marketing and distribution support; and ● third-party coverage or reimbursement. If we are not successful in achieving market acceptance for any new products that we have developed and that have been approved for commercial sale, we may be unable to recover the large investment we will have made and have committed ourselves to making in research and development efforts and our growth strategy will be adversely affected. In addition, the proposal of or issuance of recommendations by government agencies, physician or patient organizations, or other industry specialists that limit the use or acceptance of a particular product, whether adopted or not, could result in reduced sales of a product. 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. Any regulatory approval of our Proprietary 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. To the extent any off-label (i.e., unapproved) uses and departures from the approved administration directions become pervasive and produce results such as reduced efficacy or other reported adverse effects, the reputation of our products in the marketplace may suffer. In addition, to the extent off-label uses are associated with reduced efficacy or increases in reported adverse events, there could be a decline in our revenues or potential revenues. Furthermore, the 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, EMA, the IMOH or similar authorities in other jurisdictions rules and guidelines relating to promotion and advertising can lead to other negative consequences that could hurt us, 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. 22 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, the IMOH, as well as our partners may, at any time and from time to time, audit or inspect our facilities. 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 require remedial measures that may be costly or time consuming for us to implement and may result in the temporary or permanent suspension of the manufacture, sale and distribution of our products. 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 contracting. 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. 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. 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. In this 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 sales opportunities from the products we would be unable to produce or distribute, or the loss of customers during such period. 23 If our shipping or distribution channels were to become inaccessible due to an accident, act of terrorism, strike, epidemic or pandemic (such as the COVID-19 pandemic) or any other force majeure event, our supply, production and distribution processes could be disrupted. Most of our Proprietary 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, act of terrorism, strike, epidemic or pandemic (such as the COVID-19 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 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”) which took effect May 25, 2018, 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 our clinical development operations. In addition, the Israeli Privacy Protection Regulations (Information Security), 2017, which apply to our operations in Israel, require us to take certain security measures to secure the processing of personal data. 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”). These privacy, security and data protection laws and regulations could 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 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. See “—Research and development efforts invested in our pipeline of specialty and other products may not achieve expected results.” 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. 24 Product liability claims or product recalls involving our products, or products 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 and 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. If we cannot successfully defend ourselves against claims that our product candidates or 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 recruitment of 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; and ● higher insurance premiums. 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 affected, viral and other infections may escape detection using current testing methods and may not be susceptible to inactivation methods. Any transmission of disease through the use of one of our products 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. 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 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. 25 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. 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. 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. The COVID-19 pandemic 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 a number of 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. 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, and we cannot predict what effect such legislation or regulatory actions 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, pre-clearance of certain promotional materials, manufacturing processes and practices, product labeling, confirmatory or post-approval clinical research, import and export requirements and record keeping. These obligations may result in significant expense and limit our ability to commercialize our current and any future approved products. 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 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. Recent legislation has given the FDA additional authority to require accountability and enforce the post-marketing requirements and commitments associated with accelerated approval. 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 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 and other civil penalties; ● criminal prosecutions; ● injunctions, suspensions or revocations of regulatory approvals; ● suspension 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; 26 ● restrictions on operations, including costly new manufacturing requirements; ● product recalls or seizures 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 are not able to maintain regulatory compliance, we might not be permitted to commercialize our current or any future approved products and our business would suffer. 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. 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. Also, a person or company need not have actual knowledge of statute or specific intent to violate certain such laws in order to have committed a violation. Therefore, our arrangements with potential referral sources must be structured with care to comply with applicable 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. 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 $27,018 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. Through the Physician Payments Sunshine Act, the healthcare reform law 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. 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”. 27 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 are in the process of adopting U.S. healthcare compliance and ethics programs that generally 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 is costly, and failure to comply could subject us to enforcement action. 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. The existence of 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. 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. The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid rebate program will increase our costs and the complexity of compliance and will be time-consuming. Changes to the definition of “average manufacturer price” (AMP), and the Medicaid rebate amount under the Affordable Care Act and CMS and the issuance of final regulations implementing those changes has affected and could further affect our 340B “ceiling price” calculations. When we participate in the Medicaid rebate program, we are required to report “average sales price” (ASP), information to CMS for certain categories of drugs that are paid for under Part B of the Medicare program. Future statutory or regulatory changes or CMS binding guidance could affect the ASP calculations for our products and the resulting Medicare payment rate and could negatively impact our results of operations. Generally, the Medicaid rebate program, also known as the “340B Program,” has been subject to numerous recent challenges, leading to ongoing uncertainty in various areas. There is pending litigation regarding on what can reasonably constitute a 340B eligible patient, which could significantly expand the covered entity patient description. Recent litigation also clarified that manufacturers have no obligation under the 340B statute to provide 340B drugs to an unlimited number of contract pharmacy locations, as the program struggles with increasing participation by contract pharmacies. Most notably, on June 15, 2022, after many years of ongoing litigation, the U.S. Supreme Court unanimously overturned a substantial Medicare Part B payment reduction to many 340B Program participating hospitals related to certain outpatient prescription drugs provided to Medicare patients in American Hospital Association v. Becerra. It is unclear how such current and pending litigation could spur new regulations and also affect the scope and demands of the 340B Program, which could affect our products and operations in ensuring compliance with Program requirements. 28 Pricing and rebate calculations vary among products and programs, involve complex calculations and are often subject to interpretation by us, governmental or regulatory agencies and the courts. The Medicaid rebate amount is computed each quarter based on our submission to CMS of our current AMP and “best price” for the quarter. If we become aware that our reporting for a prior quarter was incorrect or has changed as a result of recalculation of the pricing data, we are obligated to resubmit the corrected data for a period not to exceed twelve quarters from the quarter in which the data originally were due. Any such revisions could have the impact of increasing or decreasing our rebate liability for prior quarters, depending on the direction of the revision. Such restatements and recalculations would increase our costs for complying with the laws and regulations governing the Medicaid rebate program. Price recalculations also may affect the “ceiling price” at which we are required to offer our products to certain covered entities, such as safety- net providers, under the 340B/Public Health Service (PHS) drug pricing program. In addition, if we are found to have made a misrepresentation in the reporting of ASP, we are subject to civil monetary penalties for each such price misrepresentation and for each day in which such price misrepresentation was applied. If we are found to have knowingly submitted false AMP or “best price” information to the government, we may be liable for civil monetary penalties per item of false information. Any refusal of a request for information or knowing provision of false information in connection with an AMP survey verification would also subject us to civil monetary penalties. In addition, our failure to submit monthly/quarterly AMP or “best price” information on a timely basis could result in a civil monetary penalty per day for each day the information is late beyond the due date. Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, under which we participate in the Medicaid program. In the event that CMS terminates our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure that our submissions will not be found by CMS to be incomplete or incorrect. In order for our products to be reimbursed by the primary federal governmental programs, we must report certain pricing data to the USG. Compliance with reporting and other requirements of these federal programs is a pre-condition to: (i) the availability of federal funds to pay for our products under Medicaid and Medicare Part B; and (ii) procurement of our products by the Department of Veterans Affairs (DVA), and by covered entities under the 340B/PHS program. The pricing data reported are used as the basis for establishing Federal Supply Schedule (FSS), and 340B/PHS program contract pricing and payment and rebate rates under the Medicare Part B and Medicaid programs, respectively. Pharmaceutical companies have been prosecuted under federal and state false claims laws for submitting inaccurate and/or incomplete pricing information to the government that resulted in increased payments made by these programs. Although we maintain and follow strict procedures to ensure the maximum possible integrity for our federal pricing calculations, the process for making the required calculations is complex, involves some subjective judgments and the risk of errors always exists, which creates the potential for exposure under the false claims laws. If we become subject to investigations or other inquiries concerning our compliance with price reporting laws and regulations, and our methodologies for calculating federal prices are found to include flaws or to have been incorrectly applied, we could be required to pay or be subject to additional reimbursements, penalties, sanctions or fines, which could have a material adverse effect on our business, financial condition and results of operations. To be eligible to have our products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by certain federal agencies and grantees, we also must participate in the DVA FSS pricing program. To participate, we are required to enter into an FSS contract with the DVA, under which we must make our innovator “covered drugs” available to the “Big Four” federal agencies-the DVA, the DoD, the Public Health Service (including the Indian Health Service), and the Coast Guard-at pricing that is capped under a statutory federal ceiling price (FCP) formula set forth in Section 603 of the Veterans Health Care Act of 1992 (VHCA). The FCP is based on a weighted average wholesale price known as the Non-Federal Average Manufacturer Price (Non-FAMP), which manufacturers are required to report on a quarterly and annual basis to the DVA. Under the VHCA, knowingly providing false information in connection with a Non-FAMP filing can subject us to significant penalties for each item of false information. If we overcharge the government in connection with our FSS contract or Section 703 Agreement, whether due to a misstated FCP or otherwise, we are required to disclose the error and refund the difference to the government. The failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations. Unexpected refunds to the government, and responding to a government investigation or enforcement action, can be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects. 29 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 license 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 — Environmental.” 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. We have experienced labor disputes and work stoppages in the past. For example, on March 3, 2022, during the course of 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 on April 26, 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. 30 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 officer. 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 actions against us, our subsidiaries or our executive officers. 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. At present, we consider our patents relating to our manufacturing process to be material to the operation of our business as a whole. 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. 31 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. Our patents are due to expire at various dates between 2024 and 2041. 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. 32 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. 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. The AIA included a number of 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. 33 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 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 also be subject to claims that we are infringing, misappropriating or otherwise violating other intellectual property rights, such as trademarks, copyrights or trade secrets. Third parties could therefore bring claims against us or our strategic partners that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if such a claim were brought against us, our strategic partners or our manufacturer suppliers for Distribution products, we or they could be forced to permanently or temporarily stop or delay manufacturing, exportation or sales of such product or product candidate that is the subject of the dispute or suit. See also “We recently 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.” 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. 34 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. Risks Related to Our Financial Position and Capital Resources We have incurred significant losses since our inception and while we were profitable in the three years ended December 31, 2020, we incurred operating losses in the last two fiscal years and may not be able to achieve or sustain profitability. As of December 31, 2022, our cash and cash equivalents and short-term investments were $34.3 million. Since inception, we have incurred significant operating losses, and while we were profitable in the three years ended December 31, 2020, we incurred net losses of $2.3 million and $2.2 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $48.5 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 life, resulting in significant amortization expenses captured as costs of goods sold and sales and marketing expenses. For the year ended December 31, 2022, such amortization expenses totaled $7.1 million. The contingent consideration and other long-term liabilities are reevaluated at the end of each reporting period resulting in significant reevaluation cost recognized as financial expenses. For the year ended December 31, 2022, such financial expenses totaled $6.3 million. We estimate to incur these significant depreciation and financial expenses for the foreseeable future. For additional information, see Note 5b in our consolidated financial statements included in this Annual Report. While the recent acquisition of a 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 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 incurred and the liabilities we assumed in connection with the recent acquisition of the portfolio of four FDA-approved products. On November 15, 2021, to partially fund the acquisition of the portfolio of four FDA-approved products, we obtained a $40 million debt facility from Bank Hapoalim B.M., comprised of a $20 million short-term revolving credit facility and a $20 million five-year loan. Effective as of January 1, 2023, the financing facility was amended such that the $20 million short-term revolving credit facility was replaced with a NIS 35 million (approximately $10 million) credit facility. The indebtedness incurred may have significant adverse consequences on our business, including: ● limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes; ● require the use of a substantial portion of our cash to service our indebtedness rather than investing our cash to fund our strategic growth opportunities and plans, working capital and capital expenditures; ● expose us to the risk of increased interest rates as these borrowings are subject to the Secured Overnight Financing Rate (“SOFR”), (i) in the case of the long-term loan, SOFR + 2.18%; and (ii) in the case of the credit facility, PRIME + 0.55; ● limit our flexibility to plan for, or react to, changes in our business and industry; 35 ● increase our vulnerability to the impact of adverse economic, competitive and industry conditions; ● 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, the terms of the loan and credit facility contain restrictive covenants that may limit our ability to engage in activities that may be in our long-term best interest. These restrictive covenants include, among others, limitations on restructuring, the sale of purchase of assets, material licenses, certain changes of control and the creation of floating charges over our property and assets. Under the terms of these facilities, we are also required to maintain certain financial covenants, including minimum equity capital, maximum working capital to debt ratio and minimum debt coverage ratio. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our debt. 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 achievement of sales thresholds through December 31, 2034. ● A total amount of $14.2 million on account of acquired inventory which will be paid in ten equal quarterly instalments of $1.5M each (or the remaining balance at the final instalment). ● 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. 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 5b in our consolidated financial statements included in this Annual Report. Our business requires substantial capital, including potential investments in large capital projects, to operate and grow and to achieve our strategy of realizing increased operating leverage. Despite our indebtedness, we may still incur significantly more debt. In order to obtain and maintain FDA, EMA and other regulatory approvals for product candidates and new indications for existing products, we may be required to enhance the facilities and processes by which we manufacture existing products, to develop new product delivery mechanisms for existing products, to develop innovative product additions and to conduct clinical trials. We face a number of obstacles that we will need to overcome in order to achieve our operating goals, including but not limited to the successful development of experimental products for use in clinical trials, the design of clinical study protocols acceptable to the FDA, the EMA and other regulatory authorities, the successful outcome of clinical trials, scaling our manufacturing processes to produce commercial quantities or successfully transition technology, obtaining FDA, EMA and other regulatory approvals of the resulting products or processes and successfully marketing an approved or new product with applicable new processes. To finance these various activities, we may need to incur future debt or issue additional equity. We may not be able to structure our debt obligations on favorable economic terms and any offering of additional equity would result in a dilution of the equity interests of our current shareholders. To the extent that we raise additional funds to fund our activities through debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us. A failure to fund these activities may harm our growth strategy, competitive position, quality compliance and financial condition. In addition, our manufacturing facility requires continued investment and upgrades. 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 future 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 complete our research and development with respect to any or all of our pipeline products or to commercialize our products. As of December 31, 2022, we had cash and short-term investments of $34.3 million. We plan to fund our future operations through continued sale and distribution of our proprietary and distribution products, commercialization and or out-licensing of our pipeline product candidates, and as requires raising additional capital through the sale of equity or debt. These amounts may not be sufficient to complete the research and development of all of our candidates, and there can be no assurances of the financial success of our commercialization activities or our ability to access the equity and debt capital markets on terms acceptable to us, if at all. To the extent we are unable to fund our research and development, our future product development activities could be materially adversely affected. 36 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 issuing new debt could be higher than the costs we incur under our current debt. The higher cost of new debt may limit our ability to have cash on hand for working capital, capital expenditures and acquisitions on terms that are acceptable to us. To service our indebtedness and other obligations, we will 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 our 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 our debt and other obligations. If we are unable to service our 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 our debt 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. The failure of Silicon Valley Bank and recent turmoil in the banking industry may negatively impact our business, results of operations and financial condition. On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank (“SVB”) and appointed Federal Deposit Insurance Corporation (the “FDIC”) receiver. On March 12, 2023, the Department of the Treasury, the Federal Reserve, and the FDIC jointly released a statement that depositors at SVB would have access to their funds, even those in excess of the standard FDIC insurance limits, under a systemic risk exception. As of March 10, 2023, our wholly owned subsidiary KI Biopharma LLC had approximately $0.6 million held at SVB, which represents approximately 3% of our consolidated cash and cash equivalents balance as of March 10, 2023. Our subsidiary could experience payment disruptions during the interim. Notwithstanding the situation with SVB, we believe our current cash and cash equivalents and expected future cash to be generated by our operational activities will be sufficient to satisfy our liquidity requirements for at least the next 12 months. Despite the measures taken by the United States federal government, there is great uncertainty in the markets regarding the stability of regional banks and the safety of deposits in excess of the FDIC insured deposit limits. The ultimate outcome of these events, and whether further regulatory actions will be taken, cannot be predicted. Further, these events may make equity or debt financing more difficult to obtain, and additional equity or debt financing might not be available on reasonable terms, if at all; difficulties obtaining equity or debt financing could have a material adverse effect on our financial condition, as well as our ability to continue to grow our operations. 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 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. 37 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’; ● 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; ● recalls and/or adverse events associated with our products; ● the expiration of contractual lock-up agreements with our executive officers and directors; 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. For example, during the year ended December 31, 2022, the stock market experienced extreme price and volume fluctuations, and our share price declined. 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 the 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. 38 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. Future sales of ordinary shares by affiliates could cause our share price to fall. The FIMI Opportunity Funds own 9,452,708 of our outstanding ordinary shares (representing an ownership percentage of 21.1% of the outstanding shares and 20.2% on a fully diluted basis as of March 15, 2023). Pursuant to a registration rights agreement entered into with FIMI Opportunity Funds on January 20, 2020, 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, Leon Recanati and Jonathan Hahn 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), Leon Recanati and Jonathan Hahn, members of our board of directors, beneficially owned, directly and indirectly, approximately 21.1%, 8.1% and 4.3% of our outstanding ordinary shares, respectively, as of March 15, 2023. 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, Leon Recanati, and the Hahn family 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 our board of directors 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. On March 6, 2013, a shareholders agreement was entered into, effective March 4, 2013, pursuant to which Mr. Recanati and any company controlled by him (collectively, the “Recanati Group”), on the one hand, and Damar Chemicals Inc. (“Damar”), TUTEUR S.A.C.I.F.I.A (“Tuteur”) (companies controlled by the Hahn family) and their affiliates (collectively, the “Damar Group”), on the other hand, have each agreed to vote the ordinary shares beneficially owned by them in favor of the election of director nominees designated by the other group as follows: (i) three director nominees, so long as the other group beneficially owns at least 7.5% of our outstanding share capital, (ii) two director nominees, so long as the other group beneficially owns at least 5.0% (but less than 7.5%) of our outstanding share capital, and (iii) one director nominee, so long as the other group beneficially owns at least 2.5% (but less than 5.0%) of our outstanding share capital. In addition, to the extent that after the designation of the foregoing director nominees there are additional director vacancies, each of the Recanati Group and Damar Group have agreed to vote the ordinary shares beneficially owned by them in favor of such additional director nominees designated by the party who beneficially owns the larger voting rights in our company. We are not party to such agreement or bound by its terms. As a result of such voting agreement, the Recanati Group and the Damar Group and their affiliates together have significant influence over the election of directors of the company. 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, at least 75% of our gross income is passive income, or at least 50% of the value of our assets is attributable to assets that produce passive income or are held for the production of 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.” 39 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, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or 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. Furthermore, our directors and executive officers are not required to report equity holdings under Section 16 of the Exchange Act and are not subject to the insider short-swing profit disclosure and recovery regime. 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.” We have never paid cash dividends on our ordinary shares and we do not anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment in our ordinary shares will likely depend on whether the price of our ordinary shares increases, which may not occur. We have never declared or paid any cash dividends on our ordinary shares and do not intend to pay any cash dividends. Any agreements that we may enter into in the future may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our ordinary shares. In addition, Israeli law limits our ability to declare and pay dividends and may subject our dividends to Israeli withholding taxes. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on their investments. Risks Relating to Our Incorporation and Location in Israel Conditions in Israel could adversely affect our business. We are incorporated under Israeli law and our principal offices and manufacturing facilities are located in Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the State of Israel was established in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbors. Although Israel has entered into various agreements with Egypt, Jordan and the Palestinian Authority, there has been terrorist activity with varying levels of severity over the years. In the event that our facilities are damaged as a result of hostile action or hostilities otherwise disrupt the ongoing operation of our facilities or the airports and seaports on which we depend to import and export our supplies and products, our ability to manufacture and deliver products to customers could be materially adversely affected. Additionally, the operations of our Israeli suppliers and contractors may be disrupted as a result of hostile action or hostilities, in which event our ability to deliver products to customers may be materially adversely affected. 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 circumstance. Although the Israeli government currently covers certain value of direct damages that are 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. 40 Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continues or increases. These restrictions may limit materially our ability to obtain raw materials from these countries or sell our products to companies in these countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners, or significant downturn in the economic or financial condition of Israel, could adversely affect our operations and product development, cause our sales to decrease and adversely affect the share price of publicly traded companies having operations in Israel, such as us. In addition, the Israeli Government recently proposed a broad judicial reform in Israel. In response to the foregoing developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed judicial reform, if adopted, may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or conduct business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic conditions. Such proposed judicial reform may also adversely affect the labor market in Israel or lead to political instability or civil unrest. Actual or perceived political or judicial instability in Israel or any negative changes in the political environment may adversely affect the Israeli economy and financial condition and, in turn, our business, financial condition, results of operations, growth prospects and market price of our shares, as well as on our ability to raise additional capital. Our operations may be disrupted by the obligations of personnel to perform military service. As of December 31, 2022, we had 360 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 response to increased tension and hostilities, there have been occasional call-ups of military reservists, and it is possible that there will be additional call-ups in the future. 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 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. We have obtained a tax ruling from the Israel Tax Authority according to which, among other things, our activity has been qualified as an “industrial activity,” as defined in the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”), and is also eligible for tax benefits as a “Privileged Enterprise,” which apply to the turnover attributed to such enterprise, for a period of up to ten years from the first year in which we generated taxable income. The tax benefits under the Privileged Enterprise status are scheduled to expire at the end of 2023. In order to remain eligible for the tax benefits of a Privileged Enterprise, 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. These conditions 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. For more information about applicable Israeli tax regulations, see “Item 10. Additional Information — E. Taxation — Israeli Tax Considerations and Government Programs.” 41 In the future, we may not be eligible to receive additional tax benefits under the Investment Law if we increase certain of our activities outside of Israel. 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 corporate tax rate applicable to our Privileged Enterprise’s income, which would have been applied had we not enjoyed 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 to our Privileged Enterprise’s income had we not enjoyed the exemption. For more information about applicable Israeli tax regulations, see “Item 10. Additional Information — E. Taxation — Israeli Tax Considerations and Government Programs.” 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, 2022, we had net operating loss carryforwards (“NOLs”) for tax purposes of approximately $26.5 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 detail regarding our NOLs, see Note 22 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 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 shareholders 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. 42 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 whose country of residence does not have a tax treaty with Israel granting tax relief to such shareholders from Israeli tax. 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. 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 needed expertise across the entire spectrum of our intellectual capital needs. While we have a number of our key personnel who 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. We are subject to risks associated with doing business globally. Our operations are subject to risks inherent to conducting business globally and under the laws, regulations and customs of various jurisdictions and geographies. These risks include fluctuations in currency exchange rates, changes in exchange controls, loss of business in government and public tenders that are held annually in many cases, nationalization, expropriation and other governmental actions, availability of raw materials, changes in taxation, importation limitations, export control restrictions, changes in or violations of applicable laws, including applicable anti-bribery and anti- corruption laws, such as the FCPA and the U.K. Bribery Act of 2010, pricing restrictions, economic and political instability, disputes between countries, personnel culture differences, diminished or insufficient protection of intellectual property, and disruption or destruction of operations in a significant geographic region regardless of cause, including war, terrorism, riot, civil insurrection or social unrest. Failure to comply with, or material changes to, the laws and regulations that affect our global operations 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. 43 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 not violate our policies or applicable law. 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. Developments in the economy may adversely impact our business. Our operating and financial performance may be adversely affected by a variety of factors that influence the general economy in the United States, Europe, Israel, Russia, Latin America, Asia and other territories worldwide, including global and local economic slowdowns, challenges faced banks and the health of markets for the sovereign debt. Many of our largest markets, including the United States, Latin America and states that are members of the Commonwealth of Independent States previously experienced dramatic declines in the housing market, high levels of unemployment and underemployment, and reduced earnings, or, in some cases, losses, for businesses across many industries, with reduced investments in growth. A recessionary economic environment may adversely affect demand for our plasma-derived protein therapeutics. As a result of job losses, 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 price pressure for reimbursement of new drugs, which may adversely affect the demand for our 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. Tax legislation in the United States may impact our business. Changes to the Internal Revenue Code, 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. 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. 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 15 on revenue from contracts with customers that we adopted in 2018 and IFRS 16 on leases that we adopted in 2019 and changes in their interpretation, we might be required to change our accounting policies, particularly concerning revenue recognition, to alter our operational policies so that they 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 target. 44 The Russian invasion of Ukraine may have a material adverse impact on us. Commencing in 2021, Russian President Vladimir Putin ordered the Russian military to begin massing thousands of military personnel and equipment near its border with Ukraine and in Crimea, representing the largest mobilization since the illegal annexation of Crimea in 2014. President Putin has initiated troop movements into the eastern portion of Ukraine and continues to threaten an all-out invasion of Ukraine. On February 22, 2022, the United States and several European nations announced sanctions against Russia in response to Russia’s actions. On February 24, 2022, President Putin commenced a full-scale invasion of Russia’s pre-positioned forces into Ukraine, which has had a negative impact on supply chains and the economy and business activity globally. Furthermore, Russia’s ongoing military actions in Ukraine, and the varying involvement of the United States and other NATO countries precludes prediction as to the ultimate adverse impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to our operations and the price of our shares. To date, our operations have not been materially impacted by Russia’s invasion of Ukraine, however, we may not be able to continue and supply our products to our Russian distributor, and even if we are able to continue the supply of product, there can be no assurance that our distributor may be able to pay us for such products given the actions by the Russian government to seize all international foreign currency payments. Our revenues, profitability and financial condition may be affected if we are unable to continue to sell our products to the Russian market and/or are not able to collect due proceeds from previous and/or future product sales. Additionally, the impact of higher energy prices and higher prices for certain raw materials and goods and services resulting in higher inflation and disruptions to financial markets and disruptions to manufacturing and supply and distribution chains for certain raw materials and goods and services across the globe may impact our business in the future. We continue to assess and respond where appropriate to any direct or indirect impact that the Russian invasion of Ukraine has on the availability or pricing of the raw materials for our products, manufacturing and supply and distribution chains for our products and on the pricing and demand for our products. Increasing scrutiny of, and evolving expectations for, sustainability and environmental, social, and governance (“ESG”) initiatives could increase our costs or otherwise adversely impact our business. Public companies are facing increasing scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder groups. Such increased scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. While we may at times engage in voluntary ESG initiatives, such initiatives may be costly and may not have the desired effect. If our ESG practices and reporting do not meet investor or other stakeholder expectations, which continue to evolve, we may be subject to investor or regulator engagement regarding such matters. In addition, new sustainability rules and regulations have been adopted and may continue to be introduced in various states and other jurisdictions. For example, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply and impose increased oversight obligations on our management and board of directors. Our failure to comply with any applicable 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. Item 4. Information on the Company Corporate Information We were incorporated under the laws of the State of Israel on December 13, 1990, under the name Kamada Ltd. In August 2005, we successfully completed an initial public offering on the TASE. In June 2013, we successfully completed an initial public offering in the United States on Nasdaq. The address of our principal executive office is 2 Holzman St., Science Park, P.O. Box 4081, Rehovot 7670402, Israel, and our telephone number is +972 8 9406472. Our website address is www.kamada.com. The reference to our website is intended to be an inactive textual reference and the information on, or accessible through, our website is not intended to be part of this Annual Report. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other information regarding registrants like us that file electronically with the SEC. You can also inspect the Annual Report on that website. We have irrevocably appointed Puglisi & Associates as our agent to receive service of process in any action against us in any United States federal or state court. The address of Puglisi & Associates is 850 Library Avenue, Suite 204, P.O. Box 885, Newark, Delaware 19715. Capital Expenditures For a discussion of our capital expenditures, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.” Business Overview We are a commercial stage global biopharmaceutical company with a portfolio of marketed products indicated for rare and serious conditions and a leader in the specialty plasma-derived field focused on diseases of limited treatment alternatives. We are also advancing an innovative development pipeline targeting areas of significant unmet medical need. Our strategy is focused on driving profitable growth from our significant commercial catalysts as well as our manufacturing and development expertise in the plasma-derived and biopharmaceutical markets. 45 We operate in two segments: (i) the Proprietary Products segment, which includes our six FDA approved plasma-derived biopharmaceutical products - CYTOGAM, KEDRAB, WINRHO SDF, VARIZIG, HEPGAM B and GLASSIA, as well as KAMRAB, KAMRHO (D) and two types of equine-based anti-snake venom (ASV) products; all of which we market internationally in more than 30 countries. We manufacture our proprietary products at our cGMP compliant FDA-approved production facility located in Beit Kama, Israel, using our proprietary platform technology and know-how for the extraction and purification of proteins and IgGs from human plasma, as well as at third party contract manufacturing facilities; and (ii) the Distribution segment, in which we leverage our expertise and presence in the Israeli market by distributing, for use in Israel, more than 25 pharmaceutical products supplied by international manufacturers and have recently added eleven biosimilar products to our portfolio, which, subject to EMA and IMOH approvals, are expected to be launched in Israel through 2028. As part of our Proprietary Products segment, we sell CYTOGAM, a Cytomegalovirus Immune Globulin Intravenous (Human) (CMV-IGIV), indicated for prophylaxis of CMV disease associated with solid organ transplantation in the United States and Canada. Total revenues from sales of CYTOGAM for the year ended December 31, 2022, the first full year during which we sold the product, was $22.6 million. We market KEDRAB, a human rabies immune globulin (HRIG), in the United States through a strategic distribution and supply agreement with Kedrion. Our 2022 revenues from sales of KEDRAB to Kedrion totaled $16.2 million as compared to $11.9 million and $18.3 million during 2021 and 2020, respectively. Sales of KEDRAB by Kedrion in the United States during the years 2022, 2021 and 2020 totaled $36.2 million, $24.7 million, and $23.7 million, respectively. Based on the information provided by Kedrion, these sales represent approximately 32%, 27% and 23% share of the relevant U.S. market in each of these years, respectively. KEDRAB in-market sales by Kedrion during 2022 grew in comparison to the pre-COVID-19 pandemic sales and we anticipate this trend to continue during 2023 and beyond. We believe that sales of CYTGOM and KEDRAB in the U.S. market, which generated more than 50% of gross profitability in the year ended December 31, 2022, will continue to increase in the coming years and will be a major growth catalyst for the foreseeable future. We sell WINRHO SDF, VARIZIG and HEPGAM B, in the United States, Canada and several other international markets, mainly in the Middle East and North Africa (“MENA”) regions. Total revenues from sales of these products for the year ended December 31, 2022, the first full year during which we sold these products, was $29.5 million. For the year ended December 31, 2022, we generated combined revenues of $52.1 million through sales of CYTOGAM, WINRHO SDF, VARIZIG and HEPGAM B, the portfolio of four FDA-approved products that we acquired in November 2021. The 2022 revenues from this portfolio represent a 24% year over year increase compared to the $41.9 million of total revenues generated by this portfolio during the year ended December 31, 2021. We market GLASSIA in the United States through a strategic partnership with Takeda. During 2021, Takeda completed the technology transfer of GLASSIA manufacturing to its facility in Belgium and received the required FDA approval and initiated its own production of GLASSIA for the U.S. market. In addition, during 2021, Takeda obtained a marketing authorization approval for GLASSIA from Health Canada. During the first quarter of 2022, Takeda began to pay us royalties on sales of GLASSIA manufactured by Takeda, 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. In 2022, we received a total of $14.2 million from Takeda, of which $12.2 of sales-based royalty income (for the period between March and December of 2022) and a $2.0 million one-time payment on account of the transfer, to Takeda, of the GLASSIA U.S. BLA. Based on current GLASSIA sales in the U.S. and forecasted future growth, we expect to receive royalties from Takeda in the range of $10 million to $20 million per year for 2023 to 2040 on GLASSIA sales. Historically, we generated revenues on sales of GLASSIA, manufactured by us, to Takeda for further distribution in the United States. Our revenues from sales of GLASSIA to Takeda totaled $26.2 million and $64.9 million during 2021 and 2020, respectively. During 2021, we also recognized revenues of $5.0 million on account of a sales milestone associated with GLASSIA sales by Takeda. We also market GLASSIA in other counties through local distributors. Total revenues derived from sales of GLASSIA in all other countries during 2022 was $5.9 million, as compared to $7.6 million and $5.5 million during 2021 and 2020, respectively. These ex-U.S. market sales of GLASSIA generated approximately 40% gross margin in the year ended December 31, 2022. Our 2022 revenues from the sales of the remaining Proprietary products, including KAMRAB (a human rabies immune globulin (HRIG) sold by us outside the U.S. market) and KAMRHO (D) IM (for prophylaxis of hemolytic disease of newborns), as well as our anti-snake venoms, totaled $13.9 million, as compared to $18.4 million and $11.2 million during 2021 and 2020, respectively. We own an FDA licensed plasma collection center that we acquired in March 2021 from the privately held B&PR based in Beaumont, Texas, which currently specializes in the collection of hyper-immune plasma used in the manufacture of KAMRHO (D). For the year ended December 31, 2022, we generated $0.4 million in revenues from this plasma collection center, which were included in our Proprietary Products revenues. See below “— Recent Acquisitions.” We are in the process of significantly expanding our hyper-immune plasma collection capacity in this center. We obtained FDA approval for the collection of hyper-immune plasma to be used in the manufacture of KEDRAB, which is plasma that contains high levels of antibodies from donors who have been previously vaccinated by an active rabies vaccine and plan to start collections of such plasma during 2023. We also intend to leverage our FDA license 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. We believe that the expansion of our plasma collection capabilities will allow us to better support our plasma needs as well as generate additional revenues through sales of collected normal source plasma. To that end, during March 2023, we entered into a lease for a new plasma collection center in Uvalde, Houston, Texas and expect to commence operations at the new center following the completion of its construction and obtaining the required regulatory approvals. 46 Our Distribution segment is comprised of sales in Israel of pharmaceutical products manufactured by third parties. Sales generated by our Distribution segment during 2022 totaled $ 26.7 million, as compared to $28.1 million and $32.3 million during 2021 and 2020, respectively. The majority of the revenues generated in our Distribution segment are from plasma-derived products manufactured by European companies, and its sales represented approximately 75%, 84% and 89% of our Distribution segment revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Over the past several years we continued to extend our Distribution segment products portfolio to non-plasma derived products, including recently entering into an agreement with Alvotech and two additional companies for the distribution in Israel of eleven different biosimilar products which, subject to EMA and subsequently IMOH approvals, are expected to be launched in Israel through 2028. We believe that sales generated by the launch of the biosimilar products portfolio will become a major growth catalyst. We currently estimate the potential aggregate peak revenues, achievable within several years of launch, generated by the distribution of all eleven biosimilar products to be approximately $40 million annually. In addition to our commercial operation, we invest in research and development of new product candidates. Our leading investigational product is Inhaled AAT for AATD, for which we are continuing to progress the InnovAATe clinical trial, a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial. We have additional product candidates in early development stage. For additional information regarding our research and development activities, see “— Our Development Product Pipeline”. We continue to focus on driving profitable growth through expanding our growth catalysts which include: investment in the commercialization and life cycle management of our commercial Proprietary products, led by CYTOGAM and KEDRAB sales in the U.S. market; continued growth of our Proprietary hyper-immune portfolio’s revenues in existing and new geographic markets through registration and launch of the products in new territories; expanding sales of GLASSIA in ex-U.S. markets; generating royalties from GLASSIA sales by Takeda; expanding our plasma collection capabilities in support of our growing demand for hyper-immune plasma as well as sales of normal source plasma to other plasma-derived manufacturers; continued increase of our Distribution segment revenues specifically through launching the eleven biosimilar products in Israel; and leveraging our FDA-approved IgG platform technology, manufacturing, research and development expertise to advance development and commercialization of additional product candidates, including our investigational Inhaled AAT product, and identify potential commercial partners for this product. We currently expect to generate total revenues for the fiscal year 2023 in the range of $138 million to $146 million and EBITDA in the range of $22 million to $26 million. The mid- range points of the projected 2023 revenue and EBITDA forecast represent a 10% and 35% growth over fiscal year 2022, respectively. Recent Acquisitions Acquisition of IgG portfolio In November 2021, we acquired a portfolio of four FDA approved plasma-derived hyper-immune commercial products from Saol. For a description of the four products acquired from Saol, CYTOGAM, HEPAGAM B, VARIZIG and WINRHO SDF, see below “— Our Commercial Product Portfolio — Proprietary Products Segment.” The acquisition of this portfolio furthered our core objective to become a fully integrated specialty plasma company with strong commercial capabilities in the U.S. market, as well as to expand to new markets, mainly in the MENA region, and to broaden our portfolio offering in existing markets. Our wholly owned U.S. subsidiary, Kamada Inc., is responsible for the commercialization of the four products in the U.S. market, including direct sales to wholesalers and local distributers. Under the terms of the agreement, we paid Saol a $95 million upfront payment, and agreed to pay up to an additional $50 million of contingent consideration subject to the achievement of sales thresholds for the period commencing on the acquisition date and ending on December 31, 2034. The first sales threshold was achieved by the end of 2022, and a $3 million contingent consideration payment was paid to Saol during the first quarter of 2023. Subject to certain conditions defined in the agreement between the parties, we may be entitled for up to $3.0 million credit deductible from the contingent consideration payments due for the years 2023 through 2027. In addition, we acquired inventory valued at $14.4 million and agreed to pay the consideration to Saol in ten quarterly installments of $1.5 million each or the remaining balance at the final installment, of which we paid four installments of $1.5 million each to Saol during 2022. To partially fund the acquisition costs, we obtained a $40 million financing facility from the Israeli Bank Hapoalim B.M., comprised of a $20 million five-year loan and a $20 million short-term revolving credit facility. Effective as of January 1, 2023, the financing facility was amended such that the $20 million short-term revolving credit facility was replaced with a NIS 35 million (approximately $10 million) credit facility. For information regarding the financing, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facility and Loan Agreement with Bank Hapoalim B.M.” 47 In connection with the acquisition, we entered into a transition services agreement (TSA) with Saol, under which Saol provided to us during 2022 certain services and support (including, managing sales and distribution, payment collection, logistics management, price reporting, regulatory affairs, medical inquiries, quality control complaints and pharmacovigilance), in order to secure the smooth transfer of the acquired assets and related commitments. During the transition period to date, we have recruited staff as needed, and have gradually assumed all operational responsibilities related to the acquired products, including distribution and sales, quality oversight, supply chain activities and finance related issues. In addition, we assumed regulatory responsibility for all products in the United States as of September 2022 following FDA acknowledgment of the BLAs transfer, and we assumed regulatory responsibility in Canada for CYTOGAM, WINRHO SDF and VARIZIG as of June 2022 and for HEPAGAM B as of October 2022, following acknowledgment of the Drug Identification Number (“DIN”) transfer by Health Canada. We continue to market inventory acquired from Saol under its label and product serial number. Pursuant to an earlier engagement with Saol, during 2019, we initiated technology transfer activities for transitioning CYTOGAM manufacturing to our manufacturing facility in Beit Kama, Israel. As a result of the consummation of the IgG portfolio acquisition, which included the acquisition of all rights relating to CYTOGAM, the previous engagement with Saol with respect to this product expired. During December 2022, we submitted a PAS to the FDA for approval to manufacture CYTOGAM at the Beit Kama facility and FDA approval is currently expected by mid-2023. The anticipated FDA approval will mark the successful conclusion of the technology transfer process of CYTOGAM from its previous manufacturer, CSL Behring. A similar application to the Canadian health authorities was submitted in January 2023, with approval expected by the third quarter of 2023. In connection with the acquisition, we assumed a contract manufacturing agreement with Emergent for the manufacturing of HEPAGAM B, VARIZIG and WINRHO SDF. We expect to continue manufacturing these products with Emergent in the foreseeable future and are considering the initiation of a technology transfer for transitioning the manufacturing of these products to our manufacturing facility in Beit Kama, Israel. The initiation of such a technology transfer would be subject to executing a new, amended manufacturing services agreement with Emergent, as currently contemplated, covering operational aspects and the technology transfer related services and scope. We anticipate that once initiated, such a technology transfer may be completed within four to five years. Plasma Collection Center Acquisition In March 2021, we completed the acquisition of the FDA licensed plasma collection center and certain related assets from the privately held B&PR based in Beaumont, Texas, which specializes in the collection of hyper-immune plasma used in the manufacturing of KAMRHO (D), used for prophylaxis of hemolytic disease of newborns. This plasma collection center is one of the few FDA licensed centers in the U.S. collecting the specialty plasma required for this product. The acquisition, for a total consideration of approximately $1.61 million, was consummated through Kamada Plasma LLC, our wholly owned subsidiary, which operates our plasma collection activity in the United States. Our Commercial Product Portfolio Our commercial products portfolio includes our proprietary plasma-derived biopharmaceutical products in our Proprietary Products segment, which are marked and sold directly or through strategic partners and local distributers in the U.S., Canada, and additional markets worldwide, as well as licensed products, some of which are plasma-derived, which are marketed and sold by us in our Distribution segment in Israel. Proprietary Products Segment Our products in the Proprietary Products segment consist of plasma-derived protein and IgGs therapeutics derived from human plasma that are administered by injection or infusion. We also manufacture anti-snake venom products from equine based serum. Our Proprietary Products segment sales totaled $102.6 million, $75.5 million and $100.9 million for the years ended December 31, 2022, 2021 and 2020, respectively. For the years ended December 31, 2022, and 2021 (effective from November 22, 2021), revenues from sales of CYTOGAM, HEPAGAM B, VARIZIG and WINRHO SDF totaled $52.1 million and $5.4 million, respectively. Revenues from sales of KEDRAB to Kedrion for further distribution in the U.S. market totaled $16.2 million, $11.9 million and $18.3 million for the years ended December 31, 2022, 2021 and 2020, respectively. In 2022, we recognized a total of $14.2 million as revenues from Takeda, of which $12.2 million of sales-based royalty income on account of GLASSIA sales by Takeda (for the period between March and December 2022) and a $2.0 million one-time payment on account of the transfer, to Takeda, of the GLASSIA U.S. BLA. Sales of GLASSIA to Takeda for further distribution in the U.S. were terminated during 2021; for the years ended December 31, 2021 and 2020 revenues from the sales of GLASSIA to Takeda totaled $26.2 million and $65.1 million, respectively. In addition, during 2021 we recognized revenues of $5.0 million on account of a sales milestone due from Takeda. Sales of GLASSIA, other than to Takeda, for the years ended December 31, 2022, 2021 and 2020, totaled $5.9 million, $7.6 million and $5.5 million, respectively. Sales of our other Proprietary products (including sales of our development stage Anti-SARS-CoV-2 IgG product during 2020) accounted for the substantial balance of total revenues in the Proprietary Products segment for the years ended December 31, 2022, 2021 and 2020. 48 The following tables lists our Proprietary Products: Product CYTOGAM KAMRAB/ KEDRAB Indication Prophylaxis of Cytomegalovirus (CMV) disease in kidney, lung, liver, pancreas, heart and heart/lung transplants Active Ingredient Cytomegalovirus Immune Globulin Intravenous (Human) Geography USA, Canada, and Qatar*** Prophylaxis of rabies disease Anti-rabies immunoglobulin (Human) USA, Israel, India, Thailand, El Salvador, Bosnia***, Russia*, Mexico*, Georgia*, Ukraine*, Poland***, South Korea***, Canada, Australia, Argentina***, and Brazil***. WINRHO SDF Immune thrombocytopenic Rho(D) immunoglobulin (Human) USA, Canada, Egypt, Hong Kong, purpura (ITP) and suppression of rhesus isoimmunization (RH) Kuwait, Saudi Arabia, South Korea, Turkey, UAE, Uruguay, and Iraq** HEPAGAM B Prevention of Hepatitis B Hepatitis B immunoglobulin (Human) USA, Canada, Turkey, Israel, Saudi recurrence liver transplants and post-exposure prophylaxis VARIZIG Post exposure prophylaxis of Varicella Zoster Immunoglobulin (Human) Varicella in high risk individuals GLASSIA (or Ventia/Respikam in certain countries) Intravenous AATD Alpha-1 Antitrypsin (Human) Arabia***, UAE, Bahrain***, Moldova*** and Kuwait* USA, Canada, Belgium***, Kuwait***, Netherlands***, Sweden***, UAE***, Norway***, Denmark***, Brazil and Estonia*** USA, Canada**, Israel, Russia, Brazil*, Argentina, Uruguay**, South Africa***, Colombia**, Albania**, Kazakhstan**, and Costa Rica** KamRho (D) IM Prophylaxis of hemolytic disease Rho(D) immunoglobulin (Human) Israel, Brazil, India*, Argentina, of newborns Paraguay, Chile, Russia, Nigeria*, Thailand*, Costa Rica** and the Palestinian Authority KamRho (D) IV Treatment of immune Rho(D) immunoglobulin (Human) India* and Argentina* Snake bite antiserum thermobocytopunic purpura Treatment of snake bites by the Vipera palaestinae and the Echis coloratus Anti-snake venom Israel * We have regulatory approval but did not market the product in this country in 2022. ** Product was registered, but we have not yet started sales. *** Product was marketed without registration. Propriety Products CYTOGAM CYTOGAM (Cytomegalovirus Immune Globulin Intravenous (Human)) (CMV-IGIV) is indicated for CMV disease associated with the transplantation of the kidney, lung, liver, pancreas and heart. CYTOGAM, approved by the FDA in 1998, is the sole FDA-approved immunoglobulin (IgG) product for this indication, and was acquired by us from Saol in November 2021. 49 CYTOGAM is administered within 72 hours after transplantation and then at weeks 2, 4, 6, 8, 12 and 16 after transplantation. The precise dosage is adjusted according to patient’s weight. CMV seroprevalence in the US is estimated at 50-80% among adults. CMV is typically passed through direct personal contact. A seropositive status indicates exposure to the virus and development of antibodies against CMV. After initial infection, CMV establishes lifelong latency in the host. Immunocompetent individuals possess few defenses, which protect mostly from infection and clinical symptoms (cell-mediated immunity). Immunocompromised patients, such as transplant patients, are vulnerable to both de novo and reactivation of CMV. In SOTs, seronegative recipients (R-) receiving seropositive organs (D+) have the highest risk of CMV infection and disease. The occurrence of disease caused by CMV in transplanted patients without prophylaxis in patients undergoing lung or heart-lung transplantation is 50%-75%, 9%-23% after heart transplantation, 22%-29% after liver transplantation, and 8%-32% after kidney transplantation. Investigational studies have shown that administration of CMV-IGIV is associated with neutralization of free CMV particles, which may lead to specific activation of the immune system, by raising relevant antibodies to levels capable of attenuating or reducing the incidence of serious CMV disease post-transplantation. Based on the Organ Procurement and Transplantation Network (OPTN), in the U.S., there were more than 42,000 SOT procedures performed during 2022. The OPTN also suggests that the number of transplants each year continues to accelerate and in each of the past 11 years, new annual records have been set in the number of deceased donors nationwide. Transplantation has also increased as a result of greater and more successful usage of organs from less traditional donors, including older individuals and people who have died of cardiorespiratory failure. Several available antivirals (ganciclovir and valganciclovir) are being used and are considered standards of care for the prevention of CMV infection in high-risk patients. As CMV infection in immunocompromised solid organ transplant patients can be severe and life-threatening, we believe that administration of CYTOGAM together with the available antivirals may provide additional protection in preventing CMV disease for certain high-risk transplant populations, such as lung and heart transplant. We believe there is an under-utilization of CYTOGAM as prophylaxis to CMV in high risk populations within SOT due to lack of new data and awareness regarding the benefits of combination CYTOGAM and antiviral therapy, and by addressing these deficits, higher usage rates can be supported. CYTOGAM is registered and sold in the United States and Canada. In addition, CYTOGAM is supplied on a named patient basis without registration in Qatar. We plan to leverage our existing international distribution network to explore the opportunities to register and commercialize the product in other territories. In addition, we are currently working with key opinion leaders (“KOLs”) in the U.S. to generate new clinical data in support of CYTOGAM and may explore future label expansion opportunities for the use of CYTOGAM in other indications. We obtained the approval from Health Canada for the transfer of the DIN in June 2022. We received FDA acknowledgment for the transfer of the ownership of the U.S. BLA for CYTOGAM in September 2022. During December 2022, we submitted an application to the FDA to manufacture CYTOGAM at the Beit Kama facility. The application was submitted as a PAS and FDA approval is currently expected by mid-2023. The anticipated FDA approval will mark the successful conclusion of the technology transfer process of CYTOGAM from the previous manufacturer, CSL Behring. A similar application to the Canadian health authorities was submitted in January 2023, with approval expected by the third quarter of 2023. Our currently available inventory of CYTOGAM is sufficient to meet market demand until the currently anticipated approval schedule. Total revenues from sales of CYTOGAM for the year ended December 31, 2022, the first full year during which we sold the product, was $22.6 million. KAMRAB/KEDRAB KAMRAB is a hyper-immune plasma-derived therapeutic for prophylactic treatment against rabies infection that is administered to patients after exposure to an animal suspected of being infected with rabies. KAMRAB is manufactured at our manufacturing facility in Beit Kama, Israel from plasma that contains high levels of antibodies from donors that have been previously vaccinated by an active rabies vaccine. KAMRAB is administered by a one- time injection, and the precise dosage is a function of the patient’s weight (20 IU/kg). According to the WHO, rabies is estimated to cause 59,000 human deaths annually in over 150 countries and each year more than 29 million people worldwide receive a post-bite rabies vaccination. This is estimated to prevent hundreds of thousands of rabies deaths annually. The CDC recommends that PEP treatment for people who have never been vaccinated against rabies previously should always include administration of both Human Rabies Immuno Globulin (HRIG) and rabies vaccine. According to the CDC, the combination of HRIG and vaccine is recommended for both bite and non- bite exposures, regardless of the interval between exposure and initiation of treatment. KAMRAB has been sold by us in various markets outside the United States through local distributors since 2003 and is currently sold in 15 countries, including Canada where it received marketing approval in November 2018, in various South American markets through the PAHO, the specialized international health agency for the Americas, and in Australia in which it received marketing approval in August 2021. In July 2011, we signed a strategic distribution and supply agreement with Kedrion for the clinical development and marketing in the United States of KAMRAB, pursuant to which Kedrion agreed to bear all the costs required for the Phase 2/3 clinical trials. See “— Strategic Partnerships — Kedrion (KAMRAB/KEDRAB).” The results of a phase 2/3 study demonstrated that KAMRAB was non-inferior to the comparator HRIG product in achieving Rabies Virus Neutralizing Antibody (RVNA) levels of ≥0.5 IU/mL on day 14, when each was co-administered with a rabies vaccine. In addition, KAMRAB was found to be well-tolerated with a safety profile similar to that of the comparator HRIG product. Based on these results, in August 2017, we received FDA approval for the marketing of KAMRAB in the United States for PEP against rabies infection, and in April 2018 we, together with Kedrion, launched the product in the United States under the trademark KEDRAB. 50 In June 2021, the FDA approved a label update for KEDRAB, establishing the product’s safety and effectiveness in children aged 0 to 17 years. The updates to the KEDRAB label were based on data from the KEDRAB U.S. post marketing pediatric study, the first and only clinical trial to establish pediatric safety and effectiveness of any HRIG in the United States. The KEDRAB U.S. pediatric trial was conducted at two sites, one in Arkansas and another in Rhode Island. The study included 30 pediatric patients (ages 0-17 years old), each of whom received KEDRAB as part of PEP treatment following exposure or suspected exposure to an animal suspected or confirmed to be rabid, and safety follow-up was conducted for up to 84 days. The primary objective of the study was to confirm the safety of KEDRAB in the pediatric population. Secondary objectives included the evaluation of antibody levels and the effectiveness of KEDRAB in the prevention of rabies disease when administered with a rabies vaccine according to the PEP recommended guidelines. No serious adverse events were observed during the study. No incidence of rabies disease or deaths were recorded throughout the 84-day study period. According to the CDC data, no children in the United States treated with post-exposure prophylaxis have been reported to have had rabies between 2018 and April 2021, which supports the use of KEDRAB in children. Our revenues from sales of KEDRAB to Kedrion during 2022 totaled $16.2 million as compared to $11.9 million and $18.3 million during 2021 and 2020, respectively. Sales of KEDRAB by Kedrion in the United States during the years 2022, 2021 and 2020 totaled $36.2 million, $24.7 million, and $23.7 million, respectively. Based on the information provided by Kedrion, these sales represent approximately 32%, 27% and 23% share of the relevant U.S. market in each of these years, respectively. KEDRAB in-market sales by Kedrion during 2022 grew in comparison to the pre-COVID-19 pandemic sales and we anticipate this trend to continue 2023 and beyond. WINRHO SDF WINRHO SDF is a Rho(D) Immune Globulin Intravenous (Human) product indicated for use in clinical situations requiring an increase in platelet count to prevent excessive hemorrhage in the treatment of non-splenectomies, for Rho(D)-positive children with chronic or acute immune thrombocytopenia (ITP), adults with chronic ITP, and children and adults with ITP secondary to HIV infection. WINRHO SDF is also used for suppression of Rhesus (Rh) Isoimmunization during pregnancy and other obstetric conditions in non-sensitized, Rho(D)-negative women. WINRHO SDF, approved by the FDA in 1995, was acquired by us from Saol in November 2021. Immune thrombocytopenic purpura (ITP) is a blood disorder characterized by a decrease in the number of platelets – the cells that help blood clot. Recent findings suggest that nearly 20,000 children and adults are newly diagnosed with ITP each year in the United States. Rho(D) immunoglobulin is an effective option for rapidly increasing platelet counts in patients with symptomatic ITP. HDN is a blood disorder in a fetus or newborn infant. In some infants, it can be fatal. During pregnancy, Red Blood Cells (RBCs) from the unborn baby can cross into the mother’s blood through the placenta. HDN occurs when the immune system of the mother sees a baby’s RBCs as foreign. Antibodies then develop against the baby’s RBCs. These antibodies attack the RBCs in the baby’s blood and cause them to break down too early. Rho(D) immunoglobulin is administered to Rh-negative pregnant women as prophylactic therapy, to prevent the disease. The proportion of Rh-negative blood type differs from country to country and in the United States approximately 15% of people are Rh-negative. In the U.S. market WINRHO SDF is used almost solely as treatment of ITP, however due to an FDA black-box warning for Intravascular Hemolysis (IVH) issued in 2011, as well as the introduction of new ITP therapies, its sales in the U.S. market dropped significantly between 2011 to 2017 and have remained relatively flat since. The current use of WINRHO SDF in the U.S. market is for treatment of acute ITP in which it competes with corticosteroids and high-dose IVIG. We believe that as the only Rho (D) product positioned in the U.S. for ITP, maintaining awareness of the product will continue to support ongoing usage rates. WINRHO SDF is currently registered and sold in 10 territories including the United States and Canada, as well as Egypt, Hong Kong, Kuwait, Saudi Arabia, South Korea, Turkey, the United Arab Emirates, and Uruguay. In ex-U.S. territories, the product is mainly used to treat HDN, and we are continually evaluating with our existing international distribution network the registration and commercialization of the product in other territories. We obtained FDA acknowledgment for the transfer of the ownership of the BLA for WINRHO SDF in September 2022. The ownership transfer of the DIN was approved by Health Canada in June 2022, and we are in the process of submitting requests to transfer the registration of the product in other international countries as applicable. WINRHO SDF is currently manufactured by Emergent under a contract manufacturing agreement, which was assigned to us by Saol following the consummation of the acquisition. We expect to continue manufacturing the product with Emergent in the foreseeable future, and are considering the initiation of a technology transfer for transitioning the manufacturing of WINRHO SDF to our manufacturing facility in Beit Kama, Israel. The initiation of such a technology transfer would be subject to executing a new revised manufacturing services agreement with Emergent, as currently contemplated covering operational aspects and the technology transfer related services and scope. We anticipate that once initiated, such a technology transfer may be completed within four to five years. Our KAMRHO (D) is a comparable product to WINRHO SDF and approved for HDN. The two products are registered and distributed in different markets. 51 HEPAGAM B HEPAGAM B is a hepatitis B Immune Globulin (Human) (HBIg) product indicated to both prevent hepatitis B virus (HBV) recurrence following liver transplantation in hepatitis B surface antigen positive (HBsAg- positive) patients and to provide post-exposure prophylaxis treatment. HEPAGAM B, which was approved by the FDA in 2006 for post-exposure prophylaxis and in 2007 as a prevention therapy, was acquired by us from Saol in November 2021. Liver transplantation is the treatment of choice for patients with liver failure secondary to chronic hepatitis B. However, liver transplantation is complicated by the risk of recurrent hepatitis B virus infection, which significantly impairs graft and patient survival. Prevention of hepatitis B virus (HBV) reinfection includes use of antiviral therapy, with the addition of hepatitis B immune globulin. HBIG treatment is based upon the rationale that administered antibody will bind to and neutralize circulating virions, thereby preventing graft infection. In the U.S. market HEPAGAM B is mostly used for post-transplant prophylaxis in which it competes with Nabi-HB, a product of ADMA. Given the expected continued increase in liver transplants in the ex-U.S. countries, and with our planned direct marketing efforts we believe product usage may grow. HEPAGAM B is registered and sold in six territories including the United States, Canada, Turkey, Israel, the United Arab Emirates and Kuwait (in which territory sales have not yet initiated). In addition, HEPAGAM B is supplied on a named patient basis without registration in Moldova, Bahrain and Saudi Arabia (in which the registration process is currently on going). FDA acknowledgment of ownership transfer of the BLA of HEPAGAM B was received in September 2022. Health Canada approval for the DIN transfer was obtained in October 2022. We are in the process of submitting requests to transfer the registration of the product in other international countries as applicable. HEPAGAM B is currently manufactured by Emergent under a contract manufacturing agreement which was assigned from Saol following the consummation of the acquisition. We expect to continue manufacturing the product with Emergent in the foreseeable future, and are considering the initiation of a technology transfer for transitioning the manufacturing of HEPAGAM B to our manufacturing facility in Beit Kama, Israel. The initiation of such a technology transfer would be subject to executing a new, amended manufacturing services agreement with Emergent, as currently contemplated, covering operational aspects and the technology transfer related services and scope. We anticipate that once initiated, such a technology transfer may be completed within four to five years. VARIZIG VARIZIG (Varicella Zoster Immune Globulin (Human)) is a product that contains antibodies specific for VZV, and it is indicated for post- exposure prophylaxis of varicella (chickenpox) in high-risk patient groups, including immunocompromised children, newborns, and pregnant women. VARIZIG is intended to reduce the severity of chickenpox infections in these patients. The CDC recommends VARIZIG for post-exposure prophylaxis of varicella for persons at high-risk for severe disease who lack evidence of immunity to varicella. VARIZIG, approved by the FDA in 2012, is the sole FDA- approved IgG product for this indication, and was acquired by us from Saol in November 2021. Varicella-zoster virus (VZV) causes varicella (chicken pox) and herpes zoster (shingles). Varicella is a common childhood illness. Herpes zoster is caused by VZV reactivation. The incidence of herpes zoster increases with age or immunosuppression. Individuals at highest risk of developing severe or complicated varicella include immunocompromised people, preterm infants, and pregnant women. Varicella zoster immune globulin (human) (VARIZIG) is recommended by the CDC for post-exposure prophylaxis to prevent or attenuate varicella-zoster virus infection in high-risk individuals. VARIZIG may help these vulnerable patients to be defended against serious disease from varicella exposure. It has been demonstrated that post-exposure administration of VARIZIG was associated with low rates of varicella in high-risk patients. VARIZIG is registered and sold in the United States and Canada. In addition, VARIZIG is supplied on a named patient basis or through a tender in Belgium, Kuwait, Netherlands, Sweden, the United Arab Emirates, Norway, Denmark, and Estonia. In July 2022, we secured an $11.4 million agreement to supply VARIZIG to the PAHO, which also serves as Regional Office for the WHO, for further distribution in Latin America. The supply of the product commenced in the fourth quarter of 2022 and is expected to continue through the first half of 2023. FDA acknowledgment of ownership transfer of the BLA of VARIZIG was received in September 2022. Health Canada approval for the DIN transfer was obtained in June 2022. 52 VARIZIG is currently manufactured by Emergent under a contract manufacturing agreement which was assigned from Saol following the consummation of the acquisition. We expect to continue manufacturing the product with Emergent in the foreseeable future, and are considering the initiation of a technology transfer for transitioning the manufacturing of VARIZIG to our manufacturing facility in Beit Kama, Israel. The initiation of such a technology transfer would be subject to executing a new, amended manufacturing services agreement with Emergent, as currently contemplated, covering operation aspects and the technology transfer related services and scope. We anticipate that once initiated, such a technology transfer may be completed within four to five years. In October 2022, we were awarded an extension of an existing tender from the Canadian Blood Services (CBS) for the supply of the four IgG products, CYTOGAM, HEPAGAM, VARIZIG and WINRHO SDF, for an additional three years, commencing on April 1, 2023, for an approximate total value of $22 million, securing the ongoing sales of those products in the Canadian market. CBS manages the Canadian supply of blood products for all Canadian provinces and territories, excluding Quebec. We have an option to extend the agreement for up to two additional years. In addition, in Quebec, we also supply CYTOGAM, HEPAGAM, VARIZIG and WINRHO SDF under the agreement with H’ema Quebec that was assigned to us from Saol. GLASSIA GLASSIA is an intravenous AAT product produced from fraction IV plasma that is indicated by the FDA for chronic augmentation and maintenance therapy in adults with emphysema due to congenital AATD. AAT is a naturally occurring protein found in a derivative of plasma known as fraction IV. AAT regulates the activity of certain white blood cells known as neutrophils and reduces cell inflammation. Patients with genetic AATD suffer from a chronic inflammatory state, lung tissue damage and a decrease in lung function. While GLASSIA does not cure AATD, it supplements the patient’s insufficient physiological levels of AAT and is administered as a chronic treatment. As such, the patient must take GLASSIA indefinitely over the course of his or her life in order to maintain the benefits provided by it. GLASSIA is administered through a single weekly intravenous infusion. In the United States and Europe, we believe that AATD is currently significantly under-diagnosed and under-treated. Based on information published by the Alpha-1 Foundation, there are approximately 100,000 people with AATD in the United States and about the same number in Europe, and we estimate, based on medical literature, that only approximately 10% of all potential cases of AATD are treated. We believe that the primary reasons for this significant gap are the non-availability of AAT products in many countries, under diagnosis of patients suffering from AATD, expensive and protracted registration processes required to commence sales of AAT products in new markets and the absence of insurance reimbursement in various countries. We expect diagnosis of AATD to continue to increase going forward as awareness of AATD increases. Based on a market analysis report from 2020, the estimated annual growth rate of currently approved AATD therapies in the U.S. and the five largest European countries is approximately 6-8%. According to the Centers for Medicare and Medicaid Services, published payment allowance limits for Medicare part B, the average sale price, as of January 2023, of 10 mg of GLASSIA is $5.099, resulting in an annual cost of between $80,000 and $120,000 per each AATD patient. In the United States, in some of the European countries and in Israel, we believe that the majority of the cost of treatment is covered by medical insurance programs. GLASSIA was the first FDA-approved liquid AAT, which is ready for infusion and does not require reconstitution and mixing before infusion, as is required from most other competing products. Additionally, in June 2016, the FDA approved an expanded label of GLASSIA for self-infusion at home after appropriate training. GLASSIA has a number of advantages over other intravenous AAT products, including the reduction of the risk of contamination during the preparation and infection during the infusion, reduced potential for allergic reactions due to the absence of stabilizing agents, simple and easy use by the patient or nurse, and the possible reduction of the nurse’s time during home visits, in the clinic or in the hospital and the ability to self- infuse at home. 53 Currently, GLASSIA is registered in 12 countries, of which it is currently being sold in the United States, Argentina, Israel and Russia. GLASSIA is also sold in South-Africa on a non-registered named-patient basis. During 2023-2024, we expect to launch and sell GLASSIA in some of the additional countries where it is currently registered. The majority of sales of GLASSIA are in the United States, where it obtained FDA approval in July 2010 and sales commenced in September 2010. As part of the approval, the FDA requested that we conduct post-approval Phase 4 clinical trials, as is common in the pharmaceutical industry, aimed at collecting additional safety and efficacy data for GLASSIA. According to our agreement with Takeda (See “— Strategic Partnerships — Takeda (Glassia).”), the Phase 4 clinical trials are financed and managed by Takeda, provided that if the cost of such Phase 4 clinical trials exceeds a pre-defined amount, we will participate in financing such trial up to a certain amount by offsetting such amounts from future milestones, sales of GLASSIA or royalties from Takeda. The first Phase 4 safety study completed enrollment of a total of 30 subject in the U.S. and Canada during 2020 and its clinical study report was completed and was submitted to the FDA during 2022. The second Phase 4 efficacy study was initiated during 2016 and was terminated two years after initiation based on the DSMB’s recommendation due to very low recruitment rates. During 2019, Takeda submitted a revised Phase 4 protocol to the FDA. Following several interactions with the FDA with respect to the Phase 4 efficacy study requirements, Takeda decided not to continue to pursue the study. We market GLASSIA in the United States through a strategic partnership with Takeda. During 2021, Takeda completed the technology transfer of GLASSIA manufacturing to its facility in Belgium and received the required FDA approval and initiated its own production of GLASSIA for the U.S. market. In addition, during 2021, Takeda obtained a marketing authorization approval for GLASSIA from Health Canada. During the first quarter of 2022, Takeda began to pay us royalties on sales of GLASSIA manufactured by Takeda, 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. In 2022, we received a total of $14.2 million from Takeda, of which $12.2 of sales-based royalty income (for the period between March and December of 2022) and a $2.0 million a one-time payment on account of the transfer, to Takeda, of the GLASSIA U.S. BLA. Based on current GLASSIA sales in the U.S. and forecasted future growth, we expect to receive royalties on GLASSIA sales from Takeda in the range of $10 million to $20 million per year for 2023 to 2040. Historically, we generated revenues on sales of GLASSIA, manufactured by us, to Takeda for further distribution in the United States. Our revenues from the sale of GLASSIA to Takeda totaled $26.2 million and $64.9 million during 2021 and 2020, respectively. During 2021 we also recognized revenues of $5.0 million on account of a sales milestone associated with GLASSIA sales by Takeda. KAMRHO (D) KAMRHO (D), similar to WINRHO SDF, is indicated for the prevention of HDN, which is a blood disease that occurs where the blood type of the mother is incompatible with the blood type of the fetus. KAMRHO (D) is produced from hyper-immune plasma and is administered through intra-muscular injection (KAMRHO (D) IM). We have completed the registration process for KAMRHO (D) in several countries and we currently sell it in seven countries, including Israel, as well as countries in Latin America, Asia, Africa and Eastern Europe. SNAKE BITE ANTISERUM Our snake bite antiserum products are used for the treatment of people who have been bitten by the most common Israeli viper (Vipera palaestinae) and by the Israeli Echis (Echis coloratus). The venom of these snakes is poisonous and causes, among other symptoms, severe immediate pain with rapid swelling. These snake bites can lead to death if left untreated. Our snake bite antiserum products are produced from hyper-immune serum that has been derived from horses that were immunized against Israeli viper and Israeli Echis venom. These products are the only treatment in the Israeli market for Vipera palaestinae and Echis coloratus snake bites. We manufacture the snake bite antiserums pursuant to an agreement with the IMOH entered into in March 2009 and as extended and amended in November 2022. The agreement with the IMOH was initially entered into following a tender that we won, and the extension of the agreement was under an exemption from a tender. We completed construction of the production facilities and laboratories for the product in accordance with the agreement, and successfully passed the IMOH inspections. We began production of our snake bite antiserums in August 2011 and commenced sales to the IMOH in 2012. Under the agreement and subject to its terms, the IMOH has undertaken to purchase from us, and we have undertaken to supply the IMOH, a minimum quantity of snake bite antiserums each year during the term of the agreement. The agreement with the IMOH is currently in effect until September 2024. 54 Plasma Collection As part of our strategy of evolving into a fully integrated specialty plasma company, we established Kamada Plasma LLC, a newly formed wholly owned subsidiary, which operates our plasma collection activity in the United States. In March 2021, we completed the acquisition of the FDA licensed plasma collection center and certain related assets from the privately held B&PR based in Beaumont, Texas, which specializes in the collection of hyper- immune plasma used in the manufacture of KAMRHO (D). The acquisition of B&PR’s plasma collection center represented our entry into the U.S. plasma collection market. We intend to leverage this acquisition to reduce our dependency on third-party suppliers in terms of plasma supply needs as well as generate sales from commercialization of collected normal source plasma. We are in the process of significantly expanding our hyperimmune plasma collection capacity by investing in the acquired plasma collection center in Beaumont, Texas. We obtained FDA approval for the collection of hyper-immune plasma to be used in the manufacture of KEDRAB, which is plasma that contains high levels of antibodies from donors who have been previously vaccinated by an active rabies vaccine and plan to start collections of such plasma during 2023. In addition, we initiated a project to leverage our FDA plasma collection license to establish a network of new plasma collection centers in the United States, commencing in 2023, with the intention to collect normal source plasma for sale to other plasma- derived manufacturers, as well as hyperimmune specialty plasma required for manufacturing of our Proprietary products. In connection with such project, during March 2023, we entered into a lease for a new plasma collection center in Uvalde, Houston, Texas and expect to commence operations at the new center following the completion of its construction and obtaining the required regulatory approvals. Distribution Segment Our Distribution segment is comprised of marketing and sales in Israel of pharmaceutical products manufactured by third parties. We engage third party manufacturers, register their products with the IMOH, import the products to Israel, market, sell and distribute them to local HMOs, hospitals and pharmacists. Sales generated by our Distribution segment during 2022 totaled $26.7 million, as compared to $28.1 million and $32.3 million during 2021 and 2020, respectively, and accounted for approximately 21%, 27% and 24% of our total revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Our primary products in the Distribution segment include pharmaceuticals for critical care delivered by injection, infusion or inhalation. Currently, most of the revenues generated in our Distribution segment are from products produced from plasma or plasma-derivatives and are manufactured by European companies. IVIG is our primary product in the Distribution segment, comprising approximately 59%, 73% and 76% of total revenues in the Distribution segment for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in sales of IVIG during 2022 as compared to previous years was as a result of supply shortages of our European manufacturers. Over the past several years we continued to extend our Distribution segment products portfolio to non-plasma derived products and in December 2019, we entered into an agreement with Alvotech, a global biopharmaceutical company, to commercialize Alvotech’s portfolio of six biosimilar product candidates in Israel, upon receipt of regulatory approval from the IMOH. During 2021 we added two additional products to the agreement, bringing the total number of products in the portfolio to eight. Alvotech’s pipeline includes biosimilar product candidates aimed at treating autoimmunity, oncology and inflammatory conditions. Subject to approval by the IMOH, we expect to launch the first of these products, in Israel during 2023 and two others during 2024. Following receipt of the EMA marketing approval by Alvotech, and subject to subsequent approval by the IMOH, the remaining seven products included under the agreement with Alvotech are expected to be launched in Israel through 2028. In addition, in January 2021, we announced our entering into agreements with two undisclosed international pharmaceutical companies to commercialize three additional biosimilar product candidates in Israel. Subject to approval by the EMA and subsequently by the IMOH, the three products are expected to be launched in Israel through 2026. The two pharmaceutical companies will maintain development, manufacturing and supply responsibilities for these three products. Based on the projected list price reduction due to the continued increase in competition as a result of the launch of additional biosimilar products and new competitors entering the biosimilar market, and anticipated market penetration potential, we currently estimate the potential aggregate peak revenues from the sale of all eleven products, achievable within several years of launch, to be approximately $40 million annually. 55 The following table sets forth our primary products in the Distribution segment. Product Respiratory Indication Active Ingredient BRAMITOB Management of chronic pulmonary infection due to pseudomonas aeruginosa in patients six Tobramycin years and older with cystic fibrosis FOSTER Regular treatment of asthma where use of a combination product (inhaled corticosteroid Beclomethasone dipropionate, and long-acting beta2-agonist) is appropriate Formoterol fumarate TRIMBOW Maintenance treatment in adult patients with moderate to severe chronic obstructive Beclomethasone dipropionate, pulmonary disease (COPD)with Asthma Maintenance treatment of asthma Formoterol fumarate, GLYCOPYRRONIUM AS BROMIDE PROVOCHOLINE Diagnosis of bronchial airway hyperactivity in subjects who do not have clinically apparent Methacholine Chloride asthma AEROBIKA OPEP device RUPAFIN Symptomatic treatment of Allergic rhinitis and Urticaria None Rupatadine RUPAFIN ORAL SOLUTION Immunoglobulins Symptomatic treatment of allergic rhinitis in children aged 2 to 11 years and urticaria in Rupatadine children aged 2 to 11 years IVIG Treatment of various immunodeficiency-related conditions Gamma globulins (IgG) (human) VARITECT Preventive treatment after exposure to the virus that causes chicken pox and zoster herpes Varicella zoster immunoglobulin ZUTECTRA Prevention of hepatitis B virus (HBV) re-infection in HBV-DNA negative patients 6 months after liver transplantation for hepatitis B induced liver failure (human) Human hepatitis B immunoglobulin HEPATECT CP Prevent contraction of Hepatitis B by adults and children older than two years Hepatitis B immunoglobulin (human) MEGALOTECT CP Contains antibodies that neutralize CMV viruses and prevent their spread in CMV immunoglobulin (human) immunologically impaired patients RUCONEST Treatment of acute angioedema attacks in adults with hereditary angioedema (HAE) due to Conestat Alfa C1 esterase inhibitor deficiency Critical Care HEPARIN SODIUM INJECTION ALBUMIN and ALBUMIN Coagulation Factors Treatment of thrombo-embolic disorders such as deep vein thrombosis, acute arterial Heparin sodium embolism or thrombosis, thrombophlebitis, pulmonary embolism, fat embolism. Prophylaxis of deep vein thrombosis and thromboembolic events Maintains a proper level in the patient’s blood plasma Human serum Albumin Factor VIII Treatment of Hemophilia Type A diseases Coagulation Factor VIII (human) Factor IX Treatment of Hemophilia Type B disease Coagulation Factor IX (human) COAGADEX Treatment specifically for hereditary factor X deficiency Coagulation factor X 56 Vaccinations IXIARO Active immunization against Japanese encephalitis in adults, adolescents, children and Japanese encephalitis purified infants aged 2 months and older inactivated vaccine VIVOTIF Immunization against disease caused by Salmonella Typhi Typhoid vaccine live oral Metabolic Disease PROCYSBI Nephropathic cystinosis in adults and children 1 year of age and older Cysteamine Biartrate LAMZEDE Treatment of alpha-mannosidosis Velmanase alfa Oncology ELIGARD Management of advanced prostate cancer Leuprolide acetate Our Development Product Pipeline Our research and development activities include conducting pre-clinical and clinical trials and other development activities for our Propriety pipeline products, improving existing products and processes, conducting development work at the request of regulatory authorities and strategic partners, as well as communicating with regulatory authorities regarding our commercial products and clinical and development programs. We incurred approximately $13.2 million, $11.4 million and $13.6 million in research and development expenses in the years ended December 31, 2022, 2021 and 2020, respectively. We are in various stages of pre-clinical and clinical development of new product candidates for our Proprietary Products segment. Inhaled Formulations of AAT for AATD We are in the process of clinical development of an inhaled formulation of AAT administered through the use of a nebulizer. The nebulizer was developed by PARI. Inhaled AAT for AATD has been designated as an orphan drug for the treatment of AATD in the United States and Europe. We have been able to leverage our expertise gained from the production of GLASSIA to develop a stable, high-purity Inhaled AAT product candidate for the treatment of AATD. Existing treatment for AATD require weekly intravenous infusions of AAT therapeutics. We believe that Inhaled AAT for AATD, if approved, will increase patient convenience and reduce or replace the need for patients to use intravenous infusions of AAT products, decreasing the need for clinic visits or nurse home visits, improving the patient’s quality of life and reducing medical costs. If approved, Inhaled AAT for AATD is estimated to be the first AAT product that is not required to be delivered intravenously and instead is administered non-invasively by inhalation once daily. The current standard care for AATD in the United States and in certain European countries, as well as in some additional international markets, is a weekly intravenous infusion of an AAT therapeutic. We estimate that only 2% of the AAT dose reaches the lung when administered intravenously. We have conducted a U.S. Phase 2 clinical study demonstrating that administration of an inhaled formulation of AAT through inhalation results in greater dispersion of AAT to the target lung tissue, including the lower lobes and lung periphery. Accordingly, the inhaled formulation of AAT requires a significantly lower therapeutic dose, and we believe it would be more effective in reducing inflammation of the lung tissue and inhibiting the uncontrolled neutrophil elastase that causes the breakdown of the lung tissue and the emphysema. Because of the smaller amount of AAT dose used in Inhaled AAT for AATD (since it is applied directly to the site of action rather than administered systematically), we believe that this product, if approved, will enable us to treat significantly more patients from the same amount of plasma and production capacity and may be more cost effective for patients and payors and may increase our profitability. We conducted a double-blind randomized placebo-controlled Phase 2/3 pivotal trial, under EMA guidance, which was completed at the end of 2013. A total of 168 patients participated in the trial in seven countries in Europe and Canada. Subjects in this trial were administered with a twice daily treatment of Inhaled AAT or equivalent dose of placebo for 50 consecutive weeks. The primary endpoint of the trial was the time from randomization to the first event-based exacerbation with a severity of moderate or severe. Other endpoints, which were secondary and tertiary, included additional exacerbation measures, lung function, lung density measured by CT scan and quality of life. The trial was 80% powered based on the number of exacerbation events collected in the study, in order to detect a difference between the two groups after 50 weeks. A 20% difference between the two groups was required to prove efficacy and was considered clinically meaningful, allowing the decision to prescribe the treatment. An open label extension of an additional 50 weeks on active drug was offered to study participants in most sites once they completed the initial 50-week period. Treatment in the open label extension of the trial was completed in November 2014. 57 This study did not meet its primary and secondary endpoints. However, lung function parameters, including Forced Expiratory Volume in One Second (“FEV1”) % of Slow Vital Capacity (“SVC”) and FEV1 % predicted, FEV1 (liters) which was collected to support safety endpoints, showed concordance of a potential treatment effect in the reduction of the inflammatory injury to the lung that is known to be associated with a reduced loss of respiratory function. In accordance with guidance received following the meetings conducted with the European rapporteur and co-rapporteur, we performed several post hoc analyses. Results of the post hoc analyses indicated that after one year of daily inhalation of our Inhaled AAT, clinically and statistically significant improvements were seen in spirometric measures of lung function, particularly in bronchial airflow measurements FEV1 (L), FEV1% predicted and FEV1/SVC. These favorable results were even more evident when analyzing the overall treatment effect throughout the full year. For lung function, overall effect for one year: ● FEV1 (L) rose significantly in AAT treated patients and decreased in placebo treated patients (+15ml for AAT vs. -27ml for placebo, a 42 ml difference, p=0.0268) ● There was a trend towards better FEV1% predicted (0.54% for AAT vs. -0.62% for placebo, a 1.16% difference, p=0.065) ● FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.62% for AAT vs. -0.87% for placebo, a 1.49% difference, p=0.0074) For lung function change at week 50 vs. baseline: ● There was a trend towards reduced FEV1 (L)decline (-12ml for AAT vs. -62ml for placebo, a 50 ml difference, p=0.0956) ● There was a trend towards a reduced decline in FEV1% predicted (-0.1323% for AAT vs. -1.6205% for placebo, a 1.4882% difference, p=0.1032) ● FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.61% for AAT vs. -1.07% for placebo, a 1.68% difference, p=0.013) During March 2014, we initiated a Phase 2 trial in the United States. The trial was completed in May 2016. This trial was intended to serve as a supplementary trial to the European Phase 2/3 trial and was designed to incorporate parameters required by the FDA. This Phase 2, double-blind, placebo- controlled study explored the Endothelial Lining Fluid (“ELF”) and plasma concentration as well as safety of Inhaled AAT in AATD subjects. The subjects received one of two doses of Inhaled AAT or placebo. The study involved the daily inhalation of 80 mg or 160 mg of human AAT or placebo via the eFlow device for 12 weeks. Following the 12-week double blind period, the subjects were offered to participate in an additional 12 weeks open label period during which they receive only Inhaled AAT therapy. In December 2015, we completed the enrollment of patients in the study and in August 2016 we reported positive top-line results, according to which we met the primary endpoint. AATD patients treated with our Inhaled AAT product in such U.S. Phase 2 clinical trial, demonstrated a significant increase in ELF AAT antigenic level compared to the placebo group (median increase 4551 nM, p-value<0.0005 (80 mg/day, n=12), and 13454 nM, p-value<0.002 (160mg/day, n=12)). These results are more than twice the increase of ELF antigenic AAT level (+2600 nM) observed in our previously completed intravenous AAT pivotal study (60mg/kg/week). Antigenic AAT represents the total amount of AAT in the lung, both active and inactive. The study results also showed that our Inhaled AAT is more efficient than IV to restore ELF AAT level within the lung. In addition, ELF Anti-Neutrophil Elastase inhibitory (“ANEC”) level also increased significantly [median increase 2766 nM, p-value<0.0005 (80mg/day) and 3557 nM, p-value<0.004 (160 mg/day)]. The increase in ELF ANEC level was also more than twice that demonstrated in our previously completed IV AAT pivotal study. The ANEC level represents the active AAT that can counterbalance further damage by neutrophil elastase. 58 The updated data included in our poster presentation of May 2017 demonstrated that ELF-AAT, neutrophil elastase (NE)-AAT and ANEC complexes concentration significantly increased in subjects receiving the 80 mg and 160 mg doses, (median increase of 38.7 neutrophil migration (nM), p- value<0.0005 (80 mg/day, n=12), and median increase of 46.2 nM, p-value<0.002 (160 mg/day, n=10)). This is a specific measure of the anti-proteolytic effect in the ELF and represents the amount of NE that was broken down by AAT. The increase in levels of functional AAT was six times higher (160 mg per day) than is achievable with intravenous (IV) AAT. In addition, ELF NE decreased significantly. Also, the 80 mg data demonstrated a significant reduction in the percentage of neutrophils. Finally, aerosolized M-specific AAT was detected in the plasma of all subjects receiving Inhaled AAT, consistent with what was seen in the Phase 2/3 clinical trial of our Inhaled AAT conducted in the EU. We filed the MAA for our Inhaled AAT for AATD during the first quarter of 2016 and in June 2017 we withdrew the MAA, as following extensive discussions with the EMA we concluded that the EMA did not view the data submitted as sufficient, in terms of safety and efficacy, for approval of the MAA, and that the supplementary data needed for approval required an additional clinical trial. While the post-hoc data indicated a statistically significant and clinically meaningful improvement in lung function, the EMA was of the opinion that an overall positive conclusion on the effect of Inhaled AAT for AATD could not be reached based on that post-hoc analysis, and that the treatment of AATD patients with our Inhaled AAT product should be further evaluated in the clinic in order to obtain comprehensive long-term efficacy and safety data. The EMA was of the opinion that the study failed to show sufficient beneficial effects in the population studied. In addition, there were concerns about the tolerability and safety profile of the AAT, mainly in patients with severe lung disease. Lastly, the EMA raised concerns about the high rate of patients with antibodies (ADA) responding to AAT, which might reduce its effects or make patients more prone to allergic reactions, despite evidence that none of the patients with such ADA response had allergic reaction nor a lower level of AAT in the serum. When presented with the European Phase 2/3 study data, the FDA expressed concerns and questions in connection with the safety and efficacy of Inhaled AAT for the treatment of AATD and the risk/benefit balance to patients based on that data and product characteristics. Following several discussions with the FDA and EMA, through which additional data and information were provided and we addressed both agencies’ guidance with respect to our proposed subsequent Phase 3 pivotal study protocol, we received positive scientific advice from the Committee of Medicinal Products for Human Use (“CHMP”) of the EMA related to the development plan for our proposed pivotal Phase 3 pivotal study for Inhaled AAT for AATD, and in April 2019, we received a letter from the FDA stating that we had satisfactorily addressed the concerns and questions with respect to the proposed Phase 3 clinical trial. During December 2019, we initiated our Phase 3 InnovAATe trial and announced the first-patient-in. InnovAATe is a randomized, double-blind, placebo-controlled, pivotal Phase 3 trial designed to assess the efficacy and safety of Inhaled AAT in patients with AATD and moderate lung disease. Up to 220 patients will be randomized 1:1 to receive either Inhaled AAT at a dose of 80mg once daily, or placebo, over two years of treatment. The primary endpoint of the InnovAATe trial is lung function measured by FEV1. Secondary endpoints include lung density changes as measured by CT densitometry, as well as other parameters of disease severity, such as additional pulmonary functions, exacerbation rate and six-minute walk test. The safety profile will be monitored continuously by a Data Monitoring Committee with predefined rules to be applied after the first 60 subjects have completed six months of treatment. The study is led by Jan Stolk, M.D., Department of Pulmonology, Member of European Reference Network LUNG, Leiden University Medical Center, the Netherlands. During 2021 and 2022, enrolment in the pivotal Phase 3 InnovAATe clinical trial was negatively affected by the impact of COVID-19 pandemic on healthcare systems. In 2022, following the moderation of the pandemic, the study was expanded to additional sites across Europe and enrollment accelerated. By the end of February 2023, 50 patients were enrolled in the study, of whom 17 have completed the two-year study treatment period at the initial trial site in Leiden, the Netherlands. Only one patient discontinued treatment prematurely due to airway irritation that started during the run-in period (before introducing the drug/placebo), and no drug-related serious adverse events were reported. Additionally, as part of routine and planned monitoring processes, and for the fourth time since study initiation, the independent DSMB recently recommended that the trial continue without modification. Moreover, based on the encouraging safety observed to date, the DSMB supported an expansion to the inclusion criteria to also include subjects with severe airflow limitation (40%

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