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

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

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

In addition, our ability to bring our therapeutic candidates to market depends on the quality and integrity of data that we present to regulatory authorities in order to obtain marketing authorizations. Although we attempt to audit and control the quality of third partythird-party data, we cannot guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not been fraudulently generated.

If third parties do not manufacture our therapeutic candidates with sufficient quality,or do not manufacture and sell any products we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, in sufficient quantities, in the required timeframe, and at an acceptable cost and quality, clinical development and commercialization of our therapeutic candidates wouldor promotion of products we may promote or commercialize could be delayed.delayed and sales of any product we may promote or commercialize may be adversely affected.

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

We may not be able to maintain our existing or future third-party manufacturing arrangements on acceptable terms, if at all. If for some reason our manufacturers or our development or commercialization partners’ manufacturers do not perform as agreed or expected, we or our partners may be required to replace them. Although we are not substantially dependent upon our existing manufacturing agreements since we could replace them, with other third party manufacturers,in which event we may incur added costs and delays in identifying, engaging, qualifying and training any such replacements.replacements, and such additional costs and delays may adversely impact our ability to obtain regulatory clearances and approvals to commercialize our therapeutic candidates or any product we may promote or commercialize, or make such commercialization or marketing economically unfeasible.

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

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

For example, our supplier of raw materials for RIZAPORT™ has been sending updates to the FDA regarding progress of corrective actions in regard to compliance issues at its manufacturing facility and subsequently invited the FDA for re-inspection, which are independent of us and not specific to RIZAPORT™. Although the supplier is working to solve its compliance issues and although we are working to ensure continued supply of the necessary raw materials for RIZAPORT™ regardless of the outcome of its compliance discussions, our ability to obtain FDA approval for RIZAPORT™ may be delayed until we are able to secure a compliant source of API, and successfully manufacture new batches with the new API.

While there may be several alternative suppliers of APIAPIs on the market, we have yet to conclude extensive investigations into the quality or availability of their APIs. As a result, we can provide no assurances that supply sources will not be interrupted from time to time. Changing API suppliers or finding and qualifying new API suppliers can be costly and take a significant amount of time. Many APIs require significant lead time to manufacture. There can also be challenges in maintaining similar quality or technical standards from one manufacturing batch to the next.

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

We anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our therapeutic candidates.candidates and reliance on third-party manufacturers for any products that we may promote or commercialize, including Donnatal®,  EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg.

To date, our therapeutic candidates have been manufactured in relatively small quantities for preclinical testing and clinical trials as well as for other regulatory purposes by third-party manufacturers. If the FDA or other regulatory agencies approve any of our therapeutic candidates for commercial sale, we expect that we would continue to rely, at least initially, on third-party manufacturers to produce commercial quantities of our approved therapeutic candidates. In addition, we rely on and we expect to continue to rely on third-party manufacturers to produce commercial quantities of Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or any product that we may gain the rights to in the future in order to promote or commercialize. These manufacturers may not be able to successfully increase or maintain the manufacturing capacity for any of our approved therapeutic candidates that may be approved in the future, Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or any product we may gain the rights to in order to promote or commercialize in the future, in a timely or economic manner, or at all. SignificantExcept for current FDA regulations with respect to “medical foods,” significant scale-up of manufacturing may require additional validation studies, which the FDA or other foreign regulatory agencies must review and approve. Foreign regulatory agencies may also require approval of additional validation studies for scaling up the manufacturing process of any of our products including “medical foods” If theythe third-party manufacturers are unable to successfully increase or maintain the manufacturing capacity for a therapeutic candidate or for products that we may promote or commercialize, or if we are unable to secure replacement third-party manufacturers or unable to establish our own manufacturing capabilities, or secure replacement manufacturers, the commercial launch of any approved products may be delayed or there may be a shortage in supply.supply which could have a material adverse effect on our business, financial condition or results of operations.

We and our third-party manufacturers or our partners' manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities.

We and our contractthird-party manufacturers or our partners' manufacturers are, and will be, required to adhere to laws, regulations and guidelines of the FDA orand other foreign regulatory authorities setting forth current good manufacturing practices.practices (“cGMP”). These laws, regulations and guidelines cover all aspects of the manufacturing, testing, quality control and recordkeeping relating to our therapeutic candidates.candidates with varying cGMP rigors depending on what phase each of our respective therapeutic candidates is in with respect to its drug development process and any products we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg. We and our third-party manufacturers and our partners' manufacturers may not be able to comply with applicable laws, regulations and guidelines. We and our third-party manufacturers and our partners' manufacturers are and will be subject to unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the United States (U.S.).U.S. Our failure, or the failure of our third-party manufacturers or our partners' manufacturers, to comply with applicable laws, regulations and guidelines could result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our therapeutic candidates and commercially-marketed products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our therapeutic candidates and commercially-marketed products, and materially and adversely affect our reputation, business, financial condition and results of operations.

EvenOur therapeutic candidates, our current commercial products, Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, and any product we may promote or commercialize in the future, even if we obtainall regulatory clearances and approvals our therapeutic candidatesare obtained, will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and applicable foreign laws, regulations and guidelines, we could lose those clearances and approvals, if required at all, and our businessreputation, business, financial condition and results of operations may be seriously harmed.materially and adversely affected.

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

As we develop our producttherapeutic candidates or commercialize our products, we may also periodically discuss with the FDA and other regulatory authorities certain clinical, regulatory and manufacturing matters and, our views may, at times, differ from those of the FDA.FDA and other regulatory authorities. For example, the FDA may seek to regulate our therapeutic candidates or any product we may promote or commercialize that consist of two or more active ingredients as combination drugs under its Combination Drug Policy. The Combination Drug Policy requires that we demonstrate that each active ingredient in a drug product contributes to the product’s claimed effect. If the FDA raises questions regarding whether available data and information provided to the FDA demonstrate the contribution of each active ingredient in such combination drug products, we may be required to provide additional information, which may include the results ofrequire us to conduct additional preclinical studies or clinical trials. If we and/or our commercialization partners, as applicable, are required to conduct additional clinical trials or other testing of our therapeutic candidates or of our current commercial products, Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, or any other product candidates,we may

promote or commercialize, we may face substantial additional expenses, be delayed in obtaining marketing clearance or approval, for our product candidatesif required by the FDA, or may never obtain marketing approval.clearance or approval for such therapeutic candidate or product we may promote or commercialize, including Donnatal®. In addition, Donnatal® is currently subject to the FDA’s DESI proceedings to determine its effectiveness and the right to continue to be marketed in the U.S., and there is no assurance as to the outcome of such proceedings.  To our knowledge at this time and based on our review of docketed correspondence with the FDA, the FDA has not made a final determination as to the efficacy of Donnatal®.  See “–  Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or products which we may promote or commercialize may be withdrawn from the market at any time due to product withdrawal requests by the FDA or other foreign regulatory authorities.”

In addition, in 2011, the manufacturerFDA granted RHB-104 orphan drug designation for the treatment of Crohn’s disease in the pediatric population, and in 2017, the FDA granted YELIVA® orphan drug designation for the treatment of cholangiocarcinoma and granted RHB-107 orphan drug designation for pancreatic cancer.  If we fail to maintain the orphan drug designation exclusivity, our competitors may sell products equivalent to RHB-104, YELIVA® or to RHB-107 to treat the same indications and our revenues could be reduced.

In November 2014, the FDA granted TALICIA® a Qualified Infectious Disease Product (QIDP) designation. In January 2017, we announced that RHB-104 had been granted QIDP designation by the FDA for the treatment of NTM infections. If TALICIA®  and/or RHB-104 fails to maintain its QIDP designation, it could significantly increase the development time for TALICIA®  and RHB-104 for the treatment of NTM infections, as the case may be.

In addition, third-party manufacturers and the manufacturing facilities that we and our development or our commercialization partners use to producemanufacture any therapeutic candidate and any other products that we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, will be subject to periodic review and inspection by the FDA and may be subject to similar review by other foreign regulatory authorities. Later discovery of previously unknown problems with any therapeutic candidate or product we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, manufacturer or manufacturing process, or failure to comply with rules and regulatory requirements, may result in actions, including but not limited to the following:

Risks Related to Our Industry

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

Except for RIZAPORT™, which hasNone of our therapeutic candidates have been cleared or approved for marketing, in Germany but has yet to be marketed,and none of our therapeutic candidates has been approved for marketing or is currently being marketed or commercialized.commercialized in any jurisdiction. We were granted certain rights to promote Donnatal® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in certain U.S. territories and to commercialize EnteraGam®, all three of which we recently began promoting in the U.S. Even if any of our therapeutic candidates are approved for commercialization, theyor any product we may promote or commercialize receive, have received or do not require regulatory clearance or approval, it may not become a commercially viable products.product. For example, even if we or our development or commercialization partners receive regulatory clearance or approval to market a therapeutic candidate, or receive regulatory clearance or approval to promote or commercialize any product, the clearance or approval may be subject to limitations on the indicated uses or subject to labeling or marketing restrictions, which could materially and adversely affect thetheir marketability and profitability of the therapeutic candidate.profitability. In addition, a new therapeutic candidate may appear promising at an early stage of development or after clinical trials but never reach the market, or it may reach the market but not result in sufficient product sales, if any. A therapeutic candidate or any product that we may promote or commercialize, may not result in commercial success for various reasons, including but not limited to:

Physicians, various other health care providers, patients, payors or the medical community, in general, may be unwilling to accept, utilize or recommend any of our approved therapeutic candidates.candidates and any product we may promote or commercialize. If we are unable, either on our own or through third parties, to manufacture, commercialize andor market our proposed formulations, or therapeutic candidates or any product we may promote or commercialize when planned, or to develop them commercially, viable therapeutic candidates, we may not achieve any market acceptance or generate meaningful revenue.

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

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

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

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

New drug delivery mechanisms, drug delivery technologies, new drugs and new treatments that have been developed or that are in the process of being developed or will be developed by others may render our therapeutic candidates and products we may promote or commercialize noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared to our therapeutic candidates. candidates and products we may promote or commercialize. In addition, Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and products we may promote or commercialize may compete with products of third parties for market share, and generic drugs or products that treat the same indications as Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or products we may promote or commercialize can have an adverse effect on our revenues by reducing our market share or requiring us to reduce the price of the products we market.  We are aware of at least two products that are, to our understanding, illegal copies of Donnatal®  that currently are being sold in the U.S. The FDA has not taken action against these products and this has had a negative effect on our commercial success.

Technological competition from, and commercial capabilities of, pharmaceutical and biotechnology companies, universities, governmental entities and others is intense and is expected to increase. Many of these entities have significantly greater research and development capabilities, human resources and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial resources. These entities represent significant competition for us. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing and other resources.

The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations, or therapeutic candidates or products we may promote or commercialize, even if commercialized. Many of our

targeted diseases and conditions can also be treated by other medications or drug delivery technologies. These treatments may be widely accepted in medical communities and have a longer history of use.use, among other possible advantages. The established use of these competitive drugs may limit the potential for our therapeutic candidates to receive widespread acceptance if commercialized.commercialized and may limit the potential for widespread acceptance of promoting Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and for products we may promote or commercialize.

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

On March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March 30, 2010, the President signed the “Health Care and Education Reconciliation Act” (P.L. 111-152), collectively commonly referred to as the “Healthcare Reform Law.” The Healthcare Reform Law included a number of new rules regarding health insurance, the provision of health care, andhealthcare, conditions to reimbursement for healthcare services provided to Medicare and Medicaid patients.patients, and other healthcare policy reforms. Through the law makinglaw-making process, substantial changes have been and continue to be made to the current system for paying for healthcare in the U.S., including changes made in order to extend medical benefits to thosetens of millions of Americans who lacklacked insurance coverage. Extending coverage and to a large population could substantially change the structure of the health insurance system and the methodologycontain or reduce healthcare costs (such as by reducing or conditioning reimbursement amounts for reimbursing medicalhealthcare services and drugs.drugs, and imposing additional taxes, fees, and rebate obligations on pharmaceutical and medical device companies). This legislation is one of the most comprehensive and significant reforms ever experienced by the U.S. in the healthcare industry and has significantly changed the way healthcare is expected to have meaningful ramifications on tens of millions of citizens in the U.S.financed by both governmental and private insurers. This legislation is expected to impacthas impacted the scope of healthcare insurance the insurance refunds from theand incentives for consumers and insurance companies, and possibly also on the costs of medical products.among others. Additionally, the Healthcare Reform Law’s provisions are designed to encourage providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant portion of the cost of providing care. Through modified reimbursement rates and other incentives, the U.S. government is requiring that providers identify the most cost-effective services, supplies and pharmaceuticals. This environment has caused changes in the purchasing habits of consumers and providers and resulted in specific attention to the pricing negotiation, product selection and utilization review surrounding pharmaceuticals. To the extent that our therapeutic candidates may at some point be reimbursable by U.S. federal government programs, thisThis attention may result in our therapeutic candidates and products we may promote or commercialize being chosen less frequently or the pricing being substantially lowered.  However, the effectSome of the legislationprovisions of the Healthcare Reform Law have not yet been fully implemented and regulatory guidance continues to be issued.  At this stage, it is difficult to predict and, at this stage, we are unable to estimate the full extent of the direct and/or indirect impact of the legislationHealthcare Reform Law on us.

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

Extending medical benefits to those who currently lack coverage will likely result in substantial cost to the U.S. federal government, which may force significant additional changes to the healthcare system in the U.S. Much of the funding for expanded healthcare coverage may be sought through cost savings. While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care.care and increased enforcement activities. Cost of care could be reduced further by decreasing the level of reimbursement for medical services or products (including those therapeutic candidates currently being developed by us or our development and/or commercialization partners)partners or any product we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction in the utilization of, or reimbursement for, any therapeutic candidate or any product we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, or for which we receive marketing approval in the future, could have a materiallymaterial adverse effect on our business, financial performance.condition and results of operations.

Several states and private entities initially mounted legal challenges to the Healthcare Reform Law, and they continue to litigate various aspects of the legislation. On July 26, 2012, the U.S. Supreme Court generally upheld the healthcare reform legislationprovisions of the Healthcare Reform Law at issue as constitutional. However, the U.S. Supreme Court held that the legislation improperly required the states to expand their Medicaid programs to cover more individuals. As a result, the states have a choice as to whether they will expand the numbersnumber of individuals covered by their respective state Medicaid programs. Some states have determined that they will not expand their Medicaid programs and will develop other cost savingcost-saving and coverage measures to provide care to currently uninsured residents.individuals. Many of these efforts to date have included the institution of Medicaid managedMedicaid-managed care programs. The manner in which these cost savingcost-saving and coverage measures are implemented could have a materiallymaterial adverse effect on our business, financial performance.condition and results of operations. Further, the healthcare regulatory environment has seen significant changes in recent years and is still in flux.  Legislative initiatives to modify, limit, replace, or repeal the Healthcare Reform Law and judicial challenges continue, and may increase in light of the current administration and legislative environment.  We cannot predict the impact on our business of future legislative and legal challenges to the healthcare reform legislationHealthcare Reform Law or other changes to the current laws and regulations.

If third-party payors do not adequately reimburse customers for any of our therapeutic candidates that are approved or cleared for marketing or for products that we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, they might not be purchased or used, and our revenues and profits will not develop or increase.increase and they may decrease.

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

a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective; and

neither experimental nor investigational.

Obtaining reimbursement approval for a therapeutic candidate or for any product that we may promote or commercialize from eachany government or other third-party payor is a time-consuming and costly process that could require us or our development and/or commercialization partners to provide supporting scientific, clinical and cost-effectiveness data for the use of our therapeutic candidates or any product that we may promote or commercialize to each payor. Even when a payor determines that a therapeutic candidate or any product that we may promote or commercialize is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or other foreign regulatory authorities. Reimbursement rates may vary according to the use of the therapeutic candidate or the use of any product that we may promote or commercialize and the clinical setting in which it used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to calculate these rates. In particular, reimbursement for our products may not be available from Medicare and Medicaid, and reimbursement from other third-party payors may be limited. For example, reimbursement both from government and private payors for Donnatal®   may be limited or non-existent due to its status as a DESI product.  Also, successful commercialization of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg requires a conducive reimbursement environment. If this product does not receive adequate reimbursement coverage, or if reimbursement coverage is reduced or otherwise adversely affected, then its commercial prospects could be severely limited. In addition, because EnteraGam® is a “medical food” it is subject to unique FDA regulations and requirements that could limit its market potential, and our ability to get reimbursement coverage could be limited because of this product.

In the U.S., there have been, and we expect that there will continue to be, federal andState state proposals to constrain expenditures for medical products and services, which may affect payments for our therapeutic candidates or for any product that we may promote or commercialize in the U.S. In addition, there is a growing emphasis on comparative

effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our products and/or reimburse our products at a lower rate.  We believe that legislationLegislation that reduces reimbursement for our therapeutic candidates could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our therapeutic candidates, if approved.approved, or for any product that we may promote or commercialize. This could materially and adversely impact our business, financial condition and results of operations by reducing our ability to generate meaningful revenue, raise capital, obtain additional collaborators and market our therapeutic candidates, if approved.market. At this stage, we are unable to estimate the extent of the direct and/or indirect impact of any such federal and Statestate proposals.

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

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

In the event that we were to market products in theU.S., we would beWe are subject to additional healthcare regulation and enforcement by the U.S. federal government and the states in which we conduct or will conduct our business. The laws that may affect our ability to operate include, but are not limited to, the following:

Further, the recently enacted Healthcare Reform Law, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity can now be found guilty of fraud or an anti-kickback violation without actual knowledge of the statute or specific intent to violate it. In addition, the Healthcare Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statue constitutes a false or fraudulent claim for purposes of the False Claims Act. Possible sanctions for violation of these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare, Medicaid and other government programs and forfeiture of amounts collected in violation of such prohibitions. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition and results of operations and financial condition.operations.

The Healthcare Reform Law also imposes reporting requirements on certain medical device and pharmaceutical manufacturers, among others, to make annual public disclosures of certain payments and other transfers of value to physicians and teaching hospitals and ownership or investment interests held by physicians or their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for “knowing failures”), for all payments, transfers of value or ownership or investment interests that are not reported. Manufacturers were required to begin data collection on August 1, 2013 and report such data to CMSthe Centers for Medicare and Medicaid Services by March 31st of each year.  CMSThe Centers for Medicare and Medicaid Services made the data publicly available on its searchable database beginning in September 2014.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing, medical directorships, and other purposes. Some states, such as California, Massachusetts and Vermont, mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians, and some states limit or prohibit such gifts.

Most recently, there has been a trend in federal and state legislation aimed at requiring pharmaceutical companies to disclose information about their production and marketing costs, and ultimately lowering costs for drug products. Several states have passed or introduced bills that would require disclosure of certain pricing information for prescription drugs that have no threshold amount or are above a certain annual wholesale acquisition cost, and in June 2016 Vermont became the first state to pass legislation requiring certain drug companies to disclose information relating to justification of certain price increases. The U.S. Congress has also introduced bills targeting prescription drug price transparency.

Any such implementation of legislation requiring publication of drug costs could materially and adversely impact our business, financial condition and results of operations by promoting a reduction in drug prices. As such, patients may choose to use other low-cost, established drugs or therapies.

The scope and enforcement of these laws isare uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. We cannot predict the impact on our business, financial condition nor results of operations of any changes in these laws. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, financial condition and results of operations, and financial condition.operations. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming.

Our marketing, promotional and business practices, including with respect to pricing, as well as the manner in which sales forces interact with purchasers, prescribers and patients, are subject to extensive regulation and any material failure to comply could result in significant sanctions against us.

The marketing, promotional and business practices, including with respect to pricing, of pharmaceutical companies, as well as the manner in which companies’ in-house or third party sales forces interact with purchasers, prescribers, and patients, are subject to extensive regulation, enforcement of which may result in the imposition of civil and/or criminal penalties, injunctions, and/or limitations on marketing practices for some of our products and/or pricing restrictions or mandated price reductions for some of our products. Many companies have been the subject of claims related to these practices asserted by state or federal authorities. These claims have resulted in fines and other consequences, such as  

entering into corporate integrity agreements with the U.S. government. Companies may not promote drugs for “off-label” uses-that is, uses that are not described in the product’s labeling and that differ from those approved by the FDA or other applicable regulatory agencies. A company that is found to have improperly promoted off-label uses may be subject to significant liability, including civil and administrative remedies, as well as criminal sanctions. In addition, management’s attention could be diverted from our business operations and our reputation could be damaged.

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

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

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

The clinical trials that we conduct and the testing, manufacturing, marketing and commercial sale and use or misuse of our therapeutic candidates and any products we may promote or commercialize involve and will involve an inherent risk that significant liability claims may be asserted against us. We currently have a product liability policy that includes coverage for our clinical trials. Should we decide to seek additional insurance against such risks before our product sales commence, there is a risk that such insurance will be unavailable to us or if it can be obtained at such time, that it will be available at an unaffordable cost. Even if we obtain insurance, it may prove inadequate to cover claims and/our development or litigation costs, especially in the case of wrongful death claims.commercial partners. Product liability claims or other claims related to our therapeutic candidates and any products we may promote or commercialize, regardless of merit or their outcome, could require us to spend significant time and money in litigation or to pay significant settlement amounts or judgments. A product liability claim could also significantly harm our reputation and the market price of our shares and delay market acceptance of our therapeutic candidates and decrease demand for any products that we promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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

If serious adverse events or other undesirable side effects are identified during the use of our investigational new drugs that have not yet received regulatory marketing approval under the Expanded Access Program (EAP), it may adversely affect our development of such therapeutic candidates.

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

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

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

The pharmaceutical industry, like other industries and businesses, continues to face the effects of the challenging economic environment. Patients experiencing the effects of the challenging economic environment, including high unemployment levels and increases in co-pays,, may switch to generic products, delay treatments, skip doses or use other less effective treatments to reduce their costs. Challenging economic conditions in the U.S. include the demands by payors for substantial rebates and formulary restrictions limiting access to brand-name drugs. In addition, in Europe and in a number of emerging markets there are government-mandated reductions in prices for certain pharmaceutical products, as well as government-imposed access restrictions in certain countries. All of the aforesaid may make it more difficult for us to commercialize our therapeutic candidates.candidates and any products that we may promote or commercialize including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg.

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

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

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

In the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, as well as personally identifiable information of patients, clinical trial participants and employees. We also have outsourced elements of our information

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

Risks Related to Intellectual Property

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

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

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

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

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

After the completion of development and registration of our patents, third parties may still manufacture and/or market therapeutic candidatesproducts in infringement of our patent protectedpatent-protected rights. Such manufacture and/or market of our therapeutic candidatesproducts in infringement of our patent protectedpatent-protected rights is likely to cause us damage and lead to a reduction in the prices of our therapeutic candidates or any

product we may promote or commercialize, including Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, thereby reducing our anticipatedpotential profits.

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

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

We are reliant on our licensing partner, Valeant, to prosecute, maintain and defend the patents and other intellectual property rights of RHB-106 which we have licensed to Valeant. If Valeant does not prosecute, maintain and defend the patents and other intellectual property rights of RHB-106, it could materially harm our ability to obtain suitable patent protection covering RHB-106 or ensure freedom to commercialize RHB-106 in view of third-party patent rights, thereby materially reducing our potential profits from RHB-106. Our out-license agreement with Valeant is currently subject to discussion with Valeant, including renegotiation of its terms.

In addition, Donnatal®, for which we were granted certain rights to promote Donnatal® in certain U.S. territories, and EnteraGam®, for which we were granted the exclusive U.S. rights to EnteraGam® for all indications for human use, are not protected by patents.   The third GI-specialty product, Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, includes the active ingredient esomeprazole strontium, which is protected by a process patent covering methods of preparing esomeprazole salts. If the FDA proceedings related to Donnatal® designed to determine its effectiveness will be ongoing, only products that receive a New Drug Application (“NDA”) from the FDA, DESI products and those actively participating in the hearing process of the FDA may be marketed. However, other competing products may freely enter the market, and we and our partners may not have sufficient intellectual property rights in Donnatal® to protect it from such competition.  See “– Risks Related to Our Business and Regulatory Matters – Donnatal®, EnteraGam® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or products which we may promote, sell or market may be withdrawn from the market at any time due to product withdrawal requests by the FDA or other foreign regulatory authorities. See “Item 3. Key Information – D. Risk Factors – Risks Related to Our Business and Regulatory Matters – We or our development or commercialization partners may be subject to product withdrawal requests by the FDA or other foreign regulatory authorities for Donnatal® or products which we may promote or commercialize.”

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

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

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

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

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

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

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

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

Risks Related to our Ordinary Shares and American Depositary Shares.ADSs

We may be a “passive foreign investment company” for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors.

While the determination of passive foreign investment company, or PFIC, status is fact specific,fact-specific and generally cannot be made until the close of the taxable year in question, based on the value and composition of our assets, we may be a PFIC for U.S. federal income tax purposes for our current taxable year and future taxable years. A non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2)

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

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

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

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

Additionally, market prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities has from time to time experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any one company. In the past, following periods of market volatility, shareholders have often instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful.

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

All of our outstanding Ordinary Shares are registered and available for sale in Israel. In addition, as of February 22, 2016,December 31, 2017, we had non-tradable warrantsoptions to purchase an aggregate of 4,183,49625,781,798 Ordinary Shares under our Amended and Restated Award Plan (2010) (the "2010 Award Plan") outstanding and non-tradable warrants to purchase an aggregate of 357,8962,025,458 ADSs (each representing 10 Ordinary Shares) and optionsoutstanding. In addition, as of December 31, 2017, we had a balance of up to purchase 20,511,3383,530,951 Ordinary Shares reserved for issuance from the total number of Ordinary Shares reserved by our board of directors for issuance under our 2010 Stock Option Plan.Award Plan (including Ordinary Shares subject to outstanding options under such plan). Substantial sales of our Ordinary Shares or ADSs, or the perception that such sales may occur in the future, including sales of sharesOrdinary Shares issuable upon the exercise of options, and warrants or other equity-based securities, may cause the market price of our Ordinary Shares or ADSs to decline. Moreover, the issuance of shares underlying our options and warrants will also have a dilutive effect on our shareholders, which could further reduce the price of our Ordinary Shares and ADSs on their respective exchanges.

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

Our Ordinary Shares have been traded on the TASE since February 2011, and our ADSs have been listed on Thethe NASDAQ Capital Market since December27, 2012. Trading in our securities on these markets taketakes place in different currencies (U.S. dollars on Thethe NASDAQ Capital Market and New Israeli Shekels, or NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the U.S. and Israel). The trading prices of our securities on these two markets may differ due to these and other factors. Any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.

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

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

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

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

As a public company in the U.S., and Israel, we incur additional significant accounting, legal and other expenses as a result of the listing of our securities on both Thethe NASDAQ Capital Market and the Tel-Aviv Stock Exchange.TASE. These include costs associated with the reporting requirements of the Securities and Exchange Commission (“SEC”) and the requirements of Thethe NASDAQ MarketListing Rules, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002 or the (“Sarbanes-Oxley Act.Act”). These rules and regulations have increased our legal and financial compliance costs, introduced new costs such as investor relations, travel costs, stock exchange listing fees and shareholder reporting, and made some activities more time consumingtime-consuming and costly. Any future changes in the laws and regulations affecting public companies in the U.S. and Israel, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the MarketNASDAQ Listing Rules, of The NASDAQ, as well as applicable Israeli reporting requirements, will result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult and costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The

impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers and may require us to pay more for such positions.

Since we are an “emerging growth company,” as defined in the JOBS Act, we may take advantage of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act (and the rules and regulations of the SEC thereunder). We will remain an emerging growth company until the earliest of: (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0$1.07 billion; (b) the last day of our fiscal year following the fifth anniversary of the date of the first sale of our Ordinary Shares pursuant to an effective registration statement (in our case, December 31, 2018); (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), which would occur if the market value of our Ordinary Shares held by non-affiliates is $700 million or more as of the last business day of our most recently completed fiscal quarter. When these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with such reporting requirements. We cannot predict or estimate the amount of additional costs we may incur as a result of complying with these additional reporting requirements.

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

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under Thethe NASDAQ Capital MarketListing Rules for domestic issuers. For instance, we follow home country practice in Israel with regard to, among other things, composition of the board of directors, which does not require that a majority of a company's board of directors be independent, director nomination procedureprocedures and quorum at shareholders’ meetings. In addition, we follow our home country law, instead of Thethe NASDAQ Capital MarketListing Rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity basedequity-based compensation plans, an issuance that will result in a change of control of the company,Company, certain transactions other than a public offering involving issuances of a 20% or more interest in the companyCompany and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. companydomestic issuer listed on Thethe NASDAQ Stock Market may provide less protection than is accorded to investors under The Marketthe NASDAQ Listing Rules of The NASDAQ Capital Market applicable to domestic issuers.

In addition, as a foreign private issuer, we are exempt from the rules and regulations under the United States Securities Exchange Act of 1934, as amended, related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the United States Securities Exchange Act of 1934, as amended.Act. In addition, we are not required under the United States Securities Exchange Act of 1934, as amended, to file annual, quarterly and current reports and financial statements with the Securities and Exchange CommissionSEC as frequently or as promptly as domestic companies whose securities are registered under the United States Securities Exchange Act of 1934, as amended.Act.