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Entera Bio Ltd

Company Valuation

May 2016

2

Disclaimer

This work is composed by GSE Financial Advisory Ltd. (“GSE”) for Entera Bio Ltd (“Entera” and/or “the Company”), following valuation for 31.12.2014 and for 30.09.2015. The work is

intended solely for Entera’s 31.3.2016 financial report.

For the purpose of composing this work, we have relied on information and/or explanations and/or forecasts and/or exhibits the Company and/or anyone on its behalf have provided us

with. GSE assumes that this information is credible and does not perform an independent examination of the information. Also, nothing which may point to the data being unreasonable

has come to our attention. The data has not been examined in an independent manner, and therefore the work presented to you does not constitute a verification of these data's

correctness, completeness and accuracy. An economic evaluation should reflect in a reasonable and fair manner a given state of being at a given time, based on known data, while

considering the basic assumptions and estimated forecasts. Additionally, we have relied on external data sources, as described in the Appendix.

This work does not constitute a due diligence review and is not to replace such. In addition, this work is not intended to determine the Company's value for a specific investor, and there

is nothing within this work to constitute any legal advice or opinion.

This work does not include any accounting auditing regarding the compliance with the accounting rules. GSE is not liable for the manner of the Company's accounting presentation of

the financial reports in all that regards the accuracy and completeness of the data and the implications of that accounting presentation, as far as such exist.

This work includes a description of the methodological principles and analysis principles. The description refers to the main substantial work practices which we have implemented, and

does not constitute a complete and detailed description of the Company and its environment.

If the case may be that the data GSE has relied upon is not complete nor accurate or credible, the results of this work might change. We reserve the right to return and update this work

in light of new data which might have not been brought before us. To remove all doubt, this work is valid only for the time it has been signed.

This work includes prospective information, as its definition in the Securities Law, 5728-1968, obtained, among others from the Company. In this opinion of ours, we referred to, among

others, the estimates, forecasts and appraisals we have been provided with by the Company's management. The realization of this information is not certain. The information is based

in part on information which existed in the Company prior to writing this work, as well as on various assumptions and anticipations regarding both the Company as well as many

external factors; including the state of the market in which the Company operates, the potential competitors and the general state of the market. It shall be emphasized that there is no

certainty that such assumptions or anticipations shall be actualized, in whole or in part.

We hereby confirm that we hold no dependency on the Company, excluding the fact that we are being paid for composing this work. Also, we hereby confirm that our fees are not

dependent on the outcomes of the work.

We hereby confirm that we have no personal stake in the Company/ controlling shareholder.

GSE and any company controlled by it directly and/or indirectly as well as any controlling shareholder, officer and employee in any of such, are not liable for any damage, loss of profit

or expense of any kind and nature, including direct and/or indirect, which might incur to anyone relying on the mentioned in this work, in whole or in part. To remove all doubt, it is

hereby clarified that nothing in this work constitutes an offer or recommendation or opinion regarding the profitability of the purchase of the Company's securities/ executing the

transaction.

The Company shall not be entitled to receive from us, whether due to contract or damages, in accordance with the law or otherwise, any sum due to loss of profits, data or reputation,

or due to any consequential damage, random or indirect, or as special or punitive damages regarding any lawsuits resulting from services provided within this work or which are related

in any other way with the services provided by us within this work. All, whether the likeliness of such loss or damage has been expected or not, in the case where we have not acted

with gross negligence and / or malice.

3

Details of Assessing Company

Giza Singer Even

Giza Singer Even is Israel’s largest economic and financial advisory and investment banking firm. The firm has extensive expe rience

in accompanying the largest companies, the most prominent privatizations and the most important deals in the Israeli economy, which

it has accumulated over its thirty years of activity. Giza Singer Even is active in three areas, via independent business divisions:

economic consulting; investment banking; analytical research and corporate governance.

This paper was prepared by a team headed by Nir Harush, Head of Financial Advisory Services, CPA with a BA and MBA in , with 14

years of experience in the field of economics corporate finance.

Respectfully,

GSE Financial Advisory Ltd.

Date: 24.05.2016

4

Company Overview

5

Business Card

Entera was founded in 2009, in Israel, by Dr. Phillip

Schwartz and commenced operations in August

2010 with financing by DNA and logistic support

from Oramed Pharmaceuticals

The Company focuses on the development and

commercialization of orally delivered protein and

other large molecule therapeutics

Entera holds a patent, combining two technologies:

• Synthetic molecule absorption enhancer,

facilitating the absorption of large molecules

• Proprietary formulation to prevent molecule

degradation

The drugs are designated for two medical

conditions: Hypo-Parathyroidsm and

Osteoporosis

The company has succesfully completed a

phase 2a of the clinical trial in Hypo-

Parathyroidsm patients

Company Description Management(1)

Key

Personnel Role Experience

Dr. Phillip

Schwartz CEO

• Biotech and Pharmaceutical

experience

• Research experience

Mira

Rosensweig CFO

• Financial and executive

management

Dr. Hillel

Galitzer COO

• Early stage Biotech

• Medical research

• Osteoporosis research

Dr. Miriam

Blum CMO

• Pharmaceutical clinical trial

experience

• Residency in internal medicine &

fellowships in endocrinology &

bone metabolism

Shareholder Non diluted Fully diluted

DNA 69.9% 51.44%

Centillion Fund 18.7% 17.91%

Phillip Schwartz - 7.34%

Private investors 9.4% 15.7%

Others 2% 7.61%

Shareholders (31.03.2016)(1)

(1) Source: the Company

6

Target Conditions

Entera targets two medical conditions - Hypoparathyroidsm and Osteoporosis

Hypo-Parathyroidism is a disorder in which the

parathyroid glands of the neck are absent, or

do not produce sufficient parathyroid hormone

(PTH)

The incidence of severe Hypo-Parathyroidism

is estimated at 100,000 patients in the US and

180,000 patients worldwide (orphan disease)

Hypo-Parathyroidism leads to a number of

serious clinical issues including peripheral

neuropathies, electrolyte imbalances and even

fatalities

NPS(1) (acquired by SHIRE in 2015 for $5.2 B)

received an FDA approval for the use of the

PTH hormone for Hypo-Parathyroid treatment

(Natpara) (2) . Shire made Natpara available on

April 1, 2015(3) at an annual cost of $100k

(1) NPS (acquired by SHIRE the main competitor of Entera’s Hypo-Parathyroid treatment

(2) http://www.nasdaq.com/article/nps-hormone-drug-gets-fda-approval-20150123-00697

(3) http://investors.shire.com/~/media/Files/S/Shire-IR/quarterly-reports/2015/q2-2015-earning

Hypo-Parathyroidism Osteoporosis

a systemic skeletal disease characterized by

low bone mass, deterioration of bone tissue

and increased bone fragility and susceptibility

to fracture

It most commonly affects older populations,

primarily postmenopausal women

The condition can even be fatal, as 25% of

those who fracture a hip will die within six

months of injury

Injectable osteoporosis medications currently

account for more than 20% of the market

(Monetary) and sales of more than $2.5bn per

annum

7

Entera’s Solution

Currently, there are few possible treatments for Osteoporosis, including a once daily hormone injection.

For Hypo-Parathyroidism, NPS’ (acquired by SHIRE) newly approved drug Natpara, replaces the missing

hormone by a daily injection of the missing PTH hormone

• An oral dosage form of PTH would be superior for two main reasons:

− In Hypo-Parathyroidism, the FDA declared, that a once daily treatment is inferior to multiple daily

doses, which can easily be administered orally (1)

− There is material advantage in the convenience for the patients in taking an oral drug, and for

physicians with adjusting patients’ dosage

Entera’s oral delivered PTH hormone will substituted the current solution of injectable hormone,

providing a combination of efficacy, tolerability and convenience

The solution combines

A patented technology, addressing two aspects of oral drug delivery’s hurdles:

• A proprietary synthetic chemical complex, which enables molecular transport of large molecules such

as hormones through the intestinal wall

• A proprietary molecular protection system, which prevents drug break down and significantly extends

the half life of delivered entities in the gut

With an effective hormone drug (PTH) - an extensively studied hormone, commercially available as

a treatment for Osteoporosis, FDA approved since Dec 2002(2)

Creating the first effective oral treatment for Hypo-Parathyroidism and Osteoporosis

1

2

1 2

(1) https://www.pharmamedtechbi.com/~/media/Supporting%20Documents/The%20Pink%20Sheet%20DAILY/2014/September/Natpara_FDA_brfg.pdf

(2) https://www.centerwatch.com/drug-information/fda-approved-drugs/drug/812/forteo-teriparatide

8

Key Milestones

Osteoporosis Hypo-Parathyroid General & Finance

Date Milestone

Oct 2009 Incorporation

Aug 2010 Commenced operation

Jan 2011

DNA purchased 47% of

Entera from Oramed (stock

& cash) - $1.8m valuation

Oramed transferred the

patent rights - 3% royalties

and back-licensing

May 2011 Additional $500K from DNA

Sep 2012 $1.15m in convertible loans

- $9.3m valuation

Nov 2013 $635K round - $12.5m

valuation

Feb 2014

$5m round + $1.125m in

preferred shares - $22.5m

pre-money valuation

Date Milestone Date Milestone

Sep 2010 Oral formulation was tested in pigs and rats

Aug 2011 1st human test

Jan 2012

Multi stage phase 1 - more than 30 subjects and over 16 months duration. Till this

stage the development was for Osteo but also provided results that enabled the

Hypo phase 2

Jun 2013

Successful formulation was

developed

Plans for phase 2

commenced

Aug 2013 Complete phase 1a trial

Jan 2014 FDA Orphan Drug application

submitted

Apr 2014 FDA grants Orphan Drug

status

9

Key Milestones (Cont’d)

Date Milestone

Dec 2014

Signed engagement with a

leading American

underwriter for a US IPO

Date Milestone

Jul 2014 Multi centre phase 2a trial

Q3 2015 Successful completion of

phase 2a trial

Q4 2016 UK /US phase 2b

Q1 2017

IND phase 3 submission

Q3 2017 Multi centre phase 3

Q3-4 2018 Study report for phase 3 trial

Submit NDA/BLA to FDA

Date Milestone

Q4 2014

Phase 1 b trial - formulation

optimisation for large scale

manufacture

Q3 2016 Phase 2a trial in small cohort

- 6 months

Q3 2016 Pre-IND preparation

Q4 2016 IND submission for phase 2

Q1 2017 Phase 2b trial

Q2 2017 Partner with large pharma -

phase 3 development

Q4 2019 Study report for phase 3 trial

Submit NDA/BLA to FDA

Osteoporosis Hypo-Parathyroid General & finance

Aug 2015

The company received a

convertible loan - $2

million

10

Recent Developments

On 2 February 2014 Entera announced raising $5m in private placement, indicating a valuation of

$22.5m pre-money

Additional investments (on the same pre-money valuation of $22.5m):

• During 2014 additional investments of $1.1m, and $25k by a private investor in January 2015

On 24 April 2014, Entera received an Orphan Drug status from the FDA for Hypo-Parathyroidisim

2014: Entera acquired the necessary equipment and facilities for larger scale production (for phase 2

trials) scaling up from 100 to over 1,000 tablets a day and still adjusting its production capacities

Following a successful phase 1, Entera conducted an additional clinical trial with the focus of examining

production scale up and food interaction

• The trial’s goal of scale up validation was completed on 10 patients, and as a result the Company has

the production capacity needed for phase 2

• A second cohort was subsequently enrolled for additional process optimization. The study showed

significantly higher bioavailability and lower variability (similar to the available injection, and surpassing

other oral delivery technologies).

On September 2014 the FDA published a briefing document(1) regarding Natpara (a competitor drug

manufactured by NPS for Hypo-Parathyroidisim), stating that a lower and more frequent dosing regimen

will likely provide a better control on hypercalciuria - strengthening the premise for an oral based

medication

On December 2014 Entera announced a signed engagement with a leading US underwriter for a

US IPO


11

Recent Developments (Cont’d)

July 2015 : Entera announced phase 2a trial completed successfully

-On August 2014 Entera initiated a pilot study to assess the safety and efficacy of oral PTH (1-34) in the

treatment of Hypo-Parathyroidisim.

-17 patients used oral PTH (1-34) for 4 months during the trial

-The oral PTH (1-34) was used by the patients more than 8,000 times

-The trial met its primary endpoint for both safety and efficacy

August 2015 : Entera raised approximately $2m in convertible loan

The company estimates a two quarters delay in milestones due to an updated capital raising

schedule. Due to the necessity of capital raising to the continuous operations of the company, we

incorporated such risk in our current valuation

Based on the company’s forecast, it will start selling in Q1 2019 for the Hypo-Parathyroidisim, and

in H-2 2020 for Osteoporosis. This timeline reflects a two quarters delay compared to previous

valuation in the Hypo-Parathyroidisim selling (for 09/2015)


12

Business Strategy and Competitive Edge

Entera has a proprietary drug delivery technology, on which it can develop new oral formulations

Commercialization

• Entera will initially focus on developing the oral treatment for Hypo-Parathyroidism

• Oral treatment for Osteoporosis would be a second product also based on the technology and the

same API (PTH) but would be a different formulation, dose and treatment regimen

• At a later stage, the Company could extend the development to other proteins or large molecules

Business model

• Entera is still in early stages of clinical trials, and therefore does not operate a sales team, at the

moment

• At the appropriate stage, Entera plans on partnering with a large pharmaceutical company for the

marketing stage

• In the final stages of the clinical trials for Osteoporosis, the Company will try to form a partnership,

whereby the partner will support the trials, regulatory approvals and registrations. For Hypo the

company plans to form a partnership for the commercial sales stage only.

Competitive Edge

• Entera is utilizing one patent that addresses two aspects of the oral drug delivery hurdles (protein

degradation and lack of absorption). Additional PCTs have been filed and more are expected

• Additional patents (PCTs) have been filed in 2015 and more are expected in the near future.

• The actual hormone treatment (PTH) is already an approved treatment by the FDA

• The technology, enables a synergetic solution for oral drug delivery with the most effective hormone

treatment

13

Market Analysis

14 http://www.mayoclinic.org/diseases-conditions/hyperparathyroidism/basics/causes/con-20022086

Acquired Hypo-Parathyroidism - The most

common cause of Hypo-Parathyroidism

develops after accidental damage to or

removal of the parathyroid glands during

surgery. This surgery may be a treatment for

diseases of the nearby thyroid gland, or for

throat cancer or neck cancer.

Autoimmune disease - The immune system

creates antibodies against the parathyroid

tissues, trying to reject them as if they were

foreign bodies.

Hereditary Hypo-Parathyroidism - Either the

parathyroid glands aren't present at birth, or

they don't work properly.

Hypo-Parathyroidism is decreased function of

the parathyroid glands with underproduction

of parathyroid hormone.

Can lead to low levels of calcium in the blood

often causing cramping and twitching of

muscles or tetany (involuntary muscle

contraction), and several other symptoms.

What is Hypo-Parathyroidism?

Hypo - Parathyroidism Treatment Market

According to markets researches the value of Hypo-Parathyroidism market will increase at a CAGR of

3.3% over the next five years. The market value will also increased from $2.3bn today to $2.62bn till 2019

Causes of Hypo-Parathyroidism

Number of Patients

Chronic Hypo-Parathyroidism affects

approximately 180,000 patients worldwide

In the U.S. this population is believed to total

about 50,000 and may affect a similar number

of patients across Europe

Available western market is about 100,000

patients

15

www.mayoclinic.org/diseases-conditions/hyperparathyroidism/basics/causes/con-20022086

Hypo - Parathyroidism Treatment Market (Cont’d)

Recent neck surgery, particularly if the thyroid

was involved

A family history of hypoparathyroidism

Having certain autoimmune or endocrine

conditions, such as Addison's disease, a

condition characterized by a deficit in hormone

production by the adrenal glands

Extensive cancer radiation treatment:

Radiation can result in destruction of the

parathyroid glands, as can radioactive iodine

treatment for hyperthyroidism, occasionally.

Low levels of magnesium in your blood: which

can affect the function of the parathyroid

glands. Normal serum magnesium levels are

required for optimum secretion of parathyroid

hormone.

Risk Factors More Causes

16 http://www.transparencymarketresearch.com/pressrelease/osteoporosis-drugs-market.htm

Reduced sex hormones, particularly in women

Anorexia nervosa and bulimia

Tobacco smoking

Excessive alcohol intake

Reduced calcium and vitamin D

Inactivity or immobility

A progressive bone disease characterized by a

decrease in bone mass and density which can

lead to an increased risk of fracture

In osteoporosis, the bone mineral density

(BMD) is reduced, bone microarchitecture

deteriorates, and the amount and variety of

proteins in bone are altered

Osteoporosis is defined by the World Health

Organization as a bone mineral density of 2.5

standard deviations or more below the mean

peak bone mass Risks Factors

What is Osteoporosis?

Osteoporosis Treatment Market

According to market research the value of osteoporosis treatment market in 2015 will be $8.5bn and is

estimated to reach $8.9bn in 2020, growing at a CAGR of 1.2% averagely from 2014 to 2020

Causes of Osteoporosis

Age - risk increases with age after the mid-30s

Being Caucasian or Asian

Small bone structure

Osteoporosis in the family (a parent or sibling

having the disease, but particularly a parent

having a hip fracture)

Previous fracture during a low-level injury, at

age over 50 years in particular

Number of Patients

Osteoporosis is estimated to affect 200

million worldwide. Of this population 75

million live in western world countries -

U.S.A, Japan and western Europe countries

17

Osteoporosis - Overview

Worldwide osteoporosis causes more than 9m fractures annually resulting in an osteoporotic fracture

every 3 seconds.

As stated, Osteoporosis is estimated to affect 200m people worldwide: (By the following segmentation)

• Age 60- 10%

• Age 70- 20%

• Age 80- 40%

• Age 90- 66%

The disease affects in estimation 75 million people in Europe, USA and Japan which is considered

to be a more accessible markets

The osteoporosis therapeutics market is the primary reason for the continued growth of the global bone

metabolism sector.

The strong performance of the osteoporosis market is expected to continue, with GBI research predicting

it will help the overall bone metabolism therapeutics market reach a value of $27.1bn by 2018.

18

Orphan Drug - Overview

An orphan drug, is a dedicated route to manufacture, market and approve a unique product which is used

by special populations. The US Drug Administration encourages the pharmaceutical companies to

develop drugs for special populations suffering from rare medical conditions with incentives

Due to the small consumer market and relatively high development costs pharmaceutical companies

have low interest in developing such kind of products

The orphan drug act 1983 defined a patient population (up to 200,000 people in the United States) and

offers governmental incentive to pharmacy companies such as:

• Seven years of market exclusivity. Even if the patent period ends, the company will be able to continue

sell of the drug without competition

• Tax relives, Grants and government subsidies for R&D and more

Females, White and Hispanics are more likely to suffer from Hypo-Parathyroidism than other gender and

races. The prevalence of Hypo-Parathyroidism increases with age:

• Age 12 - 19: ~2%

• Age 65: ~15%

19

Drug Costs - Insurance Participation

Source: National Health and Nutrition Examination Survey (NHANES III) and the Colorado Thyroid Disease Prevalence Study

Osteoporosis treatments typically are

considered medically necessary and covered

by health insurance when prescribed by a

doctor

For patients covered by health insurance,

typical out-of-pocket costs would include a

prescription drug usually ranging

from $5 to $150, depending on which drug is

used and how the insurance company

classifies the specific drug

Osteoporosis

Despite the cost, insurers are usually willing to

pay for the therapies because they have few

members who need them and the drugs can

be lifesaving

Hypo - Parathyroidism

20

Phases of Clinical Research

Clinical trials involving new drugs are commonly classified into four phases

If the drug successfully passes through Phases I, II, and III, it will usually be approved by the national

regulatory authority for use in the general population

Source: Nature Publishing Group - ‘A better prescription for drug-development financing, August 2007

Phase Primary Goal

Pre-clinical Testing in non-human subjects, to gather efficacy, toxicity and pharmacokinetic information

Phase 0 Oral bioavailability and half-life of the drug

Phase 1 Testing of drug on healthy volunteers for dose-ranging

Phase 2 Testing of drug on patients to assess efficacy and safety

Phase 3 Testing of drug on patients to assess efficacy, effectiveness and safety

Phase 4 Post-marketing surveillance - watching drug use in public

21

Competitors

22

Eli Lilly & Company – Forteo (Osteoporosis Treatment)

Eli Lilly is a public medical company listed on NASDAQ (Market Cap-over $80 B)1.

Among different products Eli Lily offers the Forteo injected drug

This drug is a recombinant form of a hormone secreted by the parathyroid and called the parathyroid

hormone or PTH. Exists naturally in the body and increases bone density and bone strength in order to

help prevent fractures, especially, in treating Osteoporosis and for other medical uses

The drug is injected in the thigh or abdomen through an easy-to-use delivery device. The drug must be

injected and can’t be taken in any other way or form.

The annual revenue generated by Forteo was $1,322m in 2014 and $1,348.3m in 2015. The revenue is

expected to grow annually in CAGR of 3.82% up to $1,497m in 2019

Source: National Health and Nutrition Examination Survey (NHANES III) and the Colorado Prevalence Study

1.Source: Yahoo Finance

23

NPS Pharmaceuticals – Natpara (Hypo-Parathyroidism Treatment)

NPS, acquired by Shire Plc in 2015,specializes in rare-disease drugs. Its Gattex injections treat a

potentially deadly bowel disorder that diminishes the body’s ability to absorb nutrients and fluids. Gattex

had $142m sales in 2015

The market for rare-disease treatments is considered attractive, despite a small number of patients,

because companies can increase prices dramatically - as in Gattex case.

Natpara is another rare-disease drug which treats hormone underproduction situation called Hypo-

Parathyroidism and is already approved in U.S.A.

NPS Revenues in 2014 according to its financial statement were $384m, with an EBITDA margin of 14%

On January 2015, Shire Plc. Acquired NPS for $5.2 Billion

Natpara had $ 24.4m sales during 2015

24

Public Pharma companies - Financial Data

(1) Based on Analysis Report – J.P Morgan North America Equity Research (19/12/2014) ; Market Cap is as of J.P.Morgan’s report

Company(1) Rev. (M$) COGS

Margin Market Cap EBITDA

Margin

EBIT

Margin EV/Rev. EV/EBITDA

Bristol - Mayers 15,395 25% 101,519 23% 25% 6.51X 28.5X

Eli Lilly & company 20,351 24% 77,142 20% 23% 4.21X 21.1X

Merck & Co. 40,051 24% 171,690 33% 36% 4.75X 14.11X

Pfizer Inc. 47,287 18% 204,703 38% 39% 4.37X 11.33X

Mylan Inc. 10,582 42% 22,578 24% 28% 2.85X 11.17X

Valeant

Pharmaceuticals 9,029 24% 48,805 39% 51% 6.98X 17.4X

NPS 384.4 7% 4,008 14% - 11.62X 70.45X

Average (w/o NPS) 23,782 26% 30% 34% 4.94X 17.26X

Average (w/ NPS) 20,439 23% 27% - 5.98X 24.86X

25

NPS & Eli Lilly Competitor Products - Global Market Data

Natpara & Forteo Market Model Projection – Analysis Reports

NPS - Natpara 2016E 2017E 2018E E2019 2020E

Patients worldwide

Cost / patient $54k $55k $56k $57k $58k

Disease Incidents 130,381 131,614 132,859 134,115 135,384

Expected Penetration 6.4% 9.8% 14.1% 17.9% 20.9%

Number of Patients 2,365 4,703 8,053 11,027 14,055

Total Sales $148M $234M $404M $570M $727M

Eli Lilly - Forteo 2016E 2017E 2018E E2019 2020E

Patients worldwide

Cost / patient(1) Approximately $14k

Total Sales $1,409M $1,436M $1,446M $1,171M $1,063M

26

Valuation Analysis

27

Valuation Methodology

A DCF analysis was applied for this valuation

The discounted cash flows method is a commonly accepted method in the theory of finance

A DCF analysis is appropriate and reasonable as long as the basic assumptions it is based on are correct

and accurate, as known at the valuation date

The analysis is sensitive to the determination of the appropriate discount rate, which by itself is not an

easy task and is somewhat subjective

The calculation of the applied discount rate is shown in the following slide

Discounted Cash Flows (DCF)

28

Value Parameter

22.0% Cost of equity

- D/V

22.0% WACC

Valuation Methodology (Cont’d)

For the purpose of the valuation, we used a rounded Weighted Average Cost of Capital (WACC) of 22%

We used the Capital Asset Pricing Model (CAPM) to

determine the required return on the Company’s

equity, and made certain assumptions to determine the

Company’s appropriate capital structure

Cost of equity:

1. US Treasury Real Long-Term Rates, as of March 31, 2016

2. The market premium is estimated at 6.25%, based on

Damodaran Online

3. According to Duff & Phelps, 10z docile 2015

4. In order to determine the Company’s Beta, we selected a

number of publicly traded companies which operate in the

Pharma segment

5. Specific risk premium added based on GSE’s professional

opinion regarding the risk related to the delay in capital

raising schedule

Below is the list of companies used for the beta

calculation:

WACC summary

The following tables summarizes the WACC calculation:

Note Value Parameter 1 0.8% Risk-free interest

2 6.25% Market Premium

3 12.0% Size risk

4 0.7 Beta

5 4.0% Specific risk

22.0% Cost of equity (rounded)

Unlevered Beta Company

0.6 Eli Lilly and Company

0.7 Shire

0.5 Abbott Laboratories

0.9 Bayer AG

0.7 Pfizer Inc.

0.9 Novartis AG

0.9 Roche Holding AG

0.7 Merck & Co. Inc.

1.0 AbbVie Inc.

0.6 Bristol-Myers Squibb Company

0.9 Amgen Inc.

0.7 Average

29

Valuation Methodology (Cont’d)

Since the Company is still in the process of clinical trials, a probability factor is applied

The nature of clinical trials indicates that not all

companies will achieve regulatory approval,

and therefore the cash flows assumed for the

valuation analysis are subject to probability of

success

Based on a research including studies with

novel APIs (1) taking inventory of a large

number of clinical studies, here are the

probabilities for entering the next phase

(1) Trends in Risk Associated with New Drug Development: Success Rates for Investigational Drugs JA DiMasi, L Feldman, A Seckler and A Wilson

Probability Factor Factor Applied for the Company

For a company just entering phase 1, the

probability of reaching the market is:

• 71%*44%*86%*80%=21%

The Company has already completed phase

2a and intend to start phase 2b clinical trials,

and therefore the probability of reaching the

market is higher

We are applying the full risk of probability for

phase 2, since trail (phase 2b) not completed

yet. Therefore the probability of Entera

reaching the market is:

• 44%*86%*80%=30%

For the R&D expenses, we have applied the

probability factor based on the relevant phase

Current Phase Probability of entering

the next phase

Phase 1 71%

Phase 2 44%

Phase 3 86%

Registration 80%

30

Main Assumptions - General

Both treatments are prescribed medications that most probably will be covered by patients’ medical

insurance

In this analysis, we have assumed that the company will raise material equity to serve the needed

investments up until 2018

The company estimates a two quarters delay in milestones due to an updated capital raising



Based on the company’s forecast, it will start selling in Q1 2019 for the Hypo-Parathyroidisim, and in

H-2 2020 for Osteoporosis. This timeline reflects a two quarters delay for Hypo -Parathyroidisim

compared to previous valuation (for 09/2015)

The company has modified the R&D forecast from the 9/2015 valuation’s forecast to reflect the delay

We have not taken into account in our valuation analysis the development of future treatments, other than

the treatments for stated two conditions

The Company’s patent, that is relevant for Hypo-Parathyroidisim treatment and for Osteoporosis treatment

will expire on 2029. The Company does not plan to compete in the generic drugs market, and therefore, we

did not assume additional revenues from these medications post 2029.

Revenue:

• Concluded based on the estimation for the number of patients per year and the average annual price per

patient.

− Important to emphasize that these conditions are chronic, and as such, the treatment is not a one-time

process (i.e. the majority of the patients are repeated patients)

31

Main Assumptions - General (Cont’d)

COGS:

• The majority of the manufacturing will be outsourced to an external contractor

• Analysis of comparable companies shows an average COGS margin of 23%. We have applied

additional 10% as the company does not have the size benefits of the comparables

In 2018, there is a one-time royalty payment to the OCS of $450k

CAPEX:

• The Company will need to invest in equipment and facilities for part of the manufacturing process

Royalties:

• As per the agreement with Oramed(1), Entera is obliged to pay Oramed 3% of the gross profit (post

sales and marketing)

R&D:

• The majority of the R&D expenses are the costs for the clinical trials (adjusted to the two quarters

delay)

• Once the drug is FDA approved, there are very minimal additional costs

(1) Royalties calculation is based on an agreement with Oramed, as quoted by the Company

Company Bristol -

Mayers Eli Lily Merck Pfizer Mylan Valeant NPS Average

COGS margin 25% 24% 24% 18% 42% 24% 7% 23%

32

Main Assumptions - Hypo-Parathyroidisim

Hypo-Parathyroidisim is an orphan drug, and as such is protected for a period of 7 years from start of

sales

• The Company assumes it will complete the necessary trials, and receive an FDA approval by Q4 2018,

reflecting two quarters delay than previously estimated, and start selling in Q1/2019. Therefore, the

protection period is until the beginning of Q1 2026 instead of Q3 2025

Number of patients:

• 2019: start sales with 3,500 patients (c. 5% of total market and c. 9% of the Western market(1)).

• We have assumed growing penetration growth, stabling at 20% of the Western market and c. 11% of

total market (lower than the expected penetration rate of Natpara)

− In orphan drugs there is usually a tendency for faster growth rates

• Post Orphan protection, we believe the company will start losing market share due to new entrants,

and have assumed a 10% decrease in market share every year, up until 2029.

• Due to the delay in the sales from Q3 2018 to Q1 2019, the partial growth for each year is being taking

into account for the revenues calculation.

(1) Includes the US, Europe and Japan

(2) Calculated as 0.5*20% + 0.5*0.9*20% to reflect the delay in the orphan protection

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

% of world

market 2% 5% 8% 11% 11% 11% 11% 10% 9% 8% 7% 6%

% of western

market 3% 9% 15% 20% 20% 20% 20%2 19% 16% 15% 13% 12%

33

Main Assumptions - Hypo-Parathyroidisim (Cont’d)

Pricing model:

• The company estimates a launching price around $50k per year, per patient..

• To be conservative, we have applied a discount rate of 50% on the above estimated price, for the

launching price, i.e. $25k(1)

• Once the orphan drug protection terminate, we are assuming there will be a minimal price drop, due to

competition, to c.$21.3k (15% drop).

Sales and Marketing:

• The Company assumes start of sales Q1 2019 is the launch year, and as such the sales and marketing

expenses are expected to be relatively high. Estimated to be 50% of revenue in 2019 will be paid for

marketing costs in 2018 and 50% of revenue in 2019 will be paid in 2019.

• From 2020 onwards we are assuming sales and marketing to stable at 30% of revenues, slightly higher

than industry average

34

Main Assumptions - Osteoporosis

The Company assumes it will complete the necessary trials, and receive an FDA approval for marketing

& sell by 2020

Number of patients:

• 2020: start sells with 10,000 patients (compared with total market of 200m patients and 75m in the

western world(1)

• We have assumed growing penetration rate, stabling at 0.1% of the Western market

Pricing model:

• Similar drugs in the market (injection based) cost, approximately, $14k per year, per patient

• To be conservative, we have applied a discount rate of 50% on the above price, for the launching

price, i.e. $7k

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

% of world

market 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0%

% of western

market 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

(1) Includes the US, Europe and Japan

35

Main Assumptions - Osteoporosis (Cont’d)

Sales and Marketing:

• The Company assumes start of sales in Q3 2020, and as such the sales and marketing expenses are

expected to be relatively high. Estimated to be 60% of revenue through commercial JV with other

pharma company.

• Additionally, the company has assumed start of marketing efforts in 2019 - estimated at half the level of

2020, as the company will already have a S&M team in place, and will only need to increase

accordingly

• From 2021 onwards we are assuming sales and marketing to stable at 30% of revenues, slightly higher

than industry average

36

Forecasted Cash Flows

($m) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Revenues:

- - - - - 88 219 388 521 525 529 532 509 372 337 305

- - - - - - 35 140 315 525 709 790 796 801 807 813

Total revenues - - - - 88 254 528 836 1,050 1,237 1,323 1,305 1,173 1,144 1,118 Revenue growth 190% 108% 58% 26% 18% 7% -1% -10% -2% -2%

COGS:

Hypo. - - - - 29 73 130 174 176 177 178 170 124 113 102

Osteo. - - - - - 12 47 105 176 237 264 266 268 270 272

Total COGS - - - - 29 85 177 280 351 414 443 437 393 383 374

Gross profit - - - - 58 169 352 557 699 823 880 868 781 761 744 Gross margin 67% 67% 67% 67% 67% 67% 67% 67% 67% 67% 67%

S&M:

Hypo. - - - 44 44 66 116 156 158 159 160 153 112 101 92

Osteo. - - - - 11 21 56 95 158 213 237 239 240 242 244

Total S&M - - - 44 54 87 172 251 315 371 397 392 352 343 335

Royalties - - - 0 0 2 5 9 12 14 14 14 13 13 12

R&D - 5 26 44 56 40 8 5 6 7 8 7 7 7 7

G&A - - 2 3 5 9 18 28 36 43 45 43 41 39 39 % of revenue 6% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3%

Depreciation 0 0 0 0 1 1 1 2 2 2 3 3 3 3 3

EBIT (0) (5) (28) (92) (58) 30 147 262 328 386 414 410 365 356 348 EBIT margin -67% 12% 28% 31% 31% 31% 31% 31% 31% 31% 31%

Tax - - - - - - - 63 82 97 103 102 91 89 87

Profit, after tax (0) (5) (28) (92) (58) 30 147 200 246 290 310 307 274 267 261

CAPEX 0 0 2 2 2 3 3 3 3 3 3 3 3 3 3

Depreciation 0 0 0 0 1 1 1 2 2 2 3 3 3 3 3

FCF (100%) (0) (5) (30) (93) (60) 29 145 199 245 289 310 307 273 267 261

FCF (probability factor)* (0) (5) (16) (35) (26) 7 44 60 74 88 94 93 83 81 79

* Expenses were factored based on clinical phases development. 2015: 100%; 2016: 100%; 2017: 53%; 2018: 44%; 2019: 43%; 2020:34%; 2021 - 2029: 30%

37

Enterprise Value and Sensitivity Analysis

As mentioned above, we have applied:

• A 30% probability factor on the FCF (expenses were factored based on clinical phases development,

taking into account the weight of each treatment in the R&D expenses)

• A rounded 22% WACC

− We have valued Entera’s Enterprise Value at $65.7M

Sensitivity analysis of the EV:

WACC

18% 20% 22% 24% 26%

100.5 81.5 65.7 52.5 41.3

($m) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

FCF (100%) (0) (5) (30) (93) (60) 29 145 199 245 289 310 307 273 267 261

FCF (probability factor) (0) (5) (16) (35) (26) 7 44 60 74 88 94 93 83 81 79

Period - 0.375 1.25 2.25 3.25 4.25 5.25 6.25 7.25 8.25 9.25 10.25 11.25 12.25 13.25

Discount factor 1.00 0.93 0.78 0.64 0.52 0.43 0.35 0.29 0.24 0.19 0.16 0.13 0.11 0.09 0.07

Discounted cash flows (0) (5) (12) (22) (14) 3 15 17 18 17 15 12 9 7 6

EV 65.7

38

Equity Value

Net Financial Debt (31.3.2016):

Equity Value:

We have valued Entera’s Equity as of 31.03.2016 in the amount of $64.2M

($m) 31.3.2016

Cash 0.5

Loans (1.9)

Debt component of convertible loan (0.1)

Net Financial Debt (1.5)

($m) 31.3.2016

Enterprise Value 65.7

Net Financial Debt (1.5)

Equity Value 64.2

39

Conclusions

(1) http://investors.shire.com/~/media/Files/S/Shire-IR/quarterly-reports/2015/q2-2015-earning-

release-resultsday-23-Jul-2015

Based on the above mentioned methodology, we have valued Entera’s equity at $64.2m.

Subject to the successful capital raising of the company, we will update Entera’s valuation in the future.

Supporting Analyses:

• There were few material developments during 2015, supporting the decrease in Entera’s valuation:

− The company estimates a two quarters delay in milestones due to an updated capital raising



− Based on the company’s forecast, it will start selling in Q1 2019 for the Hypo-Parathyroidisim, and in

H-2 2020 for Osteoporosis. This timeline reflects a two quarters delay compared to previous

valuation (for 09/2015)

40

Comparison to previous valuation results

The following detailing of the differences from the current valuation to the previous valuation:

Subject 30.09.2015 31.03.2016 Notes

Revenue Flow

(Hypo-Parathyroidisim) H-2 2018 Q1 2019

Based on the company’s forecast, there

will be a two quarters delay in Hypo-

Parathyroidisim sales. There is no

change in the rest of the forecast years

revenues.

Expenditures

H-2 2018

Q1 2019

In accordance with the delay in the

revenues, expenditures delay is also

expected.

WACC 19% 22%

Due to the two quarters delay in

milestones there is a necessity of capital

raising to the continuous operations of

the company. Therefore, we

incorporated such risk in our current

valuation.

Net Financial Debt - ($1.5M)

The current valuation has also

considered the company’s net financial

debt , in order to value Entera’s equity.

Enterprise Value $76M $65.7M

The decrease in the Enterprise Value

has resulted from the increase in the

company’s WACC as mentioned above.

41

Appendix

42

Data sources

We have based our analysis on the following sources:

• Conversations with management

• Company presentation

• Company’s forecasts

• DNA filings

• Different analysis reports

• Similar companies financial statements

• Publications:

− National Health and Nutrition Examination Survey (NHANES III) and the Colorado Thyroid Disease

Prevalence Study

− Nature Publishing Group - ‘A better prescription for drug-development financing, August 2007

− Natpara FDA Briefing - September 2014

• Trends in Risk Associated with New Drug Development: Success Rates for Investigational Drugs JA

DiMasi, L Feldman, A Seckler and A Wilson

• TASE immediate announcements

• CapitalIQ

• Bloomberg