----

| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---------|------------------------------------------------------------------------------------------------|

| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---------|--------------------------------------------------------------------------------------|

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---------|------------------------------------------------------------------------------------------|

| ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---------|---------------------------------------------------------------------------------------------|

| Title of Each Class                      | Name of Each Exchange on which Registered |
|------------------------------------------|-------------------------------------------|
| Ordinary Shares, par value NIS 1.00 each | The NASDAQ Stock Market LLC               |

----

| U.S. GAAP ☐ | International Financing Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
|---------------------------|---------------------------------------------------------------------------------------------------------------|---------------|

----

| PART I                                                                                |   |
|---------------------------------------------------------------------------------------|--------|
| Item 1. Identity of Directors, Senior Management and Advisers                         | 4      |
| Item 2. Offer Statistics and Expected Timetable                                       | 4      |
| Item 3. Key Information                                                               | 4      |
| Item 4. Information on the Company                                                    | 40     |
| Item 4A. Unresolved Staff Comments                                                    | 74     |
| Item 5. Operating and Financial Review and Prospects                                  | 74     |
| Item 6. Directors, Senior Management and Employees                                    | 95     |
| Item 7. Major Shareholders and Related Party Transactions                             | 120    |
| Item 8. Financial Information                                                         | 125    |
| Item 9. The Offer and Listing                                                         | 125    |
| Item 10. Additional Information                                                       | 126    |
| Item 11. Quantitative and Qualitative Disclosures About Market Risk                   | 142    |
| Item 12. Description of Securities Other Than Equity Securities                       | 143    |
| PART II                                                                               |   |
| Item 13. Defaults, Dividend Arrearages and Delinquencies                              | 144    |
| Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds | 144    |
| Item 15. Controls and Procedures                                                      | 144    |
| Item 16A. Audit committee financial expert                                            | 145    |
| Item 16B. Code of Ethics                                                              | 145    |
| Item 16C. Principal Accountant Fees and Services                                      | 145    |
| Item 16D. Exemptions from the Listing Standards for Audit Committees                  | 145    |
| Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers       | 146    |
| Item 16F. Change in Registrant's Certifying Accountant                                | 146    |
| Item 16G. Corporate Governance                                                        | 146    |
| Item 16H. Mine Safety Disclosure                                                      | 147    |
| PART III                                                                              |   |
| Item 17. Financial Statements                                                         | 148    |
| Item 18. Financial Statements                                                         | 148    |
| Item 19. Exhibits                                                                     | 148    |

----

|  | · | our expectation that the number of patients treated by our product "Glassia" will double by 2018 compared to the number of patients in 2014 and that our revenues will grow by approximately 30% by 2017 compared to our revenues for 2016 and that we will achieve our revenue goal of $100 million by 2017; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our belief that our relationships with our strategic partners will lead to increased revenues and other benefits in the future and that such relationships, including with Shire plc. (“Shire”), will continue without disruption; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our expectation that the minimum aggregate revenue for Glassia for the years 2017 to 2020  under our agreement with Shire will  reach approximately $237 million; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our ability to procure adequate quantities of plasma and fraction IV which are acceptable for use in our manufacturing processes from our suppliers; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our ability to maintain compliance with government regulations and licenses; |
|--|--------|------------------------------------------------------------------------------|

|  | · | our ability to identify growth opportunities for existing products and our ability to identify and develop new product candidates; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our belief that the market opportunity for Alpha-1 Antitrypsin (“AAT”) products will grow; |
|--|--------|--------------------------------------------------------------------------------------------------------|

----

|  | · | the various uses of AAT products to potentially be effective against various diseases, including GvHD, type-1 diabetes and lung transplantations, as well as its ability to be used in connection with cystic fibrosis and bronchiectasis; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the beneficial characteristics of Inhaled AAT for AATD, which we believe may result in our increased profitability; |
|--|--------|---------------------------------------------------------------------------------------------------------------------|

|  | · | our belief that the potential world market for AAT products is significantly larger than current consumption indicates; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------|

|  | · | our belief that we will be able to continue to meet our customers' demand for AAT; |
|--|--------|------------------------------------------------------------------------------------|

|  | · | the timing of, and our ability to, obtain and/or maintain regulatory approvals for our products and new product candidates, the rate and degree of market acceptance, and the clinical utility of our products; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the potential market opportunities for our products and product candidates; |
|--|--------|-----------------------------------------------------------------------------|

|  | · | our anticipation that we will receive marketing authorization for our inhaled formulation of AAT for treatment of AAT deficiency (“Inhaled AAT for AATD") from the European Medicines Agency (the “EMA”) by the fourth quarter of 2017 and launch Inhaled AAT for AATD in 2018 in Europe; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our ability to receive marketing authorization for and to launch our KamRAB product for Prophylaxis treatment of rabies disease with the U.S. Food and Drug Administration (the “FDA”) in the United States in 2017; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our anticipation to discuss and identify with the FDA, in the first half of 2017, the clinical and regulatory pathway for registration in the United States of our Inhaled AAT for AATD; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our plan to further develop the GvHD indication including initiation of a Phase II/III study in 2017 in Europe; |
|--|--------|-----------------------------------------------------------------------------------------------------------------|

|  | · | our expectation that we will receive topline results from our clinical trial of AAT by intravenous for the treatment of newly diagnosed Type-1 diabetes in the second half of 2017; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our plan to further develop our recombinant AAT products; |
|--|--------|-----------------------------------------------------------|

|  | · | our expectations regarding the timing of the beginning of the production of Glassia by Shire; |
|--|--------|-----------------------------------------------------------------------------------------------|

|  | · | our anticipation that we will generate higher revenues as we diversify our revenue base by increasing the number of products we offer; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our expectations regarding the future breakdown of our segments by revenue; |
|--|--------|-----------------------------------------------------------------------------|

|  | · | our expectations regarding the potential actions or inactions of existing and potential competitors of our products; |
|--|--------|----------------------------------------------------------------------------------------------------------------------|

|  | · | legislation or regulation in countries where we sell our products that affect product pricing, reimbursement, access or distribution channels; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the impact of geographic and product mix on our total revenues and gross profit; |
|--|--------|----------------------------------------------------------------------------------|

|  | · | our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our technology and products; and |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the impact of our research and development expenses as we continue developing product candidates. |
|--|--------|---------------------------------------------------------------------------------------------------|

----

----

----

|                                                                                                               |   | Year Ended December 31,               |       |
|--------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                               |   | 2016                                  |       |   | 2015 |   |   | 2014 |   |   | 2013 |   |   | 2012 |   |
|                                                                                                               |   | (in thousands, except per share data) |       |
| Consolidated Statements of Operations Data:                                                                        |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues from Proprietary Products                               |   | $                                     | 55,958     |   |   | $ | 42,952 |   |   | $ | 44,389 |   |   | $ | 50,658 |   |   | $ | 46,445 |   |
| Revenues from Distribution                                       |   |                                  | 21,536     |   |   |   | 26,954 |   |   |   | 26,676 |   |   |   | 19,965 |   |   |   | 26,230 |   |
| Total revenues                                                   |   |                                  | 77,494     |   |   |   | 69,906 |   |   |   | 71,065 |   |   |   | 70,623 |   |   |   | 72,675 |   |
|                                                                                                               |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues from Proprietary Products                                                                         |   |                                  | 37,433     |   |   |   | 30,468 |   |   |   | 32,617 |   |   |   | 27,104 |   |   |   | 26,911 |   |
| Cost of revenues from Distribution                               |   |                                  | 18,411     |   |   |   | 23,640 |   |   |   | 23,406 |   |   |   | 17,112 |   |   |   | 23,071 |   |
| Total cost of revenues                                           |   |                                  | 55,844     |   |   |   | 54,108 |   |   |   | 56,023 |   |   |   | 44,216 |   |   |   | 49,982 |   |
| Gross profit                                                     |   |                                  | 21,650     |   |   |   | 15,798 |   |   |   | 15,042 |   |   |   | 26,407 |   |   |   | 22,693 |   |
| Research and development expenses                                |   |                                  | 16,245     |   |   |   | 16,530 |   |   |   | 16,030 |   |   |   | 12,745 |   |   |   | 11,821 |   |
| Selling and marketing expenses                                   |   |                                  | 3,243      |   |   |   | 3,652 |   |   |   | 2,898 |   |   |   | 2,100 |   |   |   | 1,853 |   |
| General and administrative expenses                              |   |                                  | 7,643      |   |   |   | 7,040 |   |   |   | 7,593 |   |   |   | 7,862 |   |   |   | 4,781 |   |
| Operating income (loss)                                          |   |                                  | (5,481     | ) |   |   | (11,424 | ) |   |   | (11,479 | ) |   |   | 3,700 |   |   |   | 4,238 |   |
| Financial income                                                 |   |                                  | 469        |   |   |   | 463 |   |   |   | 404 |   |   |   | 278 |   |   |   | 578 |   |
| Income (expense) in respect of currency exchange and translation differences and derivatives instruments, net      |   |                                  | 127        |   |   |   | 625 |   |   |   | - |   |   |   | (369 | ) |   |   | (100 | ) |
| Income (expense) in respect of revaluation of warrants to fair value                                               |   |                                  | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (576 | ) |
|                                                                                                               |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial expense                                                |   |                                  | (126       | ) |   |   | (934 | ) |   |   | (2,086 | ) |   |   | (3,142 | ) |   |   | (3,357 | ) |
| Income (loss) before taxes on income                             |   |                                  | (5,011     | ) |   |   | (11,270 | ) |   |   | (13,161 | ) |   |   | 467 |   |   |   | 783 |   |
| Taxes on income                                                  |   |                                  | 1,722      |   |   |   | - |   |   |   | 52 |   |   |   | 24 |   |   |   | 523 |   |
| Net income (loss)                                                |   |                                  | (6,733     | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |   | $ | 443 |   |   | $ | 260 |   |
| Income (loss) attributable to equity holders                                                                       |   |                                  | (6,733     | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |   | $ | 443 |   |   | $ | 260 |   |
| Income (loss) per share attributable to equity holders:                                                            |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                            |   | $                                     | (0.18      | ) |   | $ | (0.31 | ) |   | $ | (0.37 | ) |   | $ | 0.01 |   |   | $ | 0.01 |   |
| Diluted                                                          |   | $                                     | (0.18      | ) |   | $ | (0.31 | ) |   | $ | (0.37 | ) |   | $ | 0.01 |   |   | $ | 0.01 |   |
| Weighted-average number of ordinary shares used to compute income (loss) per share attributable to equity holders: |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                            |   |                                  | 36,418,833 |   |   |   | 36,245,813 |   |   |   | 35,971,335 |   |   |   | 32,714,631 |   |   |   | 28,078,996 |   |
| Diluted                                                          |   |                                  | 36,418,833 |   |   |   | 36,245,813 |   |   |   | 35,971,335 |   |   |   | 33,385,651 |   |   |   | 28,686,636 |   |
|                                                                                                               |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated Statements of Cash Flows:                                                                             |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operating activities                             |   | $                                     | 1,897      |   |   | $ | (13,979 | ) |   | $ | (9,918 | ) |   | $ | (3,854 | ) |   | $ | (8,262 | ) |
| Cash flows from investing activities                             |   |                                  | 1,637      |   |   |   | 11,253 |   |   |   | (26,819 | ) |   |   | (3,903 | ) |   |   | (2,432 | ) |
| Cash flows from financing activities                             |   |                                  | 1,490      |   |   |   | (6,355 | ) |   |   | (7,640 | ) |   |   | 49,208 |   |   |   | 2,966 |   |
|                                                                                                               |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Consolidated Balance Sheet Data:                                                                                   |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash, cash equivalents, restricted cash and short-term investments                                                 |   | $                                     | 28,632     |   |   | $ | 28,306 |   |   | $ | 51,896 |   |   | $ | 74,177 |   |   | $ | 33,795 |   |
| Trade receivables                                                |   |                                  | 19,788     |   |   |   | 23,071 |   |   |   | 17,514 |   |   |   | 17,882 |   |   |   | 13,861 |   |
| Working capital (1)                                              |   |                                  | 49,871     |   |   |   | 57,655 |   |   |   | 66,206 |   |   |   | 85,108 |   |   |   | 40,651 |   |
| Total assets                                                     |   |                                  | 99,696     |   |   |   | 101,992 |   |   |   | 119,140 |   |   |   | 139,379 |   |   |   | 89,114 |   |
| Total liabilities                                                |   |                                  | 32,953     |   |   |   | 29,485 |   |   |   | 38,723 |   |   |   | 49,409 |   |   |   | 60,721 |   |
| Total shareholders’ equity                                 |   |                                  | 66,743     |   |   |   | 72,507 |   |   |   | 80,417 |   |   |   | 89,970 |   |   |   | 28,393 |   |
|                                                                                                               |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Data:                                                                                                        |   |                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjusted net income (loss)(2) (3)                           |   | $                                     | (5,663     | ) |   | $ | (9,363 | ) |   | $ | (9,462 | ) |   | $ | 9,414 |   |   | $ | 2,103 |   |
| Adjusted EBITDA(2)                                               |   | $                                     | (909       | ) |   | $ | (6,290 | ) |   | $ | (4,940 | ) |   | $ | 3,156 |   |   | $ | 8,549 |   |

|  | (1) | Working capital is defined as total current assets minus total current liabilities. |
|--|-----|-------------------------------------------------------------------------------------|

|  | (2) | We present adjusted net income (loss) and adjusted EBITDA because we use these non-IFRS financial measures to assess our operational performance, for financial and operational decision-making, and as a means to evaluate period-to-period comparisons on a consistent basis. Management believes these non-IFRS financial measures are useful to investors because: (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making; and (2) they exclude the impact of non-cash items that are not directly attributable to our core operating performance and that may obscure trends in the core operating performance of the business. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (3) | Adjusted EBITDA is defined as net income (loss), plus income tax expense, plus financial expense, net, plus depreciation and amortization expense, plus non-cash share-based compensation expenses, plus or minus income or expense in respect of exchange and translation differences and derivatives instruments not designated as hedging, and plus one-time management compensation payment. Management believes that adjusted EBITDA provides useful information to investors for the same reasons discussed above for adjusted net income (loss). |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                   |   | Year Ended December 31, |   |
|----------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                   |   | 2016                    |   |   | 2015 |   |   | 2014 |   |   | 2013 |   |   | 2012 |   |
|                                                                                   |   | (in thousands)          |   |
| Net income (loss)                    |   | $                       | (6,733 | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |   | $ | 443 |   |   | $ | 260 |   |
| Non-cash share-based compensation expenses                                             |   |                    | 1,071  |   |   |   | 1,907 |   |   |   | 3,751 |   |   |   | 1,327 |   |   |   | 1,267 |   |
| One-time management compensation payment                                               |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | 1,386 |   |   |   | - |   |
| Expense (income) in respect of revaluation of warrants to fair value         |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 576 |   |
| Adjusted net income (loss)           |   | $                       | (5,663 | ) |   | $ | (9,363 | ) |   | $ | (9,462 | ) |   | $ | 3,156 |   |   | $ | 2,103 |   |

----

|                                                                                              |   | Year Ended December 31, |   |
|---------------------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                              |   | 2016                    |   |   | 2015 |   |   | 2014 |   |   | 2013 |   |   | 2012 |   |
|                                                                                              |   | (in thousands)          |   |
| Net income (loss)                               |   | $                       | (6,733 | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |   | $ | 443 |   |   | $ | 260 |   |
| Income tax expense                              |   |                    | 1,722  |   |   |   | - |   |   |   | 52 |   |   |   | 24 |   |   |   | 523 |   |
| Financial expense, net                          |   |                    | (343   | ) |   |   | 471 |   |   |   | 1,682 |   |   |   | 2,864 |   |   |   | 2,779 |   |
| Depreciation and amortization expense           |   |                    | 3,501  |   |   |   | 3,227 |   |   |   | 2,788 |   |   |   | 3,001 |   |   |   | 3,044 |   |
| Non-cash share-based compensation expenses                                                        |   |                    | 1,071  |   |   |   | 1,907 |   |   |   | 3,751 |   |   |   | 1,327 |   |   |   | 1,267 |   |
| Income (expense) in respect of translation differences and derivatives instruments, net           |   |                    | (127   | ) |   |   | (625 | ) |   |   | - |   |   |   | 369 |   |   |   | 100 |   |
| Expense (income) in respect of revaluation of warrants fair value                                 |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 576 |   |
| One-time management compensation payment                                                          |   |                    | -      |   |   |   | - |   |   |   | - |   |   |   | 1,386 |   |   |   | - |   |
| Adjusted EBITDA                                 |   | $                       | (909   | ) |   | $ | (6,290 | ) |   | $ | (4,940 | ) |   | $ | 9,414 |   |   | $ | 8,549 |   |

----

----

----

----

|  | · | regulators may not authorize us to commence or conduct a clinical trial within a country or at a prospective trial site; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------|

|  | · | the regulatory requirements for product approval may not be explicit, may evolve over time and may diverge among jurisdictions; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------|

|  | · | delays may occur in obtaining our clinical materials; |
|--|--------|-------------------------------------------------------|

|  | · | our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or to abandon strategic projects; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower or more difficult than we anticipate or participants may withdraw from our clinical trials at higher rates than we anticipate; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | delays may occur in reaching agreement on acceptable clinical trial agreement terms with prospective sites or obtaining institutional review board approval; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our strategic partners may not achieve their clinical development goals and/or comply with their relevant regulatory requirements; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our third-party contractors, such as contract research organizations, may fail to comply with regulatory requirements or meet their contractual obligations to us; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | we may be forced to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any participant experiences an unexpected serious adverse event; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies, and result in the recall of any approved product distributed pursuant to data determined to be fraudulent; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the cost of our clinical trials may be greater than we anticipate; |
|--|--------|--------------------------------------------------------------------|

|  | · | an audit of preclinical or clinical studies by the FDA, the EMA, the regulatory authorities in Israel or other regulatory authorities may reveal noncompliance with applicable regulations, which could lead to disqualification of the results of such studies and the need to perform additional studies; and |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | our product candidates may not achieve the desired clinical benefits or may cause undesirable side effects, or the product candidates may have other unexpected characteristics. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | be delayed in obtaining regulatory or marketing approval for our product candidates; |
|--|--------|--------------------------------------------------------------------------------------|

|  | · | be unable to obtain regulatory and marketing approval; |
|--|--------|--------------------------------------------------------|

|  | · | decide to halt the clinical trial or other testing; |
|--|--------|-----------------------------------------------------|

|  | · | be required to conduct additional trials under a conditional approval; |
|--|--------|------------------------------------------------------------------------|

|  | · | be unable to obtain reimbursement for our products in all or some countries; |
|--|--------|------------------------------------------------------------------------------|

|  | · | only obtain approval for indications that are not as broad as we initially intend; |
|--|--------|------------------------------------------------------------------------------------|

|  | · | have the product removed from the market after obtaining marketing approval from the FDA, the EMA, the regulatory authorities in Israel or other regulatory authorities; and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | be delayed in, or prevented from, the receipt of clinical milestone payments from our strategic partners. |
|--|--------|-----------------------------------------------------------------------------------------------------------|

----

|  | · | the prevalence and severity of any side effects; |
|--|--------|--------------------------------------------------|

|  | · | the efficacy, potential advantages and timing of introduction to the market of alternative treatments; |
|--|--------|--------------------------------------------------------------------------------------------------------|

|  | · | our ability to offer our product candidates for sale at competitive prices; |
|--|--------|-----------------------------------------------------------------------------|

|  | · | relative convenience and ease of administration of our products; |
|--|--------|------------------------------------------------------------------|

|  | · | the willingness of physicians to prescribe our products; |
|--|--------|----------------------------------------------------------|

|  | · | the willingness of patients to use our products; |
|--|--------|--------------------------------------------------|

----

|  | · | the strength of marketing and distribution support; and |
|--|--------|---------------------------------------------------------|

|  | · | third-party coverage or reimbursement. |
|--|--------|----------------------------------------|

----

----

----

----

----

----

----

----

|  | · | decreased demand for our plasma-derived protein therapeutics and any product candidates that we may develop; |
|--|--------|--------------------------------------------------------------------------------------------------------------|

|  | · | injury to our reputation; |
|--|--------|---------------------------|

|  | · | difficulties in recruitment of new participants to our future clinical trials and withdrawal of current clinical trial participants; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  | · | costs to defend the related litigation; |
|--|--------|-----------------------------------------|

|  | · | substantial monetary awards to trial participants or patients; |
|--|--------|----------------------------------------------------------------|

|  | · | difficulties in finding distributors for our products; |
|--|--------|--------------------------------------------------------|

|  | · | difficulties in entering into strategic partnerships with third parties; |
|--|--------|--------------------------------------------------------------------------|

|  | · | diversion of management’s attention; |
|--|--------|--------------------------------------------|

|  | · | loss of revenue; |
|--|--------|------------------|

|  | · | the inability to commercialize any products that we may develop; and |
|--|--------|----------------------------------------------------------------------|

|  | · | higher insurance premiums. |
|--|--------|----------------------------|

----

----

----

----

----

----

----

----

----

----

----

|  | · | actual or anticipated fluctuations in our financial condition and operating results; |
|--|--------|--------------------------------------------------------------------------------------|

|  | · | overall conditions in the specialty pharmaceuticals market; |
|--|--------|-------------------------------------------------------------|

|  | · | loss of significant customers or changes to agreements with our strategic partners; |
|--|--------|-------------------------------------------------------------------------------------|

|  | · | changes in laws or regulations applicable to our products; |
|--|--------|------------------------------------------------------------|

|  | · | actual or anticipated changes in our growth rate relative to our competitors’; |
|--|--------|--------------------------------------------------------------------------------------|

|  | · | announcements of clinical trial results, technological innovations, significant acquisitions, strategic alliances, joint ventures or capital commitments by us or our competitors; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | changes in key personnel; |
|--|--------|---------------------------|

|  | · | fluctuations in the valuation of companies perceived by investors to be comparable to us; |
|--|--------|-------------------------------------------------------------------------------------------|

|  | · | the issuance of new or updated research reports by securities analysts; |
|--|--------|-------------------------------------------------------------------------|

|  | · | disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual property protection for our technologies; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | announcement of, or expectation of, additional financing efforts; |
|--|--------|-------------------------------------------------------------------|

|  | · | sales of our ordinary shares by us or our shareholders, including pursuant to our recently filed registration statement on Form F-3; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  | · | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; |
|--|--------|-------------------------------------------------------------------------------------------------------|

|  | · | recalls and/or adverse events associated with our products; |
|--|--------|-------------------------------------------------------------|

|  | · | the expiration of contractual lock-up agreements with our executive officers and directors; and |
|--|--------|-------------------------------------------------------------------------------------------------|

|  | · | general political, economic and market conditions. |
|--|--------|----------------------------------------------------|

----

----

----

|  | · | December 31, 2018, which is the last day of the fiscal year in which the fifth anniversary of our initial public offering in the United States has occurred; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the last day of the fiscal year in which our annual gross revenues are $1 billion or more; |
|--|--------|--------------------------------------------------------------------------------------------|

|  | · | the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the date we qualify as a “large accelerated filer” with at least $700 million of equity securities held by non-affiliates. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|  | · | December 31, 2018, which is the last day of the fiscal year in which the fifth anniversary of our initial public offering in the United States has occurred; |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the last day of the fiscal year in which our annual gross revenues are $1 billion or more; |
|--|--------|--------------------------------------------------------------------------------------------|

|  | · | the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt securities; or |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the date we qualify as a “large accelerated filer” with at least $700 million of equity securities held by non-affiliates. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| Product                                                   |         | Indication                                                                                                                                                |         | Active Ingredient                  |         | Geography                                                                                                                             |
|-----------------------------------------------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|------------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------|
| Respiratory                                               |         |                                                                                                                                                      |         |                               |         |                                                                                                                                  |
| Glassia (or Respira/RespiKam/Ventia in certain countries) |         | Intravenous AATD                                                                                                                                          |         | Alpha-1 Antitrypsin (human)        |         | United States, Israel, Russia, Slovenia*, Brazil, Argentina, Cuba, Turkey, Colombia**                                                 |
| Immunoglobulins                                           |         |                                                                                                                                                      |         |                               |         |                                                                                                                                  |
| KamRAB                                                    |         | Prophylaxis of rabies disease                                                                                                                             |         | Anti-rabies immunoglobulin (human) |         | Israel, India, Thailand, El Salvador,  Australia, Russia*, Mexico*, Georgia* and Korea                                           |
| KamRho (D) IM                                             |         | Prophylaxis of hemolytic disease of newborns                                                                                                              |         | Rho(D) immunoglobulin (human)      |         | Israel, Brazil, India, Argentina, Paraguay, Chile,  Russia, Kenya, Nigeria, Sri Lanka*, Thailand** and the Palestinian Authority |
| KamRho (D) IV                                             |         | Treatment of immune thermobocytopunic purpura                                                                                                             |         | Rho(D) immunoglobulin (human)      |         | Israel, India*, Sri Lanka* and Argentina*                                                                                             |
| Snake bite antiserum                                      |         | Treatment of snake bites by the Vipera palaestinae and Echis coloratus                                                                                    |         | Anti-snake venom                   |         | Israel*                                                                                                                               |
| Other Products                                            |         |                                                                                                                                                      |         |                               |         |                                                                                                                                  |
| Heparin Lock Flush                                        |    | To maintain patency of indwelling IV catheter designed for intermittent injection therapy or blood sampling                                               |    | Heparin sodium                     |    | Israel*                                                                                                                               |
| Kamacaine 0.5%                                            |         | Local or regional anesthesia or analgesia during surgery, diagnostic and therapeutic procedures and obstetrical procedures. Spinal anesthesia for surgery |         | Bupivacaine HCl                    |         | Israel                                                                                                                                |
| Human transferrin (diagnostical grade)                    |    | Not for human use                                                                                                                                         |    | Transferrin                        |    | United States, Israel, Germany, France and Netherlands                                                                                |

| * | We have regulatory approval, but have not marketed the product in this country in 2016. |
|---|-----------------------------------------------------------------------------------------|

----

----

----

| Product                  |         | Indication                                                                                                                                                                                                                    |         | Active Ingredient                                  |
|--------------------------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|----------------------------------------------------|
| Respiratory              |         |                                                                                                                                                                                                                          |         |                                               |
| Bramitob                 |         | Management of chronic pulmonary infection due to pseudomonas aeruginosa in patients six years and older with cystic fibrosis                                                                                             |         | Tobramycin                                         |
| FOSTER                   |         | Regular treatment of asthma where use of a combination product (inhaled corticosteroid and long-acting beta2-agonist) is appropriate                                                                                     |         | Beclomethasone dipropionate, Formoterol fumarate   |
| Immunoglobulins          |         |                                                                                                                                                                                                                          |         |                                               |
| IVIG 5%                  |         | Treatment of various immunodeficiency-related conditions                                                                                                                                                                      |         | Gamma globulins (IgG) (human)                      |
| Varitect                 |         | Preventive treatment after exposure to the virus that causes chicken pox and zoster herpes                                                                                                                                    |         | Varicella zoster immunoglobulin (human)            |
| Zutectra                 |         | Prevention of hepatitis B virus (HBV) re-infection in HBV-DNA negative patients 6 months after liver transplantation for hepatitis B induced liver failure                                                                    |         | Human hepatitis B immunoglobulin                   |
| Hepatect CP              |         | Prevent contraction of Hepatitis B by adults and children older than two years                                                                                                                                                |         | Hepatitis B immunoglobulin (human)                 |
| Megalotect               |         | Contains antibodies that neutralize cytomegalovirus viruses and prevent their spread in immunologically impaired patients                                                                                                     |         | CMV immunoglobulin (human)                         |
| Critical Care            |         |                                                                                                                                                                                                                          |         |                                               |
| Heparin sodium injection |         | Treatment of thrombo-embolic disorders such as deep vein thrombosis, acute arterial embolism or thrombosis, thrombophlebitis, pulmonary embolism, fat embolism. Prophylaxis of deep vein thrombosis and thromboembolic events |         | Heparin sodium                                     |
| Albumin                  |         | Maintains a proper level in the patient’s blood plasma                                                                                                                                                                  |         | Human serum Albumin                                |
| Coagulation Factors      |         |                                                                                                                                                                                                                          |         |                                               |
| Factor VIII              |         | Treatment of Hemophilia Type A diseases                                                                                                                                                                                       |         | Coagulation Factor VIII (human)                    |
| Factor IX                |    | Treatment of Hemophilia Type B disease                                                                                                                                                                                        |    | Coagulation Factor IX (human)                      |
| Vaccinations             |         |                                                                                                                                                                                                                          |         |                                               |
| IXIARO                   |         | Active immunization against Japanese encephalitis in adults, adolescents, children and infants aged 2 months and older                                                                                                        |         | Japanese encephalitis purified inactivated vaccine |

| (1) | “IV” represents intravenous administration of the product. “IH” represents inhaled administration of the product. “IM” represents intramuscular administration of the product. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (2) | Phase I and II are completed in Israel. Phase II/III is completed in Europe. Phase II began in first quarter of 2014 in the United States and completed in the third quarter of 2016. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Phase I and II are completed in Israel. |
|-----|-----------------------------------------|

| (4) | Phase II clinical trials in Israel for newly diagnosed cases of Type-1 diabetes began in first quarter of 2014. |
|-----|-----------------------------------------------------------------------------------------------------------------|

| (5) | Phase II/III clinical trials are completed.  BLA has been submitted in U.S. |
|-----|----------------------------------------------------------------------------------|

| (6) | Orphan drug designation in the United States. |
|-----|-----------------------------------------------|

| (7) | Orphan drug designation in the European Union. |
|-----|------------------------------------------------|

----

----

|  | · | FEV1 (L) rose significantly in AAT treated patients and decreased in placebo treated patients (+15ml for AAT vs. -27ml for placebo, a 42 ml difference, p=0.0268) |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | There was a trend towards better FEV1% predicted (0.54% for AAT vs. -0.62% for placebo, a 1.16% difference, p=0.065) |
|--|--------|----------------------------------------------------------------------------------------------------------------------|

|  | · | FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.62% for AAT vs. -0.87% for placebo, a 1.49% difference, p=0.0074) |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | There was a trend towards reduced FEV1 (L)decline (-12ml for AAT vs. -62ml for placebo, a 50 ml difference, p=0.0956) |
|--|--------|-----------------------------------------------------------------------------------------------------------------------|

|  | · | There was a trend towards a reduced decline in FEV1% predicted (-0.1323% for AAT vs. -1.6205% for placebo, a 1.4882% difference, p=0.1032) |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | FEV1/SVC% rose significantly in AAT treated patients and decreased in placebo treated patients (0.61% for AAT vs. -1.07% for placebo, a 1.68% difference, p=0.013) |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

**.**

----

----

----

----

----

----

----

----

----

----

----

----

----

|  | 1. | preclinical laboratory tests and animal tests; |
|--|----|------------------------------------------------|

|  | 2. | submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may commence; |
|--|----|------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | adequate and well-controlled human clinical trials to establish the safety and efficacy of the product; |
|--|----|---------------------------------------------------------------------------------------------------------|

|  | 4. | submission to the FDA of a BLA or supplemental BLA; |
|--|----|-----------------------------------------------------|

|  | 5. | FDA pre-approval inspection of product manufacturers; and |
|--|----|-----------------------------------------------------------|

|  | 6. | FDA review and approval of the BLA or supplemental BLA. |
|--|----|---------------------------------------------------------|

----

|  | · | Phase I studies may be conducted in a limited number of patients, but are usually conducted in healthy volunteer subjects. The drug is usually tested for safety and, as appropriate, for absorption, metabolism, distribution, excretion, pharmacodynamics and pharmacokinetics. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Phase II usually involves studies in a larger, but still limited, patient population to evaluate preliminarily the efficacy of the drug candidate for specific, targeted indications; to determine dosage tolerance and optimal dosage; and to identify possible short-term adverse effects and safety risks. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Phase III trials are undertaken to further evaluate clinical efficacy of a specific endpoint and to test further for safety within an expanded patient population at geographically dispersed clinical study sites. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

|  | · | increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%; |
|--|--------|-------------------------------------------------------------------------------------------------------------------|

|  | · | requires Medicaid rebates for covered outpatient drugs to be extended to Medicaid managed care organizations; |
|--|--------|---------------------------------------------------------------------------------------------------------------|

|  | · | requires manufacturers of drugs covered under Medicare Part D to participate in a coverage gap discount program, under which they must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible Medicare beneficiaries during their coverage gap period; and |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| Legal Name               |   | Jurisdiction      |
|--------------------------|--------|-------------------|
| Kamada Biopharma Limited |   | England and Wales |
| Kamada Inc.              |   | Delaware          |
| Bio-Kam Ltd.             |   | Israel            |
| Kamada Assets Ltd.       |   | Israel            |

----

----

----

----

----

----

----

|                                                                                                   |   | Year Ended December 31,               |   |
|--------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                   |   | 2016                                  |   |   | 2015 |   |   | 2014 |   |
|                                                                                                   |   | (in thousands, except per share data) |   |
| Revenues from Proprietary Products                   |   | $                                     | 55,958 |   |   | $ | 42,952 |   |   | $ | 44,389 |   |
| Revenues from Distribution                           |   |                                  | 21,536 |   |   |   | 26,954 |   |   |   | 26,676 |   |
| Total revenues                                       |   |                                  | 77,494 |   |   |   | 69,906 |   |   |   | 71,065 |   |
| Cost of revenues from Proprietary Products           |   |                                  | 37,433 |   |   |   | 30,468 |   |   |   | 32,617 |   |
| Cost of revenues from Distribution                   |   |                                  | 18,411 |   |   |   | 23,640 |   |   |   | 23,406 |   |
| Total cost of revenues                               |   |                                  | 55,844 |   |   |   | 54,108 |   |   |   | 56,023 |   |
| Gross profit                                         |   |                                  | 21,650 |   |   |   | 15,798 |   |   |   | 15,042 |   |
| Research and development expenses                    |   |                                  | 16,245 |   |   |   | 16,530 |   |   |   | 16,030 |   |
| Selling and marketing expenses                       |   |                                  | 3,243  |   |   |   | 3,652 |   |   |   | 2,898 |   |
| General and administrative expenses                  |   |                                  | 7,643  |   |   |   | 7,040 |   |   |   | 7,593 |   |
| Operating income (loss)                              |   |                                  | (5,481 | ) |   |   | (11,424 | ) |   |   | (11,479 | ) |
| Financial income                                     |   |                                  | 469    |   |   |   | 463 |   |   |   | 404 |   |
| Income (expense) in respect of currency exchange differences and derivatives instruments               |   |                                  | 127    |   |   |   | 625 |   |   |   | — |   |
|                                                                                                   |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Financial expense                                    |   |                                  | (126   | ) |   |   | (934 | ) |   |   | (2,086 | ) |
| Income (loss) before taxes on income                 |   |                                  | (5,011 | ) |   |   | (11,270 | ) |   |   | (13,161 | ) |
| Taxes on income                                      |   |                                  | 1,722  |   |   |   | - |   |   |   | 52 |   |
| Net income (loss)                                    |   | $                                     | (6,733 | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |

----

|                                                                             |   | Change2016 vs. 2015    |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                             |   | 2016                                  |   |   | 2015   |   |   | Amount |   |   | Percent |   |
|                                                                             |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                        |   |                                  |   |   |   |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                                     | 55,958 |   |   | $      | 42,952 |   |   | $ | 13,006 |   |   |   | 30.2 | % |
| Distribution                   |   | $                                     | 21,536 |   |   | $      | 26,954 |   |   |   | (5,418 | ) |   |   | (20.1 | )% |
| Total                          |   | $                                     | 77,494 |   |   | $      | 69,906 |   |   | $ | 7,588 |   |   |   | 10.8 | % |
| Cost of Revenues:                                                                |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                                     | 37,433 |   |   | $      | 30,468 |   |   | $ | 6,965 |   |   |   | 22.8 | % |
| Distribution                   |   | $                                     | 18,411 |   |   | $      | 23,640 |   |   |   | (5,229 | ) |   |   | (22.1 | )% |
| Total                          |   | $                                     | 55,844 |   |   | $      | 54,108 |   |   | $ | 1,736 |   |   |   | 3.2 | % |
| Gross Profit:                                                                    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                                     | 18,525 |   |   | $      | 12,484 |   |   | $ | 6,041 |   |   |   | 48.3 | % |
| Distribution                   |   | $                                     | 3,125  |   |   | $      | 3,314  |   |   |   | (189 | ) |   |   | (5.7 | )% |
| Total                          |   | $                                     | 21,650 |   |   | $      | 15,798 |   |   | $ | 5,852 |   |   |   | 37.0 | % |

----

|                                                                                                |   | Year ended December 31, |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------|--------|
|                                                                                                |   | 2016                    |   |   | 2015 |   |
|                                                                                                |   | (in thousands)          |   |
| Inhaled AAT                                       |   | $                       | 2,695  |   |   | $ | 4,939 |   |
| AAT for newly diagnosed Type-1 Diabetes           |   |                    | 2,320  |   |   |   | 1,753 |   |
| AAT IV for lung transplant rejection and for GvHD                                                   |   |                    | 194    |   |   |   | - |   |
| Anti Rabies                                                                                         |   |                    | 1,772  |   |   |   | - |   |
| Unallocated salary                                |   |                    | 5,237  |   |   |   | 4,566 |   |
| Unallocated facility cost allocated to research and development                                     |   |                    | 3,244  |   |   |   | 4,569 |   |
| Unallocated other expenses                        |   |                    | 783    |   |   |   | 703 |   |
| Total research and development expenses           |   | $                       | 16,245 |   |   | $ | 16,530 |   |

----

----

|                                                                             |   | Year EndedDecember 31, |   |   | Change2015 vs. 2014 |   |
|----------------------------------------------------------------------------------|--------|------------------------|--------|--------|---------------------|--------|
|                                                                             |   | 2015                   |   |   | 2014                |   |   | Amount |   |   | Percent |   |
|                                                                             |   | (in thousands)         |   |
| Revenues:                                                                        |   |                   |   |   |                |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                      | 42,952 |   |                | $      | 44,389 |   |   | $ | (1.437 | ) |   |   | (3.2 | )% |
| Distribution                   |   |                   | 26,954 |   |                |   | 26,676 |   |   |   | 278 |   |   |   | 1.0 | % |
| Total                          |   | $                      | 69,906 |   |                | $      | 71,065 |   |   | $ | (1,159 | ) |   |   | (1.6 | )% |
| Cost of Revenues:                                                                |   |                   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                      | 30,468 |   |                | $      | 32,617 |   |   | $ | (2,149 | ) |   |   | (6.6 | )% |
| Distribution                   |   |                   | 23,640 |   |                |   | 23,406 |   |   |   | 234 |   |   |   | 1.0 | % |
| Total                          |   | $                      | 54,108 |   |                | $      | 56,023 |   |   | $ | (1,915 | ) |   |   | 3.4 | % |
| Gross Profit:                                                                    |   |                   |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Proprietary Products           |   | $                      | 12,484 |   |                | $      | 11,772 |   |   | $ | 712 |   |   |   | (6.0 | )% |
| Distribution                   |   |                   | 3,314  |   |                |   | 3,270 |   |   |   | 44 |   |   |   | 1.63 | % |
| Total                          |   | $                      | 15,798 |   |                | $      | 15,042 |   |   | $ | 756 |   |   |   | 5.0 | % |

----

|                                                                                                |   |  Year ended December 31, |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                                |   | 2015                          |   |   | 2014 |   |
|                                                                                                |   | (in thousands)                |   |
| Inhaled AAT                                       |   | $                             | 4,939  |   |   | $ | 6,326 |   |
| AAT for newly diagnosed Type-1 Diabetes           |   |                          | 1,753  |   |   |   | 1,959 |   |
| Unallocated salary                                |   |                          | 4,566  |   |   |   | 4,514 |   |
| Unallocated facility cost allocated to research and development                                     |   |                          | 4,569  |   |   |   | 2,409 |   |
| Unallocated other expenses                        |   |                          | 703    |   |   |   | 822 |   |
| Total research and development expenses           |   | $                             | 16,530 |   |   | $ | 16,030 |   |

----

----

|                                                                                           |   | Three Months Ended |   |
|------------------------------------------------------------------------------------------------|--------|--------------------|--------|
|                                                                                           |   | December 31, 2016  |   |   | September 30, 2016 |   |   | June 30, 2016 |   |   | March 31, 2016 |   |   | December 31, 2015 |   |   | September 30, 2015 |   |   | June 30, 2015 |   |   | March 31, 2015 |   |
|                                                                                           |   | (in thousands)     |   |
| Revenues from Proprietary Products                                                             |   | $                  | 17,688 |   |   | $ | 15,044 |   |   | $ | 12,106 |   |   | $ | 11,120 |   |   | $ | 17,525 |   |   | $ | 9,553 |   |   | $ | 12,708 |   |   | $ | 3,173 |   |
| Revenues from Distribution                                                                     |   |               | 6,570  |   |   |   | 4,329 |   |   |   | 6,960 |   |   |   | 3,677 |   |   |   | 8,143 |   |   |   | 6,516 |   |   |   | 6,538 |   |   |   | 5,757 |   |
| Total revenues                               |   |               | 24,258 |   |   |   | 19,373 |   |   |   | 19,066 |   |   |   | 14,797 |   |   |   | 25,668 |   |   |   | 16,069 |   |   |   | 19,246 |   |   |   | 8,930 |   |
| Cost of revenues from Proprietary Products                                                     |   |               | 13,590 |   |   |   | 9,433 |   |   |   | 7,479 |   |   |   | 6,931 |   |   |   | 10,649 |   |   |   | 6,889 |   |   |   | 9,635 |   |   |   | 3,295 |   |
| Cost of revenues from Distribution           |   |               | 5,700  |   |   |   | 3,644 |   |   |   | 5,958 |   |   |   | 3,089 |   |   |   | 6,954 |   |   |   | 5,472 |   |   |   | 5,971 |   |   |   | 5,243 |   |
| Total cost of revenues                                                                         |   |               | 19,290 |   |   |   | 13,097 |   |   |   | 13,437 |   |   |   | 10,020 |   |   |   | 17,603 |   |   |   | 12,361 |   |   |   | 15,606 |   |   |   | 8,538 |   |
| Gross profit                                 |   |               | 4,968  |   |   |   | 6,276 |   |   |   | 5,629 |   |   |   | 4,777 |   |   |   | 8,065 |   |   |   | 3,708 |   |   |   | 3,640 |   |   |   | 392 |   |
| Research and development expenses                                                              |   |               | 4,221  |   |   |   | 4,415 |   |   |   | 3,502 |   |   |   | 4,107 |   |   |   | 4,425 |   |   |   | 5,047 |   |   |   | 3,415 |   |   |   | 3,643 |   |
| Selling and marketing expenses                                                                 |   |               | 686    |   |   |   | 866 |   |   |   | 856 |   |   |   | 835 |   |   |   | 966 |   |   |   | 950 |   |   |   | 944 |   |   |   | 799 |   |
| General and administrative expenses                                                            |   |               | 1,955  |   |   |   | 2,014 |   |   |   | 1,861 |   |   |   | 1,813 |   |   |   | 1,881 |   |   |   | 1,722 |   |   |   | 1,737 |   |   |   | 1,700 |   |
| Operating income (loss)                                                                        |   |               | (1,894 | ) |   |   | (1,019 | ) |   |   | (590 | ) |   |   | (1,978 | ) |   |   | 793 |   |   |   | (4,011 | ) |   |   | (2,456 | ) |   |   | (5,750 | ) |
| Financial income                             |   |               | 81     |   |   |   | 90 |   |   |   | 133 |   |   |   | 165 |   |   |   | 100 |   |   |   | 63 |   |   |   | 114 |   |   |   | 186 |   |
| Income (expense) in respect of currency exchange differences and derivatives, net              |   |               | 259    |   |   |   | (73 | ) |   |   | 90 |   |   |   | (149 | ) |   |   | 205 |   |   |   | (341 | ) |   |   | 248 |   |   |   | 513 |   |
|                                                                                           |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial expense                            |   |               | (20    | ) |   |   | (39 | ) |   |   | (30 | ) |   |   | (37 | ) |   |   | (110 | ) |   |   | (333 | ) |   |   | (248 | ) |   |   | (243 | ) |
| Income (loss) before taxes on income                                                           |   |               | (1,574 | ) |   |   | (1,041 | ) |   |   | (397 | ) |   |   | (1,999 | ) |   |   | 988 |   |   |   | (4,622 | ) |   |   | (2,342 | ) |   |   | (5,294 | ) |
| Taxes on income                              |   |               | 234    |   |   |   | - |   |   |   | 1,188 |   |   |   | 300 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Net income (loss)                            |   | $                  | (1,808 | ) |   | $ | (1,041 | ) |   | $ | (1,585 | ) |   | $ | (2,299 | ) |   |   |   |   |   | $ | (4,622 | ) |   | $ | (2,342 | ) |   | $ | (5,294 | ) |

----

----

|                                                              |   | Total  |   |   | Less than 1 Year |   |   | 1 – 3 Years |   |   | 4-5 Years |   |   | 6 Year and thereafter |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|------------------|--------|--------|-------------------|--------|--------|-----------|--------|--------|-----------------------|--------|
| Purchase commitments                                              |   | $      | 29,617 |   |             |   | -      |              |   |   | -         |   |   |                  | -      |   |   |   | - |   |
| Long-term debt obligations (1)                                    |   |   | 1,903  |   |             |   | 464    |              |   |   | 890       |   |   |                  | 549    |   |   |   | - |   |
| Operating lease obligations                                       |   |   | 6,195  |   |             |   | 782    |              |   |   | 1,437     |   |   |                  | 1,117  |   |   |   | 2,859 |   |
| Total           |   | $      | 37,715 |   |             | $      | 1,246  |              |   |   | 2,327     |   |   |                  | 1,666  |   |   |   | 2,859 |   |

|  (1) | Includes interest payments on our long term loans which bear annually fixed interest rate in the range of 3.15%-3.55%. |
|-----------|------------------------------------------------------------------------------------------------------------------------|

----

----

----

|  | · | Expected Life.  The expected life of the share options is based on historical data, and is not necessarily indicative of the exercise patterns of share options that may occur in the future. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Volatility.  The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices on the TASE is reasonably indicative of expected future trends. |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Risk-free interest rate.  The risk-free interest rate is based on the yields of non-index-linked Bank of Israel treasury bonds with maturities similar to the expected term of the options for each option group. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Expected forfeiture rate.  The post-vesting forfeiture rate is based on the weighted average historical forfeiture rate. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------|

|  | · | Dividend yield and expected dividends.  We have not recently declared or paid any cash dividends on our ordinary shares and do not intend to pay any cash dividends. We have therefore assumed a dividend yield and expected dividends of zero. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Share price on the TASE.  The price of our ordinary shares on the TASE used in determining the grant date fair value of options is based on the price on the grant date. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name                    |   | Age    |   | Position                                                                         |
|-------------------------|--------|--------|--------|----------------------------------------------------------------------------------|
| Executive Officers:     |   |   |   |                                                                             |
| Amir London             |   | 48     |   | Chief Executive Officer                                                          |
| Gil Efron               |   | 51     |   | Deputy Chief Executive Officer and Chief Financial Officer                       |
| Liliana Bar, PhD        |   | 62     |   | Vice President, Research and Development & IP                                |
| Yael Brenner            |   | 54     |   | Vice President, Quality                                                          |
| Shani Dotan             |   | 44     |   | Vice President, Human Resources                                                  |
| Eran Nir                |   | 44     |   | Vice President, Operations                                                       |
| Orit Pinchuk            |   | 52     |   | Vice President, Regulatory Affairs                                               |
| Dr. Naveh Tov           |   | 53     |   | Vice President, Clinical Development and Medical Director for Pulmonary Diseases |
| Ruth Wolfson, PhD       |   | 70     |   | Senior Vice President, Scientific Affaires                                       |
|                    |   |   |   |                                                                             |
| Directors:              |   |   |   |                                                                             |
| Leon Recanati*          |   | 68     |   | Chairman                                                                         |
| David Tsur              |   | 66     |   | Director, Active Deputy Chairman                                                 |
| Dr. Michael Berelowitz* |   | 72     |   | Director                                                                         |
| Avraham Berger*         |   | 65     |   | Director                                                                         |
| Jonathan Hahn           |   | 34     |   | Director                                                                         |
| Dr. Abraham Havron*     |   | 69     |   | Chairman of Audit Committee and Chairman of Compensation Committee               |
| Gwen A. Melincoff *     |   | 64     |   | Director                                                                         |
| Saadia Ozeri*           |   | 47     |   | Director                                                                         |

| * | Independent director under the Nasdaq listing requirements. |
|---|-------------------------------------------------------------|

----

----

----

----

----

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|  | · | an employment relationship; |
|--|--------|-----------------------------|

|  | · | a business or professional relationship, even if not maintained on a regular basis (excluding insignificant relationships); |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------|

|  | · | control; and |
|--|--------|--------------|

|  | · | service as an office holder (excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering). |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | the shares that are voted at the meeting in favor of the election of the external director, excluding abstentions, include at least a majority of the votes of shareholders who are not controlling shareholders and shareholders who do not have a personal interest in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder); or |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the total number of shares held by non-controlling shareholders and shareholders who do not have a personal interest in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder) that are voted against the election of the external director does not exceed 2% of the aggregate voting rights in the company. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company, and provided further that the external director is not an affiliated or competing shareholder, as defined in the Companies Law, or a relative of such a shareholder at the time of the appointment, and is not affiliated with such a shareholder at the time of appointment or within the two years preceding the date of appointment; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | his or her service for each such additional term is recommended by the board of directors and is approved at a shareholders meeting by the same majority required for the initial election of an external director (as described above); or |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | such external director nominates himself or herself for each such additional term and his or her election is approved at a shareholders meeting by the same disinterested majority as required for the election of an external director nominated by a 1% or more shareholder (as described above). |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | oversight of our independent auditors and recommending the engagement, compensation or termination of engagement of our independent auditors to the board of directors or shareholders for their approval, as applicable, in accordance with the requirements of the Companies Law; |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | pre-approval of audit and non-audit services to be provided by the independent auditors; |
|--|--------|------------------------------------------------------------------------------------------|

|  | · | reviewing and recommending to the board of directors approval of our quarterly and annual financial reports; and |
|--|--------|------------------------------------------------------------------------------------------------------------------|

|  | · | overseeing the implementation and amendment of our policies for compliance with Israeli and U.S. securities laws and applicable Nasdaq corporate governance requirements. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the chairman of the board of directors; |
|--|--------|-----------------------------------------|

|  | · | any director employed by the company or who provides services to the company on a regular basis (other than as a member of the board of directors); |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a controlling shareholder or a relative of a controlling shareholder (as defined below); and |
|--|--------|----------------------------------------------------------------------------------------------|

|  | · | any director employed by the company’s controlling shareholder or by an entity controlled by the controlling shareholder, a director who regularly provides services to its controlling shareholder or to an entity controlled by the controlling shareholder, or any director who derives most of his or her income from the controlling shareholder. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|  | · | information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position; and |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------|

|  | · | all other important information pertaining to such action. |
|--|--------|------------------------------------------------------------|

----

|  | · | refrain from any act involving a conflict of interests between the performance of his or her duties to the company and his or her other duties or personal affairs; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | refrain from any activity that is competitive with the business of the company; |
|--|--------|---------------------------------------------------------------------------------|

|  | · | refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------|

|  | · | disclose to the company any information or documents relating to the company’s affairs which the office holder received as a result of his or her position as an office holder. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a transaction other than in the ordinary course of business; |
|--|--------|--------------------------------------------------------------|

|  | · | a transaction that is not on market terms; or |
|--|--------|-----------------------------------------------|

|  | · | a transaction that is likely to have a material impact on the company’s profitability, assets or liabilities. |
|--|--------|---------------------------------------------------------------------------------------------------------------------|

----

|  | · | at least a majority of the shares held by shareholders who have no personal interest in the transaction and who are present and voting at the meeting on the matter are voted in favor of approving the transaction, excluding abstentions; or |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the shares voted against the transaction by shareholders who have no personal interest in the transaction who are present and voting at the meeting represent no more than 2% of the voting rights in the company. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | an amendment to the company’s articles of association; |
|--|--------|--------------------------------------------------------------|

|  | · | an increase in the company’s authorized share capital; |
|--|--------|--------------------------------------------------------------|

|  | · | a merger; and |
|--|--------|---------------|

|  | · | the approval of related party transactions and acts of office holders that require shareholder approval. |
|--|--------|----------------------------------------------------------------------------------------------------------|

|  | · | the securities issued amount to 20% or more of the company’s outstanding voting rights before the issuance; |
|--|--------|-------------------------------------------------------------------------------------------------------------------|

|  | · | some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------|

|  | · | the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s outstanding share capital or voting rights. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|  | · | a majority of the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such matter and who are present and voting at the meeting, are voted in favor of approving the compensation package, excluding abstentions; or |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the total number of shares voted by non-controlling shareholders and shareholders who do not have a personal interest in such matter that are voted against the compensation package does not exceed 2% of the aggregate voting rights in the company. |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Name and Position                                                   |   | Salary         |   |   | Bonus(1) |   |   | Value ofOptionsGranted(2) |   |   | Other(3) |   |   | Total |   |
|---------------------------------------------------------------------|--------|----------------|--------|--------|----------|--------|--------|---------------------------|--------|--------|----------|--------|--------|-------|--------|
|                                                                |   | (in thousands) |   |
| Amir LondonChief Executive Officer                                  |   | $              | 269    |   |     | $      | 140    |                      |   | $      | 97       |   |   | $     | 20     |   |   | $ | 526 |   |
| Gil EfronDeputy Chief Executive Officer and Chief Financial Officer |   | $              | 260    |   |     | $      | 103    |                      |   | $      | 46       |   |   | $     | 20     |   |   | $ | 429 |   |
| David TsurActive Deputy Chairman of the Board of Directors          |   | $              | 169    |   |     | $      | -      |                      |   | $      | 149      |   |   | $     | 28     |   |   | $ | 346 |   |
| Eran SchenkerVice President Medical Director                   |   | $              | 188    |   |     | $      | 36     |                      |   | $      | 25       |   |   | $     | 16     |   |   | $ | 265 |   |
| Liliana BarVice President R&D                                   |   | $              | 186    |   |     | $      | 34     |                      |   | $      | 20       |   |   | $     | 17     |   |   | $ | 257 |   |

| (1) | The annual bonus is subject to the fulfillment of certain targets determined for each year by the board of directors (for our Chief Executive Officer) and by our Chief Executive Officer (for our other executive officers). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The value of options is the expense recorded in our financial statements for the period ended December 31, 2016 with respect to all options granted to such executive officer. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Cost of use of company car. |
|-----|-----------------------------|

|  | · | a majority of the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such matter and who are present and voting at the meeting, are voted in favor of approving the compensation package, excluding abstentions; or |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | a majority of the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such matter and who are present and voting at the meeting are voted in favor of approving the compensation package, excluding abstentions; or |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed 2% of the aggregate voting rights in the company. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | a monetary liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount, or according to criteria, determined by the board of directors as reasonable under the circumstances. Such undertaking shall detail the foreseen events and amount or criteria mentioned above; |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | reasonable litigation expenses, including reasonable attorneys’ fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent (mens rea); and (2) in connection with a monetary sanction; and |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent (mens rea). |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a breach of a duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder; and |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a monetary liability imposed on the office holder in favor of a third party. |
|--|--------|------------------------------------------------------------------------------|

|  | · | a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company; |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a breach of the duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | an act or omission committed with intent to derive illegal personal benefit; or |
|--|--------|---------------------------------------------------------------------------------|

|  | · | a fine or penalty levied against the office holder. |
|--|--------|-----------------------------------------------------|

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----

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| Name                                                                                |   | Number |      |   | Percentage |   |
|-------------------------------------------------------------------------------------|--------|--------|-----------|--------|------------|--------|
| Amir London (1)                   |   |   | 88,344    |   |       |   | * |   |
| Gil Efron (2)                     |   |   | 142,063   |   |       |   | * |   |
| Dr. Liliana Bar (3)               |   |   | 35,000    |   |       |   | * |   |
| Yael Brenner (4)                  |   |   | 14,500    |   |       |   | * |   |
| Shani Dotan (5)                   |   |   | 26,063    |   |       |   | * |   |
| Eran Nir (6)                      |   |   | 4,166     |   |       |   | * |   |
| Orit Pinchuk (7)                  |   |   | 22,000    |   |       |   | * |   |
| Dr. Eran Schenker (8)             |   |   | 40,703    |   |       |   | * |   |
| Dr. Naveh Tov (9)                 |   |   | 9,730     |   |       |   | * |   |
| Dr. Ruth Wolfson (10)             |   |   | 40,071    |   |       |   | * |   |
| Leon Recanati (11)                |   |   | 4,008,123 |   |       |   | 10.99 | % |
| David Tsur (12)                   |   |   | 1,105,662 |   |       |   | 3.01 | % |
| Dr. Michael Berelowitz            |   |   | -         |   |       |   | * |   |
| Avraham Berger                    |   |   | -         |   |       |   | * |   |
| Jonathan Hahn (13)                |   |   | 3,084,252 |   |       |   | 8.46 | % |
| Dr. Abraham Havron (14)           |   |   | 17,992    |   |       |   | * |   |
| Gwen A. Melincoff                                                                   |   |   | -         |   |       |   | - |   |
| Saadia Ozeri (15)                 |   |   | 4,255     |   |       |   | * |   |
| Directors and Executive Officers as a group (18 persons)                            |   |   | 8,642,922 |   |       |   | 23.22 | % |

|  | * | Less than 1% of our ordinary shares. |
|--|---|--------------------------------------|

----

|  | (1) | Includes 6,000 restricted shares and options to purchase 82,344 ordinary shares exercisable within 60 days of the date of this Annual Report, at a weighted average exercise price of NIS 20.34 (or $5.29) per share, which expire between May 15, 2020 and February 28, 2023. Does not include unvested options to purchase 83,157 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | Includes 5,000 restricted shares and options to purchase 137,063 ordinary shares exercisable within 60 days of the date of this Annual Report, at a weighted average exercise price of NIS 25.35 (or $6.59) per share, which expire between June 13, 2018 and February 28, 2023. Does not include unvested options to purchase 23,438 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (3) | Includes options to purchase 35,000 ordinary shares exercisable within 60 days of the date of this Annual Report, at a weighted average exercise price of NIS 37.84 (or $9.84) per share, which expire between February 28, 2019 and February 28, 2023.  Does not include unvested options to purchase 7,500 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (4) | Includes 2,000 restricted shares and options to purchase 12,500 ordinary shares exercisable within 60 days of the date of this Annual Report, at a weighted average exercise price of NIS 17.59 (or $4.58) per share, which expire between October 27, 2021and February 28, 2023. Does not include unvested options to purchase 18,500 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (5) | Includes 2,000 restricted shares and options to purchase 24,063 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 29.67 (or $7.72) per share, which expire between October 27, 2021and February 28, 2023.  Does not include unvested options to purchase 14,438 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (6) | Subject to 4,166 restricted shares.  Does not include unvested options to purchase 12,500 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (7) | Includes 2,000 restricted shares and options to purchase 20,000 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 27.15 (or $7.06) per share, which expire between July 13, 2020 and February 28, 2023.  Does not include unvested options to purchase 13,500 ordinary shares that are not exercisable within 60 days of this Annual Report |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (8) | Includes 2,000 restricted shares and options to purchase 12,500 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 17.59 (or $4.58) per share, which expire between July 13, 2020 and February 28, 2023. Does not include unvested options to purchase 18,500 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (9) | Includes 4,167 restricted shares and includes options to purchase 5,563 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of  NIS 18.18 (or $4.73) per share, which expire between May 14, 2020 and February 28, 2023. Does not include unvested options to purchase 14,938 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (10) | Includes options to purchase 37,344 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 44.47 (or $11.57) per share, which expire between May 14, 2020 and February 28, 2023. Does not include unvested options to purchase 7,657 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|  | (11) | Mr. Recanati holds 677,479 ordinary shares directly and 3,295,644 ordinary shares indirectly through Gov. Gov is wholly-owned by Mr. Recanati, the Chairman of our board of directors, who exercises sole voting and investment power over the shares held by Gov. In addition includes options to purchase 35,000 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 31.30 (or $8.14) per share, which expire between May 14, 2020 and February 28, 2023. Does not include unvested options to purchase 20,000 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (12) | Includes options to purchase 334,375 ordinary shares exercisable within 60 days of the date of this Annual Report, at a weighted average exercise price of NIS 45.10 (or $11.73) per share, which expire between June 8, 2018 and February 28, 2023. Does not include unvested options to purchase 47,500 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (13) | Mr. Jonathan Hahn directly holds 313,841 ordinary shares and options to purchase 18,750 ordinary shares exercisable within 60 days of this Annual Report, at an exercise price of NIS 29.9 (or $7.78) per share, which expire between May 14, 2020 and February 28, 2023. In addition, we were informed that Mr. Hahn holds 25% of the shares of Sinara Financing S.A. (“Sinara”), which holds 100% of the shares of Damar Chemicals Inc. (“Damar”), which directly holds 2,751,661 ordinary shares. We were informed that additional 50% of the shares of Sinara are held by Mr. Hahn’s siblings, who also directly hold an aggregate 576,649 ordinary shares. Does not include unvested options to purchase 11,250 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (14) | Includes 1,742 shares owned by Operon Consultants Ltd., which is wholly-owned by Dr. Havron. Dr. Havron also holds options to purchase 16,250 ordinary shares exercisable within 60 days of the date of this Annual Report, at an exercise price of NIS 33.09 (or $8.61) per share, which expire between May 14, 2020 and February 28, 2023.  Does not include unvested options to purchase 8,750 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (15) | Does not include unvested options to purchase 5,000 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|--|------|------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name                                                                                     |   | Number |      |   | Percentage |   |
|------------------------------------------------------------------------------------------|--------|--------|-----------|--------|------------|--------|
| Hahn Family (1)                        |   |   | 3,660,901 |   |       |   | 10.04 | % |
| Leon Recanati (2)                      |   |   | 4,008,123 |   |       |   | 10.99 | % |
| D.S Apex Holdings group (3)            |   |   | 2,733,731 |   |       |   | 7.50 | % |
| The Phoenix Holding Ltd. (4)           |   |   | 2,978,752 |   |       |   | 8.17 | % |
| Yelin Lepidot (5)                      |   |   | 2,708,910 |   |       |   | 7.43 | % |

| (1) | Mr. Jonathan Hahn directly holds 313,841 ordinary shares and options to purchase 18,750 ordinary shares exercisable within 60 days of this Annual Report, at an exercise price of NIS 29.9 (or $7.78) per share, which expire between May 14, 2020 and February 28, 2023.  In addition, we were informed that Mr. Hahn holds 25% of the shares of Sinara Financing S.A. (“Sinara”), which holds 100% of the shares of Damar Chemicals Inc. (“Damar”), which directly holds 2,751,661 ordinary shares. We were informed that an additional 50% of the shares of Sinara are held by Mr. Hahn’s siblings, who also directly hold an aggregate of 576,649 ordinary shares. Does not include unvested options to purchase 11,250 ordinary shares directly held by Mr. Jonathan Hahn that are not exercisable within 60 days of this Annual Report. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr. Recanati holds 677,479 ordinary shares directly and 3,295,644 ordinary shares indirectly through Gov. Gov is wholly-owned by Mr. Recanati, the Chairman of our board of directors, who exercises sole voting and investment power over the shares held by Gov. In addition, Mr. Recanati holds options to purchase 35,000 ordinary shares exercisable within 60 days of this Annual Report at an exercise price of NIS 31.30 (or $8.14) per share, which expire between May 14, 2020 and February 28, 2023. Does not include unvested options to purchase 20,000 ordinary shares that are not exercisable within 60 days of this Annual Report. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Based solely upon, and qualified in its entirety with reference to, a notice dated January 10, 2017 submitted to our company. To the best of our knowledge, BRM Group Ltd. and Mr. Zvi Stepak are the joint controlling shareholders of DS Apex Holdings Ltd. (“DS Apex”). BRM Group Ltd. is a private investment company beneficially owned by Messrs. Eli Barkat, Nir Barkat, and Yuval Rakavy. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Based solely upon, and qualified in its entirety with reference to, a notice dated January 2, 2017 submitted to our company.  To the best of our knowledge, the shares are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holding Ltd.  The Phoenix Holding Ltd. is a majority-owned subsidiary of Delek Group Ltd.  The majority of Delek Group Ltd.’s outstanding shares and voting rights are owned, directly and indirectly, by Itshak Sharon (Tshuva) through private companies wholly-owned by him, and the remainder is held by the public.  Each of the reporting persons disclaims beneficial ownership of the reported shares in excess of their actual pecuniary interest therein. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Based solely upon, and qualified in its entirety with reference to, Amendment No. 2 to Schedule 13G, filed on February 8, 2017.  According to the Schedule 13G/A, 431,886 ordinary shares are beneficially owned by mutual funds managed by Yelin Lapidot Provident Funds Management Ltd. and 277,024 ordinary shares are beneficially owned by provident funds managed by Yelin Lapidot Mutual Funds Management Ltd, each a wholly-owned subsidiary of Yelin Lapidot Holdings Management Ltd. (“Yelin Lapidot Holdings”).  Messrs. Dov Yelin and Yair Lapidot each own 24.38% of the share capital and 25% of the voting rights of Yelin Lapidot Holdings, and are responsible for the day-to-day management of Yelin Lapidot Holdings.  Each of the reporting persons disclaims beneficial ownership of the reported shares. To our knowledge, based on information provided to us by our transfer agent in the United States, as of February 24, 2017, we had one shareholder of record who was registered with an address in the United States, holding approximately 6,420,031 of our outstanding ordinary shares. Such number is not representative of the portion of our shares held in the United States nor is it representative of the number of beneficial holders residing in the United States, since such ordinary shares were held of record by one U.S. nominee company, CEDE & Co. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                 |   | Price Per Ordinary Share |   |
|--------------------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                                 |   | High                     |   |   | Low |   |
| Annual:                                                                              |   |                     |   |   |   |   |
| 2016                               |   | $                        | 6.29   |   |   | $ | 3.26 |   |
| 2015                               |   | $                        | 5.15   |   |   | $ | 3.09 |   |
| 2014                               |   | $                        | 17.95  |   |   | $ | 3.02 |   |
| 2013 (from May 30, 2013)           |   | $                        | 17.07  |   |   | $ | 9.60 |   |
|                                                                                 |   |                     |   |   |   |   |   |   |
| Quarterly:                                                                           |   |                     |   |   |   |   |   |   |
| Fourth Quarter 2016                |   | $                        | 6.29   |   |   | $ | 5.05 |   |
| Third Quarter 2016                 |   | $                        | 5.34   |   |   | $ | 3.63 |   |
| Second Quarter 2016                |   | $                        | 4.19   |   |   | $ | 3.60 |   |
| First Quarter 2016                 |   | $                        | 4.44   |   |   | $ | 3.26 |   |
| Fourth Quarter 2015                |   | $                        | 4.47   |   |   | $ | 3.24 |   |
| Third Quarter 2015                 |   | $                        | 4.12   |   |   | $ | 3.09 |   |
| Second Quarter 2015                |   | $                        | 5.15   |   |   | $ | 3.75 |   |
| First Quarter 2015                 |   | $                        | 4.83   |   |   | $ | 3.79 |   |
|                                                                                 |   |                     |   |   |   |   |   |   |
| Most Recent Six Months:                                                              |   |                     |   |   |   |   |   |   |
| February 2017 (through February 27, 2017)                                            |   | $                        | 7.25   |   |   | $ | 6.28 |   |
| January 2017                       |   | $                        | 6.25   |   |   | $ | 5.50 |   |
| December 2016                      |   | $                        | 5.90   |   |   | $ | 5.25 |   |
| November 2016                      |   | $                        | 5.85   |   |   | $ | 5.15 |   |
| October 2016                       |   | $                        | 6.29   |   |   | $ | 5.05 |   |
| September 2016                     |   | $                        | 5.26   |   |   | $ | 4.62 |   |

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|                                                                                                  |   | NIS                      |   |   | $                        |   |
|-------------------------------------------------------------------------------------------------------|--------|--------------------------|--------|--------|--------------------------|--------|
|                                                                                                  |   | Price Per Ordinary Share |   |   | Price Per Ordinary Share |   |
|                                                                                                  |   | High                     |   |   | Low                      |   |   | High |   |   | Low |   |
| Annual:                                                                                               |   |                     |   |   |                     |   |   |   |   |   |   |   |
| 2016                                                |   |                     | 23.25  |   |                     |   | 13.10 |   |   |   | 6.32 |   |   |   | 3.56 |   |
| 2015                                                |   |                     | 19.45  |   |                     |   | 12.09 |   |   |   | 4.97 |   |   |   | 3.09 |   |
| 2014                                                |   |                     | 62.00  |   |                     |   | 11.60 |   |   |   | 15.85 |   |   |   | 2.97 |   |
| 2013                                                |   |                     | 60.77  |   |                     |   | 33.80 |   |   |   | 15.54 |   |   |   | 8.64 |   |
| 2012                                                |   |                     | 35.95  |   |                     |   | 19.02 |   |   |   | 9.19 |   |   |   | 4.86 |   |
|                                                                                                  |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Quarterly:                                                                                            |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Fourth Quarter 2016                                 |   |                     | 23.25  |   |                     |   | 19.27 |   |   |   | 6.32 |   |   |   | 5.24 |   |
| Third Quarter 2016                                  |   |                     | 19.79  |   |                     |   | 14.05 |   |   |   | 5.38 |   |   |   | 3.82 |   |
| Second Quarter 2016                                 |   |                     | 16.05  |   |                     |   | 14.01 |   |   |   | 4.36 |   |   |   | 3.81 |   |
| First Quarter 2016                                  |   |                     | 17.70  |   |                     |   | 13.10 |   |   |   | 4.81 |   |   |   | 3.56 |   |
| Fourth Quarter 2015                                 |   |                     | 17.48  |   |                     |   | 13.03 |   |   |   | 4.75 |   |   |   | 3.54 |   |
| Third Quarter 2015                                  |   |                     | 15.77  |   |                     |   | 12.09 |   |   |   | 4.29 |   |   |   | 3.29 |   |
| Second Quarter 2015                                 |   |                     | 19.45  |   |                     |   | 14.11 |   |   |   | 5.29 |   |   |   | 3.84 |   |
| First Quarter 2015                                  |   |                     | 19.33  |   |                     |   | 14.70 |   |   |   | 5.25 |   |   |   | 4.00 |   |
|                                                                                                  |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| Most Recent Six Months:                                                                               |   |                     |   |   |                     |   |   |   |   |   |   |   |   |   |   |   |
| February 2017 (through February 27, 2017)           |   |                     | 27.10  |   |                     |   | 23.55 |   |   |   | 7.37 |   |   |   | 6.40 |   |
| January 2017                                        |   |                     | 23.92  |   |                     |   | 20.89 |   |   |   | 6.50 |   |   |   | 5.68 |   |
| December 2016                                       |   |                     | 22.50  |   |                     |   | 20.35 |   |   |   | 6.12 |   |   |   | 5.53 |   |
| November 2016                                       |   |                     | 22.37  |   |                     |   | 19.66 |   |   |   | 6.08 |   |   |   | 5.34 |   |
| October 2016                                        |   |                     | 23.25  |   |                     |   | 19.27 |   |   |   | 6.32 |   |   |   | 5.24 |   |
| September 2016                                      |   |                     | 19.79  |   |                     |   | 17.34 |   |   |   | 5.38 |   |   |   | 4.71 |   |

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|  | · | banks, certain financial institutions or insurance companies; |
|--|--------|---------------------------------------------------------------|

|  | · | real estate investment trusts, regulated investment companies or grantor trusts; |
|--|--------|----------------------------------------------------------------------------------|

|  | · | dealers or traders in securities, commodities or currencies; |
|--|--------|--------------------------------------------------------------|

|  | · | tax-exempt entities; |
|--|--------|----------------------|

|  | · | certain former citizens or long-term residents of the United States; |
|--|--------|----------------------------------------------------------------------|

|  | · | persons that received our shares as compensation for the performance of services; |
|--|--------|-----------------------------------------------------------------------------------|

|  | · | persons that will hold our shares as part of a “hedging,” “integrated” or “conversion” transaction or as a position in a “straddle” for U.S. federal income tax purposes; |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities, or holders that will hold our shares through such an entity; |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | S-corporations; |
|--|--------|-----------------|

|  | · | persons whose “functional currency” is not the U.S. Dollar; |
|--|--------|-------------------------------------------------------------------------|

|  | · | persons that own directly, indirectly or through attribution 10% or more of the voting power or value of our shares; or |
|--|--------|-------------------------------------------------------------------------------------------------------------------------|

|  | · | persons holding our ordinary shares in connection with a trade or business conducted outside the United States. |
|--|--------|-----------------------------------------------------------------------------------------------------------------|

|  | · | a citizen or resident of the United States; |
|--|--------|---------------------------------------------|

----

|  | · | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any jurisdiction thereof; or |
|--|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | a trust or estate the income of which is subject to United States federal income taxation regardless of its source. |
|--|--------|---------------------------------------------------------------------------------------------------------------------|

----

|  | · | at least 75% of its gross income is “passive income”, or |
|--|--------|----------------------------------------------------------------------|

|  | · | at least 50% of the average quarterly value of its gross assets is attributable to assets that produce passive income or are held for the production of passive income. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----

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| Period                       |   | Change in Average Exchange Rate of the NIS against the U.S. Dollar (%) |       |
|------------------------------|--------|------------------------------------------------------------------------|------------|
| Year ended December 31, 2014 |   |                                                                   | 12.0       |   |
| Year ended December 31, 2015 |   |                                                                   | 8.6        |   |
| Year ended December 31, 2016 |   |                                                                   |  (1.2 | ) |

----

----

|                                                                              |   | Year Ended December 31, |    |
|-----------------------------------------------------------------------------------|--------|-------------------------|---------|
|                                                                              |   | 2016                    |    |   | 2015 |   |
| Audit Fees(1)                   |   | $                       | 190,000 |   |   | $ | 180,000 |   |
| Audit-Related Fees(2)           |   |                    | 15,000  |   |   |   | -- |   |
| Tax Fees(3)                     |   |                    | 33,615  |   |   |   | 5,942 |   |
| Total                           |   | $                       | 238,615 |   |   | $ | 185,942 |   |

| (1) | Audit fees are aggregate fees for audit services for each of the years shown in this table, including fees associated with the annual audit and reviews of our quarterly financial results submitted on Form 6-K, consultations on various accounting issues and audit services provided in connection with other statutory or regulatory filings. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Audit-related fees are for services rendered by our auditors in connection with our shelf registration statement on Form F-3. |
|-----|-------------------------------------------------------------------------------------------------------------------------------|

| (3) | Tax services rendered by our auditors were for tax compliance and for tax consulting associated with international transfer pricing. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

----

|  | · | Shareholder approval requirements for equity issuances and equity-based compensation plans. Under the Companies Law, the adoption of, and material changes to, equity-based compensation plans generally require the approval of the board of directors (for approval of equity based arrangements, see “Item 6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Specified Related Party Transactions under Israeli Law — Disclosure of Personal Interests of a Controlling Shareholder and Approval of Certain Transactions,” “Item 6. Directors, Senior Management and Employees — Compensation of Directors” and “Item 6. Directors, Senior Management and Employees — Compensation of Executive Officers”). Similarly, the approval of the board of directors is generally sufficient for a private placement unless the private placement is deemed a “significant private placement” (see “Item 6. Directors, Senior Management and Employees — Approval of Significant Private Placements”), in which case shareholder approval is also required, or an office holder or a controlling shareholder or their relative has a personal interest in the private placement, in which case, audit committee approval is required prior to the board approval and, for a private placement in which a controlling shareholder or its relative has a personal interest, shareholder approval is also required (see “Item 6. Directors, Senior Management and Employees — Fiduciary Duties and Approval of Specified Related Party Transactions under Israeli Law”). |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Requirement for independent oversight on our director nominations process and to adopt a formal written charter or board resolution addressing the nominations process. In accordance with Israeli law and practice, directors are recommended by our board of directors for election by our shareholders. The Damar Group and Recananti Group have entered into a shareholders’ agreement which includes an agreement about voting in the election of nominees appointed by the other party (see “Item 7. Major Shareholders and Related Party Transactions — Related Party Transactions — Shareholders’ Agreement”). |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Quorum requirement. Under our articles of association and as permitted under the Companies Law, a quorum for any meeting of shareholders shall be the presence of at least two shareholders present in person, by proxy or by a voting instrument, who hold at least 25% of the voting power of our shares instead of 33 1/3% of the issued share capital required under Nasdaq requirements. At an adjourned meeting, any number of shareholders shall constitute a quorum. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | · | Compensation Committee Charter. As permitted under the Companies Law, we do not have a formal charter for our compensation committee. |
|--|--------|---------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                                                                | Page   |
|---------------------------------------------------------------------------------------------------------------------|--------|
| Report of Independent Registered Public Accounting Firm           | F-2    |
|                                                                                                                |   |
| Consolidated Financial Statements as of December 31, 2016:                                                          |   |
| Consolidated Balance Sheets                                       | F-3    |
| Consolidated Statements of Comprehensive Income (Loss)            | F-4    |
| Consolidated Statements of Changes in Equity                      | F-5    |
| Consolidated Statements of Cash Flows                             | F-6    |
| Notes to the Consolidated Financial Statements                    | F-8    |
| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                         |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 1.1         |   | Amended Articles of Association of the Registrant (incorporated by reference to Appendix A2 to the Proxy Statement for the 2016 Annual General Meeting of Shareholders, filed as Exhibit 99.1 to Form 6-K filed with the Securities and Exchange Commission on July 26, 2016).                                                      |
| 1.2         |   | Memorandum of Association of the Registrant, as currently in effect (as translated from Hebrew) (incorporated by reference to Exhibit 3.1 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                                             |
| 2.1         |   | Form of Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.1 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                                                                                                     |
| 4.1†  |   | Exclusive Manufacturing, Supply and Distribution Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.1 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                      |
| 4.2†  |   | Technology License Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter Healthcare S.A. (incorporated by reference to Exhibit 10.2 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                           |
| 4.3†  |   | Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of August 23, 2010, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.3 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                     |
| 4.4†  |   | First Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of May 10, 2011, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.4 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013). |

----

| 4.5†  |   | Second Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement, dated as of June 22, 2011, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.5 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                     |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.6†  |   | Exclusive Distribution Agreement, dated as of August 2, 2012, by and between Kamada Ltd. and Chiesi Farmaceutici S.p.A. (incorporated by reference to Exhibit 10.6 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                                                                                                                                                                                                                                                                                                                                                                          |
| 4.7†  |   | License Agreement, dated as of November 16, 2006, by and between PARI GmbH and Kamada Ltd. (incorporated by reference to Exhibit 10.7 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.8†  |   | Amendment No. 1 to License Agreement, dated as of August 9, 2007, by and between PARI GmbH and Kamada Ltd. (incorporated by reference to Exhibit 10.8 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.9†  |   | Addendum No. 1 to License Agreement, dated as of February 21, 2008, by and between PARI GmbH and Kamada Ltd. (incorporated by reference to Exhibit 10.9 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.10† |   | Supply and Distribution Agreement, dated as of July 18, 2011, by and between Kamada Ltd. and Kedrion S.p.A. (incorporated by reference to Exhibit 10.10 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.11† |   | Distribution Agreement, dated as of August 2, 2011, by and between Kamada Ltd. and TUTEUR S.A.C.I.F.I.A. (incorporated by reference to Exhibit 10.11 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.12        |   | Kamada Ltd. 2011 Israeli Share Option Plan (incorporated by reference to Exhibit 10.13 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.13        |   | English translation of form of Indemnification Agreement with the Registrant’s directors and officers (incorporated by reference to Exhibit 10.15 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 4.14        |   | English translation of amendment to form of Indemnification Agreement with the Registrant’s directors and officers (incorporated by reference to Appendixes A3 and A4 of the Proxy filed as Exhibit 99.1 to Form 6-K filed with the Securities and Exchange Commission on May 22, 2015).                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.15        |   | English summary of two lease agreements dated June 20, 2002, by and between the Israel Lands Administration and Kamada Nehasim (2001) Ltd., as such agreements were amended by lease agreement dated January 30, 2011, by and between the Israel Lands Administration and Kamada Nehasim (2001) Ltd. (incorporated by reference to Exhibit 10.16 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                          |
| 4.16        |   | English summary of a lease agreement dated December 2, 1984, by and between Africa-Israel Holdings Ltd. and RAD Chemicals Ltd., as amended by a supplement to the lease agreement dated October 7, 1999, by and between Africa-Israel Holdings Ltd., RAD Chemicals Ltd. and Kamada Ltd., as further amended by supplements to the lease agreement dated November 27, 2005; December 6, 2005; June 27, 2006; September 29, 2009; May 30, 2011; and August 13, 2012, by and between Africa-Israel Holdings Ltd. and Kamada Ltd. (incorporated by reference to Exhibit 10.17 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013). |
| 4.17† |   | Fraction IV-1 Paste Supply Agreement, dated December 3, 2012, by and between Baxter Healthcare S.A. and Kamada Ltd. (incorporated by reference to Exhibit 10.18 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on April 11, 2013).                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.18        |   | Registration Rights Agreement, dated as of April 14, 2013, by and among Kamada Ltd. and the individuals and entities identified therein (incorporated by reference to Exhibit 10.19 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                                                                                                                                                                                                                                                                                                                                                         |

----

| 4.19        |   | Side Letter Agreement, dated as of March 23, 2011, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.20 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).                                                            |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.20        |   | First Amendment to the Exclusive Manufacturing Supply and Distribution Agreement, dated as of September 6, 2012, between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.21 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013).     |
| 4.21† |   | Second Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of May 14, 2013, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.22 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 15, 2013). |
| 4.22† |   | First Amendment to the Technology License Agreement, dated as of May 14, 2013, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 10.23 of the Registration Statement on Form F-1 filed with the Securities and Exchange Commission on May 28, 2013).                                |
| 4.23† |   | Third Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of September 2014, by and between Kamada Ltd. and Baxter Healthcare Corporation (incorporated by reference to Exhibit 4.25 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2015).       |
| 4.24† |   | First Amendment to the Distribution Agreement dated as of August 19, 2014, by and between Kamada Ltd. and TUTEUR S.A.C.I.F.I.A (incorporated by reference to Exhibit 4.26 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on April 28, 2015).                                               |
| 4.25† |   | Third Amendment to the Amended and Restated Fraction IV-1 Paste Supply Agreement executed on June 19, 2015 by and between Kamada Ltd. and Baxalta US Inc. (incorporated by reference to Exhibit 4.29 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 25, 2016).                      |
| 4.26† |   | Fourth Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of October, 2015, by and between Kamada Ltd. and Baxalta US Inc. (incorporated by reference to Exhibit 4.30 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 25, 2016).                  |
| 4.27† |   | Second Amendment to the Technology License Agreement, dated as of August 25, 2015, by and between Kamada Ltd. and Baxalta GmbH. (incorporated by reference to Exhibit 4.31 of the Annual Report on Form 20-F filed with the Securities and Exchange Commission on February 25, 2016).                                                |
| 4.28† |   | Fifth Amendment to the Exclusive Manufacturing, Supply and Distribution Agreement, dated as of October 5, 2016, by and between Kamada Ltd. and Shire plc.                                                                                                                                                                            |
| 4.29        |   | Amended and Restated Compensation Policy, approved by the shareholders of the Registrant on August 30, 2016 (incorporated by reference to Appendix A2 of the Proxy Statement filed as Exhibit 99.2 to Form 6-K filed with the Securities and Exchange Commission on August 31, 2016).                                                |
| 4.30        |   | Kamada Ltd. 2011 Israeli Share Award Plan (incorporated by reference to Exhibit 4.2 of the FORM S-8 filed with the Securities and Exchange Commission on February 9, 2017).                                                                                                                                                          |
| 4.31† |   | Services Agreement dated as of September 14, 2016 by and between Kamada Ltd. and Yissum Research Development Company of the Hebrew University of Jerusalem Ltd.                                                                                                                                                                      |
| 4.32† |   | 1st Addendum to Supply And Distribution Agreement dated October 15, 2016 between Kamada Ltd., and Kedrion S.p.A.                                                                                                                                                                                                                     |
| 8.1         |   | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                      |
| 12.1        |   | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                                                                                       |
| 12.2        |   | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                                                                                       |
| 13.1        |   | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                       |
| 15.1        |   | Consent of Ernst & Young Global, independent registered public accounting firm.                                                                                                                                                                                                                                                  |

| † | Portions of this exhibit have been omitted pursuant to a request for confidential treatment and the non-public information has been filed separately with the Securities and Exchange Commission. |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | KAMADA LTD. |                                                       |
|--------|-------------|------------------------------------------------------------|
|   |        |                                                       |   |
|   | By:         | /s/ Gil Efron                                              |   |
|   |        | Gil Efron                                                  |   |
|   |        | Deputy Chief Executive Officer and Chief Financial Officer |   |

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|                                                                     | Page       |
|--------------------------------------------------------------------------|------------|
|                                                                     |       |
| Report of Independent Registered Public Accounting Firm                  | F-2        |
|                                                                     |       |
| Consolidated Balance Sheets                                              | F-3        |
|                                                                     |       |
| Consolidated Statements of Profit or Loss and Other Comprehensive Income | F-4        |
|                                                                     |       |
| Consolidated Statements of Changes in Equity                             | F-5        |
|                                                                     |       |
| Consolidated Statements of Cash Flows                                    | F-6 - F-7  |
|                                                                     |       |
| Notes to the Consolidated Financial Statements                           | F-8 - F-62 |

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| Tel-Aviv, Israel        |   | /S/Kost Forer Gabbay & Kasierer  |
|-------------------------|--------|--------------------------------------|
| February  28, 2017 |   | A member of Ernst & Young Global |

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|                                                                                                                                                 |   |   |   |   | As of December 31, |     |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------|----------|
|                                                                                                                                                 |   |   |   |   | 2016               |     |   | 2015 |   |
|                                                                                                                                                 |   | Note   |   |   | In thousands       |     |
| Current Assets                                                                                                                                       |   |   |   |   |               |     |   |   |   |
| Cash and cash equivalents                                                                                                                            |   | 5      |   |   | $                  | 9,968    |   |   | $ | 5,047 |   |
| Short-term investments                                                                                                                               |   | 6      |   |   |               | 18,664   |   |   |   | 23,259 |   |
| Trade receivables, net                                                                                                                               |   | 7      |   |   |               | 19,788   |   |   |   | 23,071 |   |
| Other accounts  receivables                                                                                                                     |   | 8      |   |   |               | 3,063    |   |   |   | 2,881 |   |
| Inventories                                                                                                                                          |   | 9      |   |   |               | 25,594   |   |   |   | 26,336 |   |
|                                                                                                                                                 |   |   |   |   |               | 77,077   |   |   |   | 80,594 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
| Property, plant and equipment, net                                                                                                                   |   | 10     |   |   |               | 22,249   |   |   |   | 21,309 |   |
| Other long term assets                                                                                                                               |   | 11     |   |   |               | 370      |   |   |   | 89 |   |
|                                                                                                                                                 |   |   |   |   |               | 22,619   |   |   |   | 21,398 |   |
|                                                                                                                                                 |   |   |   |   |               | 99,696   |   |   |   | 101,992 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
|   Current Liabilities                                                                                                                           |   |   |   |   |               |     |   |   |   |   |   |
| Current maturities of loans and capital leases                                                                                                       |   | 12,15  |   |   |               | 412      |   |   |   | 37 |   |
| Trade payables                                                                                                                                       |   | 13     |   |   |               | 16,277   |   |   |   | 16,917 |   |
| Other accounts payables                                                                                                                              |   | 14     |   |   |               | 5,614    |   |   |   | 4,064 |   |
| Deferred revenues                                                                                                                                    |   | 18a,b  |   |   |               | 4,903    |   |   |   | 1,921 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |               | 27,206   |   |   |   | 22,939 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
| Non-Current Liabilities                                                                                                                              |   |   |   |   |               |     |   |   |   |   |   |
| Loans and capital leases                                                                                                                             |   | 15     |   |   |               | 1,364    |   |   |   | 151 |   |
| Employee benefit liabilities, net                                                                                                                    |   | 17     |   |   |               | 722      |   |   |   | 787 |   |
| Deferred revenues                                                                                                                                    |   | 18a,b  |   |   |               | 3,661    |   |   |   | 5,608 |   |
|                                                                                                                                                 |   |   |   |   |               | 5,747    |   |   |   | 6,546 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
| Shareholder's Equity                                                                                                                                 |   | 20     |   |   |               |     |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
| Ordinary shares of NIS 1 par value:                                                                                                                  |   |   |   |   |               |     |   |   |   |   |   |
| Authorized - 60,000,000 ordinary shares; Issued and outstanding – 36,447,175 and 36,418,741 shares at December 31, 2016 and 2015, respectively |   |   |   |   |               | 9,320    |   |   |   | 9,320 |   |
| Additional paid in capital                                                                                                                           |   |   |   |   |               | 162,671  |   |   |   | 162,238 |   |
| Capital reserve due to translation to presentation currency                                                                                          |   |   |   |   |               | (3,490   | ) |   |   | (3,490 | ) |
| Capital reserve from hedges                                                                                                                          |   |   |   |   |               | (27      | ) |   |   | (1 | ) |
| Capital reserve from available for sale  financial assets                                                                                       |   |   |   |   |               | 19       |   |   |   | 73 |   |
| Capital reserve from share-based payments                                                                                                            |   |   |   |   |               | 9,795    |   |   |   | 9,157 |   |
| Capital reserve from employee benefits                                                                                                               |   |   |   |   |               | (81      | ) |   |   | (59 | ) |
| Accumulated deficit                                                                                                                                  |   |   |   |   |               | (111,464 | ) |   |   | (104,731 | ) |
|                                                                                                                                                 |   |   |   |   |               | 66,743   |   |   |   | 72,507 |   |
|                                                                                                                                                 |   |   |   |   |               |     |   |   |   |   |   |
|                                                                                                                                                 |   |   |   |   | $                  | 99,696   |   |   | $ | 101,992 |   |

----

----

|                                                                                 |   |   |   |   | For the Year EndedDecember 31,                    |   |
|--------------------------------------------------------------------------------------|--------|--------|--------|--------|---------------------------------------------------|--------|
|                                                                                 |   |   |   |   | 2016                                              |   |   | 2015 |   |   | 2014 |   |
|                                                                                 |   | Note   |   |   | In thousands, except for share and per share data |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |
| Revenues from proprietary products                                                   |   |   |   |   | $                                                 | 55,958 |   |   | $ | 42,952 |   |   | $ | 44,389 |   |
| Revenues from distribution                                                           |   |   |   |   |                                              | 21,536 |   |   |   | 26,954 |   |   |   | 26,676 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                                       |   | 23a    |   |   |                                              | 77,494 |   |   |   | 69,906 |   |   |   | 71,065 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues from proprietary products                                           |   |   |   |   |                                              | 37,433 |   |   |   | 30,468 |   |   |   | 32,617 |   |
| Cost of revenues from distribution                                                   |   |   |   |   |                                              | 18,411 |   |   |   | 23,640 |   |   |   | 23,406 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Total cost of revenues                                                               |   | 23b    |   |   |                                              | 55,844 |   |   |   | 54,108 |   |   |   | 56,023 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                         |   |   |   |   |                                              | 21,650 |   |   |   | 15,798 |   |   |   | 15,042 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Research and development expenses                                                    |   | 23c    |   |   |                                              | 16,245 |   |   |   | 16,530 |   |   |   | 16,030 |   |
| Selling and marketing expenses                                                       |   | 23d    |   |   |                                              | 3,243  |   |   |   | 3,652 |   |   |   | 2,898 |   |
| General and administrative expenses                                                  |   | 23e    |   |   |                                              | 7,643  |   |   |   | 7,040 |   |   |   | 7,593 |   |
| Operating loss                                                                       |   |   |   |   |                                              | (5,481 | ) |   |   | (11,424 | ) |   |   | (11,479 | ) |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Financial income                                                                     |   | 23f    |   |   |                                              | 469    |   |   |   | 463 |   |   |   | 404 |   |
| Expense in respect of currency exchange differences and derivatives instruments, net |   |   |   |   |                                              | 127    |   |   |   | 625 |   |   |   | - |   |
| Financial expense                                                                    |   | 23f    |   |   |                                              | (126   | ) |   |   | (934 | ) |   |   | (2,086 | ) |
| Loss before  taxes on income                                                    |   |   |   |   |                                              | (5,011 | ) |   |   | (11,270 | ) |   |   | (13,161 | ) |
| Taxes on income                                                                      |   |   |   |   |                                              | 1,722  |   |   |   | - |   |   |   | 52 |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                             |   |   |   |   |                                              | (6,733 | ) |   |   | (11,270 | ) |   |   | (13,213 | ) |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Other Comprehensive Income (loss):                                                   |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Items that may be reclassified to profit or loss in subsequent periods:              |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Gain (loss) on available for sale financial assets                                   |   |   |   |   |                                              | (54    | ) |   |   | 63 |   |   |   | 37 |   |
| Gain (loss) on cash flow hedges                                                      |   |   |   |   |                                              | 47     |   |   |   | 71 |   |   |   | (162 | ) |
| Net amounts transferred to the statement of profit or loss for cash flow hedges      |   |   |   |   |                                              | (73    | ) |   |   | 44 |   |   |   | (110 | ) |
| Items that will not be reclassified to profit or loss in subsequent periods:         |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Actuarial gain (loss) from defined benefit plans                                     |   |   |   |   |                                              | (22    | ) |   |   | 22 |   |   |   | 48 |   |
| Total comprehensive loss                                                             |   |   |   |   | $                                                 | (6,835 | ) |   | $ | (11,070 | ) |   | $ | (13,400 | ) |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Loss per share attributable to equity holders of the Company:                        |   | 24     |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
|                                                                                 |   |   |   |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Basic loss per share                                                                 |   |   |   |   | $                                                 | (0.18  | ) |   | $ | (0.31 | ) |   | $ | (0.37 | ) |
| Diluted loss per share                                                               |   |   |   |   | $                                                 | (0.18  | ) |   | $ | (0.31 | ) |   | $ | (0.37 | ) |

----

----

|                                                      |   | Share capital |   |   | Sharepremium |   |    | Conversionoption inconvertibledebentures |   |   | CapitalreservefromAvailablefor salefinancialassets |   |   | Capital reserve due to translation topresentationcurrency |   |   | Capitalreservefromhedges |   |   | Capital reserve from share-basedpayments |   |   | Capital reserve from employeebenefits |   |   | Accumulated deficit |   |   | Total equity |   |
|-----------------------------------------------------------|--------|---------------|--------|--------|--------------|--------|---------|------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|-----------------------------------------------------------|--------|--------|--------------------------|--------|--------|------------------------------------------|--------|--------|---------------------------------------|--------|--------|---------------------|--------|--------|--------------|--------|
|                                                      |   | In thousands  |   |
| Balance as of December 31, 2013                           |   | $             | 9,201  |   |         | $      | 157,100 |                                     |   | $      | 2,218                                              |   |   | $                                                         | (27    | )      |                     | $      | (3,490 | )                                        |   | $      | 156                                   |   |   | $                   | 5,189  |   |         | $      | (129 | ) |   | $ | (80,248 | ) |   | $ | 89,970 |   |
| Net income                                                |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | (13,213 | ) |   |   | (13,213 | ) |
| Other comprehensive income (loss)                         |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | 37     |   |                     |   | -      |                                     |   |   | (272                                  | )      |   |                | -      |   |         |   | 48 |   |   |   | - |   |   |   | (187 | ) |
| Total comprehensive income (loss)                         |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | 37     |   |                     |   | -      |                                     |   |   | (272                                  | )      |   |                | -      |   |         |   | 48 |   |   |   | (13,213 | ) |   |   | (13,400 | ) |
| Exercise of options into shares                           |   |          | 7      |   |         |   | 238     |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | (157   | )      |         |   | - |   |   |   | - |   |   |   | 88 |   |
| Conversion of convertible debentures into shares          |   |          | *      |   |         |   | 9       |                                     |   |   | (1                                                 | )      |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | - |   |   |   | 8 |   |
| Expiration of conversion option on convertible debentures |   |          | -      |   |         |   | 1,070   |                                     |   |   | (1,070                                             | )      |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | - |   |   |   | - |   |
| Cost of share-based payment                               |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | 3,751  |   |         |   | - |   |   |   | - |   |   |   | 3,751 |   |
| Balance as of December 31, 2014                           |   | $             | 9,208  |   |         | $      | 158,417 |                                     |   | $      | 1,147                                              |   |   | $                                                         | 10     |   |                     | $      | (3,490 | )                                        |   | $      | (116                                  | )      |   | $                   | 8,783  |   |         | $      | (81 | ) |   | $ | (93,461 | ) |   | $ | 80,417 |   |
| Net loss                                                  |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | (11,270 | ) |   |   | (11,270 | ) |
| Other comprehensive income                                |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | 63     |   |                     |   | -      |                                     |   |   | 115                                   |   |   |                | -      |   |         |   | 22 |   |   |   | - |   |   |   | 200 |   |
| Total comprehensive income (loss)                         |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | 63     |   |                     |   | -      |                                     |   |   | 115                                   |   |   |                | -      |   |         |   | 22 |   |   |   | (11,270 | ) |   |   | (11,070 | ) |
| Exercise of options into shares                           |   |          | 112    |   |         |   | 2,674   |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | (1,533 | )      |         |   | - |   |   |   | - |   |   |   | 1,253 |   |
| Expiration of conversion option on convertible debentures |   |          | -      |   |         |   | 1,147   |                                     |   |   | (1,147                                             | )      |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | - |   |   |   | - |   |
| Cost of share-based payment                               |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | 1,907  |   |         |   | - |   |   |   | - |   |   |   | 1,907 |   |
| Balance as of December 31, 2015                           |   | $             | 9,320  |   |         | $      | 162,238 |                                     |   | $      | -                                                  |   |   | $                                                         | 73     |   |                     | $      | (3,490 | )                                        |   | $      | (1                                    | )      |   | $                   | 9,157  |   |         | $      | (59 | ) |   | $ | (104,731 | ) |   | $ | 72,507 |   |
| Net loss                                                  |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | -      |   |         |   | - |   |   |   | (6,733 | ) |   |   | (6,733 | ) |
| Other comprehensive loss                                  |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | (54    | )      |                     |   | -      |                                     |   |   | (26                                   | )      |   |                | -      |   |         |   | (22 | ) |   |   | - |   |   |   | (102 | ) |
| Total comprehensive  loss                            |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | (54    | )      |                     |   | -      |                                     |   |   | (26                                   | )      |   |                | -      |   |         |   | (22 | ) |   |   | (6,733 | ) |   |   | (6,835 | ) |
| Exercise of options into shares                           |   |          | *      |   |         |   | 433     |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | (433   | )      |         |   | - |   |   |   | - |   |   |   | * |   |
| Cost of share-based payment                               |   |          | -      |   |         |   | -       |                                     |   |   | -                                                  |   |   |                                                      | -      |   |                     |   | -      |                                     |   |   | -                                     |   |   |                | 1,071  |   |         |   | - |   |   |   | - |   |   |   | 1,071 |   |
| Balance as of December 31, 2016                           |   | $             | 9,320  |   |         | $      | 162,671 |                                     |   | $      | -                                                  |   |   | $                                                         | 19     |   |                     | $      | (3,490 | )                                        |   | $      | (27                                   | )      |   | $                   | 9,795  |   |         | $      | (81 | ) |   | $ | (111,464 | ) |   | $ | 66,743 |   |

----

----

|                                                                                      |   |   |   |   | For the Year EndedDecember 31, |   |
|-------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|
|                                                                                      |   |   |   |   | 2016                           |   |   | 2015 |   |   | 2014 |   |
|                                                                                      |   | Note   |   |   | In thousands                   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |
| Cash Flows from Operating Activities                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |
| Net loss                                                                                  |   |   |   |   | $                              | (6,733 | ) |   | $ | (11,270 | ) |   | $ | (13,213 | ) |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Adjustments to the profit or loss items:                                                  |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                             |   | 10, 11 |   |   |                           | 3,501  |   |   |   | 3,227 |   |   |   | 2,788 |   |
| Financial expenses (income), net                                                          |   |   |   |   |                           | (470   | ) |   |   | (154 | ) |   |   | 1,682 |   |
| Cost of share-based payment                                                               |   | 21     |   |   |                           | 1,071  |   |   |   | 1,907 |   |   |   | 3,751 |   |
| Income tax expense                                                                        |   |   |   |   |                           | 1,722  |   |   |   | - |   |   |   | 52 |   |
| Gain from sale of property and equipment                                                  |   |   |   |   |                           | (18    | ) |   |   | - |   |   |   | (2 | ) |
| Change in employee benefit liabilities, net                                               |   |   |   |   |                           | (87    | ) |   |   | 87 |   |   |   | (57 | ) |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           | 5,719  |   |   |   | 5,067 |   |   |   | 8,214 |   |
| Changes in asset and liability items:                                                     |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Decrease (increase) in trade receivables, net                                             |   |   |   |   |                           | 3,489  |   |   |   | (5,604 | ) |   |   | (869 | ) |
| Decrease (increase)  in other accounts receivables                                   |   |   |   |   |                           | 211    |   |   |   | 118 |   |   |   | (50 | ) |
| Decrease (increase) in inventories                                                        |   |   |   |   |                           | 742    |   |   |   | (913 | ) |   |   | (3,490 | ) |
| Decrease (increase)  in deferred expenses                                       |   |   |   |   |                           | (433   | ) |   |   | (565 | ) |   |   | 1,209 |   |
| Increase (decrease) in trade payables                                                     |   |   |   |   |                           | (2,650 | ) |   |   | 887 |   |   |   | 3,261 |   |
| Increase (decrease) in other accounts payables                                            |   |   |   |   |                           | 1,520  |   |   |   | 94 |   |   |   | (344 | ) |
| Increase (decrease)  in deferred revenues                                            |   |   |   |   |                           | 1,035  |   |   |   | (2,405 | ) |   |   | (4,026 | ) |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           | 3,914  |   |   |   | (8,388 | ) |   |   | (4,309 | ) |
| Cash received (paid) during the year for:                                                 |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Interest paid                                                                             |   |   |   |   |                           | (60    | ) |   |   | (484 | ) |   |   | (1,210 | ) |
| Interest received                                                                         |   |   |   |   |                           | 842    |   |   |   | 1,143 |   |   |   | 758 |   |
| Taxes paid                                                                                |   |   |   |   |                           | (1,785 | ) |   |   | (47 | ) |   |   | (158 | ) |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |                           | (1,003 | ) |   |   | 612 |   |   |   | (610 | ) |
|                                                                                      |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) operating activities                                       |   |   |   |   | $                              | 1,897  |   |   | $ | (13,979 | ) |   | $ | (9,918 | ) |

----

----

|                                                              |   |   |   |   | For the Year EndedDecember 31, |   |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------|--------|
|                                                              |   |   |   |   | 2016                           |   |   | 2015 |   |   | 2014 |   |
|                                                              |   | Note   |   |   | In thousands                   |   |
| Cash Flows from Investing Activities                              |   |   |   |   |                           |   |   |   |   |   |   |   |
| Proceeds from sale of )investment in) short term investments, net |   |   |   |   | $                              | 4,236  |   |   | $ | 13,971 |   |   | $ | (23,746 | ) |
| Purchase of property and equipment and intangible assets          |   | 10     |   |   |                           | (2,641 | ) |   |   | (2,718 | ) |   |   | (3,076 | ) |
| Proceeds from sale of property and equipment                      |   |   |   |   |                           | 42     |   |   |   | - |   |   |   | 3 |   |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) investing activities               |   |   |   |   |                           | 1,637  |   |   |   | 11,253 |   |   |   | (26,819 | ) |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Proceeds from exercise of warrants and options                    |   |   |   |   |                           | *      |   |   |   | 1,254 |   |   |   | 88 |   |
| Receipt of long-term loans                                        |   |   |   |   |                           | 1,701  |   |   |   | 197 |   |   |   | - |   |
| Repayment of long-term loans                                      |   |   |   |   |                           | (211   | ) |   |   | (9 | ) |   |   | - |   |
| Repayment of convertible debentures                               |   |   |   |   |                           | -      |   |   |   | (7,797 | ) |   |   | (7,728 | ) |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by (used in) financing activities               |   |   |   |   |                           | 1,490  |   |   |   | (6,355 | ) |   |   | (7,640 | ) |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Exchange differences on balances of cash and cash equivalent      |   |   |   |   |                           | (103   | ) |   |   | (418 | ) |   |   | (187 | ) |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in cash and cash equivalents                  |   |   |   |   |                           | 4,921  |   |   |   | (9,499 | ) |   |   | (44,564 | ) |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at the beginning of the year            |   |   |   |   |                           | 5,047  |   |   |   | 14,546 |   |   |   | 59,110 |   |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at the end of the year                  |   |   |   |   | $                              | 9,968  |   |   | $ | 5,047 |   |   | $ | 14,546 |   |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Significant non-cash transactions                                 |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Purchase of property and equipment through capital lease          |   |   |   |   | $                              | 132    |   |   | $ | - |   |   | $ | - |   |
| Purchase of property and equipment                                |   |   |   |   | $                              | 1,968  |   |   | $ | - |   |   | $ | - |   |
| Exercise of convertible debentures into shares                    |   |   |   |   | $                              | -      |   |   | $ | - |   |   | $ | 7 |   |
|                                                              |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| *Represent an amount of less than 1 thousands                     |   |   |   |   |                           |   |   |   |   |   |   |   |   |   |   |

----

----

| NOTE 1: - | GENERAL |
|-----------|---------|

|  | a. | General description of the Company and its activity |
|--|----|-----------------------------------------------------|

| Proprietary Products | Development, manufacture and sale of plasma-derived therapeutics products.                                                     |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------|
| Distribution         | Distribution of drugs in Israel manufacture by other companies, most of which are produced from plasma or its derivatives products. |

|  | b. | The Company has three fully-owned subsidiaries – Kamada Inc, Kamada Biopharma Limited and Bio-Kam Ltd which are not active. In addition the Company owns 74% of Kamada Assets Ltd. ("Kamada Assets"). |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | Definitions |
|--|----|-------------|

| The Company     | -             | Kamada Ltd.                                                                                                                                                     |
|-----------------|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |          |                                                                                                                                                            |
| The Group       | -             | The Company and its subsidiaries.                                                                                                                               |
|            |          |                                                                                                                                                            |
| Subsidiary      |  -  | A company which the Company has a control over (as defined in IFRS 10) and whose financial statements are consolidated with the Company's Financial Statements. |
|            |          |                                                                                                                                                            |
| Related parties | -             | As defined in IAS 24.                                                                                                                                           |
|            |          |                                                                                                                                                            |
| USD/$ NIS  | - -      | U.S. dollar. New Israeli Shekel                                                                                                                            |

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES |
|-----------|---------------------------------|

|  | a. | Basis of presentation of financial statements |
|--|----|-----------------------------------------------|

|  | 1. | These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Board. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | Measurement basis: |
|--|----|--------------------|

|  | b. | The Company's operating cycle is one year. |
|--|----|--------------------------------------------|

|  | c. | The consolidated financial statements comprise the financial statements of companies that are controlled by the Company (subsidiaries). Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The consolidation of the financial statements commences on the date on which control is obtained and ends when such control ceases. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | d. | Functional currency, presentation currency and foreign currency |
|--|----|-----------------------------------------------------------------|

|  | 1. | Functional currency and presentation currency |
|--|----|-----------------------------------------------|

|  | 2. | Transactions, assets and liabilities in foreign currency |
|--|----|----------------------------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | 3. | Index-linked monetary items |
|--|----|-----------------------------|

|  | e. | Cash equivalents |
|--|----|------------------|

|  | f. | Short-term investments: |
|--|----|-------------------------|

|  | g. | Allowance for doubtful accounts |
|--|----|---------------------------------|

|  | h. | Inventory |
|--|----|-----------|

| Raw materials                | -      | At cost of purchase using the first-in, first-out method.                                                                                                      |
|------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                         |   |                                                                                                                                                           |
| Work in process              | -      | At the average costs for the quarter of manufacturing including materials, labor and other direct and indirect manufacturing costs on the basis of each batch. |
|                         |   |                                                                                                                                                           |
| Finished products            | -      | At the average costs for quarter of manufacturing including materials, labor and other direct and indirect manufacturing costs on the basis of each batch.     |
|                         |   |                                                                                                                                                           |
| Purchased products and goods | -      | On a "first in – first out" basis.                                                                                                                       |

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | i. | Revenue recognition |
|--|----|---------------------|

|  | - | Revenues from the sale of goods are recognized when all the significant risks and rewards of ownership of the goods have passed to the buyer and the seller no longer retains continuing managerial involvement. The delivery date is usually the date on which ownership passes. |
|--|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | - | Agreements with multiple elements provide for varying consideration terms, such as upfront payments and milestone payments. Revenues from such agreements that do not contain a general right of return and that are composed of multiple elements such as distribution exclusivity, license and services are allocated to the different elements and  are recognized in respect of each element separately. An element constitutes a separate accounting unit if and only if it has a separate value to the customer. Revenue from the different element is recognized when the criteria for revenue recognition have been met and only to the extent of the consideration that is not contingent upon completion or performance of future services in the contract. |
|--|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | - | Revenue from milestone events stipulated in the agreements is recognized upon the occurrence of a substantive element specified in the agreement or as a measure of substantive progress towards completion. |
|--|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | j. | Taxes on income |
|--|----|-----------------|

|  | 1. | Current taxes: |
|--|----|----------------|

|  | 2. | Deferred taxes: |
|--|----|-----------------|

|  | k. | Leases |
|--|----|--------|

|  | 1. | Finance lease |
|--|----|---------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | 2. | Operating lease |
|--|----|-----------------|

|  | l. | Property, plant and equipment |
|--|----|-------------------------------|

|                                      |   | %      |   | Mainly % |
|-------------------------------------------|--------|--------|--------|---------------|
|                                      |   |   |   |          |
| Buildings                                 |   | 2.5-4  |   | 4             |
| Machinery and equipment                   |   | 10-20  |   | 15            |
| Vehicles                                  |   | 15     |   | 15            |
| Computers, equipment and office furniture |   | 6-33   |   | 33            |
| Leasehold improvements                    |   | (*)    |   | 18            |

|  | m. | Intangible assets |
|--|----|-------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | n. | Impairment of non-financial assets |
|--|----|------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | o. | Financial instruments |
|--|----|-----------------------|

|  | 1. | Financial assets |
|--|----|------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | 2. | Financial liabilities |
|--|----|-----------------------|

|  | b. | Financial liabilities measured at fair value through profit or loss |
|--|----|---------------------------------------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | 3. | Fair value |
|--|----|------------|

|  | - | Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. |
|--|---|---------------------------------------------------------------------------------------------|

|  | - | Level 2 - inputs other than quoted prices included within Level 1 that are observable either directly or indirectly. |
|--|---|----------------------------------------------------------------------------------------------------------------------|

|  | - | Level 3 - inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data). |
|--|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | p. | Derivative financial instruments designated as hedges |
|--|----|-------------------------------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | q. | Provisions |
|--|----|------------|

|  | r. | Employee benefit liabilities |
|--|----|------------------------------|

|  | 1. | Short-term employee benefits |
|--|----|------------------------------|

|  | 2. | Post-employment benefits |
|--|----|--------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | s. | Share-based payment transactions |
|--|----|----------------------------------|

----

----

| NOTE 2: - | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
|-----------|-----------------------------------------|

|  | t. | Income (loss) per Share |
|--|----|-------------------------|

| NOTE 3: - | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS |
|-----------|-----------------------------------------------------------------------------------------------------------------|

|  | - | Legal claims |
|--|---|--------------|

|  | - | Pensions and other post-employment benefits |
|--|---|---------------------------------------------|

----

----

| NOTE 3: - | SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS(CONT.) |
|-----------|------------------------------------------------------------------------------------------------------------------------|

|  | - | Determining the fair value of share-based payment transactions |
|--|---|----------------------------------------------------------------|

|  | - | Provisions for clinical trial and related expenses |
|--|---|----------------------------------------------------|

|  | - | Capitalization of Inventory costs |
|--|---|-----------------------------------|

| NOTE 4: - |  DISCLUSURE OF NEW IFRS IN THE PERIOD. |
|-----------|---------------------------------------------|

|  | a. | IFRS 15 – Revenues from contracts with customers |
|--|----|--------------------------------------------------------|

----

----

| NOTE 4: - |  DISCLUSURE OF NEW IFRS IN THE PERIOD  (CONT.) |
|-----------|----------------------------------------------------------|

----

----

| NOTE 4: - |  DISCLUSURE OF NEW IFRS IN THE PERIOD  (CONT.) |
|-----------|----------------------------------------------------------|

|  | b. | IFRS 9 - Financial Instruments |
|--|----|--------------------------------|

|  | c. | IFRS 16 – Leases |
|--|----|------------------------|

|  | d. | IAS 12 – Taxes on income amendments |
|--|----|-------------------------------------------|

|  | a. | Negative differences between the book value and tax value of an asset that is being measured at its fair value, create deductible temporary differences regardless the way that the asset is eventually settled. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b. | Future expected taxable income estimates may include the settlement of certain assets at amount that is higher than such asset's book value, if there is sufficient evidence that the settlement is expectable. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | In order to evaluate whether an entity will have sufficient taxable income in the future, a comparison must be made between deductible temporary differences and to taxable income that excludes tax deductions created as a result of reversal of those deductible temporary differences. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 4: - |  DISCLUSURE OF NEW IFRS IN THE PERIOD  (CONT.) |
|-----------|----------------------------------------------------------|

|  | d. | As part of the analysis of utilizing deductible temporary differences against taxable income, tax laws and regulation should be considered if they limit the taxable income source for that deduction. In the event that tax laws and regulation limit the utilization of carry forward losses against income from specific source, the evaluation of the deductible temporary difference will be performed together with other deductible temporary differences from the applicable source. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | e. | IAS 7 – Cash flow amendments |
|--|----|------------------------------------|

| NOTE 5: - |  CASH AND CASH EQUIVALENTS |
|----------------|---------------------------------|

|                                       |   | December 31, |   |
|--------------------------------------------|--------|--------------|--------|
|                                       |   | 2016         |   |   | 2015 |   |
|                                       |   | In thousands |   |
|                                       |   |         |   |   |   |   |
| Cash and deposits for immediate withdrawal |   | $            | 7,891  |   |   | $ | 4,957 |   |
| Cash equivalents in USD deposits (1)       |   |         | 2,001  |   |   |   | - |   |
| Cash equivalents in NIS deposits (2)       |   |         | 76     |   |   |   | 90 |   |
|                                       |   |         |   |   |   |   |   |   |
|                                       |   | $            | 9,968  |   |   | $ | 5,047 |   |

|  | (1) | The deposits as of December 31, 2016 bear interest of 1.12% per year. |
|--|-----|-----------------------------------------------------------------------|

|  | (2) | The deposits as of December 31, 2016 and 2015 bear interest of 0.01% per year. |
|--|-----|--------------------------------------------------------------------------------|

| NOTE 6: - |  SHORT-TERM INVESTMENTS |
|-----------|------------------------------|

|                                                                         |   | December 31, |   |
|------------------------------------------------------------------------------|--------|--------------|--------|
|                                                                         |   | 2016         |   |   | 2015 |   |
|                                                                         |   | In thousands |   |
|                                                                         |   |         |   |   |   |   |
| Marketable securities (equity and debt) at fair value through profit or loss |   | $            | 1,490  |   |   | $ | 1,425 |   |
| Bank deposits in USD (1)                                                     |   |         | 8,010  |   |   |   | - |   |
| Available for sale debt securities                                           |   |         | 9,164  |   |   |   | 21,834 |   |
|                                                                         |   |         |   |   |   |   |   |   |
|                                                                         |   | $            | 18,664 |   |   | $ | 23,259 |   |

|  | (1) | The deposits as of December 31, 2016 bear interest of 1.69%- 1.84% per year. |
|--|-----|------------------------------------------------------------------------------|

----

----

| NOTE 7: - | TRADE RECEIVABLES, NET |
|-----------|------------------------|

|                                     |   | December 31, |   |
|------------------------------------------|--------|--------------|--------|
|                                     |   | 2016         |   |   | 2015 |   |
|                                     |   | In thousands |   |
| Open accounts:                           |   |         |   |   |   |   |
| In NIS                                   |   | $            | 9,326  |   |   | $ | 10,294 |   |
| In USD                                   |   |         | 10,816 |   |   |   | 12,771 |   |
|                                     |   |         | 20,142 |   |   |   | 23,065 |   |
|                                     |   |         |   |   |   |   |   |   |
|  Checks receivable                  |   |         | 45     |   |   |   | 404 |   |
|                                     |   |         |   |   |   |   |   |   |
|                                     |   |         | 20,187 |   |   |   | 23,469 |   |
|                                     |   |         |   |   |   |   |   |   |
| Less allowance for doubtful accounts (1) |   |         | (399   | ) |   |   | (398 | ) |
|                                     |   |         |   |   |   |   |   |   |
| Trade receivables, net                   |   | $            | 19,788 |   |   | $ | 23,071 |   |

|  | (1) | Allowance for doubtful accounts: |
|--|-----|----------------------------------|

| December 31, 2015 |   | $      | (398 | )      |
|-------------------|--------|--------|------|--------|
| Deductions        |   |   | 1    |   |
| December 31, 2016 |   | $      | (399 | )      |

|              |   | Neither past due nor impaired |   |         | Past due trade receivables with aging of |   |      |  Total |   |
|-------------------|--------|-------------------------------|--------|--------------|------------------------------------------|--------|-----------|-------------|--------|
|              |   |                          |   | Up to30 Days |                                     |   | 30-60Days |        |   | 60-90Days |   |   | 90-120Days |   |   | Over 120 days |   |   |   |
|              |   | In thousands                  |   |
|              |   |                          |   |         |                                     |   |      |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2016 |   | $                             | 17,769 |         |                                     | $      | 1,891     |        |   | $ | 24 |   |   | $ | 43 |   |   | $ | 6 |   |   | $ | 10 |   |   | $ | 19,743 |   |
|              |   |                          |   |         |                                     |   |      |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2015 |   | $                             | 20,022 |         |                                     | $      | 2,212     |        |   | $ | 376 |   |   | $ | 4 |   |   | $ | - |   |   | $ | 53 |   |   | $ | 22,667 |   |

----

----

| NOTE 8: - | OTHER ACCOUNTS RECEIVABLES |
|-----------|----------------------------|

|                                                                               |   | December 31, |   |
|------------------------------------------------------------------------------------|--------|--------------|--------|
|                                                                               |   | 2016         |   |   | 2015 |   |
|                                                                               |   | In thousands |   |
|                                                                               |   |         |   |   |   |   |
| Materials for clinical trials and inventory designated for R&D activities |   | $            | 1,229  |   |   | $ | 796 |   |
| Prepaid expenses                                                                   |   |         | 1,057  |   |   |   | 875 |   |
| Government authorities                                                             |   |         | 374    |   |   |   | 905 |   |
| Receivables for unpaid interest                                                    |   |         | 82     |   |   |   | 241 |   |
| Financial derivatives, net                                                         |   |         | -      |   |   |   | 34 |   |
| Other                                                                              |   |         | 321    |   |   |   | 30 |   |
|                                                                               |   |         |   |   |   |   |   |   |
|                                                                               |   | $            | 3,063  |   |   | $ | 2, 881 |   |

|               |   | December 31, |   |
|--------------------|--------|--------------|--------|
|               |   | 2016         |   |   | 2015 |   |
|               |   | In thousands |   |
|               |   |         |   |   |   |   |
| Finished products  |   | $            | 6,542  |   |   | $ | 10,583 |   |
| Purchased products |   |         | 5,607  |   |   |   | 6,365 |   |
| Work in progress   |   |         | 6,227  |   |   |   | 4,487 |   |
| Raw materials      |   |         | 7,218  |   |   |   | 4,901 |   |
|               |   |         |   |   |   |   |   |   |
|               |   | $            | 25,594 |   |   | $ | 26,336 |   |

|  | (1) | During the years 2016, 2015 and 2014, the Company recognized, at cost of revenues, as an expense for inventories carried at net realizable totaled of $0.5 million, $0.5 million, and less than $0.1 million, respectively. |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 10: – | PROPERTY, PLANT AND EQUIPMENT |
|------------------|-------------------------------|

|  | a. | Composition and movement: |
|--|----|---------------------------|

|                                     |   | Landand Buildings(1) |   |   | MachineryandEquipment(1) |   |   | Vehicles |   |   | Computers, Equipment and Office Furniture |   |   | Leasehold Improvements |   |   | Total  |   |
|------------------------------------------|--------|----------------------|--------|--------|--------------------------|--------|--------|----------|--------|--------|-------------------------------------------|--------|--------|------------------------|--------|--------|--------|--------|
|                                     |   | In thousands         |   |
| Cost                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |
| Balance at January 1, 2016               |   | $                    | 26,701 |   |                     | $      | 24,111 |     |   | $      | 94                                        |   |   | $                      | 4,576  |   |   | $      | 1,079 |   |   | $ | 56,561 |   |
| Additions                                |   |                 | 963    |   |                     |   | 3,220  |     |   |   | -                                         |   |   |                   | 202    |   |   |   | 62 |   |   |   | 4,447 |   |
| Sale and write-off                       |   |                 | (46    | )      |                     |   | (846   | )        |   |   |                                      |   |   |                   | (143   | )      |   |   | (89 | ) |   |   | (1,125 | ) |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of December 31, 2016          |   |                 | 27,618 |   |                     |   | 26,485 |     |   |   | 94                                        |   |   |                   | 4,635  |   |   |   | 1,052 |   |   |   | 59,884 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Accumulated Depreciation                 |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1, 2016            |   |                 | 11,237 |   |                     |   | 19,310 |     |   |   | 83                                        |   |   |                   | 3,610  |   |   |   | 1,012 |   |   |   | 35,252 |   |
| Depreciation and impairment              |   |                 | 1,402  |   |                     |   | 1,355  |     |   |   | 3                                         |   |   |                   | 535    |   |   |   | 44 |   |   |   | 3,339 |   |
| Sale and write-off                       |   |                 | (33    | )      |                     |   | (693   | )        |   |   |                                      |   |   |                   | (141   | )      |   |   | (89 | ) |   |   | (956 | ) |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of December 31, 2016          |   |                 | 12,606 |   |                     |   | 19,972 |     |   |   | 86                                        |   |   |                   | 4,004  |   |   |   | 967 |   |   |   | 37,635 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                      |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Depreciated cost as of December 31, 2016 |   | $                    | 15,012 |   |                     | $      | 6,513  |     |   | $      | 8                                         |   |   |                   | 631    |   |   | $      | 85 |   |   | $ | 22,249 |   |

|                                     |   | Landand Buildings(1) |   |   | MachineryandEquipment(1) |   |   | Vehicles |   |   | Computers, Equipment and OfficeFurniture |   |   | Leasehold Improvements |   |   | Total  |   |
|------------------------------------------|--------|----------------------|--------|--------|--------------------------|--------|--------|----------|--------|--------|------------------------------------------|--------|--------|------------------------|--------|--------|--------|--------|
|                                     |   | In thousands         |   |
| Cost                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |
| Balance at January 1, 2015               |   | $                    | 26,261 |   |                     | $      | 22,273 |     |   | $      | 94                                       |   |   | $                      | 4,159  |   |   | $      | 1,056 |   |   | $ | 58,843 |   |
| Additions                                |   |                 | 440    |   |                     |   | 1,838  | (2)      |   |   | -                                        |   |   |                   | 417    |   |   |   | 23 |   |   |   | 2,718 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of December 31, 2015          |   |                 | 26,701 |   |                     |   | 24,111 |     |   |   | 94                                       |   |   |                   | 4,576  |   |   |   | 1,079 |   |   |   | 56,561 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Accumulated Depreciation                 |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of January 1, 2015            |   |                 | 9,828  |   |                     |   | 17,929 |     |   |   | 78                                       |   |   |                   | 3,235  |   |   |   | 1,004 |   |   |   | 32,074 |   |
| Depreciation                             |   |                 | 1,409  |   |                     |   | 1,381  |     |   |   | 5                                        |   |   |                   | 375    |   |   |   | 8 |   |   |   | 3,178 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Balance as of December 31, 2015          |   |                 | 11,237 |   |                     |   | 19,310 |     |   |   | 83                                       |   |   |                   | 3,610  |   |   |   | 1,012 |   |   |   | 35,252 |   |
|                                     |   |                 |   |   |                     |   |   |     |   |   |                                     |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| Depreciated cost as of December 31, 2015 |   | $                    | 15,464 |   |                     | $      | 4,801  |     |   | $      | 11                                       |   |   |                   | 966    |   |   | $      | 67 |   |   | $ | 21,309 |   |

|  | (1) | Including labor costs charged in 2016 and 2015 to the cost of facilities, machinery and equipment in the amount of $510 thousands and $317 thousands, respectively. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (2) | Including borrowing costs of $11 thousands capitalized in 2016 to the cost of machinery and equipment. |
|--|-----|--------------------------------------------------------------------------------------------------------|

----

----

| NOTE 10: – | PROPERTY, PLANT AND EQUIPMENT (CONT.) |
|------------------|---------------------------------------|

|  | b. | As for liens, refer to Note 19. |
|--|----|---------------------------------|

|  | c. | Capitalized leasing rights of land from the Israel land administration. |
|--|----|-------------------------------------------------------------------------|

|                |   | December 31, |   |
|---------------------|--------|--------------|--------|
|                |   | 2016         |   |   | 2015 |   |
|                |   | In thousands |   |
|                |   |         |   |   |   |   |
| Under finance lease |   | $            | 1,029  |   |   | $ | 1,040 |   |

| NOTE 11: - | OTHER LONG TERM ASSETS |
|------------|------------------------|

|                       |   | December 31, |   |
|----------------------------|--------|--------------|--------|
|                       |   | 2016         |   |   | 2015 |   |
|                       |   | In thousands |   |
|                       |   |         |   |   |   |   |
| Long term leasing deposits |   | $            | 40     |   |   | $ | 35 |   |
| Intangibles assets, net    |   |         | 330    |   |   |   | 54 |   |
|                       |   |         |   |   |   |   |   |   |
|                       |   | $            | 370    |   |   | $ | 89 |   |

| NOTE 12: – | CURRENT MATURITIES OF LOANS AND CONVERTIBLE DEBENTURE |
|------------------|-------------------------------------------------------|

|                               |   | Linked to NIS |   |
|------------------------------------|--------|---------------|--------|
|                               |   | December 31,  |   |
|                               |   | 2016          |   |   | 2015 |   |
|                               |   | In thousands  |   |
|                               |   |          |   |   |   |   |
| Long term loans and capital leases |   |          | 412    |   |   |   | 37 |   |
|                               |   |          | 412    |   |   |   | 37 |   |

----

----

| NOTE 13: - | TRADE PAYABLES |
|------------|----------------|

|                     |   | December 31, |   |
|--------------------------|--------|--------------|--------|
|                     |   | 2016         |   |   | 2015 |   |
|                     |   | In thousands |   |
|                     |   |         |   |   |   |   |
| Open debts mainly in USD |   | $            | 11,187 |   |   | $ | 13,066 |   |
| Open debts in NIS        |   |         | 5,038  |   |   |   | 3,727 |   |
|                     |   |         |   |   |   |   |   |   |
|                     |   |         | 16,225 |   |   |   | 16,793 |   |
| Notes payable            |   |         | 52     |   |   |   | 124 |   |
|                     |   |         |   |   |   |   |   |   |
|                     |   | $            | 16,277 |   |   | $ | 16,917 |   |

| NOTE 14: – | OTHER ACCOUNTS PAYABLES |
|------------------|-------------------------|

|                           |   | December 31, |   |
|--------------------------------|--------|--------------|--------|
|                           |   | 2016         |   |   | 2015 |   |
|                           |   | In thousands |   |
|                           |   |         |   |   |   |   |
| Employees and payroll accruals |   | $            | 4,135  |   |   | $ | 3,338 |   |
| Derivatives instruments        |   |         | 32     |   |   |   | - |   |
| Accrued Expenses and Others    |   |         | 1,447  |   |   |   | 726 |   |
|                           |   |         |   |   |   |   |   |   |
|                           |   | $            | 5,614  |   |   | $ | 4,064 |   |

| NOTE 15: - | LONG TERM LIABILITIES |
|------------|-----------------------|

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS |
|------------|-----------------------|

|  | a. | Classification of financial assets and liabilities |
|--|----|----------------------------------------------------|

|                                                                   |   | December 31, |   |
|------------------------------------------------------------------------|--------|--------------|--------|
|                                                                   |   | 2016         |   |   | 2015 |   |
|                                                                   |   | In thousands |   |
| Financial assets                                                       |   |         |   |   |   |   |
|                                                                   |   |         |   |   |   |   |
| Financial assets at fair value:                                        |   |         |   |   |   |   |
| Marketable securities (equity and debt) – through profit or loss |   | $            | 1,490  |   |   | $ | 1,425 |   |
| Financial assets at fair value throughother comprehensive income-      |   |         |   |   |   |   |   |   |
|                                                                   |   |         |   |   |   |   |   |   |
| Available for sale debt securities-                                    |   |         | 9,164  |   |   |   | 21,834 |   |
| Derivative instruments                                                 |   |         | -      |   |   |   | 34 |   |
|                                                                   |   |         |   |   |   |   |   |   |
| Financial assets at cost-                                              |   |         |   |   |   |   |   |   |
| Short term bank deposits                                               |   |         | 8,010  |   |   |   | - |   |
|                                                                   |   | $            | 18,664 |   |   | $ | 23,293 |   |
|  Financial liabilities                                            |   |         |   |   |   |   |   |   |
|                                                                   |   |         |   |   |   |   |   |   |
| Financial liabilities at fair value through profit or loss:            |   |         |   |   |   |   |   |   |
| Derivatives instruments                                                |   | $            | 32     |   |   | $ | - |   |
| Financial liabilities measured at amortized cost:                      |   |         |   |   |   |   |   |   |
| Bank loans and capital leases                                          |   |         | 1,776  |   |   |   | 188 |   |
|                                                                   |   | $            | 1,808  |   |   | $ | 188 |   |

|  | b. | Financial risk factors |
|--|----|------------------------|

|  | a) | Foreign exchange risk |
|--|----|-----------------------|

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS (CONT.) |
|------------|-------------------------------|

|  | b) | Price risk |
|--|----|------------|

|  | 2. | Credit risk |
|--|----|-------------|

|  |  a) | Trade receivables: |
|--|----------|--------------------|

|  |  b) | Cash and cash equivalent and short term investments: |
|--|----------|------------------------------------------------------|

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS (CONT.) |
|------------|-------------------------------|

|  | 3. | Liquidity risk |
|--|----|----------------|

|                                                    |   | Less than one year |   |   | 1 to 2 |   |   | 2 to 3 |   |   | 3 to 5 |   |   | Total  |   |
|---------------------------------------------------------|--------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                    |   | In thousands       |   |
|                                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trade payables                                          |   | $                  | 16,277 |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   | $ | 16,277 |   |
| Other accounts payables                                 |   |               | 5,614  |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 5,614 |   |
| Long term loans and capital leases (including interest) |   |               | 464    |   |   |   | 461    |   |   |   | 429    |   |   |   | 549    |   |   |   | 1,903 |   |
|                                                    |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                    |   | $                  | 22,355 |   |   | $      | 461    |   |   | $      | 429    |   |   | $      | 549    |   |   | $ | 23,794 |   |

|                                |   | Less than one year |   |   | 1 to 2 |   |   | 2 to 3 |   |   | 3 to 5 |   |   | Total  |   |
|-------------------------------------|--------|--------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                |   | In thousands       |   |
|                                |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trade payables                      |   | $                  | 16,917 |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   | $ | 16,917 |   |
| Other accounts payables             |   |               | 4,064  |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | 4,064 |   |
| Long term loan (including interest) |   |               | 43     |   |   |   | 43     |   |   |   | 43     |   |   |   | 75     |   |   |   | 204 |   |
|                                |   |               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                |   | $                  | 21,024 |   |   | $      | 43     |   |   | $      | 43     |   |   | $      | 75     |   |   | $ | 21,185 |   |

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS (CONT.) |
|------------|-------------------------------|

|  | c. | Fair value |
|--|----|------------|

|                                     |   | Carrying Amount December 31, |   |   | Fair ValueDecember 31, |   |
|------------------------------------------|--------|------------------------------|--------|--------|------------------------|--------|
|                                     |   |                         |   |   |                   |   |   |   |   |   |   |   |
|                                     |   | 2016                         |   |   | 2015                   |   |   | 2016 |   |   | 2015 |   |
|                                     |   | In thousands                 |   |
| Financial liabilities                    |   |                         |   |   |                   |   |   |   |   |   |   |   |
| Bank loans and capital  leases |   | $                            | 1,776  |   |                   | $      | 188 |   |   | $ | 1,761 |   |   | $ | 185 |   |

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS (CONT.) |
|------------|-------------------------------|

|  | d. | Classification of financial instruments by fair value hierarchy |
|--|----|-----------------------------------------------------------------|

|                                                          |   | Level 1      |   |   | Level 2 |   |
|---------------------------------------------------------------|--------|--------------|--------|--------|---------|--------|
|                                                          |   | In thousands |   |
| December 31, 2016                                             |   |         |   |   |    |   |
|                                                          |   |         |   |   |    |   |
| Marketable securities at fair value through profit or loss:   |   |         |   |   |    |   |
| Equity shares                                                 |   | $            | 70     |   |    | $      | - |   |
| Mutual funds                                                  |   |         | 388    |   |    |   | - |   |
| Debt securities (corporate and government)                    |   |         | 1,032  |   |    |   | - |   |
| Available for sale debt securities (corporate and government) |   |         | -      |   |    |   | 9,164 |   |
|                                                          |   | $            | 1,490  |   |    | $      | 9,164 |   |
|                                                          |   |
|                                                          |   | Level 1      |   |   | Level 2 |   |
|                                                          |   | In thousands |   |
| December 31, 2015                                             |   |
| Marketable securities at fair value through profit or loss:   |   |         |   |   |    |   |   |   |
| Equity shares                                                 |   | $            | 67     |   |    | $      | - |   |
| Mutual funds                                                  |   |         | 365    |   |    |   | - |   |
| Debt securities (corporate and government)                    |   |         | 993    |   |    |   | - |   |
| Derivatives instruments                                       |   |         | -      |   |    |   | 34 |   |
| Available for sale debt securities (corporate and government) |   |         | -      |   |    |   | 21,834 |   |
|                                                          |   | $            | 1,425  |   |    | $      | 21,868 |   |

|                    |   | Level 1      |   |   | Level 2 |   |
|-------------------------|--------|--------------|--------|--------|---------|--------|
|                    |   | In thousands |   |
| December 31, 2016       |   |         |   |   |    |   |
|                    |   |         |   |   |    |   |
| Derivatives instruments |   | $            | -      |   |    | $      | 32 |   |

----

----

| NOTE 16: - | FINANCIAL INSTRUMENTS (CONT.) |
|------------|-------------------------------|

|                                                             |   | December 31, |   |
|------------------------------------------------------------------|--------|--------------|--------|
|                                                             |   | 2016         |   |   | 2015 |   |
|                                                             |   | In thousands |   |
| Sensitivity test to changes in market price of listed Securities |   |         |   |   |   |   |
|                                                             |   |         |   |   |   |   |
| Gain (loss) from change:                                         |   |         |   |   |   |   |
| 5% increase in market price                                      |   | $            | 535    |   |   | $ | 1,163 |   |
| 5% decrease in market price                                      |   | $            | (535   | ) |   | $ | (1,163 | ) |

| Sensitivity test to changes in foreign currency: |   |   |   |   |   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                             |   |   |   |   |   |   |
| Gain (loss) from change:                         |   |   |   |   |   |   |
| 5% increase in NIS                               |   | $      | 19     |   |   | $      | 300 |   |
| 5% decrease in  NIS                         |   | $      | (19    | )      |   | $      | (300 | ) |
| 5% increase in Euro                              |   | $      | (184   | )      |   | $      | (147 | ) |
| 5% decrease in  Euro                        |   | $      | 184    |   |   | $      | 147 |   |

|  | e. | Linkage terms of financial liabilities by groups of financial instruments pursuant to IAS 39:  |
|--|----|-----------------------------------------------------------------------------------------------------|

|                                                     |   | December 31, |   |
|----------------------------------------------------------|--------|--------------|--------|
|                                                     |   | In thousands |   |
|                                                     |   | 2016         |   |   | 2015 |   |
| In NIS:                                                  |   |         |   |   |   |   |
| Bank loans and capital leases measured at amortized cost |   | $            | 1,776  |   |   | $ | 188 |   |

----

----

| Note 16: - | Financial Instruments (cont.) |
|------------|-------------------------------|

|  | f. | Derivatives and hedging: |
|--|----|--------------------------|

| NOTE 17: - | EMPLOYEE BENEFIT LIABILITIES, NET |
|------------|-----------------------------------|

|  | a. | Post-employment benefits: |
|--|----|---------------------------|

|  | 1. |  Defined contribution deposit: |
|--|----|-------------------------------------|

----

----

| NOTE 17: - | EMPLOYEE BENEFIT LIABILITIES, NET (CONT.) |
|------------|-------------------------------------------|

|  | 2. |  Defined benefit plans: |
|--|----|------------------------------|

|  | 3. | Expenses recognized in comprehensive income (loss): |
|--|----|-----------------------------------------------------|

|                                                                                                                                                                           |   | Year EndedDecember 31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                                                                                                           |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|                                                                                                                                                                           |   | In thousands           |   |
|                                                                                                                                                                           |   |                   |   |   |   |   |   |   |   |
| Current service cost                                                                                                                                                           |   | $                      | 359    |   |   | $ | 391 |   |   | $ | 455 |   |
| Interest expenses, net                                                                                                                                                         |   |                   | 20     |   |   |   | 18 |   |   |   | 23 |   |
|  Current service cost (income) due to the transfer of real yield from the compensation component to the royalties' component in executive insurance policies before 2004. |   |                   | 5      |   |   |   | (10 | ) |   |   | (9 | ) |
| Total employee benefit expenses                                                                                                                                                |   | $                      | 384    |   |   | $ | 399 |   |   | $ | 469 |   |
|                                                                                                                                                                           |   |                   |   |   |   |   |   |   |   |   |   |   |
| Actual (negative) return on plan assets                                                                                                                                        |   | $                      | 22     |   |   | $ | (12 | ) |   | $ | 295 |   |

|                       |   | Year EndedDecember 31, |   |
|----------------------------|--------|------------------------|--------|
|                       |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|                       |   | In thousands           |   |
|                       |   |                   |   |   |   |   |   |   |   |
| Cost of revenues           |   | $                      | 228    |   |   | $ | 209 |   |   | $ | 244 |   |
| Research and development   |   |                   | 62     |   |   |   | 90 |   |   |   | 101 |   |
| Selling and marketing      |   |                   | 13     |   |   |   | 18 |   |   |   | 14 |   |
| General and administrative |   |                   | 81     |   |   |   | 82 |   |   |   | 110 |   |
|                       |   |                   |   |   |   |   |   |   |   |   |   |   |
|                       |   | $                      | 384    |   |   | $ | 399 |   |   | $ | 469 |   |

----

----

| NOTE 17: - | EMPLOYEE BENEFIT LIABILITIES, NET (CONT.) |
|------------|-------------------------------------------|

|  | 4. | The plan assets (liabilities), net: |
|--|----|-------------------------------------|

|                       |   | December 31, |   |
|----------------------------|--------|--------------|--------|
|                       |   | 2016         |   |   | 2015 |   |
|                       |   | In thousands |   |
|                       |   |         |   |   |   |   |
| Defined benefit obligation |   | $            | (5,235 | ) |   | $ | (5,425 | ) |
| Fair value of plan assets  |   |         | 4,513  |   |   |   | 4,638 |   |
| Total liabilities, net     |   | $            | (722   | ) |   | $ | (787 | ) |

|  | 5. | Changes in the present value of defined benefit obligation |
|--|----|------------------------------------------------------------|

|                    |   | 2016         |   |   | 2015   |   |
|-------------------------|--------|--------------|--------|--------|--------|--------|
|                    |   | In thousands |   |
|                    |   |         |   |   |   |   |
| Balance at January 1,   |   | $            | 5,425  |   |   | $      | 5,496 |   |
|                    |   |         |   |   |   |   |   |   |
| Interest costs          |   |         | 141    |   |   |   | 147 |   |
| Current service cost    |   |         | 359    |   |   |   | 390 |   |
| Benefits paid           |   |         | (650   | )      |   |   | (471 | ) |
| Demographic assumptions |   |         | (17    | )      |   |   | (7 | ) |
| Financial assumptions   |   |         | *      |   |   |   | - |   |
| Past Experience         |   |         | (104   | )      |   |   |  **(110 | ) |
| Currency Exchange       |   |         | 81     |   |   |   |  **(20 | ) |
| Balance at December 31, |   | $            | 5,235  |   |   | $      | 5,425 |   |

|  | 6. | Plan assets |
|--|----|-------------|

|  | a) | Plan assets |
|--|----|-------------|

----

----

| NOTE 17: - | EMPLOYEE BENEFIT LIABILITIES, NET (CONT.) |
|------------|-------------------------------------------|

|  |  b) | Changes in the fair value of plan assets |
|--|----------|------------------------------------------|

|                                                                                                                                                           |   | 2016         |   |   | 2015   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------|--------|
|                                                                                                                                                           |   | In thousands |   |
|                                                                                                                                                           |   |         |   |   |   |   |
| Balance at January 1,                                                                                                                                          |   | $            | 4,638  |   |   | $      | 4,774 |   |
|                                                                                                                                                           |   |         |   |   |   |   |   |   |
| Expected return                                                                                                                                                |   |         | 121    |   |   |   | 128 |   |
| Contributions by employer                                                                                                                                      |   |         | 311    |   |   |   | 283 |   |
| Benefits paid                                                                                                                                                  |   |         | (522   | )      |   |   | (402 | ) |
| Demographic assumptions                                                                                                                                        |   |         | 1      |   |   |   | 1 |   |
| Financial assumptions                                                                                                                                          |   |         | -      |   |   |   | - |   |
| Past Experience                                                                                                                                                |   |         | (100   | )      |   |   | * (141 | ) |
| Current service cost due to the transfer of real yield from the compensation component to the royalties component in executive insurance policies before 2004. |   |         | (5     | )      |   |   | 10 |   |
| Currency exchange                                                                                                                                              |   |         | 69     |   |   |   | *(15 | ) |
|                                                                                                                                                           |   |         |   |   |   |   |   |   |
| Balance at December 31,                                                                                                                                        |   | $            | 4,513  |   |   | $      | 4,638 |   |

|  | 7. | The principal assumptions underlying the defined benefit plan |
|--|----|---------------------------------------------------------------|

|                                |   | 2016   |   |   | 2015   |   |   | 2014   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                |   | %      |   |
|                                |   |   |   |   |   |   |   |   |   |
| Discount rate of the plan liability |   |   | 3.72   |   |   |   | 2.6    |   |   |   | 4.1 |   |
|                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Future salary increases             |   |   | 4      |   |   |   | 4      |   |   |   | 4 |   |

----

----

|  | a. | On August 23, 2010, the Company entered into a collaboration agreement with Baxter Healthcare Corporation ("Baxter"), an international biopharmaceutical company, and specializing, among other things, in the development, manufacture, marketing and sale of pharmaceutical products. During 2015, Baxter has assigned all its rights under the collaboration agreement to Baxalta US Inc. ("Baxalta") which was acquired in 2016 by Shire plc (“Shire”). (Baxter, Baxalta and Shire will refer as "Shire"). The collaboration agreement consists of three main agreements (1) the appointment of Shire as the sole distributer of the Company's AAT IV drug ("Glassia") in the United States, Canada, Australia and New Zealand ("the Territory" and "the Distribution Agreement", respectively); (2) granting licenses to Shire for the use of the Company's knowhow and patents for the production, continued development and sale of Glassia  by Shire ("the License Agreement") in the Territory and (3) an agreement to provide raw materials, produced by Shire, and used for the production of Glassia  ("the Raw Materials Supply Agreement"). Pursuant to the agreements, payments were originally set for the Company for meeting milestones at a total sum of $45 million, and for Glassia  purchases at a minimum sum of $ 60 million over the first five years from the signing of the Distribution Agreement. In addition, the Company is entitled to royalties at a sum of no less than $5 million per year, starting from the beginning of the sale of Glassia produced by Shire in accordance with the License Agreement. Since 2013 and every year thereafter, the parties amended the License Agreement and the Distribution Agreement by extending the distribution period of minimum purchases of Glassia and the minimum purchase quantity. Prior to the last amendment of the Distribution Agreement in October 2016, the net sums received in advance were recorded as deferred revenues and were recognized as revenues according to the actual rate of sales, based on the sales forecast in the Distribution Agreement. Commencing on the latest amendment of the Distribution Agreement in October 2016 the remaining deferred revenues are recognized on a straight line basis according to Shire’s minimum purchase commitment in the Distribution Agreement for the remaining period prior to the recent amendment. According to the latest amendment of the Distribution Agreement, the distribution period is currently expected to end by the end of 2020, with the start of production by Shire. Non-refundable revenues due to the achievement of milestones are recognized upon reaching the milestone. Following the last amendment the aggregate minimum revenue for Glassia in the extended agreement for the years 2017-2020 will reach approximately $237 million and may be expanded to $288 million during that period. As of December 31, 2016, the Company received a total of $36.5 million for the achievement of certain milestone and advances in respect of the Distribution and License Agreements. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|  | b. | On August 2, 2012, the Company entered into a strategic agreement with CHIESI FARMACEUTICI S. P. A, a fully integrated European Pharmaceutical company focused on respiratory disease and special care products ("Chiesi"). According to the agreement, Chiesi will be an exclusive distributor of the AAT inhaled product of the Company for treatment of alpha-1 antitrypsin deficiency ("Product") in Europe. Chiesi will be responsible for, among other things, product marketing, patients screening and obtaining reimbursement approvals for the product ("Distribution Agreement"). As part of the Distribution Agreement, the Company shall be entitled to receive payments of up to $ 60 million, contingent of meeting regulatory and sales milestones. In addition, Chiesi has committed to purchase products in minimum quantities during a period of five years commencing after receiving reimbursement approvals required. The agreement is for a period of 12 years from signature. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c. | The Company has engaged in operating lease agreements for office and storage spaces. These agreements will expire between 2017 and 2026. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------|

|                  |   | In thousands |   |
|-----------------------|--------|--------------|--------|
|                  |   |         |   |
| Year 1                |   | $            | 411    |   |
| Year 2 to 5           |   |         | 2,767  |   |
| Year 6 and thereafter |   |         | 2,291  |   |
|                  |   |         | 5,469  |   |

----

----

|  | d. | The Company has engaged in operating lease agreements for the vehicles in its possession. These agreements will expire between 2017 and 2019. Minimum future lease fees for the existing vehicles as of December 31, 2016 are as follows: |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         |   | In thousands |   |
|--------------|--------|--------------|--------|
|  Year 1 |   | $            | 371    |   |
|  Year 2 |   |         | 243    |   |
|  Year 3 |   |         | 112    |   |
|         |   |         | 726    |   |

|  | e. | In November 2006, an agreement was signed between the Company and a third party on the matter of research and development collaboration. As part of the agreement, the Company was licensed to use developments made by the third party. Furthermore, the third party will provide the Company with devices for carrying out the clinical trials, free of charge. In the event that the development is successful, the Company will pay the third party royalties based on sales of the devices. This obligation on behalf of the Company to pay royalties shall expire either when the patents expire or 15 years from the first commercial sale, whichever comes last. On the date of the expiry of the royalty period, the license will become non-exclusive and the Company shall be entitled to use the rights granted to it pursuant to the agreement without paying royalties or any other compensation. In addition, the third party would pay royalties of the total net sales exceeding a certain sum, according to a mechanism set in the agreement, until the patent expires or until 15 years pass from the first date of sale, whichever is earlier. In February 2008, the parties signed an amendment to the agreement according to which the exclusive global license granted to the Company was expanded to two additional indications. It was also decided that sales to the additional indications would be added to the sales of the first two outlines covered by the original agreement. Royalties' payments will be according to the royalty model set in the original agreement. In addition, the parties signed a commercialization and supply agreement, which ensures long-term regular supply of the device at the basis of the collaboration and spare parts of this device. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | f. | In August 2007, the Company entered into a long-term agreement with a multinational European company for the purchase of a raw material used for the development and manufacture of medicines at graded amounts and prices. In addition to the price paid by the Company for the raw material, the Company will pay the supplier an additional sum upon the sale of the product manufactured from the raw material in the territories set in the agreement, after receiving regulatory approvals. As of December 31, 2016, the regulatory approval was not yet received. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | h. | On June 30, 2015 the Company’s shareholders approved the employment terms of Mr. Amir London in his position as the Company’s chief executive officer (“CEO”), effective as of July 1, 2015. Under the employment agreement, Mr. Amir London is entitled to a monthly gross salary of NIS 65,000 (or $16,658). On August 30, 2016 the general meeting of the shareholders approved the update of Mr. London’s monthly gross salary to NIS 71,500 (or $18,430), effective as of July, 1 2016. During 2016 the Company recorded approximately $140 thousands, as a bonus to Mr. London. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|  | g. | In October 2013, the Company entered into an agreement with Contract Research Organization ("CRO"), for its phase II clinical trial for treatment of AAT for newly diagnosed type one diabetes patients. The total scope of payment to the CRO under the agreements, as amended, may reach $5.7 million, payable over the trial period which was initially designed to last over four years, including payments to trial sites and various service providers in the trial. The completion of the trial was accelerated during 2015 and is expected to end by mid-2017. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | h. | In July 2011, the Company signed a strategic collaboration agreement with an international pharmaceutical company in the area of clinical development, marketing and sales in the United States of a post exposure prophylaxis product for the prevention of rabies in human beings. The product, KamRAB, is developed, manufactured and marketed by the Company in other countries. According to the agreement, the partner shall bear all of the costs required to carry out the phase 3 clinical trial. It was agreed that the costs involved in registering the product with the U.S. Food and Drug Administration (FDA) will be divided equally between the parties. The study was completed in December 2014. The study had met the trial’s primary endpoint. The Company submitted a Biologics License Application (BLA) with the U.S. Food and Drug Administration (FDA) in August 2016. In October 2016 the parties entered into an amendment to the agreement with respect to the conduct of clinical trial for pediatric treatment of Rabies in the United States. The cost of the study will be equally shared between the parties. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 19: - |  GUARANTEES AND CHARGES |
|------------|------------------------------|

|  | 1. | In order to guarantee the rental payments for an office in Ness Ziona and other obligations, the Company provided a bank guarantees in the amount of $ 339 thousands. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | As collateral for the Company’s loans in amount of NIS 7,355 thousands, the Company has pledged the specific assets which were purchased with those loans. |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | a. | Share capital |
|--|----|---------------|

|                                    |   | December 31, 2016 |       |   | December 31, 2015 |   |
|-----------------------------------------|--------|-------------------|------------|--------|-------------------|--------|
|                                    |   | Authorized        |       |   | Outstanding       |   |   | Authorized |   |   | Outstanding |   |
| ordinary shares of NIS 1 par value |   |              | 60,000,000 |   |              |   | 36,447,175 |   |   |   | 60,000,000 |   |   |   | 36,418,741 |   |

|  | b. | Rights attached to Shares |
|--|----|---------------------------|

----

----

|  | c. | Share options |
|--|----|---------------|

|  | d. | Capital management in the Company |
|--|----|-----------------------------------|

| NOTE 21: - |  SHARE-BASED PAYMENT |
|------------|---------------------------|

|  | a. | Expense recognized in the financial statements |
|--|----|------------------------------------------------|

|                       |   | For the Year EndedDecember 31 |   |
|----------------------------|--------|-------------------------------|--------|
|                       |   | 2016                          |   |   | 2015 |   |   | 2014 |   |
|                       |   | In thousands                  |   |
| Cost of revenues           |   | $                             | 332    |   |   | $ | 564 |   |   | $ | 1,136 |   |
| Research and development   |   |                          | 134    |   |   |   | 390 |   |   |   | 725 |   |
| Selling and marketing      |   |                          | 71     |   |   |   | 98 |   |   |   | 178 |   |
| General and administrative |   |                          | 534    |   |   |   | 855 |   |   |   | 1,712 |   |
| Total share-based payment  |   | $                             | 1,071  |   |   | $ | 1,907 |   |   | $ | 3,751 |   |

|  | b. | Option granted to the Company's Chief Executive Officer ("CEO") |
|--|----|-----------------------------------------------------------------|

----

----

| NOTE 21: - |  SHARE-BASED PAYMENT (CONT.) |
|------------|-----------------------------------|

|  | c. | Employees options |
|--|----|-------------------|

|  | 1. | During 2014, 2015 and 2016 the Company's Board of Directors approved the grant, for no consideration, of 20,000, 356,075 and 263,900 options, respectively to employees. The fair value of the options was estimated at $140 thousands, $749 thousands and $462 thousands, respectively. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | On July 12, 2016, the Company's Board of Directors approved the grant to the Company’s management, of 57,500 options at an exercise price of NIS 15.20 per option. The expected volatility of the share prices is 32%-41% and the risk-free interest rate is 0.2%-1.3%. The expected average forfeiture rate is 0% and the dividend yield is 0%.  According to a calculation formula based on the Binomial Model, the fair value of the options was estimated at $86 thousands. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 3. | On July 12, 2016, the Company's Board of Directors approved the grant of 19,167 RSs to the Company’s management subject to shareholders approval which was granted on August 30, 2016. The RSs do not have exercise price. The RSs are exercisable in 13 installments, 25% of the RSs vest on the first anniversary of the grant date and 6.25% vest at the end of each quarter thereafter into ordinary shares. The fair value of the RSs was estimated based on the market price of the share on the grant date at $95 thousands. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 4. | On November 24, 2016, the Board of Directors approved the grant of 12,500 options and 4,166 RSs to the Company's management. The RSs do not have exercise price. The options are exercisable into ordinary shares at an exercise price of NIS 22.08 per option. The expected volatility of the share prices is 32%-45% and the risk-free interest rate is 0.2%-1.8%. The expected average forfeiture rate is 0% and the dividend yield is 0%. According to a calculation formula based on the Binomial Model, the fair value of the options was estimated at $24 thousands. The fair value of the RS was estimated based on the market price of the share on the grant date at $22 thousands. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 21: - |  SHARE-BASED PAYMENT (CONT.) |
|------------|-----------------------------------|

|  | d. | Directors options |
|--|----|-------------------|

|  | e. | Consultants options |
|--|----|---------------------|

|  | f. | For additional information regarding the exercise of options during 2016, refer to Note 20. Change of Awards during the Year The following table lists the number of share options, the weighted average exercise prices of share options and modification in employee and service provider option plans during the year: |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   |   | 2016              |      |   | 2015                           |   |   | 2014              |   |
|----------------------------------------|--------|-------------------|-----------|--------|--------------------------------|--------|--------|-------------------|--------|
|                                   |   | Number of Options |      |   | Weighted AverageExercise Price |   |   | Number of Options |   |   | Weighted Average Exercise Price |   |   | Number of Options |   |   | Weighted AverageExercise Price |   |
|                                   |   |              |      |   | In NIS                         |   |   |              |   |   | In NIS |   |   |   |   |   | In NIS |   |
|                                   |   |              |      |   |                           |   |   |              |   |   |   |   |   |   |   |   |   |   |
|  Outstanding at beginning of year |   |              | 2,281,493 |   |                           |   | 38.96  |              |   |   | 2,396,891 |   |   |   | 37.98 |   |   |   | 2,471,507 |   |   |   | 37.53 |   |
| Granted                                |   |              | 401,275   |   |                           |   | 15.17  |              |   |   | 504,075 |   |   |   | 18.28 |   |   |   | 20,000 |   |   |   | 54.68 |   |
| Exercised                                                             |   |   | (8,398    | )      |   |   | 18.47  |   |   |   | (430,178  | )      |   |   | 11.18  |   |   |   | (35,133   | )      |   |   | 15.20  |   |
|-----------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|
| Forfeited                                                             |   |   | (187,134  | )      |   |   | 39.22  |   |   |   | (189,295  | )      |   |   | 34.94  |   |   |   | (59,483   | )      |   |   | 38.63  |   |
|                                                                  |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |
| Outstanding at end of year                                            |   |   | 2,487,236 |   |   |   | 35.20  |   |   |   | 2,281,493 |   |   |   | 38.96  |   |   |   | 2,396,891 |   |   |   | 37.98  |   |
| Exercisable at end of year                                            |   |   | 1,543,358 |   |   |   | 40.44  |   |   |   | 1,182,417 |   |   |   | 40.39  |   |   |   | 1,276,920 |   |   |   | 27.67  |   |
| The weighted average remaining contractual life for the share options |   |   |      |   |   |   | 3.62   |   |   |   |      |   |   |   | 4.15   |   |   |   |      |   |   |   | 3.84   |   |

----

----

| NOTE 21: - |  SHARE-BASED PAYMENT (CONT.) |
|------------|-----------------------------------|

|                                                                     |   | 2016          |   |
|--------------------------------------------------------------------------|--------|---------------|--------|
|                                                                     |   | Number of RSs |   |
|                                                                     |   |          |   |
| Outstanding at beginning of year                                         |   |          | -      |   |
| Granted                                                                  |   |          | 29,333 |   |
| End of restriction period                                                |   |          | -      |   |
| Forfeited                                                                |   |          | (2,000 | ) |
|                                                                     |   |          |   |   |
| Outstanding at end of year                                               |   |          | 27,333 |   |
| The weighted average remaining contractual life for the restricted share |   |          | 6.20   |   |

|                                        |   | 2016   |              |   | 2015   |   |              | 2014   |   |
|---------------------------------------------|--------|--------|-------------------|--------|--------|--------|-------------------|--------|--------|
| Dividend yield (%)                          |   |   | -                 |   |   |   | -                 |   |   |   | - |   |
| Expected volatility of the share prices (%) |   |   | 32-51             |   |   |   | 42-64             |   |   |   | 30-50 |   |
| Risk-free interest rate (%)                 |   |   | 0.13 – 1.83 |   |   |   | 0.07 – 2.04 |   |   |   | 0.92 – 3.24 |   |
| Contractual term of up to (years)           |   |   | 6.5               |   |   |   | 6.5               |   |   |   | 6.5 |   |
| Exercise multiple                           |   |   | 2                 |   |   |   | 2                 |   |   |   | 2 |   |
| Weighted average share prices (NIS)         |   |   | 15.17             |   |   |   | 17.17             |   |   |   | 55.08 |   |
| Expected average forfeiture rate (%)        |   |   | 0-5               |   |   |   | 0-5               |   |   |   | 0-5 |   |

| NOTE 22: - |  TAXES ON INCOME |
|------------|-----------------------|

|  | a. | Tax laws applicable to the Company |
|--|----|------------------------------------|

----

----

| NOTE 22: - |  TAXES ON INCOME (CONT.) |
|------------|-------------------------------|

----

----

| NOTE 22: - |  TAXES ON INCOME (CONT.) |
|------------|-------------------------------|

----

----

| NOTE 22: - |  TAXES ON INCOME (CONT.) |
|------------|-------------------------------|

| Percent of        |                     |   |   | Reduced Tax Period |   | Tax Exemption Period |
|-------------------|--------------------------|--------|--------|------------------------------|--------|--------------------------------|
| Foreign Ownership | Rate of Reduced Tax |
| 0-25%             |                     | 25%    |   | 5 years                 |   | 2 years                   |
| 25-49%            |                     | 25%    |   | 8 years                      |   | 2 years                        |
| 49-74%            |                     | 20%    |   | 8 years                      |   | 2 years                        |
| 74-90%            |                     | 15%    |   | 8 years                      |   | 2 years                        |
| 90-100%           |                     | 10%    |   | 8 years                      |   | 2 years                        |

----

----

| NOTE 22: - |  TAXES ON INCOME (CONT.) |
|------------|-------------------------------|

|  | 1. | Preferred income from a preferred enterprise will be 16% (in development area A – 7.5% instead of 9%). |
|--|----|--------------------------------------------------------------------------------------------------------------|

|  | 2. | Preferred income resulting from IP in a preferred technology enterprise will be 12% (in development area A – 7.5%). |
|--|----|---------------------------------------------------------------------------------------------------------------------------|

|  | 3. | Preferred income resulting from IP in a special preferred technology enterprise will be 6%. |
|--|----|---------------------------------------------------------------------------------------------|

|  | 4. | Any dividends distributed from technology enterprise earnings to a foreign company that qualifies the provisions that are detailed in the law, will be subject to tax at a rate of 4%. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b. | Tax rates applicable to the Company (other than the applicable preferred tax) |
|--|----|-------------------------------------------------------------------------------|

|  | c. | Tax assessments |
|--|----|-----------------|

|  | 1. |  Finalized tax assessments |
|--|----|---------------------------------|

----

----

| NOTE 22: - |  TAXES ON INCOME (CONT.) |
|------------|-------------------------------|

|  | 2. |  Tax assessments in dispute |
|--|----|----------------------------------|

|  | d. | Carry forward losses for tax purposes and other temporary differences |
|--|----|-----------------------------------------------------------------------|

|  | e. | Deferred taxes: |
|--|----|-----------------|

|  | f. | Current taxes on income: |
|--|----|--------------------------|

|                           |   | Year ended December 31, |   |
|--------------------------------|--------|-------------------------|--------|
|                           |   | 2016                    |   |   | 2015 |   |   | 2014 |   |
|                           |   | In thousands            |   |
| Current taxes                  |   | $                       | 362    |   |   | $ | - |   |   | $ | 52 |   |
| Taxes in respect of prior year |   |                    | 1,360  |   |   |   | - |   |   |   | - |   |
|                           |   |                    |   |   |   |   |   |   |   |   |   |   |
|                           |   | $                       | 1,722  |   |   | $ | - |   |   | $ | 52 |   |

|  | g. | Theoretical tax: |
|--|----|------------------|

----

----

| NOTE 23: - |  SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE LOSS |
|------------|-------------------------------------------------------------------------|

|   |                                                                           |   | Year EndedDecember 31, |   |
|--------|-------------------------------------------------------------------------------------|--------|------------------------|--------|
|   |                                                                                |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|   |                                                                           |   | In thousands           |   |
| a.     | Additional information about revenues                                               |   |                   |   |   |   |   |   |   |   |
|   |                                                                                |   |                   |   |   |   |   |   |   |   |
|   | Revenues from major customers each of whom amount to 10% or more, of total revenues |   |                   |   |   |   |   |   |   |   |
|   |                                                                                |   |                   |   |   |   |   |   |   |   |
|   | Customer A – Proprietary products Segment                                     |   | $                      | 40,451 |   |   | $ | 26,032 |   |   | $ | 26,606 |   |
|   | Customer B – Proprietary products Segment  and Distribution Segment      |   |                   | 10,225 |   |   |   | 10,306 |   |   |   | 12,352 |   |
|   |                                                                                |   |                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                           |   | $                      | 50,676 |   |   | $ | 36,338 |   |   | $ | 38,958 |   |

|          |   | Year EndedDecember 31, |   |
|---------------|--------|------------------------|--------|
|          |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|          |   | In thousands           |   |
| U.S.A.        |   | $                      | 40,585 |   |   | $ | 26,559 |   |   | $ | 26,001 |   |
| Israel        |   |                   | 25,340 |   |   |   | 30,624 |   |   |   | 32,040 |   |
| Europe        |   |                   | 3,825  |   |   |   | 3,223 |   |   |   | 5,265 |   |
| Latin America |   |                   | 4,221  |   |   |   | 6,036 |   |   |   | 5,121 |   |
| Asia          |   |                   | 3,028  |   |   |   | 2,900 |   |   |   | 2,120 |   |
| Others        |   |                   | 495    |   |   |   | 564 |   |   |   | 518 |   |
|          |   |                   |   |   |   |   |   |   |   |   |   |   |
|          |   | $                      | 77,494 |   |   | $ | 69,906 |   |   | $ | 71,065 |   |

----

----

| NOTE 23: - |  SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE LOSS (CONT.) |
|------------|---------------------------------------------------------------------------------|

|   |                               |   |                           |   |   | Year Ended   |   |   |   |   |
|--------|------------------------------------|--------|--------------------------------|--------|--------|--------------|--------|--------|--------|--------|
|   |                               |   |                           |   |   | December 31, |   |   |   |   |
|   |                               |   | 2016                           |   |   | 2015         |   |   | 2014   |   |
|   |                               |   | In thousands    |   |
|   |                               |   |                           |   |   |         |   |   |   |   |
| b.     | Cost of goods sold                 |   |                           |   |   |         |   |   |   |   |
|   |                               |   |                           |   |   |         |   |   |   |   |
|   | Cost of materials                  |   | $                              | 38,437 |   |         | $      | 41,571 |   |   | $ | 42,265 |   |
|   |  Salary and related expenses  |   |                           | 12,052 |   |         |   | 11,136 |   |   |   | 12,026 |   |
|   | Depreciation and amortization      |   |                           | 2,443  |   |         |   | 2,383  |   |   |   | 2,019 |   |
|   | Other manufacturing expenses       |   |                           | 820    |   |         |   | (47    | )      |   |   | (306 | ) |
|   |                               |   |                           |   |   |         |   |   |   |   |   |   |   |
|   |                               |   |                           | 53,752 |   |         |   | 55,043 |   |   |   | 56,004 |   |
|   | Decrease (increase) in inventories |   |                           | 2,092  |   |         |   | (935   | )      |   |   | 19 |   |
|   |                               |   | $                              | 55,844 |   |         | $      | 54,108 |   |   | $ | 56,023 |   |
| c.     | Research and development           |   |                           |   |   |         |   |   |   |   |   |   |   |
|   |                               |   |                           |   |   |         |   |   |   |   |   |   |   |
|   | Salary and related expenses        |   | $                              | 4,291  |   |         | $      | 3,737  |   |   | $ | 3,852 |   |
|   | Subcontractors                     |   |                           | 8,318  |   |         |   | 8,002  |   |   |   | 6,593 |   |
|   | Materials                          |   |                           | 96     |   |         |   | 117    |   |   |   | 185 |   |
|   | Allocation of facility costs       |   |                           | 1,811  |   |         |   | 3,269  |   |   |   | 4,102 |   |
|   | Others                             |   |                           | 1,729  |   |         |   | 1,405  |   |   |   | 1,298 |   |
|   |                               |   |                           |   |   |         |   |   |   |   |   |   |   |
|   |                               |   | $                              | 16,245 |   |         | $      | 16,530 |   |   | $ | 16,030 |   |
| d.     | Selling and marketing              |   |                           |   |   |         |   |   |   |   |   |   |   |
|   |                               |   |                           |   |   |         |   |   |   |   |   |   |   |
|   | Salary and related expenses        |   | $                              | 1,118  |   |         | $      | 1,166  |   |   | $ | 1,033 |   |
|   | Marketing support                  |   |                           | 79     |   |         |   | 368    |   |   |   | 106 |   |
|   | Packing, shipping and delivery     |   |                           | 494    |   |         |   | 454    |   |   |   | 403 |   |
|   | Marketing and advertising          |   |                           | 337    |   |         |   | 560    |   |   |   | 352 |   |
|   | Registration and marketing fees    |   |                           | 796    |   |         |   | 794    |   |   |   | 785 |   |
|   | Others                             |   |                           | 419    |   |         |   | 310    |   |   |   | 219 |   |
|   |                               |   |                           |   |   |         |   |   |   |   |   |   |   |
|   |                               |   | $                              | 3,243  |   |         | $      | 3,652  |   |   | $ | 2,898 |   |

----

----

| NOTE 23: - |  SUPPLEMENTARY INFORMATION TO THE STATEMENTS OF COMPREHENSIVE LOSS (CONT.) |
|------------|---------------------------------------------------------------------------------|

|   |                                                      |   | Year EndedDecember 31, |   |
|--------|-----------------------------------------------------------|--------|------------------------|--------|
|   |                                                      |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|   |                                                      |   | In thousands           |   |
| e.     | General and administrative                                |   |                   |   |   |   |   |   |   |   |
|   |                                                      |   |                   |   |   |   |   |   |   |   |
|   | Salary and related expenses                               |   | $                      | 3,183  |   |   | $ | 2,665 |   |   | $ | 3,244 |   |
|   | Professional fees                                         |   |                   | 1,378  |   |   |   | 1,482 |   |   |   | 1,796 |   |
|   | Depreciation, amortization and impairment                 |   |                   | 712    |   |   |   | 524 |   |   |   | 455 |   |
|   | Bad debt expenses, net                                    |   |                   | 1      |   |   |   | - |   |   |   | (53 | ) |
|   | Others                                                    |   |                   | 2,369  |   |   |   | 2,369 |   |   |   | 2,151 |   |
|   |                                                      |   | $                      | 7,643  |   |   | $ | 7,040 |   |   | $ | 7,593 |   |
|   |                                                      |   |                   |   |   |   |   |   |   |   |   |   |   |
| f.     | Financial incomes and expenses                            |   |                   |   |   |   |   |   |   |   |   |   |   |
|   |                                                      |   |                   |   |   |   |   |   |   |   |   |   |   |
|   | Financial incomes                                         |   |                   |   |   |   |   |   |   |   |   |   |   |
|   | Interest income and gains from marketable securities |   | $                      | 469    |   |   | $ | 463 |   |   | $ | 404 |   |
|   |                                                      |   |                   |   |   |   |   |   |   |   |   |   |   |
|   | Financial expenses                                        |   |                   |   |   |   |   |   |   |   |   |   |   |
|   | Interest and amortization from debentures                 |   | $                      | -      |   |   | $ | 731 |   |   | $ | 1,954 |   |
|   | Fees and interest paid to financial institutions          |   |                   | 126    |   |   |   | 111 |   |   |   | 109 |   |
|   | Others                                                    |   |                   | -      |   |   |   | 92 |   |   |   | 23 |   |
|   |                                                      |   | $                      | 126    |   |   | $ | 934 |   |   | $ | 2,086 |   |

----

----

| NOTE 24: - |  INCOME (LOSS) PER SHARE |
|------------|-------------------------------|

|  | a. | Details of the number of shares and income (loss) used in the computation of income (loss) per share |
|--|----|------------------------------------------------------------------------------------------------------|

|                                         |   | Year EndedDecember 31,    |       |
|----------------------------------------------|--------|---------------------------|------------|
|                                         |   | 2016                      |       |   | 2015 |   |   | 2014 |   |
|                                         |   | Weighted Number of Shares |       |   | Loss Attributed to equity holders of the Company |   |   | Weighted Number of Shares |   |   | Income Attributed to equity holders of the Company |   |   | Weighted Number of Shares |   |   | Income Attributed to equity holders of the Company |   |
|                                         |   |                      |       |   | In thousands |   |   |   |   |   | In thousands |   |   |   |   |   | In thousands |   |
|                                         |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| For the computation of basic loss            |   |                      | 36,418,833 |   |   | $ | (6,733 | ) |   |   | 36,245,813 |   |   | $ | (11,270 | ) |   |   | 35,971,335 |   |   | $ | (13,213 | ) |
| Effect of potential dilutive ordinary shares |   |                      | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| For the computation of diluted loss          |   |                      | 36,418,833 |   |   | $ | (6,733 | ) |   |   | 36,245,813 |   |   | $ | (11,270 | ) |   |   | 35,971,335 |   |   | $ | (13,213 | ) |

|  | b. | The computation of the diluted income per share in 2016, did not take into account the options and RSs due to their anti-dilutive effect. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------|

| NOTE 25: - |  OPERATING SEGMENTS |
|------------|--------------------------|

|  | a. | General |
|--|----|---------|

| Proprietary Products | Development, manufacture and sale of plasma-derived therapeutics products.                                 |
|----------------------|------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                       |
| Distribution         | Distribution of drugs in Israel manufacture by other companies, most of which are plasma derived products. |

----

----

| NOTE 25: - |  OPERATING SEGMENTS (CONT.) |
|------------|----------------------------------|

|                              |   | Proprietary Products |   |   | Distribution |   |   | Total  |   |
|-----------------------------------|--------|----------------------|--------|--------|--------------|--------|--------|--------|--------|
|                              |   | In thousands         |   |
|                              |   |                 |   |   |         |   |   |   |   |
| Year Ended December 31, 2016      |   |                 |   |   |         |   |   |   |   |
|                              |   |                 |   |   |         |   |   |   |   |
| Revenues                          |   | $                    | 55,958 |   |         | $      | 21,536 |   |   | $ | 77,494 |   |
|                              |   |                 |   |   |         |   |   |   |   |   |   |   |
| Gross profit                      |   | $                    | 18,525 |   |         | $      | 3,125  |   |   | $ | 21,650 |   |
|                              |   |                 |   |   |         |   |   |   |   |   |   |   |
| Unallocated corporate expenses    |   |                 |   |   |         |   |   |   |   |   | (27,131 | ) |
| Finance income, net               |   |                 |   |   |         |   |   |   |   |   | 470 |   |
|                              |   |                 |   |   |         |   |   |   |   |   |   |   |
|  Loss before taxes on income |   |                 |   |   |         |   |   |   |   | $ | (5,011 | ) |

|                           |   | Proprietary Products |   |   | Distribution |   |   | Total  |   |
|--------------------------------|--------|----------------------|--------|--------|--------------|--------|--------|--------|--------|
|                           |   | In thousands         |   |
|                           |   |                 |   |   |         |   |   |   |   |
| Year Ended December 31, 2015   |   |                 |   |   |         |   |   |   |   |
|                           |   |                 |   |   |         |   |   |   |   |
| Revenues                       |   | $                    | 42,952 |   |         | $      | 26,954 |   |   | $ | 69,906 |   |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Gross profit                   |   | $                    | 12,484 |   |         | $      | 3,314  |   |   | $ | 15,798 |   |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Unallocated corporate expenses |   |                 |   |   |         |   |   |   |   |   | (27,222 | ) |
| Finance expenses, net          |   |                 |   |   |         |   |   |   |   |   | 154 |   |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Loss before taxes on income    |   |                 |   |   |         |   |   |   |   | $ | (11,270 | ) |

----

----

| NOTE 25: - |  OPERATING SEGMENTS (CONT.) |
|------------|----------------------------------|

|                           |   | Proprietary Products |   |   | Distribution |   |   | Total  |   |
|--------------------------------|--------|----------------------|--------|--------|--------------|--------|--------|--------|--------|
|                           |   | In thousands         |   |
|                           |   |                 |   |   |         |   |   |   |   |
| Year Ended December 31, 2014   |   |                 |   |   |         |   |   |   |   |
|                           |   |                 |   |   |         |   |   |   |   |
| Revenues                       |   | $                    | 44,389 |   |         | $      | 26,676 |   |   | $ | 71,065 |   |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Gross profit                   |   | $                    | 11,772 |   |         | $      | 3,270  |   |   | $ | 15,042 |   |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Unallocated corporate expenses |   |                 |   |   |         |   |   |   |   |   | (26,521 | ) |
| Finance expenses, net          |   |                 |   |   |         |   |   |   |   |   | (1,682 | ) |
|                           |   |                 |   |   |         |   |   |   |   |   |   |   |
| Income before taxes on income  |   |                 |   |   |         |   |   |   |   | $ | (13,161 | ) |

| NOTE 26: - |  BALANCES AND TRANSACTIONS  WITH  RELATED PARTIES |
|------------|------------------------------------------------------------------|

|  | a. | Balances with related parties |
|--|----|-------------------------------|

|                              |   | Related Parties |   |
|-----------------------------------|--------|-----------------|--------|
|                              |   | In thousands    |   |
| December 31, 2016                 |   |            |   |
|                              |   |            |   |   |
| Other accounts payables           |   | $               | 230    |   |
| Employee benefit liabilities, net |   | $               | 170    |   |
| Trade receivable                  |   | $               | 675    |   |
|                              |   |            |   |   |
| December 31, 2015                 |   |            |   |   |
|                              |   |            |   |   |

| Other accounts payables           |   | $ | 291   |   |
|-----------------------------------|--------|---|-------|--------|
| Employee benefit liabilities, net |   | $ | 151   |   |
| Trade receivable                  |   | $ | 1,446 |   |

----

----

| NOTE 26: - |  BALANCES AND TRANSACTIONS WITH RELATED PARTIES (CONT.) |
|------------|--------------------------------------------------------------|

|  | b. | Benefits to related parties |
|--|----|-----------------------------|

|                                                                          |   | Year EndedDecember 31, |   |
|-------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                          |   | 2016                   |   |   | 2015 |   |
|                                                                          |   | In thousands           |   |
|                                                                          |   |                   |   |   |   |   |
| Salary and related expenses to those employed by the Company or on its behalf |   | $                      | 473    |   |   | $ | 800 |   |
|                                                                          |   |                   |   |   |   |   |   |   |
| Salary of directors not employed by the Company or on its behalf              |   | $                      | 122    |   |   | $ | 189 |   |
|                                                                          |   |                   |   |   |   |   |   |   |
| Number of People to whom the Salary and Benefits Refer                        |   |                   |   |   |   |   |   |   |
|                                                                          |   |                   |   |   |   |   |   |   |
| Related and related parties employed by the Company or on its behalf          |   |                   | 2      |   |   |   | 2 |   |
| Directors not employed by the Company                                         |   |                   | 3      |   |   |   | 3 |   |
|                                                                          |   |                   |   |   |   |   |   |   |
|                                                                          |   |                   | 5      |   |   |   | 5 |   |

|  | c. | Benefits to key executive personnel (including non-related parties) |
|--|----|---------------------------------------------------------------------|

|                     |   | Year EndedDecember 31, |   |
|--------------------------|--------|------------------------|--------|
|                     |   | 2016                   |   |   | 2015 |   |   | 2014 |   |
|                     |   | In thousands           |   |
|                     |   |                   |   |   |   |   |   |   |   |
| Short-term benefits      |   | $                      | 2,453  |   |   | $ | 2,144 |   |   | $ | 2,064 |   |
| Share-based payment      |   |                   | 460    |   |   |   | 650 |   |   |   | 1,165 |   |
| Other long-term benefits |   |                   | 28     |   |   |   | 61 |   |   |   | (8 | ) |
|                     |   |                   |   |   |   |   |   |   |   |   |   |   |
|                     |   | $                      | 2,941  |   |   | $ | 2,855 |   |   | $ | 3,221 |   |

|  | d. | Transactions with related parties Year Ended December 31, 2016 |
|--|----|---------------------------------------------------------------------|

|                                |   | Related Parties |   |
|-------------------------------------|--------|-----------------|--------|
|                                |   | Inthousands     |   |
|                                |   |            |   |
| Sales                               |   | $               | 2,230  |   |
| Selling and marketing expenses      |   | $               | 101    |   |
| General and administrative expenses |   | $               | 503    |   |

----

----

| NOTE 26: - |  BALANCES AND TRANSACTIONS WITH  RELATED PARTIES (CONT.) |
|------------|--------------------------------------------------------------------|

|                                |   | Related Parties |   |
|-------------------------------------|--------|-----------------|--------|
|                                |   | Inthousands     |   |
|                                |   |            |   |
| Sales                               |   | $               | 2,795  |   |
| Selling and marketing expenses      |   | $               | 114    |   |
| General and administrative expenses |   | $               | 526    |   |

| Sales                               |   | $ | 1,158 |   |
|-------------------------------------|--------|---|-------|--------|
| Selling and marketing expenses      |   | $ | 120   |   |
| General and administrative expenses |   | $ | 1,466 |   |

|  | e. | Revenues and Expenses from Related and Interested Parties |
|--|----|-----------------------------------------------------------|

|  | 1. | Sales to related parties are conducted at market prices. Balances that have yet to be repaid by the end of the year are not guaranteed, bear no interest and their settlement will be in cash. No guarantees were received or given for sums receivable or payable. For the years ended December 31, 2016, 2015 and 2014, the Company recorded no allowance for doubtful accounts for sums receivable from related parties. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 2. | On May 26, 2011, the Company announced its engagement in an amended agreement that revises and replaces the distribution agreement signed in 2001 between the Company and Tuteur SACIFIA, a company registered in Argentina, currently under the control of the Hahn family. The amendment to the agreement was made as an arm’s length transaction. On August 19, 2014 we amended the agreement in order to add KamRho(D) as an additional product to be distributed by Tuteur and expanded the territory to include Bolivia. Pursuant to the distribution agreement, Tuteur serves as the exclusive distributor of Glassia and KamRho(D), in Argentina, Paraguay and Bolivia. In 2016 the board of directors approved to provide Tuteur reimbursement at a non-material amount to be used for marketing activities aimed to locating new AATD patients and increasing the overall number of AATD patients treated with Glassia in Argentina. Such reimbursement will be granted until the end of September 2019. In 2016 a reimbursement was paid according to the agreement.  In addition, in 2016 and on February 28, 2017 the board of directors also approved to grant Tuteur an arm’s length discount for KamRho(D) at a non-material amount. |
|--|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| NOTE 26: - |  BALANCES AND TRANSACTIONS WITH  RELATED PARTIES (CONT.) |
|------------|--------------------------------------------------------------------|

|  | 3. | Mr. Reuven Behar, a partner of Fischer Behar Chen Well Orion Co., the Company’s external legal counsel was a director in the Company until May 2016. Fees attributed to Fischer Behar Chen Well Orion Co. are included in the tables above for the period ending May 1, 2016. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----