##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM TO
 COMMISSION FILE NUMBER: 000-51905
 OMRIX BIOPHARMACEUTICALS, INC.
  Delaware
    
    52-2147005(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)One Rockefeller Plaza, New York, New York
    
    10020(Address of principal executive offices)
    
    (Zip Code)
 (212) 887-6500
   Title of Class
    
    Name of Each Exchange on Which RegisteredCommon Stock ($0.01 par value)
    
    The NASDAQ Global Market under the symbol OMRI
 o þ
 o þ
 þ o
 o
  o Large Accelerated filer
    
    þ Accelerated filer
    
    o Non-accelerated filer
    
    o Smaller reporting company(Do not check if a smaller reporting company)
 o þ




---



##### 



OMRIX BIOPHARMACEUTICALS, INC.
REPORT ON FORM 10-K
TABLE OF CONTENTS
 PagePART IItem 1.
    
    Business
    
    
    3Item 1A.
    
    Risk Factors
    
    
    22Item 1B.
    
    Unresolved Staff Comments
    
    
    34Item 2.
    
    Properties
    
    
    34Item 3.
    
    Legal Proceedings
    
    
    34Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    34PART IIItem 5.
    
    Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
    
    
    34Item 6.
    
    Selected Financial Data
    
    
    36Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    36Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    45Item 8.
    
    Financial Statements and Supplementary Data
    
    
    45Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    70Item 9A.
    
    Controls and Procedures
    
    
    70Item 9B.
    
    Other Information
    
    
    70PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    70Item 11.
    
    Executive Compensation
    
    
    70Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    70Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    70Item 14.
    
    Principal Accountant Fees and Services
    
    
    70PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    70EX-10.28: EMPLOYMENT AGREEMENT--DROPPERTEX-10.32: LEASE AGREEMENTEX-10.33: FIRST AMENDMENT TO LEASEEX-10.34: AMENDMENT TO CONSTRUCTION AGREEMENTEX-23.1: CONSENT OF KOST, FORER, GABBAY & KASIEREREX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
  2




---



##### Table of Contents



PART I
   
 Item 1. Business
 Overview
   Biosurgical products and product candidates
       
    
    a Fibrin Patch, comprised of our Evicel components and thrombin embedded in a
biodegradable device, designed for the management and rapid control of bleeding,
including mild, moderate and severe bleeding, and for use on active bleeding sites in
trauma and surgical patients; and
    
    Adhexil, an adhesion prevention product, delivered in a kit containing a human,
fibrin-based, absorbable, adhesion barrier.
 3




---



##### Table of Contents



Passive immunotherapy products and product candidates
  
    
    IVIG, which is primarily used for the treatment of patients with immune
deficiencies. IVIG is currently primarily marketed in Israel and a
Phase 3 clinical
trial has commenced in the U.S.;
    
    VIG, which is used for the treatment of small pox vaccine-related complications and
supplied under government contracts;
    
    HT-VIG, which is a more concentrated form of VIG for the treatment of smallpox
vaccine-related complications and side effects and the prevention of the
side effects of vaccination against smallpox;
    
    HBIG, which is marketed in Israel for the prevention of re-infection of
transplanted livers in patients with Hepatitis B, or HBV. In May 2007, we submitted a
regulatory filing to the health authorities in Sweden for the approval to sell HBIG in
that country;
    
    Seasonal Influenza, which we are developing for the prevention and treatment of
Influenza complications in high risk patients; and
    
    Avian Influenza IG, which is being developed under a
Cooperative Research and Development Agreement, or CRADA, with the NIH.
  Our Protein Purification Technology
  4




---



##### Table of Contents



Our Products
  Biosurgical products and product candidates
  5




---



##### Table of Contents



Product
    
    Status
    
    Indication
    
    CollaboratorEvicel
    
    Commercially
available in the U.S.
    
    Adjunct to hemostasis
for general surgical
use in the U.S.
    
    Currently marketed
through Ethicon in
the U.S.Market Authorization
Application (MAA)
submitted to the
European Medicines
Agency (EMEA) for an
adjunct to hemostasis
for general surgical
use in the EU
    
    Adjunct to hemostasis
for general surgical
use in the EU
    
    EthiconQuixil
    
    Commercially
available in the EU,
several other
European countries,
Mexico, Brazil and
Israel
    
    Adjunct to hemostasis
for general surgical
use in Germany, UK,
France, Italy,
Ireland, Finland,
Iceland, Norway,
Germany, Sweden,
Belgium, Luxembourg,
Denmark, Switzerland,
Netherlands,
Argentina, Israel,
Mexico, Portugal,
Philippines,
Singapore, Brazil and
Canada
    
    Currently marketed
through Ethicon in
the EU and BrazilAdjunct to hemostasis
in liver and
orthopedic surgeries
in certain EU
countries, Argentina,
the Philippines,
Switzerland,
Singapore and IsraelFibrin Patch
    
    Completed Phase 1
clinical trial as an
adjunct to
hemostasis; Submitted
IND for a pivotal
study in the U.S. for
mild, moderate and
severe bleeding.
Phase 2 clinical study for
mild and moderate
bleeding anticipated
to commence in second
quarter of 2008. Working with the FDA
to establish the parameters of the study design
for severe bleeding.
    
    For the management
and rapid control of
bleeding, including
mild, moderate and
severe intra-operative
bleeding
    
    Under development
with EthiconEvithrom, our 
thrombin 
stand-alone
    
    Commercially
available in the U.S.
    
    Adjunct to hemostasis
for general surgical
use, primarily for
use in neurosurgery,
in the U.S.
    
    Currently marketed
through Ethicon in
U.S.Adhexil
    
    Commenced a Phase
1/2 clinical trial
to evaluate safety
and initial efficacy
    
    Prevention and/or
reduction of
post-operative
adhesions in patients
undergoing
gynecological surgery
 Our fibrin sealant products
   6




---



##### Table of Contents




    
    Ease-of-use.Fibrin sealants are used in time-critical situations and therefore
must be easy to use and readily available for spraying and dripping. Evicel and Quixil
are sold as a frozen liquid and require less than one minute preparation time in the
operating room after thawing. In addition, Evicel and Quixil are transparent, making it
easy for the surgeon to see the underlying surface after the sealant has been applied to
determine whether hemostasis has been achieved.
    
    Efficacy.The naturally occurring suite of proteins in BAC in Evicel and Quixil
results in a clot that has good adherence to tissue and good elasticity.
    
    Safety.Evicel and Quixil are the first, and currently the only, commercially
available liquid fibrin sealant products that do not contain animal-derived components,
thereby avoiding the possibility of an adverse reaction associated with exposure to
bovine proteins contained in other commercially available fibrin sealants.
    
    Economy.Evicel and Quixil can be refrigerated in liquid form for up to 30 days
after thawing. They come in one, two or five milliliter vials. In addition, these
products in unopened vials are stable at room temperature for up to 24 hours. Evicel and
Quixil can also be kept frozen for up to two years. This design and packaging allow for
tailored application without waste of unused product.
 Evicel
  Quixil
  Fibrin Patch
    7




---



##### Table of Contents



Evithrom
  Non-Hemostasis Products
  Passive immunotherapy products and product candidates
   Product
    
    Status
    
    Indication
    
    Target marketVIG
    
    Sales in Israel and
several European
countries
    
    Smallpox vaccine-related
complications
    
    GovernmentsHT-VIG*
    
    In development
    
    Smallpox vaccine-related
complications and
treatment of side
effects and the
prevention of the side
effects of vaccination
against smallpox
    
    GovernmentsIVIG
    
    Commercial sales in
Israel; Phase 3
clinical trial
underway in the
U.S.**
    
    Primary Immune deficiency
    
    Medical communityHBIG
    
    Commercial sales in
Israel; submitted
regulatory filing
with the health
authorities in
Sweden for the
approval to sell
HBIG in that
country.
    
    Prevention of HBV
re-infection of
transplanted liver
    
    Medical communityAvian Influenza IG
    
    In development
    
    Avian influenza
    
    Governments/Medical
communitySeasonal Influenza
    
    In development
    
    Prevention and treatment
of Influenza
complications in high
risk patients
    
    Medical community
 
 *
    
    We have received NIH grants for the development of these product candidates.**
    
    FFF Enterprises, Inc. is conducting the Phase 3 clinical trial. 8




---



##### Table of Contents



VIG
   HT-VIG
   IVIG
   HBIG
   Avian Influenza
  Research and Development
  9




---



##### Table of Contents



Sales and Marketing
   Manufacturing and Production
      10




---



##### Table of Contents




    
    nano-filtration filters, which we use for virus removal and purchase;
    
    a resin, which we use to remove plasminogen and produce BAC II;
    
    the specialized application device, which we sell as part of our Evicel and Quixil
product packages; and
    
    tranexamic acid, which we use as a stabilizing agent in the current version of
Quixil.
  Material Agreements
 Ethicon, Inc.
  Development agreement
        11




---



##### Table of Contents



Distribution and supply agreement
        12




---



##### Table of Contents



Talecris
    FFF Enterprises, Inc. and DCI Management Group LLC
    
    
    out-of-pocket expenses for conducting the clinical trial exceed an agreed upon amount; or
    
    we have not completed the limited expansion of our facility to enable expanded production of
IVIG by an agreed upon date.
    13




---



##### Table of Contents



S&A Design and Construction Ltd.
         14




---



##### Table of Contents



PlastMed Ltd.
     Magen David Adom in Israel
    Lease and manufacturing
   15




---



##### Table of Contents



Investments in the manufacturing facility
 Compulsory Investments.
   Discretionary Investments.
 Plasma
  Intellectual property
    16




---



##### Table of Contents



Intellectual Property
    Competition
  Biosurgical competition
   17




---



##### Table of Contents



Passive immunotherapy competition
  Government Regulation
       18




---



##### Table of Contents



19




---



##### Table of Contents



Employees
    Available Information
  www.sec.gov
 www.omrix.com info@omrix.com, www.omrix.com
 20




---



##### Table of Contents



Item 1A. Risk Factors
 RISKS RELATED TO OUR BUSINESS AND INDUSTRY
 We have a history of operating losses and may not maintain profitability.
  We have an exclusive relationship with Ethicon relating to the distribution and development of our
principal biosurgery products in the U.S. and certain other countries, and our resulting
dependence on Ethicon exposes us to significant product commercialization and development risks.
    
    
    for any or no reason at any time by providing us with at least
six months prior written notice and complying with certain other conditions;
    
    upon our material breach or non-compliance with applicable law and if such breach
or non-compliance is not cured; or
    
    upon our bankruptcy or similar insolvency event.
   21




---



##### Table of Contents




    
    we could experience significant delays in the development of any product candidate
then in development, including our Fibrin Patch;
    
    we would have to assume full responsibility for further development, including
funding these programs; and
    
    we may lose access to Ethicon intellectual property that relates to products
covered by the development agreement, and as a result we might be unable to develop these
products at all.
   If our products do not achieve market acceptance, we will be unable to generate significant
revenues from them.
  
    
    convenience and ease of use;
    
    availability and cost of alternative and competing products or therapies;
    
    effectiveness of our or our collaborators marketing, distribution and pricing
strategies; and
    
    publicity concerning our products as well as our competitors products.
  We may not be able to successfully develop and commercialize our product candidates, including the
Fibrin Patch or Adhexil.
  
    
    Fibrin Patch, for the management and rapid control of bleeding, including mild,
moderate and severe bleeding; and
    
    Adhexil, for the prevention and/or reduction of post-operative adhesions.
   22




---



##### Table of Contents



If the third parties with which we contract for preclinical studies and clinical trials do not
perform in an acceptable manner, or if we suffer setbacks in these clinical trials, we may be
unable to develop and commercialize our product candidates as anticipated.
  If the limited number of suppliers on which we rely fail to supply us with the raw materials and
other components we use in manufacturing our products, we might be unable to satisfy product
demand.
  
    
    nano-filtration filters, which we use for virus removal and purchase from Asahi
Kasei Pharma Corporation;
    
    a resin, which we use to remove plasminogen and produce BAC II, and purchase from
Amersham Biosciences AB;
    
    the specialized application device, which we sell as part of our Evicel and Quixil
product packages and purchase from PlastMed Ltd.; and
    
    tranexamic acid, which we use as a stabilizing agent in Quixil and purchase from
Daiichi Pharmaceuticals Co., Ltd.
  
    
    be unable or unwilling to provide us with sufficient materials to meet our demands;
    
    fail to meet our standards of quality or other specifications;
    
    increase significantly the prices they charge us for materials; or
    
    not carry out their contractual duties or meet anticipated deadlines, which could
result in delays in obtaining or maintaining regulatory approvals or in satisfying
customer orders.
  23




---



##### Table of Contents



A disruption at our sole manufacturing site would significantly interrupt our production
capabilities, which could have drastic consequences to us, including threatening our financial
viability.
  If we are unable to expand our manufacturing capacity as planned, we may be unable to satisfy
demand for our products.
   If our competitors develop and market products faster than we do or if those products are more
effective than our products, our commercial opportunities will be reduced or eliminated.
   24




---



##### Table of Contents



Our products are derived from human plasma, and are therefore subject to the risk of biological
contamination inherent in plasma-derived products. This risk could adversely affect our ability to
obtain raw materials and market our products.
    Our international operations expose us to the risk of fluctuations in currency exchange rates.
  Currency
    
    Revenues
    
    ExpensesU.S. dollars
    
    
    88
    %
    
    
    63
    %NIS
    
    
    0
    %
    
    
    29
    %Euros
    
    
    12
    %
    
    
    7
    %Other
    
    
    0
    %
    
    
    1
    %
   If we lose the services of our key management or scientific personnel, scientific collaborators or
other advisors, our business would suffer.
  25




---



##### Table of Contents



If product liability lawsuits are brought against us, we might incur substantial liabilities and
could be required to limit the commercialization of our products.
   Our operations involve biological and hazardous materials that may cause injury for which we could
be liable for damages.
   Variable demand by governments for passive immunotherapy products for bio-defense applications or
our inability to obtain additional government contracts for such products may reduce our revenues
from this area of our passive immunotherapy product line.
  
    
    fluctuations in government demand for passive immunotherapy products for
bio-defense applications influenced by budgetary preference and shifts in the perception
of the relevance of a bioterrorism threat;
    
    the termination of key government contracts;
    
    our success in obtaining additional government contracts through a bidding process;
and
    
    the development of new bio-defense products that are superior to or eliminate the
need for our products.
  26




---



##### Table of Contents



We may fail to maintain effective internal controls in accordance with section 404 of the
Sarbanes-Oxley Act of 2002.
  RISKS RELATED TO GOVERNMENT REGULATION
 The regulatory approval process for our product candidates is lengthy, and we may not be able to
obtain all of the regulatory approvals required to manufacture and commercialize our product
candidates.
    
    
    regulatory officials might interpret data from pre-clinical and clinical testing in
different ways than we and our collaboration partners interpret it and conclude that
additional data is required or that the product candidate is not safe and effective;
    
    regulatory agencies might not approve our manufacturing processes or facilities or
the processes or facilities of our collaboration partners; or
    
    regulatory agencies might change their approval polices or adopt new regulations
which can delay approval and add significant additional costs.
   27




---



##### Table of Contents



Post-approval manufacturing and marketing of our products is subject to substantial government
regulation and failure to comply with such regulation could result in fines and withdrawal of
approvals.
   We and our partners are prohibited from marketing our products for indications other than those
specifically approved by regulatory agencies. We could be subject to enforcement actions if we fail
to adhere to these restrictions.
   If we and our third-party suppliers do not maintain high standards of manufacturing in accordance
with cGMP and other manufacturing regulations, our development and commercialization activities
could suffer significant interruptions or delays.
  28




---



##### Table of Contents



RISKS RELATED TO OUR INTELLECTUAL PROPERTY
 We are dependent in part on our patents. The validity, enforceability and commercial value of our
rights under our patents are highly uncertain.
     For many of the technologies we employ in our business, we rely on maintaining competitively
sensitive know-how and other information as trade secrets, which may not sufficiently protect this
information. Disclosure of this information could impair our competitive position.
  Our commercial success depends significantly on our ability to operate without infringing the
patents and other proprietary rights of third parties.
  29




---



##### Table of Contents




    
    we may become liable for substantial damages for past infringement if a court
decides that our technologies infringe upon a competitors patent;
    
    a court may prohibit us from selling or licensing our product without a license
from the patent holder, which may not be available on commercially acceptable terms or at
all, or which may require us to pay substantial royalties or grant cross-licenses to our
patents; and
    
    we may have to redesign our product so that it does not infringe upon others
patent rights, which may not be possible or could require substantial funds or time.
   We may incur substantial costs as a result of litigation or other proceedings relating to patent
and other intellectual property rights.
   RISKS RELATED TO OUR COMMON STOCK
 The price of our common stock may be highly volatile or may decline regardless of our operating
performance.
   
    
    developments concerning Evicel, Quixil, the Fibrin Patch or any of our other
product candidates;
    
    new products introduced or announced by us or our competitors;
    
    announcements of technological innovations by us or our competitors;
    
    expiration or termination of licenses, research contracts or other collaboration
agreements;
    
    conditions or trends in the regulatory climate in the biopharmaceutical industry;
    
    intellectual property, product liability or other litigation against us;
    
    actual or anticipated variations in our operating results;
    
    changes in financial estimates by securities analysts;
    
    changes in the market valuations of similar companies; and
 30




---



##### Table of Contents




    
    sales of shares of our common stock, particularly sales by our officers, directors
and significant stockholders.
  The ownership interests of our officers, directors and largest stockholders could conflict with the
interests of our other stockholders.
  Certain provisions of Delaware law and our organizational documents could delay or discourage
takeover attempts that stockholders may consider favorable.
  
    
    allow the authorized number of directors to be changed only by resolution of our
board of directors,
    
    allow our board of directors to designate the terms of and issue, without
stockholder approval, series of preferred stock with voting or other rights or
preferences that could operate to dilute the stock ownership of a potential hostile
acquirer to prevent an acquisition that is not approved by our board of directors;
    
    require that stockholder action must be effected at a duly called stockholder
meeting and prohibit stockholder action by written consent;
    
    limit who may call meetings of our stockholders;
    
    require our stockholders to comply with advance notice procedures to nominate
candidates for election to our board of directors or to place stockholders proposals on
the agenda for consideration at meetings of stockholders; and
    
    require the approval of the holders of 80% of the outstanding shares of our capital
stock entitled to vote to amend certain provisions of our certificate of incorporation
and bylaws.
  Future sales of our common stock may cause the market price of our common stock to fall.
  31




---



##### Table of Contents



RISKS RELATED TO OUR OPERATIONS IN ISRAEL
 Political and military instability and other factors may adversely affect our operations in Israel.
   Our operations could be disrupted as a result of the obligation of key personnel in Israel to
perform military service.
  The Israeli government programs and tax benefits in which we have participated and in which we
currently participate, or from which we may receive benefits, require us to meet certain
conditions. These programs or benefits may be terminated or reduced in the future, which could
increase our costs.
   It may be difficult to enforce a U.S. judgment against us, our officers, directors and the Israeli
experts named in this prospectus outside the U.S., or to assert U.S. securities laws claims outside
of the U.S.
  32




---



##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
    
 
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  High
    
    Low2006April 20, 2006 through June 30, 2006
    
    $
    14.99
    
    
    $
    9.53July 1, 2006 through September 30, 2006
    
    $
    19.57
    
    
    $
    11.50October 1, 2006 through December 31, 2006
    
    $
    34.60
    
    
    $
    16.75 High
    
    Low2007January 1, 2007 through March 31, 2007
    
    $
    40.90
    
    
    $
    30.67April 1, 2007 through June 30, 2007
    
    $
    39.00
    
    
    $
    28.35July 1, 2007 through September 30, 2007
    
    $
    35.67
    
    
    $
    25.29October 1, 2007 through December 31, 2007
    
    $
    39.07
    
    
    $
    32.14
 33




---



##### Table of Contents



Holders of Common Stock
  Dividends
  Securities Authorized For Issuance Under Equity Compensation Plans
  Number of securitiesremaining available forWeighted- average
    
    future issuance underNumber of securities to
    
    exercise
    
    equity compensationbe issued upon exercise
    
    price of outstanding
    
    plans (excludingof outstanding options,
    
    options, warrants and
    
    securities reflected inPlan category
    
    warrants and rights
    
    rights
    
    the first column)Equity compensation plans approved by security holders
    
    
    882,067
    
    
    $
    19.85
    
    
    
    777,440Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    882,067
    
    
    $
    19.85
    
    
    
    777,440
 34




---



##### Table of Contents



Item 6. Selected Financial Data
  Year ended December 31,2005
    
    
    2006
    
    
    2007Operating ResultsTotal revenues
    
    $
    27.5
    
    
    $
    63.8
    
    
    $
    61.7Operating income (loss)
    
    
    (2.2
    )
    
    
    20.9
    
    
    
    5.9Net income (loss)
    
    
    (27.7
    )
    
    
    23.0
    
    
    
    11.9Net income (loss) for common stockholders
    
    
    (21.2
    )
    
    
    23.0
    
    
    
    11.9Net income (loss) per share:Basic net income (loss) per share of common stock
    
    $
    (2.01
    )
    
    $
    1.68
    
    
    $
    0.71Diluted net income (loss) per share of common stock
    
    
    (2.45
    )
    
    
    1.65
    
    
    
    0.69Capital expenditures
    
    
    
    
    
    $
    4.2
    
    
    $
    8.2Number of employees
    
    
    
    
    
    
    180
    
    
    
    212Financial PositionCash, cash equivalents and short-term investment
    
    
    
    
    
    $
    80.8
    
    
    $
    80.9Working capital
    
    
    
    
    
    
    94.9
    
    
    
    110.4Total assets
    
    
    
    
    
    
    121.6
    
    
    
    145.3Total debt
    
    
    
    
    
    
    1.2
    
    
    
    Stockholders equity
    
    
    
    
    
    
    96.1
    
    
    
    118.6
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operation
 GENERAL
    35




---



##### Table of Contents



EXECUTIVE OVERVIEW
     RESULTS OF OPERATIONS
 Revenues
 Year ended December 31,2005
    
    
    2006
    
    
    2007(U.S. dollars in millions)Revenues:Product sales
    
    $
    22.5
    
    
    $
    56.9
    
    
    $
    51.9Development revenues and grants
    
    
    5.0
    
    
    
    6.9
    
    
    
    9.8Total revenues
    
    $
    27.5
    
    
    $
    63.8
    
    
    $
    61.7
   Year ended December 31,2005
    
    
    2006
    
    
    2007(U.S. dollars in millions)Biosurgical productsProduct sales
    
    $
    7.0
    
    
    $
    13.4
    
    
    $
    19.3Development revenues
    
    
    4.0
    
    
    
    5.7
    
    
    
    8.811.0
    
    
    
    19.1
    
    
    
    28.1Passive immunotherapy productsProduct sales, other than VIG
    
    
    12.8
    
    
    
    22.1
    
    
    
    32.6VIG sales
    
    
    1.4
    
    
    
    21.2
    
    
    
    0.0Grants
    
    
    1.0
    
    
    
    1.2
    
    
    
    1.015.2
    
    
    
    44.5
    
    
    
    33.6Other products
    
    
    1.3
    
    
    
    0.2
    
    
    
    0.0Total
    
    $
    27.5
    
    
    $
    63.8
    
    
    $
    61.7
 36




---



##### Table of Contents



Biosurgical products
   Passive immunotherapy products
  Other products
  Cost of revenues and gross profit
 Year ended December 31,2005
    
    
    2006
    
    
    2007(U.S. dollars in millions)Cost of revenuesProduct sales
    
    $
    17.3
    
    
    $
    24.4
    
    
    $
    31.7Development revenues and grants
    
    
    4.0
    
    
    
    5.1
    
    
    
    6.0Total costs of revenues
    
    $
    21.3
    
    
    $
    29.5
    
    
    $
    37.7Gross profit
    
    $
    6.1
    
    
    $
    34.2
    
    
    $
    24.0Gross profit as a percentage of revenues
    
    
    22.1
    %
    
    
    53.6
    %
    
    
    39.0
    %
   Research and development, clinical and regulatory expenses, net
  Selling, marketing, general and administrative expenses
  37




---



##### Table of Contents



Financial income (expenses), net
  Other income (expense), net
  LIQUIDITY AND CAPITAL RESOURCES
 Working capital
 Year endedDecember 312006
    
    2007Working capital
    
    $
    94.9
    
    
    $
    110.4Cash, cash equivalents and short-term investment
    
    
    81.1
    
    
    
    80.9Trade receivables
    
    
    9.7
    
    
    
    23.0Inventories
    
    
    17.4
    
    
    
    20.5Trade payable
    
    
    7.5
    
    
    
    7.5
  38




---



##### Table of Contents



Cash flows
 Year endedDecember 312006
    
    2007Cash provided by (used in) operating activities
    
    $
    10.4
    
    
    $
    (0.8
    )Cash used in investing activities
    
    
    41.2
    
    
    
    25.8Cash provided by financing activities
    
    
    70.7
    
    
    
    6.4Capital expenditures
    
    
    4.3
    
    
    
    8.2
     Obligations and commitments
  Minimum payments due by periodLess than
    
    
    
    
    
    
    
    
    
    
    More thanConttractual obligation
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(U.S. dollars in millions)Operating leases(1)
    
    $
    19.7
    
    
    $
    3.5
    
    
    $
    6.3
    
    
    $
    3.5
    
    
    $
    6.5Purchase obligations(2)
    
    
    18.4
    
    
    
    10.6
    
    
    
    7.8
    
    
    
    
    
    
    
    Total
    
    $
    38.1
    
    
    $
    14.1
    
    
    $
    14.1
    
    
    $
    3.5
    
    
    $
    6.5
 
 (1)
    
    Consists of operating leases for our facilities and motor vehicles and assumes no exercise of
any option to extend these leases.(2)
    
    The amounts included in open purchase order commitments are subject to performance under the
purchase order by the supplier of the goods or services and do not become our obligation until
such performance is rendered. The amount shown is principally for the purchase of certain raw
materials under long term agreements only. Off-balance sheet arrangements
  Capital requirements
  39




---



##### Table of Contents



CORPORATE TAXATION
       CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
    
    revenue recognition;
    
    income taxes; and
    
    accounting for stock-based compensation and fair value of our common stock.
 Revenue recognition
   40




---



##### Table of Contents



Income taxes
   Accounting for stock-based compensation and fair value of our common stock
   41




---



##### Table of Contents



RECENT ACCOUNTING PRONOUNCEMENTS
  QUARTERLY FINANCIAL DATA
   First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    Quarter2007Revenue
    
    $
    14,169
    
    
    $
    11,158
    
    
    $
    15,827
    
    
    $
    20,551Gross profit
    
    
    5,404
    
    
    
    4,208
    
    
    
    6,253
    
    
    
    8,173Net income
    
    
    3,382
    
    
    
    1,537
    
    
    
    3,714
    
    
    
    3,307Net earnings per shareBasic
    
    
    0.20
    
    
    
    0.09
    
    
    
    0.22
    
    
    
    0.19Diluted
    
    
    0.20
    
    
    
    0.09
    
    
    
    0.21
    
    
    
    0.192006Revenue
    
    $
    11,303
    
    
    $
    16,079
    
    
    $
    18,339
    
    
    $
    18,044Gross profit
    
    
    5,155
    
    
    
    9,086
    
    
    
    10,904
    
    
    
    9,103Net income
    
    
    3,234
    
    
    
    5,311
    
    
    
    8,123
    
    
    
    6,390Net earnings per shareBasic
    
    
    0.30
    
    
    
    0.38
    
    
    
    0.54
    
    
    
    0.42Diluted
    
    
    0.29
    
    
    
    0.38
    
    
    
    0.53
    
    
    
    0.41
 42




---



##### Table of Contents



Fourth quarter results for 2006 and 2007
(unaudited, U.S. dollars in thousands, except per share amount)
 Three months ended December 312006
    
    
    2007Revenues:Product sales
    
    $
    15,684
    
    
    $
    17,542Development revenues and grants
    
    
    2,360
    
    
    
    3,009Total revenues
    
    
    18,044
    
    
    
    20,551Cost of revenues:Product sales
    
    
    6,845
    
    
    
    10,719Development revenues and grants
    
    
    2,096
    
    
    
    1,659Total cost of revenues
    
    
    8,941
    
    
    
    12,378Gross profit
    
    
    9,103
    
    
    
    8,173Research and development, clinical and regulatory expenses, net
    
    
    807
    
    
    
    1,377Selling, marketing, general and administrative expenses
    
    
    2,768
    
    
    
    5,033Operating income
    
    
    5,528
    
    
    
    1,763Financial income, net
    
    
    862
    
    
    
    1,544Net income
    
    $
    6,390
    
    
    $
    3,307Net income per share:Basic net income per share of common stock
    
    $
    0.42
    
    
    $
    0.19Diluted net income per share of common stock
    
    $
    0.41
    
    
    $
    0.19Weighted average number of shares of common stock outstanding
during the year used to compute basic net Income per share
    
    
    15,193,390
    
    
    
    16,972,886Weighted average number of shares of common stock outstanding
during the year used to compute diluted net Income per share
    
    
    15,601,221
    
    
    
    17,367,722
 Revenues fourth quarter for 2006 and 2007
 Three months ended December 312006
    
    
    2007Biosurgical productsProduct sales
    
    $
    4,260
    
    
    $
    6,515Development revenues
    
    
    1,808
    
    
    
    2,7076,068
    
    
    
    9,222Passive immunotherapy productsProduct sales other than VIG
    
    
    5,411
    
    
    
    11,027VIG sales
    
    
    6,014
    
    
    
    Grants
    
    
    551
    
    
    
    30211,976
    
    
    
    11,329Total
    
    $
    18,044
    
    
    $
    20,551
 43




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures
   Amount at
    
    Interest Rate atDecember 31,
    
    December 31,Term and Currency
    
    2007
    
    2007(amounts in thousands)Cash and cash equivalents U.S. $ deposits
    
    $
    23,058
    
    
    
    4.30
    %Cash and cash equivalents Euro deposit
    
    $
    1,737
    
    
    
    2.84
    %Cash and cash equivalents NIS deposits
    
    $
    1,075
    
    
    
    3.24
    %Cash and cash equivalents GBP deposits
    
    $
    15
    
    
    
    0.68
    %Short-term U.S. $ deposits
    
    $
    49,370
    
    
    
    4.86
    %Short-term U.S. $ deposits Auction rate securities
    
    $
    5,650
    
    
    
    6.51
    %Long-term U.S. $ deposits
    
    $
    2,234
    
    
    
    4.81
    %Long-term NIS deposits
    
    $
    195
    
    
    
    4.08
    %Long-term Euro deposits
    
    $
    80
    
    
    
    1.55
    %
   
 Item 8. Financial Statements and Supplementary Data
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageAudited Consolidated Financial Statements at December 31, 2007Management Report of Internal Control over Financial Reporting
    
    
    45Report of Independent Registered Public Accounting Firm
    
    
    46Report of Independent Registered Public Accounting Firm on
Management Assessment of Internal Control over Financial Reporting
    
    
    47Consolidated balance sheets
    
    
    48Consolidated statements of operations
    
    
    49Statements of changes in stockholders equity (deficiency)
    
    
    50Consolidated statements of cash flows
    
    
    51Notes to consolidated financial statements
    
    
    53
 44




---



##### Table of Contents



MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  
    
    pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets,
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and directors, and
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
    Robert Taub
    
    
    
    
    
    Ilanit TamanChief Executive Officer
    
    
    
    
    
    Corporate Controller
 45




---



##### Table of Contents



Tel-Aviv, Israel
    
    
    
    
    
    /s/ KOST FORER GABBAY & KASIERERMarch 14, 2008
    
    
    
    
    
    A Member of Ernst & Young Global
 46




---



##### Table of Contents



Tel-Aviv, Israel
    
    
    
    
    
    KOST FORER GABBAY & KASIERERMarch 14, 2008
    
    
    
    
    
    A Member of Ernst & Young Global
 47




---



##### Table of Contents



Consolidated balance sheets
 December 31,Note
    
    
    2006
    
    
    2007(U.S. dollars in thousands)ASSETSCash and cash equivalents
    
    
    
    
    
    $
    45,892
    
    
    $
    25,885Short-term investments
    
    
    3
    
    
    
    35,193
    
    
    
    55,020Trade receivables, net of allowance for doubtful accounts of $15 and $38, respectively
    
    
    
    
    
    
    9,748
    
    
    
    23,052Prepaid expenses and other current assets
    
    
    4
    
    
    
    2,453
    
    
    
    1,624Inventory
    
    
    5
    
    
    
    17,419
    
    
    
    20,498Current assets
    
    
    
    
    
    
    110,705
    
    
    
    126,079Property, plant and equipment, net
    
    
    6
    
    
    
    7,692
    
    
    
    14,905Long-term investments
    
    
    
    
    
    
    2,198
    
    
    
    1,211Long-term receivables
    
    
    
    
    
    
    553
    
    
    
    1,563Other assets
    
    
    7
    
    
    
    497
    
    
    
    1,526Total assets
    
    
    
    
    
    $
    121,645
    
    
    $
    145,284LIABILITIES AND STOCKHOLDERS EQUITYCurrent maturities of long-term loans
    
    
    
    
    
    $
    801
    
    
    $
    0Accounts payable and accruals:Trade
    
    
    
    
    
    
    7,498
    
    
    
    7,466Other
    
    
    8
    
    
    
    7,481
    
    
    
    8,229Current liabilities
    
    
    
    
    
    
    15,780
    
    
    
    15,695Long-term loans, net of current maturities
    
    
    9
    
    
    
    394
    
    
    
    0Deferred revenues
    
    
    
    
    
    
    8,472
    
    
    
    9,789Other long-term liabilities
    
    
    10
    
    
    
    915
    
    
    
    1,187Long-term liabilities
    
    
    
    
    
    
    9,781
    
    
    
    10,976Common stock of $0.01 par value
    
    
    12Shares authorized: 2007  43,636,364; 2006  43,636,364Shares issued: 2007  17,000,451 ; 2006  16,583,284Shares outstanding: 2007  16,993,347 ; 2006  16,576,159
    
    
    
    
    
    
    166
    
    
    
    170Preferred stock of $0.01 par valueShares authorized: 2007  7,272,727; 2006 7,272,727Shares issued and outstanding: 2007 and 2006  None
    
    
    
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    
    
    
    
    167,546
    
    
    
    177,955Treasury stock, at cost (2007  7,125 ; 2006  7,125)
    
    
    
    
    
    
    (44
    )
    
    
    (44
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (2,570
    )
    
    
    (2,394
    )Accumulated deficit
    
    
    
    
    
    
    (69,014
    )
    
    
    (57,074
    )Stockholders equity
    
    
    
    
    
    
    96,084
    
    
    
    118,613Total liabilities and stockholders equity
    
    
    
    
    
    $
    121,645
    
    
    $
    145,284
 The accompanying notes are an integral part of the financial statements.
 48




---



##### Table of Contents



Consolidated statements of operations
 Year ended December 31,Note
    
    
    2005
    
    
    2006
    
    
    2007(U.S. dollars in thousands,except share and per share data)Revenues:Product sales
    
    
    
    
    
    $
    22,478
    
    
    $
    56,925
    
    
    $
    51,903Development revenues and grants
    
    
    
    
    
    
    5,021
    
    
    
    6,840
    
    
    
    9,802Total revenues
    
    
    
    
    
    
    27,499
    
    
    
    63,765
    
    
    
    61,705Cost of revenues:Product sales
    
    
    
    
    
    
    17,378
    
    
    
    24,405
    
    
    
    31,700Development revenues and grants
    
    
    
    
    
    
    3,969
    
    
    
    5,112
    
    
    
    5,966Total cost of revenues
    
    
    
    
    
    
    21,347
    
    
    
    29,517
    
    
    
    37,666Gross profit
    
    
    
    
    
    
    6,152
    
    
    
    34,248
    
    
    
    24,039Research and development, clinical and regulatory expenses, net
    
    
    
    
    
    
    2,828
    
    
    
    3,397
    
    
    
    4,475Selling, marketing, general and administrative expenses
    
    
    
    
    
    
    5,514
    
    
    
    9,902
    
    
    
    13,642Operating income (loss)
    
    
    
    
    
    
    (2,190
    )
    
    
    20,949
    
    
    
    5,922Financial income (expenses), net
    
    
    15
    
    
    
    (25,522
    )
    
    
    1,319
    
    
    
    5,114Other income
    
    
    16
    
    
    
    
    
    
    
    790
    
    
    
    904Net income (loss)
    
    
    
    
    
    $
    (27,712
    )
    
    
    23,058
    
    
    $
    11,940Accrued dividend and induced conversion of Preferred stock and
warrants
    
    
    
    
    
    
    6,491
    
    
    
    
    
    
    
    Net income (loss) for common stockholders
    
    
    
    
    
    $
    (21,221
    )
    
    $
    23,058
    
    
    $
    11,940Net income (loss) per share:
    
    
    17Basic net income (loss) per share of common stock
    
    
    
    
    
    $
    (2.01
    )
    
    $
    1.68
    
    
    $
    0.71Diluted net income (loss) per share of common stock
    
    
    
    
    
    $
    (2.45
    )
    
    $
    1.65
    
    
    $
    0.69Weighted average number of shares of common stock outstanding
during the year used to compute basic net Income (loss) per
share
    
    
    
    
    
    
    10,562,885
    
    
    
    13,689,768
    
    
    
    16,877,095Weighted average number of shares of common stock outstanding
during the year used to compute diluted net Income (loss) per
share
    
    
    
    
    
    
    10,578,620
    
    
    
    14,011,558
    
    
    
    17,315,950
 The accompanying notes are an integral part of the financial statements.
 49




---



##### Table of Contents



Consolidated statements of changes in stockholders equity (deficiency)
 Common stock
    
    
    Additional
    
    
    Deferred
    
    
    
    
    
    
    Accumulated other
    
    
    
    
    
    
    TotalNumber of
    
    
    Share
    
    
    paid-in
    
    
    stock-based
    
    
    Treasury
    
    
    comprehensive
    
    
    Accumulated
    
    
    comprehensiveshares
    
    
    capital
    
    
    capital
    
    
    compensation
    
    
    stock
    
    
    income (loss)
    
    
    deficit
    
    
    Income (loss)
    
    
    Total(U.S. dollars in thousands, except share and per share data)Balance at January 1, 2005
    
    
    3,469,451
    
    
    $
    35
    
    
    $
    28,661
    
    
    $
    (25
    )
    
    $
    (44
    )
    
    $
    (3,922
    )
    
    $
    (70,851
    )
    
    
    
    
    
    $
    (46,146
    )Recapitalization Agreement:Conversion of convertible notes
    
    
    6,518,641
    
    
    
    65
    
    
    
    54,623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,688Conversion of Preferred stock
    
    
    875,197
    
    
    
    9
    
    
    
    5,329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,338Conversion of warrants
    
    
    8,006
    
    
    
    
    
    
    
    (1,785
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,785
    )Issuance of restricted shares of common stock
    
    
    7,576
    
    
    
    
    
    
    
    104
    
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred stock- based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Deferred compensation related to employee stock option grants
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation to non- employees
    
    
    
    
    
    
    
    
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282Warrants that were issued in contemplation with long-term loan
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,712
    )
    
    $
    (27,712
    )
    
    
    (27,712
    )Foreign currency translation Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,156
    
    
    
    
    
    
    
    3,156
    
    
    
    3,156Induced conversion of Preferred stock and warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,491
    
    
    
    
    
    
    
    6,491Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (24,556
    )Balance at December 31, 2005
    
    
    10,878,871
    
    
    $
    109
    
    
    $
    87,314
    
    
    $
    (104
    )
    
    $
    (44
    )
    
    $
    (766
    )
    
    $
    (92,072
    )
    
    
    
    
    
    $
    (5,563
    )Exercise of Options and Warrants
    
    
    214,924
    
    
    
    2
    
    
    
    782
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    784Issuance of shares in IPO
    
    
    3,953,125
    
    
    
    40
    
    
    
    34,085
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34,125Follow-on offering of shares
    
    
    1,500,000
    
    
    
    15
    
    
    
    44,318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,333Stock-based compensation to employees
    
    
    36,364
    
    
    
    *
    
    
    
    510
    
    
    
    104
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    614Stock-based compensation to non-employees
    
    
    
    
    
    
    
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    537Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,058
    
    
    
    23,058
    
    
    
    23,058Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,804
    )
    
    
    
    
    
    
    (1,804
    )
    
    
    (1,804
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    21,254Balance at December 31, 2006
    
    
    16,583,284
    
    
    $

    166
    
    
    $
    167,546
    
    
    $
    
    
    
    $
    (44
    )
    
    $
    (2,570
    )
    
    $
    (69,014
    )
    
    
    
    
    
    $
    96,084Exercise of Options and Warrants
    
    
    150,058
    
    
    
    2
    
    
    
    1,247
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,249Follow-on underwriters allotment of shares
    
    
    235,109
    
    
    
    2
    
    
    
    7,124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,126Grant of share capital
    
    
    5,000
    
    
    
    *
    
    
    
    176
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    176Stock-based compensation to employees
    
    
    27,000
    
    
    
    *
    
    
    
    1,707
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,708Stock-based compensation to non- employees
    
    
    
    
    
    
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    155Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,940
    
    
    
    11,940
    
    
    
    11,940Foreign currency translation adjustments
    
    

    
    
    

    
    
    

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172
    
    
    
    
    
    
    
    172
    
    
    
    172Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    4Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,412Balance at December 31, 2007
    
    
    17,000,451
    
    
    $
    170
    
    
    $
    177,955
    
    
    
    
    
    
    $
    (44
    )
    
    $
    (2,394
    )
    
    $
    (57,074
    )
    
    
    
    
    
    $
    118,613
 * Represents
an amount less than $1
 The accompanying notes are an integral part of the financial statements.




---



##### Table of Contents



Consolidated statements of cash flows
 Year ended December 31,2005
    
    
    2006
    
    
    2007(U.S. dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (27,712
    )
    
    $
    23,058
    
    
    $
    11,940Adjustments required to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation of property, plant and equipment
    
    
    762
    
    
    
    910
    
    
    
    1,009Amortization of intangible assets
    
    
    29
    
    
    
    59
    
    
    
    272Amortization of deferred charges
    
    
    148
    
    
    
    148
    
    
    
    Gain from sale of property, plant and equipment
    
    
    
    
    
    
    (5
    )
    
    
    Increase (decrease) in accrued severance pay, net
    
    
    (52
    )
    
    
    36
    
    
    
    98Accrued interest and exchange rates differences, net
    
    
    70
    
    
    
    104
    
    
    
    (1,114
    )Non cash stock-based payment
    
    
    332
    
    
    
    1,151
    
    
    
    1,887Non cash other income
    
    
    
    
    
    
    (790
    )
    
    
    (904
    )Inventory write-downs
    
    
    100
    
    
    
    95
    
    
    
    92Unrealized foreign exchange differences, net
    
    
    3,007
    
    
    
    (1,173
    )
    
    
    (107
    )Interest and amortization of discount on convertible notes
    
    
    296
    
    
    
    (181
    )
    
    
    Financing charges related to inducement and extinguishment of
convertible notes and warrants
    
    
    20,932
    
    
    
    
    
    
    
    Decrease (increase) in trade receivables, net
    
    
    171
    
    
    
    (4,384
    )
    
    
    (13,235
    )Decrease (increase) in prepaid expenses and other current assets
    
    
    542
    
    
    
    (1,625
    )
    
    
    (157
    )Increase in inventory
    
    
    (53
    )
    
    
    (9,868
    )
    
    
    (2,248
    )Increase (decrease) in accounts payable and accruals:Trade
    
    
    (2,086
    )
    
    
    373
    
    
    
    (429
    )Other
    
    
    (176
    )
    
    
    1,382
    
    
    
    1,083Deferred revenues
    
    
    277
    
    
    
    1,130
    
    
    
    1,014Net cash provided by (used in) operating activities
    
    
    (3,413
    )
    
    
    10,420
    
    
    
    (799
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (973
    )
    
    
    (4,039
    )
    
    
    (7,070
    )Proceeds from sale of property, plant and equipment
    
    
    3
    
    
    
    13
    
    
    
    Investment in available for sale securities
    
    
    
    
    
    
    (29,100
    )
    
    
    (16,750
    )Redemption of available for sale securities
    
    
    
    
    
    
    3,000
    
    
    
    19,931Investment in short term investments
    
    
    
    
    
    
    (17,950
    )
    
    
    (70,295
    )Redemption of short term investments
    
    
    
    
    
    
    9,120
    
    
    
    47,100Investment in long term deposits
    
    
    279
    
    
    
    (2,291
    )
    
    
    (846
    )Redemption of long term deposits
    
    
    
    
    
    
    
    
    
    
    2,198Investment in intangible assets
    
    
    (585
    )
    
    
    
    
    
    
    (100
    )Net cash used in investing activities
    
    $
    (1,276
    )
    
    $
    (41,247
    )
    
    $
    (25,832
    )
 The accompanying notes are an integral part of the financial statements.
 51




---



##### Table of Contents



Consolidated statements of cash flows
 Year ended December 31,2005
    
    
    2006
    
    
    2007(U.S. dollars in thousands)Cash flows from financing activities:Short-term credit from banks, net
    
    $
    129
    
    
    $
    (2,243
    )
    
    
    Debt issuance costs
    
    
    (161
    )
    
    
    
    
    
    
    Proceeds from Initial Public Offering
    
    
    
    
    
    
    36,764
    
    
    
    Proceeds from follow-on offering and underwriters allotments
    
    
    
    
    
    
    45,120
    
    
    
    7,126Costs relating to Initial Public Offering and the follow-on
    
    
    (493
    )
    
    
    (2,147
    )
    
    
    (788
    )Proceeds from long-term loans
    
    
    7,100Repayment of long-term loans
    
    
    (1,024
    )
    
    
    (5,643
    )
    
    
    (1221
    )Repayment of convertible promissory notes
    
    
    
    
    
    
    (1,967
    )Proceeds from exercise of options and warrants
    
    
    75
    
    
    
    784
    
    
    
    1,249Net cash provided by financing activities
    
    
    5,626
    
    
    
    70,668
    
    
    
    6,366Translation differences from cash balances of subsidiary
    
    
    68
    
    
    
    (443
    )
    
    
    258Increase (decrease) in cash and cash equivalents
    
    
    1,005
    
    
    
    39,398
    
    
    
    (20,007
    )Balance of cash and cash equivalents at beginning of period
    
    
    5,489
    
    
    
    6,494
    
    
    
    45,892Balance of cash and cash equivalents at end of period
    
    $
    6,494
    
    
    $
    45,892
    
    
    $
    25,885(1) In connection with the Recapitalization Agreement, the Company recorded the following:Issuance of common stock
    
    $
    74Conversion of convertible promissory notes
    
    
    (9,501
    )Conversion of convertible notes
    
    
    (24,407
    )Conversion of preferred stock
    
    
    (5,313
    )Conversion of warrants
    
    
    1,785Common stock issuance costs
    
    
    127Additional paid-in capital
    
    
    58,167Financing charges related to inducement and extinguishment of convertible notes
    
    $
    20,932(2) Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    428
    
    
    $
    2,337
    
    
    $
    67(3) Non-cash investing and financing activities:Non-cash investments in property, plant and equipment
    
    $
    
    
    
    $
    218
    
    
    $
    1,148Non-cash investments in costs relating to IPO deferred charges
    
    $
    605
    
    
    $
    788
    
    
    $
    
 The accompanying notes are an integral part of the financial statements.
 52




---



##### Table of Contents



U.S. dollars in thousands except share and per share data
 NOTE 1: THE COMPANY
   NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
            
    53




---



##### Table of Contents




    
    Raw materials and products in progresson the basis of specific costs.
    
    Finished products include material, labor and manufacturing costs.
       %Machinery and equipment
    
    
    10-33Office furniture and equipment
    
    
    6-20Computers and software
    
    
    33
      Revenue from Product Sales
  54




---



##### Table of Contents



Development Revenues and Grants
  
    
    Services  when services were rendered or costs were incurred, the amounts are
determinable and collectibility is reasonably assured.
    
    Products  when products are shipped or consumed, price is fixed or determinable, no
further obligation exists and collectibility is reasonably assured.
    
    Grants  when research and development expenses are incurred. Grant payments received
but not yet earned are recorded as deferred revenues.
            55




---



##### Table of Contents



NOTE 3: SHORT-TERM INVESTMENTS
 Averageinterest rate atDecember 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2007Auction rate securities
    
    
    6.51
    %
    
    $
    8,830
    
    
    $
    5,650Short-term deposits
    
    
    5.01
    %
    
    
    26,363
    
    
    
    45,525Corporate bonds
    
    
    4.71
    %

    
    
    
    
    
    
    3,845$
    35,193
    
    
    $
    55,020
 NOTE 4: PREPAID EXPENSES AND OTHER CURRENT ASSETS
 December 31,2006
    
    
    2007Restricted cash
    
    $
    250
    
    
    $
    Government
authorities
    
    
    306
    
    
    
    581FDA prepaid
fees
    
    
    347
    
    
    
    490Advances to
suppliers
    
    
    123
    
    
    
    80Prepaid expenses
and other
    
    
    1,427
    
    
    
    473$
    2,453
    
    
    $
    1,624
 56




---



##### Table of Contents



NOTE 5: INVENTORY
 December 31,2006
    
    
    2007Raw materials
    
    $
    9,996
    
    
    $
    13,455Products in progress
    
    
    849
    
    
    
    2,227Finished products
    
    
    6,574
    
    
    
    4,816$
    17,419
    
    
    $
    20,498
   NOTE 6: PROPERTY, PLANT AND EQUIPMENT, NET
 December 31,2006
    
    
    2007Cost:Machinery and equipment
    
    $
    7,012
    
    
    $
    9,082Office furniture and equipment
    
    
    647
    
    
    
    829Computers and software
    
    
    756
    
    
    
    963Vehicles
    
    
    95
    
    
    
    102Leasehold improvements
    
    
    351
    
    
    
    652Construction in progress
    
    
    4,099
    
    
    
    9,6328,861
    
    
    
    21,260Accumulated depreciation:Machinery and equipment
    
    
    3,970
    
    
    
    4,825Office furniture and equipment
    
    
    525
    
    
    
    587Computers and software
    
    
    472
    
    
    
    543Vehicles
    
    
    66
    
    
    
    79Leasehold improvements
    
    
    235
    
    
    
    3215,268
    
    
    
    6,355Property, plant and equipment, net
    
    $
    7,692
    
    
    $
    14,905
   NOTE 7: OTHER ASSETS
 December 31,2006
    
    
    2007Intellectual property rights
    
    $
    497
    
    
    $
    439Right of first refusal
    
    
    
    
    
    
    1,087$
    497
    
    
    $
    1,526
   57




---



##### Table of Contents



NOTE 8: ACCOUNTS PAYABLE AND ACCRUALS  OTHER
 December 31,2006
    
    
    2007Deferred revenues, current portion
    
    $
    4,096
    
    
    $
    3,794Payroll and related expenses
    
    
    2,049
    
    
    
    2,956Payable to government authorities
    
    
    355
    
    
    
    714Accrued expenses and other
    
    
    981
    
    
    
    765$
    7,481
    
    
    $
    8,229
 NOTE 9: LONG-TERM LOANS
 December 31,2006
    
    
    2007Bank loans
    
    $
    1,195
    
    
    $
    Less current maturities
    
    
    (801
    )
    
    
    $
    394
    
    
    $
    
  NOTE 10: OTHER LONG-TERM LIABILITIES
 December 31,2006
    
    
    2007Long-term payable
    
    $
    650
    
    
    $
    782Accrued severance pay
    
    
    265
    
    
    
    405Total
    
    $
    915
    
    
    $
    1,187
   NOTE 11: COMMITMENTS AND CONTINGENT LIABILITIES
 Leases
   2008
    
    $
    3,4702009
    
    $
    3,2372010
    
    $
    3,0802011
    
    $
    1,8702012 and thereafter
    
    $
    8,089
  58




---



##### Table of Contents



Other Obligations
    NOTE 12: STOCKHOLDERS EQUITY
         59




---



##### Table of Contents



b.
    
    Recapitalization agreement:
 1.
    
    On January 13, 2005, the Company, its stockholders, all Convertible Note holders and
certain Convertible Promissory Note holders entered into an agreement for the conversion of
securities of the Company into common stock (the Recapitalization Agreement) and certain
other agreements regarding stockholders rights.2.
    
    Pursuant to the Recapitalization Agreement, the Company exchanged all of the
Convertible Notes, part of the Convertible Promissory Notes and certain warrants that were
issued in connection with the Convertible Notes, into shares of common stock. In addition,
the Company induced the conversion of its Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock into shares of common stock. The number of shares of common
stock issued to each instrument holder was stated in the Recapitalization Agreement between
the Company and all participating investors.3.
    
    The financial statements for the year ended December 31, 2005 included financing
charges in the amount of $20,932 related to the induced conversion of the Convertible Notes
as required under SFAS 84, Induced Conversion and the extinguishment of the Convertible
Promissory Notes not readily convertible on the recapitalization date, as required by APB
Opinion No. 26, Early Extinguishments of Debt.In addition, the financial statements included a charge of $6,491 related to the excess
carrying amount of preferred stock and warrants over the value of common stock received by
their holders upon conversion of preferred stock and warrants pursuant to the
Recapitalization Agreement as required by EITF D-42, The Effect on the Calculation of
Earnings per Share for the Redemption or Induced Conversion of Preferred Stock and EITF
D-53, Computation of Earnings per Share for a Period that Includes a Redemption or an
Induced Conversion of a Portion of a Class of Preferred Stock.
 c.
    
    Warrants
     d.
    
    Treasury stockIn October 2002, 7,125 shares of common stock were repurchased by the Company for $44. The
amount was recorded as treasury stock, at cost.
 60




---



##### Table of Contents



NOTE 13: STOCK OPTION PLANS
    Stock option plans and stock options:
       61




---



##### Table of Contents



Year ended December 31,2006
    
    2007Exercise prices
    
    $
    10.0031.44
    
    
    $
    32.0538.78Expected term (years)
    
    
    5.756.25
    
    
    
    6.25Interest rates
    
    
    4.51%5.20
    %
    
    
    4.12%5.08
    %Expected volatility
    
    
    56%57
    %
    
    
    51%55
    %Expected forfeiture rate
    
    
    4%28
    %
    
    
    11%   31
    %Dividend yield
    
    
    0
    %
    
    
    0
    %Fair value at grant date
    
    $
    6.2718.34
    
    
    $
    17.3922.26
   Year Ended December 31,2005
    
    
    2006
    
    
    2007Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    Weightedaverage
    
    
    Aggregate
    
    
    
    
    
    
    average
    
    
    Aggregate
    
    
    
    
    
    
    average
    
    
    Aggregateexercise
    
    
    Intrinsic
    
    
    
    
    
    
    exercise
    
    
    Intrinsic
    
    
    
    
    
    
    exercise
    
    
    IntrinsicNumber
    
    
    price
    
    
    Value
    
    
    Number
    
    
    price
    
    
    Value
    
    
    Number
    
    
    price
    
    
    ValueBalance outstanding at
beginning of year
    
    
    226,363
    
    
    $
    8.39
    
    
    
    
    
    
    
    591,927
    
    
    $
    8.84
    
    
    
    
    
    
    
    547,729
    
    
    $
    12.01
    
    
    $
    46Changes during the year:Granted
    
    
    373,200
    
    
    $
    9.35
    
    
    
    
    
    
    
    204,092
    
    
    $
    16.99
    
    
    $
    46
    
    
    
    364,700
    
    
    $
    34.91
    
    
    
    Forfeited
    
    
    (7,636
    )
    
    $
    20.30
    
    
    
    
    
    
    
    (120,504
    )
    
    $
    8.08
    
    
    
    
    
    
    
    (106,034
    )
    
    $
    22.77Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (127,786
    )
    
    $
    6.14
    
    
    
    
    
    
    
    (52,603
    )
    
    $
    16.32Balance outstanding at end
of year
    
    
    591,927
    
    
    $
    8.84
    
    
    
    
    
    
    
    547,729
    
    
    $
    12.01
    
    
    $
    46
    
    
    
    753,792
    
    
    $
    21.27
    
    
    $
    46Balance exercisable at end
of year
    
    
    252,172
    
    
    $
    8.61
    
    
    
    
    
    
    
    253,046
    
    
    $
    7.31
    
    
    
    
    
    
    
    281,316
    
    
    $
    8.08Vested and expected to vest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427,069
    
    
    $
    12.22
    
    
    
    
    
    
    
    607,458
    
    
    $
    22.11
  Weighted
    
    
    
    
    
    
    
    
    
    WeightedOptions
    
    average
    
    
    
    
    
    Options
    
    averageoutstanding
    
    remaining
    
    Weighted
    
    exercisable
    
    exerciseat
    
    contractual
    
    average
    
    at
    
    price ofDecember 31,
    
    life
    
    exercise
    
    December 31,
    
    optionsExercise price
    
    2007
    
    (in years)
    
    price
    
    2007
    
    exercisable$35.6738.78
    
    
    148,000
    
    
    
    9.73
    
    
    $
    36.71
    
    
    
    
    
    
    $19.4134.75
    
    
    215,046
    
    
    
    9.23
    
    
    $
    32.80
    
    
    
    11,637
    
    
    $
    30.28$12.53-16.33
    
    
    143,417
    
    
    
    7.31
    
    
    $
    14.24
    
    
    
    65,986
    
    
    $
    14.01$10-12.27
    
    
    49,965
    
    
    
    8.26
    
    
    $
    11.82
    
    
    
    6,329
    
    
    $
    12.11$2.75-6.19
    
    
    197,364
    
    
    
    4.39
    
    
    $
    4.65
    
    
    
    197,364
    
    
    $
    4.65753,792
    
    
    
    
    
    
    $
    21.27
    
    
    
    281,316
    
    
    $
    8.08
   Stock-based payments to employees
  62




---



##### Table of Contents



Number ofSharesOutstanding at December 31, 2006
    
    
    Granted
    
    
    71,438Forfeitures
    
    
    (5,000
    )Cancelled
    
    
    (665
    )Outstanding at December 31, 2007
    
    
    65,773Expected to vest
    
    
    45,894
 Stock options to non-employees
    Year ended December 31,2006
    
    2007Exercise prices
    
    $
    12.27$13.75
    
    
    $
    12.27$33.44Expected term (years)
    
    
    1.5  8
    
    
    
    0.74  7.76Interest rates
    
    
    4.7%  4.9%
    
    
    
    3.4%  5.0%Expected volatility
    
    
    46%  60%
    
    
    
    39%  59%Dividend yield
    
    
    0%
    
    
    
    0%
 63




---



##### Table of Contents



Options and
    
    Exercisewarrants for
    
    price
    
    Options andcommon
    
    per
    
    warrantsIssuance date
    
    stock
    
    share
    
    exercisableFebruary 1998
    
    
    5,213
    
    
    $
    15.38
    
    
    
    5,213October 2004
    
    
    36,364
    
    
    $
    11.50
    
    
    
    36,364January 2005
    
    
    2,175
    
    
    $
    11.50
    
    
    
    2,175January 2005
    
    
    60,091
    
    
    $
    6.19
    
    
    
    60,091December 2005
    
    
    8,182
    
    
    $
    13.75
    
    
    
    June 2006
    
    
    3,750
    
    
    $
    12.27
    
    
    
    July 2007
    
    
    12,500
    
    
    $
    33.44
    
    
    
    128,275
    
    
    
    
    
    
    
    103,843
  NOTE 14: TAXES ON INCOME
   Year ended December 31,2005
    
    
    2006
    
    
    2007Domestic
    
    $
    (23,050
    )
    
    $
    (6,188
    )
    
    $
    (1,705
    )Foreign
    
    
    (4,662
    )
    
    
    29,246
    
    
    
    13,645Total
    
    $
    (27,712
    )
    
    $
    23,058
    
    
    $
    11,940
    64




---



##### Table of Contents



Deferred income taxes
  December 31,2006
    
    
    2007Deferred tax assets, reserves and allowance
    
    $
    2,051
    
    
    $
    2,657Net operating loss carryforwardU.S.
    
    
    10,466
    
    
    
    2,664Net operating loss carryforwardBelgium
    
    
    5,732
    
    
    
    4,395Deferred tax asset before valuation allowance
    
    
    18,249
    
    
    
    9,716Valuation allowance
    
    
    (18,249
    )
    
    
    (9,716
    )Net deferred tax asset
    
    $
    
    
    
    $
    
    Reconciliation
of the theoretical tax expense
  Open tax audit years
   65




---



##### Table of Contents



NOTE 15: FINANCIAL INCOME (EXPENSE), NET
 Year ended December 31,2005
    
    
    2006
    
    
    2007Financial income:Interest on short-term investments
    
    $
    157
    
    
    $
    1,345
    
    
    $
    4,562Foreign currency translation adjustments, net
    
    
    
    
    
    
    2,356
    
    
    
    758157
    
    
    
    3,701
    
    
    
    5,320Financial expense:Interest on loans and bank credit and others
    
    
    (347
    )
    
    $
    (590
    )
    
    $
    (206
    )Interest and amortization of discount on convertible notes and convertible promissory notes
    
    
    (600
    )
    
    
    (1,591
    )
    
    
    Foreign currency translation adjustments, net
    
    
    (3,149
    )
    
    
    
    
    
    
    Financing charges related to inducement and extinguishment of convertible notes
and warrants
    
    
    (20,932
    )
    
    
    
    
    
    
    Amortization of deferred issuance costs
    
    
    (651
    )
    
    
    (201
    )
    
    
    (25,679
    )
    
    
    (2,382
    )
    
    
    (206
    )Net financial income (expense)
    
    $
    (25,522
    )
    
    $
    1,319
    
    
    $
    5,114
 NOTE 16: OTHER INCOME
 Year endedDecember 31,2005
    
    

2006
    
    

2007Gain from termination of agreement with distributor
    
    $
    
    
    
    $
    790
    
    
    $
    904
  NOTE 17: NET INCOME (LOSS) PER SHARE
  a.
    
    Numerator:
 Year ended December 31,2005
    
    

2006
    
    

2007Net income (loss) available to common stockholders for basic net income (loss)
per share
    
    $
    (21,221
    )
    
    $
    23,058
    
    
    $
    11,940Induced conversion of Preferred stock
    
    
    (4,706
    )
    
    
    
    
    
    
    Net income (loss) available to common stockholders for diluted net loss per share
    
    $
    (25,972
    )
    
    $
    23,058
    
    
    $
    11,940
 66




---



##### Table of Contents



b.
    
    Denominator:
 Year ended December 31,2005
    
    

2006
    
    

2007Number of sharesWeighted average number of shares of common stock for basic net
income (loss) per share of common stock
    
    
    10,562,885
    
    
    
    13,689,768
    
    
    
    16,877,095Effect of dilutive securities: shares of preferred stock
    
    
    15,735
    
    
    
    
    
    
    
    Options, warrants and restricted shares to employees and
non-employees service providers
    
    
    
    
    
    
    321,790
    
    
    
    438,855Denominator for diluted net income (loss) per share of common stock
    
    
    10,578,620
    
    
    
    14,011,558
    
    
    
    17,315,950
  NOTE 18: MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
  Geographic Segments
  Year ended December 31,2005
    
    

2006
    
    

2007Revenues from unaffiliated customers:Israel
    
    $
    13,656
    
    
    $
    21,118
    
    
    $
    28,196United States
    
    
    9,545
    
    
    
    15,433
    
    
    
    24,477Europe
    
    
    3,831
    
    
    
    25,882
    
    
    
    7,954Central and Latin America
    
    
    410
    
    
    
    1,255
    
    
    
    1,037Others
    
    
    57
    
    
    
    77
    
    
    
    41Total
    
    $
    27,499
    
    
    $
    63,765
    
    
    $
    61,705
 December 31,2006
    
    

2007Long-lived assets:Israel
    
    $
    7,672
    
    
    $
    14,662United States
    
    
    7
    
    
    
    217Europe
    
    
    13
    
    
    
    26Total
    
    $
    7,692
    
    
    $
    14,905
 Product Line Information
  Year ended December 31,2005
    
    

2006
    
    

2007Biosurgical productsProduct sales
    
    $
    6,979
    
    
    $
    13,443
    
    
    $
    19,301Development revenues
    
    
    4,000
    
    
    
    5,665
    
    
    
    8,78010,979
    
    
    
    19,108
    
    
    
    28,081Passive immunotherapy productsProduct sales
    
    
    14,195
    
    
    
    43,321
    
    
    
    32,596Grants
    
    
    1,021
    
    
    
    1,175
    
    
    
    1,02115,216
    
    
    
    44,496
    
    
    
    33,617Other products
    
    
    1,304
    
    
    
    161
    
    
    
    7Total
    
    $
    27,499
    
    
    $
    63,765
    
    
    $
    61,705
  67




---



##### Table of Contents



Revenues from major customers
  2005
    
    
    2006
    
    
    2007% of consolidated revenuesCustomer A
    
    
    36
    
    
    
    27
    
    
    
    40Customer B
    
    
    21
    
    
    
    14
    
    
    
    22Customer C
    
    
    12
    
    
    
    *
    )
    
    
    10Customer D
    
    
    
    
    
    
    33
    
    
    
    
 
 *)
    
    Less than 10% of the Companys consolidated revenues. NOTE 19: CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
  First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter2007Revenue
    
    $
    14,169
    
    
    $
    11,158
    
    
    $
    15,827
    
    
    $
    20,551Gross profit
    
    
    5,404
    
    
    
    4,208
    
    
    
    6,253
    
    
    
    8,173Net income
    
    
    3,382
    
    
    
    1,537
    
    
    
    3,714
    
    
    
    3,307Net earnings per shareBasic
    
    
    0.20
    
    
    
    0.09
    
    
    
    0.22
    
    
    
    0.19Diluted
    
    
    0.20
    
    
    
    0.09
    
    
    
    0.21
    
    
    
    0.192006Revenue
    
    $
    11,303
    
    
    $
    16,079
    
    
    $
    18,339
    
    
    $
    18,044Gross profit
    
    
    5,155
    
    
    
    9,086
    
    
    
    10,904
    
    
    
    9,103Net income
    
    
    3,234
    
    
    
    5,311
    
    
    
    8,123
    
    
    
    6,390Net earnings per shareBasic
    
    
    0.30
    
    
    
    0.38
    
    
    
    0.54
    
    
    
    0.42Diluted
    
    
    0.29
    
    
    
    0.38
    
    
    
    0.53
    
    
    
    0.41
 68




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
  Changes in Internal Controls
  
 ITEM 9B
 Item 9B. Other Information
  
 Part III
 
  
 Part IV
 
 Item 15. Exhibits and Financial Statement Schedules
   PageReport of Independent Registered Public Accounting Firm on the Consolidated Financial Statements
    

    46Consolidated Balance Sheets as of December 31, 2007 and 2006
    

    48Consolidated Statements of Operations for the years ended December 31, 2007, 2006 and 2005
    
    49Consolidated
Statements of Changes in Stockholders Equity (Deficiency) for the years ended December 31,
2007, 2006 and 2005
    
    50Consolidated
Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005
    
    51
 69




---



##### Table of Contents



PageNotes to Consolidated Financial Statements(a) 2. Financial Statement SchedulesSchedule II  Valuation of Qualifying Accounts
    
    
    S-(a) 3. Exhibits
  Exhibitnumber
    
    Exhibit3.1
    
    Second Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to Omrixs Registration Statement on Form S-1 (File No.
333-131107))3.2
    
    Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Omrixs
Current Report on Form 8-K, filed on December 10, 2007)4.1
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to
Omrixs Registration Statement on Form S1 (File No. 333-131107))4.2
    
    Investor Rights Agreement dated January 13, 2005 (incorporated by reference to
Exhibit 4.2 to Omrixs Registration Statement on Form S-1 (File No. 333-131107))4.3
    
    Common Stock Purchase Warrant between Omrix Biopharmaceuticals, Inc. and Johnson
& Johnson Development Corporation dated August 11, 2004 (incorporated by
reference to Exhibit 4.10 to Omrixs Registration Statement on Form S-1 (File
No. 333-131107))4.4
    
    Waiver and Amendment Agreement between certain warrantholders and Omrix
Biopharmaceuticals, Inc. dated January 13, 2005 (incorporated by reference to
Exhibit 4.11 to Omrixs Registration Statement on Form S-1 (File No.
333-131107))4.5
    
    First Amendment and Waiver between Omrix Biopharmaceuticals, Inc. and Johnson &
Johnson Development Corporation dated January 13, 2005 (incorporated by
reference to Exhibit 4.12 to Omrixs Registration Statement on Form S-1 (File
No. 333-131107))4.6
    
    Waiver Agreement between certain warrantholders and Omrix Biopharmaceuticals,
Inc. dated February 22, 2005 (incorporated by reference to Exhibit 4.13 to
Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.1**
    
    Lease and Operation Agreement between Omrix Biopharmaceuticals Ltd. and Magen
David Adom in Israel dated July 20, 2000 (incorporated by reference to Exhibit
10.1 to Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.2
    
    Lease Agreement between Omrix Biopharmaceuticals Ltd. and Nichsei Har Hozvim
Ltd., became effective as of May 15, 2006 (incorporated by reference to Exhibit
10.2 to Omrixs Quarterly Report on Form 10-Q, filed on August 10, 2006)10.3
    
    Construction Agreement between Omrix Biopharmaceuticals Ltd. and S&A Design and
Construction Ltd., dated as of August 2, 2006 (incorporated by reference to
Exhibit 10.3 to Omrixs Quarterly Report on Form 10-Q, filed on August 10, 2006)10.4**
    
    Addendum to an Agreement between Magen David Adom in Israel and Omrix
Biopharmaceuticals, Inc. dated as of December 16, 2004 (incorporated by
reference to Exhibit 10.2 to Omrixs Registration Statement on Form S-1 (File
No. 333-131107))10.5**
    
    Agreement between Omrix Biopharmaceuticals Ltd. and Medimop Medical Projects
Ltd. dated June 26, 2005 (incorporated by reference to Exhibit 10.3 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.6**
    
    Development Agreement between Omrix Biopharmaceuticals, Inc. and Ethicon, Inc.
dated September 22, 2003 (incorporated by reference to Exhibit 10.4 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.7**
    
    Amendment No. 1 to Development Agreement between Omrix Biopharmaceuticals, Inc.
and Ethicon, Inc. dated July 15, 2004 (incorporated by reference to Exhibit 10.5
to Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.8**
    
    Distribution and Supply Agreement between Omrix Biopharmaceuticals, Inc. and
Ethicon, Inc. dated September 22, 2003 (incorporated by reference to Exhibit
10.6 to Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.9**
    
    Amendment No. 1 to Distribution and Supply Agreement between Omrix
Biopharmaceuticals, Inc. and Ethicon, Inc. dated July 15, 2004 (incorporated by
reference to Exhibit 10.7 to Omrixs Registration Statement on Form S-1 (File
No. 333-131107))
 70




---



##### Table of Contents



Exhibitnumber
    
    Exhibit10.10**
    
    Letter Agreement between Omrix Biopharmaceuticals, Inc. and FFF Enterprises,
Inc., dated as of August 10, 2006 (incorporated by reference to Exhibit 10.10 to
Omrixs Registration Statement on Form S-1 (File No. 333-139094))10.11**
    
    Supply and Distribution Agreement: Investigational Phase between Omrix
Biopharmaceuticals, Inc. and FFF Enterprises, Inc., dated as of December 21,
2005 (incorporated by reference to Exhibit 10.11 to Omrixs Registration
Statement on Form S-1 (File No. 333-139094))10.12**
    
    Supply and Distribution Agreement: Commercial Phase between Omrix
Biopharmaceuticals, Inc. and FFF Enterprises, Inc., dated as of December 21,
2005 (incorporated by reference to Exhibit 10.12 to Omrixs Registration
Statement on Form S-1 (File No. 333-139094))10.13**
    
    Plasma Supply Agreement between Omrix Biopharmaceuticals, Inc. and DCI
Management Group LLC, dated as of January 3, 2006 (incorporated by reference to
Exhibit 10.13 to Omrixs Registration Statement on Form S-1 (File No.
333-139094))10.14**
    
    Patent and Know-How License Agreement between Omrix Biopharmaceuticals Ltd. and
Amersham Biosciences AB dated February 18, 2003 (incorporated by reference to
Exhibit 10.8 to Omrixs Registration Statement on Form S-1 (File No.
333-131107))10.15**
    
    Supply Agreement between Omrix Biopharmaceuticals Ltd. and PlastMed Ltd. dated
March 25, 2004 (incorporated by reference to Exhibit 10.9 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.16**
    
    Addendum to Supply Agreement between Omrix Biopharmaceuticals Ltd. and PlastMed
Ltd. dated June 30, 2004 (incorporated by reference to Exhibit 10.10 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.17
    
    Supply Agreement between Daiichi Pharmaceutical Co., Ltd and Omrix
Biopharmaceuticals S.A. dated August 24, 1999 (incorporated by reference to
Exhibit 10.11 to Omrixs Registration Statement on Form S-1 (File No.
333-131107))10.18**
    
    Supply Agreement by and between Omrix Biopharmaceuticals Ltd. and Talecris
Biotherapeutics, Inc. effective as of October 8, 2006 (incorporated by reference
to Exhibit 10.18 to Omrixs Registration Statement on Form S-1 (File No.
333-139094))10.19
    
    Planova Sales Agreement between Omrix Biopharmaceuticals Ltd. and Asahi Kasei
Pharma Corporation dated March 1, 2004 (incorporated by reference to Exhibit
10.12 to Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.20
    
    Form of Indemnification Agreement between Omrix Biopharmaceuticals, Inc. and its
directors and officers (incorporated by reference to Exhibit 10.19 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.21
    
    2004 Equity Incentive Plan (incorporated by reference to Exhibit 10.20 to
Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.22
    
    2005 Equity Incentive Plan for Israeli Employees (incorporated by reference to
Exhibit 10.21 to Omrixs Registration Statement on Form S-1 (File No.
333-131107))10.23
    
    2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.22 to
Omrixs Registration Statement on Form S-1 (File No. 333-131107))10.24
    
    Form of Non-Qualified Stock Option Agreement (incorporated by reference to
Exhibit 10.29 to Omrixs Current Report on Form 8-K, filed on June 30, 2006)10.25
    
    Employment Agreement between Omrix Biopharmaceuticals, Inc. and Robert Taub
dated March 20, 2006 (incorporated by reference to Exhibit 10.23 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.26
    
    Employment Agreement between Omrix Biopharmaceuticals Ltd. and Nissim Mashiach
dated as of January 1, 2008 (incorporated by reference to Exhibit 99.2 to
Omrixs Current Report on Form 8-K, filed on February 1,2008)10.27
    
    Employment Agreement between Omrix Biopharmaceuticals Ltd. and Ana Stancic dated
as of August 19, 2007 (incorporated by reference to Exhibit 99.1 to Omrixs
Current Report on Form 8-K, filed on August 23,2007)10.28 
    
    Employment Agreement between Omrix Biopharmaceuticals Ltd. and V. Marc Droppert
dated August 24, 200710.29
    
    Director Agreement between Omrix Biopharmaceuticals, Inc. and Fredric Price
dated January 13, 2006 (incorporated by reference to Exhibit 10.29 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))
 71




---



##### Table of Contents



Exhibitnumber
    
    Exhibit10.30
    
    Employment Agreement between Omrix Biopharmaceuticals, Inc. and Nanci Prado
dated August 28, 2006 (incorporated by reference to Exhibit 10.38 to Omrixs
Registration Statement on Form S-1 (File No. 333-139094))10.31
    
    Form of Undertaking to Maintain Confidentiality between Omrix Biopharmaceuticals
Ltd. and its employees (incorporated by reference to Exhibit 10.30 to Omrixs
Registration Statement on Form S-1 (File No. 333-131107))10.32 
    
    Lease Agreement between RCPI Landmark Properties, L.L.C. and Omrix
Biopharmaceuticals, Inc. dated as of September 19, 200610.33 
    
    First Amendment to Lease between RCPI Landmark Properties, L.L.C. and Omrix
Biopharmaceuticals, Inc. dated as of March 12, 200710.34 
    
    Amendment to Construction Agreement between Omrix Biopharmaceuticals, Ltd. and S&A Design and Construction Ltd. dated as of March 13, 200821.1
    
    List of subsidiaries of Omrix Biopharmaceuticals, Inc. (incorporated by
reference to Exhibit 21.1 to Omrixs Registration Statement on Form S-1 (File
No. 333-131107))23.1
    
    Consent of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global31.1
    
    Certification of Principal Executive Officer pursuant to Section 302 of the
Sarbanes  Oxley Act of 200231.2
    
    Certification of Principal Financial Officer pursuant to Section 302 of the
Sarbanes  Oxley Act of 200232
    
    Certification of Principal Executive Officer and Principal Financial Officer
Pursuant to Section 906 of the Sarbanes  Oxley Act of 2002
 
 **
    
    Portions of this document have been omitted and filed separately with the Commission pursuant
to requests for confidential treatment pursuant to Rule 24b-2.
    
    Filed herein. 72




---



##### Table of Contents



SIGNATURES
  OMRIX BIOPHARMACEUTICALS, INCDated: March 17, 2008
    By:
    /s/ Robert TaubRobert TaubChief Executive Officer and Director
(Principal Executive Officer)Dated: March 17, 2008
    By:
    /s/ Ilanit TamanIlanit TamanCorporate Controller
(Principal Accounting Officer)  Signature
    
    Title
    
    Date/s/ Robert Taub
    
    Chief Executive Officer and Director
    
    March 17, 2008Robert Taub/s/ Fredric D. Price
    
    Chairman of the Board of Directors
    
    March 17, 2008Fredric D. Price/s/ Larry Ellberger
    
    Director
    
    March 17, 2008Larry Ellberger/s/ Bernard Horowitz
    
    Director
    
    March 17, 2008Bernard Horowitz/s/ Kevin Rakin
    
    Director
    
    March 17, 2008Kevin Rakin/s/ Philippe Romagnoli
    
    Director
    
    March 17, 2008Philippe Romagnoli/s/ Steven St. Peter
    
    Director
    
    March 17, 2008Steven St. Peter
 73




---



##### Table of Contents



Three years ended December 31, 2007  (U.S. $ in thousands)
 Column B
    
    Column C
    
    
    
    
    
    
    
    
    
    Column FBalance at
    
    Charged to
    
    
    
    
    
    Column E
    
    Balancebeginning
    
    cost and
    
    Column D
    
    Translation
    
    at end ofColumn A
    
    of period
    
    expenses
    
    Deductions
    
    differences
    
    periodAllowance for doubtful accounts:Year ended December 31, 2005
    
    
    16
    
    
    
    11
    
    
    
    4
    
    
    
    (1
    )
    
    
    22Year ended December 31, 2006
    
    
    22
    
    
    
    
    
    
    
    6
    
    
    
    (1
    )
    
    
    15Year ended December 31, 2007
    
    
    15
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    38Allowance for inventory write-downs:Year ended December 31, 2005
    
    
    649
    
    
    
    100
    
    
    
    258
    
    
    
    
    
    
    
    491Year ended December 31, 2006
    
    
    491
    
    
    
    95
    
    
    
    41
    
    
    
    
    
    
    
    545Year ended December 31, 2007
    
    
    545
    
    
    
    92
    
    
    
    42
    
    
    
    
    
    
    
    595
 74