RedHill Biopharma Ltd (RDHL)

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RedHill Biopharma Provides Q2/2020 Financial Results and Operational Highlights

Q2/2020 net revenues of approximately $21 million, up from $1.1 million in Q1/2020 and $1.6 million in Q2/2019, an increase of approximately 1,900% and 1,200%, respectively

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Completed acquisition of Movantik® from AstraZeneca and secured exclusive control over U.S. commercialization through new royalty-bearing agreement with Daiichi Sankyo
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Talicia® added as an unrestricted branded agent to three major national formularies, providing a strong platform for continued prescription growth
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Entered into binding term sheet with Cosmo Pharmaceuticals for exclusive licensing and manufacturing agreement for multiple products, under which RedHill is set to receive $12 million upfront and up to another $9 million in milestone payments
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Ongoing global COVID-19 Phase 2/3 and U.S. Phase 2 studies with opaganib planned to deliver preliminary data for potential emergency use applications as early as Q4/2020
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Pivotal Phase 3 study for first-line pulmonary NTM infections with RHB-204, to be funded primarily by Cosmo Pharmaceuticals, planned to be initiated following recent FDA IND clearance
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Cash balance of approximately $56 million as of August 12, 2020, with an additional $12 million anticipated following closing of the agreement with Cosmo Pharmaceuticals
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Management to host webcast today, at 8:30 a.m. EST

TEL AVIV, Israel and RALEIGH, N.C., Aug. 13, 2020 (GLOBE NEWSWIRE) -- RedHill Biopharma Ltd. (Nasdaq: RDHL) (“RedHill” or the “Company”), a specialty biopharmaceutical company, today reported its financial results and operational highlights for the second quarter, ended June 30, 2020.

Dror Ben-Asher, RedHill’s Chief Executive Officer, said: “This has been a standout period for RedHill with the acquisition of Movantik from AstraZeneca and the launch of Talicia. From an R&D perspective, we have been making progress against some of the world’s most pressing healthcare challenges – COVID-19, infectious diseases and antibiotic resistance. We have worked diligently and rapidly to initiate in parallel global Phase 2/3 and U.S. Phase 2 studies, with potential global emergency use applications expected as early as the fourth quarter of this year. We are also making the necessary preparations to make opaganib widely available, subject to positive results from the two ongoing studies and potential global emergency use authorizations, if granted. We are also delighted with the recent FDA clearance to initiate the pivotal Phase 3 study with RHB-204 in first-line pulmonary NTM infections, a rare and highly resistant infectious disease with no FDA-approved first-line therapy. In summary, with three FDA-approved products being promoted, commercial operations largely resumed, growing revenues, and our late-stage development programs progressing as planned, we are well-positioned for continued and rapid growth, with a number of near- and long-term growth drivers.”

Micha Ben Chorin, RedHill’s Chief Financial Officer, added: “In our first full quarter promoting Movantik and Talicia, we generated record net revenues of approximately $21 million, despite the challenges of the COVID-19 environment. In addition, our amended agreement with Daiichi Sankyo, which increases our gross margins from Movantik, and the amended agreement with AstraZeneca improve our financial position as we continue to grow sales. Our sales force has mostly returned to the field, significantly increasing daily calls since June, and our commercial team continues to rapidly expand managed care coverage for Talicia, successfully securing unrestricted access for millions of patients. Looking ahead, with patients gradually returning to clinics and testing for H. pylori resuming, we expect to see the increasing prescriber enthusiasm translate into strong revenue growth for Talicia. With a cash balance of approximately $56 million as of yesterday, and an additional $12 million upfront payment expected from the agreement with Cosmo Pharmaceuticals, we continue to maintain strong financial discipline while implementing our strategic commercial and development plans.”

Financial highlights for the second quarter, ended June 30, 20201

Net Revenues of $20.9 million, compared to $1.1 million in the first quarter of 2020. The increase was primarily attributable to revenues from Movantik.

Cost of Revenues of $14.2 million, compared to $1.7 million in the first quarter of 2020. The increase was primarily attributable to the revenues from Movantik.

Gross Profit of $6.7 million, compared to $0.7 million gross loss for the first quarter of 2020.

Research and Development Expenses were $3.2 million, compared to $2.8 million in the first quarter of 2020. The increase was primarily attributable to the initiation of studies with opaganib for COVID-19.

Selling, Marketing and Business Development Expenses were $10.0 million, compared to $9.0 million in the first quarter of 2020. The increase was primarily attributable to the expansion of our commercialization activities related to Movantik and Talicia. The increase was partially offset by savings in travel and related expenses due to COVID-19 and by a payment received under the U.S. Small Business Administration Payroll Protection Program (“PPP”).

General and Administrative Expenses were $6.0 million, compared to $4.6 million in the first quarter of 2020. The increase was primarily attributable to the transition costs related to the acquisition of Movantik. The increase was partially offset by the payment received under the PPP.

Operating Loss was $12.5 million, compared to $17.0 million in the first quarter of 2020. The decrease was primarily attributable to the gross profit from sales of Movantik, partially offset by the increase in Operating Expenses, as described above.

Net Cash Used in Operating Activities was $15.0 million, compared to $10.6 million in the first quarter of 2020. The increase was primarily attributable to changes in working capital due to the expansion of our commercial operations following the acquisition of Movantik, and the gap between revenue recognition and collection.

Net Cash Used in Investing Activities was $49.8 million, comprised primarily of a $52.5 million payment to AstraZeneca for the acquisition of Movantik. Net Cash Provided by Investing Activities for the first quarter of 2020 was $4.0 million, comprised primarily of proceeds from bank deposits and from the sale of marketable securities.

Net Cash Provided by Financing Activities was $5.5 million, comprised primarily of $6.4 million in proceeds from the Company’s “at-the-market” (ATM) facility. Net Cash Provided by Financing Activities for the first quarter of 2020 was $59.1 million, comprised primarily of $79.3 million from long-term borrowing, offset by $20.0 million in restricted cash.

Liquidity and Capital Resources

Cash Balance2 as of June 30, 2020, was $53.1 million, compared to $115.1 million as of March 31, 2020. The decrease was primarily attributable to the payment of $52.5 million to AstraZeneca for the acquisition of Movantik, made on April 1, 2020, and Net Cash Used in Operating Activities, as detailed above, partially offset by proceeds of $6.4 million from the Company’s ATM in the second quarter of 2020.

Subsequent to June 30, 2020 and up until August 12, 2020, 630,486 American Depositary Shares (ADSs) of the Company were issued under the Company’s ATM facility, generating additional net proceeds of approximately $5.1 million.

Commercial Highlights:

Movantik® (naloxegol)3
RedHill initiated U.S. promotion of Movantik with its dedicated sales force in April 2020, following the acquisition of the global rights from AstraZeneca (LSE/STO/NYSE: AZN), excluding Europe, Canada, and Israel.

In August 2020, RedHill announced that it had replaced the 2015 Movantik co-commercialization agreement with Daiichi Sankyo, Inc. (assigned under the agreement with AstraZeneca), with a new royalty-bearing agreement. Under the terms of the new agreement, RedHill bears all responsibilities and costs for commercializing Movantik in the U.S. During the term of the new agreement, RedHill will pay Daiichi Sankyo a mid-teen royalty rate on net sales of Movantik in the U.S., in addition to three annual lump sum payments, starting in 2021 and ending in 2023.

In addition, the companies entered into a subscription agreement under which Daiichi Sankyo received 283,387 in American Depositary Shares of RedHill as a partial consideration in relation to Movantik.

RedHill also amended its agreement with AstraZeneca for Movantik, whereby the Companies agreed to postpone the non-contingent payment of $15.0 million by RedHill to December 2021 and to increase the amount due by $0.5 million.

Talicia® (omeprazole magnesium, amoxicillin and rifabutin)4
RedHill launched Talicia in the U.S. in mid-March 2020, making Talicia available at pharmacies nationwide.

In April 2020, RedHill announced that Prime Therapeutics, a pharmacy benefit manager (PBM) serving 23 Blue Cross and Blue Shield Plans and more than 30 million members nationally, had added Talicia to the NetResults™ A-Series National Formulary as an unrestricted, preferred brand for H. pylori treatment, effective July 1, 2020.

In July 2020, RedHill announced that another PBM, EnvisionRx, a division of EnvisionRxOptions and a wholly owned subsidiary of Rite Aid, had added Talicia to its formularies, as the unrestricted branded agent for H. pylori treatment, effective July 1, 2020. The Company announced in March 2020 that Express Scripts had also added Talicia to its National Preferred Formulary as a preferred brand.

Exclusive Licensing and Manufacturing Agreement with Cosmo Pharmaceuticals
RedHill announced in August 2020 that it has entered into a binding term sheet with Cosmo Pharmaceuticals N.V. (SIX: COPN) (“Cosmo”) for an exclusive licensing and manufacturing agreement for multiple products. The transaction is expected to close in the coming weeks.

Pursuant to the agreement, the companies will co-develop a novel next-generation therapy for the eradication of H. pylori infection. Cosmo is to receive the exclusive European rights to the new drug and will pay RedHill $7 million upon signing of the license agreement and an additional $2 million upon approval in Europe, and 30% royalties. The companies plan to jointly execute clinical trials pursuing simultaneous regulatory approvals in the U.S. and Europe, with a cost split 70% RedHill and 30% Cosmo. Cosmo will become the exclusive worldwide manufacturer for the novel next-generation therapy for the eradication of H. pylori infection, Movantik, which RedHill recently acquired from AstraZeneca, and RHB-204 for pulmonary nontuberculous mycobacteria (NTM) infections. Cosmo will be paid €5.5 million for tech transfer, formulation and development work with respect of these products. Additionally, Cosmo will finance the planned pivotal Phase 3 clinical study with RHB-204, which recently received FDA clearance to proceed, with a payment of $5 million upon signing of the agreement and an additional $7 million in two milestone payments. Cosmo will be entitled to 15% royalty payments.

R&D Highlights

COVID-19 (SARS-CoV-2) Program: Opaganib (ABC294640, Yeliva®)5

RedHill initiated, in July 2020, a Phase 2/3 clinical study evaluating opaganib in patients hospitalized with severe SARS-COV-2 infection (the cause of COVID-19) and pneumonia (NCT04467840). The study has received approvals in the UK, Russia, and Mexico and is set to enroll up to 270 patients in up to 40 clinical sites. The study is also under review in Brazil, Italy and additional countries, with further expansion planned.

In parallel, a Phase 2 study is ongoing in the U.S., evaluating opaganib in patients with severe COVID-19 (NCT04414618). The study is set to recruit up to 40 patients, of which approximately 50% have already been enrolled. Enrollment is expected to be completed this month.

Subject to positive data from the studies, RedHill aims to apply for emergency use authorizations in the fourth quarter of this year.

Encouraging results from the treatment of the first severe COVID-19 patients with opaganib, on a compassionate use basis, were published6 in June 2020. Analysis of treatment outcomes with opaganib in severe COVID-19 patients showed substantial benefit in both clinical outcomes and inflammatory markers, as compared to a retrospective matched case-control group from the same hospital.

RHB-204 - Pulmonary Nontuberculous Mycobacteria (NTM) Infections

In July 2020, RedHill announced that the U.S. FDA had cleared its Investigational New Drug (IND) application for a pivotal Phase 3 study to evaluate RHB-204 as a first-line, orally administered, stand-alone treatment for pulmonary NTM disease caused by Mycobacterium avium Complex (MAC) infection. The study aims to enroll 125 patients in up to 50 sites across the U.S.

Opaganib - Cholangiocarcinoma and prostate cancer
The Phase 2a study evaluating the activity of opaganib in advanced cholangiocarcinoma (bile duct cancer) is ongoing. After completing enrollment for the first cohort, RedHill initiated enrollment for the second cohort of the study, evaluating opaganib in combination with hydroxychloroquine, an anti-autophagy agent.

Recent pre-clinical findings, presented at the American Association for Cancer Research (AACR) annual meeting, demonstrated that treatment with opaganib and RHB-107 (upamostat, WX-671)7, individually and in combination, resulted in tumor regression and that the combination of both drugs was more potent and well tolerated in the animal models. In light of these findings, RedHill plans to add an additional cohort to the ongoing Phase 2a study, evaluating opaganib in combination with RHB-107, subject to discussions with the FDA.

An additional Phase 2 study with opaganib in prostate cancer is ongoing at the Medical University of South Carolina (MUSC). The study is supported by a National Cancer Institute grant awarded to MUSC with additional support from RedHill.

COVID-19 Update

Protecting employees, patients, colleagues, and communities continues to be RedHill’s primary focus during the COVID-19 pandemic. Along with utilizing various remote technologies, in-person work practices have been resumed, where possible, and subject to authorization and guidance from the relevant health authorities and clinics.

RedHill took immediate action to mitigate the potential impact of the COVID-19 pandemic on its business operations and is executing a comprehensive commercial strategy to support its growth initiatives and work practices in adherence to social distancing and other public health guidelines. To date, there have been no significant disruptions to the Company’s supply chain. Some promotional and development activities, which were postponed by approximately one quarter due to limitations, have been largely resumed. RedHill will continue to assess the potential impact of COVID-19 on its business and operations.

Conference Call and Webcast Information:

The Company will host a conference call and live webcast today, Thursday, August 13, 2020, at 8:30 a.m. EST to present the second quarter financial results and operational highlights.

The webcast and accompanying slides will be broadcast live on the Company's website: http://ir.redhillbio.com/events and will be available for replay for 30 days.