RedHill Biopharma Ltd (RDHL)

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After job cuts, Raleigh drugmaker considers selling lead product

https://www.bizjournals.com/triangle/news/2022/10/27/redhill-biopharma-movantik-sale-layoffs.html?utm_source=sy&utm_medium=nsyp&utm_campaign=yh

By Zac Ezzone – Staff writer, Triangle Business Journal

Oct 27, 2022

Months after reducing its commercial workforce in the U.S., a Raleigh drugmaker may be looking to offload its lead commercial product.
RedHill Biopharma, an Israeli company with its U.S. headquarters in Raleigh, is "negotiating with a potential acquirer" for its drug Movantik, according to an Oct. 14 securities filing. In the first quarter of the year, sales from the drug made up the majority of the company's net revenue – about $14.6 million of a total $18.2 million.

The company acquired the drug from AstraZeneca (Nasdaq: AZN) with financing from a February 2020 credit agreement worth up to $115 million. Through this loan with HCR Collateral Management, RedHill borrowed $30 million to support its commercial operations and another $50 million to fund the acquisition of the drug.

But on Sept. 13, RedHill received a "notice of events of default and reservation of rights letter" from HCR. In a Sept. 16 securities filing, the company said it "disagrees with the assertions made by HCR" and disputes the "alleged events of default." The filing didn't include details on the company's alleged breaches of the credit agreement.

RedHill declined to comment on the situation.

The company, however, did acknowledge that it has not yet delivered its second quarter financial statements to HCR. RedHill planned to publicly release its financial results by Sept. 23, a deadline that was then moved back to Oct. 14. As of Wednesday, the company has not yet released its financial results for the quarter.

In the Oct. 14 filing, the company said it expects to finalize its second quarter financial statements and restate its first quarter statements "as soon as practicable following completion of the audit committee's review." In the filing, RedHill also states that "the company has determined that a material weakness exists within its internal control over financial reporting as it relates to recognition of certain allowances for deductions."

Additionally, the company said that it's "continuing to engage in constructive discussion with HCR ... to evaluate strategic alternatives to satisfy its outstanding obligations under the credit agreement." This includes the company's discussions with a potential acquirer of Movantik, a treatment for constipation caused by prescription pain medicines.

Negotiations involving RedHill's lead product follow the company disclosing in June its intentions to cut one-third of its U.S. commercial workforce as part of a plan to save $50 million over the next 18 months.

At the end of 2021, RedHill had 201 employees, of which 182 were based in the U.S. and 19 in Israel. The company also worked with 10 consultants throughout the U.S., Israel and Canada, according to an annual financial report filed in March. Commercial operations made up the vast majority of the company's headcount at 182 employees, while 17 were described as management and administration and two, plus the 10 consultants, focused on research and development.

Aside from Movantik, the company has two other commercial products, Talicia and Aemcolo, and a pipeline of investigational drugs, including two late-stage candidates targeting Covid-19. At the time RedHill announced the layoffs, the company said it would try to move the Covid-19 programs forward from external funding, like grants and industry partnerships.



RedHill's stock fell sharply last year on news that one of those late-stage candidates, opaganib, failed to meet its primary endpoints in a phase 2/3 study in severe Covid-19 patients. The stock has mostly been trending down ever since, leading the company to recently fall out of compliance with a Nasdaq listing rule that establishes a minimum bid price for companies.

Nasdaq officials notified the company Oct. 12 that its stock closed below $1 a share for 30 consecutive business days. The company has an initial 180-day period to regain compliance and could be eligible for a subsequent 180-day extension.

RedHill's stock price closed at $0.67 on Wednesday, down about 77 percent from the beginning of the year. Its 52-week high is $5.77.