On February 22, 2018 RedHill Biopharma Ltd. (NASDAQ:RDHL) (Tel-Aviv Stock Exchange:RDHL) ("RedHill" or the "Company"), a specialty biopharmaceutical company primarily focused on late clinical-stage development and commercialization of proprietary drugs for gastrointestinal diseases and cancer, reported an investor update on its fourth quarter and full-year 2017 financial results (Press release, RedHill Biopharma, FEB 22, 2018, View Source [SID1234524154]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
The Company will host a conference call today, February 22, 2018 at 9:00 am EST to review the financial results and business highlights. Dial-in details are included below.
Micha Ben Chorin, RedHill’s CFO, said: "Following a highly productive 2017, we enter 2018 with confidence and are committed to pursue top-line growth with financial discipline, including gradual reduction in cash to be used in operating activities to a quarterly average of approximately $8.5 million during the year. Our cash position was approximately $46 million at the end of 2017 and net revenues in the fourth quarter of 2017 were $2 million, up 31% over the prior quarter. We are looking forward to top-line results from the first Phase III study with RHB-104 for Crohn’s disease, expected in mid-2018, and from the confirmatory Phase III study with TALICIA for H. pylori infection, expected in the second half of 2018."
Fourth Quarter 2017 Results1
Net Revenues for the fourth quarter of 2017 were $2.0 million, an increase of 31% from the third quarter of 2017. Net Revenues for the fourth quarter of 2016 were $0.1 million. The increase from the fourth quarter of 2016 was due to the initiation of U.S. commercial operations in mid-2017.
Cost of Revenues for the fourth quarter of 2017 was $0.9 million, due to cost of goods sold and royalties relating to commercialization activities. Cost of Revenues for the third quarter of 2017 was $0.9 million. There was no Cost of Revenues for the fourth quarter of 2016.
Gross Profit for the fourth quarter of 2017 was $1.1 million, an increase of 84% from the third quarter of 2017, primarily due to the increase in Net Revenues, as detailed above. Gross Profit for the fourth quarter of 2016 was $0.1 million.
Research and Development Expenses for the fourth quarter of 2017 were $8.3 million, an increase of 2% from the third quarter of 2017. Research and Development Expenses for the fourth quarter of 2016 were $7.5 million. The increase from the fourth quarter of 2016 was mainly due to the ongoing confirmatory Phase III study with TALICIA2 for H. pylori infection.
Selling, Marketing and Business DevelopmentExpenses for the fourth quarter of 2017 were $3.8 million, a decrease of 8% from the third quarter of 2017. The decrease was primarily due to a decrease in marketing material expenses. Selling, Marketing and Business Development Expenses for the fourth quarter of 2016 were $0.4 million. The Company recognized selling and marketing expenses for the first time in 2017 due to the establishment and advancement of the Company’s U.S. commercial operations.
General and Administrative Expenses for the fourth quarter of 2017 were $2.5 million, an increase of 11% from the third quarter of 2017. General and Administrative Expenses for the fourth quarter of 2016 were $1.2 million. The increase from the comparable periods was mainly due to the establishment and advancement of the Company’s U.S. commercial operations.
Operating Loss for the fourth quarter of 2017 was $14.4 million, compared to $9.0 million in the fourth quarter of 2016. The increase was mainly due to the establishment of the Company’s U.S. commercial operations.
Financial Income, net for the fourth quarter of 2017 was $4.0 million, compared to $0.6 million for the fourth quarter of 2016. The increase was mainly due to a fair value gain on derivative financial instruments resulting from a decrease in valuation of non-tradeable warrants, accounted as non-current liabilities.
Net Cash Used in Operating Activities for the fourth quarter of 2017 was $14.2 million, up 39%, compared to $10.2 million in the fourth quarter of 2016. The increase was a direct result of the increase in Operating Loss, as detailed above.
Net Cash Used in Investing Activities for the fourth quarter of 2017 was $9.0 million, compared to Net Cash Provided by Investing Activities of $21.3 million for the fourth quarter of 2016. The change from the comparable period was mainly due to bank deposits.
Net Cash Provided by Financing Activities for the fourth quarter of 2017 was $20.9 million compared to $35.9 million for the fourth quarter of 2016, both resulting from public offerings.
Full-Year 2017 Results3
Net Revenues for 2017 were $4.0 million, compared to $0.1 million for 2016. The increase was due to the initiation of the Company’s U.S. commercial operations in mid-2017.
Cost of Revenues for 2017 was $2.1 million, due to cost of goods sold and royalties relating to commercialization activities. There was no Cost of Revenues for 2016.
Gross Profit for 2017 was $1.9 million, compared to $0.1 million for 2016. The increase was due to the initiation of the Company’s U.S. commercial activities in mid-2017.
Research and Development Expenses for 2017 were $33.0 million, compared to $25.2 million for 2016. The increase was mainly due to the ongoing confirmatory Phase III study with TALICIA and from the Phase I/II studies with YELIVA.
Selling, Marketing and Business Development Expenses for 2017 were $12.0 million, compared to $1.6 million for 2016, which was comprised of business development expenses only. The Company recognized selling and marketing expenses for the first time in 2017 due to the establishment and advancement of the Company’s U.S. commercial operations.
General and Administrative Expenses for 2017 were approximately $8.0 million, compared to $3.8 million for 2016. The increase was mainly due to the establishment and advancement of the Company’s U.S. commercial operations in 2017.
Operating Loss for 2017 was $52.0 million, compared to $30.5 million for 2016. The increase was due to an increase in the Company’s research and development activities, as well as the establishment and advancement of the Company’s U.S commercial operations in 2017, as detailed above.
Financial Income, net for 2017 was $6.4 million, compared to $1.2 million for 2016. The increase was mainly related to a fair value gain on derivative financial instruments.
Net Cash Used in Operating Activities for 2017 was $44.8 million, compared to $28.3 million for 2016. The increase was a direct result of the increase in Operating Loss, as detailed above.
Net Cash Used in Investing Activities for 2017 was $18.6 million, compared to Net Cash Provided by Investing Activities of $24.5 million for 2016. The change from the comparable period was mainly due to withdrawal and deposit activities in bank deposits and financial assets at fair value through profit or loss.
Net Cash Provided by Financing Activities for 2017 was $25.7 million, compared to $36.0 million for 2016. For 2017, the Net Cash Provided by Financing Activities was mainly due to the November 2017 underwritten public offering and an exercise of warrants and options in the first quarter of 2017. For 2016, the Net Cash Provided by Financing Activities was mainly due to the December 2016 underwritten public offering and the concurrent registered direct offering.
Cash Balance4 as of December 31, 2017 was $46.2 million, a decrease of $20 million, compared to $66.2 million as of December 31, 2016, and an increase of $6.8 million, compared to $39.4 million as of September 30, 2017. The changes in the Cash Balance resulted mainly from Net Cash Provided by Financing Activities and Net Cash Used in Operating Activities.
Conference Call and Webcast Information:
The Company will host a conference call today,Thursday, February 22, 2018 at 9:00 am EDT to review the financial results and business highlights.
To participate in the conference call, please dial one of the following numbers 15 minutes prior to the start of the call: United States: +1-800-281-7829; International: +1-646-828-8143; and Israel: +972-3-721-9463. The access code for the call is: 2134987.
The conference call will be broadcasted live and will be available for replay on the Company’s website, View Source, for 30 days. Please access the Company’s website at least 15 minutes ahead of the conference call to register, download and install any necessary audio software.
Availability of RedHill Annual Report on Form 20-F Through Its Website
RedHill’s Annual Report on Form 20-F, containing audited financial statements for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on February 22, 2018, is available on its website (View Source). Shareholders may receive a hard copy of the annual report free of charge upon request.
Select 2017 R&D highlights:
TALICIA (RHB-105)- H. pylori infection (confirmatory Phase III) (FDA Fast-Track QIDP status)
In June 2017, RedHill initiated the confirmatory Phase III study with TALICIA (RHB-105) for H. pylori infection (ERADICATE Hp2 study). To date, approximately 50% of the planned 444 patients have been enrolled in the study. Top-line results are expected in the second half of 2018.
RHB-104 – Crohn’s disease (Phase III)
In November 2017, RedHill completed enrollment of its first Phase III study with RHB-104 for Crohn’s disease (MAP US study). Top-line results are expected in mid-2018.
In October 2017, RedHill announced that it had curtailed the target sample size in the MAP US study from 410 to approximately 331 subjects, while maintaining statistical power of over 80% to detect the expected treatment effect.
In July 2017, RedHill reported, following a second pre-planned meeting by an independent Data and Safety Monitoring Board (DSMB) to assess safety and efficacy data from the MAP US study, that it had received a unanimous recommendation from the DSMB to continue the study as planned.
In March 2017, RedHill initiated an open-label extension Phase III study to the MAP US study (MAP US2 study).
RHB-104 – nontuberculous mycobacteria (NTM) infections (planned pivotal Phase III) (FDA Fast-Track QIDP status)
RedHill plans, subject to further input from the U.S. Food & Drug Administration (FDA), to initiate in mid-2018 a pivotal Phase III study to assess the safety and efficacy of RHB-104 as potential first-line treatment for nontuberculous mycobacteria (NTM) infections caused by mycobacterium avium complex (MAC) infection.
BEKINDA (RHB-102) 24 mg – acute gastroenteritis and gastritis (Phase III)
In June 2017, RedHill announced positive results from the first Phase III study with BEKINDA 24 mg for acute gastroenteritis and gastritis (GUARD study). The randomized, double-blind, placebo-controlled study successfully met its primary endpoint of efficacy and BEKINDA 24 mg was found to be safe and well tolerated in this indication. Top-line results indicated that the study successfully met its primary endpoint in the Intent to Treat (ITT) population (p = 0.04), despite high positive outcome rate in the placebo arm. BEKINDA 24 mg improved the efficacy outcome by 21%; 65.6% of BEKINDA-treated patients, as compared to 54.3% of placebo patients (p = 0.04; n=192 in the BEKINDA group and n=129 in the placebo group). In per-protocol (PP) analysis of patients who met all protocol entry criteria and for which the diagnosis of gastroenteritis was confirmed (n=177 in the BEKINDA group and n=122 in the placebo group), BEKINDA 24 mg improved the efficacy outcome by 27%; 69.5% of patients in the BEKINDA group vs. 54.9% in the placebo group (p = 0.01). RedHill met with the FDA to discuss the study results and the clinical and regulatory path towards potential marketing approval of BEKINDA 24 mg in the U.S. Following the guidance provided at the meeting, RedHill is currently working with the FDA to design a confirmatory Phase III study to support a potential New Drug Application (NDA) with BEKINDA 24 mg for acute gastroenteritis and gastritis.
BEKINDA(RHB-102) 12 mg – IBS-D (Phase II)
In January 2018, RedHill announced positive final results5 from the Phase II study with BEKINDA 12 mg for the treatment of diarrhea-predominant irritable bowel syndrome (IBS-D). The randomized, double-blind, placebo-controlled Phase II study successfully met its primary endpoint, improving the primary efficacy outcome of stool consistency (per FDA guidance definition) by an absolute difference of 20.7% vs. placebo (p-value=0.036). RedHill plans to meet with the FDA in the first half of 2018 to discuss plans for one or two pivotal Phase III studies with BEKINDA 12 mg for IBS-D to support a potential NDA.
YELIVA (ABC294640) – cholangiocarcinoma (Phase IIa) (FDA Orphan Drug designation)
In December 2017, RedHill initiated a Phase IIa study with YELIVA (ABC294640) for the treatment of cholangiocarcinoma (bile duct cancer). The single-arm Phase IIa study is evaluating YELIVA as a single agent in patients suffering from advanced, unresectable intrahepatic, perihilar and extrahepatic cholangiocarcinoma. The study is planned to enroll up to 39 patients at Mayo Clinic major campuses in Arizona and Minnesota and The University of Texas MD Anderson Cancer Center.
RHB-107 (MESUPRON) – gastrointestinal and other solid tumor cancers (Orphan Drug designation for pancreatic cancer)
In October 2017, RHB-107 (MESUPRON) (INN: upamostat) was granted FDA Orphan Drug designation for the treatment of pancreatic cancer. The Orphan Drug designation allows RedHill to benefit from various incentives to develop RHB-107 for this indication, including a seven-year marketing exclusivity period for the indication, if approved. Following the recent identification of a new mechanism of action for RHB-107, inhibition of trypsin-3, RedHill is currently evaluating potential utilization of RHB-107 in several gastrointestinal indications.
U.S. Commercial Highlights
As part of RedHill’s strategy to set the stage for the potential launch of its proprietary, late-clinical stage gastrointestinal products, if approved by the FDA, the Company established U.S. commercial operations in early 2017. RedHill’s U.S. commercial operations, with offices in Raleigh, NC, include a gastrointestinal-focused sales force of approximately 40 sales representatives.
As part of this initiative, RedHill entered into commercial agreements granting the Company certain rights to promote Donnatal (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide)6 and Esomeprazole Strontium DR Capsules 49.3 mg7 and to commercialize EnteraGam (serum-derived bovine immunoglobulin/protein isolate, SBI)8. RedHill launched Donnatal and EnteraGam in June 2017, and Esomeprazole Strontium DR Capsules 49.3 mg in September 2017. The Company continues to pursue the acquisition of additional commercial gastrointestinal products in the U.S.
Financial Highlights
In November 2017, RedHill issued in a public offering 4,090,909 American Depositary Shares (ADSs), each representing ten of its ordinary shares, at a price of $5.50 per ADS, raising net proceeds of approximately $21 million.
A cost reduction plan was initiated at the end of 2017 to gradually reduce the average quarterly cash to be used in operating activities in 2018 to approximately $8.5 million.
Expanded Access Program (EAP)
RedHill adopted an Expanded Access Program (EAP), allowing patients with life-threatening diseases potential access to RedHill’s investigational new drugs that have not yet received regulatory marketing approval. Expanded access (sometimes referred to as "compassionate use") is possible outside RedHill’s clinical trials, under certain eligibility criteria, when a certain investigational new drug is needed to treat life-threatening condition and there is some clinical evidence suggesting that the drug might be effective in that condition. Following the adoption of the program, RedHill continues to receive patient requests to obtain access to investigational drugs. Subject to evaluation of eligibility and all the necessary regulatory and other approvals, RedHill is likely to provide certain patients with an investigational new drug under the EAP. Further information about RedHill’s EAP can be found on the Company’s website at: View Source/expandedaccess.