On July 29, 2015 RedHill Biopharma Ltd. (NASDAQ:RDHL) (TASE:RDHL) ("RedHill" or the "Company"), an Israeli biopharmaceutical company primarily focused on late clinical-stage, proprietary, orally-administered, small molecule drugs for inflammatory and gastrointestinal diseases, including gastrointestinal cancers, reported its financial results for the quarter ended June 30, 2015 (Press release, RedHill Biopharma, JUL 29, 2015, View Source [SID:1234506741]).
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Financial highlights for the second quarter and six months ended June 30, 2015:
Revenues for the six months ended June 30, 2015 were immaterial compared to revenues of approximately $7.0 million for the six months ended June 30, 2014, which resulted mainly from an upfront payment of $7.0 million received from Salix Pharmaceuticals, Inc. ("Salix") for the out-licensing of RedHill’s RHB-106 encapsulated bowel preparation and related rights.
Cost of Revenues for the six months ended June 30, 2015 was immaterial compared to approximately $1.0 million for the six months ended June 30, 2014, which resulted from a payment of $1.0 million to Giaconda Limited, triggered by the Salix licensing transaction.
Research and Development Expenses, net for the quarter ended June 30, 2015 were approximately $5.1 million, an increase of approximately $1.9 million, or approximately 59%, compared to approximately $3.2 million in the quarter ended June 30, 2014. Research and Development Expenses, net for the six months ended June 30, 2015 were approximately $8.9 million, an increase of approximately $4.0 million, or approximately 82%, compared to approximately $4.9 million in the six months ended June 30, 2014. The increase in both periods was mainly due to expenses related to the ongoing Phase III studies with RHB-104 (Crohn’s disease), RHB-105 (H. pylori) and BEKINDA (gastroenteritis and gastritis).
General and Administrative Expenses for the quarter ended June 30, 2015 were approximately $0.8 million, a decrease of approximately $0.2 million, or approximately 20%, compared to approximately $1.0 million in the quarter ended June 30, 2014. The decrease was mainly due to a decrease in share-based compensation.
Financing Expenses, net for the quarter ended June 30, 2015 were approximately $0.7 million, an increase of approximately $0.3 million, or approximately 75%, compared to approximately $0.4 million in the quarter ended June 30, 2014. The increase was mainly due to a non-cash financing expense of $0.9 million resulting from the revaluation of the Company’s derivative financial instruments.
Operating Loss for the quarter ended June 30, 2015 was approximately $5.9 million, an increase of approximately $1.8 million, or approximately 44%, compared to approximately $4.1 million in the quarter ended June 30, 2014. The increase resulted mainly from an increase in Research and Development Expenses, net. Operating Loss for the six months ended June 30, 2015 was approximately $10.6 million, an increase of approximately $9.8 million compared to approximately $0.8 million in the six months ended June 30, 2014. The increase was mainly due to the $7 million revenues from the Salix transaction received in the first quarter of 2014 and to an increase in Research and Development Expenses, net.
Net Cash Used in Operating Activities for the quarter ended June 30, 2015 was approximately $4.7 million, an increase of approximately $0.5 million, or approximately 12%, compared to approximately $4.2 million in the quarter ended June 30, 2014. The increase resulted mainly from an increase in Research and Development Expenses, net. Net Cash Used in Operating Activities for the six months ended June 30, 2015 was approximately $8.1 million, an increase of approximately $5.6 million, or approximately 224%, compared to approximately $2.5 million in the six months ended June 30, 2014. The increase was mainly due to revenues from the Salix transaction received in the first quarter of 2014.
Net Cash Provided by Investment Activities for the quarter ended June 30, 2015 was approximately $3.5 million, compared to Net Cash Used in Investment Activities of approximately $16.8 million in the quarter ended June 30, 2014. The Net Cash Provided by Investment Activities in the quarter ended June 30, 2015 was mainly due to the change in investment in short-term bank deposits and partially offset by an upfront payment of $1.5 million to Apogee Biotechnology Corporation ("Apogee") as part of the Apogee licensing transaction. In addition, the Company recorded $2.0 million as a current liability as part of the same Apogee licensing transaction. Net Cash Used in Investment Activities for the six months ended June 30, 2015 was approximately $3.6 million, a decrease of approximately $13.2 million, or approximately 79%, compared to approximately $16.8 million in the six months ended June 30, 2014. The decrease was mainly due to investments of cash in bank deposits in the amount of $17 million during the six months ended June 30, 2014.
Net Cash Provided by Financing Activities for the six months ended June 30, 2015 was approximately $13.2 million, mainly from the February 2015 public offering, compared to approximately $24.4 million for the six months ended June 30, 2014, mainly from two private placements, for a total of $20 million and the exercise of warrants, during the first quarter of 2014.
Cash Balance1 as of June 30, 2015 was approximately $26.6 million,compared to $32.6 million as of March 31, 2015. The decrease resulted mainly from an increase in expenses due to the Company’s research and development activities. The cash position as of June 30, 2015 does not include the gross proceeds of $44.5 million before underwriting discounts and commissions and other offering expenses from the July 2015 public offering.
1 Including cash, bank deposits and short-term investments.
Ori Shilo, Deputy CEO, Finance and Operations said: "The second quarter of 2015 was very successful for RedHill. We reached an important milestone with the positive top-line results from the RHB-105 (H. pylori) first Phase III study, successfully meeting the study’s primary endpoint. Our recent public offering of $44.5 million in gross proceeds has significantly strengthened our cash position to approximately $66 million as of July 28, 2015, and allows us to continue to develop our pipeline of advanced clinical programs, including the two ongoing Phase III studies with BEKINDA for gastroenteritis and with RHB-104 for Crohn’s disease, and to conduct a second Phase III study with RHB-105 for H. pylori infection. During this quarter we completed enrollment for the Phase IIa, proof-of-concept clinical study of RHB-104 for multiple sclerosis, with top-line interim results expected in the fourth quarter of 2015 or the first quarter of 2016, and we have also recently initiated a Phase I/II clinical study in the U.S. with ABC294640 for refractory lymphoma."
Recent operational highlights:
On July 27, 2015, the Company updated that it had received confirmation from Salix Pharmaceuticals Ltd., recently acquired by Valeant Pharmaceuticals International, Inc., (NYSE:VRX) (TSX:VRX), that it continues the development of RedHill’s RHB-106 tasteless solid oral formulation bowel preparation development program. RedHill and Salix entered into an exclusive license agreement in February 2014, under which Salix acquired the worldwide exclusive rights to RedHill’s RHB-106 encapsulated formulation for bowel preparation and rights to other purgative developments.
On July 22, 2015, the Company closed its underwritten public offering, which included an over-allotment option exercised by the underwriters of 277,143 American Depository Shares ("ADSs"), for a total of 2,739,143 ADSs, each representing 10 of its ordinary shares, at an offering price of $16.25 per ADS. Gross proceeds from the public offering were approximately $44.5 million, before underwriting discounts and commissions and other offering expenses. Investors in the offering included Broadfin Capital LLC, Visium Asset Management, Special Situations Funds, funds managed by Sabby Management LLC, Longwood Capital Partners LLC, Menora Mivtachim and others. Nomura and Roth Capital Partners actedas joint book-running managers. MLV & Co. and H.C. Wainwright & Co. acted as co-managers for the offering.
On July 15, 2015, the Company announced that it had elected to extend its August 2014 exclusive option agreement with RESprotect GmbH for the acquisition of the pancreatic cancer drug candidate RP101. RedHill further updated that it had commenced a preclinical development program for RP101 to examine the efficacy of RP101 in various tumor models. The preclinical program is intended to support the existing clinical data and to assess a potential clinical development path for RP101.
On July 6, 2015, the Company announced that it had received regulatory authorization to commence patient enrollment in Australia and New Zealand for its ongoing Phase III study with RHB-104 for Crohn’s disease (the MAP US study), and had commenced patient screening in New Zealand. The MAP US first Phase III study is currently ongoing in the U.S. and additional countries, with interim analysis of the study expected in the second half of 2016, after half of the 270 patients expected to be enrolled in the study will have completed 26 weeks of treatment. RedHill further announced, in June 2015, that the UK Medicines and Healthcare Products Regulatory Agency (MHRA) had accepted RedHill’s Clinical Trial Application (CTA) to initiate a second Phase III study of RHB-104 for Crohn’s disease (the MAP EU study). The MAP EU study is planned to commence in a select number of European counties, and, once initiated, will run in parallel with the currently ongoing MAP US first Phase III study. RedHill also announced, in July 2015, that it had received two notices of allowance from the United States Patent and Trademark Office (USPTO) regarding two patent applications covering RHB-104, which are expected to be valid through 2029.
On June 29, 2015, the Company announced that it had initiated a Phase I/II clinical study in the U.S. to evaluate ABC294640 in patients with refractory/relapsed diffuse large B-cell lymphoma (DLBCL). The Phase I/II study is intended to evaluate the safety and tolerability of ABC294640, as well as provide a preliminary evaluation of efficacy of the drug in patients with refractory/relapsed DLBCL, primarily patients with HIV-related DLBCL. The study is funded primarily by a grant awarded by the National Cancer Institute (NCI) STTR program.
On June 15, 2015, the Company announced positive top-line results from its Phase III study with RHB-105 for the treatment of Helicobacter pylori (H. pylori) bacterial infection. Top-line results from the study demonstrated 89.4% efficacy in eradicating H. pylori infection with RHB-105. The ERADICATE Hp first Phase III study successfully met its primary endpoint of superiority over historical standard of care efficacy levels of 70%, with high statistical significance (p < 0.001). No serious adverse events, new or unexpected safety issues related to the drug candidate were noted in the study. A meeting with the FDA is being planned by RedHill to discuss the clinical and regulatory path for approval of RHB-105 as a potential best-in-class, first-line therapy for H. pylori infection. Completion of the clinical study report (CSR) is expected in the third quarter of 2015. RedHill also announced, in April 2015, that the USPTO had issued a Notice of Allowance for a new U.S. patent covering the RHB-105 formulation, which is expected to be valid until at least 2034.
On June 9, 2015, the Company announced that the last patient had been enrolled in the Phase IIa, proof-of-concept clinical study evaluating RHB-104 as an add-on therapy to interferon beta-1a in patients treated for relapsing-remitting multiple sclerosis (RRMS). Seventeen patients were enrolled in the open label Phase IIa study (the CEASE-MS study), which is designed to assess the efficacy and safety of RHB-104 as an add-on therapy to interferon beta-1a in patients suffering from RRMS following 24 weeks of treatment. Patients are evaluated for an additional term of 24 weeks after completing treatment with RHB-104. The CEASE-MS study is being conducted at two medical centers in Israel and top-line interim results are expected either in the fourth quarter of 2015 or the first quarter of 2016.