On June 23, 2022 RedHill Biopharma Ltd. (Nasdaq: RDHL) ("RedHill" or the "Company"), a specialty biopharmaceutical company, reported its first quarter 2022 financial results and operational highlights, targeting positive cash from operations1 to start during H2/22 and recent implementation of a comprehensive cost reduction plan, expected to generate operational cost savings of approximately $50 million over the next 18 months (Press release, RedHill Biopharma, JUN 23, 2022, View Source [SID1234616222]).
Dror Ben-Asher, RedHill’s Chief Executive Officer, said: "To address the current market realities and operating landscape, RedHill is being decisive about controlling its own destiny and is highly focused on achieving earlier profitability, targeting positive cash from operations to start during H2/221. Our comprehensive cost reduction plan is expected to generate operational cost savings of approximately $50 million over the next 18 months. The majority of these savings result from an approximately one-third reduction of the U.S. commercial team workforce, returning to pre-pandemic levels, streamlined operational expenditure including selling, general and administrative (SG&A) expenses and refining the Company’s R&D strategy to rely mostly on external funding sources based on the promising clinical data generated to date. On behalf of RedHill and its Board of Directors, I would like to express my profound and respectful gratitude to the colleagues who are departing RedHill. We value and are extremely grateful for your immense contributions and dedication which enabled RedHill to build a first-class U.S. commercial organization and launch three innovative products that help patients in need. While difficult, the changes we have made as part of our cost reduction plan were necessary given the current realities."
Mr. Ben-Asher continued: "Improved financial stability resulting from cost savings, a commercial basket including three FDA-approved proprietary drugs, continued prescription growth and healthy sales, improved managed care coverage and the amended credit agreement with HCR, positions RedHill for further growth. To that end, RedHill is in non-binding discussions to acquire a synergetic U.S. FDA-approved, patented GI drug currently generating dozens of millions of dollars, which, if materialized, will help expedite and increase cash generation."
Micha Ben Chorin, Chief Financial Officer at RedHill, added: "RedHill’s commercial team has further strengthened Movantik’s share of the growing PAMORA class to approximately 74%, and Talicia’s approximately 13% quarterly growth further consolidates its position as the leading U.S. brand for H. pylori eradication. The Company’s disciplined cost control measures reduced Q1/22 cash used in operating activities by more than 70% to approximately $4 million, compared to approximately $15 million in Q4/21. Despite the challenging market conditions, RedHill is on its way to achieving company-wide positive cash from operations1 this year, and this, along with the envisaged growth drivers from the pipeline and potential acquisitions, could boost cash generation and further improve cash flow. We are confident that RedHill is well positioned for continuing growth."
Mr. Ben-Asher further remarked: "Turning to R&D, in reliance of promising clinical and other data we generated to date, we expect external funding for much of our promising R&D programs, through grants, industry partnerships and participation in platform studies. COVID-19, included in a broader category of ‘pandemic preparedness’, remains an area of high interest and need for novel oral therapeutics such as RedHill’s candidates. Regulatory feedback on opaganib, supportive of a confirmatory study has provided a pathway to potential opaganib submissions for approval in COVID-19. Most recently, opaganib further exhibited its variant-agnostic credentials by demonstrating potent in vitro efficacy against Omicron, while also showing, in a separate study, potent in vitro inhibition of influenza A H1N1, adding to evidence of opaganib’s broader antiviral potential and its promising applicability to ‘pandemic preparedness’. Meanwhile, RedHill’s 2nd COVID-19 therapeutic candidate, RHB-107, successfully met the Part A study primary outcome measure for its Phase 2/3-stage study in non-hospitalized COVID-19, showing, among other promising data, a 100% reduction in hospitalization due to COVID-19. Discussions are ongoing regarding potential external funding through grants, platform studies and other public, private and industry partnerships to support the opaganib and RHB-107 programs, as well as our ongoing Phase 3 study with RHB-204 for NTM disease."
Financial results for the quarter ended March 31, 2022 (Unaudited)
Net Revenues for the first quarter of 2022 were $18.2 million, as compared to $22.1 million in the fourth quarter of 2021, the difference being attributable to typical cyclical trends in Movantik sales and increased gross to net deductions related mainly to increased formulary coverage.
Cost of Revenues for the first quarter of 2022 were $8.0 million, as compared to $19.3 million in the fourth quarter of 2021. The decrease was attributed to recognition of an approximately $9 million impairment related to the intangible asset of Aemcolo for travelers’ diarrhea in the previous quarter.
Gross Profit for the first quarter of 2022 was $10.2 million, as compared to $2.7 million in the fourth quarter of 2021. The increase was attributed to the impairment recognized in the previous quarter, as detailed above.
Research and Development Expenses for the first quarter of 2022 were $3.1 million, as compared to $5.9 million in the fourth quarter of 2021. The decrease was attributed to the ongoing optimization of R&D costs and completion of elements of the opaganib and RHB-107 development programs.
Selling, Marketing and General and Administrative Expenses for the first quarter of 2022 were $20.4 million, as compared to $17.6 million in the fourth quarter of 2021. The increase was mainly attributed to a one-off positive adjustment in quarter four of 2021 and expenses related to professional services and other related expenses in the first quarter of 2022.
Operating Loss for the first quarter of 2022 was $13.2 million, as compared to $20.7 million in the fourth quarter of 2021. The decrease was mainly attributed to the impairment recognized in the previous quarter, as detailed above.
Net Cash Used in Operating Activities for the first quarter of 2022 was $4.2 million, as compared to $14.9 million in the fourth quarter of 2021. The decrease was mainly due to changes in working capital and continued implementation of cost-reduction measures.
Net Cash Used in Financing Activities for the first quarter of 2022 was $4.9 million, as compared to Net Cash Provided by Financing Activities of $17.6 million in the fourth quarter of 2021, comprised mostly from proceeds of equity offerings completed in the fourth quarter of 2021. The additional decrease of $5 million was due to a reduction of Movantik acquisition liabilities.
Liquidity and Capital Resources
Cash Balance1 as of March 31, 2022, was $45.0 million, as compared to $54.2 million as of December 31, 2021.
On June 17, 2022, RedHill Biopharma Inc. signed an amendment to the HCR Credit Agreement reducing the revenue covenant to $75.0 million for the next two quarters, with a 0.5% increase in interest.
The license of opaganib for COVID-19 by Kukbo for South Korea is expected to yield a $1.5 million upfront payment to RedHill and, in addition, up to $5.6 million in milestone payments plus royalties on net sales.
The license of Talicia for H. pylori by Gaelan Medical for the United Arab Emirates, with $2.0 million upfront payment received, is anticipated to yield additional milestones and royalties on net sales.
Discussions with additional potential partners, for both in- and out-licensing partnerships, are ongoing including for potential acquisitions of additional synergetic commercial products with strong cash generation potential.
The Company’s focus and determination to drive both Movantik and the PAMORA class as a whole have delivered important results, with Movantik’s Q1/22 performance matching the record pace set in Q4/21. This represents an 8.6% increase in new prescriptions compared to Q1/21, more than doubling the already strong growth of the overall PAMORA class in the same period and contributing to a further increase in market share for Movantik, now up to almost 74% of the PAMORA class.
Nearly 92% of insurance plans provide access for Movantik – best-in-class coverage – and as of January 1, 2022, Movantik has been approved for inclusion as a preferred and unrestricted brand on a major National Medicare Part D formulary serving more than 10 million Americans. Movantik’s total commercial coverage now extends to 151 million American patients’ lives and has grown to 46 million Medicare lives, with over 93% coverage of Medicare Part D lives.
With best-in-class payer coverage, focused execution in the pain segment and continuing the PAMORA class market development, Movantik is well-positioned for continued growth in 2022 and beyond.
Talicia (omeprazole magnesium, amoxicillin and rifabutin)
Talicia reached new TRx heights in Q1/22, growing a further 12.8% compared to the previous record levels set in Q4/21. This growth represents an 80% increase in new prescriptions from Q1/21, further cementing Talicia’s position as the most prescribed branded H. pylori therapy in the U.S. Significant increase in prescription volume in March of this year, coupled with a growing prescriber base, improving payor coverage and continuing promotional focus is expected to result in further growth acceleration.
Medi-Cal, California’s Medicaid Health Care program, which added Talicia last year to its Contract Drug List (CDL) for H. pylori treatment, with no prior authorization required, expanded coverage to 14 million beneficiaries on January 1, 2022. Florida Medicaid coverage started in April and another large Part D plan coverage became effective earlier this quarter. The Company also expects a major new coverage win to initiate July 1, 2022. As of May 2022, total Talicia coverage stood at nearly 200 million American lives, equating to seven out of ten lives.
Outside of the U.S., in January 2022, the Company announced that it had entered into an exclusive license agreement with Gaelan Medical Trade LLC, a wholly owned subsidiary of the Ghassan Aboud Group (GAG), for Talicia in the United Arab Emirates (UAE). Under the terms of the agreement, RedHill received an upfront payment of $2 million and is eligible for additional milestone payments as well as tiered royalties up to mid-teens on net sales of Talicia in the UAE if marketing authorization is received and Talicia is commercialized. Gaelan Medical received the exclusive rights to Talicia in the UAE, as well as a right of first refusal in relation to Talicia in the Gulf Cooperation Council region (Saudi Arabia, Kuwait, Qatar, Bahrain and Oman) for a pre-determined period.
The Company continues to be ready for post-COVID-19 returning travel opportunities for Americans.
COVID-19, included in a broader category of ‘pandemic preparedness’, remains an area of high interest and need for novel oral therapeutics. Data from prespecified analyses of opaganib’s Phase 2/3 study (NCT04467840), announced in January and February 2022, demonstrated that opaganib improved viral RNA clearance, achieved faster time to recovery and reduced mortality in key subpopulations of moderate to severe hospitalized patients with COVID-19. Additionally, a post-hoc analysis identified a biomarker, the fraction of inspired oxygen (FiO2), to select patients that showed superior outcomes with opaganib vs. placebo. Opaganib also demonstrated potent in vitro efficacy against the Omicron SARS-CoV-2 variant and is expected to remain effective against sub-variants BA.2, XE and other emerging and future variants. Based on regulatory guidance, a positive confirmatory study constitutes the likely pathway to potential opaganib submissions for approval in the U.S., EU, and multiple other territories.
Data from the global Phase 2/3 study has now been published on MedRxiv and will also be the subject of a "Late-Breaker" oral presentation at the joint CDC / Task Force for Global Health-organized International Conference on Emerging Infectious Diseases, to be held in August.
On June 21, 2022, and adding to opaganib’s expanding patent suite, RedHill was granted an additional U.S. patent directed to a method for the treatment of COVID-19 in patients with moderate to severe COVID-19 related pneumonia using opaganib.
RedHill is pursuing multiple public and private external funding sources for our programs including grants in the U.S., UK and EU, government sponsored platform studies and industry partnerships. In March 2022, the Company announced that it had entered into an exclusive license agreement with Kukbo Co. Ltd., a South Korean corporation, for the exclusive rights to commercialize opaganib for the treatment of COVID-19 in South Korea. Under the terms of the agreement, RedHill is entitled to receive an upfront payment of $1.5 million and is eligible for $5.6 million in additional milestone payments, as well as low double-digit royalties on net sales of opaganib if marketing authorization is received and opaganib is commercialized.
Other indications under investigation:
Influenza A H1N1: Opaganib demonstrated potent in vitro inhibition of influenza A H1N1, at low concentrations and with no evidence of toxicity at these levels. The results were obtained in Normal Human Bronchial Epithelial Cells (NHBE) assay, the natural human target of the virus, making it a realistic model. These results add to previous data demonstrating antiviral activity in several in vitro and in vivo viral infection models including SARS-CoV-2, influenza and Ebola, providing further evidence of opaganib’s potential broad-spectrum antiviral effect. Discussions with NIH are ongoing regarding next steps for investigating opaganib’s broader antiviral potential and its promising applicability to ‘pandemic preparedness’.
The Company continues to advance opaganib’s development program in oncology with the cholangiocarcinoma (CCA) Phase 2 study analysis expected in Q3/2022
In March 2022, the Company announced positive top-line results from Part A of the two- stage Phase 2/3 study of novel, once-daily, orally-administered, antiviral drug candidate, RHB-107. The study, evaluating RHB-107 for the treatment of non-hospitalized patients with symptomatic COVID-19 in the early course of the disease (NCT04723537), who do not require supplemental oxygen (the vast majority of COVID-19 patients) was predominantly conducted in the U.S. (60/61 patients) as well as South Africa.
Results showed that RHB-107 met the primary outcome measure, demonstrating a favorable safety and tolerability profile and showed a 100% reduction in hospitalization due to COVID-19, with zero patients (0/41) on the RHB-107 arms versus 15% (3/20) hospitalized due to COVID-19 on the placebo-controlled arm (nominal p-value=0.0317). The study also showed an approximately 88% reduction in reported new severe COVID-19 symptoms after treatment initiation, with only one patient in the RHB-107 treated group 2.4%, (1/41) versus 20% (4/20) of patients in the placebo-controlled arm. Further analysis of study data also showed a faster recovery from severe COVID-19 symptoms for patients in the RHB-107 arm, with a median of 3 days to recovery with RHB-107 vs. 8 days with placebo.
RHB 107’s unique human host-targeted, suggested antiviral mechanism is expected to act independently of viral spike protein mutations and remain effective against Omicron and sub-variants BA.2, XE and other emerging and future variants.
Next steps for the study are expected following ongoing discussions with regulators.
RHB-204 – Pulmonary Nontuberculous Mycobacteria (NTM) Disease
A U.S. Phase 3 study is ongoing in the U.S. to evaluate the efficacy and safety of RHB-204 in adults with pulmonary NTM disease caused by Mycobacterium avium Complex (MAC) infection (NCT04616924). The waning of COVID-19 is expected to accelerate the advancement of the program
The study protocol provides for 6 months co-primary endpoint of sputum culture conversion (SCC) and clinical outcome (patient-reported outcomes – PRO) in a randomized placebo-controlled design, followed by open label active treatment with RHB-204 for 12 months from conversion.
RHB-204 has been granted Orphan Drug designation and QIDP status – providing for Fast Track and Priority Review and resulting in eligibility for 12 years post-approval market exclusivity.
Conference Call and Webcast Information:
The Company will host a conference call and webcast today, Thursday, June 23, 2022, at 8:30 a.m. EDT, during which it will present key highlights for the first quarter of 2022.
The webcast including slides will be broadcast live on the Company’s website, View Source, and will be available for replay for 30 days.