RedHill Biopharma Ltd. (Nasdaq: RDHL) ('RedHill' or the 'Company'), a specialty biopharmaceutical company, today reported its third quarter 2022 financial results and operational highlights.
Dror Ben-Asher, RedHill's Chief Executive Officer, said: 'The agreement in principle to sell Movantik to HCR in return for termination of all HCR debt obligations, subject to closing, is a significant turnaround opportunity for the Company, freeing us up to expedite both organic and inorganic growth. RedHill's U.S. commercial operations achieved positive cash flow in Q3/22, before interest payments, thanks to ongoing implementation of our cost-reduction plan. Talicia and Movantik have delivered year-to-date growth of 65% and 6.7%, respectively, and Q4/22 data to date indicate continued growth for both products. Turning to R&D, we continue to press forward with our two novel, broad-acting, host-directed late clinical-stage antiviral drug candidates, opaganib and RHB-107, in line with our stated goal to advance our late clinical-stage R&D programs primarily through external non-dilutive financing. We are advancing discussions for RHB-107's inclusion in a U.S. COVID-19 outpatients platform trial. Opaganib continues to advance as well, with collaborations ongoing and under discussion for COVID-19 and other viral diseases for government pandemic preparedness purposes. Additionally, multiple discussions and activities are advancing to expedite opaganib's development as a potential homeland security nuclear medical countermeasure (MCM) via the Animal Rule, subject to further guidance from FDA, which may provide for an MCM Priority Review Voucher eligibility. We are also holding multiple partnership discussions in relation to our products and potential acquisitions of additional revenue-generating products.'
Net Revenues for the third quarter of 2022 were $17.6 million, as compared to $18.3 million in the second quarter of 2022, the difference being attributable to an increase in units sold, accompanied by increased gross-to-net allowances as the percentage of Medicare part D and Medicaid prescriptions increased.
Cost of Revenues for the third quarter of 2022 was $9.5 million, as compared to $9 million for the second quarter of 2022.
Gross Profit for the third quarter of 2022 was $8.1 million, as compared to $9.4 million for the second quarter of 2022. The decrease was primarily attributable to a $0.7 million inventory write-off, recognized in the third quarter of 2022.
Research and Development Expenses for the third quarter of 2022 were $1.6 million, as compared to $1.5 million for the second quarter of 2022.
Selling, Marketing and General and Administrative Expenses for the third quarter of 2022 were $13.6 million, as compared to $17 million for the second quarter of 2022. The decrease was mainly attributed to the successful and ongoing cost-reduction program.
Operating Loss for the third quarter of 2022 was $7.1 million, as compared to $9.2 million for the second quarter of 2022, as described above.
Financial Expenses, net, as of September 30, 2022 were $28.6 million, as compared to $4.0 million as of September 30, 2021 due to the previously disclosed notice of event of default sent by HCR in September as a result of which the Company classified the borrowing under the credit agreement with HCR as a current liability and adjusted its carrying amount to reflect all amounts owing or payable under the credit agreement as being immediately due. As noted below, the Company has reached a non-binding agreement in principle with HCR with respect to the terms of a transfer of RedHill's rights in Movantik to HCR in exchange for the extinguishment of all RedHill's obligations under the credit agreement.[4]
Net Cash Used in Operating Activities for the third quarter of 2022 was $6 million, as compared to $16.6 million for the second quarter of 2022. The decrease was attributed to ongoing cost-reduction program accompanied by changes in working capital and positive cash flow from U.S. commercial operations.
Net Cash Used in Financing Activities for the third quarter of 2022 was $5.7 million comprised primarily of payables with respect to the Movantik acquisition.
Cash Balance 2 as of September 30, 2022, was $31.4 million, as compared to $43.2 million as of June 30, 2022, and $45 million as of March 31, 2022.
Q3/22 Business updates
On November 14, 2022, the Company announced that it has reached a non-binding agreement in principle with HCR with respect to the terms of a transfer of RedHill's rights in Movantik to HCR in exchange for the extinguishment of all RedHill's obligations (including all principal, interest, revenue interest, prepayment premiums and exit fees) under the Credit Agreement between RedHill's U.S. subsidiary RedHill Biopharma Inc. and HCR dated as of February 23, 2020 (as amended). RedHill would retain substantially all pre-closing assets and liabilities relating to Movantik and HCR would assume substantially all post-closing assets and liabilities. It is expected that RedHill would provide cash-generating transition services to HCR to ensure a seamless process and uninterrupted patient care. Subject to certain approvals, the definitive agreements are expected to be signed and the transaction is expected to close by year-end, but there can be no assurance that the parties will enter into definitive agreements or that the transaction will be completed.
On September 2, 2022, the Company filed a lawsuit against Kukbo Co. Ltd. ('Kukbo') in the Supreme Court of the State of New York, County of New York, Commercial Division, as a result of Kukbo's default in delivering to the Company $5.0 million under the Subscription Agreement, dated October 25, 2021, in exchange for ADSs, and a further payment of $1.5 million due under the Exclusive License Agreement, dated March 14, 2022. On November 24, 2022, the Company received a letter from Kukbo asserting that Kukbo intends to defend its case and bring a counterclaim against the Company. The Company believes in the merits of its lawsuit against Kukbo and will continue to pursue a favorable judgment. The Company notes that Kukbo did not file a response in the U.S. court within the required timeframe.
Discussions regarding out-licensing of RedHill's products in multiple territories and in-licensing of new revenue-generating products are advancing.
About RedHill Biopharma
RedHill Biopharma Ltd. (Nasdaq: RDHL) is a specialty biopharmaceutical company primarily focused on gastrointestinal and infectious diseases. RedHill promotes the gastrointestinal drugs, Movantik for opioid-induced constipation in adults5, Taliciafor the treatment of Helicobacter pylori (H. pylori) infection in adults7, and Aemcolo for the treatment of travelers' diarrhea in adults8. RedHill's key clinical late-stage development programs include: (i) RHB-204, with an ongoing Phase 3 study for pulmonary nontuberculous mycobacteria (NTM) disease; (ii) opaganib (ABC294640), a first-in-class oral broad-acting, host-directed, SK2 selective inhibitor targeting multiple indications, including for pandemic preparedness, with a Phase 2/3 program for hospitalized COVID-19 and a Phase 2 program in oncology and a radiation protection program ongoing; (iii) RHB-107 (upamostat), an oral broad-acting, host-directed serine protease inhibitor with potential for pandemic preparedness and is in Phase 3-stage development as treatment for non-hospitalized symptomatic COVID-19, and targeting multiple other cancer and inflammatory gastrointestinal diseases; (iv) RHB-104, with positive results from a first Phase 3 study for Crohn's disease and (v) RHB-102, with positive results from a Phase 3 study for acute gastroenteritis and gastritis and positive results from a Phase 2 study for IBS-D. More information about the Company is available at www.redhillbio.com/ twitter.com/RedHillBio.
This press release contains 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be preceded by the words 'intends,' 'may,' 'will,' 'plans,' 'expects,' 'anticipates,' 'projects,' 'predicts,' 'estimates,' 'aims,' 'believes,' 'hopes,' 'potential' or similar words and include statements regarding anticipated continued growth in prescriptions, the sale of Movantik, the addition of new revenue generating products, non-dilutive development funding from RHB-107 and its inclusion in a key platform study. Forward-looking statements are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company's control and cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, the risk that the growth in prescriptions will not continue, that the sale of Movantik and the addition of new generating products will not occur; that the FDA pre-study requirements will not be met and/or that the Phase 3 study of RHB-107 in COVID-19 outpatients will not be approved to commence or if approved, will not be completed or, should that be the case, that we will not be successful in obtaining alternative non-dilutive development funding for RHB-107, that the obligations of the term loan will not be met and that HCR will take steps to accelerate our payment obligations under our credit agreement with HCR, that we will not be successful in increasing sales of our commercial products, including due to market conditions, that the Phase 2/3 COVID-19 study for RHB-107 may not be successful and, even if successful, such studies and results may not be sufficient for regulatory applications, including emergency use or marketing applications, and that additional COVID-19 studies for opaganib and RHB-107 are likely to be required, as well as risks and uncertainties associated with the risk that the Company will not successfully commercialize its products; as well as risks and uncertainties associated with (i) the initiation, timing, progress and results of the Company's research, manufacturing, pre-clinical studies, clinical trials, and other therapeutic candidate development efforts, and the timing of the commercial launch of its commercial products and ones it may acquire or develop in the future; (ii) the Company's ability to advance its therapeutic candidates into clinical trials or to successfully complete its pre-clinical studies or clinical trials or the development of a commercial companion diagnostic for the detection of MAP; (iii) the extent and number and type of additional studies that the Company may be required to conduct and the Company's receipt of regulatory approvals for its therapeutic candidates, and the timing of other regulatory filings, approvals and feedback; (iv) the manufacturing, clinical development, commercialization, and market acceptance of the Company's therapeutic candidates and Talicia; (v) the Company's ability to successfully commercialize and promote Talicia, and Aemcolo and Movantik; (vi) the Company's ability to establish and maintain corporate collaborations; (vii) the Company's ability to acquire products approved for marketing in the U.S. that achieve commercial success and build its own marketing and commercialization capabilities; (viii) the interpretation of the properties and characteristics of the Company's therapeutic candidates and the results obtained with its therapeutic candidates in research, pre-clinical studies or clinical trials; (ix) the implementation of the Company's business model, strategic plans for its business and therapeutic candidates; (x) the scope of protection the Company is able to establish and maintain for intellectual property rights covering its therapeutic candidates and its ability to operate its business without infringing the intellectual property rights of others; (xi) parties from whom the Company licenses its intellectual property defaulting in their obligations to the Company; (xii) estimates of the Company's expenses, future revenues, capital requirements and needs for additional financing; (xiii) the effect of patients suffering adverse experiences using investigative drugs under the Company's Expanded Access Program; (xiv) competition from other companies and technologies within the Company's industry and (xv) the hiring and employment commencement date of executive managers. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 20-F filed with the SEC on March 17, 2022. All forward-looking statements included in this press release are made only as of the date of this press release. The Company assumes no obligation to update any written or oral forward-looking statement, whether as a result of new information, future events or otherwise unless required by law.
Contact:
Tel: +972-54-6543-112
Email: adi@redhillbio.com
REDHILL BIOPHARMA LTD. 