RedHill Biopharma's (RDHL) CEO Dror Ben-Asher on Q1 2016 Results - Earnings Call Transcript

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RedHill Biopharma Ltd. (NASDAQ:RDHL) Q1 2016 Results Earnings Conference Call April 20, 2016 9:00 AM ET


Dror Ben-Asher - CEO

Micha Ben Chorin - CFO

Gilead Raday - COO

Maurice Shani - Business Development Manager


RK - HC Wainwright

Ed Woo - Ascendiant Capital


Good day and welcome to the RedHill Biopharma's Firs Quarter 2016 Financial Results and Business Highlights Conference Call. At this time, I would like to turn the conference to RedHill CEO, Mr. Dror Ben-Asher and Mr. Micha Ben Chorin, RedHill CFO and Gilead Raday, COO. Before we begin, we will read from RedHill's safe harbor statement. Please go ahead.

Maurice Shani

Thank you, Daniel. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. These statements are only predictions and RedHill cannot guarantee that they will in fact occur. RedHill does not assume any obligation to update that information.

Actual events, results or achievements may differ materially from what RedHill projects today. Additional information concerning factors that could cause actual events, results or achievements to materially differ from those contained in the forward-looking statements can be found in the company's Annual Reports on Form 20-F and in its other filings with the Securities and Exchange Commission. Mr. Dror Ben-Asher, please go ahead.

Dror Ben-Asher

Thank you, Shani, and to those of you who are on our call live, thank you for joining us. Given the time limitations, we will focus today on selected operational highlights covering our three ongoing Phase III flagship programs for gastrointestinal diseases, RHB-105 for its pylori infection RHB-104 for Crohn's disease and BEKINDA for gastroenteritis and gastritis. We will also briefly mention our Phase II programs with RHB-104 for multiple sclerosis and YELIVA, and SK2 inhibitor first-in-class oncology and inflammation drug.

But first I would like to refer to Micha our CFO for discussion of our first quarter 2016 financial results announced earlier today.

Micha Ben Chorin

Thank you Dror, good morning or good afternoon everybody. I'll provide a short overview of our financial results for the first quarter of 2016. In this first quarter of 2016, we did not record meaningful revenues.

R&D expenses during the quarter were $4.7 million compared to $3.8 million in Q1 '15. The increase was mainly due to the clinical trial costs related to the ongoing Phase III MAP US study with RHB-104 for Crohn's disease

G&A expenses in the quarter were $1.2 million compared to 900,000 in Q1 '15. The increase was mainly due to professional fees associated with business development activities we have had.

Operational loss for the quarter was $5.9 million combining $4.7 million R&D and $1.2 million G&A. Our operational cash burn rate during the quarter was $5 million compared to $3.4 million in Q1 '15. The increase was inline with our expectations and represents increasing in clinical development activities.

Cash flow from financing activities in the quarter was immaterial compared to the $13 million in the first quarter of 2015, resulted from our public offering done in February 2015 in the US.

Our cash position remains strong with $53.4 million and no debt, a decrease of $5 million from our cash position in December 31, 2015.

I will now turn the discussion back to Dror and will be happy to take questions later on. Thank you.

Dror Ben-Asher

Thank you very much. Thank you, Micha. To refresh your memory RedHill is focused on development and commercialization of late clinical stage proprietary orally-administered small molecule drugs for GI diseases, gastrointestinal diseases and inflammatory diseases and cancer.

We are pursuing a multiple short-term goal strategy and maintain a strong a balance sheet and a balanced pipeline, including three ongoing Phase III GI programs, as well as several Phase II stage development programs. We are aiming to become a GI inflammation and oncology focused specialty pharma in the United States.

Selected 2016 potential milestones include interim data, safety and monitoring both DSMB analysis of the RHB-104 Phase III and MAP US study for Crohn's disease that is currently ongoing, top-line results from the Phase III GUARD study with BEKINDA for gastroenteritis and gastritis, and commencement of the confirmatory Phase III study with RHB-105 for H. pylori infection.

Selected operational highlights so far this year include the positive meeting with the US Food and Drug Administration, FDA regarding the path to marketing approval of RHB-105 and the planned confirmatory Phase III study for the treatment of H. pylori infection announced earlier this week.

The initiation of Phase II study with BEKINDA for diarrhea-predominant irritable bowel syndrome IBS-D announced earlier this month and also the encouraging top line interim results from a Phase IIa proof-of-concept study with RHB-104 for multiple sclerosis. Finally, the final results from the successful first Phase III study with RHB-105 for treatment of H. pylori infection were announced also during the quarter.

On April 18, we announced that we concluded a positive type B meeting with the US FDA, regarding the past two marketing approval of RHB-105 for H. pylori infection and the planned confirmatory Phase III study.

The FDA confirmed, subject to final minutes, the planned two-arm, randomized, double-blind, active comparator design of the confirmatory Phase III study with RHB-105 for H. pylori infection, expected to be initiated in the second half of 2016.

Based on FDA feedback, and subject to successful completion, the planned confirmatory Phase III study, along with a successfully completed first Phase III study and data from supportive PK program are expected to support a US New Drug Application, an NDA for RHB-105 for H. pylori infection.

The confirmatory Phase III study with RHB-105 follows a successful final results from the first Phase III clinical study with RHB-105, the study is called ERADICATE Hp study, which was reported on March 8, 2016.

The study successfully met its primary endpoint of superiority over historical standard-of-care, eradication rates of 70%, with high statistical significance at 001. The final results demonstrated 89.4% efficacy in eradicating H. pylori infection with RHB-105.

RHB-105 has been granted Qualifying Infectious Disease Product, QIDP designation by the FDA, providing a Fast-Track development pathway, as well as Priority Review status, potentially leading to a shorter review time by the FDA once the NDA is filed. If approved, RHB-105 will also receive an additional five years of US market exclusivity, in addition to the standard exclusivity period for a total of 8 years of market exclusivity in the United States.

H. pylori infection is a major of chronic gastritis, septic alfa [ph] disease gastric cancer and mucositis lymphoid tissue MALT lymphoma. There is a growing worldwide concern over decreasing efficacy rates of available treatment.

One hundred million Americans in over half of the world population, I repeat, half of the world population are estimated to be infected with H. pylori and approximately 3 million patients are treated annually in the United States to eradicate H. pylori infection. 2015 worldwide and US potential for H. pylori eradication therapy is estimated at 4.8 billion and 1.4 billion respectively.

Moving on to our second Phase III GI program, RHB-104 for the treatment of Crohn's disease. 2016 is a very important year for this flagship drug candidate. With Phase III Interim DSMB analysis from the ongoing MAP US study for Crohn's disease expected in the second half of the year.

On March 1, 2016 we announced that we completed enrollment of over half the planned 270 patients in the Phase III MAP US study in the United States and additional countries. Interim Data Safety and monitoring involve DSMB analysis is therefore expected in the second half of 2016 and we are well on track to achieve this important milestone.

The ongoing Phase III with RHB-104 is potential paradigm changer as far as the treatment of Crohn’s disease is concerned and that it targets a potential cause of the disease, the intracellular, Mycobacterium avium paratuberculosis or in short MAP.

In February 2016, we announced that the notice of allowance was received from US Patent office for a 5th US Patent covering RHB-104 expected to be valid through 2029 and we currently hold five US patents and multiple international patents for RHB-104.

RHB-104 is also being explored for the treatment of multiple sclerosis. On March 31, 2016 we announced encouraging interim results from our ongoing CEASE-MS Phase IIa proof-of-concept clinical study evaluating fixed oral dose RHB-104 in patients treated for relapsing-remitting multiple sclerosis or in short RRMS.

The ongoing CEASE-MS, single-arm, open-label study was designed with a series of exploratory endpoints to evaluate the safety and potential efficacy of RHB-104 combination as an add-on therapy to interferon beta-1a in 18 patients treated for RRMS.

Interim results after completion of the 24-week treatment period of the study demonstrated positive safety and clinical signals and support further clinical development based on encouraging preliminary data.

Additional data reads are due at week 48 following a 24-week follow-up treatment period with interferon beta-1a, without RHB-104 add-on. The top-line interim results demonstrated an annualized relapse rate, ARR at 24 weeks of 0.288 in the modified intent-to-treat, mITT population and 0.0 in the per-protocol population, comparing favorably with previously reported pivotal studies of interferon beta-1a therapies Avonex at 0.67 and Rebif at 0.87 to 0.91.

88% of the mITT patient population and 100% of the per protocol patient population were relapse free at weeks 24, comparing favorably with previously reported pivotal data on the use of Rebif at 75% in comparison with Avonex at 63% as standalone first line therapy

No patients in the CEASE-MS study relapsed after week 8 of treatment. With only a single active T1 post gadolinium lesion noted among all patients followed, combined unique active lesions, CUAs, the primary outcome measure in the study were almost entirely MRI T2 lesions;

Although not powered for efficacy, a reduction in total MRI T2 lesion volume was observed at 24 weeks as compared to baseline, suggesting a decreased burden of disease and comparing favorably with previously reported Avonex and Rebif data.

Moving on BEKINDA, our third Phase III GI disease program, top line results from the ongoing Phase III GUARD study for gastroenteritis and gastritis are expected in the second half of this year.

We previously announced following a meeting with FDA that the ongoing Phase III GUARD study may be sufficient a single study to support the filing of the marketing application an NDA for BEKINDA 24 milligram subject to achieving sufficiently striking positive results.

On April 11, 2016, we also announced that we initiated a randomized, double-blind, placebo-controlled, 2-arm parallel group Phase II clinical study in the United States, evaluating the safety and efficacy of BEKINDA12 milligram in patients with diarrhea-predominant irritable bowel syndrome or IBS-D.

The study is expected to be conducted in 12 clinical sites in the US and enroll 120 patients who will be randomized 60 to 40 to receive either BEKINDA 12 milligram or placebo once daily for a period of eight weeks. The primary endpoint for the study is stool consistency.

Another product we will briefly mention today is YELIVA. The YELIVA is a proprietary first-in- class orally administered SK2 inhibitor with anti-inflammatory and anticancer activities targeting multiple oncology and inflammatory and GI diseases. Several Phase I and Phase II programs has been completed are ongoing or are planned to commence in the coming months.

The development of YELIVA has been and continues to be significantly supportive by National Cancer Institute grant awarded to our partner Apogee in conjunction with several US academic institutions with additional support from RedHill.

In this respect, it is worth mentioning that we continue our collaboration with a US government agency for the development of the treatment for Ebola virus disease with a proprietary combination therapy of RedHill. It is also worth mentioning that given todays call time limitations several of our ongoing development programs have not been mentioned or discussed here.

We continue our extensive corporate development activities in relation to both acquisition of commercial assets in United States, primarily within RedHill's specialty focus on GI and inflammation and partnerships for commercialization of some of products to out- licensing.

In relation to out-licensee we continue to take particular care to ensure that our pharma partners and transaction terms are the right ones, providing the best possible home for our products to maximize value generation for our shareholders from RedHill late clinical stage assets.

To sum up, with important potential milestones and catalysts in the horizon a strong balance sheet, high quality institutional support and a balanced pipeline, including several Phase III and several Phase II programs targeting strong unmet medical needs, we continue to aggressively execute RedHill's plans. We are positioning RedHill as emerging specialty pharma focused primarily on GI inflammation in United States with strong clinical development capabilities, as well as integrated US commercial operation.

I will now turn it back to Daniel and we'll be happy to take any questions you may have.

Question-and-Answer Session


Thank you. [Operator Instructions] We can now take our first question and it comes from Swayampakula Ramakanth of HC Wainwright. Please go ahead sir. Your line is open.


Thank you. Good morning Dror. This is RK from HCW. I have few questions and let me ask some of them and get back in the line. So the first set of questions is on RHB-105, so from yesterdays press release, we do understand that the FDA is asking for a supportive PK study, along with the confirmatory Phase III study.

Regarding the PK study what are the aims for this study and do you need to get data from the confirmatory - I mean, from the supportive PK to design you confirmatory Phase III study?

Dror Ben-Asher

The answer is negative. We do not need the data to design our confirmatory Phase III study. This is something that we are completing as we speak. We have had a PK program since the very beginning of the RHB-105 development several years ago. There is no drug approved by FDA without PK data. So this data is important to support new drug application and eventual approval.

It has to do with - for example food effects, which every approved drug that needs to be – needs to include and so on. Just to remind the listeners that PK studies are done with healthy volunteers, a very small scale and very short and in-expensive.


Okay. So regarding the competitor combination of [indiscernible] you are planning to use, what's the eradication rate that has been normally seen this – that this combination and which will become your hurdle rate?

Dror Ben-Asher

There is not much data on that because this combination - its still not - LNTPI [ph] is not approved as such as the combination for H. pylori. However, what we see is roughly the same as standard of care.


Okay. And then the last question on 105, if you start the study and say sometime in the second half of 2016, what do you think is the timeline in terms of completing recruitment and also potentially hearing another initial data from the study?

Dror Ben-Asher

We did not publicly announce the timelines yet because we are just deciding as we speak about the number of sites and so on. We will announce as soon as we have a clear guide on some of that.


Okay. Let me ask you a couple more questions on one other molecule and then I'll step back into the line. This is on BEKINDA, I am sure you are eager to know there is also gastroenteritis study, could you begin to note or remind us the design and the primary endpoint of the study and then is this study enough to seek approval and what kind of indication would apply for the new goal for - go for registration?

Dror Ben-Asher

RK, I will defer this to Gilead who is here in the room.

Gilead Raday

Hi. The endpoint of the gastroenteritis study is treatment of the symptoms of nausea and vomiting. So the avoidance for the primary endpoint, the avoidance of vomiting from given the dose until the valuable period after the dose. And that’s compared to placebo 60 to 40 ratio between the active arm and the placebo arm.

We did have a meeting with regulatory agencies and pending results of the study if they are sufficiently strong from a statistical perspective and positive of course, there is a possibility that a single study will be sufficient for approval of the product for gastroenteritis and gastritis, but that’s again subject to the results.


Okay. And the last question from me for now, on the IBS-D study that you recently talked about, what do you think about the date of the investigators for study and how quickly do you expect to recruit patients into the study?

Gilead Raday

I believe RK, again, that we haven’t guided on completion of the study. We want to see start our PK recruitment is going, as soon as we have stronger sense of timing we will share with you, with the market.


Thank you. I'll get back in a little bit. Thanks.

Gilead Raday

Thank you.


We can now take our next question if you wish?

Dror Ben-Asher

We are ready.


We can now take our next question. It comes from Ed Woo of Ascendiant Capital. Your line is open. Please go ahead.

Ed Woo

Yes. I'd also like to throw my congratulations on RHB-105 news that we're looking for to more information later this year. My question is actually on [indiscernible] I know you recently announced agreement licensing agreement, do you anticipate more agreements in the near future on this?

Dror Ben-Asher

Yes. Hi, Ed. Absolutely we're in discussion looking to conclude additional territorial data. If you recall that there is approval in Europe already - is of course under the mutual recognition of course with bigger DCP in Germany and so on and there will be in other country as we just start care binding term sheet for Spain and potentially other countries.

We think US will be driven primarily by the visibility of the timing of approval in the US. There is interest from an US potential partners. We are in discussion with such partner, but we haven’t reached a point where we feel we should be announcing anything. Again, it’s tied very much to our progress and I believe we announced those timelines that we expect for a new PDUFA date.

Ed Woo

Great. And my last question is, I know you previously mentioned that you guys were exploring – extending your potential commercial sales force in anticipation of subsequent [ph] drug approvals, do you have any discussions on your progress on that?

Dror Ben-Asher

Yes, we have been looking at numerous commercial aspects in United States that fit within our criteria, meaning GI inflammation, ideally oral FDA approved on the market and so on. With a view to acquire such assets and generate the sales and the knowledge that is needed in order to have a well experienced and a solid commercial operation by the time our flagship GI products hits the US market.

And those are all potential block busters. Therefore we want to have the option to at least co-promote them in the United States in due course because this where the margins are, this is where are our shareholders value is and we feel this is a right thing to do.

Ed Woo

Great. Thank you and good luck.

Dror Ben-Asher

Thank you, Ed.


Thank you. We have no further questions at present. [Operator Instructions] We have in fact another question. It’s a follow up question from Swayampakula Ramakanth of HC Wainwright. Your line is open. Please go ahead.


Thank you. Just couple of more questions on 104, regarding the Crohn's program, what should we expect from the DSMB analysis and when do you think we can hear top line data from the study?

Dror Ben-Asher

DSMB analysis focuses on safety and we also included futility analysis. So that’s a default of what the markets and the company will be hearing. We are considering maybe expanding that little bit, but it’s under discussion and currently the charter of the DSMB allows DSMB to tell the company that the drive appeared sufficiently safe to continue the study and pass the futility analysis, so that the sufficient likelihood of success to continue. That’s the DSMB and we are well on track get to that independent analysis in the second half of this year.

With regard to overall top line results from the study, I can only say that recruitment is going well, even very well. We passed already a few enrollments that we announced the mid way point and we continue to add sites and we continue to add countries as we speak. We are aiming at 120 sites and we are getting there.

So I think it’s too early to say when, but we are getting to a point where we should be able to say when top line results would be expected.


And Dror, any color you can provide on the European study for the Crohn's program?

Dror Ben-Asher

It’s a good question, RK because indeed the market you study, the second Phase III study for Crohn's is RHB-104 has been cleared by several European authorities already to grow.

We are not pressing the button yet because we have our own internal discussion about the optimal design and optimal timing and so on. So we remain undecided and we look to take a decision in the coming weeks and months what to do with that study and whether or not to press the button now.


Okay. And then regarding the CEASE-MS program, you know, obviously you recently announced encouraging data from the study. When can we expect a final data and also what are the next steps in terms of clinical development and commercialization for the MS?

Dror Ben-Asher

Again, right question, actually we expect to complete the study very soon, because you recall that the first 24 weeks treatment with RHB-104. Its an add on therapy to interferon beta was over sometimes I believe in November or so. And then the remaining patients they remain for another 24 weeks to complete another 24 weeks treatment period but only with interferon without RHB-104, so that’s almost around the corner.

We think we'll be able to generate the data faster than last time because we have the experience and also it’s beta that has less to do with RHB-104 treatment data. So I would say sometimes in the summer, I don’t if its late summer maybe we should be able to announce final results.

With regards to the next phase, this has probably brought us more and stronger efficacy signal then we expected for such a small study. We are talking about 18 patients [indiscernible] 17 patients, two sites only open-label with no comparator. So we really presently surprised by the efficacy signal and highly qualified obviously given the size and nature of the US study.

Therefore the next stage should be a Phase II study that is larger, that it probably controls with some kind of comparator that we can do by ourselves and only could - we could do with a partner we would see. We are not looking to grow into a larger Phase III study by ourselves anytime soon.

This indication multiple sclerosis we believe adds value to the overall pockets of RHB-104 with lead indication is Crohn's and I remind the listeners that we have three additional auto inflammatory or auto immune indication with RHB-104 such as RA [ph]


Thank you, Dror. And it’s been a great quarter. So hope to talk to you soon. Thanks.

Dror Ben-Asher

Thank you, RK.


We have no further questions at present. [Operator Instructions] As we have no further questions at this point, I would not like to hand the call back to speakers for any additional or concluding remarks. Thank you.

Dror Ben-Asher

Thank you, Daniel. And thank you all for listening and for your interest in RedHill. We remain committed to being available to discuss and answer any questions you may have. You can approach us by phone, by email, call us and so on and you will find us very responsive. Thank you very much and have a great day.


That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

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