RedHill And Talicia: I Say Yes

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About: RedHill Biopharma Ltd. (RDHL), Includes: AGN
by: First Genesis Consulting

Summary

Talicia (RHB-105) is a Phase 3 triple combination therapy drug candidate in clinical trial for eradication of H. pylori infection. Top-line data readout for Talicia is expected late Q4/2018.

The pathophysiological effects of H. pylori in the gastrointestinal tract are broad including gastric cancer, the most lethal cancer in the world, that accounts for >750,000 death annually.

In US, 117M individuals are infected with H. pylori, a serious chronic transmissible infectious agent, with global prevalence estimated at 4.32 billion.

RedHill proposes Talicia as an innovative, advanced first-line therapy for eradication of H. pylori irrespective of ulcer status. I also clarify why placebo was used in the first Talicia trial.

Is this doable? I say 'yes' and offer my thorough analysis based in part on my call interview with Gilead Raday, COO at RedHill Biopharma.

Author's note: I am grateful to COO, Gilead Raday and management for granting me a call interview for this article.

The therapeutic battle for clinical excellence starts in the mind of a visionary who thinks outside the box to develop a paradigm changing pharmacological approach to disease states

Clinical Agenda For Talicia

The top-line data readout from the confirmatory Phase 3 trial of Talicia (RHB-105), an anti-H. pylori infection drug candidate, is imminent (Q4/2018). RedHill (RDHL) is an Israeli small ($204M) market cap commercial stage biopharma making therapeutic waves with clinical development of innovative therapies such as Talicia (the focus of this article) and RHB-104 for diseases affecting the gastrointestinal tract.

Using historical perspectives on H. pylori and clinical data from RedHill's first Phase 3 Talicia trial, I justify RedHill's clinical desire and goal of wanting Talicia approved as an advanced first-line treatment for eradication of H. pylori infection regardless of ulcer status.

Given the huge addressable market (discussed below) and documented reduced clinical efficacy (30-40%) in the current standard of care (SoC), I concur with RedHill's clinical rationale for developing Talicia as a novel proprietary fixed-dose triple therapy combination of two antibiotics (amoxicillin/rifabutin) and a proton pump inhibitor (PPI; omeprazole) in an all-in-one oral capsule.

To apprehend white collar criminals, the FBI just need to follow the money. Likewise, in science, we are taught to follow scientific evidence to validate or refute a hypothesis. Personally, I believe there is significant clinical efficacy and differentiation of Talicia from branded therapies. Specifically, branded therapies are associated with antibiotic resistance by H. pylori, some undesirable side effects, high pill loads, and inconvenient dosing.

Talicia has a favorable safety profile, reduced pill load since in an all-in-one oral capsule and of course, negligible antibiotic resistance. Finally, Talicia has a broad therapeutic target of all H. pylori mediated pathophysiological effects versus SoC that is therapeutically used largely for ulcers. For this reason, I say 'yes' to Talicia as a unique and pioneering eradication treatment for H. pylori triggered gastrointestinal pathologies.

Addressable Market & H. Pylori Resistance

H. pylori infection is chronic, asymptomatic, and its clinical effects are progressive. It triggers gastritis (inflammation of the stomach), peptic ulcer disease, gastric cancer, and mucosa-associated lymphoid tissue as depicted in Figure 1 below.

The worldwide prevalence of H. pylori infection is stipulated to be 4.32B individuals (US: 117M, Europe: 149M, Japan: 66M; China: 726M). For this reason, the global addressable market for the eradication of H. pylori is huge projected to be~ $4.8B with US, Europe, Japan, and China accounting for $1.4B (30%), $1.62B, $0.65B and $0.66B, respectively.

Due to lack of diagnosis and its asymptomatic clinical characteristics, it is estimated that a small number of US patients (2.9M) are treated annually for H. pylori with similar observations in Europe (3.2M), Japan (1.4M), and China (5.3M). In view of the fact that in places like China, a country with one of the highest rate of gastric cancer in the world, ~726M folks are infected with H. pylori, effective and affordable therapies are urgently needed.

The current recommendation by clinicians is that all individuals who test positive for H. pylori infection, a serious chronic transmissible infectious, to be treated. The large untapped addressable market and far-reaching pathological consequences of H. pylori infection justifies the clinical need for Talicia, an advanced triple combination therapeutic agent, with possibly broad clinical/medical applications in the gastrointestinal tract.

Figure 1: Diverse Pathophysiological Effects of H. pylori Infection in Gastrointestinal Tract (Nobel Prize Committee 2005)

Current branded SoC for H. pylori infection involves triple (Prevpac) or quadruple (Pylera) therapy using a PPI with antibiotics (clarithromycin, amoxicillin, metronidazole, tetracycline) and bismuth (for Pylera as discussed later). However, emerging H. pylori resistance to clarithromycin and metronidazole together with reduced therapeutic efficacy hasten the clinical need for superior effective first-line therapies. If approved, Talicia will be the first new first-line therapy for eradication of H. pylori infection in a decade.

Conservatively, the US addressable market of $1.45B is based on $500 branded therapy per 2.9M patients treated annually. Notably, most branded therapies (Pylera, Omeclamoxand Prevpac) in the US are priced $600-800. On proposed approval for broad clinical indication, a conservative target of at least 20% of the potential patient population at branded pricing ($500 per therapy) should yield revenue value of ~$300M for Talicia in the US alone.

Talicia has Qualifying Infectious Disease Product (QIDP) designation under the GAIN Act for serious or life-threatening infections, including Fast-Track development, priority review, and extended market exclusivity for a total of 8 years. Furthermore, in 2017, the WHO designated H. pylori as one of high priority antibiotics-resistant pathogen in need of new effective antibiotics.

In subsequent sections, I will also discuss pharmacological steps taken by RedHill to limit potential resistance by H. pylori to Talicia therapy.

Historical Perspectives: The Bacteria/H. pylori-Ulcer Clinical Connection

When I started writing this article, I had intended to include a narrative of the paradigm-changing scientific data by Drs. Barry Marshall & Robin Warren that led to the identification and characterization of H. pylori as the trigger of gastritis and peptic ulcer. To limit the length of this article, the historical scientific perspective by Marshall & Warren, recipients of the 2005 Nobel Prize in Medicine/Physiology for their discovery of "the bacterium Helicobacter pylori and its role in gastritis and peptic ulcer disease" has been published in my blog.

Talicia: The Clinical Expectation

In 2016, RedHill reported clinical efficacy for Talicia (RHB-105), its Phase 3 anti-H. pylori infection drug candidate, in patients with dyspepsia. Senior COO, Gilead Raday elaborated:

The study demonstrated an overall success rate of 89.4% in eradicating H. pylori, and met its protocol-defined primary endpoint of superiority in eradication of H. pylori infection over historical SoC efficacy levels of 70%, with high statistical significance (P<0.001). Notably, the 89.4% efficacy in eradicating H. pylori infection with Talicia was also superior to subsequent open-label treatment with SoC therapies of patients in the placebo arm of the ERADICATE Hp study, which demonstrated only 63% eradication rate in the mITT population (P<0.006). Importantly, no serious adverse events related to the drug were observed in the study. The occurrence of H. pylori eradication was confirmed via 13C Urea Breath Test (UBT) testing 28-35 days after completion of treatment.

Obviously, this was an important milestone in the clinical development of Talicia. This data validated RedHill's viewpoint that Talicia is an advanced first-line anti-H. pylori infection drug candidate over SoC therapies based on its therapeutic benefit. Analyst Scott Henry from Roth Capital Partners remarked that due to the lack of an active comparator arm in the first ERADICATE Hp trial, some investors may be uncertain on the likelihood of significant clinical benefits (i.e. eradication) by Talicia in the confirmatory trial. This could account for the heavy discounting in Talicia.

RedHill's COO, Gilead Raday on the use of placebo:

clarified those concerns with regard to the use of placebo versus Talicia in the first ERADICATE Hp trial. Placebo was never meant to be an active comparator. Placebo was used as a safety measure to help RedHill and its Clinical investigator understand the effectiveness of Talicia in eradicating H. pylori infection in dyspeptic patients and also help them check for potential side effects.

As we await the release of the top-line data for the Phase 3 confirmatory (ERADICATE Hp2) trial, I highlight some important amendments to its clinical design versus the first Phase 3 (ERADICAT Hp) trial for Talicia. In the confirmatory Phase 3 trial, FDA approved an active comparator arm that consisted of high doses, amoxicillin 3000 mg or 3 g and omeprazole 120 mg, similar to the doses in Talicia.

By using a dual therapy comparator arm, RedHill hopes to elucidate/demonstrate the clinical benefits of optimized dose of rifabutin in the amoxicillin/omeprazole cocktail in Talicia. As noted by RedHill's advisory panel and lead clinical investigator, Professor Graham, dual therapy active comparator trials involving amoxicillin and omeprazole have consistently yielded lower eradication rates ~61-70%.

Other changes in the confirmatory ERADICATE Hp2 trial, more patients have been enrolled with n=455 in vs. n=118 in Hp. Finally, despite observing 89.4% clinical effect in the first Phase 3 trial, the confirmatory trial is moderately powered to detect a 13% treatment effect at 83% vs. 70% in the ITT population.

Talicia: The Clinical Differentiation

The revolutionary discovery by Drs. Marshall and Warren paved the way for peptic ulcer to be cured by a short regimen of antibiotics and acid secretion inhibitors. By 1996, the FDA approved the first antibiotic, clarithromycin, specifically for ulcers. At the moment, treating ulcers with antibiotics is standard therapy.

SoC therapy, Prevpac, is a triple combination therapy using a PPI (lansoprazole) with clarithromycin and amoxicillin. On the other hand, SoC Pylera by Allergan (NYSE:AGN) is a quadruple therapy that requires 2 separate prescriptions for PPI (omeprazole) and Pylera (metronidazole, tetracycline, bismuth). Presently, SoC therapies have a 30-40% failure rate due to H. pylori resistance to clarithromycin and metronidazole (Graham, DY, Clin. Gastroenterol Hepatol. 2009; Gisbert et. al. Aliment Pharmacol. Ther. 2011; O'Connor et. al. Eur. J Gastroenterol Hepatol. 2010; Alba et. al. Curr. Opin. Infect. Dis. 2017; Greenberg et. al. Lancet. 2011). Furthermore, Pylera has unwanted side effects including warning for potential carcinogenicity due to metronidazole. It is also a somewhat costly drug.

Due to increasing development of H. pylori resistance to antibiotics, clarithromycin, and metronidazole, gastroenterologists are faced with the clinical dilemma of predicting if infecting H. pylori strain in a patient will be resistant to antibiotics, if so, to which antibiotics. They are also faced with possible adverse reactions to antibiotics that could lead to discontinuation in addition to other unknown variables that could influence the clinical efficacy of the therapy.

To maximize H. pylori eradication by therapies, the Maastricht Consensus recommends a 2-week treatment that includes maximal acid inhibition. H. pylori thrives in an acidic environment. It has been reported that H. pylori eradication rates parallel acid inhibition.

Talicia is a daily dose all-in-one capsule triple combination therapy containing omeprazole @120mg; rifabutin@150mg; amoxicillin@3g. Rifabutin is a member of the rifamycin family belonging to the WHO lists of essential medicine. The efficacy of rifabutin in eradicating multi-resistant H. pylori is well documented (Lim et. al. Helicobacter, 2014; Zullo et. al. J. Gastrointestin Liver Dis. 2010; ). Likewise, the sensitivity of H. pylori to amoxicillin is well known (Lim et. al. Helicobacter, 2014; Seddik et. al. Eur J Clin Pharmacol. 2013). H. pylori resistance to amoxicillin and rifabutin is negligible <1.04% (Hirschi, et. al. J. Gastroenterol. 1996; Mégraud F, Gut, 2004).

My personal opinion is that by pharmacologically tweaking the regimen composition (antibiotics and PPI) as well as selecting antibiotics with negligible/low H. pylori resistance rate, Talicia demonstrates significant differentiation which has also been documented therapeutically in the clinical trials by RedHill (discussed previously). Talicia is marketed as a first line treatment for naïve H. pylori-infected patients that have been recently diagnosed or have never been treated for H. pylori infection.

Obviously, no one can exclude that H. pylori resistance may also develop with Talicia in subsequent years. My viewpoint is that the high effective dose omeprazole in Talicia versus lower doses used in other therapies together with antibiotics less susceptible to H. pylori resistance suggests that Talicia is a novel and superior first-line therapy that will be effective at clinically "terminating" H. pylori to reverse its pathological effects in the gastrointestinal tract.

Financials And Risk

RedHill has multiple shots on goal with several early/mid-phase (RHB-102, RHB-106, RHB-107, RHB-204) and Phase 3 (RHB-104 and Talicia) drug candidates currently in clinical development. RedHill's imminent catalyst is the confirmatory Phase 3 top-line data readout for H. pylori drug candidate Talicia.

Analyst Scott Henry from Roth Capital Partners gives RedHill Biopharma a valuation of $17 per share based on a sum-of-the-parts analysis. Key drivers include RHB-104 ($9.00/share), RHB-105 ($3.25/share), RHB-102 ($2.75/share), and cash/remaining pipeline/Donnatal/EnteraGam ($2.00/share). Impediments to our price target include failure of clinical data to match expectations and the inability to enter into favorable marketing agreements for the company's pipeline compounds.

All clinical trials are associated with risks including trials delay, negative clinical outcome. With several commercial products and multiple drug candidates in clinical trials, I think RedHill's long-term valuation of $17 per share is really low. Personally, I believe that the clinical development of Talicia is timely, unique and possesses significant clinical differentiation from its peers given the progressive resistance by H. pylori to current SoC therapies.

Epilogue

A winner is a dreamer who never gives up-Nelson Mandela

The revolutionary discovery by Drs. Marshall and Warren paved the way for peptic ulcer to be cured by a short regimen of antibiotics and acid secretion inhibitors. By 1996, the FDA approved the first antibiotic, clarithromycin, specifically for ulcers. Today, treating ulcers with antibiotics is standard therapy.

With 30% of US population infected with H. pylori, there is a need for advanced first-line therapies with broad clinical indication to slow, eradicate the progressive and fatal pathophysiological consequences of H. pylori in the gastrointestinal tract. Talicia fits that profile.

Respectfully speaking, it is my point of view that Talicia is a drug that is highly warranted in the clinical setting regardless of the analysts rating. RedHill, I see a lot of your methodological clinical approach in this quote by Charles Dickens "I never could have done what I have done without the habits of punctuality, order, and diligence, without the determination to concentrate myself on one subject at a time".

Investors, I end my article with my previous statement that the therapeutic battle for clinical excellence starts in the mind of a visionary who thinks outside the box to develop a paradigm changing pharmacological approach to disease states. Talicia will not be everyone's cup of tea. Nevertheless, its novel anti-H. pylori infection drug candidate, Talicia, will advance the clinical quest initiated by Drs. Marshall and Warren to dramatically eradicate the H. pylori infection that leads to gastrointestinal inflammation, pathological and possibly oncological damage. Once again, RedHill, I appreciate the interview for this article.

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Disclosure: I am/we are long RDHL.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.