RedHill Biopharma Ltd. Q2 FY2020 earnings call

• Company focus remains on rapid, sustainable, and profitable revenue growth with plans for operational breakeven in 2021.
• Second quarter was strong with record sales. Made rapid progress on R&D, with opaganib in global Phase 2/3 and US Phase 2 studies for COVID-19, and FDA clearance for RHB-204's pivotal Phase 3 study for NTM infections.
• Entered COVID-19 period resilient and emerged stronger, having built a robust US commercial and R&D organization.
• Acquired Movantik from AstraZeneca and renegotiated terms with Daiichi Sankyo for Movantik, improving gross margins.
• Commercial team gradually returning to field sales, with sales reps averaging over five calls per day in July, up from three in June.
• Talicia launched in mid-March despite COVID, and Movantik showed successful transition with increased scripts.

In the second quarter of 2020, RedHill Biopharma generated record net revenues of approximately $21 million. The gross profit was $6.7 million, primarily from Movantik. Research and development expenses were $3.2 million, an increase mainly due to the initiation of opaganib studies for COVID-19. Operating loss was $12.5 million, lower than the first quarter's $17 million. Cash balance as of June 30th was approximately $53 million, and as of August 13th, 2020, it was approximately $56 million. Revenue contribution is mainly from Movantik and Talicia, with Movantik being a key driver of gross profit.

• Aim to achieve operational breakeven in 2021.
• Opaganib's initial results and potential emergency use authorization application for COVID-19 planned for Q4 2020.
• RHB-204's pivotal Phase 3 study for NTM infections is advancing with funding from Cosmo Pharmaceuticals.
• Expect strong revenue growth driven by Talicia ramp-up and Movantik sales.

• COVID-19 could continue to impact sales and operational activities, such as delays in clinical study enrollments or restrictions on field sales.
• Uncertainty around clinical trial results for opaganib and RHB-204 could affect the timeline for potential approvals and revenue generation.
• Market competition in the GI and infectious disease sectors could impact the growth of products like Movantik and Talicia.

Q: David Hoang asked about Movantik's strategy difference from AstraZeneca and script split between in-patient and outpatient.

A: Rick Scruggs responded that they focus on increasing Movantik business by bringing more patients from over-the-counter laxatives and are focused on over 18,000 prescribers, and they are mostly focused on outpatients and aim to drive growth there.

Q: Scott Henry inquired about Movantik's steady-state gross margins and COVID-19 trial data timeline for opaganib.

A: Micha Ben Chorin said the new deal with Daiichi will reduce cost of goods sold, moving to mid-teens royalty level from current levels. Dror Ben-Asher mentioned it's possible to see data in September but can't be committed to.

Q: Ed Woo asked about sales force ramp-up and if 150 sales reps is still a goal.

A: Dror Ben-Asher and Rick Scruggs responded that they are well on their way to getting sales force back to speed, currently at around 2,600 in-person calls per week, and currently comfortable with 100 sales reps but may grow in the future.

Q: Matt Kaplan asked about NTM program's Phase 3 plans and Talicia's marketing post-COVID.

A: Dror Ben-Asher described the RHB-204's pivotal Phase 3 study design and enrollment timeline. Dror Ben-Asher also mentioned that Talicia will continue to have marketing efforts through the Internet and other non-in-person channels.