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Edited Transcript of RDHL.TA earnings conference call or presentation 23-Jul-19 12:30pm GMT

Q2 2019 Redhill Biopharma Ltd Earnings Call

TEL AVIV-YAFO Jul 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Redhill Biopharma Ltd earnings conference call or presentation Tuesday, July 23, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dror Ben-Asher

RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO

* Gilead Raday

RedHill Biopharma Ltd. - COO

* Guy Goldberg

RedHill Biopharma Ltd. - Chief Business Officer

* Micha Ben-Chorin

RedHill Biopharma Ltd. - CFO

* Rick D. Scruggs

RedHill Biopharma Ltd. - COO of US Operation & Director

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Conference Call Participants

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* Christopher N. Marai

Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology

* Edward Moon Woo

Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media

* Jonas Peciulis

Edison Investment Research Limited - Analyst

* Matthew Lee Kaplan

Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research

* Robin Thai Garner Kalley

LifeSci Capital, LLC, Research Division - Senior Analyst

* Scott Robert Henry

Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research

* Stephen Gilbertpaul Brozak

WBB Securities, LLC, Research Division - Senior Equity Analyst

* Swayampakula Ramakanth

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the RedHill Biopharma Second Quarter 2019 Financial Results and Operational Highlights Conference Call. (Operator Instructions) I would like to introduce to the conference call RedHill's CEO, Mr. Dror Ben-Asher; Mr. Micha Ben-Chorin, RedHill CFO; Mr. Gilead Raday, RedHill's Chief Operating Officer; Mr. Guy Goldberg, RedHill's Chief Business Officer; and Mr. Rick Scruggs, RedHill's Chief Operating Officer, U.S. operations. Before we begin, we will read from RedHill's Safe Harbor Statement. Please go ahead.

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Guy Goldberg, RedHill Biopharma Ltd. - Chief Business Officer [2]

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Thank you. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of RedHill, including statements with respect to RedHill's expectations regarding initiation, timing, progress and results of its research manufacturing, preclinical studies, clinical trials, marketing applications or approvals, if any, other therapeutic candidate development, efforts and the timing of the commercial launch of its therapeutic candidates as well as business promotion and other efforts related to RedHill's commercialization activities.

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, performance time and results or commercialization activities may differ materially from what RedHill projects to-date.

Additional information concerning factors that could cause actual events, performance, time and results or commercialization activities to materially differ from those contained in the forward-looking statements, can be found in the company's annual report on Form 20-F filed with the SEC on February 26, 2019, and in its other filings with the Securities and Exchange Commission.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [3]

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Thank you, Guy. Good day, everyone, and thank you for joining us. Today, we will briefly discuss our results for the second quarter of 2019 and focus on Talicia for H. pylori bacterial infection.

H. pylori infection is a Group I carcinogen, which affects approximately 35% of the U.S. population and more than half of the world's population. RedHill's Talicia NDA was recently accepted by the FDA for priority review with a target PDUFA action date of November 2 this year. This is less than 4 months away. Intensive preparations are undergoing for a potential commercial launch of Talicia shortly thereafter with our established sales force led by our highly experienced commercial management team.

Assuming FDA approval, Talicia has potential to become the new first-line standard-of-care therapy for H. pylori and stands to benefit from 8 years of regulatory market exclusivity as well as patent protection through 2034.

But first, Micha, our CFO, will discuss our financial results announced earlier today.

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Micha Ben-Chorin, RedHill Biopharma Ltd. - CFO [4]

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Thank you, Dror. Good morning and good afternoon, everybody. I will provide a short overview of our financial results for the second quarter of 2019. We generated net revenues of $1.6 million in the second quarter of 2019 compared with $1.7 million in the first quarter of 2019.

We recorded gross profit of $1.1 million in second quarter of 2019 compared with $1.3 million in the first quarter of 2019. We recorded research and development expenses of $7 million in the second quarter of 2019 compared to $5.4 million in the first quarter of 2019. The increase is attributed primarily to the onetime PDUFA fee payment of $2.6 million to FDA in relation to the Talicia NDA submission.

Selling, marketing and business development expenses were $4.1 million in second quarter of 2019 compared with $3.1 million in the first quarter of 2019. The increase is attributed to the expansion of the commercial operations team with several key executive hires as well as preparations for the potential commercial launch of Talicia in the U.S.

General and administrative expenses were $2.4 million in the second quarter of 2019 compared with $2 million in the first quarter of 2019. The increase is attributed primarily to preparations for the potential U.S. launch of Talicia.

Operating loss was $12.4 million in the second quarter of 2019 compared to $9.2 million in the first quarter of 2019. The increase is primarily due to the PDUFA fee payment of $2.6 million for the FDA in relation to Talicia NDA submission.

Net cash used in operating activities were $10.4 million in second quarter of 2019 compared to $7.5 million in the first quarter of 2019. The increase is attributed -- attributable primarily to a onetime PDUFA fee payment of $2.6 million for the FDA in relation to the Talicia NDA submission. Cash balance as of June 30, 2019, was $34.9 million compared to $45.5 million as of March 31, 2019.

Capitalization, as of the end of the second quarter of 2019, we have no debt on our balance sheet. We continue to maintain cost discipline towards potential launch of Talicia forecasted in the last quarter of this year subject to FDA approval.

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

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [5]

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Thank you, Micha. Earlier this month, we announced that the FDA has accepted for review the New Drug Application, or NDA, for Talicia, RHB-105, intended to be indicated for H. pylori infection. The NDA for Talicia has also been granted priority review designation and was assigned a target Prescription Drug User Act, or PDUFA, action date by the FDA of November 2, 2019.

Priority review is a designation granted by the FDA to prioritize the review process for drugs that, if approved, would be significant improvement in the safety or effectiveness of the treatment of serious conditions when compared to standard applications. The acceptance for review of the NDA for Talicia and the priority review designation are encouraging as we continue our intensive preparations for potential U.S. commercial launch of Talicia as a potential new first-line standard-of-care therapy for H. pylori. We continue to work closely with the FDA with the aim of bringing this important new therapy to patients.

The Talicia NDA is supported by a robust package, including 2 positive Phase III studies in the U.S. along with 2 pharmacokinetic studies evaluating food effects and comparative bioavailability. The 2 Phase III studies with Talicia successfully met their primary endpoints with high statistical significance ranging from 0.001 to 0.0001. Importantly, 90% of the PK population subjects with confirmed blood levels of Talicia's actives on day 13 of the treatment, an important indicator of at least partial compliance by the patients, achieved confirmed eradication of H. pylori.

By contrast, low rates of eradication ranging from 53% to 63% were obtained in patients treated with physicians-directed standard-of-care therapies in the open-label parts of both Talicia's Phase III studies. These results are consistent with the literature describing the diminished efficacy of standard-of-care therapies, which Talicia is intended to address.

H. pylori is classified as a Group I carcinogen and is the strongest risk factor for the development of gastric cancer and the major risk factor for peptic ulcer disease and gastric mucosa-associated lymphoid tissue or MALT lymphoma. H. pylori infected persons have sixfold increased risk of developing non-cardia gastric cancer and MALT lymphoma.

Resistance for existing therapy is growing with current standard of care failing in approximately 30% to 40% of patients. H. pylori resistance is, therefore, a high priority pathogen and public health concern. Importantly, no resistance to rifabutin, a key component of Talicia, was detected in culture results taken throughout the Talicia pivotal Phase III study from patients across 20 U.S. states.

The 2018 potential market for H. pylori eradication therapy was estimated at approximately $4.8 billion worldwide and $1.4 billion in the U.S. Talicia is intended to target an estimated 2.5 million patients treated annually in the United States. Commercial readiness is, therefore, our key corporate priority leading this effort is our established commercial management team, which we have strengthened through several key new hires over the past few months.

We target a commercial launch shortly following potential FDA approval with our existing sales force, which already promotes several commercial GI products to thousands of gastroenterologists, other high-prescribing specialists and primary care physicians across select U.S. territories.

If approved, Talicia stands to benefit from 5 years of additional U.S. market exclusivity on top of the standard exclusivity period for a total of 8 years of regulatory exclusivity in addition to our patents, which extends protection until at least 2034.

Turning to R&D. We continue discussions with FDA in relation to the potential path to approval of our Phase III programs with RHB-104 for Crohn's disease, RHB-204 for first-line treatment of NTM infections and BEKINDA for gastroenteritis. These studies are under preparation. In addition, the ongoing phase II study evaluating YELIVA in advanced cholangiocarcinoma, bile duct cancer, continues to enroll patients with enrollment of the full cohort of 39 evaluable patients expected to be completed by the end of the year.

On the business development front, discussions are ongoing for potential acquisition of additional revenue-generating GI assets. This is largely driven by our [installations] to capitalize on economies of scale and synergies created with RedHill's existing commercial operations and strong existing presence within the U.S. GI community.

To sum up. This is an exciting and transformative time for RedHill. We're confident and well positioned for rapid growth. We will now be happy to take any questions you may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Christopher Marai of Nomura.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [2]

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Congratulations on the quarter. I wanted to follow up on 2 key programs. First, 104 for Crohn's and the potential need for a confirmatory Phase III trial on your last successful results. Could you maybe discuss with us some of your plans there to move that forward? And then I have a follow-up.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [3]

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Thank you, Chris. I will defer this to Gilead.

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Gilead Raday, RedHill Biopharma Ltd. - COO [4]

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Thank you, Dror. We're planning to meet with FDA in the coming months to discuss our plans for the confirmatory Phase III study. We have a design that we are contemplating and will present that together. We're presenting the data of the previous Phase III study, the successful results and the benefit that was shown to the moderate-to-severe patients, and we hope to come to agreement with FDA and initiate this confirmatory Phase III study in early 2020.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [5]

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Okay. Is there any chance that -- or should we have an expectation that you might not need that confirmatory trial?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [6]

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Our function all along has been that -- to adequately control the studies are required. Those are the guidelines. Anything other than that is an exception to the role, which is highly unlikely in the case of Crohn's disease. In other indications, say, pancreatic cancer, given the nature of the need, you might be able to get away with a single Phase III study. But in Crohn's, it's extremely difficult, and we're not counting on it. We're planning for confirmatory Phase III study that will hopefully drive us all the way to approval.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [7]

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Okay. No -- that makes sense. Okay, and then maybe one quick follow-up just on the NTM program. You had previously indicated I think that, that you'll be looking at a 6-month endpoint for the pivotal Phase III maybe 100 patients. You said that you could probably start this study year-end, early next year, I guess, in the press release. So how quickly do you think that might be able to enroll? And do you think that the current Insmed ARIKAYCE launch will potentially impede enrollment or help enrollment or frankly confound results in second-line asset, and you guys will be looking at first-line population.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [8]

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Thank you, Chris. Great questions. Before deferring to Gilead, I just wanted to make sure that the audience understands the sharp differences between RedHill's RHB-204 and Insmed ARIKAYCE, which was -- is and still is a very important drug that helps create disease awareness, which was barely existent prior to the Insmed very successful efforts.

Insmed ARIKAYCE is indicated for second-line treatment of NTM. Insmed's ARIKAYCE is an inhaled administration, requires an inhalation device. It comes on top of standard of care, and it's also priced the way it is priced. RedHill's RHB-204 is intended to be indication for first-line NTM infection, the whole market. It is a stand-alone drug orally administered, and we're confident it will be priced competitively and fairly. That's the background. I'll now defer to Gilead specifically about our program.

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Gilead Raday, RedHill Biopharma Ltd. - COO [9]

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Thank you, Dror. As indicated, Chris, we are planning to initiate the study. We're currently checking all the boxes in the preclinical development to ensure this study can meet the endpoints that we're targeting from a regulatory perspective as a pivotal study for NDA filing. We do still believe that we can pursue a Subpart H - Accelerated Approval with a 6-month endpoint of sputum conversion and the design that we have proposed of studying versus -- RHB-204 versus placebo control, and this seems to be agreed going forward. So we believe we can recruit quite effectively, hopefully within a year the entire cohort. And that should be a rapid conclusion of that data point, which would enable us to submit for Subpart H - Accelerated Approval.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [10]

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Okay, and just to confirm. So you said you're going to be against a placebo control. Is that correct? Not the standard of care.

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Gilead Raday, RedHill Biopharma Ltd. - COO [11]

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Correct. There is no approved first-line therapy for NTM infection. There is physician-guided therapy, and we're in discussions as we discussed with FDA planning to have a placebo-controlled study.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [12]

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Do you think that placebo control might -- that might preclude patients from enrolling in your trial overall? And how might you counteract that if that occurs?

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Gilead Raday, RedHill Biopharma Ltd. - COO [13]

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Yes. We don't see that as an issue. We're going for first-line patients with noncavitary disease in order to be able to study the study with placebo as a control, and that seems to be accepted by the key opinion leaders, the clinicians and the regulatory agency. So we don't expect to have a problem. In fact, the awareness that Dror has alluded to with our case makes this probably easier to enroll then without that program.

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Christopher N. Marai, Nomura Securities Co. Ltd., Research Division - MD & Senior Analyst of Biotechnology [14]

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Okay. And then just lastly maybe, how many sites do you look to run that study yet?

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Gilead Raday, RedHill Biopharma Ltd. - COO [15]

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We're looking at U.S. sites currently, major sites through the NTM consortium, and we're looking at 20 sites probably or a little bit less.

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Operator [16]

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Our next question comes from the line of Matt Kaplan of Ladenburg Thalmann.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [17]

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Just wanted to dig in a little bit further in terms of the process with the review of Talicia. Do you expect to have an AdCom advisory committee meeting before the November 2 PDUFA?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [18]

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We do not. From everything we know about the regulations and the practices, we do not expect an AdCom to be required. But with regulators, anything is possible. Unlikely, though.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [19]

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Okay. Very good. And then you're talking about the preparations that are ongoing for the launch of Talicia. Can you talk a little bit about what you think your commercial team will look like going into the launch of the product, if it's approved in -- later this year?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [20]

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Thank you, Matt. I'll defer this to Guy Goldberg, our Chief Business Officer; and Rick Scruggs, Chief Operating Officer, U.S. Guy, please.

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Guy Goldberg, RedHill Biopharma Ltd. - Chief Business Officer [21]

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Thank you. We're very fortunate to have a very seasoned commercial team leading its effort, led by Rick, who's sitting here with us today. This is a team that has been successful, has worked together, many of them in the past, and we've already filled out all of the key senior hires that we're looking through that would be involved from managed markets to marketing and so on and so forth. So we're in full ramp-up mode to be able to launch this product successfully, and I'll turn it over to Rick to add some color on that.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [22]

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Thanks for the question. I'll just add some additional comments. Like Guy has said, we have filled out all the key departments from managed markets to marketing to safety to supply chain. As you know, we have a current sales force out there selling products right now, establishing our footprint in the physicians' offices, and we are prepared to add additional reps as we get closer to launch and prepare to launch the product in fourth quarter upon successful approval.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [23]

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Great. Thanks for the added detail. And just shifting gears in terms of the pipeline. RHB-104, I guess, given the positive Phase III results already reported, what's your current thoughts on the path forward for RHB-104 in Crohn's? And I guess, specifically, what's your thinking of the design of the potential Phase III -- confirmatory Phase III?

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Gilead Raday, RedHill Biopharma Ltd. - COO [24]

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Thank you, Matt. We certainly are very confident based on the positive results that we saw and the benefit that was very -- signal that was strong from the previous Phase III study in moderate-to-severe Crohn's patients, in all-comers, and we are planning to pursue a similar population study to confirm these successful results, both on the induction of -- of remission and the maintenance of remission. And we have, of course, made some learnings from the previous results to enable us to enable the design study to improve the chance of success -- the likelihood of success and even expand on the benefit that we'll see. And we're presenting that data to FDA, so I don't want to be go into details of the design. Once we have concurrence from FDA on the proposed design, then we'll be able to announce precisely what the program is planned to look like. But in general, it follows in the footsteps of the success of the previous study trying to stay as close as possible to those parameters that were successful in the previous study.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [25]

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Okay, fair enough. Thanks for the added detail. And then last question. You mentioned in your prepared remarks about some business development activity. Can you give us a little sense in terms of what type of product you're looking for in the GI space to add to your current portfolio?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [26]

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Yes, we're very busy on the business development front. We are looking for product that are GI and GI related. Not necessarily prescribed only by GI. It could be products that are prescribed by GIs as well as other specialties, primary care internists and so on. And we're looking for products of a magnitude that we can afford to acquire that are significantly revenue generating with as certain as possible the trajectory that are proprietary, sufficiently protected with barriers to competition and that our commercial team and salespeople will be confident about promoting, addressing significant unmet medical needs. To add a little bit of color on that, we're in active discussions constantly for such products. If and when we reach a point where we are close to acquiring and are about to commit, we will, of course, announce publicly. I hope that helps.

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Operator [27]

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Our next question comes from Scott Henry of Roth Capital.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [28]

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First on the pipeline with regards to RHB-204. Just thinking about the trial activity starting in Q4, perhaps 18 months to completion in data, should we be thinking about a filing for that product by late 2021? Or are there any other gating factors that impact that timing?

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Gilead Raday, RedHill Biopharma Ltd. - COO [29]

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Thank you, Scott. Yes, the time frame that you've outlaid is the current expectation, and we believe we can get that going, and that should support the accelerated approval submission, which would follow in parallel with completion of the study and pursuing the additional endpoints that could further support full approval down the stream.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [30]

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Okay. And when we think about a little further out about 2021, 2022, should we think about the NTM or RHB-204 as being your next product launch. Would that be your next priority after Talicia in terms of getting a product on the market or any of the other ones that could potentially jump in front of that?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [31]

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There are 2 parallel paths here. The first is organic growth, which is what you are referring to. Here we have RHB-204, or NTM, and we also may be able to get BEKINDA for gastroenteritis, which is a very, very short study, confirmatory Phase III study following a successful Phase III study to the markets in a timely manner. However, it is very likely that, between now and the approval of RHB-204 or BEKINDA for gastroenteritis, if approved, we'll be able to acquire additional revenue-generating GI assets. The reason being that we have a unique operation here at RedHill that has been up and running for the last 2 years and is accelerating. And this infrastructure allows us to plug in, so to speak, additional attractive products into the bag in a seamless manner. In fact, I will refer to Rick to add a little bit of color about operation here and how we can absorb and adapt additional products, and why it makes sense.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [32]

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So yes. So we have an experienced management team that has launched numerous products in our past careers. And we have an excellent sales force already out there, relationships with physicians. We are definitely going to have room in our bags, so to speak, to add additional products. And if we were to acquire products sooner, we're ready to launch those products sooner from a business development perspective. And then we -- the future of these products that we have enable us to -- we launch Talicia, and we're out there with that product, we're able to absorb the other products in our pipeline readily into our bags that target properly and bring those to physicians and patients immediately.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [33]

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Great. Thank you for that color. Shifting over to the model, the products currently on the market kind of dipped in 2Q from Q1. Typically, first quarter is the low watermark. How should we think about -- is there any specific product that's given you more problems than others? And how should we think about the trend going forward for those products currently on the market?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [34]

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Thank you, Scott. I wouldn't make too much out of it. The products that we're currently promoting are smaller products that are not ours that we have not developed. And they fluctuate according to a number of variables that are for the most part beyond our control having to do with managed care, challenges and having to do with competition challenges, these kind of things. And some of them are described in our excellent partners' SEC filings. If you want to look at Donnatal, you can look at the advanced SEC filings or Mytesi at the Jaguar filings and so on and so on. This is an important exercise for us and a very good learning experience. We are happy with the process so far with these products, and we see them differently than the way Talicia is going to be.

Talicia is a product of a different magnitude that was developed here at RedHill for the last 10 years and for probably 15 or 20 years in total. It is a product that we have very high expectations of over time, and we have been preparing for the potential launch of Talicia very intensively for a very long time. In fact, the last 2 years with smaller products are part of that planning and preparation process for the launch of Talicia as well as additional large products that we'll either acquire or complete the development for internally. I hope this helps.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [35]

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Thank you for that color. I guess, final question. G&A and selling expenses increased in the quarter. I think it was mentioned in anticipation of the Talicia launch. Should we think about those higher numbers as go-forward numbers and increasing more? Or was there any noise that may subside in Q3? I would imagine they are go-forward, but I want to confirm that.

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Micha Ben-Chorin, RedHill Biopharma Ltd. - CFO [36]

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Scott, it's Micha. Thank you for the question. So yes, as can be imagined, we are preparing today Talicia launch. And for such, we -- we'll incur a little bit more expenses in the G&A while we recruit additional people to support the launch.

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Operator [37]

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Your next question comes from the line of Steve Brozak of WBB.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [38]

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Since most questions have been asked and answered, the one though that I'd like to just get some final color or iteration revolves around Talicia. Because, obviously, the performance was exceedingly significant in your Phase III data (inaudible) would give me a bigtime tell that, that should become standard-of-care material. What else do you have that you would want to just talk about and in as much color as you like on why Talicia should become standard of care and why that becomes important?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [39]

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Thank you, Steve. Great question. We, unfortunately, cannot comment and share our thoughts about an intended label because the FDA is currently reviewing the NDA with PDUFA date of less than 4 months from now. We also cannot elaborate too much about the advantages of the product because, for as long as there's no confirmed label, that would be considered inappropriate. However, what we have seen -- and this is a factual statement. What we have seen in our Phase III studies and specifically in the last confirmatory Phase III study in over 450 patients, all of them in the U.S., in 55 sites across the nation is that Talicia does seem to overcome resistance thanks to the novel active within our formulation, and that is rifabutin. Talicia is the only rifabutin-based therapy, if approved. And we have seen zero resistance, I repeat, zero resistance to rifabutin in our confirmatory Phase III study.

By contrast, we have seen high resistance rates as expected to standard-of-care therapies clarithromycin that nearly 20%, give or take, along the lines that literature would make us expect. And metronidazole, over 40% resistance -- I repeat, over 40% resistance to metronidazole. And those are key ingredients in standard-of-care therapies.

Increasing resistance is a major challenge. It's a public health concern of a significant magnitude worldwide as clearly expressed by many governments and the World Health Organization, and also in the U.S., as clearly expressed by the government, the GAIN Act specifically designates H. pylori. Therefore, Talicia benefits or does well from a QIDP status. That gives us the fast-track development but also gives us, once approved -- if approved, 8 years of market exclusivity.

Overcoming resistance is the key message to drive home. We have seen very high efficacy rates in our study, 90% in even partially compliant patients. And even ITT analysis, the most conservative, that includes all patients including those that are noncompliant, 84%. The comparator arm in our confirmatory study achieved only 58% eradication. The p-value here was less than 0.001. I think that speaks for itself.

As far as the safety and tolerability, our results, again, speak for themselves because we have seen the profile that we were have hoping for and we submitted to FDA. Therefore, we are confident about the prospects of Talicia. The data that we were able to generate supports a robust NDA file, which is currently being reviewed by FDA. This is part of the story, but I will stop it here.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [40]

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Great. Thank you for that direct answer and all-encompassing answer at the same time. I very much appreciate. Good luck, obviously, with the approval and looking forward to the end of the year.

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Operator [41]

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Your next question comes from the line of Robin Garner of LifeSci Capital.

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Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [42]

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I wanted to ask you about your recent ATM, and the figures of proceeds that you guys mentioned were also for potential commercial launch. Can you talk to us and tell us about how the commercial team needs to continue to be strengthened? And if you could introduce us to some of the new hires that you've recently hired as well.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [43]

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Thank you, Robin. I will refer this to Rick.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [44]

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Thanks, Robin, for the question. I'll give you some additional information. So we hired a Head of Marketing, Rob Jackson, who I've worked with at Salix before, and he brings a ton of experience to us, and he's (inaudible) marketing department and he's filling that team out. We hired Bob Gilkin, the head of the managed markets group. But he is a talented professional, and he is filling out his team.

We've filled out our supply chain with Steve Thomasian, who has -- mostly recently worked with him at Salix as well. So we were dropping the Salix name. We all worked there and spent a lot of time there. We're bringing these talents here to put them to work here in RedHill. So we filled out our complete commercial team. We are filling out some additional resources in the managed markets department and also in the marketing department, and we have mapped and are ready to fill additional territories for our sales department. So there's a lot that we've done here. And of course, a lot more marketing research around the product that is giving us more information to use or to get ready to launch the product. So hopefully that gives you some additional color.

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Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [45]

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That's great. And actually, if -- maybe just a follow-up on that. If Talicia is launched potentially in Q4, how does that change your conversation with physicians, whether it's the addition of territories or just in terms of how that conversation might go in terms of selling the other products as well?

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [46]

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So if the drug is approved, we will launch in the fourth quarter. We will prepare our sales force. And we're actually bringing some of that group in now to do some disease state training. We will actually have Talicia -- I guess your question is probably where is it going to be in the -- what position in our bag will it be? It will be a first-position product we will sell through physicians, and we'll also alter some of our targeting with those territories. So we'll be ready to launch the product as soon as it's approved.

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Robin Thai Garner Kalley, LifeSci Capital, LLC, Research Division - Senior Analyst [47]

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Great. Thank you. Perhaps my last question is more on the development side, but can you walk us through the development pathway for YELIVA if the Phase IIa study is positive potentially in early 2020 and where you might go from there?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [48]

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Thank you, Robin. We are very excited about the YELIVA studies, specifically about the cholangiocarcinoma Phase II study that is ongoing at leading U.S. sites, including 2 of the Mayo Clinics in the Anderson and other leading sites. We are receiving excellent cooperation from the key opinion leaders in the country and are not far from completing the study. I will defer to Gilead to add a little bit of color on what we are planning next.

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Gilead Raday, RedHill Biopharma Ltd. - COO [49]

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Thank you, Dror. As the study's ongoing, we see some signal, but we want to complete the enrollment in order to really define -- discuss with FDA next steps towards NDA filing in the future. Since cholangiocarcinoma is a disease with such unmet need, progression is so quick and mortality is so fast, the unmet need here is really great. And given that the regulatory pathways can sometimes be shortened, and we're hopeful that results from the study will support short pathways towards NDA filing in the future and believe that we have such positive data when given the clear unmet need in this disease category, we will try to pursue as fast as possible approval in order to provide new therapy for these patients.

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Operator [50]

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Your next question comes from the line of Ed Woo of Ascendiant.

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Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [51]

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Yes, can you talk about your preparedness for the supply side of Talicia once the -- you -- once you do -- if you do get approval for NDA?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [52]

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Ed, I'll refer this to Rick.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [53]

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So could you -- I guess, I just clarify your question a little bit. I mean we are -- we do have agreements in place to supply product. We are developing the final touches to that, so to speak. So we will have sufficient quantities of product to sell later in the year. So I'm not sure if I'm answering your question or actually what your question really is, I guess.

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Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [54]

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I guess if you do get approval on November 2, how quickly would you be able to have product to sell? Would it be days or weeks from approval?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [55]

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We expect to have sufficient quantities upon approval with the commercial launch, which is expected shortly thereafter. We have been working closely with the manufacturer for several years now, preparing for that moment, and we feel confident that we'll be already in parallel with the NDA process ahead of the commercial launch.

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Operator [56]

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Your next question comes from the line of Jonas Peciulis of Edison Research.

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Jonas Peciulis, Edison Investment Research Limited - Analyst [57]

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Obviously, most pressing matters were already addressed. Just really -- just a couple of quick ones. So November 2, which is the PDUFA date set, it appears to be on Saturday, which is rather interesting timing given that you have -- you're listing on TASE and NASDAQ and also that sometimes they tend to sort of respond maybe before they began or [inflect] several days in advance. So given my -- it's a bit premature question, but have you had been thinking about that when -- by that I mean, when sort of you could make this specific press announcement given this binary nature of event.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [58]

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Yes, Jonas. Yes, indeed, November 2 is a Saturday. This is pretty standard because the PDUFA date is according to an absolute number of days, so that's sort of automatic arbitrary. So what happens in situations like this, I guess, that's what you're asking, is assuming FDA by that time is ready and willing to give us the approval that we are seeking, we expect to get it probably a day or 2 before or early the following week. I will say also that the PDUFA date generally is just a target date. The approval could come afterward, could come before, anything is possible. It's not a stand-alone date that cannot be deviated from. It's entirely up to the agency to do whatever it wishes whenever it feels ready to inform the company of the outcome of its review.

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Jonas Peciulis, Edison Investment Research Limited - Analyst [59]

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Okay. That's clear, I think. Okay, just last one on the financials. In P&L, there is an financial income item of positive $1.5 million, so it just -- it stands out a bit from other quarters. So just thinking where is it coming from, if you can just give me an idea?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [60]

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Thank you, Jonas. Yes, there are several factors affecting the revenues from one quarter to the other. If you look at the filings of ADVANZ, our partner for Donnatal, you will see that they are publicly highlighting again and again the competitive pressures on the product. So I would urge you to look there.

There's other matters that we are challenged with. Nothing is too dramatic, so you could continue to expect the quarterly revenue to fluctuate according to various factors that are beyond our control. Again, we expect by contrast to have a different level of control or influence, in the case of Talicia, because that's a product that we have developed internally that we hope to get approved as soon enough, all goes well, and that we have been preparing for the launch in all respects for a very long time now. That will be a different situation, all goes well. I hope this helps.

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Jonas Peciulis, Edison Investment Research Limited - Analyst [61]

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So apologies. I should clarify my question. I was talking about the financial income. I believe your stuff explains the top line revenues. I mean it's not substantial. It was $1.5 billion in this quarter in financial income, so I was thinking given its the higher income than in other quarters in terms of financial inflow where it coming from, but if its -- it's not that big of a difference.

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Micha Ben-Chorin, RedHill Biopharma Ltd. - CFO [62]

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Jonas, this is Micha. The financial income in the P&L comes from the increase of value of the warrants that came due to the reduction in sale -- in share price in the period of the end of Q2 in June 30. So this is the reason the warrants go to change in the value and created financial income this quarter. But there are fluctuations between the quarters which are impacted by the price of the share.

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Operator [63]

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And your final question comes from the line of Swayampakula Ramakanth of H.C. Wainwright.

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Swayampakula Ramakanth, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [64]

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Obviously, most of my questions have been answered. But I just want to understand something on your commercial structure and how you're working towards launching Talicia. As you've said, you've had these operations for around 2 years or little bit longer than 2 years. And as you said, we can't use the current revenue run rate as a yardstick since they are not your product. But at the same time -- I would like to understand, since you say you had your commercial team meet with quite a few high prescribers. What have you learned during this process, especially, when you're getting ready to go in front of these prescribers for Talicia once it gets approved? And how can the Salix team deliver to that front?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [65]

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I will defer this in a moment to Rick. It really has to do with studying the disease state in the market for a very long time now, for quite a few years and, if you rightly stated, even more so in the last 2 years given that we have a commercial operation. What we have learned -- and I'm not referring to the field, I'm referring to various discussions with payers, with subscribers, not only GIs but also primary care physicians, internees and others, is that there's a very clear need out there for a new therapy for H. pylori infection. Without going into too many details, I can repeat that resistance to antibiotics commonly used in standard of care is growing and is high and is concerning. It's concerning for the government. It's concerning for the treating physician. It's concerning for the patients. And it's devastating for those patients who are unfortunate enough to have developed malignancies. Therefore, we take this condition very seriously. We intend to explain to the health-care provider community how important that indication is. And at that point, I think I can refer to Rick to elaborate a little bit about his thinking.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [66]

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Yes, thanks and thanks for the question. I thought I'd just give one thought here as Dror and company felt well enough to establish commercial operations 2 years ahead of Talicia launch and filled it with some difficult products to sell, and we have some great salespeople out there delivering messages to our physicians and supporting the products that they're selling.

But when we started -- I'll give you the example. We started Salix many years ago. We actually didn't start. We had an approved product, and so we had to introduce the company Salix and the product we were selling. So here we've already been out there for 2 years introducing the company, selling products that are know to physicians, have their challenges, and our sales team has done this tremendous job selling those. And when they are able to sell Talicia, which is a product that we will own, we get to make all the decisions around, that will do tremendous -- it will be a tremendous effort on our part. So I think our folks come from all walks of life who work in this company. We have some Salix people. We have people from other parts of the world that work here as well. And we bring all those experiences together to create this great momentum we're going to have when Talicia is approved. So that's -- anything else?

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Operator [67]

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There are no further questions on the line, sir.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [68]

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Thank you, Tracy, and thank you all for joining the call. Please reach out to us if you have any additional questions. We wish you all a pleasant day.

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Operator [69]

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Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.