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Edited Transcript of RDHL.TA earnings conference call or presentation 19-Nov-19 1:30pm GMT

Q3 2019 Redhill Biopharma Ltd Earnings Call

TEL AVIV-YAFO Nov 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Redhill Biopharma Ltd earnings conference call or presentation Tuesday, November 19, 2019 at 1:30:00pm 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

* 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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* Edward Moon Woo

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

* Henry Carl Beinstein

Gagnon Securities LLC - Partner & Portfolio Manager

* Jackson Dean Harvey

Nomura Securities Co. Ltd., Research Division - Research Analyst

* Jonas Peciulis

Edison Investment Research Limited - Analyst

* Matthew Lee Kaplan

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

* Scott Robert Henry

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

* Sean Lee

H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate

* Stephen Gilbertpaul Brozak

WBB Securities, LLC, Research Division - Senior Equity Analyst

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Presentation

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Operator [1]

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Good day, and welcome to the RedHill's Biopharma Third Quarter 2019 Financial Results and Operational Highlights Conference Call.

At this time, I would like to introduce to the conference call RedHill's CEO, Mr. Dror Ben-Asher; Mr. Micha Ben-Chorin, RedHill's 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. (Operator Instructions)

Before we begin, we will read from RedHill's safe harbor statement. Please go ahead.

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Unidentified Company Representative, [2]

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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 the initiation, timing, progress and results of its research, manufacturing, preclinical studies, clinical trials, marketing application or approvals, if any, other therapeutic candidate development efforts and the timing of the commercial launch of Aemcolo and Talicia and its therapeutic candidates as well as the 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, timing results or commercialization activities may differ materially from what RedHill projects today.

Additional information concerning factors that could cause actual events, performance, timing, 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.

Thank you. I'm transferring the mic to Dror.

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

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Thank you, [Mavan]. Good day, everyone, and thank you for joining us.

The last several weeks have included transformative events for RedHill, including the FDA approval of Talicia for H. pylori infection in adults and our strategic collaboration with Cosmo Pharmaceuticals. RedHill acquired the U.S. rights to Cosmo's FDA-approved Aemcolo for travelers' diarrhea in adults, and Cosmo invested $36 million in RedHill.

Intensive and diligent preparations are ongoing for the commercial launches of Aemcolo and Talicia in Q4 '19, this quarter, and Q1 '20, respectively, with our existing and expanding sales force.

We plan to discuss our commercial strategy and plans for Talicia and Aemcolo in more detail during an investor and analyst event being held in New York this coming Friday, November 22, which will also be webcast live.

Let me now turn the call to Micha, our CFO, who will discuss our financial results for the quarter, which were 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'll provide a short overview of our financial results for the third quarter of 2019. We continue to remain cost disciplined with a cash burn of approximately $9 million during the third quarter. We remain debt free and obtained a strategic $36 million investment from Cosmo Pharmaceuticals, which considerably improved our already debt-free balance sheet ahead of the planned Talicia and Aemcolo launches.

We generated net revenues of $1.4 million in the third quarter of 2019 compared with $1.6 million in the second quarter of 2019. We recorded gross profit of $800,000 in the second quarter of 2000 -- in the third quarter of 2019 compared to $1.1 million in the second quarter of 2019.

We recorded research and development expenses of $2.8 million in the third quarter of 2019 compared to $7 million in the second quarter of 2019. The decrease is attributable primarily to the completion of the Phase III study with Talicia and the onetime PDUFA fee of $2.6 million for the Talicia New Drug Application, NDA, in the second quarter of 2019.

Selling and marketing and business development expenses were $4.9 million in the third quarter of 2019 compared to $4.1 million in the second quarter of 2019. The decrease is attributable primarily to the company's launch preparations for Talicia.

General and administrative expenses were $2.9 million in the quarter compared to $2.4 million in the second quarter of 2019. The increase is attributable primarily to the increase in professional service related to the launch operations of Talicia.

Operating loss was $9.8 million in the third quarter of 2019 compared to $12.4 million in the second quarter of 2019. The decrease is attributable primarily to lower R&D expenses.

Net cash used in operating activities were $8.9 million in the third quarter of 2019 compared to $10.4 million in the second quarter of 2019. The decrease is attributable primarily to the onetime PDUFA fee of $2.6 million for the Talicia NDA submission paid in the second quarter of 2019.

Capitalization. Cash balance as of October 22, 2019, following the Cosmo investment was approximately $59 million with no debt.

In July 2019, pursuant to previously filed shelf registration statement, the company filed prospectus supplement for the issuance and sale of up to $60 million of the company's American Depositary Shares, ADSs, in an at-the-market, ATM, offering led by SVB Leerink, LLC.

As of September 30, 2019, no ADSs have been offered, issued or sold under the ATM offering.

Importantly, we expect to maintain cost discipline towards Aemcolo launch this quarter, Q4, and Talicia launch next quarter, Q1 2020.

Thanks to the carefully planned and gradual building of our U.S. commercial capabilities over the last 3 years, we plan and potentially need to spend overall substantially less than relevant industry peers with plans for a potential breakdown -- breakeven of our commercial operations as early as 2021.

I will now turn the discussion back to Dror, and we'll 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. As I mentioned earlier, a major milestone recently was the approval of Talicia for the treatment of H. pylori infection in adults. Talicia is the only rifabutin-based therapy approved for the treatment of H. pylori infection and is designed to address the high resistance of H. pylori bacteria to current erythromycin-based standard-of-care therapies and the imperative need for new treatments.

H. pylori bacterial infection affects more than 50% of the world's population and approximately 100 million Americans. It is classified as a group I carcinogen and is the strongest risk factor for the development of gastric cancer and a major risk factor for peptic ulcer disease, gastritis and other diseases. Talicia is intended to target an estimated 2 million patients treated annually in the U.S. It is eligible for U.S. market exclusivity for a total of 8 years in addition to the U.S. patent which extends patent protection until at least 2034.

With our established sales force and commercial capabilities already in place, we are excited to move ahead with the planned U.S. commercial launch of Talicia during the first quarter of 2020. We will continue to keep you appraised of the progress of the launch.

This brings me to the other significant event. Last month, we announced a strategic collaboration with Cosmo Pharmaceuticals, including an exclusive license for the U.S. rights to Aemcolo and a simultaneous private investment by Cosmo of $36 million in RedHill equity.

Aemcolo is a minimally absorbed antibiotic that is delivered to the colon. It is approved by FDA for the treatment of travelers' diarrhea caused by noninvasive strands of E. coli in adults.

Travelers' diarrhea presents a significant market opportunity for RedHill, with 32 million Americans traveling to developing countries each year, of whom high percentage develop travelers' diarrhea. We plan to launch Aemcolo in the U.S. in the coming weeks later this quarter.

Heading up the launches of both Aemcolo and Talicia is our highly experienced and motivated commercial team headquartered in Raleigh, North Carolina. This execution-focused team is led by Rick Scruggs, formerly at Salix, and has been carefully and gradually setting the stage over the last 3 years for the launch of Talicia and other new products.

Intensive and diligent preparation for the launches of Aemcolo and Talicia are ongoing full force on all fronts. We are checking the necessary boxes one by one, including extensive market access and managed care groundwork; marketing; field sales force expansion and disease awareness campaign; medical affairs, including publications and presentations activities; supply chain; quality and compliance management and more.

In addition, discussions are ongoing for the potential acquisition by RedHill of rights to additional FDA-approved commercial-stage GI assets driven by RedHills' strategy to capitalize on economies of scale and synergies created with RedHills' growing commercial capabilities and presence within and beyond the U.S. GI community.

Turning to our research and development. Discussions have been advancing with FDA in relation to the potential path to approval of our Phase III programs, including RHB-104 for Crohn's disease, RHB-204 for first-line treatment of NTM infections and BEKINDA for gastroenteritis. In addition, the ongoing Phase II study evaluating our new chemical entity YELIVA in advanced cholangiocarcinoma bile duct cancer continue to enroll patients in leading U.S. centers, with enrollment expected to be completed in the coming months.

Before I turn the call over to the operator for questions, I want to remind everybody that we are scheduled to host an investor and analyst event on Friday this week, November 22 in New York. During this event, we will provide an overview of the commercial strategy and plans for both Talicia and Aemcolo, followed by a Q&A session. A live webcast of the event, including the slide presentation and additional information, will be available on the company's website.

To sum up our comments today, this is an exciting and transformative time for RedHill. We are confident and well positioned for the future. We will now 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.

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Jackson Dean Harvey, Nomura Securities Co. Ltd., Research Division - Research Analyst [2]

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This is Jackson Harvey on for Christopher Marai. I just have a question on RHB-204 and NTM. Could you provide a little more color around the ongoing FDA discussions? Has this been moving a little bit more slowly than anticipated?

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

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Thank you for your question. We planned initially 2 FDA meetings following the results of the study. The study was very successful. We conducted 1 of the 2 meetings already, and we intend to have additional meetings. Currently, we are focused on the solution to MAP diagnostics with regard to sorting out the patient population. That's -- as far as Crohn's is concerned, we plan another meeting, and we'll take it from there.

Regarding RHB-204, we have been checking all the right boxes. Studies -- supportive studies to date have been successful. And we do plan to initiate the pivotal study activities in half 1. To be more specific, we did experience some delays, although no major delays. We fully intend to conduct the study. It's not supposed to be a long one, and we feel very confident about our prospects.

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Operator [4]

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

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [5]

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I'll just ask 1 and 1 follow-up. Given the fact that you've got these 2 products that you're launching, can you tell us how your sales force is going to approach it, both for the dedicated gastroenterology community? And also, what are your thoughts on general practitioners that are obviously going to be seeing a lot of these same and similar types of patients? And 1 follow-up after that.

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

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Thank you, Steve. A lot of data analytics and planning has been happening in the last few months. I will defer this to Rick Scruggs, who's heading the U.S. operations, who is on the call today.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [7]

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So -- hi, that's a good question. We have done extensive research and targeted the right writers of where the prescriptions for Talicia will be written in the current market base. We have mapped for 140 territories, which we are currently filling. We will promote both Talicia and Aemcolo into those offices. We are calling on a large number of primary care physicians and over 11,000 gastros. So we are going to promote both of these products into these -- both of these environments, and we are prepared to do that.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [8]

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Okay. And the follow-up has to deal with Talicia. You mentioned something in terms of -- Talicia's a unique product as far as we've assessed. If someone were to go out there and try and look at the components and work with them, how difficult is that? And why -- what are the benefits? Obviously, because any clinician that sees the data is going to say this is a no-brainer as far as we've assessed. What are your thoughts on that and any feedback?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [9]

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We have done, Steve, extensive primary research with physicians of various specialties, obviously, GI, primary care, internists, nurse practitioners, other mid-level physician assistants, literally hundreds and hundreds of relevant health care providers have been interviewed, participated in partners, surveyed, you name it. And the results are very encouraging for us, pretty much in all respects. With that said, I will defer to Rick, if he would like to add some color.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [10]

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So -- yes. So a little color. I mean it'd be very difficult and almost impossible to ask a compounding pharmacy to make these products for an affordable cost for patients. So the convenience of having the product in one pill, the fact that we're going to promote to physicians, the fact that we are going to have it covered by the payers, so it'll be in the normal process of getting a prescription filled. So there's no advantage really for someone to try to make this product -- write 3 or 4 different prescriptions, you have 3 or 4 different co-pays.

In actuality, some of these products are very expensive at pharmacy. So if you're trying to think about cash-paying patients that want to kind of create their own thing at some compounding pharmacy, I think it's a very difficult thing. Plus the physicians and in all our research, this has never come up. And in my experience of doing these launches and these products, I don't believe this is going to be an issue at all with us as far as someone trying to make a copy of the product by using the components and putting it together. I just don't think that's a realistic threat for the product.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [11]

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Thank you, Rick. I would also add that if you look at the various layers surrounding the product, a compounding attempt is not the same product, entirely different PK profile, entirely different doses, very high out-of-pocket for the patient, as Rick mentioned. Promotion is not possible, both because of QIDP status, which gives us 8 years of market exclusivity in the U.S., but also because of the patents 2034. So overall, an entirely different product that cannot be promoted. We just don't see it happening.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [12]

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So if I were to infer from everything you said, with the interlocking advantages that you've got, this becomes the go-to product for anyone with H. pylori or any clinician treating anyone for H. pylori. You comfortable with that?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [13]

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We know the label is H. pylori infection. We also know it's the only rifabutin-based therapy. We also know that in our study the data was very clear, 0 resistance to rifabutin, and anything between just under 20% to over 40% resistance. And we know this is growing to antibiotics commonly used in standard of care. Effectively, it positions us very well for the launch of Talicia. And we are planning for Talicia to be a well-established, well-received product for H. pylori. To remind the audience, there hasn't been a launch of anything materially new into this space for many years.

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Stephen Gilbertpaul Brozak, WBB Securities, LLC, Research Division - Senior Equity Analyst [14]

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Good luck with the launch, of course.

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Operator [15]

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Your next question comes from the line of Scott Henry from Roth Capital.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [16]

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Congratulations on the progress over the recent months. Just a couple of questions. First, for Aemcolo, how should we think about the Q4 launch? Obviously, we've got the Thanksgiving holiday and then we've got the other holidays. Should we be thinking -- I mean, is the launch more prepping the reps? Or should we expect any material revenues in Q4?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [17]

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The launch will take place in Q4, both in the field and obviously, it's talking to the channels and so on. This is planned to be happening in Q4. For more color I'm deferring to -- I'm referring to Rick.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [18]

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So -- yes. So we -- as you know, this is an approved drug. We have an opportunity now to launch it into the world. Cosmo didn't launch it except through a web-based idea, which we're still going to follow with that as well. So the answer to your question, we are launching the product into the channel into -- and by channel, I define that as our network of pharmacies, wholesalers, et cetera. We will sell product into the channel actually next week. And then we will actually have our current sales force of -- we have currently 35 sales reps that are trained. And we'll let those guys loose the first week of December, and they'll start promoting. So we'll see prescriptions in the month of December. But as you say, this is a short month, 3 weeks. So what we're doing really is prepping the market, prepping the physicians, getting the distribution out there.

The product already has some pretty good coverage that Aries and Cosmo were able to ascertain. And we'll have co-pay assistance programs to help make sure the drug gets filled at pharmacy. But revenue, I think we're still deciding about what number we should sell into the channel based on the short period we have for promotion of prescription. So I don't know what that number is yet. We're going to determine it in the coming days.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [19]

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Okay. And now when we think about that category, obviously, similar mechanism of action with Xifaxan. How will you position this product relative to Xifaxan in the travelers' diarrhea segment?

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

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Thank you, Scott. When you look at the details of the studies and the mechanism and the attributes overall of Aemcolo, there are several because of various compliance restrictions and because of competition reasons about pricing and other issues, we'd rather not elaborate, if okay with you.

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Scott Robert Henry, Roth Capital Partners, LLC, Research Division - MD, Senior Research Analyst & Head of Pharmaceuticals Research [21]

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Certainly. Fair enough there. And Dror, obviously, you're going to be focusing on these 2 key launches, which are significantly more material. But the other products, just for modeling purposes, do you think they'll benefit from the other -- from the new launches? Or should we expect them to fade? Or how should we think of all those co-promotes in the wake of having more reps, but having more things to do?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [22]

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Thank you, Scott. This is an excellent and timely question. We are currently in discussions with our 3 partners for the 3 products that we are currently selling and have been selling for a while. We expect a conclusion one way or the other soon enough to be able to update the market. Which products are going to be kept under which economic structure and which products are not going to be kept because we would rather have our 140 reps. Again, we are going from roughly 40 now to nearly a 100 before the end of the year and 140 for the launch of Talicia. We want their capacity to be utilized for products that optimize, maximize revenue and gross profit.

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Operator [23]

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(Operator Instructions) Your next question comes from the line of Matt Kaplan from Ladenburg.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [24]

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Just a question, maybe more for Rick. You mentioned, I guess, in your prepared remarks about some of the efficiencies that you could have in your commercial operation. I guess can you help us understand, in terms of when you roll out the 140 reps, I guess, next year, what are the efficiencies and synergies that you can -- you hope to be able to exploit, I guess, when you're marketing Aemcolo and Talicia both?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [25]

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Rick, you can have this one.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [26]

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Okay. I had a little difficulty. You broke up a little bit with the question. How are we going to market and what are the efficiencies we have by selling these products together? Was that the question?

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [27]

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Yes. And you also said that you're able to create a situation that's a little bit different from -- we typically see from a commercial operation in terms of launching products in the space that could be more efficient just overall as well.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [28]

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So I'm not sure I still understand the question, but I'll take a shot at it. So we are currently building -- we established a sales force, a smaller group that established the RedHill brand in physician offices. So I look back at my experience at Salix and I tell the story is that when we started that company, we started out with 20 reps, and we had 1 approved product. And when we started talking to the physicians we had to explain who RedHill is and what was our first drug colazal. So -- and that took up a lot of time with physicians. We've been out there for almost 4 -- 3 years now establishing the RedHill brand. So we won't have to explain who RedHill is to a majority of -- a large majority of our physicians. We'll be able to go right to selling our key products. So there's an efficiency there where we don't have to go out and sell the company.

But having said that, we are going to be able to add additional people to our group. We've already hired -- approaching 30 more reps already to add to our group. We have a sales training class coming up here in the first part of December. And as those people roll out of those training classes, we put them into the field to go to work, selling Aemcolo and our current basket of products. And also doing disease-state discussions with physicians around Talicia until we actually launched the product in the first quarter.

So we are going to be calling on over 23,000 physicians. We are going to be calling over close to 12,000 gastros, 10,000 primary care physicians and about 2,000 mid-levels. So we have a great reach.

When we look at the analysis of the call points, there is a good synergy between the call points of Talicia writers and physicians that write for travelers' diarrhea, physicians that write Xifaxan. So there is good call synergies, so we'll have efficiencies in that respect. So I think the efficiencies are, the products lineup, we've been out there already and we've had a lot of time to prep to go out there and understand the market and execute efficiently.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [29]

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Great. That's helpful. And Dror, I guess, what are your thoughts now on the pricing for Aemcolo and Talicia?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [30]

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Thank you. We're actually there, but at this specific point in time, we'd rather not elaborate. Maybe we'll be in a position to provide more specific details on Friday this week during our event.

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Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [31]

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I look forward to Friday's presentation.

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Operator [32]

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

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Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [33]

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Congratulations. My question is more on -- you said that you could possibly breakeven in your commercial operations by 2021, does that include your clinical development? Or is that only in the sales and marketing of these drugs?

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

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Thank you, Ed, and thanks for noticing our important comment. That comment was about the commercial operations itself. R&D costs are tightly controlled. As you saw, they went down significantly, even in Q3 this year. And we made a statement qualified specifically about breakeven potentially of commercial operations as early as 2021.

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Edward Moon Woo, Ascendiant Capital Markets LLC, Research Division - Director of Research and Senior Research Analyst of Internet & Digital Media [35]

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I look forward to the call on Friday.

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Operator [36]

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

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Jonas Peciulis, Edison Investment Research Limited - Analyst [37]

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Congratulations for the FDA approval, it's quite a milestone. Could you please sort of give us your thoughts, how -- what is the rationale behind the specific number of sales reps of 140? I guess with this question I would like, sort of, to understand whether this 140 reps would be sufficient to -- really an optimal number of sales force or, for example, you might need to increase that further? Sort of, just any kind of, sort of, your -- whatever you can, sort of, give us, what's behind that 140?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [38]

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Sure. Sure. Yes. Thank you, Jonas. Excellent question. There's a lot of homework, preparation, data analytics, a lot of discussion over month and month when you decide territorial mapping, the number of reps, territory for each and so on and so on, with numerous factors being considered.

As a general comment, and then I will defer to Rick, our goal was to take our existing almost 40 reps that have been with us for the last 3 years and expand for the launch of Talicia and now Aemcolo as well in a way that is not too small because you only get to launch a product first time once to get it right, but also not too big. Because if you go too big, you take risks, and we are a company that does not like unnecessary risks. You can see it in our models, in our preparations over 3 years for this moment and various other components of our business model. 140, we felt is the optimal number, given the numerous factors that we took into account. That said, I will defer to Rick, if he would like to add anything.

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [39]

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Dror, I think you captured the question nicely. I mean I could just add the mapping goes into the number of physicians we'd like to capture, where these prescriptions actually reside, the market segments and the ability to reach those in a frequent manner and get the message out to physicians and make the products available to patients. So there's a lot of work that goes into that. And right now we believe the number of 140 is an optimal number for our current launch to primary care physicians and gastroenterologists. And also, we think it's the right number for Aemcolo. But these things could change as we get into this because we do believe these products can be very successful once they're launched into physicians' offices.

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Jonas Peciulis, Edison Investment Research Limited - Analyst [40]

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Okay. That's useful. One question on BEKINDA and specifically, the update on BEKINDA that, sort of, you have in today's press release. You mentioned that you -- so you had a meeting with FDA to discuss the pediatric study plans. So what's your latest thinking about further R&D plans for BEKINDA? So you're going to do both pediatric and adult populations in one go as opposed to step-wise manner?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [41]

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Thank you for that. BEKINDA is a product we are very excited about. An R&D program that went through a sizable, hundreds of patients, Phase III study in the U.S. and has done really well. And we would love to bring it to patients as quickly as possible. Obviously, that requires an additional adequately controlled Phase III pivotal study per the FDA guidelines.

We have been in discussions with agency about this program. What took a little bit of time was to reach an understanding about the pediatric plan, which is a regulatory requirement, which we obviously take very seriously. We have done that. The planned study will aim at an intended indication of adults. We are developing also for pediatrics. The study is a very short one. The duration of treatment is very short. Patients are recruited quickly. It's one of those rare indications where you can recruit quickly, just like we have done in the previous Phase III study. And we are looking forward to bring this to patients.

The one caveat being that we have not announced yet the planned timing of the study. We expect to do so in the next quarter or so to announce the planned timing in more detail.

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Operator [42]

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(Operator Instructions) Your next question comes from the line of Sean Lee from H.C. Wainwright.

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Sean Lee, H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate [43]

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Just 2 quick ones. First, for Talicia, do you expand to -- what kind of coverage does 140 reps give you in the U.S. in terms of geographies? And do you expect to expand that further next year if the launch goes well?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [44]

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Sean, great question. We will elaborate in much more detail on Friday. But since you've got us going, we're so excited about this, we will say something now, which is H. pylori population in the U.S. is highly concentrated. While we are talking about 100 million Americans, the actual territories where vast majority of these patients are, are not many. What this allows us to do is to cover most of the relevant prescribers with 140 reps. This is the bottom line. We'll provide much more details on Friday. Unless, Rick, you're on the line, would you like to add anything?

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [45]

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No, I think that's good. I mean on Friday, we'll actually share the map, so you can see where everybody is located. So we will cover Continental United States. Of course, there'll be some white areas like Wyoming, Montana, where there's really not a lot of physicians and not a lot of H. pylori cases for us to seek. I mean the cases are concentrated in certain states, but we will cover most of the country. And then we'll cover the -- what we call the white space with our telesales group as well. So we'll have a complete map to share with you on Friday.

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Sean Lee, H.C. Wainwright & Co, LLC, Research Division - Equity Research Associate [46]

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Great. Looking forward to that presentation. And my second question is on the marketing strategy for the 2 drugs. Are you focusing primarily on the door-to-door visits to the physicians? Or do you plan on having some organized physician education sessions? Or would there be any direct-to-consumer marketing?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [47]

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Rick, would you like to take this one?

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Rick D. Scruggs, RedHill Biopharma Ltd. - COO of US Operation & Director [48]

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Yes. Sure. So we will do all of those things. We have a dedicated sales force of 140 salespeople. We have 5 thought leader liaisons working with key opinion leaders. We have currently a medical liaison science team of 6 people that will be out there, who'll be talking about disease state. We are present at ACG, American College of Gastroenterology. We'll be at DDW next year. We are numerous -- we will be at numerous conferences this year. We're -- for primary care, et cetera. We will be working with patient advocacy groups. We will be doing public relations and public affairs. And we'll be looking at direct-to-consumer at some point, maybe not right now, but at some point. And as you know, there is already some limited direct-to-consumer with Aemcolo through the website, and we'll continue that. So we will address the sales and marketing of the product in all venues as we go forward.

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Operator [49]

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(Operator Instructions) Your next question comes from the line of Hank Beinstein from Gagnon Securities.

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Henry Carl Beinstein, Gagnon Securities LLC - Partner & Portfolio Manager [50]

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Congratulations on the announcement. Most of the questions that I had have been answered. But I did want to ask, Dror, one question that's occurred to me. You indicated briefly that you were considering acquiring other products to put in your salesmens' bag. Could you give us a little color on exactly what you were thinking? And how many additional products might be in your focus?

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [51]

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Thank you, Hank. It's highly relevant and timely question because if you look back 5 years ago, we were entirely focused on R&D. Three years ago, we started building very carefully and gradually our commercial operation starting with promoting several co-promotion or in-licensed products from other companies to establish our presence. And while at it, the commercial operation became a major asset for us in the sense that we have the capabilities, we have the supportive functions, we have reps in the field very familiar with the health care providers and vice versa, calling on already thousands of GI primary care call points. And soon enough, as Rick mentioned, almost 24,000 call points with 140 reps.

This is in the GI space or in any specialty of similar size and scale is a major capability that needs to be capitalized on. What it means is that we need to capitalize on our economies of scale and from most promising, largest, most profitable products that we can into those call points. We already have 3 smaller products, which were discussed earlier, and we are launching Aemcolo, which is potentially a large product, this quarter in the coming weeks. And Talicia, we are planning to launch in Q1, again, a potentially large or very large product.

We do have the capacity to add very carefully and selectively highly promising, potentially large, FDA-approved products into our universe of health care providers, which we call on, sometimes weekly, sometimes monthly, depending on each name. This is where we are. We are in discussions for potential acquisition of several FDA-approved products, commercial stage or nearly FDA-approved, both. And you could certainly expect us to do our very best in the coming quarters to add very exciting products into the bag of our field force as well as marketing and medical affairs and all the others that are dealing with it.

It's the plan. It's been the plan all along. There's very few players in the GI space, and our goal and objective is to become a leading player, if not the leading player in the GI space, highly focused, narrowly focused in the coming years. I hope I answered your question.

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Henry Carl Beinstein, Gagnon Securities LLC - Partner & Portfolio Manager [52]

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Very Helpful. Looking forward to Friday.

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Operator [53]

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There are no further questions at this time. So I will hand over to the speakers for the final remarks.

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Dror Ben-Asher, RedHill Biopharma Ltd. - Co-Founder, Chairman & CEO [54]

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Thank you. And thank you, everybody, for being with us today. We are available should anybody have follow-up questions, on the phone, by e-mail, as always. Otherwise, have a great day. Thank you.

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Operator [55]

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