Redhill Biopharma Ltd.

Q3 2021 Earnings Conference Call

11/30/2021

spk06: Good day and thank you for standing by. Welcome to the Red Hill Biopharmers 3rd Quarter 2021 Results Financial Conference Call. If you wish to ask a question, please press star 1 on your telephone keypad. At this time, I would like to introduce to the conference call Red Hill's CEO, Dror Ben Asher, Micah Ben Corrine, Chief Financial Officer, Gilid Rade, Chief Operating Officer, Guy Goldberg, Chief Business Officer. Adi Frisch, Chief Corporate and Business Development Officer. Rob Jackson, Senior Vice President, Sales and Marketing. Bob Gilkin, Senior VP Market Access and Trade Relations. And Dr. June Almanoff, Chief Medical Officer. Before we begin, we will read from Red Hills Safe Harbor Statement. Please go ahead.
spk01: Thank you, Brian. 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 the business, promotion, and other efforts related to Redhill's commercialization activities and the initiation, timing, progress, and results of Redhill's research, manufacturing, preclinical studies, clinical trials, marketing applications, and approvals, if any, including the clinical trials of Opaginib and RHP107 for the treatment of COVID-19. 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 20F, filed with the SEC on March 18, 2021, and in its other filings with the Securities and Exchange Commission.
spk08: Thank you, Alexandra. Good day, everyone, and thank you for joining our third quarter earnings call. Today, we'll be presenting detailed R&D commercial and financial highlights. In light of the recent emergence of the Omicron variant, and the risk presented by future variants of concern, we will elaborate on Red Hill's strategy with Opaganib and RHB107, and there are increasingly relevant mechanisms of action potential against the emerging variants. Our U.S. commercial business continues to drive growth, delivering a second consecutive quarterly net revenue record of $21.6 million. despite continuously challenging pandemic environments. Felicia generated another record quarter with 15% growth in new prescriptions, while Movanti continues to perform, adding a 1.1% increase to new prescriptions. Both products are also continuing to make strides in gaining both commercial and government formulary coverage. Rob Jackson, who is heading our marketing and sales will further elaborate shortly. Turning to R&D. Given the recent emergence of the heavily mutated Omicron or South African variant, as well as likely emergence of other variants of concern over time, the importance of drug candidates that act independently of the viral spike protein is growing. This makes both Opaginib and RHB107 host-targeted mechanism of action and expected maintenance of effects against new variants increasingly more relevant in the battle against COVID-19. The third quarter saw significant focus on completing Opaginib's global phase 2.3 COVID-19 study in hospitalized patients. specifically in the currently underserved, hospitalized, moderately severe patient group, which the Pfizer and Merck pills do not address, a subpopulation comprising more than 50% of our total study population. Opaginib demonstrated a 62% reduction in mortality, as well as improved return to room air and earlier hospital discharge. This is consistent with what we have seen in our phase two study and compassionate use experience. The consistency across multiple endpoints and territories provides us with a high degree of confidence in the results showing a positive effect in this patient population. We have now provided regulators in various countries with robust data packages to facilitate discussions on next steps. and will continue to provide data to regulators in additional countries. Expedited review of the Opaginib data has already been granted by EMA, the European Union's regulatory body, equivalent to the FDA in the United States. In parallel, we continue to progress our Phase 2-3 program in non-hospitalized patients in the United States and South Africa with our other novel once daily oral COVID-19 drug candidate, RHB107, with Part A topline results expected in the first quarter of 2022. Gilad, our chief operating officer, will elaborate about the status of our COVID-19 programs shortly. Our Phase III study of RHB204 in pulmonary NTM disease continues to enroll patients in the United States. Importantly, progress with phase 3 stage RGB104 for Crohn's disease is expected to speed up thanks to a recent, much-awaited potential progress in mycobacterium avium subspecies paratypoclosis, or in short, MAP detection research. We are very excited about that. With steep reduction in quarterly operating and net loss, a quarterly record gross profit of $12.4 million, with improved gross margin from net revenues, and a potential commercial non-GAAP EBITDA break-even before the end of the year, along with advanced, exciting, and timely R&D pipeline. We are well positioned for short, medium, and long-term success as an emerging specialty pharma company. Before turning to our Chief Business Officer, Guy Goldberg, and the rest of the team for our presentation. Please remember to press the link in order to view our detailed slides to be followed by a Q&A session.
spk10: Thank you, Dror. As we near the end of the year, Redhill is at a very important point. I will start with the bottom of the slide, focusing on Redhill's pandemic program. With Omicron and the potential for future variants dominating the attention of public health officials, what they have been saying loud and clear is that a simple, scalable, effective, and safe therapeutic is desperately needed. As we all know, the hope that if vaccines alone will get us out of this pandemic will most likely not become reality. Red Hill is uniquely positioned to make a difference with its two oral COVID vaccine, sorry, two oral COVID therapeutic candidates. First, opagamib. our novel, orally-administered, first-in-class SK2 inhibitor addressing the moderately severe inpatient hospitalized population. With its method of action targeting the host cell, rather than working on the virus directly, we believe we can cast a wider net of efficacy against emerging variants such as the Omicron variant. We have conducted two clinical studies, a Phase II and a Phase II-III study in hospitalized COVID patients, both demonstrating the potential of opaginib. and Gilad will provide more detail on the Phase 2-3 study that is the focus of our submissions in several countries around the world. These submissions open up a potentially milestone-rich upcoming few months as we get feedback from these regulatory agencies as far as next steps. Gilad will also provide important new updates later in the presentation on timelines for regulatory feedback, as well as new biomarker data and support that our post hoc analysis has identified the correct target population for opaginib. Second, we have ARCHB107 or Opamistat, an orally administered inhibitor of S1 family of trypsin-like serine proteases being developed as a treatment for non-hospitalized COVID patients. Opamistat has demonstrated potent inhibition of SARS-CoV-2 viral replication in preclinical model of human bronchial tissue. and as a result of prior development in a number of indications in several clinical studies, we also have a clinical safety profile from approximately 200 patients. We are conducting a Phase 2-3 study in non-hospitalized COVID-19 patients in the U.S. and South Africa, and we have completed recruitment for Part A of the study and expect top-line results in Q1 2022. Importantly, RHB107 is also a once-daily oral pill and is also host-mediated, which means that it could It should also potentially work against various mutations, such as Omicron. Also importantly, patients in the study are tested for specific viral strain. Returning now to the top part of the slide in our financial highlights from Q3. On the commercial side, we generated record quarterly revenues despite industry-wide challenges, and we believe we will see growth throughout the end of the year and into next year. As a small company, we continue to stand the test of the pandemic and prove we are a resilient organization. Telissia generated 15% quarter-over-quarter growth, commercial coverage continues to improve, and we continue to achieve important launch milestones that will be covered later in the presentation. We believe Telissia has enormous potential both for patients and as a value driver for Redhill as a company. As with almost all launches, especially during these challenging times, we continue to advise that it takes time to build awareness and acceptance both with payers and also with physicians. With Movantic, we continue to maintain our market leader position. Movantic is well-liked by physicians in its great reimbursement, great efficacy and safety, and great brand recognition satisfaction. There is still a very large and underserved OIC patient population, and Redhill continues to improve Movantic's status of best unrestricted coverage in the Pomora class. Finally, we maintain a cash position of $51.5 million as of September 30th to support our R&D and commercial efforts. I would like to provide a brief overview of Redhill to those new to the story who may be on our call today. Redhill is a fully integrated specialty biopharmaceutical company focused on gastrointestinal and infectious diseases with a robust pipeline of drugs and a world-class commercial operation run out of our headquarters, U.S. headquarters in Raleigh, North Carolina. At the top of the slide, you see the three FDA-approved drugs we promote, Movantic for opioid-induced constipation, Telicia for H. pylori infection, and mColo for traveler's diarrhea caused by non-invasive strains of E. coli. Rob Jackson, our Senior VP for Marketing and Sales, will be going into detail on the commercial efforts. The second part of the slide shows the multiple late-stage programs in development addressing important medical needs. Gilad Redai, our Chief Operating Officer, will review our two COVID programs that I just mentioned. I will then provide an update on RHB204 for NTM disease and RHB104 for Crohn's disease. I will now turn it over to Gilad.
spk11: Thank you, Guy. In the following slides, I will provide an overview of our advanced COVID-19 programs, specifically with respect to the promise for addressing the Omicron variant and the growing concerns due to potential emergence of resistance to current vaccines and antibodies. I will also provide further data and analyses from the global Phase 2-3 study, some of which has not been shared before, which bolster our previous reporting of an apparent meaningful benefit of Opaginib to the survival of moderately severe hospitalized COVID-19 patients. As a reminder, Opaginib is an oral pill which is a first-in-class proprietary selective sphingosine kinase 2 inhibitor. Through inhibiting this host factor enzyme, Opaginib exerts a dual action against COVID-19, inhibiting viral replication on the one hand and reducing the body's excess immune response to the infection, on the other hand. Preclinical efficacy has been demonstrated in numerous anti-inflammatory and anti-viral models, including demonstrating the blocking of SARS-CoV-2 viral replication across several variants in human bronchial tissue. Multiple Phase II studies in compassionate use in COVID and non-COVID indications have shown promising signals of activity and safety in hospitalized patients. The recently completed Global Phase 2-3 study in COVID-19 showed Opaginib's apparent benefit to the survival of hospitalized COVID-19 patients in moderately severe conditions. These are patients with COVID-19 pneumonia who require supplemental oxygen of up to 60% fraction of inspired oxygen, or FiO2 in short. These patients represent a large underserved COVID-19 patient population, which the Pfizer and Merck pills do not address. The hospitalized patient population that opaginib benefited in the study was far more advanced in disease progression than the early stage outpatients, which participated in the Pfizer and Merck studies. Opaginib benefited a population of hospitalized patients in moderately severe condition with a median of 11 days from the onset of symptoms, while the Pfizer and Merck studies were limited to outpatients with a maximum duration of five days from onset of symptoms. This distinguishes Opaginib as a potential game changer for advanced COVID-19 patients who are at a high risk of dying from their condition and are already well beyond the realm that the Pfizer and Merck pills can target. Importantly, Opaginib's mechanism of action is independent of the Omicron variant spike protein mutations, which are raising global concerns regarding its potential to evade vaccines and antibodies. Opaginib's antiviral effect is on the intracellular process of viral replication at the replication-transcription complex. This takes place downstream from the viral attachment to the cell membrane and viral entry into the cell. As such, Opaginib's activity, which blocks the replication of the virus inside the cells, isn't impacted by changes in the viral envelope, specifically changes in the spike protein are of no direct consequence to Opagonib's pathway. Opagonib's proposed antiviral activity is hence expected to be fully maintained against the Omicron variant and also against other future foreseeable spike protein variants of concern. In a similar fashion, Opagonib's proposed anti-inflammatory activity is also independent of Omicron variant spike protein mutations. The reduction in inflammation due to Opaginib's inhibition of SK2 is not directly related to the SARS-CoV-2 virus, but rather to the body's immune responses. As such, Opaginib's anti-inflammatory activity is also expected to be fully maintained against the Omicron variant and against other potentially emerging variants of concern. Opaginib's capacity to work against Omicron and other future variants through both its antiviral and its anti-inflammatory modes of action position it in a unique and high-priority potential COVID-19 therapy potential. The reason we are excited about opaginib's potential central role in treating COVID-19 is the apparent benefit of opaginib in reducing mortality of advanced hospitalized COVID-19 patients in moderately severe conditions. Patients requiring a level of oxygen supplementation of up to 60% fraction of inspired oxygen, or FiO2. In our global Phase II-III study, this patient population consisting of 251 subjects showed a significant 62% reduction in mortality events when treated with opaginib, with a nominal p-value of 0.019. The mortality rate in the control arm was 15.7%, indicative of the high risk of such patients dying due to the serious condition they were in. Treatment of these patients with opaginib reduced the mortality risk to 6%, a very meaningful potential to save lives. The Kaplan-Meier curves of time to mortality event in this hospitalized patient population show a clear separation, beginning from a few days after treatment initiation and carried through to the end of the follow-up period at day 42. Supporting the critically important benefit to the survival of patients, additional key clinical outcomes showed a consistent benefit of opaginib for this patient population. 76.9% of opaginib-treated patients were weaned from their oxygen support and were able to breathe room air by day 14, versus 63.4% for placebo, an efficacy benefit with nominal p-value of 0.033. Consistent with these findings, other key secondary endpoints also showed an apparent benefit of opaginib in this hospitalized patient population with nominally significant p-values. A clinical improvement of two or more points on the WHO ordinal scale by day 14 showed a meaningful difference with approximately 80% clinical improvements in the opaginib-treated arm versus 66% in the control arm with nominal p-value of 0.023. Similarly, the time to clinical improvement, down to a score of 3 or lower from a baseline score of 5 on the WHO ordinal scale, was shorter for patients treated with opaginib, with a median of 8 days versus 10 days and a p-value of 0.01. Patients treated with opaginib were also discharged earlier from hospital, with a mean difference of approximately 4.5 fewer days in hospital, with a nominal p-value of 0.022. The consistency of Opaginib's benefit across the various clinical outcomes evaluated strengthens the inference that the clinical benefit is not a one-off statistical finding as a result of a specific measurement. Further supporting the apparent overall benefit to survival, Opaginib's benefit in this population of patients was consistent across the territories participating in the study. In Europe, Latin America, Israel, and Russia, demonstrating that the survival benefit was not driven by any territorial outliers. To ensure that the clinical benefit is not a result of potentially confounding risk factors, a comprehensive analysis of the potential confounders was conducted. As can be seen, an exhaustive list of such potential confounders was analyzed. This analysis demonstrated clearly that the survival benefit remains consistent and high. within a range of 59% to 66% survival benefits, irrespective of potentially confounding risk factors, including such major known factors such as age, sex, diabetes, BMI, or use of dexamethasone as underlying standard of care. A recent analysis of the inflammatory biomarkers of the opaginib study subjects, which we are sharing publicly today for the first time, Further substantiates and supports the utility of FiO2 as a valuable indicator of COVID-19 disease severity, and also as a potential predictor of a treatment benefit with opaginib in this target population of hospitalized patients. This table shows that known and accepted disease severity indicating markers, such as CRP, lymphocyte counts, and D-dimer, are in close correlation and agreement with FiO2. This demonstrates with very significant nominal p-values, as shown in the rightmost column, that the group of patients characterized as requiring lower FiO2 at baseline, that is up to 60% FiO2, are indeed a distinct group of hospitalized patients exhibiting lower levels of severity markers than those patients that required higher than 60% FiO2 oxygen at baseline. This recent analysis that was not previously publicly announced further supports the overall framework of the FiO2-based analysis of study outcomes. It supports using FiO2 as an indicator of disease severity and as a potential identifier of the patient population that stands the best chance of significantly benefiting from being treated with opaginin. The analysis of safety outcomes shows that safety events in the study were similar between treatment arms with no new safety concerns emerging. The majority of the TEAEs were mild to moderate in severity. Serious TEAEs were experienced by 52 out of 230 patients in the opaginib arm versus 52 out of 233 patients in the placebo arm, similar ratios. TEAEs with an outcome of death occurred in 15.7% versus 17.2% in the opaginib and placebo arms respectively. The excellent safety results support the overall risk-benefit evaluation of Opragonib in this patient population and is expected to be an important component in regulatory considerations going forward. Acknowledging that the analysis of the study that demonstrates the apparent benefits for the moderately severe patient population was conducted post hoc, it is important to clarify why we have a high degree of confidence that this outcome is not a statistical artifact, inferring that opaginib may indeed be effective in this population. The framework of the post hoc analysis, which identified a subpopulation showing a meaningful benefit when treated with opaginib, is strongly supported by the following aspects. FiO2, which is a parameter used to identify the subpopulation, is a clinically and medically relevant parameter for capturing oxygen requirements of patients. and for indicating disease severity. This conjecture is now strongly supported by the correlation of FiO2 with known and accepted inflammatory biomarkers of disease severity. Consistency of opaginib's apparent benefits across the different clinical endpoints strengthens the likelihood that the outcome of any one particular endpoint is not a statistical artifact. The consistency of opaginib's apparent benefit across the study territories provides additional support showing that the effects seen are not driven by any particular territorial outlier. Further, while not shown in this presentation, we also tested the consistency of opaginib's apparent benefit using different oxygen supplementation cutoff points. For example, FiO2 of 50% instead of 60%. This analysis confirmed that the benefit for the lower oxygen supplementation patients which reflects lower severity of patients, is maintained irrespective of the precise cutoff point selected. Again, reducing the likelihood that the analysis is a statistical artifact and supporting the assertion that there is a correlative relationship between lower severity of disease and opaginib's capacity to benefit the patients. Finally, as presented earlier, opaginib's apparent benefit is not dependent on baseline risk factors or potential confounders. showing that opaginib is the likely factor underlying the differences in outcomes for the treated patients. Given all this, despite the analysis being post hoc, the thoroughness of this analysis provides a high degree of confidence that the apparent benefit is not a statistical artifact and that opaginib may be safe and effective in this underserved hospitalized COVID-19 patient population. The resurgence of concerns that Omicron variant might show resistance to vaccines and antibodies further highlights the urgency and the potential advantages of Opagonib's potential effectiveness against such variants. To update on the regulatory status, we have filed Opagonib data package in key territories worldwide and continue to file in additional countries. We are anticipating regulatory guidance for next steps in the targeted hospitalized COVID-19 patients population where there is no currently effective treatment. Europe's EMA has indicated rapid procedure timelines with preliminary feedback expected by year-end. Preliminary feedback from the US FDA is expected in January 2022. Additional territories pursued are the UK, Russia, Brazil, Israel, Switzerland, Colombia, India, and South Africa. We are also making plans for a confirmatory study with Opaginib in the targeted moderately severe hospitalized patients. Subjects to regulatory feedback, we will consider shifting from the current standard severity classifications based on the World Health Organization Ordinal Scale, which utilizes the type of oxygen delivery device, to defining COVID-19 pneumonia severity using FiO2 as the key parameter. Moving over to a quick update on RHB107 or Upamostat, our second COVID-19 novel oral pill program that is currently being evaluated in a Phase 2-3 study in non-hospitalized COVID-19 patients in the US and in South Africa. RHB107 is a once-daily oral capsule given early in the course of the disease to outpatients. It targets serine proteases, which are human enzymes, that are involved in facilitating the entry of SARS-CoV-2 into target cells. The cleaving of the spike protein by these host human serine proteases is a necessary step in viral attachment and entry into the cells, which is independent of the mutations observed in the Omicron variant that are altering the spike protein antigenic properties. As such, RSP107 is expected to be insensitive to mutations in a spike protein given its host-mediated mechanism of action. RSP107 has demonstrated inhibition of SARS-CoV-2 viral replication in preclinical models of human bronchial tissue and is currently being evaluated in outpatients with symptomatic COVID-19 in the U.S. and South Africa. Recruitment for Part A of the study has been completed. and top-line readout is expected in Q1 2022. We plan to also analyze variants, and we'll plan to include the Omicron variant of concern in the study analysis going forward. I will now turn it back to Guy Goldberg for reviewing additional R&D programs that are not COVID-related.
spk10: Guy Goldberg Thanks, Gilad. So, we'll start with RHP204. RSP204 is a novel combination therapy of three antibiotic drugs that are active against non-tuberculous mycobacterial infection or NTM disease. We are currently in a Phase III study as a first-line therapy. This is important, and it's a value-driving study because NTM is a difficult-to-treat infection with no FDA-approved first-line definitive care treatment. In addition, this is an orphan disease with an estimated 110,000 pulmonary infections NTM patients in the United States. RHP204 has been granted orphan drug designation, qualified infectious disease product designation, and fast track designation. With these designations, it is eligible for priority review of the NDA and 12 years of market exclusivity. This slide shows the study design. We are testing RHP204 as a potential first-line standalone oral therapy. The randomized placebo-controlled face-free study is planned to enroll 125 subjects. The key study endpoints of sputum culture conversion and patient-reported clinical outcomes will be evaluated at month six with longer-term follow-up, including the post-treatment maintenance of conversion. An important recent change is that we added an interim sample size re-estimate at approximately 50% enrollment. In addition, to accelerate recruitment, we are planning to expand the study to additional territories outside the United States, including the UK and Japan. I will now provide an update on RHB104, our innovative treatment for Crohn's disease. As Dora mentioned, based on recent published research, potential progress in mycobacterium avian perituberculosis, or MAP, diagnostic technology, may enable us to advance the program towards a confirmatory study in MAP-positive moderate-severe disease Crohn's patients, subject, of course, to required regulatory input. As a reminder about this program, there is growing evidence that intracellular mycobacteria play a crucial role in Crohn's disease. Investigators have specifically identified MAP as a putative cause of the disease. Testing this theory, we conducted a Phase III study in Crohn's disease that successfully met our primary and key secondary endpoints, including remission at 26 weeks and response at week 26, early remission at week 16, durability, maintenance, and others. Overall, RHP104 demonstrated meaningful, consistent, and statistically significant clinical activity. In addition, the parent benefit in patients with concomitant anti-TNF use indicates that RHP104 can potentially be used effectively and safely as an adjunct treatment to other standard of care medications. Since we completed the phase three study, there's been a lot of work by us and others on a companion diagnostic to identify MAP infection. It is not an easy thing to do. However, we believe based on recent public research that there may be progress and we will have an update for investors as soon as we can validate the method. If there is a successful diagnostic, we envision conducting an additional confirmatory clinical study with entry criteria being MAP positive status and a primary endpoint including mucosal healing. We will, of course, need FDA feedback. However, we envision that such a study could be relatively small, perhaps 100 to 150 patients. Crohn's disease is a large, multibillion-dollar market with a large unmet medical need due to the limited benefit of monoclonal antibody therapy and other immune-suppressing drugs and safety-related issues to those treatments. I will now turn it over to Rob to walk through our commercial progress.
spk03: Thank you, Guy, and good morning. Over the next few minutes, I'm going to summarize the excellent progress we made during the third quarter in our sales, marketing, and market access activities so that you can understand how we have developed our business and why we feel increasingly confident about the fourth quarter in 2022. In the third quarter, Redhill achieved record quarterly prescription volume for Telicia. despite the continuously challenging pandemic environment. Telicia prescription volume grew by 117 percent over Q3 2020, and by 15 percent, a five-point improvement over the second quarter growth rate of 10 percent. Simultaneously, we added growth from Avantic over second quarter of 2021. Redhill continues to maintain clear market leadership of the Pomora class, and we are confident in our ability to capitalize on an improving selling environment during the fourth quarter. In the second quarter, Redhill grew Movantic volume by 5.6% over first quarter of 2021, and we added an additional 1% growth in third quarter. We achieved this by taking a disciplined approach to focusing on the pain segment. In tandem, we're also executing marketing strategies that focus on growing the Pomora market. This is a key objective for Movantic as the established market leader. We've invested heavily in digital marketing tactics to first raise opioid-induced constipation awareness with patients and prescribers, and secondly, to educate these potential customers about how Movantic can help provide relief from the symptoms of OIC. During the third quarter, we also achieved significant market access successes with key payers that we believe will yield further growth from Movantic during the fourth quarter in 2022. A key predictor of the health of the OIC market is the growth or decline in the rate of opioid prescribing. As you can see here, opioid prescribing continues to stabilize during 2021, a major improvement over the declining trend that began way back in 2012. There is a very strong correlation between opioid prescribing and Movantic volume, and a stable opioid prescribing trend provides support for Movantic in the entire Promora class. On this next slide, you can clearly see that two other things are happening. First, prescribing volume in the Pomora class is stabilizing, similar to what we're seeing in the opioid class, and this is a good sign from Avantik. Second, we can see a shift in Pomora prescribing trends, with the class beginning to return to growth. This is a significant change for the Pomora class, and on a moving annual total basis, Pomora prescribing volume bottomed out in June and has remained steady or improved slightly since then. Again, this is a very good sign for our Movantic business and reflects our efforts and investments as the market leader to return the Pomora class to growth. In summary, Movantic continues to achieve new milestones. Over 2.5 million prescriptions have been dispensed since launch. Overall, Movantic has achieved about 90% commercial coverage across all payers, and new prescriptions and total riders both increased year on year during third quarter of 2021. Simultaneously, Telesia continued to achieve new milestones as well, and in third quarter, Telesia achieved its best ever performance in terms of prescription volume growth. Telesia achieved a new high in commercial payer coverage, and Telesia also achieved further improvements in customer access, which in turn enabled greater trial and usage of the brand. Given what we have seen so far this quarter, we expect that this trend will accelerate in the fourth quarter. In the third quarter, Tulisi achieved 15% growth, and we are optimistic this growth will accelerate as recent pair wins take effect, new pair wins come to fruition, and field execution continues to improve. Antimicrobial stewardship is an important issue, and when the most effective antibiotics are used first line, they provide the best chance for cure while eliminating the need for second, third, and even fourth lines of treatment. These growing realizations among the prescriber community are enabling Telicia to achieve record performance in third quarter for weekly, monthly, and quarterly volume. And in the fourth quarter, we'll continue to increase our focus on Telicia and expect to further accelerate our growth heading into 2022. On the payer front, our market access team has continued to improve our very competitive position with commercial payers. Additionally, Telicia was recently awarded a very significant contract by Medi-Cal, the California state Medicaid program. Effective January 1st, 2022, Telicia will be available to 14 million Medi-Cal beneficiaries as a preferred brand with no restrictions when all managed Medicaid plans will follow the state contract drug list. We are confident this will accelerate Telicia uptake in what is the second largest individual state in the country for H. pylori infections and treatments. This is another clear sign that prescribers increasingly recognize, first, the challenges of chlorothromycin resistance that were clearly outlined by the American College of Gastroenterology's 2017 guidelines, and secondly, the pitfalls of continuing to persist with using chlorothromycin-based therapy as a first-line agent of choice. I want to reiterate that this brand continues to achieve new milestones. Again, we had record weekly, monthly, and quarterly prescription volume. We expect that that's going to continue into next year and certainly into fourth quarter. We had our highest levels of commercial and government coverage, and we recently had the unrestricted Medi-Cal win as well. And lastly, we achieved 117% prescription volume growth over third quarter of 2020 with Telicia. We also continue to promote mColo to consumers, PCPs, and gastroenterologists. The COVID-19 pandemic has obviously had a very negative impact on international travel, especially non-essential travel outside of the continental United States, where traveler's diarrhea risk is greatest. Our midterm expectations for MCOLO are tempered by this reality. In summary, we finished the third quarter with a consistent and growing trend of Telicia growth. We achieved numerous commercial milestones for Telicia, and as the market leader in the Pomora class, we demonstrated our ability to continue to grow new Movantic prescriptions, stabilize prescription volume in the Pomora class, and further improve on our already strong Movantic payer coverage. We're looking forward to further improving our performance in the fourth quarter in 2022. Thank you for your time, and I'll turn the call back to our CFO, Miha Ben-Koram.
spk07: Miha Ben- Thank you, Rob. Good morning, good afternoon. I will provide a short financial summary of the quarter. Redhill is executing on a consistent growth and value creation strategy, enabling us to be near quarterly commercial non-GAAP EBITDA break even by the end of this year. We have achieved another quarterly record of net revenues and gross profit, accompanied by a reduction in operating and net loss. Our cash balance of $51.5 million as of September 30th, 2021, has been supplemented by more than $20 million in equity financing during this month of November. Net revenues were $21.6 million for the third quarter of 2021, a second consecutive quarter of record net revenues attributable to an increase in revenues from both Talicia and Movantic, as shown by Rob. The record net revenues also contributed a quarterly record gross profit of $12.4 million, an increase of 14 percent from previous quarter, which represents 57 percent gross margin from net revenues compared with 51 percent in the previous quarter. On the expenses side, we had substantially lower expenses in the third quarter than in the second quarter, $29.8 million compared with $35.8 million, mainly attributable to the completion of our global COVID-19 Phase II-III study with the Paganit. Operating loss was approximately $17.4 million, compared with $24.9 million in the previous quarter, a decrease of 30%, which was mainly attributable to increasing revenues, increasing gross profit, completion of our great majority of our COVID-19 programs, and reduction in share-based compensation expenses. Net cash used in operating activities was approximately $19 million for the third quarter of 2021, similar to the second quarter of 2021. We have ended the quarter well-positioned for potential quarterly commercial non-GAAP EBITDA break even by the end of this year. I will now turn it over to a drawer for Q&A.
spk06: Thank you. Once again, for the participants over the phone line, please press star 1 if you wish to ask a question. And your first question comes from the line of Brandon Foulkes from Cantor Fitzgerald, your line is now open. You may ask your question.
spk02: Hi, thanks for taking my questions and congratulations on all the progress in both the pipeline and the commercial front. Maybe just firstly on epigenome, I appreciate all the additional data there. Should we think about the EMA as being the most receptive here and potentially, you know, I know you said we're going to expect feedback from them first. Is that indicative of that is probably going to be in the lead in the EMA versus the US. Maybe secondly, just staying on the pipeline on 204, you talked about expanding the territories in the phase three. Is that just to speed up the pace of enrollment and the program, or should we think of something else driving the potential expansion there? And then lastly, if I may just slip an all three up front, On the Telicia coverage, obviously, congratulations. Great coverage there. Just going forward, should we expect additional wins here or improvements in coverage, or do you believe you're in a very strong, steady state now, and it's really just executing on those coverage wins? Thank you.
spk08: Thank you, Ram. It's Dror here. Starting with the question about EMA and whether this is likely to be the most important response in the short term. So you're right about saying that this is likely to be first to respond, as Gilad said, before the end of the year. It's an expedited review, which we're very happy about. But it does not necessarily mean that this is the territory where we expect the fastest progress. We are applying in many more countries, some of them with a very high degree and increasing need for treatment for this patient population in Latin America, in Europe, Israel, Switzerland, India, South Africa, and others. And we do not know at this point which country or countries will be the most promising for an advance towards the market. The question about RGB204 for anti-infections. Yes, the speed of enrollment is the main reason that we are expanding the study to additional territories. The other reason is that we see strong need for RGB204 for anti-infections in other countries, such as Japan, where there's actually more patients than in the U.S. Your last question about Felicia coverage and whether we should be expecting additional coverage, further improvement. Right now, coverage is excellent, but it can be improved. I'll refer this to Bob Gilkin with heading our market access team. Bob, would you like to elaborate on the Talicia coverage and what we can expect moving forward?
spk04: Sure. Thank you, George. I appreciate that. So first, Rob and I are committed with pulling through the great coverage that we have for Talicia. Eight out of ten commercially-insured patients have access to Talicia. Most of those patients have access with no restrictions. We are committed to expanding that coverage. Our National Account Executive team is working hard, diligently. We have many things in the works right now, cannot elaborate at this time, but definitely expect to see more wins as we go into 2022. We're not done yet. If there's any indication of our ability to get it done, take a look at MoBantic and what we were able to do once we acquired it from AstraZeneca. Our team has continued to improve coverage, and we expect to do the same thing with Talicia like I said, that Rob and I are committed with pulling our current coverage through with our gritty ATCs out there in the field. Thank you.
spk02: Great. Thank you very much. I appreciate all the detail.
spk06: Thank you. We will now be taking our next question that comes from the line of Ram Selvaraju from HC Wainwright. Your line is now open. You may ask your question.
spk09: This is and dialing in for . Can you hear me okay?
spk08: Yes, we can.
spk09: All right. Awesome. Great. Great presentation. Congrats on your progress. Just a few questions from our end. So, your face to be analysis looks solid and convincing. So, with respect to using FiO2 as a medically relevant parameter, so just curious, have you spoken to KOL and received any preliminary thoughts regarding its feasibility in current medical practice? Also, are there any limitations that you're aware of in using FiO2 as a relevant parameter in treating COVID patients?
spk11: Thank you. Certainly, we have interacted with KOLs, and we will have further interaction, as we indicated, with regulators This is a change from what the standard World Health Organization ordinal scale characterizes as severity, but certainly FIO2 is a very well-known measure and parameter that is being used by the treating physicians and KOLs, and we get feedback that it's certainly a feasible parameter to utilize going forward, but we'll have more input and further information once we have the regulatory feedback as we explained.
spk09: Okay. Thanks for the clarity. So with respect to the RHB107 Phase 2-3 study, the data readout is expected in first quarter 2022. So can you remind us whether you expect to report any preliminary efficacy data in addition to the safety?
spk11: Sure. So the RHB107 study is a two-stage study. Part A is the part that we're currently completed enrollment for and expect top-line readout in Q1. This was a 60-patient part of the study, evaluating primarily the safety aspects of two doses that we are evaluating, and that will be the main outcome. We will get, of course, and capture also efficacy endpoints and parameters, but given the relatively small size of the cohort, we don't expect to have clear indications on efficacy, but we may follow signals that we get and certainly select a dose for optimal, for optimally going forward into the part B of the study, which will be the main part that assesses efficacy.
spk09: Okay, thanks for the clarity. So, yeah, with respect to RHP107, are there any benefits, limitations from a safety efficacy perspective in targeting serine proteases in COVID treatment? Also, are you aware of any competitors working in this space?
spk11: So, in terms of the safety aspect, RHP107 has been studied already even prior to COVID in other indications, extensively clinically, over 200, 400, I think, patients altogether. And the safety aspects are very well established and adequate for treating the early-stage patients or outpatients of COVID-19. In fact, RSP107 was provided on a longer-term basis in other indications. So we're not concerned about safety aspects. In terms of the second part of the question, can you remind me what else you asked?
spk09: Yeah, just curious whether there are any, are you aware of any competitors working in this space?
spk11: In terms of the protease inhibitors, there are competitors that are targeting protease inhibitors or other compounds in a similar class. The serine proteases that are viral targeted, like the Pfizer drug, are a different class and different target.
spk09: All right. Thanks for taking my questions. Congrats again.
spk02: Thank you.
spk06: Thank you. We will now be taking our next question that comes from the line of David Hung from SMBC. Your line is now open. You may ask your question.
spk13: Hey, thanks so much for taking my questions. So, I had a few here. First one, just on, I guess, the scenario expectations for your discussions with regulators, you know, regarding the paginib post hoc analysis. You talked about running a confirmatory trial in, you know, using FIO2 to select patients. Is that, you know, is that, I guess, is that definitely occurring or is that subject to regulator feedback, you know, or any other factors in terms of your decision to pursue another trial?
spk11: Sure. Thank you, David. Certainly, everything that we have discussed is subject to the regulatory feedback process. that we will receive with according to the timelines that we illustrated of the expected feedback, initial feedback. Certainly for further full approval processes, it's quite clear that additional study in the target population is likely to be required. The question will be that of timing in terms of whether it is in parallel or prior to any other potential emergency uses in parallel to the study that we may contemplate. And of course, the use of FiO2 as a selective parameter of the target population, again, we think that it's very feasible and makes a lot of sense, but we'll get regulatory feedback in that respect also.
spk13: Okay, got it. Thanks for that. And then on Talisha, I just had a Maybe you could help me understand a little bit in terms of squaring the excellent script growth you're seeing in Taliesha with the revenues reported for the quarter. So can you just give a sense of maybe what type of rebating is going on for the product, and has there been any material change in the gross to net for Taliesha over recent quarters?
spk08: Thank you, David. It's draw here. Specific numbers for rebating is not something that any peer company would disclose. However, we can make general comments, and I'll refer this to Bob.
spk04: Yes, thank you, Drew. Appreciate that. We are well within industry standards, probably doing a little bit better than industry standards as it relates to rebate contracting with our payer customers. We take a very... conservative approach to discounting. We really watch our gross to net. We've been very fortunate with a product like Talicia where the clinical attributes of the products and really how it fares and does much better than the clary-based therapies really provides an advantage for us. And payers do see the value in the product. So we've been very fortunate on that front. But we've been able to maintain and hold on to that rebate line. One of the challenges that we do see is that, you know, payers continue to increase rebates and more deductibles that we're seeing across the board. So obviously we're trying to kind of manage that and make sure that our products are affordable for our patients. Thank you.
spk13: Great. Really appreciate you sharing that. And then just last question on RHV104 and Crohn's disease. I guess, can you provide any more color on the maybe expected timelines or further development there and your level of confidence in being able to secure the companion diagnostic test?
spk08: Thank you, David. I'm glad you asked because we are as committed as ever. to RGB104 for Crohn's disease. We have been asked by investors and numerous patients on a daily basis from all over the world, what is happening with this program? How can we access this product for compassionate use? Numerous questions on a daily basis. And we do understand that this is a potential breakthrough in the treatment paradigm. And the phase three results that Guy mentioned briefly are robust and very, very promising. We are aware of all that. But in the last three or four years, we were reluctant to move forward into a confirmatory phase three study without making sure that we are right on target when it comes to the patient population. And the right patient population directly related to our suggested mechanism of access is Mycobacterium avium paratyberculosis-infected Crohn's patients, as opposed to all comers, even though we were very successful in all comers. And very recently, there was, for the first time, a peer-reviewed publication that disclosed a very important progress in detecting MAP, which we believe gives us a decent chance of running the study that we always dreamed of. Now to the timelines. We expect to have some kind of idea about validating the test. Within weeks. And we are highly committed to this program. So we intend to go to the regulators quickly with a proposed design and take it from there. I'll remind you that the holy grail in Crohn's treatment is mucosal healing imaging. And the mucosal healing data, which is completely objective from our phase three study, is very, very promising. In fact, we have shown significance in mucosal healing despite a relatively small number of patients. So, again, we are very excited about this program, and we are fully committed to moving it forward as quickly as possible because the patients are waiting for it. And now it seems that at last we have a way forward.
spk13: Okay, thanks for the additional color drawer. Really appreciate it. That's it for me.
spk06: Thank you. We will now be taking our next question that comes from the line of Bert Hazlett from BTIG. Your line is now open. You may ask your question.
spk05: Yes, thank you. Congratulations on the progress. Especially impressed with Talicia and the efforts you're making there. Along those lines, do you have any anecdotal evidence or circumstances you can present with regard to field force engagement? How is the traction growing or not with regard to your sales effort? And could you describe the market a little bit? Is it improving the diagnosis of the condition actually improving itself? Thank you.
spk08: Thank you very much, Beth. Wonderful questions. I'll refer them to Rob.
spk03: Thank you, Gerard. Great question. We're definitely seeing a lot of improvement in what's happening in the field. I mean, our team is executing better, but we're also seeing a lot of growth week after week, not only in volume but also in consistency. So I would say the traction is definitely improving in the field for Telicia. In terms of the diagnostic component, I think the conditions have certainly improved. If you go back to the peak of COVID last year or earlier this year, a lot of prescribers were not performing breath testing for obvious reasons, as well as endoscopic biopsies in the hospital. That has changed significantly. So although COVID is still a bit of an issue for us out there, it's certainly better than it was at the beginning of the year.
spk05: Okay. Thank you for that. And then maybe you mentioned it, and maybe I missed it. My apologies. Is there any chance you could give us a breakdown of revenue, maybe in percentage terms, of Movantic versus Talisia in the quarter? Thank you for that. And apologies if I've missed it.
spk07: Sure. Thank you, Bert. This is Michal. about a little over $19 million coming from Movantic and almost $2.25 million coming from TELICIA.
spk05: Terrific. Looking forward to hearing of the growth of TELICIA going forward. Thanks.
spk06: Thank you. We will now be taking our next question that comes from the line of Scott Henry from Roth Capital. Your line is now open. You may ask your question.
spk12: Thank you, and good morning or afternoon, possibly, over there. I have a couple questions on the commercial operations, and I may be a little more critical, but that's only because I want to understand exactly what's going on there. Sequentially from 2Q to 3Q, revenues only went up about $100,000. So I have to assume Movantic was down sequentially. Is that the correct assumption? And is that seasonal, or how should we be thinking about that?
spk08: Thank you. Scott is draw here. No, it's not related at all. You know, X-Factory sales and scripts are very different things sometimes.
spk07: But I can add, Scott, that both revenues from Movantic and Talicia went up, and we took a negative impact from Emcolo. So both Talicia and Movantic are up.
spk12: Could you give me any idea of how large the negative impact on AMCOLO was?
spk07: It's not very big. It's towards the neighborhood of 100,000.
spk12: Okay. And, you know, with regards to AMCOLO, What are your thoughts there? Is it burning a lot of cash marketing the product? I mean, there's virtually no revenues coming from it, but I don't know, which is understandable given COVID. But is it taking a lot of resources is the question, and how long can you keep doing that?
spk08: Thank you. Thank you, Scott, about that. I'll let Rob answer. Obviously, before I turn to Rob, the pandemic has had a very negative impact on travel to high-risk territory. Therefore, what we have seen in the beginning, right before the pandemic, with MCOLO, which was a very nice trend, has come to a halt, a complete halt almost. I'll let Rob explain what we are doing right now in terms of our own investment. We are big believers in the product as the pandemic gradually, hopefully eases. Rob?
spk03: Thank you, Gerard. To answer the question, relative to Mavagic and Teresia, mCull is taking very few resources right now. It's typically in a second or third position detail when the opportunity arises. I would not be concerned, looking at this from the outside, that we're overweighting our effort or our spend on EMCOLA relative to what we're able to deliver right now during the pandemic.
spk12: Okay. I guess, Rob, and this is a question for you, because I know you sound very enthusiastic about the direction of the commercial division. But when I look at it, I mean, yes, the loss went way down in Q3 from Q2. but that's largely because it went way up from Q1 to Q2. So, I mean, if I compare Q3 to Q1, the story isn't as attractive. So my question is, when are we going to see an inflection point and really start to get that loss in a declining mode versus up one quarter, down one quarter? When can we see a sustainable improvement? Thank you.
spk08: Rob, would you like to take this?
spk03: Sure. Certainly, in terms of Telicia, we are seeing a sustainable improvement. If you look at the slide in our deck for Telicia where we break out the prescription volume by month, you will see that there has been a sustainable improvement since the end of second quarter. We have put more focus on Telicia, second half of the year, and we are definitely seeing an uptake. And I know, based on what I'm seeing already, I'm very confident we're going to have a strong fourth quarter as well. So, We're heading in the right direction, and if you take that and combine that with the Medi-Cal win that we have, it's going to kick into effect in January of next year. I think between the sustained performance we're seeing in our core business plus what we'll get from Medicaid plus potentially some spillover there on the commercial side, I expect we'll be able to continue that trend right through 2022 and continue to accelerate it.
spk12: Okay. I'm just looking forward to seeing that commercial break even and When I speak of the trends, obviously I see the Talicia scripts every week. They look great. But I just want to see that loss start to decline because it is still a significant number. But shifting gears, I did want to ask, the gross margin in the quarter looked pretty good. How should we think about that going forward?
spk07: So you're right that we have a substantial increase this quarter, and this is compared to previous two quarters in which we had a smaller margin, mainly due to the shorter expiration of Telissia, which comprises part of the inventory and the channel. And now after we got the FDA extension of the expiration from two years to three years, this allows us to much better flexibility in the operations and also contribute to the increased margin. So we will see an increase of margin going forward as compared with Q1 that you mentioned, for example.
spk12: So I guess what I'm saying is, do you think Q3's gross margin, can you maintain that level going forward from Q3 number?
spk07: Q4 may be a little lower than Q3, but above Q1 and Q2 gross margins.
spk12: Okay, that's helpful. Thank you. And then the final question, I think it'll be the final, on opaginib, if you do have to do a confirmatory trial, how long do you think that would take from start to finish?
spk11: Thanks, Scott. Gilead here. We think, you know, the last study that enrolled 450, overall 450 patients, actually, was completed in a year, close to a year. We think that given the positive data from the study targeted to the right population of the moderately severe hospitalized patients, we can probably do better than that. And given the resources and the potential support from external sources also, be it public platforms or other sources, we could go even broader in terms of number of sites and get the study done in under a year. So that would be our target.
spk12: Okay, great. Thank you for that, caller. And thank you for taking the questions.
spk11: Thank you.
spk06: Thank you. Still no further questions that came through, sir. Please continue.
spk08: Thank you, Brian. Thank you all for joining the call. Please feel free to reach out to us if you have any additional questions. Keep safe and have a pleasant day.
spk06: Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect.
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