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spk03: Good day and welcome to Redhill Biopharma's first quarter 2022 financial results and operational highlights conference call. If you would like to ask a question during today's conference, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. At this time, I would like to introduce to the conference call Redhill CEO, Dror Ben Asher. Rick Scruggs, President of Redhill Biopharma Incorporated and Chief Commercial Officer. Guy Goldberg, Chief Business Officer. Gilead Reday, Chief Operating Officer. Micha Ben Chorin, Chief Financial Officer. RD Frisch, Chief Corporate and Business Development Officer. And Rob Jackson, Senior Vice President of Marketing. Before we begin, we will read from Redhill's Safe Harbor Statement. Please go ahead.
spk00: 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 financial results, operational cost savings, promotion and other efforts related to Redhill's commercialization activities, potential acquisitions 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 Opacanib and RHB107 for the treatment of COVID-19 and RHB204 for NCM disease. 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 20S filed with the SEC on March 17, 2022, and its other filings with the Securities and Exchange Commission. I will now turn the call to Joy Ben-Asher, Red Hill CEO.
spk01: Thank you, Debbie. Good day, everyone, and thank you for joining our first quarter earnings call. To address the current market reality, Redhill is decisive about controlling its own destiny. We are highly focused on achieving earlier profitability, targeting positive cash from operations to start during the second half of 2022. Our comprehensive cost reduction plan is expected to generate operational cost savings of approximately $50 million over the next 18 months. We are already seeing the significant positive impact of our discipline cost control approach with a reduction of over 70% in cash used in operating activities in the first quarter. The majority of our cost reduction plan, the savings, results from an approximately one-third reduction of the U.S. commercial team workforce. We've also streamlined operational expenditure, including SGMA expenses, and also refined the company's R&D strategy to rely mostly on external funding sources for now, based on the promising clinical data generated today. Our excellent R&D progress will be discussed shortly by Gilad, our chief operating officer. On behalf of the company, I would like to express my profound and respectful gratitude to the colleagues who have departed right here. While difficult, the changes we have made as part of our cost reduction plan were necessary given the current reality. I would also like to thank our resilient and highly driven team, as well as various stakeholders, for their patience and support as we continue to diligently and decisively grow the business against various headwinds. In summary, Regis significantly improved financial stability, results from major cost savings, a robust commercial portfolio, with three FDA-approved proprietary drugs, continued prescription growth, expanded managed care coverage, and the recently improved credit agreement with healthcare royalties. Rehi is therefore well-positioned for further growth, both organically from our own pipeline and non-organically through potential acquisitions of additional revenue-generating synergistic products. to expedite and increase cash generation, both in the short term and the longer term. I will now be turning to our Chief Business Officer, Guy Goldberg, and the rest of the team for our detailed commercial R&D financial presentation to be followed by a Q&A session.
spk03: Unfortunately, it appears we have a slight technical problem. We'll be with you in just one moment. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
spk04: Thank you, Dror, and apologies to our listeners who had to bear with us while we had some technical challenges. I will start at the beginning of slide four. This is Guy, and I'll walk through an overview on my section, and then we'll continue the presentation. So Dror just made his remarks, and I'll be now on slide five. So Redhill is going through an important transformational process to achieve financial independence. This is one of the longest and deepest downturns that the biotech sector has ever been through. Only resilient companies will emerge stronger at the end of the tunnel. In this new reality, Redhill implemented important cost control measures to weather the storm. In other words, as can be seen in the illustration at the bottom of the slide, By investing less, we're able to conserve cash and speed up the point where we achieve breakeven. We have been implementing a comprehensive cost reduction program that aims to make us cash flow positive from operations during the second half of 2022. By focusing on achieving operational profitability earlier, we expect savings of approximately $50 million over the next 18 months. In conjunction, we have completed other complementary initiatives to support this strategy, including improving the terms of key covenants in our credit agreement with our partner, Healthcare Royalties. We're also continuing discussions on various BD opportunities that fit the strategic goal, that is, commercial-stage products that match our current call points and are creative in terms of revenue and return on investment. We have a top-tier commercial organization in place and any additional product would benefit from our excellent commercial team drive, talent, and experience, and would also see the benefit company-wise of economies of scale. Next, in R&D, while RHP 204 continues to progress as before for our other programs, including our two COVID drug candidates, we are currently expecting to advance those programs through external funding. We are committed to our COVID programs and believe the data we have generated is highly promising and justifies continued development. In this funding environment, we are in discussions for other non-dilutive sources of capital, including public and private grants, largely in the U.S. and Europe, COVID-19 platform studies, and industry partnerships. This slide shows our R&D activities. I want to emphasize that our COVID-19 programs, Opagonib and Opamistat, are core programs for Redhill, and we will continue to move forward. The need for oral therapeutics in this space is still acute. Research indicates that the newest subvariants of Omicron show substantial resistance to vaccine-induced and infection-induced serum neutralizing activity. COVID continues to be an important field of drug development for two reasons. First, it is an ongoing and future public health threat with a huge unmet medical need. And second, it has shown to be a very large, relatively undeveloped market opportunity. We are firm believers in our COVID programs, and we think their unique post-directed mechanism of action puts us at the forefront of development in this field. In fact, the broad-acting antiviral nature of our programs could be very important with the growing general interest in pandemic preparedness. Gilad will provide more updates on our COVID programs and other development programs later. I will now turn it over to Rob to discuss our commercial progress.
spk08: Thank you, Guy, and good morning. Over the next few minutes, I'm going to summarize the progress we've made during the first quarter with our sales, marketing, and market access activities. so that you can understand why we continue to feel confident about where the business is heading this year. Our clear corporate priorities are to drive revenue growth and manage expenses as we continue to progress toward operational profitability in the second half of 2022. I'd like to begin my presentation by recognizing the efforts of our Redhill colleagues, especially our sales team, as we all strive to deliver consistent, profitable growth. Thank you to everybody for your contributions. During the first quarter, Redhill achieved record quarterly prescription volume. In the first quarter, Redhill delivered our second-best quarterly performance from Movantic since we added Movantic to our portfolio. We maintained a very strong prescribing trend during the always-challenging start of a new deductible season, and Movantic continues to maintain clear market leadership of the Pomora class with nearly 74% market share. During the first quarter, Redhill grew Tulisia prescription value by 12.8% over the fourth quarter of 2021, a significant achievement following our very strong record close to last year. Telicia prescription volume has surpassed Pilara, establishing Telicia as the most prescribed branded H. pylori therapy in the United States. This is strong evidence that payers and prescribers increasingly and rapidly recognize Telicia's ability to overcome the combined challenges of chlorothymicin resistance, H. pylori regimen tolerability, and diminished efficacy. And these are the issues that frustrate prescribers and patients every day. consuming valuable healthcare resources, and forcing patients to endure multiple rounds of a 14-day antibiotic regimen while searching for an effective therapy such as Telicia. Our two lead brands are well positioned to continue these performance trends into the second half of the year. In the month of June, we've already achieved new weekly prescription volume records for both Movantic and Telicia. We're closing the second quarter with a trend of growing volume, and we're entering the third quarter with positive momentum. During the first quarter, Redhill delivered Movantic prescription volume that was within 1% of our record fourth quarter results. And our first quarter volume represented an 8.6% improvement over what we achieved in the first quarter of 2021. We achieved this by continuing to take a disciplined approach and focusing on target prescribers in the pain specialty segment. In tandem, we also executed marketing strategies focused on growing the Pomora market. This is a key objective for Movantic as the established market leader, and we invested to raise opioid-induced constipation awareness with patients and prescribers, and also to educate these potential customers about how Movantic provides relief from the symptoms of opioid-induced constipation. The positive impact of these investments in market development can be seen in the next slide. Looking at the 12-month moving annual total of Pomora prescriptions, a clear trend of market growth has developed over the past three quarters. This is a significant change for the Pomora class, reflecting Red Hill's investment in building awareness of opioid-induced constipation and encouraging provider-patient conversations. Many believe the Pomora class would decline in tandem with the opioid market. In fact, the opposite is happening, and we expect that opioid prescribing may flatten or even increase in the near future, providing further support for the Pomora market. Movantic is the clear market leader, and Movantic will disproportionately benefit from more patients being treated with Pomora agents. Recently, CDC announced rough revisions to their 2016 opioid prescribing guideline, and this new guideline is expected to provide further support for opioid use in patients experiencing chronic pain. In fact, one of the reported intents of the revised guideline is to address the misapplication of the 2016 guideline, and CDC expects to publish their final guidance by the end of this year. It remains to be seen, but the new guideline may relax some portions of the 2016 guideline, resulting in a potential increase in responsible opioid prescribing and a subsequent increase in demand for Pomora agents. An alternate view of Movantic's prescribing data, the 13-week moving annual total trend also shows robust growth as we move into the second quarter of 2022. After facing the challenge of the COVID-19 pandemic and the allocation of corporate focus on the Talicia launch in 2020, we successfully developed a positive growth trend for Movantic that continues to improve. To summarize, Movantic continues to achieve new milestones. Movantic delivered 8.6% growth versus first quarter of 2021. Movantic maintains its competitive advantage of having best-in-class payer coverage with nearly 92% of insurance plans providing access for Movantic. And since original launch, more than 3 million Movantic prescriptions have been dispensed. Simultaneously, Telicia continued to achieve new milestones. And as you can see in this graph, monthly prescription volume continues to increase consistently. In the first quarter, Telicia achieved its best-ever performance in terms of prescription volume and market share. And our March volume represented a strong finish to the first quarter. In the first quarter, Telicia achieved 12.8% quarter-on-quarter growth and record prescription volume, building on the record volume previously achieved in the fourth quarter of last year. And additionally, when we compare first quarter of 2022 to first quarter of 2021, Telicia's first quarter results represented an 80% growth in prescription volume, and we expect this trend to continue. On the payer front, our market access team has continued to improve our already competitive position with payers. Effective January 1st of this year, Telicia became available to 14 million Medi-Cal beneficiaries as a preferred brand with no restrictions. This has helped Redhill accelerate Telicia uptake in what is the second largest individual state for H. pylori infections and treatments. Effective April 1st, Telicia gained similar coverage on Florida Medicaid, Additionally, another large Part D plan per coverage became effective earlier this quarter. And effective July 1st, another national PBM will improve access to Talicia on its commercial formulary, improving Talicia's position from restricted, not preferred, to preferred. We expect to see a further prescription volume lift from this win during the second half of 2022 carrying into 2023. These wins are consistent signs that healthcare providers and payers are increasingly recognizing first The challenge of chlorothromycin resistance. These challenges are clearly outlined by the American College of Gastroenterology's 2017 guidelines. Secondly, the pitfalls of continuing to persist using chlorothromycin-based therapy as a first-line treatment of choice. And third, the clinical benefits of prescribing Telicia. To summarize, Telesia continues to achieve new milestones. We achieve record prescription volume driven by 12.8% volume growth over the fourth quarter of 2021 and 80% growth over what we had in first quarter of last year. We've generated significant improvements in payer coverage, and we currently have the highest level of payer coverage compared to any of the other branded H. pylori therapies. In summary, we finished the first quarter with a consistent growth trend for our two lead brands, Movantic and Telesia. We remain focused on our corporate priorities of driving revenue growth and managing expenses as we continue to progress toward positive cash from operations and increase independence in the second half of this year. As a market leader in the Pomora class, we demonstrated our ability to continue to grow new Movantic prescriptions, grow prescription volume in the Pomora class, and further improve on already strong Movantic payer coverage. We continue to build the case for Telicia with payers, emphasizing the known shortcomings of chlorothromycin-based therapies and the clinical benefits of prescribing Telicia. And we continue to advance new ways to grow AMCOLA volume in the primary care segment. We look forward to further growing our business during the remainder of the year. And thank you, and I'll turn the call back to our COO, Gilad Reday.
spk06: Thank you, Rob. I will provide a brief update on our R&D activities. Opaginib is our orally administered first-in-class selective sphingosine kinase 2 inhibitor in advanced clinical development. Opaginib has broad antiviral activity and inhibits viral replication of multiple types of viruses, including COVID-19. Opaginib also reduces the body's excess immune response, providing a dual-action benefit to patients with severe inflammatory response to viral infections. Opaginib's development is also being continued in oncology indications with cholangiocarcinoma Phase II top-line data expected in Q3 2022. With promising data from the Phase II-III study in hospitalized COVID patients and with new data confirming Opaginib's antiviral activity also against influenza, which I will discuss in the coming slides, Opaginib is a highly promising therapeutic candidate for viral pandemic preparedness. which is the current spotlight of public health efforts. RHV107 is our second clinical stage novel COVID-19 oral pill candidate. RHV107 is well positioned to treat early stage mild to moderate COVID-19 infection through targeting human serine proteases, which are host enzymes involved in viral replication. We announced positive and promising results from Part A of a Phase 2-3 study in non-hospitalized symptomatic COVID-19 patients that show upamostat's potential capacity to prevent the deterioration with excellent safety and tolerability and are progressing towards potential participation in COVID-19 outpatient platform studies. With opaginib and RHB107, Redhill holds two promising products, that could serve as important tools in responding to future pandemic waves, whether caused by SARS-CoV-2 variants or by other viruses. In fact, we're seeing a shift in focus of government funding sources, public health experts, institutions and industry towards looking for broad antiviral mechanisms of action that could address emerging new variants of SARS-CoV-2 and also combat other viruses that might create future pandemic waves. This is a more sustainable long-term approach than having to rediscover and reinvent very specific antiviral therapeutics, which quickly become obsolete in the face of rapidly mutating viruses. The novel host-targeting antiviral mechanisms of Red Hills Opaginib and RHB107 are highly suitable to meet the demands of this long-term pandemic preparedness approach. RHP204 is the most clinically advanced standalone oral therapy in development for first-line treatment of pulmonary non-tuberculous mycobacteria. The ongoing Phase III study is progressing. Overall, in line with our strategy to support operational profitability in the second half of 2022, and in view of the highly promising clinical and preclinical data generated to date, we anticipate external funding for much of our promising R&D programs through grants, industry partnerships, and participation in platform studies. I will highlight some further details regarding each program in the next few slides. Opaginib's clinical data package has been submitted to several regulatory agencies. Based on regulatory input, a positive confirmatory study constitutes the likely pathway to potential Opaginib submissions for approval in the U.S., EU, and multiple other territories. As a reminder, the global phase 2-3 data met part of its pre-specified endpoints. The study showed a 70% reduction in mortality for opaginib when given on top of remdesivir and corticosteroids, with less than 7% mortality in the opaginib arm versus over 23% mortality in the placebo control arm, with a p-value of 0.034. Opaginib also provided a 34% benefit in time to recovery by day 14, with a p-value of 0.013. Additionally, opaginib improved the median time to viral RNA clearance by at least four days with a hazard ratio of 1.34 and nominal p-value of 0.043. Seeing an improvement in viral clearance at such a late stage of the viral infection in patients with a median of 11 days from onset of symptoms is a unique clinical finding, which is indicative of opaginib's antiviral effects in the most challenging clinical setting of advanced and severe viral infections. Further post-hoc analyses also showed a marked benefit in reducing mortality, a 62% reduction in the large subpopulation of over half of the study participants, which consisted of moderately severe hospitalized COVID-19 patients. Data from the Global Phase 2-3 study has recently been published on MedRxiv and is in submission processes to peer-reviewed scientific journals. The results will also be subject of a late-breaker oral presentation at the International Conference on Emerging Infectious Diseases, which is hosted by the CDC in collaboration with the Task Force for Global Health, to be held this August in Atlanta. Adding to Opagonib's expanding patent suite, on June 21, 2022, Redhill was granted an additional U.S. patent covering a method for the treatment of patients with moderate to severe COVID-19 using Opagonib. Given its broad antiviral activity, Opaginib is continuing to be developed for treating additional viral infections, including RSV, Ebola, and influenza. Previous data has indicated Opaginib's capacity to inhibit Ebola virus replication. Recent new data utilizing preclinical services from the National Institute of Allergy and Infectious Diseases, which is part of the National Institute of Health, demonstrates Opagonid's potent activity against influenza A H1N1 strain. The results were obtained in human bronchial epithelial cells, which are the natural human target of the virus, making the test assay a realistic model of the infection. Opagonid achieved potent inhibition of viral replication at low concentrations, with no evidence of toxicity at those levels. As can be seen from the results, opaginib inhibited 90% of viral replication at a concentration which was over 60 times lower than the concentration that reduces cell viability by 50%. This markedly exceeds the target threshold for indicating potent antiviral activity in this assay and provides further evidence of opaginib's potential broad-spectrum antiviral activity. We are also continuing to advance Opaginib's development program in oncology and inflammatory indications with cholangiocarcinoma phase two study top-line analysis expected in Q3, 2020. As previously announced, RSV107, also called Upamostat, provided positive top-line results from part A of the phase two, three study in outpatients in the U.S. Part A met the primary endpoint of safety and tolerability. Moreover, Part A provided highly promising efficacy results despite its small sample size of 61 subjects. We saw a 100% reduction in COVID-19 related hospitalizations with zero out of 41 patients who were treated with RHP107 versus 16% on the placebo control arm requiring hospitalization. There was also an 88% reduction in reported new severe COVID-19 symptoms after treatment initiation. Only one RHB107 patient out of 41, equating 2.4%, reported new severe COVID-19 symptoms, versus 20% of patients reporting new severe COVID symptoms in the placebo control room. Importantly, for early-stage COVID-19-infected patients, RHB107 presents a highly favorable profile. It is taken orally once a day as a standalone treatment with excellent safety and with no major drug-drug interactions limiting its potential use. Given the promising outcomes, work is underway to complete data analysis and submit to regulatory agencies for moving into phase three studies. Further, we anticipate potential participation in a platform study, which is in advanced regulatory preparations with FDA. RHV204 is the only first-line standalone oral treatment in late-stage clinical development for pulmonary NTM disease caused by mycobacterium avian complex, MAC. a rare condition with no FDA-approved first-line therapy. We continue to advance the ongoing Phase III study in first-line pulmonary non-tuberculous mycobacteria towards potential NDA submission for this indication. We are expecting enrollment to pick up with the waning of COVID-19 in the U.S. and with expansion of study participating sites. As a reminder, the study is a randomized placebo-controlled study and has a six-month co-primary endpoint of sputum culture conversion and clinical benefit using patient-reported outcomes. After the first six months, study subjects cross over to open-label active treatment with RHP204 for an additional 12 months from conversion in accordance with clinical practice. Of note, RHP204 has been granted orphan drug designation and QIDP status. Together, these designations provide for expedited development, priority review of the NDA, and a total of 12 years market exclusivity from potential approval in the U.S. We see a lot of interest from industry in this program and are in discussions with several potential industry partners to further support and accelerate it. I will now turn it over to Michal for reviewing the Q1 2022 financial results.
spk05: Thank you, Gilad. Weville is now focusing on cash flow and financial independence. This facilitated the achievement of positive contribution from our commercial operations segment for the first time in Q4 of last year. And we are now targeting positive cash flow from operations before interest payment for the whole company to start during half two of this year. This follows recently implemented comprehensive cost reduction plan, which expected operational cost saving of approximately $50 million over the next 18 months. Importantly, looking at Q1, continuous implementation of cash optimization measures reduced cash used in operating activities by more than 70% to approximately $4 million. compared to approximately $15 million in Q4 of last year, signaling a clear path towards our stated goal of achieving financial independence. Net revenues of $18.2 million in Q1 compared to $22.1 million in Q4 of last year, the reduced revenues are due to typical cyclical trends in Movantik sales, which remains on track in Q2, with the last week measured earlier this month showing record scripts of both Talisia and Movantik. Gross profit was $10.2 million in Q1, representing 56% gross margin, which expected to continue to improve as Talisia scripts continue to grow. Research and development expenses for the quarter were $3.1 million as compared to $5.9 million in the fourth quarter of 2021. This decrease was attributed to the ongoing optimization of R&D costs and completion of elements of the OPAGANID and IHB 107 development programs. As compared with previous quarter, we had lower operating loss, lower net loss, and lower cash used in operating activities. This led to cash position of approximately $45 million as of March 31st of this year. Prior to the $15 million of gross proceeds from our registered direct offering in May. To summarize, Our projected organic sales growth potential in licensing and synergies FDA-approved revenue-generating products and out-licensing activities together with our vigorous cost reduction plan positions Red Hill well to achieve our target of positive cash flow from operations before interest payment expected to start during the second half of this year. I'll now turn the discussion back to Joe to Q&A.
spk01: Thank you, Ramecha. We are happy to take questions.
spk03: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, it is star followed by 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. Our first question today comes from the line of Brandon Foulkes from Canter Fitzgerald. Brandon, please go ahead.
spk02: Your line is now open. Hi, thanks for taking my questions and thank you for all the updates today. Maybe just firstly, can you talk about the reduction of the commercial team and any impact on overall sales Maybe just some color in terms of will those territories be covered by the remaining reps or will they remain uncovered? And then secondly, maybe just staying on the commercial portfolio, how do we think about growth to next in 2022 compared to 2021? Thank you.
spk01: Thank you, Brandon. As far as growth to next, starting from your second question, I'll refer to Micha. And the first question thereafter will be taken by Rick, our chief commercial officer. Micha, please.
spk05: So we believe we stabilized on gross to net, and we will continue in more or less where we are now.
spk02: Sorry, this is Rick. And how does that compare to last year?
spk05: The comparison of last year is a little bit more gross to net because of the coverage increase.
spk01: Brandon, are you okay on gross to net? Should we continue?
spk02: Yes, please. Thank you.
spk01: Thank you. What Growth2Net has to do with increased coverage. Rick, please.
spk07: Oh, yeah, sure. So this is Rick. I will just briefly mention or answer your question. We did do a comprehensive analysis of our commercial operation. We did a comprehensive analysis of all the territories, the territories that were profitable, the territories that had opportunities for growth. the territories that could be merged. We did merge territories. We did wind up with a few territories going to white space. We do employ in our commercial organization a group called Customer Engagement Specialists. They answer questions from physicians, also reach out to physicians in the white space. So we have consolidated. We have consolidated sales leadership as well. So we did a lot of consolidation, and we did this with an eye to hit our revenue targets for this year and into 2023. It was a tough reorganization, but it was something we needed to do, and we have successfully completed that operation, and we feel poised to go forward right now.
spk02: banks. And maybe just one more, if I may. On the $50 million operating savings over the next 18 months, any color in terms of how quickly you expect that to be achieved or how we should at least think about modeling that over the 18 months? Thank you.
spk05: Yeah, so we prepared a very detailed plan. which shows that in the next coming six quarters, more or less on the same pace, we will save those $50 million.
spk02: Great. Thank you very much, and thanks for all the updates today.
spk03: Thank you. The next question today comes from the line of Bubalam Pachapian from H.C. Wainwright. Please go ahead. Your line is now open.
spk11: Hi, this is Bubalam. Can you hear me okay?
spk01: Very well, thank you.
spk11: All right, great. A few questions from our end. So I wanted to start off our discussion first by focusing on potassium competitive acid blockers. So obviously one of your competitors recently received FDA approval. So just to kind of hear your thoughts on this and the kind of upward pressure these agents can put on Felicia sales, and also how do you see the evolution of H. pylori treatment in the wake of potassium channel blocker approval?
spk01: Thank you, Bubal. Gilad will answer the first aspect, and Rob Jackson, our head of marketing and sales, will discuss about the evolving landscape. We'll start with Gilad.
spk06: Thank you. So, Talicia, to put it succinctly, has best-in-class on-label efficacy. especially in addressing the clary-resistant population, which is the major issue for empirical first-line treatment of the H. pylori infection. So we're highly confident in Talisia continuing to be the leading brand for H. pylori treatment going forward.
spk01: Thank you, Gilad. Rob, would you like to speak about how we see the landscape evolving?
spk08: Absolutely. Thank you, Gerard. I think as a company, we certainly welcome the increased focus on H. pylori infections and the need for new treatments. So we think any additional noise that comes into the category from a new entrant will be a positive. In terms of, you know, how we'll stand up against the new competition, how this impacts the competitive landscape, to God's point, I think resistance is really the key issue here. And what we've identified with Talisa in our clinical studies is we have 90% efficacy in really regardless of the patient's resistance status. And that's a true differentiator for Talicia that's going to stand strong for the brand in the long term. And I think that's going to really play into our favor as the market grows. I think we'll continue to capture a disproportionate share of that business.
spk11: Okay, thanks for the color. And then the next one. So it appears you're doing two things at once, which are cost reduction and achieving profitability. So what's interesting is that the cost reduction comes in the backdrop of a rise in momentum in Momentic and Talicia sales. So Guy presented an interesting graph, and I believe the slopes are communicating some value. I'm just curious whether the priority here is to achieve early profitability, but grow at a slow pace, rather than grow fast, but envision profitability at a later stage.
spk01: Thank you, Ubalan. Excellent question. We have a very clear priority. to preserve cash and generate as much cash as possible and turn break-even during the second half when it comes to cash from operations. This is the clear goal. Longer term, we want to achieve whole company P&L profitability. We are heading there. As far as sacrificing growth, as Rick outlined, we have done a lot of analysis, and we are confident that we can continue to grow given the cost optimization and shifting resources inside the company to get there.
spk11: Okay, great. Just two more, if I may. So today's press release mentioned that you are engaged in a non-binding discussion to acquire a GI drug. Just curious, what has to happen in order for the process to complete, and how do you expect to fund the transaction?
spk01: Thank you. Unfortunately, we cannot provide additional color on this one beyond what we already stated.
spk11: Understood. Just one last question. What are your thoughts on the commercial outlook for COVID-19 therapeutics targeting more severely ill patients, given the evolving nature of the pandemic? Thank you.
spk06: Thank you. We see COVID-19 remain a problem, very dynamic, evolving problem with variants and mutations arising continuously. So the landscape is shifting and it's very hard to predict exactly what comes next in terms of the waves of COVID-19 infection. Certainly the public health focus and spotlight is on pandemic preparedness for waves of infection from SARS-CoV-2 variants or from other sources of pandemics outside of the SARS-CoV-2 family line. So in the long term and in the short term, we see our antiviral programs as very much in the focus of public health interests, both for COVID-19, for future potential waves, both for early stage and late stage infections, and also for other potential viruses that are lying in the wake.
spk11: All right. Thanks for the color. I appreciate taking all my questions.
spk03: Thank you. The next question today comes from the line of Scott Henry from Roth Capital. Scott, please go ahead. Your line is now open.
spk10: Thank you, and good morning. I guess for starters, it seemed like the call was later in the calendar year this year. Was there a reason for that?
spk01: Thank you, Scott. There were several reasons for that call. For example, you saw that we just announced an improved credit agreement. That was important. We also had other reasons for delay, but the results were announced already over a month ago in a public filing, so there was nothing that was particularly extreme in doing so.
spk10: Okay, fair enough. I just wanted to ask. And then I guess the other thing, I just wanted to understand the cash flow positive from operations and how you define that. Gross profit is about $10 million. SG&A is $20 million. It's hard to see how those numbers will match, but I think you're probably pulling some things out. So I just wanted to get a better understanding of the way you define cash flow positive from operations?
spk05: Yeah, thank you for the question, Scott. So obviously, we will need to do, and we're doing a vigorous action on expenses, on the expense side, and this is going to go down very substantially in all terms, whether it is the sales and marketing, G&A, and mainly R&D. And we also see our revenues continue to grow and even faster. And that will allow us to achieve cash from operations before interest payment starting from the second half of the year, whether it's going to be Q3 or Q4, we shall see.
spk10: Okay, so you are including all G&A and selling expenses in that calculation?
spk05: Correct.
spk10: I assume you're backing out stock comp, or maybe you are, maybe you're not, but just for clarity.
spk05: Sorry, can you repeat the question?
spk10: So I guess by cash flow from operations, are you including G&A and selling expenses in that?
spk05: Yes, we do.
spk10: Okay. And are you including stock compensation?
spk05: No, because we are talking about cash flow, so the equity compensation will be in the P&L, and we are referring to cash flows.
spk10: Okay. And approximately how much is that on a quarterly basis? I'm just trying to get a sense of what levers – need to happen to close that, I mean, basically to close that $10 million gap?
spk05: We referred in the conference call to the percentage of the workforce that we are reducing. This will give you the answer of how this is going to look like. And on the R&D, since we completed the programs of COVID, you can assume that our R&D expenses will continue to go even lower than the levels that we presented. And we'll also support achieving the positive cash from operations before interest payments.
spk10: Okay, great. Thank you for the caller, and thank you for taking the questions.
spk03: Thank you. The next question today comes from the line of Matt Kalpin from Leidenberg Salmon. Please go ahead. Your line is now open.
spk09: Hi, good morning and good afternoon. I just wanted to kind of follow up on Scott's question. I guess given the implementation of your cost-cutting plan, what's your current cash runway, given your current cash levels of, I guess, 45 at the end of the quarter, plus the registered direct? What's your, I guess, cash runway?
spk01: Thank you. Thank you, Matt. This is Drover. We have no growing concern, Remar, as you probably noticed. And we feel confident not only in the next month, which are covered by the no-going concern remarks, but well beyond that.
spk05: And just to add to that, according to the plan that we put together, we will be able to, with the current cash that we have, uh as we said to reach a operational um profitability in terms of cash flows and later on also to support our overall debt service and so we have enough enough cash in hand for for the next coming quarters okay that's helpful thank you and can you can you break out the revenue uh contribution performance for
spk09: Talicia and Movantic for the first quarter?
spk05: So in this quarter, we had three main components. Movantic with a little over 14. We had an out-licensing deal for Talicia for $2 million. And the rest, commercial sales of Talicia. OK.
spk09: Thank you. And then regarding the pathway for Opaginib and from a regulatory point of view, can you give us some detail in terms of your thoughts for that pathway in COVID-19?
spk04: Oh, thanks, Matt.
spk09: I guess the question is, will it include emergency use authorization or is that off the table? You have to do a full clinical development plan right now.
spk06: So for COVID-19, the current expectation is that a confirmatory, a positive confirmatory study for either opaginib or also upamostat can, depending on the situation of the pandemic, support emergency use approvals, potentially also full applications depending on the outcome of the study. But that remains to be seen, and also depending on the state of the pandemic at the time of submission. I hope that answers.
spk09: Yeah, yeah. And then last question, in terms of RHP 204 and NTM, you're talking about potentially getting some external funding for that. I guess, can you plot out the two pathways there? If you have to fund it yourself, the ongoing phase three, where are you in enrollment there, and what does that look like if you fund it yourself? And then secondly, if you bring on some external funding, what's the timing of that program in both scenarios?
spk06: We haven't provided exact guidance on timelines, but of course with additional sources of capital and resources which could be provided by interested partners, that could accelerate the timeframe of enrolling the patients, increasing the number of sites, possibly expanding this study also out of the U.S. to U.K. and Japan, for instance, which are very interesting territories high unmet need and the potential market for NTM. So we see a lot of benefit in finding co-development partners and there's a lot of interest in that respect and ongoing discussions. That's where we think the benefits of accelerating the study can come in. We hope to be able to enroll the study, I would say, within a year and a half. And that could, with six months accelerated review of an NDA and six months primary endpoint, allow for a pretty rapid completion of the study and proceeding towards NDA filing.
spk02: Thanks. Thanks for the other detail.
spk03: Thank you. That concludes today's question and answer session. So I'd like to pass the conference back over to Dror Banasher for closing remarks.
spk01: Thank you. Thanks all for joining the call. Please reach out to us if you have any additional questions. Keep safe and have a pleasant day.
spk03: That concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.
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