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REDHILL BIOPHARMA LTD.
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(the "Registrant")
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Date: June 23, 2022
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By:
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/s/ Dror Ben-Asher
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Dror Ben-Asher
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Chief Executive Officer
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Press Release
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Company contact:
Adi Frish
Chief Corporate and Business Development Officer
RedHill Biopharma
+972-54-6543-112
adi@redhillbio.com
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Media contacts:
U.S. / UK: Amber Fennell, Consilium
+44 (0) 7739 658 783
fennell@consilium-comms.com
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Three Months Ended
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||||||||
March 31,
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||||||||
2022
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2021
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|||||||
U.S. dollars in thousands
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||||||||
NET REVENUES
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18,236
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20,575
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||||||
COST OF REVENUES
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8,034
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10,253
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||||||
GROSS PROFIT
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10,202
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10,322
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RESEARCH AND DEVELOPMENT EXPENSES
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3,062
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7,484
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SELLING AND MARKETING EXPENSES
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12,560
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13,895
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||||||
GENERAL AND ADMINISTRATIVE EXPENSES
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7,818
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7,095
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||||||
OPERATING LOSS
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13,238
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18,152
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||||||
FINANCIAL INCOME
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10
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42
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||||||
FINANCIAL EXPENSES
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3,909
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4,753
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||||||
FINANCIAL EXPENSES, net
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3,899
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4,711
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||||||
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
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17,137
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22,863
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||||||
LOSS PER ORDINARY SHARE, basic and diluted (U.S.
dollars):
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0.03
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0.05
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||||||
WEIGHTED AVERAGE OF ORDINARY SHARE (in thousands)
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525,186
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429,603
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Three Months Ended
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||||||||
March 31,
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||||||||
2022
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2021
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|||||||
U.S. dollars in thousands
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||||||||
OPERATING ACTIVITIES:
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||||||||
Comprehensive loss
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(17,137
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)
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(22,863
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)
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||||
Adjustments in respect of income and expenses not involving cash flow:
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||||||||
Share-based compensation to employees and service providers
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2,306
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872
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||||||
Depreciation
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537
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492
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||||||
Amortization and impairment of intangible assets
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1,601
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1,827
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||||||
Non-cash interest expenses related to borrowing and payable in respect of intangible assets purchase
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3,123
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2,639
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||||||
Fair value losses on financial assets at fair value through profit or loss
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—
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6
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||||||
Exchange differences and revaluation of bank deposits
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4
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46
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||||||
7,571
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5,882
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|||||||
Changes in assets and liability items:
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||||||||
Decrease in trade receivables
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5,743
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5,349
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||||||
Decrease in prepaid expenses and other receivables
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1,154
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1,428
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||||||
Decrease (increase) in inventories
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538
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(2,744
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)
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Decrease in accounts payable
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(5,958
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)
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(5,017
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)
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Increase in accrued expenses and other liabilities
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3,255
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1,364
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Increase in allowance for deductions from revenue
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679
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4,334
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5,411
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4,714
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Net cash used in operating activities
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(4,155
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)
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(12,267
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)
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INVESTING ACTIVITIES:
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||||||||
Purchase of fixed assets
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(13
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)
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(88
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)
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Change in investment in current bank deposits
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8,500
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—
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||||||
Proceeds from sale of financial assets at fair value through profit or loss
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—
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475
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Net cash provided by investing activities
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8,487
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387
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||||||
FINANCING ACTIVITIES:
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||||||||
Proceeds from issuance of ordinary shares, net of issuance costs
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713
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57,941
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||||||
Exercise of options into ordinary shares
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—
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3,227
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||||||
Repayment of payable in respect of intangible asset purchase
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(5,542
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)
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(2,125
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)
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Payment of principal with respect to lease liabilities
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(115
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)
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(383
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)
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Net cash (used in) provided by financing activities
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(4,944
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)
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58,660
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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(612
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)
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46,780
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EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS
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(15
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)
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(103
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)
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BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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29,474
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29,295
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BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF PERIOD
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28,847
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75,972
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||||||
SUPPLEMENTARY INFORMATION ON INTEREST RECEIVED IN CASH
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11
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19
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||||||
SUPPLEMENTARY INFORMATION ON INTEREST PAID IN CASH
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772
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1,990
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SUPPLEMENTARY INFORMATION ON NON-CASH INVESTING AND FINANCING ACTIVITIES:
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||||||||
Acquisition of right-of-use assets by means of lease liabilities
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4,767
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—
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UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS
OF MARCH 31, 2022, IN U.S. DOLLARS:
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Page
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3 | |
4 | |
5 | |
6 | |
7-13
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Three Months Ended
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||||||||
March 31,
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||||||||
2022
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2021
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|||||||
U.S. dollars in thousands
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||||||||
NET REVENUES
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18,236
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20,575
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COST OF REVENUES
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8,034
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10,253
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||||||
GROSS PROFIT
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10,202
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10,322
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||||||
RESEARCH AND DEVELOPMENT EXPENSES
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3,062
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7,484
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||||||
SELLING AND MARKETING EXPENSES
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12,560
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13,895
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GENERAL AND ADMINISTRATIVE EXPENSES
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7,818
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7,095
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OPERATING LOSS
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13,238
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18,152
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||||||
FINANCIAL INCOME
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10
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42
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FINANCIAL EXPENSES
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3,909
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4,753
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FINANCIAL EXPENSES, net
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3,899
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4,711
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LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD
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17,137
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22,863
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||||||
LOSS PER ORDINARY SHARE, basic
and diluted (U.S. dollars):
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0.03
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0.05
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||||||
WEIGHTED AVERAGE OF ORDINARY
SHARE (in thousands)
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525,186
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429,603
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Ordinary
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Additional
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Accumulated
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Total
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|||||||||||||
shares
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paid-in capital
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deficit
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equity
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|||||||||||||
U.S. dollars in thousands
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BALANCE AT JANUARY 1, 2022
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1,495
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375,246
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(367,866
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)
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8,875
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CHANGES IN THE THREE-MONTHS PERIOD ENDED MARCH 31, 2022:
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||||||||||||||||
Share-based compensation to employees and service providers
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—
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—
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2,306
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2,306
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Issuance of ordinary shares, net of expenses
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11
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702
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—
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713
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Comprehensive loss
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—
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—
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(17,137
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)
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(17,137
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)
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||||||||||
BALANCE AT MARCH 31, 2022
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1,506
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375,948
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(382,697
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)
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(5,243
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)
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||||||||||
BALANCE AT JANUARY 1, 2021
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1,054
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293,144
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(280,334
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)
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13,864
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|||||||||||
CHANGES IN THE THREE-MONTHS PERIOD ENDED MARCH 31, 2021:
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||||||||||||||||
Share-based compensation to employees and service providers
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—
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—
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872
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872
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||||||||||||
Issuance of ordinary shares, net of expenses
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242
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57,699
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—
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57,941
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||||||||||||
Exercise of options into ordinary shares
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13
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3,214
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3,227
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|||||||||||||
Comprehensive loss
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—
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—
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(22,863
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)
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(22,863
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)
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||||||||||
BALANCE AT MARCH 31,2021
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1,309
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354,057
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(302,325
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)
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53,041
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Three Months Ended
|
||||||||
March 31,
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||||||||
2022
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2021
|
|||||||
U.S. dollars in thousands
|
||||||||
OPERATING ACTIVITIES:
|
||||||||
Comprehensive loss
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(17,137
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)
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(22,863
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)
|
||||
Adjustments in respect of income and expenses not involving cash flow:
|
||||||||
Share-based compensation to employees and service providers
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2,306
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872
|
||||||
Depreciation
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537
|
492
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Amortization and impairment of intangible assets
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1,601
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1,827
|
||||||
Non-cash interest expenses related to borrowing and payable in respect of intangible assets purchase
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3,123
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2,639
|
||||||
Fair value losses on financial assets at fair value through profit or loss
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—
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6
|
||||||
Exchange differences and revaluation of bank deposits
|
4
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46
|
||||||
7,571
|
5,882
|
|||||||
Changes in assets and liability items:
|
||||||||
Decrease in trade receivables
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5,743
|
5,349
|
||||||
Decrease in prepaid expenses and other receivables
|
1,154
|
1,428
|
||||||
Decrease (increase) in inventories
|
538
|
(2,744
|
)
|
|||||
Decrease in accounts payable
|
(5,958
|
)
|
(5,017
|
)
|
||||
Increase in accrued expenses and other liabilities
|
3,255
|
1,364
|
||||||
Increase in allowance for deductions from revenue
|
679
|
4,334
|
||||||
5,411
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4,714
|
|||||||
Net cash used in operating activities
|
(4,155
|
)
|
(12,267
|
)
|
||||
INVESTING ACTIVITIES:
|
||||||||
Purchase of fixed assets
|
(13
|
)
|
(88
|
)
|
||||
Change in investment in current bank deposits
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8,500
|
—
|
||||||
Proceeds from sale of financial assets at fair value through profit or loss
|
—
|
475
|
||||||
Net cash provided by investing activities
|
8,487
|
387
|
||||||
FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of ordinary shares, net of issuance costs
|
713
|
57,941
|
||||||
Exercise of options into ordinary shares
|
—
|
3,227
|
||||||
Repayment of payable in respect of intangible asset purchase
|
(5,542
|
)
|
(2,125
|
)
|
||||
Payment of principal with respect to lease liabilities
|
(115
|
)
|
(383
|
)
|
||||
Net cash (used in) provided by financing activities
|
(4,944
|
)
|
58,660
|
|||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(612
|
)
|
46,780
|
|||||
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS
|
(15
|
)
|
(103
|
)
|
||||
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
29,474
|
29,295
|
||||||
BALANCE OF CASH AND CASH EQUIVALENTS AT THE END OF PERIOD
|
28,847
|
75,972
|
||||||
SUPPLEMENTARY INFORMATION ON INTEREST RECEIVED IN CASH
|
11
|
19
|
||||||
SUPPLEMENTARY INFORMATION ON INTEREST PAID IN CASH
|
772
|
1,990
|
||||||
SUPPLEMENTARY INFORMATION ON NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Acquisition of right-of-use assets by means of lease liabilities
|
4,767
|
—
|
a. |
General
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1) |
RedHill Biopharma Ltd. (the “Company”), incorporated on August 3, 2009, together with its wholly-owned subsidiary, RedHill Biopharma Inc. (“RedHill Inc.”),
incorporated in Delaware, U.S. on January 19, 2017, is a specialty biopharmaceutical company primarily focused on gastrointestinal (“GI”) diseases and infectious diseases.
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2) |
Since the Company established its commercial presence in the U.S. in 2017, it has promoted or commercialized various GI-related products that were either developed
internally or acquired through in-licensing agreements. As of the date of approval of these condensed consolidated interim financial statements, the Company commercializes in the U.S., mainly Talicia®,
for the treatment of Helicobacter pylori infection in adults, the first product approved by the U.S. Food and Drug Administration
(“FDA”) being developed primarily internally by the Company, and Movantik®, for
the treatment of opioid-induced constipation.
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3) |
Through March 31, 2022, the Company has an accumulated deficit and its activities have been funded primarily through public and private offerings of the
Company’s securities and borrowing. There is no assurance that the Company’s business will generate sustainable positive cash flows to fund its business.
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b. |
Approval of the condensed consolidated interim financial statements:
|
a. |
The accounting policies applied in the preparation of the Condensed Consolidated Interim Financial Statements are consistent with those applied in the preparation
of the annual financial statements as of December 31, 2021, except for the following addition:
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b. |
The following clarification to standards issued by the IASB has not yet been adopted by the Company:
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a. |
During the three months ended March 31, 2022, the Company sold 333,533 ADSs under the “at-the-market” equity offering program (“ATM program”) at an average price of
$2.07 per ADS, for aggregate net proceeds of approximately $0.7 million, net of an immaterial amount of issuance expenses.
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b. |
In March 2022, the Company entered into an exclusive license agreement with Kukbo Co. Ltd ("Kukbo") for oral opaganib for the treatment of COVID-19, in South Korea.
Under the terms of the license agreement, which follows the strategic investment by Kukbo noted in note 18(c) to the annual financial statements as of December 31, 2021, RedHill is to receive an upfront payment of $1.5 million and is
eligible for up to $5.6 million in milestone payments as well as low double-digit royalties on net sales of oral opaganib in South Korea. Kukbo will receive the exclusive rights to commercialize opaganib in South Korea for COVID-19.
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c. |
In October 2021, the Company entered into an exclusive license agreement (the “License Agreement”) with Gaelan Medical Trade LLC ("Gaelan") for Talicia in the
United Arab Emirates (UAE). Under the terms of the License Agreement, the Company received in April 2022 an upfront payment of $2 million. In addition, the Company is eligible for additional milestone payments as well as tiered royalties
up to mid-teens on net sales of Talicia in the UAE. Gaelan will receive the exclusive rights to commercialize Talicia in the UAE, as well as a right of first refusal to commercialize Talicia in the Gulf Cooperation Council region (Saudi
Arabia, Kuwait, Qatar, Bahrain, and Oman) for a pre-determined period. Gaelan shall be responsible for obtaining and maintaining regulatory approvals, as well as to conduct any and all required clinical and other studies. In March 2022,
the Company and Gaelan signed an amendment to the License Agreement, according to which Gaelan may sublicense or assign any of its rights or obligations under the License Agreement.
|
d. |
In March 2022, the Company entered into an operating lease agreement for the U.S. offices it uses. The agreement will expire on July 31, 2034. The projected yearly
rental for the first four years expenses are approximately $400,000 per year and for the next 8 years are approximately $900,000 per year. The Company recognized right-of-use asset and lease liability of approximately $4.8 million. The
weighted average lessee’s incremental annual borrowing rate applied to the lease liabilities was 9.9%.
|
Rebates and patient discount programs
|
Product returns
|
Total
|
||||||||||
U.S. dollars in thousands
|
||||||||||||
As of January 1, 2022
|
29,742
|
969
|
30,711
|
|||||||||
Increases
|
19,773
|
1,903
|
21,676
|
|||||||||
Decreases (utilized)
|
(17,343
|
)
|
(946
|
)
|
(18,289
|
)
|
||||||
Adjustments
|
(1,789
|
)
|
(919
|
)
|
(2,708
|
)
|
||||||
As of March 31, 2022
|
30,383
|
1,007
|
31,390
|
Rebates and patient discount programs
|
Product returns
|
Total
|
||||||||||
U.S. dollars in thousands
|
||||||||||||
As of January 1, 2021
|
16,380
|
1,963
|
18,343
|
|||||||||
Increases
|
17,804
|
460
|
18,264
|
|||||||||
Decreases (utilized)
|
(13,028
|
)
|
(243
|
)
|
(13,271
|
)
|
||||||
Adjustments
|
(659
|
)
|
-
|
(659
|
)
|
|||||||
As of March 31, 2021
|
20,497
|
2,180
|
22,677
|
a. |
The following is information on options granted during the three months ended March 31, 2022:
|
Number of options granted
|
||||||||||||
According to the Award Plan of the Company (1)
|
Exercise
price for 1
ADS ($)
|
Fair value of
options on date of
grant in U.S. dollars
in thousands (2)
|
||||||||||
Date of Grant
|
||||||||||||
January 2022
|
5,000
|
2.45
|
7
|
|||||||||
March 2022
|
6,000
|
1.67
|
6
|
|||||||||
11,000
|
13
|
1) |
The options will vest as follows: for directors, employees and consultants of the Company and the Company's subsidiary who had provided services exceeding one year
as of the grant date, options will vest in 16 equal quarterly installments over a four-year period. For directors, employees and consultants of the Company and the Company's subsidiary who had not provided services exceeding one year as
of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over 12 equal quarterly installments. During the contractual term, the options will be exercisable, either in
full or in part, from the vesting date until the end of 10 years from the date of grant.
|
2) |
The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: price of the Company's ADS: $1.67-2.45,
expected volatility: 66.94%-67.21%, risk-free interest rate: 1.73%-1.78% and the expected term was derived based on the contractual term of the options, the expected exercise behavior and expected post-vesting forfeiture rates.
|
b. |
During the three months ended March 31, 2022, the Board of Directors of the Company approved grants of 2,016,500 RSUs to employees and consultants of the Company
under the Company’s Award plan. The RSUs vest as follows: 50% of RSUs will vest one year following grant and 50% will vest two years following grant. The fair value of the RSUs on the date of grant was $5.7 million.
|
Three Months Ended March 31,
|
||||||||
2022
|
2021
|
|||||||
U.S dollars in thousands
|
||||||||
Licensing revenues
|
2,000
|
—
|
||||||
Movantik revenues
|
14,614
|
18,898
|
||||||
Sales of other products
|
1,622
|
1,677
|
||||||
18,236
|
20,575
|
Three Months Ended March 31,
|
||||||||
2022
|
2021
|
|||||||
U.S. dollars in thousands
|
||||||||
Commercial Operations Segment Adjusted EBITDA
|
(5,881
|
)
|
(5,011
|
)
|
||||
Research And Development Adjusted EBITDA
|
(2,913
|
)
|
(9,950
|
)
|
||||
Financial expenses (income), net
|
3,899
|
4,711
|
||||||
Share-based compensation to employees and service providers
|
2,306
|
872
|
||||||
Depreciation
|
537
|
492
|
||||||
Amortization and impairment of intangible assets
|
1,601
|
1,827
|
||||||
Consolidated Comprehensive loss
|
17,137
|
22,863
|
a. |
In May 2022, the Company entered into a definitive agreement with a single investor. In accordance with the agreement, the Company
issued to the investor 10,563,380 ADSs (or ADS equivalents), as well as granted unregistered private warrants to purchase up to 13,204,225 ADSs, for a total net consideration of $14.3 million.
The warrants have an exercise price of $1.48 per ADS, are exercisable six months after the issuance date, and have
a term of five and one-half years. The warrants may be exercised either for cash or on a cashless basis.
|
b. |
On June 17, 2022, RedHill Inc. signed an amendment to the Credit Agreement. Under the Amendment, RedHill Inc. shall be required to
maintain minimum net sales of $75 million for the trailing four fiscal quarter periods ending June 30, 2022, and September 30, 2022, and $90 million each fiscal quarter thereafter. Redhill Inc. shall also be required to maintain minimum
net sales of $14 million for Movantik® each fiscal quarter starting the fiscal quarter ending June 30, 2022. The Amendment further sets the interest on the outstanding term loan for the quarters ending June 30, 2022, and September 30,
2022, at 3-month LIBOR rate (“LIBOR”), subject to a 1.75% floor rate, plus 7.2% fixed rate, which will be decreased to 6.7% thereafter.
|