Maurice Shani - IR Dror Ben-Asher - CEO Ori Shilo - Deputy CEO, Finance & Operations.

Scott Henry - ROTH Capital Swayampakula Ramakanth - H.C. Wainwright Ed Woo - Ascendiant Capital Markets.

Good day and welcome to the RedHill Biopharma 2015 Second Quarter Financial Results and Business Highlights Conference Call. At this time, I would like to introduce to the conference, RedHill's CEO, Mr. Dror Ben-Asher; and Mr. Ori Shilo, Deputy CEO, Finance and Operations. Before we begin, we will read from RedHill's Safe Harbor statement.

Please go ahead..

This conference call may contain projections or other forward-looking statements regarding future events or the future performance of the company. 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, results or achievements may differ materially from what RedHill projects today.

Additional information concerning factors that could cause actual events, results or achievements to materially differ from those contained in the forward-looking statements can be found in the company's Annual Report on Form 20-F and in its other filings with the Securities and Exchange Commission. I now turn it to Dror Ben-Asher, RedHill's CEO..

Thank you, Shani, and to those of you who are on our call live, thank you for joining us.

Given that we have a lot to cover within the limited time availability of this forum, we will focus today on selected recent operational highlights and primarily the status of our lead program, including the three ongoing Phase III flagship program for gastrointestinal GI diseases.

That also include RHB-105 for the treatment of Helicobacter pylori, H. pylori bacterial infection, RHB-104 for Crohn's disease, and BIKANDA for gastroenteritis and gastritis all of which, as I said, are in Phase III.

In particular, RHB-105 will be the main focus of our discussion today following the recently announced successful top-line Phase III results for the treatment of H. pylori infection, a major of cause of gastric cancer and other gastric diseases.

But before we do that, I would like to refer to Ori, for discussion of our second quarter financial results announced earlier today..

Thank you, Dror. Good morning and good afternoon everybody. I will provide a short overview of our financial results for the second quarter of 2015.

In the second quarter of 2015, as well as in the first six months of 2015, we did not record meaningful revenues compared to $7 million of revenues in the first six months of 2014 from the licensing of RHB-106 to Salix Pharmaceuticals in February, 2014.

R&D expenses during Q2 2015 were $5.1 million compared to $3.2 million in the second quarter of 2014. The significant increase is mainly due to the three ongoing Phase III trials RHB-105 for H. pylori, RHB-104 for Crohn's disease, and BIKANDA for gastroenteritis and gastritis.

G&A expenses during second quarter of 2015 were $800,000, similar to recent quarters. Operational loss for the second quarter of 2015 was $5.9 million, compared to operational loss of $4.1 million in the second quarter of 2014. The increase resulted mainly from an increase in R&D expenses.

Our operational burn rate during the second quarter of 2015 was around $4.7 million compared to $4.2 million in the second quarter of 2014. The increase is mostly related to increase in R&D activities. Our cash balance as of June 30, 2015, was approximately $26.6 million following the July, 2016 public offering.

Today, we currently have approximately $66 million in cash with no debt. In July, 2015, we raised over $44 million in a public offering including exercise of an over-allotment option by the underwriter.

The offering which was significantly oversubscribed strengthened our cash position and allowed us to execute our development plan, including the ongoing Phase III studies with BIKANDA for gastroenteritis, and RHB-104 for Crohn's disease, doing a second Phase III with RHB-105 for H.

pylori eradication, starting a second Phase III with RHB-104 for Crohn's disease in Europe, and several other early stage program. I will now turn the discussion back to Dror, and I'll be happy to take questions later on. Thank you..

Thank you, Ori. To refresh everybody's memory, RedHill is focused on the development of late-clinical stage proprietary orally administered small molecule drug for gastrointestinal and inflammatory diseases, including gastrointestinal cancer.

We're pursuing, generally speaking, a multiple short-term goal strategy and, therefore, headed into the third quarter of 2015 with a balanced pipeline, including three ongoing Phase III GI programs, and a number of Phase II stage development programs.

Among the very recent operational highlights, we are particularly excited about the initiation of a Phase I/II study in the U.S. funded primarily by the National Cancer Institute to evaluate our recently acquired first-in-class SK2 inhibitor ABC294 for refractory lymphoma.

Another recent operational highlight has to do with our partnership with Salix, currently owned by Valeant over RedHill's RHB-106 tasteless solid oral formulation bowel prep. We updated last week that Salix and Valeant informed us that they continue the development of the RHB-106 program, which we are of course very happy with.

But our main topic of discussion today is RHB-105 for H. pylori bacterial infection. On June 15, 2015, last month, we announced positive top-line results from the ERADICATE Hp first Phase III study with RHB-105 for the treatment of H. pylori infection. We demonstrated 89.4% efficacy in eradicating H. pylori infection.

Most importantly, the study successfully met its primary endpoint of superiority over historical standard of care efficacy levels of 70%, with very high statistical significance at 0.001. No serious adverse events, new or unexpected safety issues related to the drug candidates were noted in the study.

RedHill's team and our various service providers continued to focus on executing the development plan. Then the completion of the clinical study report, the CSR, is expected in the third or fourth quarter this year. A meeting with the FDA is being planned by RedHill thereafter, to discuss the clinical and regulatory path for approval in the U.S.

of RHB-105 as a potential best-in-class, first-line therapy for H. pylori infection. The RHB-105 program has a lot going for it. In April, we received a new U.S. patent covering RHB-105 formulation, which is expected to be valid until at least 2034. H.

pylori infection is a major cause of gastritis concept, peptic ulcer disease, chronic gastritis, and other GI diseases. It has been named qualifying pathogen by FDA under the GAIN Act, which is intended to encourage development of new antibiotic drugs for the treatment of serious or life threatening infections.

FDA therefore granted RHB-105 specifically, a Qualified Infectious Disease Product, QIDP designation under the GAIN Act allowing us additional five years of marketing exclusivity for a total of eight years, market exclusivity, fast-track development status, and priority review status, which shortens the review time for marketing application.

In addition, FDA has permitted RedHill to pursue with RHB-105 a significantly broader indication than that of existing H. pylori therapies, by allowing us to target first-line treatment of H. pylori infection regardless of ulcer status. Approximately 100 million Americans and over half of the world's population is infected with H.

pylori and approximately 3 million patients are treated annually in the U.S. to eradicate H. pylori. To highlight the substantial scale of the healthcare challenge presented by H. pylori bacterial infection, we had at RedHill in May, an Investor Webcast Forum focusing on the RHB-105 Phase III program and potential H. pylori eradication market.

During the event, key opinion leader, Professor David Graham from Baylor, the principal investigator of the RedHill RHB-105 Phase III study, discussed the role of H. pylori bacterial infection in diverse gastric diseases, the growing worldwide concern over increasing efficacy rate of available treatment, and the newly recommended H.

pylori eradicating strategy for preventing gastric cancer. Gastric cancer is the second most common cause of cancer deaths worldwide with approximately 1 million deaths per year. Professor Graham said and noted that there has been no new H. pylori therapies approved for over a decade. Dr.

Jerry Rosenblatt of RedHill Advisory Board discussed the world market potential for H. pylori eradication therapy and estimated the 2015 worldwide and U.S. market potential for H. pylori eradication therapy at $4.8 billion and $1.4 billion respectively. Moving on, another ongoing Phase III program is BEKINDA, previously called RHB-102.

Our once daily oral treatment for gastroenteritis and gastritis is an important program that we are investing heavily in. The Phase III GUARD study with BEKINDA is a randomized, double-blind, placebo-controlled, parallel group Phase III study that will enroll a total of 320 acute gastroenteritis and gastritis patients in the U.S.

For those of you who don't know acute gastroenteritis is an inflammation of the GI tract causing nausea and vomiting, with a potential worldwide market estimated to $650 million. If approved for marketing by the FDA, BEKINDA is expected to be the first ever 5-HT3 antagonist drug indicated for acute gastroenteritis.

We expect top-line data from this study by the first quarter of 2016, and it is also worth noting that a Phase IIa study for new and significant yet undisclosed indication is planned to commence with BEKINDA in the second half of this year.

Our third ongoing Phase III program is with our flagship drug candidate RHB-104 for the treatment of Crohn's disease. RHB-104 is a potential paradigm changer as far as the treatment of Crohn's disease is concerned.

In particular, because it targets the potential cause of the disease, range of cellular bacteria mycobacterium avium subspecies paratuberculosis, or in short MAP. The Phase III MAP U.S.

study continues to rollout and enroll patients, with over 80 clinical sites initiated in United States, Canada, Israel, Australia, New Zealand, and additional sites being initiated in Europe, for total of approximately 120 clinical sites globally. The total number of patients in the MAP U.S.

Phase III study will be 270, with interim analysis expected in the second half of 2016. After half of the patients expected to be enrolled in the study, we would have completed 26 weeks of treatment. Primary endpoint is remission at week 26.

Our team continues to work closely with the Crohn's & Colitis Foundation of America, the CCFA, the CRO, besides Quest Diagnostics, and numerous other service providers involved in this very exciting global study.

In addition, last month, the UK MHRA had accepted RedHill's clinical trial application to initiate a second Phase III study of RHB-104 for Crohn's disease. The study will be called the MAP EU study.

The MAP EU study is planned to commence in a select number of European countries and once initiated will run in parallel with the currently ongoing MAP U.S. first Phase III study. So we'll have two Phase III studies running with RHB-104 for the treatment of Crohn's disease running in parallel at the same time. We recently announced two new U.S.

patent covering RHB-104 which are expected to be valid through 2029 further strengthening our part of the state covering that drug. It's worth mentioning that RHB-104 is also being developed for the treatment of multiple sclerosis, MS.

In the ongoing CEASE-MS Phase IIa study in which RHB-104 is being evaluated as an advanced therapy to interferon beta-1a in patients treated with relapsing-remitting multiple sclerosis.

Recruitment of patients for this study was completed and a top-line interim Phase II results from this CEASE-MS study are expected in the fourth quarter of 2015 or may be the first quarter of 2016. Given that we're running out of time, I will only discuss one more program, our Phase II stage drug candidate ABC294.

We acquired the drug from a Pennsylvania based Apogee Biotechnology in March of this year. ABC294 is a proprietary first-in-class orally-administered SK2 Inhibitor, with anti-inflammatory and anti-cancer activities targeting multiple inflammatory GI and oncology diseases well within RedHill's therapeutic focus. It is clearly a potential blockbuster.

ABC294640 has successfully completed numerous preclinical studies as well as well as a Phase I study in cancer patients with advanced solid tumors. Last month, we initiated a Phase II clinical study with ABC294640 largely funded by a grant from the National Cancer Institute.

We are targeting refractory lymphoma -- refractory diffuse large B-cell lymphoma, DLBCL, and we are planning at least two Phase II clinical studies with the drug. One is for the treatment of multiple myeloma pending a grant from the National Cancer Institute. And the second is for radio-protection in cancer patients undergoing radiotherapy.

We continue our extensive business development activity in relation to partnerships for commercialization of some of our products.

We are taking particular care to ensure that our future pharma partners and for transaction terms are the right ones providing the best possible home for our products and maximizing generation of shareholders value from RedHill's late clinical stage assets.

To sum up, we headed into the third quarter of 2015, with plenty of catalyst in the horizon and a balanced pipeline including three ongoing Phase III program targeting important GI diseases.

This positioning reflects both our strong and continued commitment to addressing strong unmet medical need and our multiple short-term goal risk mitigation strategy. Moreover, following our recent public financing, we are backed by many strong U.S.

healthcare institutional investors and maintain a strong balance sheet with no debt, $66 million in cash allowing us to continue to aggressively execute our plan. I will now turn back to Julia, and would be happy to take any questions you may have..

Thank you. [Operator Instructions]. Okay. We'll now take our first from Scott Henry from ROTH Capital. Please go ahead. Your line is open..

A couple of questions. First, I just wanted to clarify couple of timelines.

The BIKANDA gastroenteritis data, did you say that would be first quarter of 2016 or is it still late '15 early '16?.

I said by the first quarter. We haven't updated beyond that. So theoretically, yes, first quarter is still possible, but more likely beginning of next year. You recall that we announced also that we're in discussions with FDA about this study. So if and when we have updates we will provide the update..

Okay, great. Thank you. That's helpful.

And then, with regards to RHB-105, given the step you have to take meeting with the FDA, would you expect to start the next trial in early 2016? Would that be expectation at this point?.

Yes. That's the expectation and we hope, although it's too early to say, but we hope we will be able to complete the study by the end of next year..

Okay, great.

And then I gather we will hear what that next indication for BIKANDA is probably in the third quarter or I guess as soon as you launch the study is that when you will announce it?.

In the coming weeks..

Okay, great. Okay. So the coming weeks. And then final question just from a modeling standpoint, R&D did jump up a little bit in the second quarter.

How should we think about R&D for the rest of the year relative to say the second quarter run rate?.

Yes. So currently the burn rate is about $5 million per quarter. What we expect is for it to go to about $7 million per quarter once the additional studies are up and running and that includes, RHB-105, second Phase III, and so on..

Okay. So the $7 million a quarter is probably a better run rate for 2016.

And then I guess to work that -- it work its way up in the second half of '15?.

Yes. I think $7 million a quarter for 2016 is a reasonable assumption..

We will now take our next question from Swayampakula Ramakanth from H.C. Wainwright. Please go ahead. Your line is open..

Thank you. Good morning, Dror. Thanks for taking my questions. Let me also startup with RHB-105. Now that you have had this positive data from the first study for a while and had some time to think through some of its instructions you can with this program.

What are your thoughts regarding the design of the second study? And now that you've put out some positive data, where are you in terms of conversations with potential partners and also anything at all regarding more clarity on timing for the second study?.

Thank you, RK. Regarding the partnership first, there is a lot of interest in the program obviously.

And I think the main reason there is a lot of interest, there was already before the data, but now even more, is simply that it's other than being a very large program in terms of commercial potential, it is a program with relatively, I stretch relatively, low uncertainty, it's all relative.

And why is that? It's because we have a Phase II behind us with pretty much the same efficacy rate that we saw in the recent Phase III. So we already have two studies showing approximately 90% efficacy. And we know standard of care is currently around 70% efficacy in eradicating H. pylori, so that's efficacy wise.

Safety wise, everything we see so far has been encouraging. QIDP, a regulatory status means that we already have fast-track development. We will have priority review once the NDA has filed in its eight years market exclusivity in the market.

On top of all that, we already know because FDA has told us, unless agency changes its mind down their audit, which is always possible, that we are permitted to pursue a much broader indication than existing therapy. And that means that all goes well, our drug will be marketed for H.

pylori positive patients that are expecting, which are obviously far higher, far larger number than those that have confirmed ulcer status. So this is relatively known, the ulcer center -- certainty I think is relatively, again, relatively low, relative to our Phase III program of this magnitude. And this is attractive for partners.

And we hope to be able to do the right thing for our shareholders at the right time and at the right term. That's the partnership. About the design, we don't have anything definite, but what we said already that we will seeking most likely head-to-head study against standard of care.

Why that? Because we want to be a -- to show superiority and to be able to -- to claim superiority on the label. Exactly the design, we don't know yet, it will only be clarified following the FDA meeting.

Timelines, I think I already answered to Scott's question earlier, but we are looking to start the study early next year and hopefully complete it next year..

Thank you very much for that elaborate answer. That's very helpful. Moving on to the 104 program, the MAP U.S. study, we understand now that you only have filed application with the authorities, start the study.

When would you hear back from them? And potentially, the timeline for this study change? Can you discuss anything more than what you've studied if you can?.

Okay.

I'm not sure I follow which product are you referring to and which application?.

The MAP U.S. study for 104..

EU, okay. Sorry. Yes. So yes we received already approval in EU to commence the Phase III study. We announced it already.

So we're free to comment the study in Europe in terms of regulatory approval, national in the UK, but not only -- was that your question?.

Yes. Yes. Okay. Then couple of more. One on the 294640, the Apogee product.

Could you provide us some more color on that product and how you're working through the clinical study?.

Yes. The product is novel, and we like it a lot, because it fits squarely within our focus on proprietary small molecule, orally administered, targeting inflammatory and GI diseases, as well as related oncology conditions. We also like the fact that we had a lot of data to look at pre-clinical mainly, but also some clinical data.

We see funding of National Cancer Institute, we initiated last month, the refractory lymphoma study, which is running in the U.S. But we are also planning at least two more Phase II studies that will run in parallel. The first is multiple myeloma study, pending final grant from National Cancer Institute, which we hope to receive very soon.

And the second is for radio-protectant in cancer patients undergoing radiotherapy. That's a very important indication that is currently underserved. We're talking about inflammation that's caused by radiotherapy in many cancer patients, be head and neck cancer or rectal cancer and many other types of cancer, so very important indication.

We have big plans for this product, which we believe is becoming one of our flagship products with clearly potential blockbuster potential..

Okay. Thank you. And then on RP101, we saw that you extend your option on this.

What is stopping from acquiring this product? Really looks like you like the product or obviously, that's why you're extending their options, you're working through some of the development programs, but -- and just so we understand, why does take options one shot at a time, why not take it completely into your hands?.

Well, it's a very good question. There is noting that stops us from exercising the option. But we are currently running a pretty large pre-clinical study. So all goes well, we will indeed expertise in the coming month..

Okay. And then the last one on 106, it's actually nice to see that Valiant is continuing to work on this molecule. But Salix expects this into their fold in February of 2014, so it's about 18 months now.

Do you have an understanding of where they are with this molecule, what kind of progress have they made with this? We understand that they're interested, but what well exactly is going on with this molecule, do you have any tied to it?.

We have a pretty good idea where things stand. But we're under confidentiality and if not our product, it's a product we have to respect that..

We'll now take our next questions from Mr. Ed Woo. Please go ahead. Your line is open..

Yes. Thank you for taking my question.

In terms of clarification on possible partner development, how quickly do you think we may get any news on any of your, I guess partnerships?.

Thank you, Ed. It's hard to tell. There is lot of discussions with many parties. We are very careful whom we go with, because those products are very late-clinical stage assets. It is in one case -- more than one case, there is already a marketing applications filed so some indication.

So we have to be very careful whom we give it to, who we entrust it with. And also, be very careful which terms we go with, because there is always a connective of continuing alone all the way to approval and in some cases even beyond. We are very careful.

I will just remind you that by way of background, the team here, the core team here at RedHill specializes in business developments and partnering and that's one of our core expertise..

Great.

And then in terms of your possible new opportunities, do you think that you have enough product pipeline right now or you want to just focus on what you have or do you still see many existing opportunities to expand on your drug portfolio?.

In terms of say, in line to see acquiring new drugs underdevelopment it's not a high priority at this point, because we have relatively broad and very advanced pipeline which keeps us very busy. That said, we did say that we opportunistically are looking for FDA-approved product within our therapeutic focus.

And we'll consider very gradually, very carefully sometime of kind of vertical integration in the U.S., the U.S. alone. We're not going to read the companies fortune; obviously we're going to take steps gradually, carefully, wisely to make sure that we're doing the right thing by the shareholders.

But as far as acquisitions are concerned, this is a high-priority event another product underdevelopment. We have nine products and many more programs under those products already, and those are clinical stage assets, which require a lot of attention and resources that's plenty to deal with right now..

There are no further questions in the queue..

Thank you, Julia. I would like to thank everybody for your participation today, the time you took this morning or this afternoon, to show interest and listen to our update and quarterly results.

We remain available at all times to be approached directly about any questions and concern or concerns you may have and promise to remain committed to be responsive and as clear as possible. Thank you and have a great day..

That will conclude today's conference call. Thank you for your participation ladies and gentlemen. You may now disconnect..