Dror Ben-Asher - Chief Executive Officer Micha Ben Chorin - Chief Financial Officer Gilead Raday - Chief Operating Officer Guy Goldberg - Chief Business Officer Ira Kalfus - Medical Director.

Dave Solomon - ROTH Capital Partners Swayampakula Ramakanth - H.C. Wainwright Christopher Marai - Nomura Instinet Ed Woo - Ascendiant Capital Jonas Peciulis - Edison Investment Research.

This conference call may contain projections or other forward-looking statements regarding future events or the future performance of RedHill, including statements with respect to RedHill's expectations regarding the initiation, timing, progress and results of its research, manufacturing, preclinical studies, clinical trials, marketing applications or approvals, if any, and other therapeutic candidate development efforts, as well as business promotion and other efforts related to RedHill's U.S.

commercialization activities. These statements are only predictions and RedHill cannot guarantee that they will in fact occur. RedHill does not assume any obligation to update that information. Actual events, 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 its other filings with the Securities and Exchange Commission. I will now like to turn the call to Mr.

Dror Ben-Asher, RedHill CEO..

Thank you. Good day, everyone and thank you for joining us. Our news flow in the coming months will be dominated by the upcoming planned top-line results of the Phase III study with RHB-104 for Crohn’s disease approximately three months from now and the confirmatory Phase III study with TALICIA for H.

pylori infection in the fourth quarter of this year. There is a tremendous energy and enthusiasm within RedHill currently as we approach those two important Phase III readouts towards which our team has been working relentlessly and diligently for years. Rapid quarter-on-quarter revenue growth from our commercial activity in the U.S.

and decreased operational costs in the first quarter of 2018 underscores our continued commitment to reducing cash burn rate and building shareholder value. Accordingly, we do not have plans to raise additional capital ahead of the MAP US Phase III study top-line results with RHB-104 for Crohn’s disease.

The plan for today is to briefly discuss our first quarter 2018 results and the upcoming milestones, and leave time to answer your questions. But first, our CFO, Micha will discuss our 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 first quarter of 2018. In summary, Q1 2018 revenues and gross profit were up 22% and 40% respectively over the previous quarter.

Operating loss was down 30% over the previous quarter, and is expected to continue to decrease over the coming quarters. At the end of the first quarter, we had a cash balance of more than $36 million. Accordingly, we do not have plans to raise additional capital ahead of the MAP US Phase III study top-line results with RHB-104 for Crohn’s disease.

I will now analyze in more detail the main line items. Net revenues for the first quarter of 2018 were $2.4 million, an increase of 22% from the fourth quarter of 2017, resulting from an increase in all our three promoted products. Gross profit for the first quarter of 2018 was $1.5 million, an increase of 40% from the fourth quarter of 2017.

Gross margin increased from 54% of revenues for the fourth quarter of 2017 to 62% from revenues for the first quarter of 2018. This increase is primarily related to Donnatal. Research and development expenses for the first quarter of 2018 were $6.4 million, a decrease of 23% from the fourth quarter of 2017.

The decrease from the fourth quarter of 2017 was mainly due to the completion of our patient enrollment in the RHB-104 Phase III study for Crohn’s disease. Selling, and marketing and business development expenses for the first quarter of 2018 were $3.2 million, a decrease of 18% from the fourth quarter of 2017.

The decrease was due to the Company’s cost reduction plan. General and administrative expenses for the first quarter of 2018 were $1.9 million, a decrease of 23% from the fourth quarter of 2017. The decrease was due to the Company’s cost reduction plan.

Operating loss for the first quarter of 2018 was $9.9 million, a decrease of 30% from the fourth quarter of 2017. The decrease was due to the increase in net revenues and gross profit, and the decrease in operating expenses across the Company as just discussed.

Net cash used in operating activities for the first quarter of 2018 was $9.5 million compared to $14.2 million in the fourth quarter of 2017. This decrease of 33% was due to the progress made with the RHB-104 Phase III program for Crohn’s disease, an overall reduction in expenses and operating loss in the company.

Cash balance as of March 31, 2018 was $36.4 million compared to $46.2 million as of December 31, 2017. The decrease was a result of the Company’s ongoing operational activities. I will now turn the discussion back to Dror, and we'll be happy to take questions later on. Thank you..

Thank you, Micha. For those of you who are new to our story, RedHill is a revenue generating specialty pharma company focused on the U.S. gastrointestinal or in short, GI market. Our commercial operation headquartered in Raleigh, North Carolina is already promoting three GI products for thousands of GI growth points across the U.S.

with a strong sales force of 40 highly motivated sale reps. Thus, establishing RedHill’s name as the rising major player with strong presence within the U.S. GI community. Strategically, our U.S. commercial operation is setting the stage for the potential U.S.

launch of RedHill’s own late stage potential blockbusters that are getting closer and closer to the market. Starting with the commercial launch of TALICIA for H. pylori infection in the United States next year is approved. Revenues from our 3 GI speciality products in the U.S. continues to grow rapidly.

Donnatal, EnteraGam and Esomeprazole Strontium 49.3 milligram generated over $2.4 million in net revenues, up 22% quarter-on-quarter, and gross profit was $1.5 million, up 40% quarter-on-quarter. Our balance sheet remains debt free with approximately $36 million at the end of the first quarter.

In parallel, operating loss decreased by 30% over the previous quarter. We expect quarterly cash run rate continue to decrease over the coming quarters along with increasing revenue. We also expect increased out-licensing activity, following the planned Phase III results in the coming months.

The last patient enrolled in the first Phase III study with RHB-104 for Crohn’s disease, the study is called MAP US study, has completed 26 weeks of treatment for primary endpoint evaluation. Top-line results from the study are expected to be announced in approximately three months from now.

To-date, over 300 of the planned total of 444 patients have been enrolled in the ongoing confirmatory Phase III study with TALICIA or RHB-105 for H. pylori infection. The TALICIA study is called ERADICATE Hp2. RedHill expects to complete enrollment in the third quarter and announce top-line results in the fourth quarter of this year.

TALICIA has been granted a fast-track QIDP status from FDA, which provides for a priority of six months NDA review and eight years of market exclusivity. Assuming the study is successful we expect to file the TALICIA new drug application or NDA in early 2019. And if approved, launch this potential blockbuster in the U.S. in the second half of 2019.

Moving on to another extremely important program for patients who are in dire need of new treatment operations, YELIVA for cholangiocarcinoma, bile duct cancer or in short, CCA, which has an FDA orphan drug designation. Nine of the planned 39 patients have already been enrolled in the same single-arm Phase II study for this important indication.

Enrollment is expected to be completed by the end of 2018. The study is ongoing at major clinics, including Mayo Clinic’s major campuses in Arizona and Minnesota, University of Texas MD Anderson Cancer Center and the Huntsman Cancer Institute, University of Utah Health.

In January, we announced positive final result from the Phase II study BEKINDA 12 milligram for the treatment of diarrhea-predominant irritable bowel syndrome, or in short IBSD.

The randomized double blind placebo controlled Phase II study successfully met its primary endpoint, including the primary efficacy outcome of stool consistency per FDA guidance definition by an absolutely trends of 20.7% versus placebo to the P-value of 0.036.

RedHill is scheduled to meet with FDA this summer to discuss the design for one or two pivotal Phase III study and path to approach it.

With regard to BEKINDA 24 milligram for gastroenteritis, RedHill is undergoing a similar process with FDA whereas the design of planned confirmatory Phase III study to support NDA filing is being discussed following a successful Phase III study compared to last year. Moving on to RHB-106 and our partnership with Salix Pharmaceuticals.

We recently amended our license agreement with Salix related to the encapsulated bowel cleanser RHB-106, as well as related rights. The amendment clarifies the development efforts to be used by Salix and provide for enhanced enrollment by RedHill in certain intellectual property matters.

In addition, the lower end of grants of royalty payments to be paid to RedHill or net sale have increased such as the potential royalties now range from high-single digits up to low-double digits. Development milestone payments remain unchanged. Another important program is RHB-204 for nontuberculous mycobacteria infection, or in short NTM.

A pivotal Phase III study with RHB-204 for the treatment of NTM is expected to be initiated in the second half of 2018, following planned completion of an ongoing supportive non-clinical program and additional inputs from the FDA.

RHB-204 is planned to be as the first line treatment for NTM disease caused by mycobacterium avium complex or in short MAC. Hence the infection -- the drug has a QIDP fast-track status from FDA, including priority six month NDA review and up to 12 years of market exclusivity. Given the time limitation, we will stop it here.

And take any questions you may have..

Thank you [Operator Instructions]. We can now take our first question from Dave Solomon from ROTH Capital Partners. Please go ahead..

Just first question, can you talk about the sequential trajectory of the approved product sales for the remainder of the year, and what would be the key drivers for those? Thanks..

We have not provided guidance for sales of our three existing commercial assets. What we can see though is a rapid increase quarter-on-quarter sequentially between Q3, which was the very first full quarter with two products, Q4 2017 which was the first full quarter with three products and Q1 which was the second full quarter with three products.

And when you look at those numbers, the trend that starts to develop with growth of over 20% quarter-on-quarter annualized, we’re already at $10 million. But we expect continued growth.

We are committed to providing guidance down the line, but we do not feel it's a right thing to do right now, because we do not yet feel that we have sufficient visibility on our projected net revenues.

I will also add that we have been and are in a lot of discussions to bring in new commercial assets to add to the basket that we are promoting to GI call points. This is for concern picture entirely. So there are various reasons why we have not yet provided guidance, but we are committed to doing so as soon as possible.

I hope I answered your question..

So could you talk a little bit about the status of BEKINDA for gastroenteritis? Thanks..

Gilead, you want to take that?.

So we had successful Phase III study and we met with FDA to discuss plans for the next study. We are finalizing the plans for the next study based on input from the agency. And we are in the process of preparing to embark on the confirmatory Phase III study in months to come..

And one last question, just on spending. Can we expect the spending levels to be sequentially down for the remainder of the year? Thank you so much for taking my questions..

So as I disclosed before, we initiated our cost reduction plan towards the end of last year, and we have continued to diligently implement the cost reduction plan. And we are expecting a further decrease of expenses..

Next question comes from Mr. Ramakanth from H. C. Wainwright. Please go ahead..

Thank you. Good morning to all. This is RK from H.C.W. Congratulations on the quarter. And couple of quick questions, with the ongoing success in the commercialization of the three products. What are some of the lessons learned in terms of commercializing these specialized products, and as such the [indiscernible].

Are there plans to add additional products to the bag and/or you would rather wait to add your own products later?.

Thank you, RK. I would answer the later and I will let Guy answer the former. As far as new product, absolutely we're in discussions for bringing in additional GI commercial products into the basket of our phenomenon outside the team.

The economies of scale should play out really nicely here, because we suspect under such a situation for revenues to go up and cost to remain more or less same, which is an ideal situation. The infrastructure is up and running. It’s well managed out of Raleigh, North Carolina.

So absolutely yes, we are looking and are in discussion for additional products on top of the three we’re already promoting, ahead of potential launch of products that we see of our own drug potentially next year.

Gilead, you want to take the first question about lessons learned?.

I think one of the major things we've learned, which is what we’re expecting is that just succeeding in the space and building relationships with physicians as we get to know we have to understand the needs of patients.

And the fact if that aspect is that the lesson we wait for the study and it’s commercialization activity now, because we really have built up fantastic organization that's well managed in the right community, not just in the medical community but also in managed care, and in trade, and other aspects of the business that we need to succeed, and to have a successful platform and new build, and eventually launch our own product.

So the lesson learned is one that we were planning on and largely we've embarked on this, which is start early and build the foundation so that you can eventually launch your own products with the right networks, the right people and the right management..

My next question is on the Phase III data that we expect in three months and then the fourth quarter, so for both RHB-105 and also TALICIA for both of these drugs.

When should we -- I mean in what form would you put out the data, would it be just separate or should we expect some more color than just the top-line data so that we can get a better data of how these drugs are working?.

I will answer generally and then I will refer to Ira. The short answer is that we will announce as much as possible publicly what we would now at a given time, for short time endpoint top-line but we’ll announce whatever we can and feel very confident about at that time.

Ira, you want to answer that?.

No, I think you did it -- that’s exactly what it is. I mean, we’re looking at top-line and we're looking at whatever we can from the secondaries. But we're putting all our efforts into getting then our top-line data and obviously some safety data..

And then on YELIVA, can you give us a little bit more color as to the timeline of -- you said when you expect enrollment to be completed.

But in terms of data, when should we expect the clinical data from this study and the same goes for 204 as well?.

I will let Gilead answer. As a general comment, I would like to remind listeners that the Phase II study with YELIVA for cholangiocarcinoma is an open label study. Therefore, we expect clinical data to continue to come out of the study as we go. In terms of enrollment, we expect to complete enrollment by the end of this year.

We’re already at about 25% enrollment and enrolling very fast. But we certainly hope and expect to be able to release clinical data on some of the patients before the end of the year. About NTM, I will let Gilead answer and Gilead can also provide additional color on the cholangiocarcinoma Phase II study with YELIVA.

Maybe one more thing to mention before Gilead is that we announced publicly that we have an expanded access program for patients, and there are treating physicians who are actively seeking solutions outside clinical studies. We are required by the regulators to put such a program in place and indeed they deed.

And we are already treating several patients, not only in the U.S. but also in other countries, as a result of this strong demand for compassionate use in this extremely difficult to treat indication with extremely limited treatment option for the patients.

Onto Gilead to discuss both the cholangiocarcinoma study and a little bit where we are with NTM. Gilead, please..

So for the cholangiocarcinoma study, as Dror mentioned, it is an open label study. So we do expect to be able to have some data during the progression of the study.

The first patient in this study was in March of this year, and the primary efficacy endpoint of the study is a combined efficacy endpoint response rate, which includes both a complete response, partial response and of stable disease with over four months.

Given the severity of the stage of disease in these patients, this is what the KOL has put together as the optimal endpoint for the study. So given this, we should have some data to be able to present probably towards the end of the year in Q4 with at least some prolonged over four months information about some of the earlier patients in the study.

Regarding NPM, as Dror mentioned, we expect to initiate the study pending additional preclinical work that we're doing here and getting some [indiscernible] guidance ahead of -- before the end of this year. And the pivotal study that we’re going to discuss with FDA has [indiscernible] accelerated approval endpoint of six months treatment.

And that should be an indication of how quickly we could see readout from the study, and we are talking about a 100 patient study versus placebo. And we expect to be able to enroll that relatively quickly we hope within a year..

And just as a follow up for the YELIVA.

So given the condition and given the status of the disease, do you think that you could get approval based on this study if it is strong, just a conditional approval or do you have an idea of what the regulatory pathways will be for YELIVA?.

For this kind of indication, there is a lot of uncertainty. The unmet medical need is immense in fact, the most one could think of. The regulators are very carefully reviewing any proof of data in this indication. We do not plan on this study to get us approved.

That said, we will bring the data to the agency, and openly discuss with them what the options are. And as soon as we know more, we will of course update the public. I hope this is helpful..

Next question comes from Christopher Marai from Nomura Instinet. Please go ahead..

First question, maybe could you highlight what the gating factors are around moving forward your program in NTM. I know you mentioned an FDA meeting will be coming up. Any timeline on that, has that been scheduled? And then secondly, when we think of the opportunity for Crohn’s for H.

pylori, you obviously have a growing sales force that -- are you expected to grow that substantially on the back of those, or would you be looking for regional partnerships? How should we think about the path there for both 104 and 105? Thank you..

Gilead, you on mute….

Yes, I was muted. I will let Ira answer. I will just say that with regard to NTM, a program like this that moves directly into a pivotal Phase III study, let alone against placebo, require some boxes to be checked. This is the standard and very well justified default regulatory process, which we are following.

With regard to FDA discussions, it has also been ongoing for quite a while, pretty frequent given that we have a QIDP status. We have excellent cooperation from the agency. And that said, I will defer to Ira to explain where we are and why we are doing what we are doing. Subject of course to competition out there, we cannot disclose everything.

And after Ira completes his answer, I will answer your question about our commercial plans for Crohn’s as of now. Ira, please..

So we have met with the agency. And as Dror said, we have excellent cooperation with the agency. As you can imagine, there have been a series of questions going back and forth, and we've been able to answer their questions as we move along. We’re in the midst of a dialogue right now.

And we fully anticipate that we're going to be able to start the study as we said in the second half of the year. Having answered the agency's concerns and being able to move forward with what we hope to be at pivotal Phase III single study in the indication, they've been very cooperative..

Thank you, Ira….

Just elaborating on the FDA concerns. Could you maybe highlight that what they were? Thanks..

Without disclosing anything that is still confidential, you can just imagine that we're bringing a new anti-infective to the agency, and the agency just wants to make sure that it's dried anti-infective, and the current guidelines all speak to using combination drugs very similar and in fact we’ll [indiscernible] are using the same drugs as ours, and just to review some of the data that's out there and the data that's available to discuss just to demonstrate that the guidelines are what's real, and what people are using and how this new therapeutic could impact or will be used in comparison to something like that, how the agencies should view this medication live in current guidelines and what the FDA actually wants them and on the market..

Thank you, Ira.

Chris, can we move on to Crohn's?.

Yes, please. Thank you..

So the question you asked was about our current thinking around future launch of RHB-104 for Crohn’s. We have been building a sales force exactly in order to have the ability to grow it around. This is a lesson that has been learned by doing a lot of homework, seeing what other content we have done. Some of them have been doing mistakes over the year.

To mention some classic errors, one of them we believe is to try to launch and build commercial infrastructure at the very last moment, ahead or even after FDA approval, which essentially means that the cost of setting up operations are going to be a high multiple on doing it well in advance, the way we have been doing it.

And errors and the mistakes that are going to be replaced and made challenges that are going to be faced by a new sales force and on sales reps, and on middle and single management among sales.

And on additional functions senior management, be it trades and market, medical affairs, compliance and everything else, there is a huge in doing something at the last moment. And the challenges are enormous if you do it at the last moment. The other possibility is of course to simply say or try if we're going to [indiscernible].

But when you do that, two things happen. First, you give up on the possibility of maintaining and keeping the vast majority of your future profit margin, because you're going to sit on royalties, which is nice but the upside is very, very limited. There is many examples of that.

The second thing that is likely to happen is that even if a big pharma partner shows up and negotiations start, the bargaining power to achieve and obtain the best possible terms is significantly compromised, which translates into much lower shareholders value.

Our current thinking is to have our own sales force, our commercial operations up and running for a couple of years by the time we launch TALICIA for H. pylori next year. And also be ready for the launch of RHB-104 for Chroh’s, which of course will be later subject to the completion of program as a whole.

So this is our current thinking, particularly we have the DNA of going it alone to contemplate that to ultimately maximize shareholder value in the long term. And we’re not talking about a small increase in shareholder value we're talking about very significant difference between going it alone and out licensing by a very high magnitude.

I hope I answered your questions. And you know what may be, Guy, you want to elaborate on that.

Do you have anything to add?.

Thank you. You explained it very well.

We had the platform, it takes time to get in there to know the doctors, to understand the market, to understand the payer environment and it’s something that can be done at the last second, the more lead time you have, the more you’re prepared to be able to have successful launch, which is exactly what we’re doing..

Next question comes from Ed Woo from Ascendiant Capital. Please go ahead..

In terms of the commercialization strategy, how many sales people do you have right now and how quickly would you be able to ramp up a new product up from getting down introduced to being how productive on that new product?.

Currently, we have 40 and we cover pretty much the whole nation, including some white space selectively. So we have both sales force and we are covering white space with inside sales [indiscernible], we’re doing both.

In terms of how much time we need to ramp up the sales force number in order to launch, let’s say, TALICIA next year, assuming the results are positive in the first quarter of this year. We’ll refer to Guy. I’ll remind you that we are targeting the GI specialty, which is not huge in terms of the numbers of clinics and healthcare providers.

TALICIA though is a drug that will be prescribed both by partner care physician and GI, so there are additional possibilities of such co-promotion with us promoting into the GI community and a larger partner promoting into the primary care space.

Guy, do you add any color you might have?.

Yes, I would just add. We haven’t yet determined what size that ultimate sales force would be, that we’d be promoting TALICIA. So we’re not yet sure what the ramp up would look like.

We are meeting with GIs, know the GIs and what network there, so we anticipate that it will be, a scalable activity will happen pretty quickly once we determine that, but it shouldn’t be a very long length….

Next question comes from Dr. Jonas Peciulis from Edison Investment Research. Please go ahead..

Actually many of those have been already answered, just to follow up and clarify on TALICIA’s commercial strategy. So you provided detailed discussion. But there seems to be more relevant for the U.S. market.

So what are your thoughts about expanding into other geographies, Europe and maybe other countries?.

We are focused on the U.S. As a small company, we have to be careful with our sources, with our spending. And not only are we focused on the U.S., we’re focused narrowly on the GI market. Outside the U.S., we are going to out-license. And we have been in discussions with numerous partners for territorial ex-U.S. deals.

We do not want to give away our assets likely and cheaply. And therefore, so far we have not completed a transaction ex-U.S. for one of our major products. When the light turns we’ll be proposed by the right partner who will cater lot, optimizing and maximizing the upside for RedHill, for our shareholders, we will strike such deals.

I will add that it will be much more easy and much more relevant when the results for Crohn’s are up in about three months, and the results for H. pylori are out in the fourth quarter. Data is something that a lot of companies out looking at waiting for, including source that we have been in active discussions with. I hope I answered your question..

Last one quick question on gross margin. So there was a rather significant increase in gross margins since its positive. So I was just wondering whether -- I mean what level could be sustainable going forward around 60% gross margin, or maybe even higher. I mean just any couple of thoughts would be helpful..

I will let Micah answer. I will say as introductory note that overall we would affect higher, but the question is which product. We are currently promoting three products that were not developed by RedHill.

When RedHill launches its own product by itself, assuming we are successful, we expect higher margin specifically for the existing product that we are promoting. Right now, I’ll defer to Micah..

Thank you, Dror. So yes exactly that. So there is a big difference between the product that we’re going to launch ourselves, and to the products that we currently promote. So with the product that we currently promote, obviously, it depends on the mix. We believe Donnatal will grow significantly, going forward.

And therefore, our gross margin could be even higher in the future even from the promoted products..

That concludes today's Q&A. I would now like to turn the call back to the host for any additional or closing remarks..

Thank you, Margaret. Thanks all for joining the call. Please do not hesitate to reach out to us if you have any additional questions. I wish you all a pleasant day. Thank you..