[Call Starts Abruptly] 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 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, timelines, results, achievements 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 20-F and in its other filings with the Securities and Exchange Commission..

Thank you, Alexandra. Good day everyone, and thank you for joining us. We will briefly discuss our full year 2018 results and focus on TALICIA for H. pylori infection. We're on track for potential new drug application NDA filing with FDA during the first half of this year.

We will also briefly discuss our RHB-104 Phase 3 program for Crohn's disease ahead of the upcoming FDA discussions. As for December 31, 2018 our financial standing remains solid with debt free balance sheet with approximately $53 million in cash. But first Micha, our CFO will discuss our financial results announced earlier today..

Good morning and good afternoon everybody. Thank you, Dror. I would provide the short overview for financial results for the full year 2018. So net revenues of $8.4 million for 2018, compared to $4 million for 2017 in which commercial operations started midyear.

Gross profit for 2018 was $5.5 million compared to $1.9 million for 2017 with gross margin increase from 47% to 66% resulting from an improved mix of the products and services delivered. Research and development expenses for 2018 were $24.9 million, compared to $33 million for 2017.

The decrease was mainly due to the finalization of Phase 3 study with RHB-104 and completion of the clinical studies with BEKINDA®. Selling, marketing and business development expenses were $12.5 million for 2018, only 4% higher than 2017. General and administrative expenses were approximately $7.5 million for 2018, 6% lower than 2017.

Operating loss of $39.3 million for 2018, compared to $52 million for 2017, reduction of 24% is due to increase in gross margin and reduction of R&D costs. Net cash used in operating activities was $34.5 million for this year 2018, compared to $44.8 million for 2017. Reduction of 23% and it is due to the lower operating loss.

Net cash provided by financing activities was $41.8 million for 2018, compared to $25.7 million for 2017. The increase was mainly due to higher gross proceeds raised in underwritten public offerings in which first year premier funds participated. Cash balance as of December 31, 2018, was $53.2 million, compared to $46.2 million in December 31, 2017.

We are expecting to keep cost discipline towards potential TALICIA launch forecasted in the last quarter of this year subject to FDA approval. I will now turn the discussion back to Dror. And we'd be happy to take questions later on. Thank you..

Thank you, Micha. We are a revenue generating, specialty pharma company focused on the United States with a strong and advanced development pipeline.

I parallel we’re progressed on the R&D front, we continue to aggressively pursue pharma outlisensing partnerships, as well as promising acquisition and in licensing opportunities for additional FDA approved and revenue generating products to add to our sales force basket to help us achieve profitability more rapidly, capitalizing on our existing commercial operations in the United States.

We are now focused on the U.S. GI, gastrointestinal market. Our U.S. commercial operation is now headed by Rick Scruggs, whom we welcome into the company. Rick formally was the Senior Executive at Salix Pharmaceuticals and we are already promoting four GI products, 2,000 of GI and other health care providers across the U.S.

With a strong focused and highly motivated salesforce with order supporting functions up and running, we are well positioned for the potential launch of TALICIA. In parallel with potential pharma partnership discussions we continue to establish RedHill’s strong presence within the U.S.

GI community and are setting a stage with a disciplined and gradual investment over the last two years for the potential U.S. launch of FDA’s fast track TALICIA for H. pylori infection. We will do it with or without a partner and it could be as early as the fourth quarter of 2019, if TALICIA is approved by FDA.

In late 2018 we announced very positive and robust results from the confirmatory Phase 3 study with TALICIA with high statistical significance at p-value of less than 0.0001 and high differentiation of 26% in favor of TALICIA relative to the active comparator.

Importantly, TALICIA’s confirmatory Phase 3 results confirmed high resistant to standard of care antibiotics including 44% resistance to metronidazole and 17% resistance to clarithromycin while testing no resistance to TALICIA’s novel active ingredient, rifabutin again detecting no resistance to TALICIA’s main ingredient, rifabutin.

We plan to submit a new drug application NDA to the food and Drug Administration in the first half of this year with eligibility for six months priority review and potential U.S. commercial launch in the fourth quarter of this year subject to FDA approval.

If approved by FDA, TALICIA is also eligible for eight years of market exclusivity in addition to the ongoing patents and really position to quickly become the new and only FDA approved standard of care for first time treatment of H. pylori infection. H.

pylori bacterial infection affects over 50% of the world's adult population and 30% to 40% of the U.S. adult population. The year 2018 global market is estimated at nearly $5 billion. H. pylori, is the strongest risk factor for the development of gastric cancer and a major risk factor for peptic ulcer disease and other conditions.

The medical need is strong and increasing with eradication of H. pylori becoming more and more difficult. Current standard-of-care therapies failing approximately 30% of patients will remain H. pylori positive, again due to the increasing resistance of H. pylori to antibiotics commonly used in standard combination therapy.

Moving on to RHB-104 for Crohn's disease, we are very excited by the robust top line results from the ground-breaking MAP US Phase 3 study with orally administered RHB-104 on top of standard-of-care for Crohn's disease. The study compellingly met both primary and key secondary endpoints.

The feedback from Medicare and patient communities and has been very encouraging and discussions are ongoing with potential pharmaceutical company partners regarding RHB-104 for Crohn's disease. We reported strong results, including successfully meeting primary end point of clinical remission at week-26 with enhanced p-value, 0.007.

And met also key secondary end points of clinical response at week-26, early clinical remission at week-16 and very importantly, clinical remission at week-16 and 52 0.003 and durable remission at all weeks, weeks 16, 52 as well. This is particularly exciting because the threshold for success was set very high.

To succeed in these measurements of durable remission at all visits all the way to week-52. Patients needed to be in remission not only at week-16 and week-52, but also at each and every evaluation visits between week-16 and week-52. This is very important.

Positive week-26 remission data demonstrated despite not being prospectively powered and a very small sample size, meaningful and statistically significant and consistent treatment effects and meaningful clinical benefits, strongly favoring RHB-104 as compared to placebo in sub-groups of patients receiving baseline standard-of-care therapies, including immunomodulators, corticosteroids and anti-TNF agents.

Moreover, very exciting is the findings in patients in-home endoscopy was performed. The study also showed statistically significant and meaningful improvements endoscopic healing, mucosal healing at 25% decrease and 50% decrease event respectively.

Importantly, fecal calprotectin, an important inflammatory marker declined significantly in the RHB-104 active arm from baseline through week-52 and that means also weeks 12, 26 and 52 in between. The bottom line is that this data confirms a broad potential benefit of RHB-104 as an add-on therapy to standard-of-care in Crohn's disease.

We continue to discuss with key opinion leaders and are preparing to meet with the FDA around mid-year to present the data package and discuss the development path to potential FDA approval.

We also expect and plan for successful Phase 3 data with RHB-104 for Crohn's disease to be presented at major conferences and to be published in major journals, subject of course to the acceptance.

To sum up, 2019 is an exciting and transformative year for RedHill, as our team continues to focus intensively on diligent preparations for the NDA submission of TALICIA, as well as the potential FDA approval and commercial launch of the TALICIA in the United States, potentially as early as the fourth quarter of this year.

We are confident and well-positioned for the future. We will now be happy to take any questions you might have..

Thank you. [Operator Instructions] Thank you. Your first question comes from the line of Christopher Marai from Nomura. Please go ahead and ask your question..

Good morning..

Good afternoon. .

This is Allen Cha on for Christopher Marai. Thanks for taking my questions. Just a couple from us.

First on 204, can you give us an idea of when we should expect a read out of the pivotal trial, assuming the 2019 start? Do you foresee any gating factors to enrollment? And also how do plan to differentiate RHB-204 from ERADICATE if it obtains real-time pricing? And the secondly on RHB-104 in Crohn’s, are you still looking to partner the assets considering the size of the indication? If so, how are the discussions going? And then lastly, are there any studies that you are contemplating for label expansions?.

Thank you. And thanks for all that. For RHB-204 we expect roughly one year for enrollment. And we expect enrolling NDA to be filed a little bit after six months treatment, primary-end point treatment finishes for the last patient in.

So it will take between 1.5 year to 1.1 year and then nine months we will file the NDA, it will be enrolling while the study continues, very similar in design to what Insmed had done. That covers that. Now comparing to ERADICATE it's an entirely different product from ours is aiming at a first line. ERADICATE is only approved for second line.

Ours will replace standard-of-care if approved. ERADICATE comes on top of standard-of-care. We believe that second line is probably 10% to 15% of the market. We are addressing the vast majority of the market. Our drug is already administered several times a week while ERADICATE is enhanced, again on top of orally administered antibiotics.

The price of ERADICATE is to the best of our knowledge roughly $130,000 [ph] a year. We expect to have a price competition, although we are in a different indication, we will be first line, ERADICATE will be second and the list goes on and on. It's really a very sharp difference and a very clear differentiation.

About label expansion for RHB-104 and partnering, label expansion is not something we're working on right now, although we are – we do have several programs that are early stage for additional indication.

As far as partnership discussions, also ongoing, they take time, it’s a very detailed and large data set, but so far going well and we are happy with what we are hearing, the data is very impressive. Anybody who digs into the data and understands Crohn's disease, then the history of data in Crohn's disease studies is deeply impressed.

I hope this answers your question?.

Yes, sure. You answered to that. Thank you very much, very helpful. Congrats on the progress. And I’ll pass the line..

Thank you..

Thank you. Your next question comes from the line of Scott Henry from Roth Capital. Please go ahead and ask your question..

Thank you. Good morning and congratulations on a strong year Dror. Just couple of questions, first, can you talk a little bit about the marketed products? They kind of dip down in Q4, just trying to get a sense of is that a trend or you said that just a blip. I was just trying to think about that Q4 relative to 2019..

Yes, we anticipated fluctuations on the quarter, there are couple of technical issues that affected the net sales price for Donnatal, and so on. But we believe Q1 is well under way to back on track and I wouldn't make too much other detail.

Overall we expect this year to be much better than last year regardless of how it fluctuates quarter-on-quarter, simply technical reasons, that we have to do with the net sales price which fluctuates all sorts of technical reasons. Nothing dramatic has happened as far as scripts, so anything like that the trend is good..

Okay, perfect. Thank you for that color.

And then when we think about modeling out the selling expenses, how should we think about TALICIA kind of pre-launch costs in 2019? And I guess when would you expect to start incurring those costs?.

We are already incurring those costs because, we have a lot of people and the external consultants, and so on who are very busy preparing for the launch of TALICIA as we speak.

For quite a while now to mention a few things of course marketing, and positioning, and managed care strategy, and manufacturing, and supply, all these things, packaging, labeling, lots and lots of things that we are working on, so it's already ongoing the cost stuff. For the moment impact is not huge.

What might make a difference is if we decide at some point to increase the number of sales reps, if we scale up significantly, which we don't necessarily need to, then we would probably be spending more.

But right now we are, as you probably saw in Q4, we are well within the guidance we provided for previous quarters, but cash balance continues to decline, because our studies are older. It might grow up later in 2019 if the pre-launch activities scale-up dramatically but right now it’s well under control..

Okay, great. And then just the final question when you meet with the FDA to discuss RHB-104 what kind of granularity are you expecting to get, are we really just thinking about the design of the second Phase 3 trial? Just trying to get a sense of what we should expect coming out of that meeting. Thank you..

Sure. I couldn't answer you better than what you just said. It's about the design of the next study. We expect enrollment in the next study of course, to be far, far, fair given the strong results we had in the past. We think patients will want in. And the GI question is we want to have patient into the study.

It will be much less of a [indiscernible] struggle. We might be able to have a shorter primary endpoint period. There's a lot of things to discuss with agency, that’s we are working on, details about the design of the next study and the possible programs..

Okay, great. Thank you Dror, for taking the questions..

Thank you. .

Thank you. Your next question comes from the line of Steve Brozak from WBB. Please go ahead and ask your question..

Good afternoon Dror. And thank you for taking these questions. Dror I just have two questions. And the first one given the Salix success story and obviously how they operated, what – and again maybe you can break this answer down in a number of different ways.

How do you compare the opportunities that you see with Redhill and what took place with Salix? And then I have a follow-up question on TALICIA please..

Steve we are not sure we understood the question and how it relates to Salix?.

Sure you have marketing – obviously your marketing person now has significant experience having been at Salix.

Can you tell us what the opportunities that you see in bringing someone like that into your Redhill fold?.

Sure. Yes, Rick Scruggs, who has joined us to Head, U.S. Operations comes to us with many years of experience.

He has been in Salix from the very beginning, was instrumental in building $15 billion, $16 billion enterprise value company within not that many years, 12, 14 years, with a very similar model to ours, initially, small company, vertical integration, GI-focused, U.S.-focused, almost identical model.

And we are very confident that Rick who has been with us for the last three years as a Director as well, who knows our company well, knows what we have got, he is the right man, at the right place, at the right time to make sure that we are launching our potential blockbuster, TALICIA the right way and make out of it for our shareholders, for the patients and overall for the future growth of RedHill positioning us as a leader maybe the leader in the GI space..

Great. I appreciate the kind of clarity because obviously this is something where you are doing it de novo, but you are someone that’s had experience in the past, which brings me to TALICIA because obviously you had mentioned before about the central part of TALICIA being rifabutin.

But can you give some color as to why TALICIA is formulated with a different advantage with rifabutin and what that means for TALICIA when you do launch it? And I'll hop back in the queue after that question. Thank you..

Thank you Steve, that's a great question. What differentiates TALICIA is that it is the only drug that is rifabutin based in the H. pylori space. Rifabutin, as we have demonstrated, or the data in our study demonstrates, starts from no resistance.

We have seen in the patients that participated in our study that resistance to commonly used antibiotics, metronidazole and Terramycin erythromycin [ph] is really, really high.

It’s a very clear differentiator and we are confident based on the results we have seen that the product once if and when approved by FDA will be positioned to become not only a new standard-of-care, but also the only approved standard-of-care for first-line treatment of H. pylori specifically as opposed to ulcer or ulcer-related H. pylori.

It’s a unique and broad indication. And TALICIA is the only rifabutin-based therapy that is getting close to the market. Thanks for bringing this up it's very important..

Great. Thank you again..

Thank you. Your next question comes from the line of Matt Kaplan from Ladenburg. Please go ahead and ask your question..

Hi good morning Dror and congrats on the progress in 2018. Just wanted to take a little bit more into TALICIA and the upcoming NDA filing, I guess two questions there.

I guess what are the next steps necessary to complete the NDA filing? And what's the rate-limiting step there? And then give us a sense in terms of the probability of a six-month priority review..

Thanks Matt. Yes great questions. Yes the NDA we plan [indiscernible] meet the FDA very soon in the coming weeks and are preferring to submit the NDA if all goes well immediately thereafter within the first half of this year. Priority review, we are eligible to that because under the GAIN Act we already received a QIDP status.

So the eligibility for priority review is already there. What we need to do is file the NDA..

Okay, perfect. Thanks. And then with RHB-104 you're expecting to start the Phase 3, pivotal Phase 3 in the second half of the year.

Can you give us some detail in terms of what you're thinking the Phase 3 study will look like in terms of design and number of patients, endpoints and stuff like that?.

Sure. Great question Matt. Gilead is with me. He will answer..

Thanks..

Hi Matt. Thanks Dror. As we discussed with the FDA previously, the design seems to be relatively clear. Approximately 100 patients are anticipated to be enrolled. The comparators intended to be placebo against RHB-204.

And the primary endpoint is anticipated to be at least for the accelerated approval process of six months, conversion of the sputum analysis. So as Dror mentioned we expect that to take about a year for enrolling that cohort..

Okay. And then the full end points for full approval..

The full end point is not 100% clear yet, still more discussions with FDA will have to take place for that..

Okay, great. Thanks for that added color. And just to follow-up on, on Scott's question, you had mentioned in terms of your current commercial products that they are back on track.

Does that mean they're back on track for growth in 2019, as you saw strong growth in 2018 over 2017? Just can you give us some more detail there?.

Sure. Yes we feel good about the trend way of saying and we are optimistic. We think we will see growth. Frankly, most growth will probably come from additional products that we are going to bring if all goes well into the basket. We are very busy with that.

And we hope to be able to secure attractive products to bring into the baskets of our reps that will hopefully, dramatically change the numbers that we are currently seeing. Hopefully even before the TALICIA launch..

Very good. Thanks again for taking the questions..

Thank you..

Thank you. Your next question comes from the line of Swayampakula Ramakanth from H.C.Wainwright. Please go ahead and ask your question..

Thank you. Good afternoon Dror. A couple of quick questions. Compared to the opportunities that you have in front of you, the current revenue lines maybe fail, but at the same time, the strength of the current commercial team is what is going to help you out later in the year when you get TALICIA to the market.

So thinking through that, I'm just trying to understand what have you been learning as a commercial team? And as you keep adding products to it what are you noticing? And I also would like to see if you can give us a little bit of a color on the Mytesi launch and how that is going? And at the same time how is the team preparing for the big launch, which is the TALICIA coming up at the end of the year?.

Thanks RK. I’ll start from the last. I would say by far the highest priority for us right now is preparing for the NDA potential approval and potential launch of TALICIA, because this is a company maker, with excellent results in what we believe are excellent prospects.

By the way, not only in the U.S., but worldwide again more than half of the world's population is infected.

With regard to the preparation they include, generally speaking, all the CMC aspects, meaning everything related to manufacturing, and labeling, and packaging, and so on, scaling up the commercial batches that need to be manufactured and so on and so on.

It includes everything that has to do with the preparations for – positioning for marketing against sales. Manage markets of course is the key priority and the strategy there needs to be the right one.

And then of course the planning for the launch of as far as how many reps, where will they be, the mapping, and so on, there's a lot of data analytics that goes on. And when I talk about your first question, which is about what have we learned, I would say by far the most important item that we learned was how important market access is.

Market access in the U.S. is a key if not the key component, the brick in the wall. And we are putting a lot of efforts into that. Related to that, I can say that for the product that we are currently promoting except one, market access is primarily dealt with by our partner that's the key learning points to-date.

About Mytesi, Mytesi belongs to a public company, Jaguar who is a wonderful, excellent partner to great products. The label is strong, the clinical studies generated very strong data, the need is there. And we are promoting the product with our reps alongside the reps of Jaguar or Napo Pharmaceuticals.

I cannot comment about the numbers or about the growth because Jaguar is a public company and we would rather have them disclose what they feel comfortable with. I hope I answered your question..

Thank you, that's very helpful.

So most of my other questions have been answered, just a simple question on RHB-104, I just like to see if you can provide us some color as to how the discussions with potential partners are going in terms of collaborating for RHB-104 and also would you wait for some of these partnerships to get to a certain stage of maturity before designing the next big study, or these are things are going to be happening independently?.

We will try independently because everything works in parallel. The likeliest scenario is probably that we design the study, we meet with FDA and it might well be that we have a partner for the study itself. But there's a lot of discussions, is it going to be only an ex-U.S. deal where – we keep the U.S.

for ourselves, especially given how strong our GI sales force is in the U.S., and so on, and so on. We continue on all processes, the design of the study is an independent matter..

Thank. Thank you very much and congratulations on the year..

Thank you..

Thank you. Your next question comes from the line of Robin Garner from LifeSci Capital. Please go ahead and ask your question..

Hi, congratulations on the quarter. And thank you for taking my call. You started the call talking about still performing the pharma partnerships and in-licensing activities. And I was wondering if you could give us some guidance on the target number of programs you expect you might in-license for 2019. That would be my first question.

My second question is around the sales force and what is the current size of it right now, as you prepare for a Q4 2019 launch. And lastly, just to touch on one of your comments from a prior question, I just like to ask what preparations are there, have there been for worldwide sales on TALICIA.

Thank you again for taking my call – my questions?.

Thank you. Thank you, Robin.

The last question was about projections?.

The last question was on whether it's partnership activities or any other plan for ex-U.S.

sales?.

Okay. Yes our partnership activities are intensive ones outside the U.S. to give you an example the estimate is that there is over 700 million patients in China alone probably 800 million in India, Europe is very big. So absolutely there's a lot of interest in the product, given the immense scale of the prevalence of this infection.

We know that in China there are hundreds of thousands of people that develop gastric cancer every year, unfortunately hundreds of thousands of them die every year from gastric cancer. And we know that H. pylori is the main cause of gastric cancer. Those are serious public health concerns, absolutely. So China is an example.

About Q4 launch of TALICIA, we are preparing to launch as soon as possible following the PDUFA date, assuming we are approved, that's the plan. To be ready we are doing everything that is needed as far as preparing for the right inventory, and managed care discussions, and pricing evaluations, and so on, and so on.

We are doing everything it takes either internally or with the external experts we've done it before. We have a very strong management team based in Raleigh, North Carolina that is focused on these preparations and now headed by Rick Scruggs, who we discussed earlier, who is very experienced.

The VP’s that we have in Raleigh, all very experienced, they have done it before. We are very comfortable with our team’s ability. And they are ecstatic about this opportunity to launch a potential blockbuster less than a year – potentially less than a year away. About your first question, I'm not sure I understood the question..

Sure.

So my first question, do you plan to in-license more than one program in 2019, since this directly relates to revenue for the company as well?.

We are trying, yes. We are trying to in-license more than one. We may end up with two, or three or nothing, that's the nature of business development activities. But we are cautiously optimistic that we will secure at least one..

Great. Thank you so much..

Thank you, Robin..

Thank you. Your next question comes from the line of Jonas Peciulis from Edison. Please go ahead and ask you a question..

Yes, good afternoon.

So my first question is just a quick one to clarify in TALICIA and the next step, are you going to release any more results of data from the Phase 3 trial before you submit the NDA or are you just going with the submission directly straight to the submission?.

Thank you. We have all the data that we need to go ahead and meet FDA and then following that hope to submit the NDA. We don't anticipate additional data coming out of the study..

Okay. That's great. Thank you.

So last one, quick one on financials, so in the past you used to provide certain cash levels as the guidance, can you sort of indicate probably any details about for 2019?.

Hi, thank you for the question. Since we are going to have before NDA submission, some one-time cost like the PDUFA fee and some manufacturing cost, we are still not providing guidance like we provided before. For all the other expenses, we should stay in the same neighborhood or below of the last year and the last guidance that we provided..

Okay. That's clear. That's all for me. Thank you..

Thank you. Your final question comes from the line of Ed Woo from Ascendiant Capital. Please go ahead and ask your question..

Yes. Thank you for taking my question.

In terms of when you do launch TALICIA if you do get approval by this year will that impact your commercial operations of your other drugs that you're already curved and commercializing will that take away focus from a sales force?.

So we currently have capacity to add products to the bucket of the sales team. And as we add more products, TALICIA being a major additional product, we will see if and when the capacity is met, then we might have to prioritize with leading products in the basket. But we're not at that stage yet..

Great. Well, thank you and good luck..

Thank you..

Thank you. There are no further questions..

Thank you for participating today and we wish everyone a wonderful week. Thank you..