Redhill Biopharma Ltd (RDHL) 2021 Q1 法說會逐字稿

Good day, and welcome to RedHill Biopharma's First Quarter 2021 Financial Results Conference Call. (Operator Instructions)

I would like to introduce to the conference call RedHill's CEO, Dror Ben-Asher; Micha Ben-Chorin, RedHill's Chief Financial Officer; Rick Scruggs, RedHill's Chief Commercial Officer; Gilead Raday, RedHill's Chief Operating Officer; Guy Goldberg, RedHill's Chief Business Officer; Adi Frish, Chief Corporate and Business Development Officer; Rob Jackson, RedHill's Senior Vice President of Sales and Marketing; and Bob Gilkin, RedHill's Senior Vice President, Market Access and Trade Relations.

Before we begin, we will read from the RedHill's safe harbor statement. Please go ahead.

Thank you, Tracy. This conference call may contain projections or other forward-looking statements regarding future events or the future performance of RedHill, including statements with respect to the business promotion and other efforts related to RedHill's commercialization activities and the initiation, timing, progress and results of RedHill's research, manufacturing, preclinical studies, clinical trials, marketing applications and approvals, if any, including the clinical trials of opaganib and RHB-107 for the treatment of COVID-19. These statements are only predictions and rather cannot guarantee that they will, in fact, occur. RedHill does not assume any obligation to update that information. Actual events, performance, timing, results or commercialization activities may differ materially from what RedHill projects today. Additional information concerning factors that could cause actual events, performance, timing, results or commercialization activities to materially differ from those contained in the forward-looking statements can be found in the company's annual report on Form 20-F filed with the SEC on March 18, 2021, and in its other filings with the Securities and Exchange Commission.

I will now turn the call to RedHill's CEO, Dror Ben-Asher.

Thank you, Alexandra. Good day, everyone, and thank you for joining us today. We will be presenting detailed highlights, so please remember to press on the link to follow the slides.

The WHO's Director General stated recently that we are on track for the second year of this pandemic to be far more deadly than the first. RedHill understands its calling, particularly because both our advanced clinical stage drug candidates, opaganib and RHB-107, are novel, expected to address new variants and our oral pills with patent protection until at least 2041, as we announced yesterday. Our highly motivated team is doing everything humanly possible to get to the finish line. This is evidenced by the fast progress of these 2 programs. RedHill is now positioned at the very forefront of novel COVID-19 therapeutics development. In fact, to the best of our knowledge, opaganib is currently the most advanced novel, dual mode of action, both antiviral and anti-inflammatory oral drug candidate of its kind in development for COVID-19. Our global 464 patients Phase II/III study in severe COVID-19 has been approved in 10 countries. It is almost 100% enrolled, and we eagerly await the upcoming top line results. Our Chief Operating Officer, Gilead, will elaborate shortly.

Commercially, a very strong end to the quarter, has set up 2021 for further growth, reversing a slow start to the year across the industry. Movantik new prescriptions in the first quarter outperformed the same quarter last year prior to its acquisition by RedHill from AstraZeneca. Talicia's consistent growth in prescription volume, repeat prescribing and new prescribers are encouraging and will likely be the key growth drivers in the coming years.

We are more confident than ever about Talicia's prospects to become the new standard of care for H. pylori for years to come, as the only drug, both approved in the U.S. for first-line treatment and addressing head-on the main public health concern of high and growing H. pylori resistance to antibiotics.

The U.S. is now emerging from the shadows of COVID-19, with patients returning to clinics and travel resuming, positively affecting also Aemcolo's prospects. Rob, our Head of Sales and Marketing, will provide additional details in a moment.

To sum up, RedHill is set for numerous near- and longer-term milestones and both organic and nonorganic growth and strong momentum. Before turning back to Guy for our presentation, please remember to press on the link in order to see our detailed slides, to be followed by a Q&A session.

Guy, please?

Thank you, Dror. As we conclude the first quarter of the year, RedHill has shown strong consistent performance on the commercial side of the business and rapid clinical progress on the R&D side, notably with our COVID programs.

In our presentation, we will provide more detail on our R&D, commercial and finance operations to complete the picture of the progress we are making and where we hope to be this upcoming year. We believe we are well positioned for growth in 2021 and in the years to come.

I would like to provide a brief overview of RedHill for those of you new to the story who may be on the call today. RedHill is a fully integrated specialty pharmaceutical company focused on gastrointestinal infectious diseases with a robust pipeline of drugs and a world-class commercial operation run out of our U.S. headquarters in Raleigh, North Carolina. We promote 3 FDA-approved drugs: Movantik, Talicia and Aemcolo that you see here on the slide and have multiple late-stage programs in development, addressing important unmet medical needs. As a result of our diverse activity, we have many paths to grow and build value.

This is our pipeline slide. Rob Jackson, our Senior Vice President of Marketing and Sales, will be going into detail on the commercial products. And Gilead Raday, our Chief Operating Officer, will be doing so for our COVID programs in RHB-204. So we'll briefly update where we are with our other programs, notably RHB-104 for Crohn's disease.

As a reminder, RHB-104 for Crohn's builds on the growing evidence from various studies in intracellular mycobacteria play a crucial role in Crohn's disease. Testing this theory, we conducted a Phase III study in Crohn's disease that successfully met our primary and key secondary endpoints, including remission at 26 weeks, response at week 26, early remission at week 16, durability, maintenance and others. Overall, RHB-104 demonstrated meaningful consistent and statistically significant clinical activity. We continue to advance the program in various ways and hope to have some news later this year.

Right now, given the intense effort we are making as a small company to fight this pandemic, our R&D efforts are focused on running COVID studies in parallel with opaganib and RHB-107. And we're also focused on RHB-204 for NTM disease. If there is nothing approved first line, then we could be the first.

So this slide highlights our progress since our last earnings call. Despite industry-wide challenges and usual first quarter effects, revenue has held steady, and we believe we will see growth throughout the year and all our products and for years to come. As a small company with a new commercial operation, we have stood the test of the pandemic and shown to be a resilient organization. This is because we have hired the best people for our commercial team and ensured that we have the most seasoned veterans leading our efforts.

Our Talicia launch continues to achieve important milestones that Rob will walk you through. We believe this product has enormous potential both for patients and as a value driver for RedHill as a company. As with almost all launches, it takes a little time to build awareness and acceptance, both in reimbursement and also with physicians. We have been working very hard from day 1 on these efforts and believe we will gain significant market share as a result.

With Movantik, we continue to protect our leadership position in the PAMORA space, and we believe we'll see growth during the rest of the year and the years to come. There is still a very large and underserved OIC patient population. We have a good cash position of approximately $92 million as of March 31 to support our R&D and commercial efforts. And this, combined with our strict financial discipline, provides a good foundation to achieve planned potential commercial operational breakeven by the end of the year.

On the R&D side, a lot of attention has been given to our COVID program and rightly so. There have been very few, if any, breakthroughs on the treatment front and many failures as we're all beginning to accept, even with the most optimistic and aggressive vaccination scenarios, COVID is likely to be an endemic global health problem, which will be around for a long time. There is an acute need for effective treatments, especially given the growing concerns around mutation. In this regard, we are very excited about opaganib. We are almost finished enrolling our global Phase II/III study, which means a robust data set will be available shortly. We're also progressing RHB-107, our second COVID program, which addresses the mild-to-moderate patient population. And another central program for us is our ongoing study for RHB-204 for NTM disease, an important indication with no approved first-line treatment. RHB-204 could be the first drug approved to treat this important orphan disease, and Gilead will update you about that shortly.

This slide shows on a 30,000-foot level our vision to become a leading specialty pharmaceutical company. We believe the key to success is to grow both organically and nonorganically. In other words, to develop drugs in-house that we believe in and that we identify as meaning in an unmet medical need and also to opportunistically bring in commercial-stage products from other companies. We have been successful so far with this approach as when we acquired Movantik from AstraZeneca and also when we developed Talicia all the way through 2 clinical studies approval and launch. We will continue with that strategy into the future. We continue to be in discussions for both in-licensing and out-licensing opportunities. We are here to build the leading specialty pharmaceutical company of the future.

And with that, I will now turn the presentation over to Gilead.

Thank you, Guy. I'm pleased to present RedHill's R&D progress highlights. COVID-19 continued to be a major R&D focus for us in 2021. RedHill is at the forefront of the efforts to develop orally available therapeutics for COVID-19, with 2 promising and rapidly advancing Phase II/III stage therapeutic candidates.

Opaganib and upamostat are both orally administered novel small molecules with potent antiviral activity. Being orally available provides them an important advantage in terms of ease and simplicity of distribution and administration. Both compounds exert their antiviral activity through targeting of a human host cell factor, so they act independently of the mutations to the viral spike protein. As such, they are expected to be active against the emerging variants, including against variants which may be resistant to certain direct-acting antibody.

Looking at the overall COVID-19 therapeutics field, while vaccine deployment establishes some pockets that seem to be nearing herd immunity, the worldwide infection rates continue to increase and there remains an urgent unmet need for a highly effective, safe and easy-to-use COVID-19 therapy. The clinical and operational challenges of developing a therapeutic for COVID-19 have established a steep pyramid with very few remaining promising and advanced oral therapy candidates at the top. With our 2 promising and differentiated oral therapy candidates, Red Hill is uniquely positioned to potentially benefit COVID-19 patients worldwide.

Opaganib is our first advanced oral therapy candidate for COVID-19. It targets SK2, a human intracellular enzyme with multiple functions. Opaganib acts dually both as a broad-spectrum antiviral and also as an anti-inflammatory. Importantly, by targeting a human host cell factor, opaganib is expected to uphold its antiviral activity against the continually emerging variants, which raise concern of resistance to direct-acting antibodies and possibly also to vaccines. As an orally administered pill, opaganib has clear advantages in terms of its distribution and administration. And due to its unique dual mechanism of action, it could potentially treat a broad range of COVID-19 patients from mild outpatients to severe hospitalized patients. Given the broad potential utilization of opaganib, we have embarked on setting up a robust supply chain for its scaled-up manufacturing.

We are now at the final stages of enrolling patients into our global study in 464 patients, with last patients expected to be enrolled in a few days. Once that is reached, last patient out and ensuing top line results are anticipated to follow shortly thereafter.

To recap, opaganib has already successfully obtained promising milestones. Opaganib successfully completed a randomized controlled Phase II study in the U.S. in 40 patients, demonstrating positive safety and efficacy signals. The ongoing global Phase II/III study has already passed 4 independent safety monitoring reviews of unblinded data, covering the first 255 subjects, and also an unblinded futility analysis from the first 135 patients enrolled. We also have positive compassionate use experience with opaganib from Israel, Switzerland and recently also cleared in Belgium. This resulted in a publication in a peer-reviewed journal, reporting that compassionate use of opaganib in severe COVID-19 patients demonstrated a substantial benefit as compared to matched case controls from the same hospital, including improvements in inflammatory and disease markers.

Furthermore, opaganib compared favorably with remdesivir in inhibiting the replication of SARS-CoV-2 in human lung bronchial tissue showing complete inhibition of viral replication. In addition, extensive preclinical data supports the broad antiviral properties of opaganib and the potent anti-inflammatory activity. And clinical safety data has by now been obtained in hundreds of patients, indicating good safety and tolerability of opaganib.

As a reminder, opaganib shows encouraging results from the successfully completed Phase II study, randomized, double-blind, placebo-controlled in hospitalized patients with severe COVID-19 patients. These are patients who require supplemental oxygen supported baseline, corresponding to Levels 4 and 5 on the WHO ordinal scale of disease severity. Patients were randomized to receive either opaganib or placebo. Opaganib was given 500 milligrams twice a day on top of standard-of-care therapy for 14 days. In terms of the standard-of-care unit in the study, approximately 80% of subjects received dexamethasone and 50% received remdesivir, the majority of patients receiving both.

With respect to efficacy signals, opaganib showed a benefit in reducing the need for supplemental oxygen. Specifically, a greater proportion of patients treated with opaganib no longer required supplemental oxygen by day 14. Opaganib also showed improvements in time to discharge from hospitals. And importantly, these observed benefits were consistent where the patients were treated with remdesivir or corticosteroids or both as the underlying standard of care.

In terms of safety, opaganib was overall safe and well tolerated. For an update on the progress of the ongoing global Phase II/III COVID-19 study with opaganib, this randomized double-blind, placebo-controlled on top of standard-of-care study in hospitalized patients with severe COVID-19 is nearing the completion of enrollment of its 464 subjects, with almost 100% of subjects already enrolled, we expect the last patients to be randomized in the coming days. Last patient out is expected to take place at the end of the follow-up period of 6 weeks. And top line results should be expected soon thereafter. The primary endpoint of the study is the proportion of patients breathing room air without oxygen support by day 14. The study will also capture additional standard important outcome measures in the follow-up period of up to 6 weeks, such as the incidence of intubation and mortality. The study has been approved in multiple countries, including Italy, U.K., Poland, Russia, Israel, Mexico, Colombia, Peru, Brazil and was recently also opened in the U.S. Four independent DSMB recommendations to continue the study were already provided, following unblinded safety and futility review. Furthermore, an evaluation of the blinded, blended intubation and mortality rates to date is encouraging, as compared to what might be expected in the treated patient population based on reported rates of mortality from large platform studies, such as RECOVERY and other studies in similar patient population.

In terms of regulatory development, FDA has indicated that additional study to support applications in the U.S. will be needed. Evaluations and discussions continue with the FDA, EMA and regulators in other countries as to the path to the applications in the various respective territories. It should be noted that the COVID-19 regulatory landscape has evolved over the last year and continues to do so rapidly. Initially, in the early stages of the pandemic, FDA and other regulatory agencies approved emergency use based on very limited data due to the absence of approved therapies or vaccinations and coupled with widespread serious diseases. Today, with the advent of vaccinations and with several emergency use approved therapies, FDA requirements have become stricter and the hurdles for approval have risen accordingly. Our expectation per discussions with senior expert consultants is that the strength of clinical safety and efficacy data will be key to potential regulatory application.

RHB-107, also called upamostat, is our second Phase II/III COVID-19 program. And it is currently targeting COVID-19 in the outpatient setting, the largest category of COVID patients. It is a novel orally administered serine protease inhibitor with potent anti-SARS-CoV-2 activity, as demonstrated in an in vitro model of human bronchial tissue. Upamostat targets a human cell factor involved in enabling viral entry into the cell, so it, too, is expected to uphold its activity against the continually emerging variants. Upamostat is also simple to distribute and administer, orally available pill, which is particularly well suited for treating the mild-to-moderate outpatients. We have initiated a Phase II/III study of upamostat in COVID-19 outpatients in the U.S. and are in the process of expanding it globally to territories in which the infection is widespread and access to vaccination is limited. The study is targeting 310 patients to be enrolled in a 2-part randomized, double-blind, placebo-controlled Phase II/III study. The endpoints of the study include time to sustained recovery and the incidence of hospitalization and disease progression. Patients will also be tested for their specific viral strain.

On non-COVID-19 pipeline front, we have initiated the Phase III study for treating first-line nontuberculous mycobacterial infection with RHB-204. Nontuberculous mycobacterial infection, or NTM, in short, is a rare disease with chronic debilitating manifestations and with no FDA-approved first-line therapy. RHB-204 is a promising potential first-line stand-alone oral therapy. Its all-in-one combination capsule is designed to ensure that the proper combination of antibiotics is administered with each dose, intended to safely and effectively treat NTM and maintain macrolide sensitivity. RHB-204 has been granted orphan drug designation, qualified infectious disease product designation and Fast Track designation. With these designations, it is eligible for priority review of the NDA and for 12 years of market exclusivity. The randomized placebo-controlled Phase III study is planned to enroll 125 patients at up to 40 sites across the U.S. And as is the case across the industry in non-COVID-related clinical studies, we are experiencing screening slowdown due to the constraints imposed by the pandemic on sites, physicians and patients. We are addressing this and are planning to expand the study to additional territories outside the U.S., and we expect enrollment to pick up over time as the impact of COVID-19 subside. The key study endpoints of sputum culture conversion and patient-reported clinical outcomes will be evaluated at month 6, with ensuing longer-term follow-up, including the post-treatment maintenance of conversion.

I will now turn it to Rob, our Senior VP of Sales and Marketing, to update on our commercial progress.

Thank you, Gilead, and good morning to everybody. Over the next few minutes, I'll summarize our sales, marketing and market access achievements during the first quarter of 2021.

As a company, we're very enthusiastic about our business prospects for this year, having Talicia, Movantik and Aemcolo in our bag and having many new growth opportunities ahead of us as a company. As Dror mentioned, the RedHill team is resilient, and we have worked together to overcome the environmental challenges during first quarter of COVID-19 lockdowns, winter weather in the Central United States, a new deductible season for patients and an overall decline in patient diagnostic visits.

Before I get any further, I want to give credit to everybody at RedHill, and especially to our sales team, which has consistently supported our effort to transform RedHill's business during the pandemic in 2020 and also in the first quarter of 2021. During the first quarter, we grew Talicia prescription volume by 11% over fourth quarter of last year. We also grew Movantik new prescription volume by 4% over the same period prior year. And most impressively, RedHill achieved a number of significant sales milestones for Talicia.

In the first quarter and for the month of March, we achieved the following sales milestones for Talicia: First, we achieved our highest quarterly prescription volume during first quarter. We also achieved our highest single month prescription volume in the month of March. We achieved our highest weekly prescription volume, and we also achieved our highest level of commercial payer coverage. When you consider that RedHill launched Talicia 1 week before the COVID-19 shutdown kicked in, we have proven our ability to be resilient, and we have done well with this brand.

Looking back, you can see that we have achieved steady growth for Talicia, with the exception of January and February. Those 2 months were very challenging for the reasons that we previously mentioned. In March, we rebounded and achieved our highest monthly prescription volume for Talicia. Throughout first quarter, we've been strengthening our sales organization and our payer coverage. And as those changes take effect, we expect to see further acceleration in our growth, especially during the second half of 2021. We are increasingly confident that Talicia will become the new standard of care for H. pylori eradication.

As we continue to expand our base of Talicia prescribers, we're also increasing the depth of Talicia prescribing. In March, we had the most prescribers since launch of Talicia. 63% of Talicia prescribers were repeat prescribers, and that's a 7 point increase over where we were in December of 2020. I think this statistic really speaks to the effectiveness of Talicia and the high-level prescriber satisfaction with the Talicia brand. H. pylori infection is the leading risk factor for the development of gastric cancer. And the issue of clarithromycin resistance is very real for clinicians, payers and patients. As more payers and prescribers realize this important fact and they realize how clarithromycin resistance has a negative impact on their ability to eradicate H. pylori infections, they will become even more favorable to prescribing Talicia and more averse to using any clarithromycin-containing therapies to treat H. pylori infections.

Antimicrobial stewardship is an important issue. And when the most effective antibiotics are used first line, they provide the best chance for cure while eliminating the need for second, third and even fourth lines of treatment. The American College of Gastroenterology recognizes this in their guidelines for H. pylori therapy. And as we educate prescribers, more of them understand the growing challenge with clarithromycin-based therapies and the benefits of Talicia.

As I previously mentioned, we have continued to improve our commercial coverage for Talicia. In first quarter, our market access team improved commercial coverage by 8 points, ending the quarter with 77% commercial coverage. Most patients covered by commercial insurance can access Talicia without restrictions. And our goal is to further improve Talicia's commercial coverage in the months ahead.

Switching to Movantik. We exited the first quarter with a strong month in the month of March. Movantik is our strongest and largest brand, and Movantik remains the undisputed market leader with 75% market share. As we ramp up promotion, we expect we can grow this brand despite the ongoing decline in opioid prescriptions. As the market leader, we are very motivated to grow the PAMORA category, and there's ample opportunity to do so. In the United States, we estimate that up to 6 million to 12 million Americans suffer from opioid-induced constipation. Although many patients might try an over-the-counter option before Movantik, the vast majority, about 71%, report dissatisfaction with their available treatment options.

Movantik also has the best coverage without restrictions in the PAMORA class for both commercial and government payer segments. Today, 9 out of 10 commercially insured patients and 7 out of 10 Medicare Part D patients can access Movantik. And effective April 1st, Cigna Medicare Part D now covers Movantik. This increased Movantik Medicare Part D coverage by 3%.

I would also like to provide an update on Aemcolo, our travelers' diarrhea treatment. At the start of April, RedHill resumed promotion of Aemcolo. And as the pandemic resides, travel is resuming, especially within North America and particularly travel to Mexico. Travel to Mexico has doubled since its pandemic low last April, but it still remains about 50% below normal. International travel outside of Mexico remains even lower. Despite that, we know some intrepid travelers are determined to get away, and we are equally determined to help them enjoy the vacations by equipping savvy travelers with Aemcolo.

Aemcolo is also very competitively priced. Additionally, our commercial coverage continues to improve, and our commercial coverage for Aemcolo is now 82%. That's an 18 point improvement over where it was in January of 2020.

In conclusion, I'd like to leave you with a couple of things that we discussed today. First, RedHill achieved numerous commercial milestones for Talicia in first quarter 2020 -- excuse me, 2021. We expect that this will become the new standard of care. We achieved our highest quarterly prescription volume in the first quarter, our highest monthly volume in the month of March, our highest weekly prescription volume and our highest level of commercial payer coverage. As the market leader in the PAMORA class, we have demonstrated the ability to continue to grow new Movantik prescriptions versus 2020. And we are also in the early stages of returning Aemcolo to active promotion in line with the return of international travel, especially travel going to Mexico. And as our investments in people, resources and capabilities come to fruition, we expect to deliver even stronger performance in the months ahead.

Thank you for your time, and I'm going to turn the call back to our CFO, Micha Ben-Chorin.

Thank you, Rob. I will provide a short financial overview now. RedHill is delivering on a clear growth strategy designed to enable us to achieve planned potential commercial operation breakeven by the end of this year. We have been diligent in maintaining solid balance sheet and spending discipline. We have $92 million in cash as of March 31, '21, and we have reduced cash burn from operating activities compared with Q4 2020, which stands at $12.3 million during this first quarter of the year.

Net revenues were $20.6 million for the first quarter of 2021, a decrease of $0.9 million compared to the fourth quarter of 2020. The decrease was mainly attributable to a typical cyclical seasonality trends in Movantik ex factory sales. We maintained a consistent gross margin of 50%.

Research and development expenses increased $1.3 million compared to the fourth quarter of 2020, mainly attributable to the progress of our COVID-19 development programs.

Selling, marketing, general and administrative expenses decreased by $3.3 million compared to the fourth quarter of 2020. Operating loss and net loss for the first quarter are lower by approximately $1.5 million compared to the fourth quarter of 2020. The decrease was mainly attributable to decrease in marketing expenses.

Net cash used in operating activities was $12.3 million for the first quarter of 2021, a decrease of $0.4 million compared to the fourth quarter of 2020. Ending the quarter with a strong and healthy cash position of $92 million allows us to continue to drive our core business forward.

I will now turn the discussion back to Dror.

Thank you, Micha. Tracy, we are happy to take questions.

(Operator Instructions) Your first question today comes from the line Ram Selvaraju from H.C. Wainwright.

This is -- dialing in for Ram Selvaraju. I just wanted to start off a discussion with the Movantik launch that happened 6 years ago. So I'm curious, what lessons were learned from it that can help frame the -- for the next 6 years? And also, what strategies are put in place to drive that option in U.S. as the economy is recovering from COVID-19?

Thank you. This is Dror. I will refer this to Rick and Rob.

So Rob, this is Rick. So the question was lessons learned from AstraZeneca's launch of the product and then lessons we can -- what we're doing going forward? Is that -- was that the question? I'm sorry. I missed that.

Yes. That's the question.

So first, I'll speak to a couple of things, the lessons learned. So AstraZeneca did a great job of launching this product. They spent, I guess, upwards of $1 billion preparing the market and launching the product. It is -- has great brand awareness. We have learned and trying to build upon that. And so with that, I'm going to hand to Rob who is responsible for building upon this great brand that we have purchased from AstraZeneca. Rob?

Sure. Thank you, Rick. I think the #1 lesson that we've learned from them was probably the importance of market development. They invested very heavily in the early years in both their sales force as well as advertising investments, which established the great brand that we have today. So it's our job to continue to build on that. And as I mentioned in my presentation, there's still a very large untapped market of individuals who are suffering from opioid-induced constipation. So as a marketing organization and a sales organization, what we're trying to do is really encourage those conversations to take place, those critical conversations between the patient and the prescriber about their opioid-induced constipation symptoms and different options that patients have to improve their conditions and reduce their suffering.

As I mentioned, a lot of people go to over-the-counter options first. Over-the-counter options don't -- they don't effectively address the underlying cause of opioid-induced constipation. You really need a PAMORA class drug to do that. And Movantik, clearly, in our opinion, is the best choice to do that. So as we continue to expand those conversations, continue to raise awareness with patients about what their options are and what these PAMORA drugs are and what Movantik is all about, we think that by growing the market as a market leader, we'll be able to continue to grow the brand.

All right. I just wanted to touch base a little bit on the pooled analysis study that was published recently. So could you comment on the incidence of abdominal pain in the Movantik group versus the placebo group?

Rob, do you want to take this?

Dror, I'm not prepared to take that question. I don't have the answer to it at my fingertips. I apologize for that.

No worries. So we will get back to you on this. Rick, you want to answer that?

No. I'm going to say I need to get back on this as well. So which study you're referring to, I mean?

I was talking about the pooled analysis study that was published recently.

So we'll follow up with you on that.

Right. Okay. No worries. So moving forward, with respect to travelers' diarrhea market. So how do you think the regulatory agencies and prescribers view the travelers' diarrhea clinical severity, classification tool? Do you see any immediate impact of this tool and Aemcolo's market penetration?

Thank you for that. I'll refer that to Rick and Rob.

Rick, would you like me to take it?

Yes, go ahead.

I think the tool will certainly be helpful. I think we have a great brand here in Aemcolo that offers some unique benefits to prescribers. And what we're focused on as a company is really trying to get patients to have Aemcolo as a proactive prescription. So anything that we can do to increase the level of conversation around travelers' diarrhea will be a plus. And as we try to do that and raise awareness with the prescribers and get patients prepared for their travel, I think that all ties together very nicely as we try to build this market with the Aemcolo brand.

Understood. So with respect to opaganib for COVID-19, what are your expectations from the ongoing Phase II/III trial? Assuming the data is positive, when do you anticipate regulatory filing and potential approval would occur? And also, what are some of the preliminary feedback you are hearing from physicians regarding the compassionate use of opaganib?

To answer the latter first, feedback from opaganib use is very positive. Some of it has been published. So this is a very easy answer. Whoever, has been using it under compassionate use, is providing us with very positive feedback. And again, some of it was published.

Regarding filings, data is king here. The consultants that we are working with, some of them very senior FDA officers previously, are very consistent and clear about how critical the strength of the data that we are going to generate soon, both safety and efficacy, is going to be in order for us to be able to file.

I can tell you, for example, we haven't said it publicly yet, so this is the first time, that we have met with EMA yesterday, the European -- EU -- the EU FDA, so to speak. A very good meeting. And it's the same message. Data is everything. This is for conditional application approval in the EU. And this is everywhere else, be it in Asia or Latin America, pretty much everywhere.

So to sum up, our plan is to generate a good as possible data, package it appropriately, show it to the regulators everywhere and have that discussion. Whether or not we'll be filing for emergency authorization, conditional approval in different places or even full marketing application later on entirely remains up to the strength of the data as well as the feedback that we'll be receiving from the various regulators.

In the U.S., for example, the regulatory environment has been developing very fast. If initially nobody knew anything about the disease. Nobody knew that the disease existed and then nobody knew what to do with it or how it affects patients, both in the immediate term and the longer term, more and more is being learned. A lot of mistakes have been done throughout the last year, almost 1.5 years now. And the regulatory approach, as Gilead explained, has been changing rapidly, and it keeps changing.

To give you one example, the follow-up period for treatment kept changing, and rightly so. If initially a couple of weeks or a month were sufficient as follow-up, now 6 weeks is pretty much the standard as follow-up for treatment. And this is something that the regulators and the medical community have learned over time. And this is, of course, affecting all companies that are developing treatments for COVID-19.

Another anecdote, which I think is a very telling one, I can tell you, that we have done 4 DSMBs. And those are comprised of top experts in the field, independent experts who have been reviewing our data. And what we have been told by them is that they have not been on any DSMB meeting of other companies where the endpoint have not changed. Now which other indication do we know where endpoints themselves, including the primary endpoint, keep changing because we keep learning about the disease as we go and the same with the regulators. So we don't have certainty here either way. We certainly assume that we will need to do additional studies in certain territories. In some, hopefully, not. The good news is that we will know soon enough. I know it's a long answer. I hope I answered to the best of my ability.

Yes. That's very, very helpful. And one final question from me. So what are your thoughts on Cosmo's recently completed Phase II study of rifamycin in IBS-C patients? So what metrics do you think are essential for you to make a go or no-go decision?

Cosmo is a dear partner, a very important strategic partner of RedHill. We have certain rights of first refusal, similar rights to that indication. And we have been reviewing the data, which is relatively new, together with Cosmo. Rick, if you wish to add anything, all yours.

Sure. Yes, sure. Thanks, Dror. So everything that you've shared was correct. We are in the midst right now of analyzing the data sets with Cosmo. We have a committee together with Dr. Falk Pharma and with Cosmo, and we are analyzing the data to see what the path forward would be, and we anticipate having some resolution of that over the coming couple of months. So we're actively engaged right now with that process.

Congrats on your progress.

Your next question comes from the line of Scott Henry of ROTH Capital.

A couple of questions. I'll try to keep them pretty tight. First, on gross margins, I noticed that it was flat from Q4 to Q1 '21. Should we expect that to maintain that level? Or would you expect them to increase throughout 2021?

Scott, you were cut there in the middle of your question. So we hope we understand the question correctly, which is, what do we expect to happen with gross margins relative to last year? Is that the question?

Well, it was relative to Q1. My apologies that it might be out of some phone difficulties. The question is, that 50% rate for Q1, should we expect that to increase throughout the year?

Scott, this is Micha. Thank you for the question. So yes, we are expecting gross margin to improve as we go forward as the mix is probably going to change as Talicia will grow. And since we do not have substantial royalties obligations on Talicia as compared to Movantik, we are expecting growth -- an increase in our gross margin.

Okay. Great. And staying on the income statement, R&D of $7.5 million was a little higher than recent numbers. Do you expect Q1 to be on the higher end for the year? Or is this higher level representative of what we should expect throughout the year?

Yes, right. So first quarter is indeed on the high-end side because of the substantial progress of the COVID-19 programs. So I would think that this is, compared to the full year, it is more than a quarter. So this quarter is more on the high-end side of the year in terms of R&D cost and expenses.

Okay. Thank you for that additional color. And then, Dror, on opaganib, yes, just doing the math, 6 weeks from the beginning of June would take me to mid-July. As far as how long it takes to slice and dice the data, should we be thinking about readout in end of July, early August? Do you think is it going to be that quick of a turnaround?

Yes. It's a great question. What we can we do in parallel. You recall that the study has been approved in 10 countries and several continents. And this entails complexities that are way beyond the understanding of people that are not in this study, in this space all the time 24/7. The complexity, for example, entails cooperation with several CROs in different countries. It entails dozens and dozens of sites in different countries. It entails audits that we routinely conduct. It entails keeping up with storing and organizing and checking and double-checking and triple-checking the data before it is uploaded and so on and so on. So all these things, as much as we can, we do in parallel. So we are hesitant, and it's not because we are trying to avoid the question, it's simply because there's so many uncertainties and so many complexities with this kind of study -- global study. We are hesitant to say the likely timing.

You are right that 2 weeks treatment is the time for the primary endpoint. And we do have a follow-up period. We'll do whatever we can in parallel. We'll announce each milestone as it comes immediately. And that's the best I can tell you. You do recall that RedHill did generate results very fast in prior studies pretty much immediately following completion of treatment in pharma terms. That's the best I can tell you. I hope it is helpful.

Dror, that's very helpful. And I look forward to hearing your updates as you move through the process, but that color is definitely helpful.

Final question then, just on the NTM program. I think the prior expectation was for about 1 year to enroll. Given COVID-19, certainly understandable that that's taking a little longer. Should we be thinking about perhaps 18 months to enroll this program? Is that about the extended duration that would be realistic?

Yes. We are looking at longer period. It is reasonable. We'll continue to update as we learn more. What is happening, which Gilead mentioned, is not only that enrollment in studies outside COVID have slowed down a lot. Some studies have stopped completely. And some studies were put on hold or barely enrolling. Specifically, in the respiratory indications and those that require lab tests, the COVID period has been very, very negative, had very negative impact on enrollment. And unfortunately, our NTM program falls exactly within this criteria. Let me just refer to Gilead to see if he would like to add anything.

Thank you. You covered it, Dror, so nothing more for me to add.

Your next question comes from the line of David Hoang from SMBC.

Congrats on the quarter. So I was just curious in terms of any feedback that you've got from your sales force on Talicia. In terms of subscriber habits, do you know much about whether you're seeing first-line usage? Is it mostly first-line or second-line usage? And if there are payer restrictions that are encountered, what types would those be? Are you seeing step edits, anything of that nature?

Thank you, David. I'll refer this to Rick.

Sorry. So the question was, are there -- what we seen in the field from our salespeople and the feedback we're getting and if we have any step edit or things like that? But we're not really having step edits or step buckets or some of the issues out there. But I have 2 experts on the line with us here. I'm going to let Rob comment on the sales part, and I'll let Bob comment on the managed market access part. So Rob?

Absolutely. Thank you very much, Rick. I would say right now, we're seeing the majority of our scripts coming from first line. And I would base that on the fact we have a very high rate of repeat prescribing that's going on out there. There's a limited number of refractory patients that need to be treated in any office. And we're seeing a lot of repeat prescribing, so that's a really good sign. We do know that we get some second-line use early on. I think particularly when physicians are trying to figure out, hey, how well does this drug work? Does it really do well with these refractory patients?

And I can tell you based off the things I've heard out of the field, we've had tremendous success with refractory patients. It works very, very well. We've had patients who've been treated 3, 4 times. And they get 1 round of Talicia, and they're cured. So it really speaks to the efficacy of the product and really creates confidence with prescribers that this is the best drug to use first line because you can get it cleaned up the first time. You don't want patients going through 2, 3, 4 rounds of 14 days of antibiotic therapy. They want to get this done the first time, and the best choice right now is Talicia to do that.

Bob, market comment, please.

Yes. Thank you, Rick. Appreciate that. So as you know, we have really good coverage of Talicia. Our commercial coverage is 77%. And of that 77%, 65% is unrestricted, so there are no PAs. So we've done a really good job there. On the Medicaid side fee-for-service, there are some PAs in place, and there are reasonable PAs, as you would see with other branded agent requirements. However, the ACG guidelines really do help support those patient types and helping physicians to get those PAs approved. Our team is working really hard to remove all possible restrictions in this category. And I hope to share some good news in the months to come. Thank you.

Great. That's really encouraging to hear. So I had a question on the Phase II/III COVID study and the rollout of opaganib, assuming positive data. How much of a lag time would you expect between getting positive top line data and then being able to commercially roll out? And which countries do you think might be most amenable for an initial launch if that occurs?

Thank you, David. Excellent question. About the commercial rollout. So initially, in most territories, a likely approval once we file is conditional, call it emergency use authorization or conditional in Europe. This means that we are not going to promote the product as such. It's more about central government contracts, central distribution agreements with managed care, this kind of thing, similar to what remdesivir has been through.

Once the full marketing approval is granted, yes, in the U.S., we certainly have the ability to promote once it's allowed. We have a commercial organization, with not only about 100 sales reps, but also another 30-or-so field professionals. And we can increase that as needed. We have the marketing expertise and managed care expertise. Everything that's needed, is in place.

Our R&D and commercial teams have been working together in close coordination for many months now on everything, starting from supply chain, all the way to messaging the story if and when it becomes relevant. So in this respect, it's about -- we'll be ready to do these agreements with central organizations, government and others, in case of the conditional approval or emergency use. And we'll be ready for promotion if and when we get full marketing approval, and that's in the U.S.

Outside the U.S., which is very interesting, I'm glad you asked. Outside the U.S., we are in close discussions with potential pharma partners who are very interested in opaganib for COVID-19. And we do expect to strike such agreements for opaganib, for territorial rights licenses, be it after the results is successful or even before. The RedHill has no aspirations to promote opaganib in the fields outside the U.S. in the foreseeable future.

I want to say one more thing about the study since you asked about how quickly following the results and so on. To put things in perspective, if you look at the landscape of COVID-19 treatment development, specifically about novel molecules supposed to repurpose this or that, there's a reason why nobody, and I mean nobody, we are looking at it every day the whole day, nobody, including Big Pharma, has completed a Phase III study, such as the opaganib study. There have been large studies with, for example, remdesivir. And those studies, for the most part, have been supported by a lot of government efforts, be it financially or inclusion in large government studies and so on. But nobody has completed a Phase III study the way we are completing, as we speak, with a novel oral molecule. Nobody. Everybody either drops their efforts or are way, way behind us.

And when you consider that opaganib has a dual mechanism, both antiviral, it completely inhibits SARS-CoV-2 according to our human cell models and is a very potent anti-inflammatory. You can understand that it is positioned alone out there. Opaganib is alone out there. It's a very, very tip of the arrow. Very, very forefront of global research. This is an extremely high bar to reach. Nobody but RedHill has gotten there to date. There's a reason for it. And that goes directly to your question as to why -- as to when we can expect to launch the product here or there. If the data is as strong as we hope and expect, we will do really, really well with the product both as emergency use, if and when approved, and as a fully marketed product. I hope I answered your question.

Yes. That was great. Really appreciate it, and I look forward to seeing the data near term.

Your final question comes from the line of Matt Kaplan from Ladenburg Thalmann.

Just wanted to follow up on opaganib in the COVID-19 indication. I guess, specifically, what are you looking for in the primary endpoint of, I guess, percentage of patients achieving room air? I guess, specifically, what would be clinically meaningful? And what would be exciting to regulators based on your discussions there?

Thank you, Matt. Excellent question. Because it keeps changing, we'll try to describe the current situation as we understand it from numerous ongoing discussions with regulators globally. I'll refer this to Gilead.

Thanks, Dror. So Matt, in terms of the primary endpoint for reaching room air by day 14, we powered the study based on the learnings from the Phase II study. In that study, we showed a 30 points difference in that endpoint between the active arm with opaganib and the control arm. And the assumptions that we used for powering the Phase II/III global study where that we would like to see a 15% delta. So we took a conservative approach in terms of the effect that we will be successfully on for the primary endpoint. And of course, this is still very meaningful from a clinical perspective. I would say that, as we see in the field, it's not a single endpoint that carries the day. Usually, it is an amalgamation of the clinical outcome across multiple endpoints that are evaluated. And that can include other endpoints like intubation and mortality, which are comparable across different products. So we will hope to be able to show some trends in additional key secondary endpoints such as those in the study going ahead.

And when we powered initially the study, if you recall, before we selected this primary endpoint, we looked at mortality. And we note -- and we powered for 270 patients to show a delta of 15% in mortality. So we are well powered or well sized with the current study to show differences in the mortality to that level and even better than that.

Okay. That's helpful. And then a follow-up in terms of -- in your prepared remarks in your press release, you mentioned that the FDA specifically said that the Phase II/III would not be sufficient for regulatory applications. What else is the FDA looking for based on your communications with them to be able to file for either EUA or approval? And is it the primary endpoint in this study, is that what's -- is one of the issues?

We don't really know because it keeps changing. The regulators learn, just like everybody else, with time. But the short answer is really that everybody wants to see the data to take the next step. And if the data is strong and the drug is safe and highly efficacious in the relevant endpoints, at least some of them, then we believe anything is possible. So we have stated, just like you did, rightly so, what the latest FDA communication is. But with all that, we are looking forward eagerly for the data. Once the data is available, we'll share it with FDA, and we'll see what the next step is. We have seen a lot of back and forth with agencies around the world by numerous companies with lots of things happening on the move as this pandemic developed and as the public health needs changed. So we will know soon enough. We'll have the data. We'll announce it. We'll share it with the regulators, including FDA. And then we'll see what the next stage is.

Great. And then last question, if I may. In terms of -- I guess, congratulations on the kind of the acceleration of Talicia's performance in March. Can you give us a sense in terms of the -- or give us a breakout of the revenues for Talicia during the first quarter?

Sure. Yes. Talicia did about $1.7 million in ex factory sales. While scripts, as we mentioned, grew by about 11%. So this will probably be translated into ex factory as things always are.

That's your final question. Thank you.

Thank you, Tracy, and thank you all for joining the call. Don't hesitate to reach out to us if you have any additional questions. Keep safe, and we wish you all a pleasant day.

That does conclude our call for today. Thank you all for participating, and you may now disconnect.