RedHill Biopharma Ltd
RedHill Biopharma Ltd. (Form: 6-K, Received: 07/25/2017 07:01:45)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of July 2017
Commission File No.: 001-35773 

REDHILL BIOPHARMA LTD.
(Translation of registrant's name into English)

21 Ha'arba'a Street, Tel Aviv, 64739, Israel
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [ X ]      Form 40-F [   ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): 

Attached hereto and incorporated by reference herein is a press release issued by the Registrant entitled: " RedHill Biopharma Reports 2017 Second Quarter Financial Results

Exhibit 1: Registrant's press release entitled " RedHill Biopharma Reports 2017 Second Quarter Financial Results ”.

Exhibit 2: Registrant’s condensed consolidated interim unaudited financial information as of June 30, 2017 and for the three months then ended.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

    REDHILL BIOPHARMA LTD.
    (Registrant)
     
   
Date: July 25, 2017   By: /s/ Dror Ben-Asher
    Dror Ben-Asher
    Chief Executive Officer
   

EXHIBIT 1

RedHill Biopharma Reports 2017 Second Quarter Financial Results

RedHill maintains a debt-free balance sheet with $51 million cash at the end of the second quarter of 2017 

Select recent milestones include:

Select potential milestones expected in the second half of 2017:

TEL-AVIV, Israel and RALEIGH, N.C., July 25, 2017 (GLOBE NEWSWIRE) -- RedHill Biopharma Ltd. (NASDAQ:RDHL) (Tel-Aviv Stock Exchange:RDHL) (“RedHill” or the “Company”), a specialty biopharmaceutical company primarily focused on late clinical-stage development and commercialization of proprietary, orally-administered, small molecule drugs for gastrointestinal and inflammatory diseases and cancer, today reported its financial results for the quarter ended June 30, 2017.

The Company will host a conference call on Tuesday, July 25, 2017 at 9:00 am EDT to review the financial results and business highlights. Dial-in details are included below. 

Financial highlights for the quarter ended June 30, 2017 2

Net Revenues for the second quarter of 2017 were approximately $0.5 million, compared to immaterial Net Revenues in the second quarter of 2016 and in the first quarter of 2017. The increase was due to the initiation, in mid-June 2017, of the U.S. promotional activities of Donnatal ® (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide) 3  and the sale of EnteraGam ® (serum-derived bovine immunoglobulin/protein isolate, SBI) 4 .

Cost of Revenues for the second quarter of 2017 were $0.3 million, reflecting costs related to the initiation of the sale of EnteraGam ® in mid-June 2017.

Research and Development Expenses   for the second quarter of 2017 were $8.4 million, an increase of $2.4 million or 40% compared to the second quarter of 2016. The increase was mainly due to the ongoing Phase III and Phase II studies with BEKINDA ®  (RHB-102) for gastroenteritis and IBS-D, respectively, the ongoing Phase III study with RHB-104 for Crohn’s disease, the ongoing and planned studies with YELIVA ® (ABC294640) for multiple indications, and the initiation of the ongoing confirmatory Phase III study with TALICIA (RHB-105) 5  for H. pylori infection. Research and Development Expenses for the second quarter of 2017 increased by $0.3 million or 4% compared to the first quarter of 2017.

General and Administrative Expenses   for the second quarter of 2017 were $1.9 million, an increase of $1.2 million compared to the second quarter of 2016. General and Administrative Expenses   for the second quarter of 2017 increased by $0.6 million or 48% compared to the first quarter of 2017. The increase from the comparable periods was mainly due to the establishment and advancement of the Company’s U.S. commercial operations in the first quarter of 2017 and enhanced professional services.

Selling, Marketing and Business Development Expenses  for the second quarter of 2017 were $3.4 million, an increase of $3.0 million compared to $0.4 million in the second quarter of 2016, comprised only of Business Development Expenses. The increase was mainly due to the establishment and advancement of the Company’s U.S. commercial operations. The Company recognized Selling and Marketing Expenses in 2017 for the first time.

Operating Loss   for the second quarter of 2017 was $13.5 million, an increase of $6.3 million or 88% compared to the second quarter of 2016. The increase was mainly due to an increase in Research and Development Expenses and Selling, Marketing and Business Development Expenses, as detailed above. Operating Loss for the second quarter of 2017 increased by $3.4 million or 34% compared to the first quarter of 2017. The increase was mainly due to an increase in Selling, Marketing and Business Development Expenses, as detailed above.

Financial Income ,   net   for the second quarter of 2017 was $2.5 million, an increase of $1.9 million compared to the second quarter of 2016. Financial Income, net for the second quarter of 2017 increased by $1.0 million or 67% compared to the first quarter of 2017. The increase from the comparable periods was mainly due to a fair value gain on derivative financial instruments.

Net Cash Used in Operating Activities   for the second quarter of 2017 was $9.7 million, an increase of $4 million or 70% compared to the second quarter of 2016. The increase was mainly due to the increase in Operating Loss, as detailed above. Net Cash Used in Operating Activities for the second quarter of 2017 decreased by $0.6 million or 6% compared to the first quarter of 2017.

Net Cash Used in Investing Activities   for the second quarter of 2017 was $4.9 million, an increase of $1.9 million or 67% compared to the second quarter of 2016. Net Cash Used in Investing Activities for the second quarter of 2017 decreased by $13.7 million compared to the first quarter of 2017. The decrease was mainly due to change in short-term investments.

Cash Balance 6  as of June 30, 2017, was $51 million, a decrease of $15 million, compared to $66 million as of December 31, 2016, and a decrease of $10 million compared to March 31, 2017. The decrease was a result of the ongoing operations, mainly related to research and development activities and the establishment of the U.S. commercial operations.

Micha Ben Chorin, RedHill’s CFO, said: “We are pleased with the important milestones achieved during the second quarter, including positive top-line results from the Phase III GUARD study with BEKINDA ® 24 mg for acute gastroenteritis, initiation of the confirmatory Phase III study with TALICIA for the treatment of H. pylori infection, and the initiation of promotional activities in the U.S. by our GI-focused sales force with Donnatal ® and EnteraGam ® , which generated encouraging initial net revenues of approximately $0.5 million in the second half of June alone. Our cash position of $51 million at the end of the second quarter should allow us to continue to execute our strategic plans, diligently advance our late-stage clinical programs and pursue the acquisition of additional commercial GI products in the U.S.”

Conference Call and Webcast Information:

The Company will host a conference call on Tuesday, July 25, 2017 at 9:00 am EDT to review the financial results and business highlights.

To participate in the conference call, please dial the following numbers 15 minutes prior to the start of the call: United States: +1-877-280-2342; International: +1-212-444-0412; and Israel: +972-3-763-0146. The access code for the call is 5090357.

The conference call will be broadcasted live and available for replay on the Company's website, http://ir.redhillbio.com/events.cfm, for 30 days. Please access the Company's website at least 15 minutes ahead of the conference call to register, download and install any necessary audio software.

Recent operational highlights:

  1. On April 4, 2017, RedHill announced that the FDA had granted YELIVA ® Orphan Drug designation for the treatment of cholangiocarcinoma. Orphan Drug designation would allow RedHill to benefit from a seven-year marketing exclusivity period for the indication, if approved, as well as other development incentives to develop YELIVA ® for cholangiocarcinoma. A Phase IIa clinical study with YELIVA ®  in patients with advanced, unresectable, intrahepatic and extrahepatic cholangiocarcinoma is planned to be initiated in the third quarter of 2017. 
     
  2. On April 5, 2017, RedHill announced the signing of an exclusive license agreement with Entera Health Inc. (“Entera Health”), granting RedHill the exclusive U.S. rights to EnteraGam ® (serum-derived bovine immunoglobulin/protein isolate, SBI), a commercially-available medical food intended for the dietary management of chronic diarrhea and loose stools, which must be administered under medical supervision. Under the terms of the agreement, RedHill will pay Entera Health royalties based on net sales generated from the sale of EnteraGam ® by RedHill.    

  3. On April 13, 2017, RedHill, together with IntelGenx Corp., announced that the Ministry of Health of Luxembourg had granted national marketing authorization for RIZAPORT ® (5 mg and 10 mg), a thin-film for the treatment of acute migraines. The national marketing authorization was granted in Luxembourg on the basis of the European Decentralized Procedure (DCP), in which Luxembourg served as the Concerned Member State. The approval in Luxembourg marked the completion of the current marketing approval process for RIZAPORT ® under the European DCP. The re-submission of the RIZAPORT ® NDA to the FDA is expected in October 2017.
     
  4. On April 24, 2017, RedHill announced the enrollment of the last patient in the Phase II study with BEKINDA ® 12 mg for the treatment of diarrhea-predominant irritable bowel syndrome (IBS-D). On July 17, 2017, RedHill announced that the last patient had completed the treatment course and the last follow-up visit. Top-line results are expected in September 2017. The randomized, double-blind, placebo-controlled Phase II study is evaluating the efficacy and safety of BEKINDA ® 12 mg in adults 18 years and older who suffer from IBS-D. The study enrolled 127 subjects at 16 clinical sites in the U.S.
     
  5. In May 2017, RedHill adopted an Expanded Access Program (EAP), allowing patients with life-threatening diseases potential access to RedHill’s investigational new drugs that have not yet received regulatory marketing approval. Expanded access (sometimes referred to as “compassionate use”) is possible outside RedHill’s clinical trials, under certain eligibility criteria, when a certain investigational new drug is needed to treat life-threatening condition and there is some clinical evidence suggesting that the drug might be effective in that condition. Following the adoption of the program, RedHill continues to receive patient requests to obtain access to investigational drugs. Therefore, subject to evaluation of eligibility and all the necessary regulatory and other approvals, RedHill is likely to provide certain patients with an investigational new drug under the EAP. Further information about RedHill’s EAP can be found on the Company’s website at: http://www.redhillbio.com/expandedaccess. 
     
  6. On June 13, 2017, RedHill announced the initiation of the promotion of two gastrointestinal specialty products, Donnatal ® and EnteraGam ® in the U.S. RedHill’s U.S. commercial operations, headquartered in Raleigh, NC, include a gastrointestinal-focused sales force of more than 30 sales representatives promoting Donnatal ® and EnteraGam ® in select U.S. territories. 
     
  7. On June 14, 2017, RedHill announced positive top-line results from the Phase III GUARD study with BEKINDA ® (RHB-102) 24 mg for acute gastroenteritis and gastritis. The study successfully met its primary endpoint of efficacy in the treatment of acute gastroenteritis and gastritis. BEKINDA ® 24 mg was found to be safe and well tolerated in this indication. The randomized, double-blind, placebo-controlled Phase III GUARD study evaluated the efficacy and safety of BEKINDA ® 24 mg in treating acute gastroenteritis and gastritis. 321 adults and children over the age of 12 were enrolled at 21 clinical sites in the U.S. and randomized in a 60:40 ratio to receive either BEKINDA ® 24 mg or placebo, respectively. The primary endpoint of the study was the proportion of patients without further vomiting, without rescue medication, and who were not given intravenous hydration from 30 minutes post first dose of the study drug until 24 hours post dose, compared to placebo. A Type B FDA meeting is expected to take place by October 2017. Top-line results indicated that the Phase III GUARD study successfully met its primary endpoint in the Intent to Treat (ITT) population (p = 0.04), despite high positive outcome rate in the placebo arm. BEKINDA ® 24 mg improved the efficacy outcome by 21%; 65.6% of BEKINDA ® -treated patients as compared to 54.3% of placebo patients (p = 0.04; n=192 in the BEKINDA ® group and n=129 in the placebo group).  Correcting for a randomization error, the difference in effect is greater with 65.8% vs. 53.9% favoring BEKINDA ® 24 mg vs. placebo in reaching the primary endpoint of the study (p = 0.03). In per-protocol (PP) analysis of patients who met all protocol entry criteria and for which the diagnosis of gastroenteritis was confirmed (n=177 in the BEKINDA ® group and n=122 in the placebo group), BEKINDA ® 24 mg improved the efficacy outcome by 27%; 69.5% of patients in the BEKINDA ® group vs. 54.9% in the placebo group (p = 0.01).
     
  8. On June 15, 2017, RedHill announced the initiation of the confirmatory Phase III study with RHB-105, newly branded as TALICIA , for the treatment of H. pylori infection (the ERADICATE Hp2 study). The two-arm, randomized, double-blind, active comparator, confirmatory Phase III study is planned to enroll 444 non-investigated dyspepsia patients with confirmed H. pylori infection in up to 65 clinical sites in the U.S., with a primary endpoint of eradication of H. pylori infection at 42 through 70 days after initiation of treatment. Subject to a successful outcome and any additional regulatory feedback, the confirmatory Phase III study is expected to complete the package required for a potential U.S. NDA for TALICIA .
     
  9. On July 12, 2017, RedHill announced that the second independent Data and Safety Monitoring Board (DSMB) meeting of the first RHB-104 Phase III study for Crohn’s disease (the MAP US study) is expected to convene in late July 2017 and will assess the safety and efficacy of RHB-104 in the first 222 subjects who have completed week 26 assessments. The DSMB meeting will include an interim efficacy analysis and an evaluation of an option for early stop for success for overwhelming efficacy. The DSMB’s recommendation is planned to be announced by early August 2017.  To date, approximately 300 patients of the planned total of 410 patients have been enrolled in the ongoing Phase III MAP US study.

About Donnatal ® :
Donnatal ® (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide), a prescription drug, is classified as possibly effective as an adjunctive therapy in the treatment of irritable bowel syndrome (irritable colon, spastic colon, mucous colitis) and acute enterocolitis. Donnatal ®  slows the natural movements of the gut by relaxing the muscles in the stomach and intestines. Donnatal ® comes in two formulations: immediate release Donnatal ®  Tablets and immediate release Donnatal ®  Elixir, a fast-acting liquid.

Important Safety Information about Donnatal ® :
Donnatal ® is contraindicated in patients who have glaucoma, obstructive uropathy, obstructive disease of the gastrointestinal tract, paralytic ileus, unstable cardiovascular status, severe ulcerative colitis, myasthenia gravis, hiatal hernia with reflux esophagitis, or known hypersensitivity to any of the ingredients. Patients who are pregnant or breast-feeding or who have autonomic neuropathy, hepatic or renal disease, hyperthyroidism, coronary heart disease, congestive heart failure, cardiac arrhythmias, tachycardia or hypertension should notify their doctor before taking Donnatal ® . Side effects may include: dryness of the mouth, urinary retention, blurred vision, dilation of pupils, rapid heartbeat, loss of sense of taste, headache, nervousness, drowsiness, weakness, dizziness, insomnia, nausea, vomiting and allergic reactions which may be severe.

Further information, including prescribing information, can be found on www.donnatal.com.

Please see the following website for complete important safety information about Donnatal ® :
http://www.donnatal.com/professionals/important-safety-information/

To report suspected adverse reactions, contact Concordia Pharmaceuticals Inc. at 1-877-370-1142 or email: medicalinformation@concordiarx.com, or the FDA at 1-800-FDA-1088 (1-800-332-1088) or www.fda.gov/medwatch. 
           
About EnteraGam ® :
EnteraGam ® (serum-derived bovine immunoglobulin/protein isolate, SBI) is a medical food product intended for the dietary management of chronic diarrhea and loose stools. EnteraGam ®  must be administered under medical supervision. EnteraGam ® binds microbial components 7 , such as toxic substances released by bacteria, that upset the intestinal environment. This helps prevent them from penetrating the lining of the intestine, which may contribute to chronic diarrhea and loose stools in people who have specific intestinal disorders 8 .

Safety Information about EnteraGam ® :
EnteraGam ®  contains beef protein; therefore, patients who have an allergy to beef or any other component of EnteraGam ®  should not take this product.  EnteraGam ®  has not been studied in pregnant women, in women during labor and delivery, or in nursing mothers.  The choice to administer EnteraGam ®  during pregnancy, labor and delivery, or to nursing mothers is at the clinical discretion of the prescribing physician.

EnteraGam ®  does not contain any milk-derived ingredients such as lactose, casein or whey.  EnteraGam ®  is gluten-free, dye-free and soy-free. 

Please see full Product Information.

To report suspected adverse reactions, contact Entera Health, Inc. at 1-855-4ENTERA (1-855-436-8372), or the FDA at 1-800-FDA-1088 (1-800-332-1088) or www.fda.gov/medwatch.

About RedHill Biopharma Ltd.:
RedHill Biopharma Ltd. (NASDAQ:RDHL) (Tel-Aviv Stock Exchange: RDHL) is a specialty biopharmaceutical company headquartered in Israel, primarily focused on the development and commercialization of late clinical-stage, proprietary, orally-administered, small molecule drugs for the treatment of gastrointestinal and inflammatory diseases and cancer. RedHill promotes two gastrointestinal products in the U.S. - Donnatal ® , a prescription oral adjunctive drug used in the treatment of IBS and acute enterocolitis, and EnteraGam ® , a medical food intended for the dietary management, under medical supervision, of chronic diarrhea and loose stools. RedHill’s clinical-stage pipeline includes: (i) TALICIA (RHB -105) - an oral combination therapy for the treatment of Helicobacter pylori infection with successful results from a first Phase III study and an ongoing confirmatory Phase III study; (ii) RHB-104 - an oral combination therapy for the treatment of Crohn's disease with an ongoing first Phase III study, a completed proof-of-concept Phase IIa study for multiple sclerosis, and QIDP status for nontuberculous mycobacteria (NTM) infections; (iii) BEKINDA ® (RHB-102) - a once-daily oral pill formulation of ondansetron with successful top-line results in a Phase III study for acute gastroenteritis and gastritis and an ongoing Phase II study for IBS-D; (iv) RHB-106 - an encapsulated bowel preparation licensed to Salix Pharmaceuticals, Ltd.; (v) YELIVA ® (ABC294640) - a Phase II-stage, orally-administered, first-in-class SK2 selective inhibitor targeting multiple oncology, inflammatory and gastrointestinal indications; (vi) MESUPRON - a Phase II-stage first-in-class, orally-administered protease inhibitor, targeting pancreatic cancer and other solid tumors and (vii) RIZAPORT ® (RHB-103) - an oral thin film formulation of rizatriptan for acute migraines, with a U.S. NDA currently under discussion with the FDA and marketing authorization received in two EU member states under the European Decentralized Procedure (DCP). More information about the Company is available at: www.redhillbio.com.

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) the initiation, timing, progress and results of the Company’s research, manufacturing, preclinical studies, clinical trials, and other therapeutic candidate development efforts; (ii) the Company’s ability to advance its therapeutic candidates into clinical trials or to successfully complete its preclinical studies or clinical trials; (iii) the extent and number of additional studies that the Company may be required to conduct and the Company’s receipt of regulatory approvals for its therapeutic candidates, and the timing of other regulatory filings, approvals and feedback; (iv) the manufacturing, clinical development, commercialization, and market acceptance of the Company’s therapeutic candidates; (v) the Company’s ability to successfully market Donnatal ® and EnteraGam ® , (vi) the Company’s ability to establish and maintain corporate collaborations; (vii) the Company's ability to acquire products approved for marketing in the U.S. that achieve commercial success and build its own marketing and commercialization capabilities; (viii) the interpretation of the properties and characteristics of the Company’s therapeutic candidates and of the results obtained with its therapeutic candidates in research, preclinical studies or clinical trials; (ix) the implementation of the Company’s business model, strategic plans for its business and therapeutic candidates; (x) the scope of protection the Company is able to establish and maintain for intellectual property rights covering its therapeutic candidates and its ability to operate its business without infringing the intellectual property rights of others; (xi) parties from whom the Company licenses its intellectual property defaulting in their obligations to the Company; and (xii) estimates of the Company’s expenses, future revenues capital requirements and the Company’s needs for additional financing; (xiii) the Company's Expanded Access Program, which allows patients with life-threatening diseases potential access, subject to regulatory and other approvals, to RedHill’s investigational new drugs that have not yet received regulatory marketing approval, if a patient suffers an adverse experience using such investigative drug, potentially adversely affecting the clinical development program of that investigational product or the Company generally; (xiv) competitive companies and technologies within the Company’s industry. More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements is set forth in the Company's filings with the Securities and Exchange Commission (SEC), including the Company's Annual Report on Form 20-F filed with the SEC on February 23, 2017. All forward-looking statements included in this Press Release are made only as of the date of this Press Release. We assume no obligation to update any written or oral forward-looking statement unless required by law.

Including cash and short-term investments.

2  All financial highlights are approximate and are rounded to the nearest hundreds of thousands.

3  Donnatal ® (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide) is a prescription drug, classified as possibly effective as an adjunctive therapy in the treatment of irritable bowel syndrome (irritable colon, spastic colon, mucous colitis) and acute enterocolitis. For more information, please see the prescribing information: http://www.donnatal.com/wp-content/uploads/2015/02/2015-02-18-Risk-Benefit-information-DTC-REV.-SE.pdf.

4  EnteraGam ® (serum-derived bovine immunoglobulin/protein isolate, SBI) is a commercially-available medical food, intended for the dietary management of chronic diarrhea and loose stools due to specific intestinal disorders, which must be administered under medical supervision.

5  BEKINDA ® , YELIVA ® and TALICIA are investigational new drugs, not available for commercial distribution.

6 Including cash and short-term investments

Horgan A, Maas K, Henderson A, Detzel C, Weaver E. Serum-derived bovine immunoglobulin/protein isolate binds to pathogen-associated molecular patterns. Poster presented at: Federation of American Societies for Experimental Biology; April 26-30, 2014; San Diego, CA.

8  Petschow BW, Burnett B, Shaw AL, Weaver EM, Klein GL. Serum-derived bovine immunoglobulin/protein isolate: postulated mechanism of action for management of enteropathy. Clin Exp Gastroenterol. 2014;7:181-190.
Gasbarrini A, Lauritano EC, Garcovich M, Sparano L, Gasbarrini G. New insights into the pathophysiology of IBS: intestinal microflora, gas production and gut motility. Eur Rev Med Pharmacol Sci. 2008;12 Suppl 1:111-117.

     
REDHILL BIOPHARMA LTD.
CONSOLIDATED CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
   
     
    Three months ended   Six months ended    
    June 30,    June 30,     
    2017   2016   2017   2016    
    U.S. dollars in thousands   U.S. dollars in thousands    
NET REVENUES    483    1    483    1    
COST OF REVENUE    272    —    272    —    
RESEARCH AND DEVELOPMENT EXPENSES, net    8,434    6,031    16,571    10,707    
SELLING, MARKETING AND BUSINESS DEVELOPMENT EXPENSES    3,376   * 424    3,981   * 736    
GENERAL AND ADMINISTRATIVE EXPENSES    1,940   * 740    3,255   * 1,655    
OTHER EXPENSES    —    —    45    —    
OPERATING LOSS    13,539    7,194    23,641    13,097    
FINANCIAL INCOME    2,523    666    4,078    1,025    
FINANCIAL EXPENSES    7    24    56    4    
FINANCIAL INCOME, net    2,516    642    4,022    1,021    
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD    11,023    6,552    19,619    12,076    
LOSS PER ORDINARY SHARE (U.S. dollars)                    
Basic    0.06    0.05    0.11    0.09    
Diluted     0.06    0.06    0.11    0.10    

* Reclassified


  REDHILL BIOPHARMA LTD.
CONSOLIDATED CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited)
 
   
    June 30,    December 31,   
    2017     2016    
    U.S. dollars in thousands  
CURRENT ASSETS:          
Cash and cash equivalents    15,319      53,786    
Bank deposits    15,407      55    
Financial assets at fair value through profit or loss    20,340      12,313    
Trade receivables and contract assets    778      99    
Prepaid expenses and other receivables   3,096     1,562    
Inventory    610      —    
     55,550      67,815    
NON-CURRENT ASSETS:          
Bank deposits    150      137    
Fixed assets    235      165    
Intangible assets    6,050      6,095    
     6,435      6,397    
TOTAL ASSETS    61,985      74,212    
           
           
CURRENT LIABILITIES:           
Accounts payable    1,145      60    
Accrued expenses and other current liabilities    7,415      3,296    
Payable in respect of intangible asset purchase    2,000      2,000    
     10,560      5,356    
           
NON-CURRENT LIABILITIES:          
Derivative financial instruments    2,622      6,155    
TOTAL LIABILITIES    13,182      11,511    
           
EQUITY:          
Ordinary shares    458      441    
Additional paid-in capital    156,587      150,838    
Warrants    —      1,057    
Accumulated deficit    (108,242 )    (89,635 )  
TOTAL EQUITY    48,803      62,701    
           
TOTAL LIABILITIES AND EQUITY    61,985      74,212    



  REDHILL BIOPHARMA LTD.
CONSOLIDATED CONDENSED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
     
       
    Three months ended   Six months ended      
    June 30,    June 30,       
    2017     2016     2017     2016        
    U.S. dollars in thousands   U.S. dollars in thousands      
OPERATING ACTIVITIES:                      
Comprehensive loss    (11,023 )    (6,552 )    (19,619 )    (12,076 )      
Adjustments in respect of income and expenses not involving cash flow:                      
Share-based compensation to employees and service providers    705      495      1,012      869        
Depreciation    18      11      32      21        
Write-off of intangible assets    —      —      45      —        
Unrealized gains on derivative financial instruments    (2,251 )    (514 )    (3,513 )    (715 )      
Fair value loses (gains) on financial assets at fair value through profit or loss    64      (54 )    79      (62 )      
Revaluation of bank deposits    (87 )    (89 )    (105 )    (147 )      
Exchange differences in respect of cash and cash equivalents    (119 )    41      (361 )    (41 )      
     (1,670 )    (110 )    (2,811 )    (75 )      
Changes in assets and liability items:                      
Increase in trade receivables and contract assets    (778 )    —      (679 )    —        
Decrease (increase) in prepaid expenses and other receivables    (421 )    (248 )    (1,534 )    192        
Increase in Inventory    (610 )    —      (610 )    —        
Increase in accrued expenses   1,124     (224 )   1,085     323        
Increase in accounts payable and accrued expenses    3,650      1,397      4,119      918        
     2,965      925      2,381      1,433        
Net cash used in operating activities    (9,728 )    (5,737 )    (20,049 )    (10,718 )      
INVESTING ACTIVITIES:                      
Purchase of fixed assets    (102 )    (16 )    (102 )    (45 )      
Change in investment in current bank deposits    284      (2,000 )    (15,260 )    —        
Purchase of financial assets at fair value through profit or loss    (10,500 )    (908 )    (13,953 )    (7,480 )      
Proceeds from sale of financial assets at fair value through profit or loss    5,447      —      5,847      —        
Net cash used in investing activities    (4,871 )    (2,924 )    (23,468 )    (7,525 )      
FINANCING ACTIVITIES:                      
Proceeds from issuance of ordinary shares, net of expenses    —      —      1,282      —        
Exercise of warrants and options into ordinary shares, net of expenses    175      100      3,407      110        
Net cash provided by financing activities    175      100      4,689      110        
DECREASE IN CASH AND CASH EQUIVALENTS    (14,424 )    (8,561 )    (38,828 )    (18,133 )      
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS    119      (41 )    361      41        
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD    29,624      12,026      53,786      21,516        
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD    15,319      3,424      15,319      3,424        
SUPPLEMENTARY INFORMATION ON INTEREST RECEIVED IN CASH    130      4      201      95        

Company contact:
Adi Frish
Senior VP Business Development &
Licensing
RedHill Biopharma
+972-54-6543-112
adi@redhillbio.com

IR contact (U.S.):
Marcy Nanus
Senior Vice President
The Trout Group
+1-646-378-2927
Mnanus@troutgroup.com

Exhibit 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

JUNE 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

JUNE 30, 2017

 

 

 

TABLE OF CONTENTS

 

 

 

  Page
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF JUNE 30, 2017 IN U.S. DOLLARS:  
   
Condensed consolidated interim statements of comprehensive loss 2
   
Condensed consolidated interim statements of financial position 3
   
Condensed consolidated interim statements of changes in equity 4
   
Condensed consolidated interim statements of cash flows 6
   
Notes to the condensed consolidated interim financial statements 7-17

 

 

 

 

 

 

 

 

 

 
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

    Three months ended   Six months ended
    June 30,   June 30,
    2017   2016   2017   2016
    U.S. dollars in thousands
NET REVENUES     483       1       483       1  
COST OF REVENUES     272             272        
GROSS PROFIT     211       1       211       1  
RESEARCH AND DEVELOPMENT EXPENSES     8,434       6,031       16,571       10,707  
SELLING, MARKETING AND BUSINESS DEVELOPMENT EXPENSES     3,376       *424       3,981       *736  
GENERAL AND ADMINISTRATIVE EXPENSES     1,940       *740       3,255       *1,655  
OTHER EXPENSES                 45        
OPERATING LOSS     13,539       7,194       23,641       13,097  
FINANCIAL INCOME     2,523       666       4,078       1,025  
FINANCIAL EXPENSES     7       24       56       4  
FINANCIAL INCOME, net     2,516       642       4,022       1,021  
LOSS AND COMPREHENSIVE LOSS FOR THE PERIOD     11,023       6,552       19,619       12,076  
LOSS PER ORDINARY SHARE (U.S. dollars)                                
Basic     0.06       0.05       0.11       0.09  
Diluted     0.06       0.06       0.11       0.10  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

*Reclassified

 

  2  
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited)

 

    June 30,   December 31,
    2017   2016
    U.S. dollars in thousands
CURRENT ASSETS:                
Cash and cash equivalents     15,319       53,786  
Bank deposits     15,407       55  
Financial assets at fair value through profit or loss     20,340       12,313  
Trade receivables and contract assets     778       99  
Prepaid expenses and other receivables     3,096       1,562  
Inventory     610        
      55,550       67,815  
NON-CURRENT ASSETS:                
Bank deposits     150       137  
Fixed assets     235       165  
Intangible assets     6,050       6,095  
      6,435       6,397  
TOTAL ASSETS     61,985       74,212  
                 
                 
CURRENT LIABILITIES:                
Accounts payable     1,145       60  
Accrued expenses and other current liabilities     7,415       3,296  
Payable in respect of intangible asset purchase     2,000       2,000  
      10,560       5,356  
                 
NON-CURRENT LIABILITIES:                
Derivative financial instruments     2,622       6,155  
TOTAL LIABILITIES     13,182       11,511  
                 
EQUITY:                
Ordinary shares     458       441  
Additional paid-in capital     156,587       150,838  
Warrants           1,057  
Accumulated deficit     (108,242 )     (89,635 )
TOTAL EQUITY     48,803       62,701  
                 
TOTAL LIABILITIES AND EQUITY     61,985       74,212  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  3  
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

    Ordinary   Additional       Accumulated   Total
    shares   paid-in capital   Warrants   deficit   equity
    U.S. dollars in thousands
BALANCE AT APRIL 1, 2017     455       156,415             (97,924 )     58,946  
                                         
CHANGES IN THE THREE-MONTH PERIOD ENDED JUNE 30, 2017:                                        
Share-based compensation to employees and service providers                       705       705  
Exercise of options into ordinary shares     3       172                   175  
Comprehensive loss                       (11,023 )     (11,023 )
BALANCE AT JUNE 30, 2017     458       156,587             (108,242 )     48,803  
BALANCE AT APRIL 1, 2016     343       120,631       1,057       (67,094 )     54,937  
                                         
CHANGES IN THE THREE-MONTH PERIOD ENDED JUNE 30, 2016:                                        
Share-based compensation to employees and service providers                       495       495  
Exercise of options into ordinary shares     1       99                   100  
Comprehensive loss                       (6,552 )     (6,552 )
BALANCE AT JUNE 30, 2016     344       120,730       1,057       (73,151 )     48,980  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  4  
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

 

    Ordinary
shares
  Additional
paid-in
capital
  Warrants   Accumulated
deficit
  Total
equity
    U.S. dollars in thousands
                     
BALANCE AT JANUARY 1, 2017     441       150,838       1,057       (89,635 )     62,701  
CHANGES IN THE SIX-MONTH PERIOD ENDED JUNE 30, 2017:                                        
Share-based compensation to employees and service providers                       1,012       1,012  
Issuance of ordinary shares, net of expenses     3       1,279                   1,282  
Exercise of warrants and options into ordinary shares     14       3,413                   3,427  
Warrants expiration           1,057       (1,057 )            
Comprehensive loss                       (19,619 )     (19,619 )
BALANCE AT JUNE 30, 2017     458       156,587             (108,242 )     48,803  
BALANCE AT JANUARY 1, 2016     343       120,621       1,057       (61,944 )     60,077  
                                         
CHANGES IN THE SIX-MONTH PERIOD ENDED JUNE 30, 2016:                                        
Share-based compensation to employees and service providers                       869       869  
Exercise of options into ordinary shares     1       109                   110  
Comprehensive loss                       (12,076 )     (12,076 )
BALANCE AT JUNE 30, 2016     344       120,730       1,057       (73,151 )     48,980  
                                         

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

  5  
 

 

REDHILL BIOPHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

    Three months ended   Six months ended
    June 30,   June 30,
    2017   2016   2017   2016
    U.S. dollars in thousands
OPERATING ACTIVITIES:                                
Comprehensive loss     (11,023 )     (6,552 )     (19,619 )     (12,076 )
Adjustments in respect of income and expenses not involving cash flow:                                
Share-based compensation to employees and service providers     705       495       1,012       869  
Depreciation     18       11       32       21  
Write-off of intangible asset                 45        
Unrealized gains on derivative financial instruments     (2,251 )     (514 )     (3,513 )     (715 )
Fair value losses (gains) on financial assets at fair value through profit or loss     64       (54 )     79       (62 )
Revaluation of bank deposits     (87 )     (89 )     (105 )     (147 )
Exchange differences in respect of cash and cash equivalents     (119 )     41       (361 )     (41 )
      (1,670 )     (110 )     (2,811 )     (75 )
Changes in assets and liability items:                                
Increase in trade receivables and contract assets     (778 )           (679 )      
Decrease (increase) in prepaid expenses and other receivables     (421 )     (248 )     (1,534 )     192  
Increase in inventory     (610 )           (610 )      
Increase (decrease) in accounts payable     1,124       (224 )     1,085       323  
Increase in accrued expenses     3,650       1,397       4,119       918  
      2,965       925       2,381       1,433  
Net cash used in operating activities     (9,728 )     (5,737 )     (20,049 )     (10,718 )
INVESTING ACTIVITIES:                                
Purchase of fixed assets     (102 )     (16 )     (102 )     (45 )
Change in investment in current bank deposits     284       (2,000 )     (15,260 )      
Purchase of financial assets at fair value through profit or loss     (10,500 )     (908 )     (13,953 )     (7,480 )
Proceeds from sale of financial assets at fair value through profit or loss     5,447             5,847        
Net cash used in investing activities     (4,871 )     (2,924 )     (23,468 )     (7,525 )
FINANCING ACTIVITIES:                                
Proceeds from issuance of ordinary shares, net of expenses                 1,282        
Exercise of warrants and options into ordinary shares, net of expenses     175       100       3,407       110  
Net cash provided by financing activities     175       100       4,689       110  
DECREASE IN CASH AND CASH EQUIVALENTS     (14,424 )     (8,561 )     (38,828 )     (18,133 )
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS     119       (41 )     361       41  
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     29,624       12,026       53,786       21,516  
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD     15,319       3,424       15,319       3,424  
SUPPLEMENTARY INFORMATION ON INTEREST RECEIVED IN CASH     130       4       201       95  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

  6  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 1 - GENERAL:

 

a. General

 

RedHill Biopharma Ltd. (the “Company”) headquartered in Israel, together with its subsidiary, is a specialty biopharmaceutical company primarily focused on the development and commercialization of late clinical-stage, proprietary, orally-administered, small molecule drugs for the treatment of gastrointestinal and inflammatory diseases and cancer. The Company is also promoting since June 2017, in the U.S. through its subsidiary, Donnatal ® , a prescription oral adjunctive drug for the treatment of IBS and acute enterocolitis, as well as EnteraGam ® , a medical food intended for the dietary management, under medical supervision, of chronic diarrhea and loose stools.

 

In February 2011, the Company listed its securities on the Tel-Aviv Stock Exchange (“TASE”). Since December 2012, the Company's American Depositary Shares (“ADSs”) have been listed on the NASDAQ Capital Market (“NASDAQ”).

 

The Company's registered address is at 21 Ha'arba'a St, Tel-Aviv, Israel.

 

The Company is engaged in the research and development of most of its therapeutic candidates and to date has out-licensed on an exclusive world-wide basis only one of its therapeutic candidates and has had two additional regional exclusive out-licensing transactions with another therapeutic candidate . Accordingly, there is no assurance that the Company’s business will generate positive cash flow. Through June 30, 2017, the Company has an accumulated deficit and its activities have been funded through public and private offerings of the Company's securities.

 

The Company plans to further fund its future operations through commercialization of its therapeutic candidates and Donnatal ® and EnteraGam ® , out-licensing certain programs and raising additional capital. The Company’s current cash resources are not sufficient to complete the research development and commercialization of all of the Company’s therapeutic candidates and Donnatal ® and EnteraGam ® . Management expects that the Company will incur more losses as it continues to focus its resources on advancing these products based on a prioritized plan that will result in negative cash flows from operating activities. The Company believes its existing capital resources should be sufficient to fund its current and planned operations for at least the next 12 months.

 

  7  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

If the Company is unable to continue to commercialize or further out-license its therapeutic candidates and Donnatal ® and EnteraGam ® , or obtain future financing, the Company may be forced to delay, reduce the scope of, or eliminate one or more of its research, development programs or commercialization programs related to these products, any of which may have a material adverse effect on the Company’s business, financial condition and results of operations.

 

b. Approval of the condensed consolidated interim financial statements

 

These condensed consolidated interim financial statements were approved by the Board of Directors on July 24, 2017.

 

NOTE 2 - BASIS OF PREPARATION OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS:

 

a. The Company's condensed consolidated interim financial statements for the three and six months ended June 30, 2017 and 2016 (the "Condensed Consolidated Interim Financial Statements") have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting”. These Condensed Consolidated Interim Financial Statements, which are unaudited, do not include all disclosures necessary for a complete statement of financial position, results of operations and cash flow in conformity with generally accepted accounting principles. The Condensed Consolidated Interim Financial Statements should be read in conjunction with the annual financial statements as of December 31, 2016 and for the year then ended and their accompanying notes, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as published by the International Accounting Standards Board (“IASB”). The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

 

The Condensed Consolidated Interim Financial Statements as of June 30, 2017 and for the three and six months then ended include for the first time the accounts of the Company and its subsidiary. Intercompany transactions and balances are eliminated on consolidation.

The accounting policies applied in the preparation of the Condensed Consolidated Interim Financial Statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2016. For more information, see Note 3 below, describing new additional accounting policies adopted by the Company with respect to its new operation.

 

  8  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

 

b. Standards and interpretations to existing standards that are not yet in effect and have not been early adopted by the Company:

 

International Financial Reporting Standard No. 9 “Financial Instruments” (hereafter - IFRS

 

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income. Further, the expected credit losses model replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement except for the recognition of changes in the Company’s own credit risk in other comprehensive income for liabilities designated at fair value through profit or loss.

 

The standard is effective for accounting periods beginning on or after 1 January, 2018. The Company is currently assessing the impact of IFRS 9.

 

International Financial Reporting Standard No. 16 “Leases” (“IFRS 16”)

 

IFRS 16 defines a lease as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. Under IFRS 16, lessees have to recognize a lease liability reflecting future lease payments and a ‘right-of-use asset’ for almost all lease contracts. The standard replaces the current guidance in IAS 17. The standard is effective for annual periods beginning on or after January 1, 2019. The Company is currently assessing the impact of adopting IFRS 16.

 

  9  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 3 - NEW ACCOUNTING POLICIES:

 

a. Revenues from contracts with customers

 

In May 2014, the IASB issued the new revenue recognition standard, IFRS 15. IFRS 15 replaces much of the prescriptive and diverse guidance in today's accounting literature.

 

Its purpose, among other things, is to remove inconsistencies in existing revenue recognition frameworks and to provide more useful information to financial statements users.

 

In the second quarter of 2017, the Company adopted retrospectively IFRS 15 as of January 1, 2017, for all periods presented. The adoption of IFRS 15 did not have an effect on neither the revenues recognized in prior periods nor to accumulated deficits as of January 1, 2015.

IFRS 15 introduces a five-step model for recognizing revenue from contracts with customers, as follows:

 

1.   Identify the contract with a customer.

 

2.   Identify the performance obligations in the contract.

 

3.   Determine the transaction price.

 

4.   Allocate the transaction price to the performance obligations in the contract.

 

5.   Recognize revenue when (or as) the entity satisfies a performance obligation.

 

Revenues from promotional services

 

The Company recognizes revenue from promotional services related to Donnatal ® as it satisfies its performance obligation over time, in an amount of the consideration it expects to be entitled to, taking into consideration the constraint on variable consideration stipulated in IFRS 15.

 

  10  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

Revenues from sale of products

 

Principal versus agent considerations

When another party is involved in providing goods or services to a customer, the Company analyses whether the Company acts as a principal or an agent in the transaction, based on whether the Company obtains control of the product before it is transferred to the customer, using the indicators provided in IFRS 15.

 

In the sale of EnteraGam ® , the Company is determined to be the principal in the arrangement (rather than an agent of Entera Health), therefore, revenue in the amount the Company is entitled to from its customers is recognized on a gross basis.

 

The Company recognizes revenues from the sale of EnteraGam ® , when control of the product is transferred to the customers, at a point in time.

 

The transaction price in these arrangements is the consideration the Company expects to be entitled to from the customer, taking into consideration the existence of variable considerations, such as the product's right of return and certain other promotional discounts provided to customers.

 

Revenues from out-licensing of the Company's intellectual property

 

Revenue incurred in connection with the out-licensing of a right to use the Company’s intellectual property is recognized at a point in time.

 

The transaction price contains variable considerations contingent upon the licensee achieving certain milestones as well as sales-based royalties, in accordance with the relevant agreement.

 

Revenue from achieving additional milestones is recognized only when it is highly probable that a significant reversal of cumulative revenues will not occur, usually upon achievement of the specific milestone, in accordance with the relevant agreement.


Sales-based royalties are not included in the transaction price, rather they are recognized as incurred, due to the specific exception for sales-based royalties in licensing of intellectual property.

 

Practical expedients and exemptions

 

The Company expenses sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded as sales and marketing expenses.

 

  11  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

b. Inventories

 

Inventories are stated at the lower of cost or net realizable value with cost determined using the first-in, first-out method. The Company recognized, for the first time an amount of $108 thousand in inventories as a cost of revenues during the three months ended June 30, 2017.

 

The Company continually evaluates inventories for potential losses due to excess, obsolete or slow-moving inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates the carrying value of a product may not be recoverable, a charge is recorded to reduce the inventory to its current net realizable value.

 

c. Trade receivables and contract assets

 

Financial assets included in trade receivables and contract assets are recognized initially at fair value. Subsequent to initial recognition they are measured at amortized cost using the effective interest rate method, less any impairment losses.

 

d. Advertising and promotional expenses


Advertising and promotional costs, including free products and samples distributed to customers, are recognized as an expense when incurred.

 

NOTE 4 - EQUITY:

 

a. On January 3, 2017, the underwriters for the Company's 2016 underwritten public offering partially exercised their option and purchased 133,104 ADSs for approximately $1.28 million. Following the partial exercise of the underwriters’ option, the underwritten public offering and the concurrent registered direct offering totaled 3,846,519 ADSs and warrants to purchase 2,025,458 ADSs, representing aggregate gross proceeds from both offerings of approximately $39.4 million before deducting underwriting discounts and commissions, placement agent fees and other offering expenses.

 

b. During the six months ended June 30, 2017, the Company received notifications of exercise with respect to options that had been issued to directors and consultants of the Company. Accordingly, the Company issued 2,808,750 ordinary shares for approximately $777 thousand.

 

c. During the six months ended June 30, 2017, the Company received notifications of exercise with respect to non-tradable warrants that had been issued in 2014 to investors in the form of private placements. Accordingly, the Company issued 2,526,320 ordinary shares for approximately $2.63 million.

 

  12  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 5 - SHARE-BASED PAYMENTS:

 

a. On March 23, 2017, the Board of Directors of the Company granted 3,025,000 options to employees and consultants of the Company under the Company’s stock options plan.  The fair value of the options on the date of grant was $1.45 million.

 

Each option is exercisable into one ordinary share at an exercise price of $1.08 per share. The options will vest as follows: for employees and consultants of the Company who had provided services exceeding one year to the Company as of the grant date, the options will vest in 16 equal quarterly installments over a four-year period. For employees and consultants of the Company who had not provided services to the Company exceeding one year as of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over the following three years in 12 equal quarterly installments.

The options will be exercisable, either in full or in part, from the vesting date until the end of 7 years from the date of grant.

 

The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: price of the Company's ordinary share: $1.03, expected volatility: 50.05%, risk-free interest rate: 2.23% and expected useful life to exercise: 7 years.

 

b. On March 23, 2017, the Board of Directors of the Company granted 62,500 options to purchase ADSs to employees of the Company under the Company’s stock options plan.  The fair value of the options on the date of grant was $327 thousand.

 

Each option is exercisable into one of the Company’s ADSs at an exercise price of $10.80 per ADS. The options will vest as follows: for employees and consultants of the Company who had provided services exceeding one year to the Company as of the grant date, the options will vest in 16 equal quarterly installments over a four-year period. For employees and consultants of the Company who had not provided services to the Company exceeding one year as of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over the following three years in 12 equal quarterly installments.


The options will be exercisable, either in full or in part, from the vesting date until the end of 7 years from the date of grant.

 

The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: price of the Company's ADS: $10.36, expected volatility: 58.09%, risk-free interest rate: 2.23% and expected useful life to exercise: 7 years.

 

  13  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

c. Following a general meeting of the Company’s shareholders held on May 11, 2017, and subsequent to the approval of the Company’s Board of Directors on March 23, 2017, the Company allocated an aggregate of 1,140,000 options under the Company’s stock options plan to the Company's directors at an exercise price equal to $1.09 per share, excluding 500,000 options to the Company's Chief Executive Officer at an exercise equal to $1.08 per share. The fair value of the options on the date of grant was $517 thousand.

 

Each option allocated to non-executive directors of the Company is exercisable into one ordinary share. The options will vest as follows: for directors who had provided services exceeding one year to the Company as of the grant date, the options will vest in 16 equal quarterly installments over a four-year period. For directors who had not provided services to the Company exceeding one year as of the grant date, the options will vest as follows: 1/4 of the options will vest one year following the grant date and the rest over the following three years in 12 equal quarterly installments.


The options will be exercisable, either in full or in part, from the vesting date until the end of 7 years from the date of grant.

 

The fair value of the options was computed using the binomial model and the underlying data used was mainly the following: exercise price equal to either $1.08 or $1.09 per share, price of the Company's ordinary share: $1.00, expected volatility: 49.77%, risk-free interest rate: 2.20% and expected useful life to exercise: 7 years.

 

NOTE 6 – NET REVENUES:

 

The Company’s net revenues for the three and six months ended June 30, 2017 consist of r evenues from the sale of products and revenues from promotional services.

 

  14  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 7 - FINANCIAL INSTRUMENTS:

 

a. Fair value hierarchy

 

The following table presents Company assets and liabilities measured at fair value:

 

    Level 1   Level 3   Total
    U.S. dollars in thousands
June 30, 2017:                        
Assets -                        
Financial assets at fair value through profit or loss     20,340             20,340  
Liabilities -                        
Derivative financial instruments           2,622       2,622  
December 31, 2016:                        
Assets -                        
Financial assets at fair value through profit or loss     12,313             12,313  
Liabilities -                        
Derivative financial instruments           6,155       6,155  

 

During the six-month period ended June 30, 2017, there were no transfers of financial assets and liabilities between Levels 1, 2 or 3 fair value measurements.  There have been no changes in the methodologies used at June 30, 2017 since December 31, 2016.

 

 

b. Fair value measurements using significant unobservable input (Level 3)

 

The following table presents the change in derivative financial liabilities measured at level 3 for the periods ended June 30, 2017 and 2016:

 

    Three months ended   Six months ended
    June 30,   June 30,
    2017   2016   2017   2016
    U.S. dollars in thousands
Balance at beginning of the period     4,873       1,036       6,155       1,237  
Amounts classified to equity                 (20 )      
Amounts recognized in profit or loss     (2,251 )     (514 )     (3,513 )     (715 )
Balance at the end of the period     2,622       522       2,622       522  

 

  15  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

The fair value of the above-mentioned derivative financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions at the end of each reporting period.

 

The fair value of the warrants is computed using the Black and Scholes option pricing model. The fair value of the warrants issued in 2016 as of June 30, 2017 is based on the price of an ordinary share on June 30, 2017 and based on the following key parameters: risk-free interest rate of 1.45% and an average standard deviation of 45.58%. The fair value of the above warrants as of December 31, 2016, was computed based on the price of an ordinary share on December 31, 2016 and based on the following key parameters: risk-free interest rate of 1.48% and an average standard deviation of 52.94%.

 

c. The carrying amount of cash and cash equivalents, current and non-current bank deposits, receivables and account payables and accrued expenses approximate their fair values.

 

NOTE 8 - LOSS PER ORDINARY SHARE:              
               
a.      Basic              

 

The basic loss per share is calculated by dividing the comprehensive loss by the weighted average number of ordinary shares in issue during the period.

 

    Three months ended   Six months ended
    June 30,   June 30,
    2017   2016   2017   2016
                 
Comprehensive loss (U.S. dollars in thousands)     11,023       6,552       19,619       12,076  
Weighted average number of ordinary shares outstanding during the period (in thousands)     171,640       127,344       170,640       127,237  
Basic loss per share (U.S. dollars)     0.06       0.05       0.11       0.09  

 

b.    Diluted              

 

The diluted loss per share for the three and six months-period ended June 30, 2017 is identical to the basic loss per share since the effect of potential dilutive shares is anti-dilutive. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares, which is calculated using the Treasury Method. The Company has two categories of dilutive potential ordinary shares: warrants issued to investors and options issued to employees and service providers. The effect of options issued to employees and service providers is anti-dilutive.

 

  16  
 

 

REDHILL BIOPHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

    Three months ended   Six months ended
    June 30,   June 30,
    2017   2016   2017   2016
Comprehensive loss (U.S. dollars in thousands)     11,023       6,552       19,619       12,076  
Adjustment for financial income of warrants           514             715  
Loss used to determine diluted loss per share     11,023       7,066       19,619       12,791  
Weighted average number of ordinary shares outstanding during the period (in thousands)     171,640       127,344       170,640       127,237  
Adjustment for warrants           171             13  
Weighted average number of ordinary shares for diluted loss per share (in thousands)     171,640       127,515       170,640       127,250  
Diluted loss per share (U.S. dollars)     0.06       0.06       0.11       0.10  

 

 

NOTE 9 - SUBSEQUENT EVENTS:

 

On July 24, 2017, the Board of Directors of the Company granted 237,500 options to purchase ADSs and 70,000 options to purchase ordinary shares to employees of the Company under the Company’s stock options plan. The estimated fair value of the options on the date of grant is $1.2 million.

 

 

 

 

 

17