Drug development company RedHill Biopharma Ltd. (Nasdaq: RDHL; TASE: RDHL)has announced a program of cutbacks. The company will focus on the digestive tract, while abandoning Rizaport, a drug for treating migraine headaches in the form of an oral thin film.
Originally solely a drug development company, RedHill over the past year has become a company that also markets drugs, after acquiring three products that were already on the market, and its cash burn rate has risen accordingly. The company's financial statements for the third quarter of 2017 list $6.5 million in accumulated costs (costs of setting up and operating a marketing system). Because of these costs and $8.1 million in continued R&D investment, the company's burn rate in the quarter rose to $10.6 million.
Revenue from these products totaled $1.5 million in the third quarter, less than the market's expectations. RedHill previously said that its EnteraGam product, a medical nutriment for control of chronic diarrhea, generated over $5 million in revenue in 2016 for the company that sold the product to RedHill, while Donnatal, a drug for treatment of irritable bowel syndrome and intestinal inflammations, generated $60 million in revenue (RedHill is not the exclusive marketer of this product). Initial revenue from these two products has not yet reached this pace, but RedHill still hopes that it will be able to improve on these results in the future.
In an announcement yesterday, RedHill said that it hoped to reduce its cash burn rate to $8.5 million a quarter in 2018. The company has $45 million in cash and no debts, after raising $22.5 million a few weeks ago.
The main purpose of acquiring the older products is to begin setting up a marketing apparatus that will be able to absorb the products that RedHill is currently developing, especially its antibiotic for treatment of H. pylori and Crohn's disease. The company is anticipating results from Phase III trials for these formulations in 2018.
Goodbye to oral thin film
The Rizaport product for treatment of migraine headaches, which RedHill announced that it was abandoning, is an existing drug that is administered in a new form designed to expedite its absorption. The approval process for the drug was expected to be short and easy, but when it was submitted for approval, the company received a letter from the US Food and Drug Administration (FDA) asking for more data.
Rizaport was one of the first products acquired by RedHill in 2010 when it began buying various products from companies encountering difficulties. RedHill has since changed its business model, and is now focusing on the digestive tract.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 7, 2017
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