RedHill Biopharma(RDHL) - 2022 Q2 - Quarterly Report

Financial Performance - Net revenues for Q2 2022 were $18.346 million, a decrease of 14.3% compared to $21.502 million in Q2 2021[6] - Gross profit for the first half of 2022 was $16.162 million, down 23.8% from $21.234 million in the same period of 2021[6] - The company reported a comprehensive loss of $11.711 million for Q2 2022, a decrease of 59.8% from $29.121 million in Q2 2021[6] - The loss per ordinary share for the first half of 2022 was $0.06, compared to $0.12 in the same period of 2021[6] - Movantik® revenues decreased to $16.125 million for the three months ended June 30, 2022, down from $19.212 million in the same period of 2021, representing a decline of approximately 11%[58] - The company reported total net revenues of $18.346 million for the three months ended June 30, 2022, compared to $21.502 million for the same period in 2021, reflecting a decrease of about 14%[58] - The company recorded a consolidated comprehensive loss of $11.711 million for the three months ended June 30, 2022, compared to a loss of $29.121 million in the same period of 2021, showing an improvement of about 60%[65] - The financial expense of $2.552 million for the three months ended June 30, 2022, compared to $4.235 million in the same period of 2021, reflecting a decrease of approximately 40%[65] Expenses and Cost Management - Research and development expenses significantly decreased to $1.472 million in Q2 2022 from $10.328 million in Q2 2021, reflecting a reduction of 85.7%[6] - The operating loss for the first half of 2022 was $25.788 million, compared to $43.038 million in the first half of 2021, indicating a 40.0% improvement[6] Assets and Liabilities - Total assets as of June 30, 2022, were $167.967 million, down from $181.188 million at the end of 2021[9] - Current liabilities increased to $166.415 million as of June 30, 2022, compared to $81.470 million at the end of 2021[9] - The allowance for deductions from revenues increased to $39.223 million as of June 30, 2022, from $30.711 million as of January 1, 2022, indicating a rise of approximately 28%[49] Cash Flow and Financing - Cash and cash equivalents at the end of Q2 2022 were $26.988 million, down from $29.474 million at the end of 2021[9] - The company raised $15.508 million from the issuance of ordinary shares and warrants in Q2 2022, compared to $273,000 in Q2 2021[16] - The company sold 836,476 American Depositary Shares (ADSs) under its "at-the-market" equity offering program at an average price of $2.18 per ADS, resulting in net proceeds of approximately $1.8 million[42] - The company entered into a definitive agreement with a single investor, issuing 10,563,380 ADSs and granting warrants to purchase up to 13,204,225 ADSs for a total net consideration of $14.4 million[45] - HCRM exercised its rights to control RedHill Inc.'s account, transferring $16 million as minimum cash required under the Credit Agreement[70] - The $16 million Funds are classified as Restricted Cash in the financial position statements as of June 30[70] Strategic Initiatives and Agreements - An exclusive license agreement with Gaelan Medical Trade LLC for Talicia in the UAE resulted in an upfront payment of $2 million, with additional milestone payments and tiered royalties up to mid-teens on net sales[42] - The company recognized $2 million in revenue from the license of Talicia IP rights and manufacturing services during the six months ended June 30, 2022[41] Business Challenges and Outlook - Management expects to incur additional losses as it focuses on advancing the development of its therapeutic candidates and commercial operations, leading to negative cash flows from operating activities[19] - The COVID-19 pandemic has materially impacted the company's commercial activities, including launch sales and marketing for Talicia and sales of Aemcolo[27] - The company has sufficient supply on hand to meet U.S. commercial demand and clinical study needs despite the challenges posed by the COVID-19 pandemic[26] - The company has classified its borrowing as a current liability due to uncertainty regarding compliance with covenants under the Credit Agreement, raising substantial doubt about its ability to continue as a going concern[24] - RedHill Inc. is required to maintain minimum net sales of $75 million for the trailing four fiscal quarters ending June 30, 2022, and September 30, 2022, increasing to $90 million each fiscal quarter thereafter[11] Legal Matters - RedHill Inc. filed a lawsuit against Kukbo for defaulting on a $5 million payment under the Subscription Agreement[70] - An additional $1.5 million is due from Kukbo under the Exclusive License Agreement[70] - The lawsuit against Kukbo is being translated into Korean for filing in South Korea[70] - A summary judgment against Kukbo is expected to be entered in the United States within several weeks[70] Discussions and Negotiations - The company has entered discussions with HCR Collateral Management regarding a consensual business solution and is evaluating strategic alternatives to satisfy its outstanding obligations under the Credit Agreement[25] - The company is engaged in discussions with HCRM regarding alleged events of default under the Credit Agreement, while continuing to operate its business as usual[66]