Executive Summary / Key Takeaways

• RedHill Biopharma is executing a strategic overhaul, shifting towards financial independence by targeting positive cash flow from operations in the second half of 2022 through aggressive cost reductions and external R&D funding.
• The company's commercial portfolio, led by Talicia (H. pylori) and Movantik (OIC), demonstrates consistent prescription growth and strong market positioning, with Talicia becoming the most prescribed branded H. pylori therapy in the U.S..
• RedHill's pipeline features differentiated, host-targeted technologies like opaganib and RHB-107, offering broad antiviral activity and potential in oncology, GI, and metabolic diseases, with significant recent advancements and non-dilutive funding initiatives.
• A recent $10 million legal victory against Kukbo and improved liquidity measures underscore enhanced financial stability, supporting future organic and non-organic growth.
• Despite a challenging biotech landscape, RedHill's specialized focus and technological advantages position it to capitalize on unmet medical needs in GI, infectious diseases, and oncology, aiming for sustained profitability.

Setting the Scene: RedHill's Strategic Pivot in a Dynamic Biopharma Landscape

RedHill Biopharma Ltd., incorporated in 2009, has established itself as a specialty biopharmaceutical company with a primary focus on gastrointestinal diseases, infectious diseases, and oncology. The company's foundational strategy has historically involved a dual approach: developing drugs in-house and opportunistically acquiring commercial-stage products. This strategy led to the acquisition of commercial rights for Movantik for opioid-induced constipation (OIC) from AstraZeneca (AZN) and Aemcolo for travelers' diarrhea from Cosmo, alongside the launch of its internally developed H. pylori treatment, Talicia.

The biopharmaceutical sector has recently experienced "one of the longest and deepest downturns," a challenging environment exacerbated by the ongoing COVID-19 pandemic. This backdrop has necessitated a decisive strategic shift for RedHill, as the company aims to "control its own destiny" by "investing less" to "conserve cash and speed up the point where we achieve breakeven." RedHill's overarching strategy now emphasizes achieving financial independence through aggressive cost control, leveraging its existing commercial assets, and increasingly relying on external funding for its promising R&D pipeline. This approach positions RedHill as a focused player in a market dominated by larger, more diversified pharmaceutical giants, requiring a keen emphasis on differentiated technology and efficient execution to compete effectively.

Technological Edge: Host-Targeted Innovation and Differentiated Formulations

RedHill's competitive advantage is significantly bolstered by its innovative technological platforms, particularly its host-targeted antiviral mechanisms and advanced drug formulations. These differentiators are central to its strategy across infectious diseases, oncology, and gastrointestinal disorders.

Core Host-Targeted Antiviral Technology

RedHill's leading investigational candidates, opaganib and RHB-107 (upamostat), exemplify its host-targeted approach to antiviral therapy. Opaganib is a first-in-class, orally administered sphingosine kinase-2 (SPHK2) selective inhibitor. Its dual mechanism of action involves inhibiting viral replication and reducing the body's excessive immune response to infection. RHB-107, an oral broad-acting serine protease inhibitor, works by blocking viral entry into human cells.

These host-directed mechanisms offer a critical advantage: they are expected to maintain efficacy against emerging viral variants, including Delta and Omicron, because they act independently of viral spike protein mutations. Opaganib, for instance, demonstrated "strong inhibition of the Delta variant" in preclinical models. Furthermore, opaganib has "compared favorably with remdesivir in inhibiting the replication of SARS CoV-2 Washington strain, while preserving cell viability," and also "demonstrated a marked reduction in the levels of IL-6 in the infected lung tissue," highlighting its combined anti-inflammatory and antiviral benefits. RHB-107 has also shown "excellent safety and tolerability" in Part A of its Phase 2/3 study for non-hospitalized COVID-19.

Advanced Formulations and Precision Medicine

Beyond antivirals, RedHill is advancing its pipeline with differentiated formulations and precision medicine approaches. RHB-204, a next-generation optimized formulation of RHB-104 for Crohn's disease, is patent protected through 2041. This program aims to be the "first ever clinical study in a specifically defined Mycobacterium avium subspecies paratuberculosis infected (MAP-positive) Crohn's disease (CD) patient population," supported by RHB-104's positive Phase 3 data, which showed a "statistically significant 64% improvement in efficacy".

In oncology, opaganib is being explored in a Bayer -supported Phase 2 combination study for advanced prostate cancer, utilizing a "precision medicine approach" with the PCPro™ lipid biomarker test to identify patients most likely to benefit. Additionally, preclinical data for opaganib in weight loss and diabetes "demonstrated weight loss and improved metabolic markers on par with semaglutide". Its "novel mechanism of action" as a "differentiated oral, non-peptide therapeutic" could "potentially avoid common GLP-1 inhibitor side effects and administration burdens".

Investor Implications of Technological Leadership

These technological differentiators are crucial for RedHill's competitive moat, market positioning, and long-term growth. The variant-agnostic nature of its antiviral candidates addresses a significant unmet need in infectious diseases. The precision medicine approach in oncology and the paradigm-shifting potential in Crohn's disease enhance the value proposition of its pipeline. As RedHill increasingly relies on external funding for R&D, these strong technological foundations make its assets more attractive for grants, platform studies, and industry partnerships, supporting future financial performance and reducing reliance on dilutive financing.

Commercial Momentum and Strategic Portfolio Management

RedHill's commercial segment is a vital component of its strategy to achieve financial independence, demonstrating consistent growth and strong market positioning for its key products.

Talicia: Leading the Fight Against H. pylori Resistance

Talicia, an FDA-approved treatment for H. pylori infection, has emerged as a market leader. It is now the "most prescribed branded H. pylori therapy in the United States". In Q1 2022, Talicia's prescription volume grew by "12.8% over Q4 2021 and 80% over Q1 2021," a trend expected to continue. Its efficacy is a key differentiator, with "90% efficacy, regardless of the patient's resistant status," which is particularly critical given the "rapidly growing issue of clarithromycin resistance". Talicia also boasts the "highest level of payer coverage compared to any of the other branded H. pylori therapies", with recent formulary wins securing "8 million additional covered lives, taking the total to more than 204 million lives". The company anticipates a UK Marketing Authorization Application (MAA) for Talicia "imminent and expected to be in time for potential approval this year".

Movantik: Dominance in Opioid-Induced Constipation

Movantik maintains a "clear market leadership with the PAMORA class with nearly 74% market share". The drug delivered "8.6% growth in Q1 2022 versus Q1 2021" and benefits from "best-in-class payer coverage with nearly 92% of insurance plans providing access". Management anticipates that potential revisions to CDC opioid prescribing guidelines could "provide further support for opioid use in patients experiencing chronic pain," potentially increasing demand for PAMORA agents like Movantik.

Aemcolo: Awaiting Travel Resurgence

Aemcolo, for travelers' diarrhea, has seen its performance tempered by the COVID-19 pandemic's impact on international travel. However, it currently requires "very few resources" and is poised for renewed focus as travel restrictions ease.

Strategic Implications of Commercial Performance

The commercial segment's achievement of a "first positive commercial operations contribution in Q4 2021" and its consistent growth are vital for RedHill's financial health. This performance supports the company's broader goal of achieving overall profitability and provides a foundation for future "non-organic growth through potential acquisitions of additional revenue-generating synergistic products", leveraging its "top-tier commercial organization".

Financial Performance and Liquidity: A Path to Independence

RedHill Biopharma has undertaken a significant financial and operational overhaul, demonstrating a clear commitment to achieving financial independence and profitability.

Cost Discipline and Efficiency

A "comprehensive cost reduction plan is expected to generate operational cost savings of approximately $50 million over the next 18 months," with savings occurring at a consistent pace over the next six quarters. This initiative has already yielded a "reduction of over 70% in cash used in operating activities in the first quarter of 2022" compared to Q4 2021. Research and development expenses decreased to $3.1 million in Q1 2022 from $5.9 million in Q4 2021, attributed to R&D cost optimization and the completion of elements of the opaganib and RHB-107 development programs.

Revenue and Profitability Trends

In Q1 2022, net revenues were $18.2 million, with Movantik contributing "a little over 14" million and Talicia approximately $2.2 million (excluding a $2 million out-licensing deal). Gross profit for the quarter was $10.2 million, representing a "56% gross margin, which is expected to continue to improve as Talicia scripts continue to grow". More recently, in the first half of 2025, "gross profit doubled compared to the first half of 2024," and "net revenues increased by 59% to $4.1 million, up from $2.6 million in the first half of 2024".

Enhanced Liquidity

RedHill's liquidity has been significantly bolstered by a recent legal victory. The New York Supreme Court upheld a $10 million summary judgment against Kukbo, comprising an "$8.25 million original award and a subsequent $1.82 million award for legal costs and expenses (including 9% statutory interest accrual)". An attachment grant from Korea's Incheon District Court further secures these assets. As of June 30, 2025, the company reported a cash balance of "$3 million," with "up to approximately $13.5 million available" through At-the-Market (ATM) and Any Market Purchase agreements. "Net cash used in operations in the first half of 2025 dropped to $5 million from $6.2 million in the first half of 2024," representing a "further 19% reduction in cash burn".

Financial Outlook

These financial metrics and strategic actions reflect a company aggressively pursuing its target of "positive cash flow from operations before interest payments for the whole company to start during the second half of 2022". The substantial cost reductions and legal wins provide a crucial liquidity runway, enabling continued development and commercialization efforts with reduced reliance on dilutive financing.

Competitive Landscape and Strategic Positioning

RedHill operates in a competitive biopharmaceutical landscape, strategically positioning itself in niche markets against larger, more diversified players such as AbbVie (ABBV), Takeda (TAK), Pfizer , and Johnson & Johnson (JNJ). While these industry giants possess greater scale and broader portfolios, RedHill's "specialized focus on underserved GI and infectious diseases" allows it to offer "potentially more tailored solutions".

In the H. pylori treatment market, Talicia's "best-in-class on-label efficacy, especially in addressing the clari-resistant population", provides a significant advantage over competitors, particularly as clarithromycin resistance is a "rapidly growing issue". This clinical differentiation, coupled with its "highest level of payer coverage", solidifies its market leadership. Similarly, Movantik maintains its "clear market leadership with nearly 74% market share" in the PAMORA class, supported by its "best overall insurance coverage".

For COVID-19 therapeutics, RedHill's host-directed antivirals, opaganib and RHB-107, target specific patient populations. Opaganib is positioned for the "moderately severe in-patient hospitalized population, which the Pfizer (PFE) and Merck (MRK) pills do not address". RHB-107, as an oral, host-directed antiviral for non-hospitalized COVID-19, offers a distinct advantage over antibody treatments that "require clinical setting, that are expensive" and have shown "weakness against the emerging variants". In the burgeoning obesity-diabetes market, opaganib's preclinical results "on par with semaglutide" and its "novel mechanism of action" that "potentially avoid[s] common GLP-1 inhibitor side effects" present a compelling alternative to established GLP-1 inhibitors.

RedHill's strategic response to the scale of its larger competitors involves leveraging its "top-tier commercial organization" for "synergistic products" and actively seeking "external funding sources" for R&D. This approach enables RedHill to maintain agility, focus on high-potential, differentiated assets, and pursue growth both organically and through targeted acquisitions.

Outlook and Future Growth Drivers

RedHill Biopharma's outlook is anchored in its commitment to achieving financial independence and advancing its pipeline. The company is "targeting positive cash flow from operations before interest payments for the whole company to start during the second half of 2022," a goal supported by its $50 million cost savings plan over 18 months.

Key pipeline catalysts are expected to drive future growth:

• Opaganib: Top-line data for the cholangiocarcinoma Phase 2 study is expected in Q3 2022. Confirmatory COVID-19 studies are the "likely pathway to potential submissions for approval," with emergency use approvals also possible. Recruitment has also initiated in a Bayer (BAYRY)-supported Phase 2 prostate cancer study.
• RHB-107: Top-line readout for Part A of the Phase 2/3 study in non-hospitalized COVID-19 patients is expected in Q1 2022.
• RHB-204 (NTM): Enrollment in the Phase 3 study for pulmonary NTM disease is expected to "pick up with the waning of COVID-19" and expansion of study sites, with a target enrollment period of 1.5 years. Orphan Drug and QIDP designations provide "12 years market exclusivity" from potential approval.
• RHB-204 (Crohn's): Positive FDA feedback on the pathway to approval has been received, with non-dilutive funding expected for this program.

Commercial expansion will continue with the growth of Talicia and Movantik, bolstered by further payer wins and potential benefits from revised opioid guidelines. Significant market opportunities exist in the global obesity-diabetes market, projected to reach "$100 billion by 2034," and the COVID-19 therapeutic market, still expected to be "worth more than $3 billion in 2025." The Crohn's disease market is also projected to grow from "$13.6 billion in 2024 to over "$19 billion in 2033," presenting substantial commercial potential for RedHill's innovative therapies.

Key Risks and Challenges

Despite its strategic advancements, RedHill faces several pertinent risks. Regulatory hurdles remain, as confirmatory studies are likely required for opaganib and RHB-107 for COVID-19 approval, and Kukbo retains the right to appeal the $10 million judgment. The reliance on "external funding sources" for R&D poses a funding dependence risk if grants or partnerships are not secured. Competitive pressure from larger pharmaceutical companies with extensive resources could impact market share and pricing. The evolving nature of the COVID-19 pandemic, with new variants and their impact on clinical trials and commercial operations (particularly for Aemcolo), also presents ongoing volatility. Finally, delays in clinical trials or failure to meet endpoints could impact future revenue streams and the overall investment thesis.

Conclusion

RedHill Biopharma stands at a pivotal juncture, having strategically refocused its operations and pipeline to pursue a path of financial independence and targeted growth. The company's commitment to cost discipline, evidenced by significant operational savings and a clear target for positive cash flow from operations in the near term, provides a solid foundation. This financial prudence, coupled with recent legal victories and improved liquidity, positions RedHill to capitalize on its differentiated assets.

The strength of RedHill's investment thesis lies in its innovative, host-targeted technologies, particularly opaganib and RHB-107, which offer variant-agnostic solutions for infectious diseases and promising applications in oncology and metabolic disorders. Bolstered by a growing commercial portfolio led by Talicia and Movantik, RedHill is strategically positioned to address significant unmet medical needs in specialized markets. While challenges remain in a competitive and dynamic biopharma landscape, RedHill's disciplined approach, technological edge, and clear strategic roadmap suggest a compelling opportunity for investors seeking exposure to a company with a renewed focus on value creation.