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Wednesday, January 11, 2017

JPM Meeting Notes - RedHill Biopharma (RDHL)


As expected, much of my meeting with RedHill Biopharma (RDHL) was focused on the company’s newly acquired rights to Donnatal® in certain areas of the U.S. Now I’ve been traveling for the past several days, so I have not had an opportunity yet to do a deep dive into Donnatal but what I do know is that the drug looks like an excellent fit for RedHill, and it certainly helps move RedHill towards its stated goal of becoming a full-integrated specialty pharmaceutical company. Donnatal is an interesting asset. The drug is not FDA Approved through the modernized U.S. FDA process; instead, it is cleared for prescription use in the U.S. through the Drug Efficacy Study Implementation (DESI) process. DESI was established in 1968 and it allows for the sale of marketed prescription drugs prior to the modernized FDA Approval process. Donnatal is classified as possibly effective as an adjunctive therapy in the treatment of irritable bowel syndrome (IBS) and acute enterocolitis.

The exact marketing plan has not been made public yet, but it is safe to say that RedHill will promote Donnatal in select areas of the U.S. to GI docs, with an obvious focus on the top prescribing decile or quartile. Concordia had previously engaged a contract sales organization to promote Donnatal in the U.S. Based on what I could find, it looks to be on a roughly $45 million annualized run-rate. My guess is that RedHill will look to retain some of the top performing representatives from this group, so they may be able to hit the ground running.

In the meantime, promoting Donnatal to GI docs gives RedHill exactly what they are looking for – exposure to the GI office and the ability to establish RedHill as a brand. That will be very important for when the company looks to bring drugs like Bekinda (Phase 3 for gastroenteritis / Phase 2 for IBS) and RHB-104 (Phase 3 for Crohn’s) to the market. Other important products for RedHill, like RHB-105 (Phase 3 for H. pylori infection) look to have overlap between GI and primary care, which could afford the company an opportunity to partner and strategically co-promote.

RedHill should have exited the year with roughly $70 million in the bank and no debt. There are a lot of moving parts here – Phase 3 GI, commercial GI, Phase 3 primary care, interesting Phase 1 and Phase 2 oncology assets – and I cannot tell you right now exactly what RedHill will look like in three years – but at least I can say all these moving parts seem to be moving in the right direction.

To learn more about RedHill, take a look at the company's "Semi-Annual Business Update" published on 1/12/2017 >> LINK

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4 comments:

  1. What's your estimate on the Donnatal revenue? I saw that Concordia fire 80ish contract salesman that were exclusively for Donnatal so I have to imagine Redhill will be picking up a majority of that stack. And that was a while ago already.

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    1. I'm still doing work on that. I'd guess that RDHL can get to $100M in the future but it will take time!

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    2. I was trying to do the math earlier. Donnatal cost has gone up so much that any sort of prescription growth adds a lot to the bottom line. I think it's over $1000 for the standard prescription. It'll be interesting to see. Maybe you can do an article on that once more numbers come out? Would be appreciated.

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