Form 6-K RedHill Biopharma Ltd. For: Nov 09
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 November 2015
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 offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F S 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 are the following:
Exhibit 1: Registrant's press release entitled "RedHill Biopharma Reports Results for the Third Quarter of 2015".
Exhibit 2: Registrant’s condensed interim unaudited financial information as of September 30, 2015 and for the nine and three months then ended.
This Form 6-K is incorporated by reference into the Company's Registration Statements on Form S-8 filed with the Securities and Exchange Commission on May 2, 2013 (Registration No. 333-188286) and October 29, 2015 (Registration No. 333-207654), and its Registration Statement on Form F-3 filed with the Securities and Exchange Commission on January 23, 2014 (Registration No. 333- 193503).
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.
|
Date: November 9, 2015 |
REDHILL BIOPHARMA LTD. Chief Executive Officer |
EXHIBIT 1
RedHill Biopharma Reports Results for the Third Quarter of 2015
Key Highlights Include:
- A strong cash position of approximately $64 million at the end of the third quarter of 2015 following the Company's July 2015 public offering in the U.S. with gross proceeds of $44.5 million
- Recent key milestones include the first European marketing approval of RIZAPORT™ announced today, positive top-line results from the Phase I study with YELIVA™ (ABC294640) in advanced solid tumors and the initiation of a Phase I/II study with YELIVA™ for diffuse large B-cell lymphoma
- RedHill continues to advance the ongoing Phase III studies with RHB-104 for Crohn's disease and with BEKINDA™ for acute gastroenteritis
- Upcoming milestones include the planned initiation of a confirmatory Phase III study with RHB-105 for H. pylori eradication, following a planned meeting with the FDA to discuss the path to approval for this potential blockbuster drug, the planned initiation of Phase II studies with BEKINDA™ for IBS-D and with YELIVA™ for multiple myeloma, as well as top-line interim results from the Phase IIa study with RHB-104 for multiple sclerosis, expected by early 2016
TEL-AVIV, Israel, Nov. 9, 2015 (GLOBE NEWSWIRE) -- RedHill Biopharma Ltd. (NASDAQ: RDHL) (TASE: RDHL) ("RedHill" or the "Company"), an Israeli biopharmaceutical company primarily focused on late clinical-stage, proprietary, orally-administered, small molecule drugs for inflammatory and gastrointestinal diseases, including cancer, today announced its financial results for the quarter ended September 30, 2015.
Financial highlights for the third quarter and for the nine months ended September 30, 2015:
Revenues for the nine months ended September 30, 2015 were immaterial compared to revenues of approximately $7.0 million for the nine months ended September 30, 2014, which resulted mainly from an upfront payment of $7.0 million received from Salix Pharmaceuticals, Inc. ("Salix") for the out-licensing of RedHill's RHB-106 encapsulated bowel preparation and related rights received in 2014.
Cost of Revenues for the nine months ended September 30, 2015 was immaterial compared to approximately $1.0 million for the nine months ended September 30, 2014, which resulted from a payment of $1.0 million to Giaconda Limited, triggered by the Salix licensing transaction in 2014.
Research and Development Expenses, net for the quarter ended September 30, 2015 were approximately $3.9 million, compared to approximately $4.1 million in the quarter ended September 30, 2014. Research and Development Expenses, net for the nine months ended September 30, 2015 were approximately $12.8 million, compared to approximately $9.0 million for the nine months ended September 30, 2014. The increase in the nine months ended September 30, 2015 was mainly due to an increase in expenses related to the ongoing Phase III studies with RHB-104 (Crohn's disease), RHB-105 (H. pylori) and BEKINDA™ (gastroenteritis and gastritis).
General and Administrative Expenses for the quarter ended September 30, 2015 were approximately $0.7 million, compared to approximately $0.9 million in the quarter ended September 30, 2014. The decrease was mainly due to a reduction in share-based compensation. General and Administrative Expenses for the nine months ended September 30, 2015 were approximately $2.4 million, compared to approximately $2.9 million for the nine months ended September 30, 2014. Thehigher expenses during the comparable period in 2014 were mainly due to professional fees associated with the January 2014 private placement.
Operating Loss for the quarter ended September 30, 2015 was approximately $4.6 million, compared to approximately $5.0 million in the quarter ended September 30, 2014. Operating Loss for the nine months ended September 30, 2015 was approximately $15.2 million, compared to approximately $5.8 million in the nine months ended September 30, 2014. The increase was mainly due to higher Research and Development Expenses and to immaterial revenues during the current period compared to the $7.0 million revenues during the comparable period in 2014..
Financing Income, net for the quarter ended September 30, 2015 were approximately $1.3 million, compared to approximately $0.8 million in the quarter ended September 30, 2014. The increase was mainly due to non-cash financing income of $1.3 million that resulted from the revaluation of warrants to investors presented at fair value under the Company's derivative financial instruments.
Net Cash Used in Operating Activities for the quarter ended September 30, 2015 was approximately $3.7 million, compared to approximately $3.8 million in the quarter ended September 30, 2014. Net Cash Used in Operating Activities for the nine months ended September 30, 2015 was approximately $11.8 million, compared to approximately $6.3 million in the nine months ended September 30, 2014. The increase was mainly due to a higher Operating Loss.
Net Cash Used by Investment Activities for the nine months ended September 30, 2015 was approximately $1.1 million, compared to approximately $17.8 million in the nine months ended September 30, 2014. The decrease was mainly due to investments of cash in bank deposits in the amount of $17 million during the nine months ended September 30, 2014.
Net Cash Provided by Financing Activities for the quarter ended September 30, 2015 was approximately $41.5 million, mainly due to the July 2015 public offerings, compared to immaterial Net Cash Provided by Financing Activities in the quarter ended September 30, 2014. Net Cash Provided by Financing Activities for the nine months ended September 30, 2015 was approximately $54.8 million, mainly due to the February and July 2015 public offerings, compared to approximately $24.4 million for the nine months ended September 30, 2014, mainly from two private placements and the exercise of warrants during the first quarter of 2014.
Cash Balance1 as of September 30, 2015 was approximately $64.2 million,compared to $26.6 million as of June 30, 2015. The increase was due to the July 2015 public offering.
Ori Shilo, Deputy CEO, Finance and Operations, said: "We are very pleased with our financial and operational results for the third quarter of 2015. Following our recent public offering, we strengthened our cash position to approximately $64 million at the end of the quarter. Our solid cash position allows us to continue the development of our advanced development pipeline, including the ongoing Phase III studies with BEKINDA™ for gastroenteritis and with RHB-104 for Crohn's disease, and to conduct a confirmatory Phase III study with RHB-105 for H. pylori eradication. During the quarter we generated more data from the successful RHB-105 first Phase III study for H. pylori, further supporting the potential superior efficacy of RHB-105 over standard-of-care therapies and we intend to hold a meeting with the FDA to present the Phase III data and to discuss the path to approval. Earlier today, we announced that we have received the first marketing approval for RIZAPORT™ for the treatment of acute migraines in Europe. This is a very significant milestone for RedHill and we are continuing our discussions with potential commercialization partners for Europe, the U.S. and additional territories. We are also advancing the development program for our promising novel oncology drug candidate YELIVA™, with recently announced positive results from the Phase I study for advanced solid tumors and the recent initiation of a Phase I/II for diffuse large B-cell lymphoma. The YELIVA™ development program is supported by various grants from the National Cancer Institute, including a $2 million grant supporting a Phase I/II study for multiple myeloma, planned to be initiated by early 2016."
Recent operational highlights:
- On November 9, 2015, the Company, together with IntelGenx Corp. ("IntelGenx"), announced that the Federal Institute for Drugs and Medical Devices of Germany (BfArM) granted marketing authorization of RIZAPORT™ (RHB-103) 5mg and 10mg, an oral thin film formulation of rizatriptan benzoate for the treatment of acute migraines. The national approval of RIZAPORT™ in Germany was granted under the European Decentralized Procedure (DCP), in which Germany served as the Reference Member State. This authorization is the first national marketing approval of RIZAPORT™. Marketing authorization in Luxemburg, the Concerned Member State, is expected to follow. RedHill and IntelGenx intend to continue to work together to obtain national phase approvals in other European DCP territories.
- On October 26, 2015, the Company announced positive top-line results from the Phase I study with YELIVA™ (ABC294640) in patients with advanced solid cancers. The study successfully met its primary and secondary endpoints, providing key information about the drug's safety, toxicities, pharmacokinetics (PK) and pharmacodynamics (PD), supporting the ongoing and planned Phase II studies with YELIVA™ (ABC294640), a proprietary, first-in-class, orally-administered sphingosine kinase-2 (SK2) selective inhibitor. The results demonstrated that YELIVA™ (ABC294640) can be safely administered to cancer patients at doses that provide circulating drug levels that are predicted to have therapeutic activity, based on levels required in preclinical models. The first-in-human Phase I study treated 21 patients with advanced solid tumors, the majority of which were gastrointestinal cancer patients, including pancreatic, colorectal and cholangiocarcinoma cancers.
- On October 22, 2015, the Company announced that the U.S. National Cancer Institute (NCI) has awarded Apogee Biotechnology Corporation ("Apogee") a $225,000 Small Business Innovation Research Program (SBIR) grant to support a pre-clinical study with YELIVA™ (ABC294640) for the treatment of prostate cancer. RedHill acquired from Apogee the exclusive worldwide rights to YELIVA™ (ABC294640) in March 2015. The NCI grant is intended to support additional studies with YELIVA™ (ABC294640) to determine its therapeutic efficacy in in vitro and in vivo models of prostate cancer in combination with radiotherapy.
- On October 14, 2015, the Company announced that, following a meeting with the U.S. FDA regarding the development path for BEKINDA™, the Company filed a protocol amendment to the BEKINDA™ Phase III gastroenteritis study's approved IND to increase data collection and to conduct, among other things, additional safety tests. RedHill also reported that it expects to receive top-line results from the Phase III study in mid-late 2016 and believes that, subject to achieving highly significant positive results, the expanded Phase III study for gastroenteritis and gastritis may be sufficient as a single study to support the filing of a marketing application for BEKINDA™ for this indication in both the U.S. and Europe. RedHill further announced that it is initiating a new gastrointestinal development program with a new formulation of BEKINDA™ for the treatment of irritable bowel syndrome with diarrhea (IBS-D), with a Phase II study planned to be initiated by early 2016, subject to fulfillment of all regulatory requirements. The Company also announced that the FDA's feedback from the recent meeting also indicated that additional clinical data is required to support a U.S. New Drug Application (NDA) with BEKINDA™ for oncology support indications under the 505(b)(2) regulatory path. Further development for oncology support indications will be decided as data from the ongoing and planned efficacy studies with BEKINDA™ for gastroenteritis and IBS-D becomes available, and once RedHill receives additional regulatory feedback from the MHRA with regard to the European Marketing Authorization Application (MAA) that was filed in December 2014 for oncology support indications.
- On September 9, 2015, the Company announced that the NCI awarded a $2 million SBIR grant to Apogee to support the planned Phase II study with YELIVA™ (ABC294640) for the treatment of refractory or relapsed multiple myeloma. The grant covers a three year period and was awarded to Apogee in conjunction with Duke University. A Phase I/II study with YELIVA™ (ABC294640) for the treatment of refractory or relapsed multiple myeloma is planned to be initiated by early 2016. The study will be conducted at Duke University Medical Center and has received Institutional Review Board (IRB) approval from Duke University Health Sciences (DUHS IRB).
- On September 8, 2015, the Company announced additional supportive data from the first Phase III study with RHB-105 for the eradication of H. pylori. Results from the subsequent open-label treatment of patients in the placebo arm with standard-of-care (SoC) therapy for persistent H. pylori infection demonstrated a 63% eradication rate with SoC. These results further support the potential superior efficacy of RHB-105 over SoC and validate the use of the historical SoC efficacy threshold of 70% implemented in the Phase III study as the control for the study's primary endpoint. RedHill announced in June 2015 positive top-line results from the ERADICATE Hp Phase III study demonstrating 89.4% efficacy in eradicating H. pylori infection with RHB-105 meeting its primary endpoint with high statistical significance (p<0.001).
- On July 27, 2015, the Company announced that it had received confirmation from Salix Pharmaceuticals Ltd., recently acquired by Valeant Pharmaceuticals International, Inc., (NYSE/TSX: VRX), that it is continuing the development of RedHill's RHB-106 tasteless solid oral formulation bowel preparation development program. RedHill and Salix entered into an exclusive license agreement in February 2014, under which Salix acquired the worldwide exclusive rights to RedHill's RHB-106 encapsulated formulation for bowel preparation and rights to other purgative developments.
- On July 22, 2015, the Company closed an underwritten public offering, which included an over-allotment option exercised by the underwriters of 277,143 American Depository Shares ("ADSs"), for a total of 2,739,143 ADSs, each representing 10 of its ordinary shares, at an offering price of $16.25 per ADS. Gross proceeds from the public offering were approximately $44.5 million, before underwriting discounts and commissions and other offering expenses. Investors in the offering included Broadfin Capital LLC, Visium Asset Management, Special Situations Funds, funds managed by Sabby Management LLC, Longwood Capital Partners LLC, Menora Mivtachim and others. Nomura and Roth Capital Partners actedas joint book-running managers. MLV & Co. and H.C. Wainwright & Co. acted as co-managers for the offering.
- On July 6, 2015, the Company announced that it had received regulatory authorization to commence patient enrollment in Australia and New Zealand for its ongoing Phase III study with RHB-104 for Crohn's disease (the MAP US study), and had commenced patient screening in New Zealand. The MAP US first Phase III study is currently ongoing in the U.S. and additional countries, with interim analysis of the study expected in the second half of 2016, after half of the 270 patients expected to be enrolled in the study will have completed 26 weeks of treatment. RedHill also announced in July 2015 that it had received two notices of allowance from the United States Patent and Trademark Office (USPTO) regarding two patent applications covering RHB-104, which are expected to be valid through 2029.
Conference Call and Webcast Information:
The Company will host a conference call on Monday, November 9, 2015, at 9:00 am EST to review the financial results and business highlights.
To participate in the conference call, please dial the following numbers five to ten minutes prior to the start of the call: United States: +1-877-280-1254; International: +1-212-444-0412; and Israel: +972-3-721-9510. The access code for the call is 7362435.
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 to register, download, and install any necessary audio software.
About RedHill Biopharma Ltd.:
RedHill Biopharma Ltd. (NASDAQ: RDHL) (TASE: RDHL) is an emerging Israeli biopharmaceutical company primarily focused on the development of late clinical-stage, proprietary, orally-administered, small molecule drugs for the treatment of inflammatory and gastrointestinal diseases, including cancer. RedHill's current pipeline of proprietary products includes: (i) RHB-105 - an oral combination therapy for the treatment of Helicobacter pylori infection with successful top-line results from a first Phase III study; (ii) RHB-104 - an oral combination therapy for the treatment of Crohn's disease with an ongoing first Phase III study; (iii) BEKINDA™ (RHB-102) - a once-daily oral pill formulation of ondansetron with an ongoing Phase III study in the U.S. for acute gastroenteritis and gastritis and a European marketing application for chemotherapy and radiotherapy-induced nausea and vomiting submitted in December 2014; (iv) RHB-106 - an encapsulated bowel preparation licensed to Salix Pharmaceuticals, Ltd.; (v) YELIVA™ (ABC294640) - an orally-administered first-in-class SK2 selective inhibitor targeting multiple oncology, inflammatory and gastrointestinal indications with a Phase I/II study initiated for refractory/relapsed diffuse large B-cell lymphoma (DLBCL); (vi) MESUPRON® - a Phase II-stage first-in-class uPA inhibitor, administered by oral capsule, targeting gastrointestinal and other solid tumors; (vii) RP101 - currently subject to an option-to-acquire by RedHill, RP101 is a Phase II-stage first-in-class Hsp27 inhibitor, administered by oral tablet, targeting pancreatic and other gastrointestinal cancers; (viii) RIZAPORT™ (RHB-103) - an oral thin film formulation of rizatriptan for the treatment of acute migraines with a U.S. NDA currently under discussion with the FDA and marketing authorization received in Germany in October 2015; and (ix) RHB-101 - a once-daily oral pill formulation of the cardio drug carvedilol.
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 establish and maintain corporate collaborations; (vi) 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; (vii) the implementation of the Company's business model, strategic plans for its business and therapeutic candidates; (viii) 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; (ix) parties from whom the Company licenses its intellectual property defaulting in their obligations to the Company; (x) estimates of the Company's expenses, future revenues capital requirements and the Company's needs for additional financing; (xi) competitive companies and technologies within the Company's industry; and (xii) the impact of the political and security situation in Israel on the Company's business. 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 26, 2015. 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.
1 Including cash, bank deposits and short-term investments.
| REDHILL BIOPHARMA LTD. | ||||
| CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE LOSS | ||||
| (Unaudited) | ||||
|
Three months ended September 30 |
Nine months ended September 30 |
|||
| 2015 | 2014 | 2015 | 2014 | |
| U.S. dollars in thousands | ||||
| REVENUES: | ||||
| Licensing revenue | -- | -- | -- | 7,000 |
| Other revenue | 1 | 4 | 3 | 13 |
|
TOTAL REVENUES |
1 |
4 | 3 | 7,013 |
| COST OF REVENUE | -- | -- | -- | 1,050 |
| RESEARCH AND DEVELOPMENT EXPENSES, net | 3,901 | 4,103 | 12,820 | 8,996 |
| GENERAL AND ADMINISTRATIVE EXPENSES | 692 | 912 | 2,420 | 2,900 |
| OTHER INCOME | -- | -- | -- | 100 |
| OPERATING LOSS | 4,592 | 5,011 | 15,237 | 5,833 |
| FINANCIAL INCOME | 1,420 | 1,146 | 889 | 637 |
| FINANCIAL EXPENSES | 120 | 371 | 182 | 187 |
| FINANCIAL INCOME, net | 1,300 | 775 | 707 | 450 |
| LOSS AND COMPREHENSIVE LOSS | 3,292 | 4,236 | 14,530 | 5,383 |
|
LOSS PER ORDINARY SHARE, (U.S. dollars) BASIC |
0.03 | 0.05 | 0.14 | 0.06 |
| DILUTED | 0.04 | 0.06 | 0.14 | 0.07 |
The accompanying notes are an integral part of these condensed financial statements.
| REDHILL BIOPHARMA LTD. | |||
| CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION | |||
| (Unaudited) | |||
| September 30 December 31 | |||
| 2015 | 2014 | ||
| U.S. dollars in thousands | |||
| CURRENT ASSETS: | |||
| Cash and cash equivalents | 47,583 | 5,892 | |
| Bank deposits | 16,559 | 17,053 | |
| Prepaid expenses and receivables | 1,231 | 3,074 | |
| 65,373 | 26,019 | ||
| NON-CURRENT ASSETS: | |||
| Bank deposits | 76 | 76 | |
| Fixed assets | 133 | 146 | |
| Intangible assets | 6,160 | 2,615 | |
| 6,369 | 2,837 | ||
| TOTAL ASSETS | 71,742 | 28,856 | |
| CURRENT LIABILITIES: | |||
| Accounts payable and accrued expenses | 2,145 | 1,720 | |
| Intangible assets payable | 2,000 | -- | |
| 4,145 | 1,720 | ||
| NON-CURRENT LIABILITIES: | |||
| Derivative financial instruments | 1,403 | 2,125 | |
| TOTAL LIABILITIES | 5,548 | 3,845 | |
|
EQUITY: |
|||
| Odinary shares | 343 | 240 | |
| Additional paid-in capital | 120,587 | 65,461 | |
| Warrants | 1,057 | 1,528 | |
| Accumulated deficit | (55,793) | (42,218) | |
| TOTAL EQUITY | 66,194 | 25,011 | |
| TOTAL LIABILITIES AND EQUITY | 71,742 | 28,856 | |
| REDHILL BIOPHARMA LTD. | |||||||||
| CONDENSED 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 JULY 1, 2015 | 271 | 79,135 | 1,057 | (52,840) | 27,623 | ||||
|
CHANGES IN THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2015: |
|||||||||
| Share-based compensation to employees and service providers | -- | -- | -- | 339 | 339 | ||||
| Issuance of ordinary shares | 72 | 41,414 | -- | -- | 41,486 | ||||
| Exercise of options into ordinary shares | * | 38 | -- | -- | 38 | ||||
| Comprehensive loss | -- | -- | -- | (3,292) | (3,292) | ||||
| BALANCE AT SEPTEMBER 30, 2015 | 343 | 120,587 | 1,057 | (55,793) | 66,194 | ||||
| BALANCE AT JULY 1, 2014 | 240 | 65,447 | 1,528 | (33,536) | 33,679 | ||||
|
CHANGES IN THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2014: |
|||||||||
| Share-based compensation to employees and service providers | -- | -- | -- | 482 | 482 | ||||
| Exercise of options into ordinary shares | * | 14 | -- | -- | 14 | ||||
| Comprehensive loss | -- | -- | -- | (4,236) | (4,236) | ||||
| BALANCE AT SEPTEMBER 30, 2014 | 240 | 65,461 | 1,528 | (37,290) | 29,939 | ||||
| * Represents amount less than $1 thousand. | |||||||||
| REDHILL BIOPHARMA LTD. | |||||||
| CONDENSED 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, 2015 | 240 | 65,461 | 1,528 | (42,218) | 25,011 | ||
|
CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2015: |
|||||||
| Share-based compensation to employees and service providers | -- | -- | -- | 955 | 955 | ||
| Exercise of options into ordinary shares | * | 74 | -- | -- | 74 | ||
| Issuance of ordinary shares and warrants | 103 | 54,581 | -- | -- | 54,684 | ||
| Warrants expiration | -- | 471 | (471) | -- | -- | ||
| Comprehensive loss | -- | -- | -- | (14,530) | (14,530) | ||
| BALANCE AT SEPTEMBER 30, 2015 | 343 | 120,587 | 1,057 | (55,793) | 66,194 | ||
| BALANCE AT JANUARY 1, 2014 | 174 | 43,144 | 1,867 | (33,260) | 11,925 | ||
|
CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2014: |
|||||||
| Share-based compensation to employees and service providers | -- | -- | -- | 1,353 | 1,353 | ||
| Exercise of warrants and options into ordinary shares, net | 11 | 5,696 | (702) | -- | 5,005 | ||
| Issuance of ordinary shares and warrants | 55 | 15,927 | 1,057 | -- | 17,039 | ||
| Warrants expiration | -- | 694 | (694) | -- | -- | ||
| Comprehensive loss | -- | -- | -- | (5,383) | (5,383) | ||
| BALANCE AT SEPTEMBER 30, 2014 | 240 | 65,461 | 1,528 | (37,290) | 29,939 | ||
| * Represents amount less than $1 thousand. | |||||||
| REDHILL BIOPHARMA LTD. | ||||
| CONDENSED INTERIM STATEMENTS OF CASH FLOWS | ||||
| (Unaudited) | ||||
|
Three months ended September 30 |
Nine months ended September 30 |
|||
| 2015 | 2014 | 2015 | 2014 | |
| U.S. dollars in thousands | ||||
| OPERATING ACTIVITIES: | ||||
| Comprehensive loss | (3,292) | (4,236) | (14,530) | (5,383) |
| Adjustments in respect of income and expenses not involving cash flow: | ||||
| Share-based compensation to employees and service providers | 339 | 482 | 955 | 1,353 |
| Depreciation | 9 | 6 | 26 | 19 |
| Cost of out-licensing of intangible assets | -- | -- | -- | 50 |
| Fair value gains on derivative financial instruments through profit or loss | (1,343) | (1,093) | (722) | (559) |
| Revaluation of bank deposits | (16) | (12) | (6) | (20) |
| Exchange differences in respect of cash and cash equivalents | 83 | 323 | 136 | 109 |
| (928) | (294) | 389 | 952 | |
| Changes in assets and liability items: | ||||
| Decrease (increase) in prepaid expenses and receivables | 341 | (149) | 1,843 | (2,030) |
| Increase in accounts payable and accrued expenses | 133 | 875 | 500 | 169 |
| 474 | 726 | 2,343 | (1,861) | |
| Net cash used in operating activities | (3,746) | (3,804) | (11,798) | (6,292) |
| INVESTING ACTIVITIES: | ||||
| Purchase of fixed assets | (6) | (4) | (13) | (34) |
| Purchase of intangible assets | (45) | (1,020) | (1,620) | (1,020) |
| Change in investment in current bank deposits | (7,500) | -- | (9,500) | (7,000) |
| Purchase of non-current bank deposits | -- | -- | -- | (10,000) |
| Maturity of non-current bank deposits | 10,000 | -- | 10,000 | -- |
| Proceeds from sale of financial assets at fair value through profit or loss | -- | -- | -- | 243 |
| Net cash provided by (used in) investing activities | 2,449 | (1,024) | (1,133) | (17,811) |
| FINANCING ACTIVITIES: | ||||
| Proceeds from issuance of ordinary shares and derivative financial instruments, net | 41,486 | -- | 54,684 | 19,364 |
| Exercise of warrants and options into ordinary shares, net | 38 | 14 | 74 | 5,005 |
| Net cash provided by financing activities | 41,524 | 14 | 54,758 | 24,369 |
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 40,227 | (4,814) | 41,827 | 266 |
| EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | (83) | (323) | (136) | (109) |
| BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 7,439 | 17,145 | 5,892 | 11,851 |
| BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD | 47,583 | 12,008 | 47,583 | 12,008 |
| Supplementary information on interest received in cash | 87 | 62 | 167 | 77 |
| Supplementary information on investing activities not involving cash flows -- purchase of intangible assets | -- | -- | 2,000 | -- |
CONTACT: Company contact:
Adi Frish
Senior VP Business Development &
Licensing
RedHill Biopharma
+972-54-6543-112
[email protected]
IR contact (U.S.):
Marcy Nanus
Senior Vice President
The Trout Group
+1-646-378-2927
[email protected]
EXHIBIT 2
REDHILL BIOPHARMA LTD.
CONDENSED INTERIM FINANCIAL INFORMATION
(UNAUDITED)
SEPTEMBER 30, 2015
REDHILL BIOPHARMA LTD.
CONDENSED INTERIM FINANCIAL INFORMATION
(UNAUDITED)
SEPTEMBER 30, 2015
TABLE OF CONTENTS
| Page | |
|
UNAUDITED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2015 - IN U.S. DOLLARS: |
|
| Condensed interim statements of comprehensive loss | 2 |
| Condensed interim statements of financial position | 3 |
| Condensed interim statements of changes in equity | 4-5 |
| Condensed interim statements of cash flows | 6 |
| Notes to the condensed interim financial statements | 7-12 |
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REDHILL BIOPHARMA LTD.
CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| REVENUES: | ||||||||||||||||
| Licensing revenue | - | - | - | 7,000 | ||||||||||||
| Other revenue | 1 | 4 | 3 | 13 | ||||||||||||
| TOTAL REVENUES | 1 | 4 | 3 | 7,013 | ||||||||||||
| COST OF REVENUE | - | - | - | 1,050 | ||||||||||||
| RESEARCH AND DEVELOPMENT EXPENSES, net | 3,901 | 4,103 | 12,820 | 8,996 | ||||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | 692 | 912 | 2,420 | 2,900 | ||||||||||||
| OTHER INCOME | - | - | - | 100 | ||||||||||||
| OPERATING LOSS | 4,592 | 5,011 | 15,237 | 5,833 | ||||||||||||
| FINANCIAL INCOME | 1,420 | 1,146 | 889 | 637 | ||||||||||||
| FINANCIAL EXPENSES | 120 | 371 | 182 | 187 | ||||||||||||
| FINANCIAL INCOME, net, see note 6 | 1,300 | 775 | 707 | 450 | ||||||||||||
| LOSS AND COMPREHENSIVE LOSS | 3,292 | 4,236 | 14,530 | 5,383 | ||||||||||||
| LOSS PER ORDINARY SHARE, (U.S. dollars) | ||||||||||||||||
| BASIC | 0.03 | 0.05 | 0.14 | 0.06 | ||||||||||||
| DILUTED | 0.04 | 0.06 | 0.14 | 0.07 | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 2 |
REDHILL BIOPHARMA LTD.
CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited)
| September 30 | December 31 | |||||||
| 2015 | 2014 | |||||||
| U.S. dollars in thousands | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | 47,583 | 5,892 | ||||||
| Bank deposits | 16,559 | 17,053 | ||||||
| Prepaid expenses and receivables | 1,231 | 3,074 | ||||||
| 65,373 | 26,019 | |||||||
| NON-CURRENT ASSETS: | ||||||||
| Bank deposits | 76 | 76 | ||||||
| Fixed assets | 133 | 146 | ||||||
| Intangible assets | 6,160 | 2,615 | ||||||
| 6,369 | 2,837 | |||||||
| TOTAL ASSETS | 71,742 | 28,856 | ||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | 2,145 | 1,720 | ||||||
| Intangible assets payable, see note 3 | 2,000 | - | ||||||
| 4,145 | 1,720 | |||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Derivative financial instruments, see note 6 | 1,403 | 2,125 | ||||||
| TOTAL LIABILITIES | 5,548 | 3,845 | ||||||
| EQUITY: | ||||||||
| Ordinary shares | 343 | 240 | ||||||
| Additional paid-in capital | 120,587 | 65,461 | ||||||
| Warrants | 1,057 | 1,528 | ||||||
| Accumulated deficit | (55,793 | ) | (42,218 | ) | ||||
| TOTAL EQUITY | 66,194 | 25,011 | ||||||
| TOTAL LIABILITIES AND EQUITY | 71,742 | 28,856 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
| 3 |
(Continued) - 1
REDHILL BIOPHARMA LTD.
CONDENSED 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 JULY 1, 2015 | 271 | 79,135 | 1,057 | (52,840 | ) | 27,623 | ||||||||||||||
| CHANGES IN THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2015: | ||||||||||||||||||||
| Share-based compensation to employees and service providers | - | - | - | 339 | 339 | |||||||||||||||
| Issuance of ordinary shares | 72 | 41,414 | - | - | 41,486 | |||||||||||||||
| Exercise of options into ordinary shares | * | 38 | - | - | 38 | |||||||||||||||
| Comprehensive loss | - | - | - | (3,292 | ) | (3,292 | ) | |||||||||||||
| BALANCE AT SEPTEMBER 30, 2015 | 343 | 120,587 | 1,057 | (55,793 | ) | 66,194 | ||||||||||||||
| BALANCE AT JULY 1, 2014 | 240 | 65,447 | 1,528 | (33,536 | ) | 33,679 | ||||||||||||||
| CHANGES IN THE THREE MONTHS PERIOD ENDED SEPTEMBER 30, 2014: | ||||||||||||||||||||
| Share-based compensation to employees and service providers | - | - | - | 482 | 482 | |||||||||||||||
| Exercise of options into ordinary shares | * | 14 | - | - | 14 | |||||||||||||||
| Comprehensive loss | - | - | - | (4,236 | ) | (4,236 | ) | |||||||||||||
| BALANCE AT SEPTEMBER 30, 2014 | 240 | 65,461 | 1,528 | (37,290 | ) | 29,939 | ||||||||||||||
* Represents amount less than $1 thousand.
The accompanying notes are an integral part of these condensed financial statements.
| 4 |
(Concluded) - 2
REDHILL BIOPHARMA LTD.
CONDENSED 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, 2015 | 240 | 65,461 | 1,528 | (42,218 | ) | 25,011 | ||||||||||||||
| CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2015: | ||||||||||||||||||||
| Share-based compensation to employees and service providers | - | - | - | 955 | 955 | |||||||||||||||
| Exercise of options into ordinary shares | * | 74 | - | - | 74 | |||||||||||||||
| Issuance of ordinary shares and warrants | 103 | 54,581 | - | - | 54,684 | |||||||||||||||
| Warrants expiration | - | 471 | (471 | ) | - | - | ||||||||||||||
| Comprehensive loss | - | - | - | (14,530 | ) | (14,530 | ) | |||||||||||||
| BALANCE AT SEPTEMBER 30, 2015 | 343 | 120,587 | 1,057 | (55,793 | ) | 66,194 | ||||||||||||||
| BALANCE AT JANUARY 1, 2014 | 174 | 43,144 | 1,867 | (33,260 | ) | 11,925 | ||||||||||||||
| CHANGES IN THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2014: | ||||||||||||||||||||
| Share-based compensation to employees and service providers | - | - | - | 1,353 | 1,353 | |||||||||||||||
| Exercise of warrants and options into ordinary shares, net | 11 | 5,696 | (702 | ) | - | 5,005 | ||||||||||||||
| Issuance of ordinary shares and warrants | 55 | 15,927 | 1,057 | - | 17,039 | |||||||||||||||
| Warrants expiration | - | 694 | (694 | ) | - | - | ||||||||||||||
| Comprehensive loss | - | - | - | (5,383 | ) | (5,383 | ) | |||||||||||||
| BALANCE AT SEPTEMBER 30, 2014 | 240 | 65,461 | 1,528 | (37,290 | ) | 29,939 | ||||||||||||||
* Represents amount less than $1 thousand.
The accompanying notes are an integral part of these condensed financial statements.
| 5 |
REDHILL BIOPHARMA LTD.
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| OPERATING ACTIVITIES: | ||||||||||||||||
| Comprehensive loss | (3,292 | ) | (4,236 | ) | (14,530 | ) | (5,383 | ) | ||||||||
| Adjustments in respect of income and expenses not involving cash flow: | ||||||||||||||||
| Share-based compensation to employees and service providers | 339 | 482 | 955 | 1,353 | ||||||||||||
| Depreciation | 9 | 6 | 26 | 19 | ||||||||||||
| Cost of out-licensing of intangible assets | - | - | - | 50 | ||||||||||||
| Fair value gains on derivative financial instruments through profit or loss | (1,343 | ) | (1,093 | ) | (722 | ) | (559 | ) | ||||||||
| Revaluation of bank deposits | (16 | ) | (12 | ) | (6 | ) | (20 | ) | ||||||||
| Exchange differences in respect of cash and cash equivalents | 83 | 323 | 136 | 109 | ||||||||||||
| (928 | ) | (294 | ) | 389 | 952 | |||||||||||
| Changes in assets and liability items: | ||||||||||||||||
| Decrease (increase) in prepaid expenses and receivables | 341 | (149 | ) | 1,843 | (2,030 | ) | ||||||||||
| Increase in accounts payable and accrued expenses | 133 | 875 | 500 | 169 | ||||||||||||
| 474 | 726 | 2,343 | (1,861 | ) | ||||||||||||
| Net cash used in operating activities | (3,746 | ) | (3,804 | ) | (11,798 | ) | (6,292 | ) | ||||||||
| INVESTING ACTIVITIES: | ||||||||||||||||
| Purchase of fixed assets | (6 | ) | (4 | ) | (13 | ) | (34 | ) | ||||||||
| Purchase of intangible assets | (45 | ) | (1,020 | ) | (1,620 | ) | (1,020 | ) | ||||||||
| Change in investment in current bank deposits | (7,500 | ) | - | (9,500 | ) | (7,000 | ) | |||||||||
| Purchase of non-current bank deposits | - | - | - | (10,000 | ) | |||||||||||
| Maturity of non-current bank deposits | 10,000 | - | 10,000 | - | ||||||||||||
| Proceeds from sale of financial assets at fair value through profit or loss | - | - | - | 243 | ||||||||||||
| Net cash provided by (used in) investing activities | 2,449 | (1,024 | ) | (1,133 | ) | (17,811 | ) | |||||||||
| FINANCING ACTIVITIES: | ||||||||||||||||
| Proceeds from issuance of ordinary shares and derivative financial instruments, net | 41,486 | - | 54,684 | 19,364 | ||||||||||||
| Exercise of warrants and options into ordinary shares, net | 38 | 14 | 74 | 5,005 | ||||||||||||
| Net cash provided by financing activities | 41,524 | 14 | 54,758 | 24,369 | ||||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 40,227 | (4,814 | ) | 41,827 | 266 | |||||||||||
| EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | (83 | ) | (323 | ) | (136 | ) | (109 | ) | ||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 7,439 | 17,145 | 5,892 | 11,851 | ||||||||||||
| BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD | 47,583 | 12,008 | 47,583 | 12,008 | ||||||||||||
| Supplementary information on interest received in cash | 87 | 62 | 167 | 77 | ||||||||||||
| Supplementary information on investing activities not involving cash flows - purchase of intangible assets | - | - | 2,000 | - | ||||||||||||
The accompanying notes are an integral part of these condensed financial statements.
| 6 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL:
a. General
RedHill Biopharma Ltd. (the “Company”) was incorporated in Israel on August 3, 2009 and is active in the pharmaceutical industry. The Company is focused primarily on the development and acquisition of late clinical-stage, proprietary, orally-administered, small molecule therapeutic candidates for the treatment of inflammatory and gastrointestinal diseases, including gastrointestinal cancers. Additionally, the Company's strategy is to commercialize these therapeutic candidates, possibly through cooperation with other pharmaceutical and biotechnology companies, and to acquire rights to additional therapeutic candidates.
In February 2011, the Company listed its securities on the Tel-Aviv Stock Exchange (“TASE”) and they have been traded on the TASE since then. Since December 2012, the Company's American Depositary Shares (“ADSs”) have been listed on the NASDAQ Capital Market (“NASDAQ”), each representing ten ordinary shares.
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 only one of its therapeutic candidates. Accordingly, there is no assurance that the Company’s business will generate positive cash flow. Through September 30, 2015, 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, out-licensing certain programs and raising additional capital. The Company's current cash resources are not sufficient to complete the research and development of all of the Company's therapeutic candidates. Management expects that the Company will incur more losses as it continues to focus its resources on advancing its therapeutic candidates 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. See note 4 for capital raised in July 2015.
If the Company is unable to commercialize or further out-license its remaining therapeutic candidates or obtain future financing, the Company may decide to delay, reduce the scope of, or eliminate one or more of its research, development programs or commercialization related to the therapeutic candidates, 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 interim financial statements
These condensed interim financial statements were approved by the Board of Directors on November 8, 2015.
| 7 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 2 - BASIS OF PREPARATION OF THE CONDENSED INTERIM FINANCIAL STATEMENTS:
| a. | The Company's condensed interim financial statements for the nine and three months ended September 30, 2015 and 2014 (the "Condensed Interim Financial Statements") have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting”. These Condensed 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 Interim Financial Statements should be read in conjunction with the annual financial statements as of December 31, 2014 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 nine and three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period. |
The accounting policies applied in the preparation of the Condensed Interim Financial Statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2014.
| b. | New IFRSs not yet in effect, and which the Company did not elect to adopt early, were listed in the 2014 annual financial statements. |
NOTE 3 - AGREEMENT TO PURCHASE INTELLECTUAL PROPERTY
On March 30, 2015 the Company entered into an agreement with a U.S.-based private company that granted the Company the exclusive worldwide development and commercialization rights for all indications to a therapeutic candidate targeting multiple inflammatory-GI and oncology disease indications. Under the terms of the agreement, the Company undertook to pay the U.S. company an upfront payment in the amount of $1.5 million and an additional amount of $2 million which will be paid on the earlier of (i) a specific date or (ii) reaching a specific development milestone. In addition, the Company undertook to pay up to $2 million in potential development milestone payments, and potential tiered royalties starting in the low double-digits. Such potential royalties are due until the later of (i) the expiration of the last to expire licensed patent that covers the product in the relevant country; and (ii) the expiration of regulatory exclusivity in the relevant country. Through September 30, 2015, the Company paid the U.S. company the initial amount of $ 1.5 million and recognized an amount of $2 million as a current liability.
| 8 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 4 - EQUITY:
| a. | In July 2015, the Company completed an underwritten public offering in the U.S. of an aggregate of 2,739,143 ADSs at a price of $16.25 per ADS generating gross proceeds to the Company of approximately 44.5$ million before underwriting discounts and commissions and other offering expenses. Net proceeds to the Company from the offering, following underwriting discounts and other offering expenses of approximately 3 million, were approximately $41.5 million. |
| b. | In February 2015, the Company completed an underwritten public offering in the U.S. of an aggregate of 1,150,000 ADSs at a price of $12.50 per ADS for gross proceeds to the Company of $14.4 million before underwriting discounts and commissions and other offering expenses. Net proceeds to the Company from the offering, following discounts, commissions and expenses amounting to $1.2 million, were approximately $13.2 million. |
As a result of the offering, the Price Protection Right as defined in the annual financial statements as of December 31, 2014, provided by the Company to investors who participated in the January 2014 private placement, is no longer valid. The change in the fair value of the Price Protection Right of $542 thousand was recognized as financial income in the statement of comprehensive loss in the first quarter of 2015.
| c. | In January 2015, 2,558,440 unexercised warrants, issued by the Company in January 2013, expired along with any related rights or claims by the holders. |
| d. | During the nine months period ended September 30, 2015, the Company received notifications of exercise with respect to options that had been issued to employees of the Company. Accordingly, the Company issued 253,750 ordinary shares for $74 thousand. |
NOTE 5 - SHARE-BASED PAYMENTS
| a. | On May 17, 2015, the Board of Directors of the Company granted 300,000 options, net of subsequently expired options to employees and consultants of the Company under the Company’s stock options plan. The net fair value of the options grant on the date of grant was $218 thousand. |
Each option is exercisable into one ordinary share at an exercise price of $1.61 per share. 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: $1.56, expected volatility: 51.75%, risk-free interest rate: 1.87% and expected useful life to exercise: seven years.
| 9 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 5 - SHARE-BASED PAYMENTS (continued):
| b. | On September 2, 2015, the Board of Directors of the Company granted 2,375,072 options to employees and consultants of the Company under the Company’s stock options plan. The fair value of the options grant on the date of grant was $1.4 million. |
Each option is exercisable into one ordinary share at an exercise price of $1.56 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: $1.30, expected volatility: 53.30%, risk-free interest rate: 1.92% and expected useful life to exercise: seven years.
NOTE 6 - FINANCIAL INSTRUMENTS:
| a. | As of September 30, 2015 and December 31, 2014, the financial instruments of the Company presented at fair value are derivative financial instruments in the amounts of $1.4 million and $2.1 million, respectively. Those instruments are classified as level 3. |
The following table presents the change in instruments measured at level 3 for the periods ended September 30, 2015 and 2014:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| U.S. dollars in thousands | ||||||||||||||||
| Balance at beginning of the period | 2,746 | 2,859 | 2,125 | - | ||||||||||||
| Proceeds received during the period | - | - | - | 2,325 | ||||||||||||
| Amounts recognized in profit or loss | (1,343 | ) | (1,093 | ) | (722 | ) | (559 | ) | ||||||||
| Balance at the end of the period | 1,403 | 1,766 | 1,403 | 1,766 | ||||||||||||
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 existing at the end of each reporting period.
| 10 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 6 - FINANCIAL INSTRUMENTS (continued):
The fair value of the warrants is computed using the Black and Scholes option pricing model. The fair value of the Price Protection Right is computed using a common valuation model which takes into account specific scenarios. The fair value of the warrants as of September 30, 2015, is based on the price of an ordinary share on September 30, 2015 and based on the following key parameters: risk-free interest rate of 0.42% and an average standard deviation of 53.56%. The fair value of the warrants and Price Protection Right as of December 31, 2014, was computed based on the price of an ordinary share on December 31, 2014 and based on the following key parameters: risk-free interest rate of 0.12% - 0.7% and an average standard deviation of 44.92% - 61.70%.
| b. | 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 7 - 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 September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Comprehensive loss (U.S. dollars in thousands) | 3,292 | 4,236 | 14,530 | 5,383 | ||||||||||||
| Weighted average number of ordinary shares outstanding during the period (in thousands) | 122,551 | 87,904 | 105,328 | 86,179 | ||||||||||||
| Basic loss per share (U.S. dollars) | 0.03 | 0.05 | 0.14 | 0.06 | ||||||||||||
| b. | Diluted |
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.
| 11 |
REDHILL BIOPHARMA LTD.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 7 - LOSS PER ORDINARY SHARE (continued):
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Comprehensive loss (U.S. dollars in thousands) | 3,292 | 4,236 | 14,530 | 5,383 | ||||||||||||
| Adjustment for financial income of warrants | 1,343 | 1,339 | 180 | 555 | ||||||||||||
| Loss used to determine diluted loss per share | 4,635 | 5,575 | 14,710 | 5,938 | ||||||||||||
| Weighted average number of ordinary shares outstanding during the period (in thousands) | 122,551 | 87,904 | 105,328 | 86,179 | ||||||||||||
| Adjustment for - Warrants | 1,022 | 819 | 1,006 | 821 | ||||||||||||
| Weighted average number of ordinary shares for diluted loss per share (in thousands) | 123,573 | 88,723 | 106,334 | 87,000 | ||||||||||||
| Diluted loss per share (U.S. dollars) | 0.04 | 0.06 | 0.14 | 0.07 | ||||||||||||
NOTE 8 - EVENTS SUBSEQUENT TO SEPTEMBER 30, 2015
In October 2015, the Company received notification of exercise with respect to options that had been issued to a consultant of the Company. Accordingly, the Company issued 85,000 ordinary shares for $34 thousand.