Good day, and welcome to the RedHill Biopharma's Second Quarter 2017 Financial Results and Business Highlights Conference Call. [Operator Instructions] At this time, I would like to introduce to the conference RedHill's CEO, Mr. Dror Ben-Asher; Mr. Micha Ben Chorin, RedHill's CFO; Mr. Gilead Raday, RedHill's Chief Operating Officer; and Mr. Guy Goldberg, RedHill's Chief Business Officer. Before we begin, we will read the RedHill's Safe Harbor statement. Please go ahead.

This conference call may contain projections or other forward-looking statements regarding future events or the future performance of RedHill including statements with respect to RedHill's expectations regarding the initiation, timing, progress and results of its research manufacturing, preclinical studies, clinical trials, marketing applications or approvals if any and other therapeutic candidate development efforts, as well as business promotion and other efforts related to RedHill's U.S. commercialization activity. These statements are only predictions and RedHill cannot guarantee that they will in fact occur. RedHill does not assume any obligation to update that information. Actual events, results or achievements may differ materially from what RedHill projects today. Additional information concerning factors that could cause actual events, results or achievements to materially differ from those contained in the forward-looking statements, can be found in the Company's Annual Report on Form 20-F and in its other filings with the Securities and Exchange Commission and also include RedHill's Expanded Access Program.

Thank you, Alexandra. And to those of you who are on our call live, thank you for your interest in RedHill and for joining us. With me are Micha, RedHill’s CFO; Guy, Chief Business Officer and Gilead, Chief Operating Officer. We will briefly discuss recent and upcoming milestones and leave time to answer your questions. But first, I would like to refer to Micha, our CFO for discussion of the second quarter financial results announced earlier today.

Thank you, Dror. Good morning or good afternoon everybody. I will provide a short overview of our financial results for the second quarter 2017. Net revenues for the second quarter of 2017 were approximately $0.5 million from a partial month of June, following the initiation of U.S. promotional activities of Donnatal and sales of EnteraGam. This is compared to immaterial net revenues in the second quarter of 2016 and in the first quarter of 2017. Cost of revenues for the second quarter of 2017 was $300,000, reflecting costs related to the initiation of the sale of EnteraGam in mid-June 2017. Research and development expenses for the second quarter of 2017 were $8.4 million, an increase of $2.4 million or 40% compared to the second quarter of 2016. The increase was mainly due to the ongoing Phase 3 and Phase 2 studies with BEKINDA for gastroenteritis and IBS-D, respectively, the ongoing Phase 3 study with RHB-104 for Crohn's disease, the ongoing and planned studies with YELIVA for multiple indications, and the initiation of the ongoing confirmatory Phase 3 study with TALICIA for H. pylori infection. Research and development expenses for the second quarter of 2017 increased by $300,000 or 4% compared to the first quarter of 2017. General and administrative expenses for the second quarter of 2017 were $1.9 million, an increase of $1.2 million compared to the second quarter of 2016. General and administrative expenses for the second quarter of 2017 increased by $600,000 or 48% compared to the first quarter of 2017. The increase from the comparable periods was mainly due to the establishment and advancement of the Company's U.S. commercial operations in the first quarter of 2017 and enhanced professional services. Selling and marketing and business development expenses for the second quarter of 2017 were $3.4 million, an…

Thank you, Micha. Our strategy is to become a revenue-generating specialty GI pharma company, with commercial presence in the U.S. to set the stage for potential launch by RedHill of our late-clinical stage potential blockbuster GI products, if approved by FDA. RedHill remains focused on diligent execution and rapid implementation of exactly the strategy with several ongoing Phase 3 GI program as well as commencement last month of U.S. specialty GI promotional activities with two commercial products. Additional commercial GI products are planned to be added to the bucket of our specialty GI U.S. sales force later this year, potentially utilizing an increasing economics of scale. Guy Goldberg, who is here with me our Chief Business Officer, will discuss our commercial U.S. operations in a moment. So let’s, recent and potential milestones for the remainder of the year include the recently announced net revenues that Micha spoke about approximately $0.5 million between mid-June and the end of June, following the year commencement of promotional activities with Donnatal and EnteraGam. Moving on to RHB-104, independent Data, Safety and Monitoring Board in short DSMB recommendation following a second DSMB meeting of the RHB-104, MAP US Phase 3 study for Crohn's disease is expected to be announced by early August 2017. The DSMB interim look includes efficacy analysis and evaluations in the first 222 subjects were completed with 26 assessments. Of an option for early stop for success for overwhelming efficacy, pre-specified protocol defined statistical significance threshold for analysis of RHB-104 versus placebo in the primary endpoint is 0.003. Specifically, early efficacy results demonstrating overwhelming efficacy or futility. At week 26, could potentially trigger an early stop to the RHB-104 Phase 3 MAP US Study if the pre-specified threshold of 0.003 is reached. In relation to BEKINDA formally called RHB-102, 24 mg formulation.…

Thank you, Dror. RedHill manage a fully functional commercial operation. This is an important transformation for RedHill from being a GI development company to being a fully integrated revenue-generating GI-focused specialty pharma company. Our U.S. operation is intended to set the stage for the potential launch by the RedHill of its late-clinical stage GI products, still in development if they are approved and to fulfill our goal of being able to take a product from the clinic all the way to the patient. In the past half year, we have moved quickly and methodically to identify two products to promote. In January and April this year, we announced an exclusive U.S. co-promotion agreement with Concordia for commercial GI drug Donnatal and an exclusive U.S. promotion agreement with Entera Health for commercial GI product EnteraGam. We have also moved quickly in this time period to build a first-class commercial infrastructure. We are very proud of this new team, they are experienced and motivated and we look forward to doing great things together. To summarize, we have a home office based in Raleigh, North Carolina led by Craig Miller, a seasoned GI veteran from Salix and that home office operation includes all of the critical functions you would expect to see including medical affairs, managed markets, finance and IT among others. Compliance is also something we take very seriously and we have an internal team dedicated to make sure all of our activities are fully compliant. Finally, the heart of the commercial organization is the sales rep, as we define the role territory consultant. They are a connection in our lifeline to the doctor and the patient. We have build a first-class sales team and led by Val Graceffa, our VP of Sales and Marketing that includes approximately 40 consultants, two trainers and four regional managers while we have just initiated activities and we just too short of a period to predict how things will develop, we are cautiously optimistic about the impact that we can have. We also continue to seek actively new commercial stage GI products to add to our portfolio. Our team is up and running, they are hungry and talented and we are motivated to make this a beginning of an endeavor that remains true to RedHill’s culture and commitment to success. Thank you. And I'll turn it over to Tracy for Q&A.

Thank you. [Operator Instructions] We will now take our first question from Scott Henry from Roth Capital. Please go ahead.

Thank you, and good morning. I’m going to start with a couple model questions. Obviously Q2 was kind of the first commercial quarter and as we model out we want to get a sense of how representative some of these numbers are for Q2 going forward. Specifically G&A of $1.9 million, in selling expenses of $3.4 million seems a little higher than I would have expected for the quarter, is there some one-time noise in that or how should I think about those line items going forward?

Hi, Scott, thank you for the question. This is Micha. So yes, we did have some one-time items. And going forward, we shall expect also some increase of our commercial operations and that’s about it.

Well, perhaps if I could ask a question in a different way. With regards to selling expenses, you typically how much would that be on an annual basis, would that be $6 million or $7 million or perhaps a higher number obviously if I take three in multiply terms four as 12 but I don’t know the magnitude of the one-time cost. Just trying to get a sense of what's the model going forward on an annual basis?

Thank you, Scott. The operation is up and running and we don’t expect a significant increase beyond that because we have a team in place. So what you see is while there is we don’t expect any significant changes.

Okay. And then not that its particularly material but could you – the mix between Donnatal and EnteraGam as it split somewhat 50/50 or which product would be the bigger of the two, just from a modeling perspective?

Thank you, Scott. It’s a very good question. At this point, its early days we prefer to give the information flow limited, we don’t have much visibility ourselves yet. We expect to gain more visibility in the coming quarter or two, at which point will provide additional color. The first two weeks of promotional activity which is a second half of June may or may not mean much. So we wouldn’t want to create any expectation here with regard to total expected sales all with regard to breakdown. If we are not be the right thing to do since we do not have ourselves enough visibility. I apologize that I cannot elaborate on that.

Okay, fair enough. And then just a couple quick questions on the pipeline, the H. pylori trial now underway, do you have a sense of how long you would expect to – it would take to enroll that trial and when we may think about getting clinical data?

Roughly speaking, we expect enrollment to take about a year. We are opening numerous sites, 65 U.S. clinical sites. H. pylori is not the most difficult to say the least indication to recruit it. It’s nothing like Crohn's for example. And the study is short, treatment duration is only two weeks and follow-up is only one month. So we think it will take about a year to recruit all patients 444. And then we’ll come up with the results as quickly as possible thereafter, you may recall that in our first Phase 3 study which will also done only in the U.S. We announced top-line results literally within days from the moment, last patient was out. Here it will take a bit longer because it’s a much larger study but we’ll do it relatively quickly thereafter.

Okay, great. And then final question, we’ve got the interim efficacy analysis coming up in August. The threshold to stop the trial for positive data is p less than 003 is it the same threshold for futility, is that a two ended test?

Yes.

Okay. I just want clarity on that. Okay, great. Thank you for taking the questions.

[Operator Instructions] We will now take our next question from Swayampakula Ramakanth from H.C.Wainwright. Please go ahead.

Thank you. This is R.K. from H.C.Wainwright. A few questions, to start off on Donnatal, can you remind us what goes into promoting Donnatal. And at this point, at least from your PR it looks like most of your sales came from EnteraGam. So does that mean you’re sampling the Donnatal quite a bit? And in terms of what you are seeing initially in your conservations with the prescribers, are things seeming like the way you’re expecting it to go?

Thanks for the question. I wouldn’t take any conclusions about the relative mix or sampling based on what we've seen so far. There is a little bit of it has to do with the way the royalty is structured with both partners which is a little bit different. But its I wouldn't take any instances as Dror mentioned with Scott’s question it's early days and it's the amount of data points we have is just too early to make conclusions.

Okay. On the – regarding the studies in terms of one or two, now you have the GUARD data and what should be our expectations, I do understand that you're going into the meeting in October or by October you would come up with a game plan. So what other [indiscernible] there are – I think that we need to look out for within that program?

Thank you, R.K. BEKINDA 24 mg for gastroenteritis is a key program. Not only because we completed a large Phase 3 study in the U.S. very successfully but also because there is a chance that we cannot quantify at this point because we don’t know, that we receive green light to file an NDA without additional study or with a post-marketing study, we just don't know. Because of this, we are going to discuss with FDA the findings of the study with very detailed breakdown. And we expect to be able to announce by October what the regulatory path is. Now that could mean another study. So that we have two adequately controlled Phase 3 studies that’s required by FDA guidance or as we hope, it could also mean that we don’t need to do another study and we can file a new drug application. We would not want the market to expect one or the other for the simple reason that we do not know ourselves. And we will not know until we meet the agency in – by October.

Okay. And then question on 104, the press release and even in your earlier conversation – earlier commentary you have said that the data are mainly positive. As we requiring you to stop the study, you would be doing that so would that single study be enough for filing or do you need the second study and if a second study is needed would the MAP EU database sufficient for that or you need to do a study in the U.S.?

Our function all along is communicated to the market is that an additional Phase 3 study is required. The importance of the MAP US Phase 3 study has to do with the potential to demonstrate efficacy data from over 200 patients in the U.S. this assumes that the DSMB recommendation, the analysis shows over less than 0.003. If we complete a study which is the likely scenario, if we complete a study will have data from over 400 patients. This kind of data is what is called in the industry a king, because for the first time there will be significant data from Phase 3 study where RHB-104 is hopefully, if we are successful reaching significant efficacy with a drug that so far from what we have seen and communicated has an attractive safety profile that is oral. And that has some pricing elasticity, and in terms of the mechanism of action this will be the first time that a drug that is not supposed to be purely symptomatic treatment is showing promising efficacy results, if we are successful. The bottom-lining is that this is a paradigm changing drug, and it’s a paradigm changing study if we are successful. Very soon we will know if we reached significance that is better than the 0.003. We will announce it very soon the moment that we receive the recommendation from the DSMB. We said repeatedly that by the beginning of August this year very soon. We will communicate the recommendation, has communicated to RedHill. So this is around the corner, I hope answered your question.

Yes, Dror, thank you. Within the press release this morning, you said that you’ve been receiving – the company has been receiving requests for use of investigational drugs under EAP. Could you likely give us an idea of what sort of you have a good basket of investigational drugs. So which ones are generally being asked for I know you cannot tell specifically but on this kind of – give us an idea like where some of the folks are really feeling the need for some of your drugs?

Sure. Yes, it’s a great question. Expanded Access Program is something that the regulator has been demanding from companies in RedHill’s position because sometimes there are life-threatening condition where the patients cannot enter a properly controlled clinical study because of no study or because they don’t meet the criteria for all those reasons. RedHill obviously would like to have patients and we put in place an Expanded Access Program. We have been receiving quite a few requests. Specifically to answer your question, they relates mainly to YELIVA, which is an oncology drug and anti-inflammatory but here we deal mainly with oncology. And if you look at the type of study that are ongoing and about to commence with YELIVA, you will see that YELIVA is targeting very serious life-threatening condition. We will do our best to assist patients that are approaching us and they are as much as we can, this is remaining thing to do, we have criteria in place and subject to regulatory and other approval that admitted including from the oncology of the patients themselves and all the necessary recommendation, we will provide the drug to the patients in need. I hope I answered your question.

Yes, that’s great. Just to finish up one quick question on EnteraGam. I know the launch is very early but I was just trying to see if you have any comments on what you are hearing from your sales force anything anecdotal that you can provide us to have a feeling as to how the sales are tracking against your own internal models?

Thanks for the question. This is Guy Goldberg. So with this we – in launching both products actually one of the things, we don’t know it makes hard to model as we are not sure what the sensitivity is to active promotion which is why we are of course hesitant to give any guidance. The feedback we are getting on the field is very positive. IBS in particular is an indication where people looking for alternative approaches, they’re looking for especially if you can non-clinical traditional medicine approaches, EnteraGam is of course a medical food. So the feedback we are getting is positive were – I think doctors are looking for alternatives, patients are looking for alternatives and we think this is a good complementary product for physicians. So feedback is good, we have to see what that – how that translates into scripts and into the sales and that remains to be seen. But the feedback we are getting anecdotally is positive.

Thank you, thank you.

There are no further questions in the queue. [Operator Instructions] We will now take our next question from Jonas Peciulis from Edison Research. Please go ahead.

Hi, thank you for taking my question. Two short questions just to follow-up on the U.S. organization, so is it now fully developed meaning that you made all the necessary hires and starting with Q3 so basically to be only the cost its running it. And then the next would be so the gross margin, looking at current numbers although they are quite too early, but the gross margin would roughly be around 50%. So is this meaningful number for me to look as going forward?

Yes, this is Guy. I’m going to answer that question, thanks very much. The answer is yes, we are fully staffed in terms of all the key hires that we are looking for, that’s not to say we might not add a person here or two here and there. But for the most part, we are fully staffed in terms of the sales team, the trainers, the home office, managed care, medical affairs, IT, HR all the key functions that we are looking to bring on that we are looking for we brought on and we are fully staffed. So the answer to that is yes, we are pretty much there. The answer to the same question on margins, it’s early to say, we need to have more data points in order to be able to have information that’s meaningful that we can relate to you and we wouldn’t want to rely information that’s misleading or not correct. So it’s early for us to give you any information on margins at this point.

Fair enough. Thank you. And just a final one, do you have any claims to report the organization as a separate business segment with profit numbers, and that’s it.

Hi, this is Micha. No, at this point, we are not going to provide segmental information in our financials.

Thank you. I think my other questions were asked already. Thank you.

[Operator Instructions] There are no further questions in the queue. I would like to turn the call back to yourself for any additional or closing remarks.

Thank you, Tracy. Thank you everybody for participating in today’s call. We remain available should you have any questions or concerns. You will find us responsive as always. Have a great day for those who will be in the U.S. and have a wonderful evening in Europe and Israel.

This concludes today's call. Thank you for your participation. You may now disconnect.