Good day. And welcome to the RedHill Biopharma Fourth Quarter and Full Year 2017 Investor Update Conference Call. At this time, I would like to introduce the conference to RedHill's CEO, Mr. Dror Ben-Asher; Mr. Micha Ben Chorin, RedHill's CFO; and Mr. Gilead Raday, RedHill's Chief Operating Officer. At the end of today’s conference, we will have a Q&A session over the phone [Operator Instructions]. Before we begin, we will read from RedHill 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 activities. 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 its other filings with the Securities and Exchange Commission.

Thank you, Alexandra. And to those of you who are on our call live, thank you for joining us. Following a productive 2017, we embarked on 2018 which promises to be a very exciting year. Upcoming results from the Phase III study with RHB-104 for Crohn’s disease are expected in mid-2018, some times this summer. The top-line results from the confirmatory Phase III study with TALICIA or RHB-105 for H. pylori infection are expected in the second half of 2018, second half of this year. We also plan to initiate around mid-2018 a pivotal Phase III study with RHB-104 as a potential first-line treatment for non-tuberculous mycobacteria or NTM infections. The plan for today is to briefly discuss our 2017 results and upcoming milestones and leave time to answer your questions. But first, Micha, our CFO, will discuss our financial results announced earlier today.

Thank you, Dror. Good morning and good afternoon, everybody. I will provide a short overview of our financial results for the fourth quarter and full year of 2017. So following productive 2017, we entered 2018 committed to pursue top-line growth with financial discipline, including gradual reduction in cash burn towards a quarterly average of approximately $8.5 million. Fourth quarter of 2017 results. Net revenues and gross profit for the fourth quarter of 2017 increased by 31% and 84% respectively from the third quarter of 2017 mainly due to the increase in Donnatal scripts. Research and development expenses for the fourth quarter of 2017 were stable from the previous quarter of 2017. Selling and marketing and business development expenses for the fourth quarter of 2017 decreased by 8% from the third quarter of 2017, primarily due to decrease in marketing materials. G&A for fourth quarter increased by 11% from the third quarter of 2017, resulting mainly from the advancement of the Company's U.S. commercial operations. Operating loss for the fourth quarter of 2017 was $14.4 million, remained mostly unchanged from the previous quarter, despite one-time non-recurring expenses of $800,000. Financial income for the fourth quarter of 2017 was $4 million due to a decrease in valuation of non-tradeable warrants, accounted as non-current liabilities. Net cash used in operating activities for the fourth quarter of 2017 was $14.2 million, a direct result of the operating loss just discussed. I’ll turn now to the full year of 2017 results. Net revenues and gross profit for 2017 were $4 million and $1.9 million respectively. The increase from 2016 was due to the initiation of the Company’s U.S. commercial operations in mid-2017. Research and development expenses for 2017 were $33 million. The increase from 2017 was mainly due to the ongoing confirmatory Phase III results…

Thank you, Micha. RedHill is a revenue generating gastrointestinal focused specialty pharma company, focused primarily on the U.S. Our commercial operation based in Raleigh, North Carolina is setting the stage for the launch, if approved, of RedHill's late clinical stage potential GI products, who are getting closer to the market. Q4 '17 net revenues from our three GI specialty products in the U.S., Donnatal, EnteraGam, and Esomeprazole Strontium were $2 million, up 31% quarter-on-quarter, and gross profit was $1.1 million, up 84% quarter-on-quarter. While this may be just the beginning of the growth trend, we are satisfied with this rapid growth and we'll continue to operate the market as we get to know more. Our balance sheets remain debt free with $46.2 million at the end of 2017 and we expect decreased quarterly cash balance this year as well as increased revenues and out-licensing activities. Key highlights for 2017. In June, we announced positive results from the first Phase III study with BEKINDA 24 milligram for acute gastroenteritis and gastritis. The study successfully met its primary endpoint of preventing vomiting. We continue to work with FDA to design a confirmatory Phase III study to support a potential new drug application with BEKINDA 24 milligram for acute gastroenteritis. In January, we announced positive final results from the Phase II study with BEKINDA 12 milligram for the treatment of diarrhea-predominant irritable bowel syndrome. The study successfully met its primary endpoint, improving the primary efficacy outcome of stool consistency per FDA guidance. We plan to meet with FDA in the first half of 2018 to discuss plans for one or two pivotal Phase III studies with BEKINDA 12 milligram for IBS-D to support a potential new drug application. In December 2017, we initiated a Phase IIa study with YELIVA for the treatment of…

Thank you [Operator Instructions]. We will now take our first question from Allen Chan from Nomura. Please go ahead.

I just have two questions regarding the NTM program. So one considering the availability of the generic components of 104 and the orphan status of the disease. I was wondering if you could give us some guidance on the potential pricing dynamics for RHB-104 and NTM. And secondly in regards to competitor infinite inhalable liposome ampicillin and factory resetting. Does this mean you’re limited to the addressable population in the first-line setting if approved or -- because our due diligence suggests that could be used synergistically in combination with 104 for its biofilm penetration? Can you provide any thoughts around that? Thank you.

Regarding pricing, it’s obviously too early to discuss. However, RHB-104 is proprietary we already have several granted U.S. patents. Moreover [clofazimine] which is one of the three ingredients is not available in United States or Europe, because it is only indicated for leprosy. As such, given the unique nature, formulation, composition of the product, this will not be too different from NMC. On top of all that, we have a QIDP status, so it’s obviously grant us five more years on top of the data exclusivity, which means we are going to have, once approved, eight years of market exclusivity regardless of the patent. So the pricing and elasticity here is meaningful. With regard to your second question, unlike instruments products, RHB-104 is intended to be indicated for first line treatment. It is a standalone treatment. It does not come on top of existing standard of care, unlike the instrument product. It is also not requiring a device it’s simply a capsule all-in-one. We hope and expect to be the very first product approved as a standalone treatment for first-line NTM treatment. I hope I answered your questions.

But do you think you can talk about -- do you see any use of 104 in the refractory setting?

Our intended indication is first-line treatment. Whatever the medical practice that we’ll develop, we cannot comment on at this point. We have to stick to our intended label, which we always do.

[Operator Instructions] We'll not take our next question from Scott Henry of ROTH Capital Partners. Please go ahead.

Just wanted to talk about of the top line operating expenses, you mentioned operating expenses going down, so the burn going down. Can we get a little bit more color on the R&D line and the G&A line for 2018? And then on the top line and how do we -- how we think about the trajectory of the current marketed products for '18? Thank you.

So we estimate that our R&D expenses for 2018 will go down, as well as the G&A. And all expenses together on cash flow basis will be added up to an average $8.5 million on quarterly rate.

And then as far as the current marketed products, you said $4 million for this year. How do we think about the growth rate going forward into next year?

We launched two products in the middle of 2017 and the third product in September 2017. While it’s too early to project for this year 2018, we are encouraged by what seems to be the beginning of growth trend with the products and revenues overall. And we will continue to update as soon as we have more visibility. You noticed that there's already much more visibility than last quarter. But we have to remember that this is only the second full quarter in the field of our sales force. We should be able to provide much more data when we have our next quarter's earnings call. I hope that helps.

We'll now take our next question from Jonas Peciulis of Edison Investment Research. Please go ahead.

Just to follow-up on the top line. Are you able to provide an idea about the product mix or at least all three products selling at the moment? And then also related question about the gross margins, so I think this quarter it's close to 60%. So is it reasonable gross margin to assume going forward?

With regard to the mix of the products, we have some limitations under the agreements with our distinct partners. However, what we can say is that most of the growth as expected came from the sales of Donnatal, both the tablets and Elixir syrup because we’re promoting two products for Donnatal. The growth there is very meaningful and that’s most of the growth that we have seen. With regard to the second question of growth of 60%, we cannot comment too much on what we expect moving forward, although we do expect a gradual improvement.

Just final question on the commercial side of business. Looking forward, are you too sound or are you actually looking to add more products to your GI portfolio in the year?

Very much so. We expect to do with better utilization of economies of scale, meaning we have infrastructure in place. We are promoting three products. The infrastructure can support additional product, promotion of additional products without a meaningful increase in costs. Therefore, we are in active discussions with various parties in an attempt to add additional FDA approved products for the GI specialty markets in the hands of our field works. I hope this answered your question.

Our next question comes from Swayampakula Ramakanth from H.C. Wainwright. Please go ahead.

Just trying to continue on the thought of the commercial operations. Could you kindly tell us what revenue run rate do you need to achieve so that the commercial operations pays for itself? And within your internal thinking, what would be the timeline that you are planning to get to that stage?

If you look at the third quarter 2017, which was a very first full quarter in the field we just initiated. At that point, you will see that annualized we generated roughly $6 million. If you look at Q4, which was second full quarter in the field, you will see annualized $8 million. If this growth continues at the current fast pace quarter-on-quarter, we should be able to achieve profitability in the coming quarters.

Within a quarter from now, is that what you said?

In the coming quarters.

And then on the cost reduction plan, I know there was a previous question talking about G&A and R&D going down. Is this pretty much because of the ending of the some of these Phase III programs in 2018, or is there going to be some additional efficiency bringing in into the operations?

It’s mainly the format. We completed pretty sizeable, hundreds of patients, Phase III study for BEKINDA and gastroenteritis. We also completed a sizeable Phase II study with the BEKINDA and IBSD, both of them in the U.S. where it’s not shift to conduct efficacy studies that are advanced. There are also efficiencies that have been created and we have been implementing in the last few months cost reduction plan that has been generating satisfactory results. I hope this answers your question.

And then one last question on YELIVA. I know you made some comments on it, I probably missed some of it and I’m asking. But on this Phase II study cholangiocarcinoma. Could you give us a timeline for the data and would this Phase II study be enough for registration or do you need to do another study?

Our assumption is that we will need another study. That said, this is an orphan indication where overall survival is only roughly one year. Five year survival is between 2% or so to 30% depending on diagnosis timing and the exact type of tumor. The study that we conducted previously with the YELIVA was completed successfully Phase Ib in advanced solid tumor patients. In that study, there were three patients with cholangiocarcinoma. One of those subjects achieved a sustained partial response overall survival of over 20 months. And the other two subjects had for long stable disease overall survival of 17.6 and 16.3 months. So first and foremost, we are doing our best to bring this medication to patients in dire need. We already treating patients outside this study as part of our expanded access program, because of the importance of this study and this indication for the patients and their families, we hope to be able to generate results as quickly as possible as the study continued. Timing of completion of the study, I cannot tell you because I don’t know. But I can tell you that we will be providing updates constantly as stable disease data becomes available, and we will see how the study goes. But under certain scenarios, we might not even need to finish the study, but rather go back to FDA as quickly as possible. But we need to see how it goes. We have hopes for positive ongoing data generation, which we will share with the market.

[Operator Instructions] We'll now take our next question from Ed Woo from Ascendiant Capital. Please go ahead.

Going back to YELIVA, how much of the study that you're going to initiate is going to self funded versus funded from some other source?

There are several Phase I/II studies ongoing with YELIVA. The last and most recent to be initiated is cholangiocarcinoma study. Unlike the previous studies that are ongoing that has been largely funded by the National Cancer Institute, the cholangiocarcinoma study was initiated by RedHill and is funded by RedHill. And the reason for that is that we did not wait for any funding, we felt the agency to move forward with the study. It was certainly important enough and we did not feel that waiting for funding or conditioning the study on funding outside funding is the right or just proper thing to do. This is an urgent need and we simply moved into the study as quickly as possible. That said, we did applied for some external funding and given the indication of the importance of the study, we are cautiously optimistic.

Then my next question is how many sales people do you have right now and do you think that that is enough for adequate coverage?

Could you repeat your question please?

For how many sales people do you have right now and do you think that is enough for full coverage of this in the U.S.?

We have 40 sales reps for all. What we are doing is we are covering the most prominent territories with sales force of 36 and we also have full inside sales that are covering the so called white space, which is the remaining territories. We are already covering almost all the United States with this operation and we'll increase as needed down the road.

Our next question comes from [Bradley Cook] from [indiscernible]. Please go ahead.

Congratulations on such an exciting pipeline for $130 million company, it’s awesome. On your H. pylori project, I wondered I know I’ve read that you were 90% effective in your studies compared with couple of the drugs that are otherwise available around 60%. I wondered is that still holding up from your view point because that’s quite exciting. And secondly, based on the market, the potential market of that drug which of that disease and that drug which effects, it seems like happy world. What could you guess your gross sales might be if you get full approval and get the market? Thank you.

Thank you, Bradley. We have seen just over 90% eradication as you rightly mentioned in Phase II study that was conducted with a slightly different formulation in an Australian study before RedHill acquired the drug. We have seen approximately 90%, 89.3% eradication in our Phase III study in the U.S. that was conducted by RedHill and completed early 2016. The current confirmatory and hopefully final study before approval, if successful, is a blinded study. We do not have any insight into the [indiscernible] of the patients. And therefore, we will not know until the very-end of the study at which point we will share with you the results. With regard to your second question about the market potential, we did provide in May 2016 an assessment by external experts of the potential market size. And to sum it up, the U.S. estimation is roughly $1.5 billion based on pricing of existing treatments that’s potential market size in the U.S., and the rest of the world about 4 billion. So those are roughly the numbers that we estimate. However, the market could grow significantly because TALICIA RHB-105 we have intended to be indicated for first-line H. pylori treatment. As such it is targeting a potential audience of more than half of the world’s adult population and somewhere between 30% and 40% of the U.S. adult population, probably 100 million Americans or so. Those are very big numbers and if we are successful in our study and if we do get approved, it means our marketing will be able to target 30% to 40% of the U.S. population and that could translate into very significant commercial potential. I hope I answered your question, Bradley.

[Operator Instructions] It appears there are no further questions at this time. We actually do have one more question from Vernon Bernardino from Seaport Global. Please go ahead. Your line is open.

Congrats on the commercial product results so far, regarding the gross margin. Can you say what percentage that was on royalties as far as cost of goods sold?

The gross margin is offset the payment of royalties.

And then regarding the commercial product supply where is that currently coming from?

The three products are coming from approved manufacturing plants. The production and supply has been uninterrupted and we do not expect any major surprises there based on what we have seen so far. We did not disclose all of the manufacturing sources to suppliers only partially, and all suppliers are based in the United States. I hope this helps.

More specifically though, so the current inventory, as reflected on the balance sheet, reflects the current supply of the commercial product?

Yes, it is.

And last question, can you expand a little more about the expanded access program, the availability for cholangiocarcinoma patients is very interesting to me.

We are in this business because we want to do good, and it’s hard imagine a situation where you can do more good than help patients that are suffering from such diseases. We effectively have been flooded with request for expanded access or sometimes called compassionate use is regulated treatment under a program that needs to be stated in advance, that is outside clinical studies. We are treating a few patients. The request comes from pretty much all over the world, not only the U.S. And when the criteria are met to mention few of those, it’s critical that the original request is supported and is officially coming from the treating physician. We need to comply with all laws and regulations in the relevant country and so on and so on. When the criteria are met, we are able to provide this treatment. It is not easy to satisfy that criteria and we need to adhere to it very strictly in the interest of the greater cholangiocarcinoma patients’ community present and future. We are making sure that we are not doing anything that would jeopardize the prospect of the drug reaching the market for the benefit of those patients and their families. I hope I answered your question.

So will you be able to provide perhaps the results from those patients regarding YELIVA, long term results?

It is highly unlikely. The patients worry a lot in terms of the stage and state of their disease. I know some companies do that in order to may be generate excitement in the short term. We do not feel at this point that this is solid approach. But obviously we are following the data and everything that needs to be submitted to the regulators will be submitted. Pretty much the only way to assess the efficacy of an investigational drug of this kind, this is a new clinical entity the efficacy and safety, is to conduct adequately controlled clinical studies, which is what we are doing with YELIVA in our Phase IIa study that is currently enrolling.

It appears there are no further questions at this time.

Thank you, Keith, and thank you all for listening. To sum up, 2017 was a highly productive year with positive BEKINDA Phase III and Phase II results, establishment of our GI focused commercial operation in the U.S. and most importantly, significant progress made towards completing our Phase III study with RHB-104 for Crohn's disease and TALICIA, RHB-105 for H. pylori infection. We look forward to updating you on the results of those two Phase III studies as early as this summer. As always, we remain available to answer any questions you may have. So please feel free to reach out to us. We wish you all a very pleasant day.

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