RedHill Biopharma Ltd. (RDHL) Q2 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you all for standing by. Welcome to RedHill Biopharma's Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please be advised that today's call is being recorded, Thursday, August 13th, 2020. And without any further delay, I would like to introduce the RedHill's executives who will be with you on this call, CEO, Mr. Dror Ben-Asher; Mr. Micha Ben Chorin, Chief Financial Officer; Mr. Rick Scruggs, Chief Commercial Officer; Mr. Gilead Raday, Chief Operating Officer; Mr. Guy Goldberg, Chief Business Officer; and Mr. Adi Frish, Senior Vice President, Business Development and Licensing. Before we begin, we will read from 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 closing of the strategic agreements with Cosmo Pharmaceuticals, the business, promotion, and other efforts related to RedHill's commercialization activities and the initiation, timing, progress, and results of RedHill's research, manufacturing, preclinical studies, clinical trials, marketing applications and approvals, if any, and the clinical trials of opaganib in the US, Europe and elsewhere for the treatment of COVID-19. These statements are predictions and RedHill cannot guarantee that they will in fact occur. RedHill does not assume any obligation to update our information. Actual events, performance, timing, results or commercialization activities may differ materially from what RedHill projects today. Additional information concerning factors that could cause actual events, performance, timing, results or commercialization activities to materially differ from those contained in the forward-looking statements can be found in the company's Annual Report on Form 20-F filed with the SEC on March 4, 2020 and in its other filings with the Securities and Exchange Commission. Transferring to Dror Ben-Asher, RedHill's CEO.

Thank you, Maurice. Good day, everyone, and thank you for joining us. I remind everybody that for the first time, we are using slides today, we'll be using it later on. Therefore, we'll try to make sure you click on the right link in order to follow the slide in a few minutes. Our clear corporate focus remains on achieving rapid, sustainable and profitable revenue growth with operational breakeven plans for some time -- at some point next year 2021. In that respect, second quarter of 2020 has been a strong one for us, and we have generated record sales. We are also making rapid progress on the R&D front, currently running two parallel global Phase 2/3 and US Phase 2 studies with opaganib, sometimes called Yeliva, for COVID-19. Initial results and potential global emergency use authorization application with opaganib for COVID-19 are planned as early as the fourth quarter of this year. In addition, FDA clearance to enter a pivotal Phase 3 study with RHB-204 for first-line NTM infections has been granted last week. Protecting our employees, patients, colleagues, and communities has been our primary focus throughout the COVID-19 pandemic period to-date, and we continue to monitor developments. We maintain full employment of our dedicated sales representatives and employees. RedHill entered the challenging COVID-19 period in a resilient position, and it is emerging even stronger. This is no coincidence as we are now reaping the benefits of building a resilient, agile, experienced, organized, and highly motivated team and having diligently and gradually built a robust and durable US commercial and R&D organization in recent years. We aim to become a leading specialty pharma leader in the US, utilizing both our organic growth capabilities driven by RedHills' very own late clinical stage pipeline as was the case with Talicia as well as non-organic growth competencies driven by continued rollout of synergistic commercial product acquisition such as acquisitions of Movantik from AstraZeneca and Aemcolo from Cosmo. With 100 sales representatives in the field and three well protected and much needed FDA approved products in our commercial bag and advanced and robust pipeline of drug candidates addressing large markets, including infectious disease, the importance of which public awareness is increasing by the day. Continued strict financial discipline and sound cash position to further strength -- to be further strengthened by the important expansion or the strategic partnership with Cosmo for multiple products announced earlier today. We are confident and uniquely positioned for fast revenue growth in the coming quarters and years. I remind again the audience to press on the link in order to see our slides later on as we present them. I will now turn to our CFO, Micha, to discuss our second quarter results, followed by the presentation of business highlights by Guy Goldberg, our Chief Business Officer, as well as the Q&A session during the remaining time. Go ahead, Micha.

Thank you. Dror. Good day, everyone. I will provide a short overview of our financial results for this Q2. Second quarter of 2020 has been transformative for RedHill. In our first full quarter promoting Movantik and Talicia, we generated record net revenues of approximately $21 million despite the challenges of COVID-19 environment. With a cash balance of approximately $56 million as of yesterday and an additional $12 million upfront payment expected from the agreement with Cosmo Pharmaceuticals, we are well positioned to continue our strong growth trend, while maintaining financial discipline. We recorded net revenues of approximately $21 million and gross profit of $6.7 million, primarily attributable to Movantik, which is far higher than any previous quarter of RedHill. Research and development expenses were relatively small with $3.2 million compared to $2.8 million in the first quarter of 2020. The increase was primarily attributable to the initiation of the studies with opaganib for COVID-19. We saw a reduction in operating loss, which was $12.5 million compared to $17 million in the first quarter of 2020. The decrease was primarily attributable to the gross profit from the sales of Movantik, partially offset by an increase of operating expenses. Overall net cash burn in the quarter, excluding the Movantik acquisition from AstraZeneca, was $9 million, which was lower than the net cash burn of approximately $12.8 million we recorded during the first quarter of 2020. Our cash position as of June 30th was approximately $53 million. As of yesterday, our cash position was approximately $56 million. We continue to maintain cost discipline during this transformative revenue record quarter. Importantly, we continue to maintain -- we are committed to maintain cost discipline as we continue to expand our commercialization activities for our GI products. While the current pandemic situation is not over yet and some unknowns remain, we still are in line to achieve operational breakeven in 2021. I will now turn the discussion to Guy, and we'll be happy to take questions later on. Thank you.

Thank you, Micha. As Dror mentioned, we are for the first time giving a presentation on our earnings call. This is because this is an important moment in our company's history as we generated record revenues, and we want to give a lot of transparency and visibility around what we are seeing in these early stages of our commercialization activities. And also, we get a lot of questions around how everything has been affected by the pandemic, and we want to be able to show you that not only is RedHill growing rapidly, but also why we are so optimistic and enthusiastic about the coming years and quarters. For the new folks on the call who are not familiar with RedHill, we are a rapidly growing US specialty company, Nasdaq-listed, ticker RDHL. We are fully integrated with three FDA approved GI products that we are commercializing ourselves. This includes Movantik, which is indicated for opioid-induced constipation; Talicia, which is indicated for H. pylori eradication; and Aemcolo, which is indicated for travelers' diarrhea. We also have a robust R&D pipeline with several important late-stage products and a strong track record of success, including opaganib, a novel COVID-19 drug candidate currently in both the US Phase 2 and global Phase 2/3 study that Gilead will elaborate on a little bit later. Second quarter was one of the most important and transformative quarters in our company's history as we generated record net revenues. Q2 net revenues as mentioned were approximately $20 million -- $21 million, and we are looking forward to strong revenue growth to be driven by Talicia ramp up and Movantik sales. We are well positioned to reach planned operational profitability next year. In addition to the milestones with these revenues, we had other important achievements. These include our acquisition of Movantik from AstraZeneca, and regaining exclusive US responsibility from Daiichi Sankyo. The renegotiated terms with Daiichi are particularly important as we believe they will significantly improve our gross margins for Movantik. In addition, ongoing parallel global Phase 2/3 and US Phase 2 COVID-19 studies with opaganib are going well, and preliminary data for the potential emergency use applications are expected as early as Q4 2020. RHB-204 has been cleared by FDA for pivotal Phase 3 study as first-line stand-alone orally administered treatment for pulmonary nontuberculous mycobacteria, or NTM disease, and as many of you saw the PR announced this morning, we have our exciting new Cosmo deal. We are expanding our relationship with this great company, Cosmo has been a fantastic partner. We have a great strategic collaboration and working relationship with them, and we look forward to doing great things with them in the future. Adi will elaborate on this transaction shortly. So, this slide discusses the impact of COVID-19 on RedHill. In summary, there have been no disruptions to clinical studies, only one quarter delay for our NTM study, and this was largely because we had to make sure patients could reliably and safely get to the investigators clinic and that we can monitor the study effectively. We had no disruptions to the supply chain, we get that question a lot from investors. Our field promotion efforts were shut down in March through May, like everyone else's. So we shifted during this period to remote promotion and continued intensive marketing activities. We have been returning steadily to the field since early June. Two critical components of that return for us are, first, the doctor's offices have opened up and are opening up and patients are starting to come back; and second, H. pylori diagnostic activities are returning and enabling positive identification of patients, which facilitates treatments. And we'll provide you more data on this in the coming commercial slides. This is our pipeline chart. The top part shows our commercial products and the bottom part shows our R&D products. Since we will provide detailed updates on our commercial products, Movantik and Talicia, and on the R&D side COVID and NTM, I will briefly mention several other important programs that are not being discussed today. So investors new to the story can appreciate our diverse activities. First, in Amecolo, this is indicated for travelers' diarrhea. This is an important part of our portfolio, and we're taking many initiatives with this product right now to set it up for success when travel resumes. On the R&D side, RHB-104 for Crohn's, we had a successful Phase 3 study, and now we are working on a diagnostic for MAP infection before we begin our next Phase 3 study. RHB-102, we had positive results for Phase 3 in gastroenteritis and positive results in Phase 2 in IBS-D, and we recently had a press release announcing the publication of data from that Phase 2 study in the American Journal of Gastroenterology. RHB-106, our bowel prep product, which we plan to move into a Phase 2 study. And finally, in oncology, we have a Phase 2 study -- we have two Phase 2 studies ongoing with opaganib and also upamostat. For those of you who have been with us for a while, this slide puts us in perspective in terms of where we came from and where we're going. We've grown from an R&D company to a fully integrated company with the small-scale commercial operation to now being an important US specialty GI company and one of the leaders in GI infectious diseases specifically. We have built a world-class commercial team headquarters in Raleigh, North Carolina and a field sales team with 100 sales reps. With our continued rapid and consistent growth both organically and non-organically, as you see with Talicia, Movantik and Aemcolo, we hope in the coming years to be a leader in the specialty pharma in the United States. I will now turn it over to Adi Frish to discuss the Cosmo deal that we just announced today.

Thank you, Guy. Hi, everybody. We were very glad to announce this morning that we have expanded our strategic partnership with Cosmo Pharmaceuticals and have entered into a binding term sheet for multiple products. The new arrangement with Cosmo covers three important products; first, RHB-204 for first-line NTM infections; secondly, Movantik for opioid-induced constipation, which we have recently acquired rights to from AstraZeneca; and thirdly, a new plan next generation H. pylori therapy. RedHill is set to receive $12 million in upfront payments and up to additional $9 million in milestone payments. Pursuant to the agreement, RedHill and Cosmo will co-develop a new novel next-generation H. pylori treatment. Cosmo will be granted with exclusive European rights to the new drug and will pay RedHill $7 million dollars upfront, an additional 2 million upon European approval, 30% royalties. Cosmo will finance the bulk of the cost of the planned pivotal Phase 3 clinical study with RHB-204 for first-line NTM infections with $5 million upfront and $7 million in milestone payments. In return, Cosmo will be entitled to 15% royalties from RedHill. RedHill also selected Cosmo to its exclusive worldwide manufacturer of Movantik as part of the transition of the rights from AstraZeneca, on top of the manufacturing of RHB-204 and the new next-generation H. pylori therapy. All in all, we are very happy to further strengthen our strategic relationships with Cosmo Pharmaceuticals as a leading well known manufacturer. And we want to extend our gratitude and appreciation to the Cosmo team for the invaluable support and growing relationships. This transaction is anticipated to initially provide RedHill with $12 million non-dilutive funding and will allow us to accelerate the development plans with a new next-generation H. pylori treatment in the planned Phase 3 study with RHB-204 for first-line NTM infections. And I would like to hand it over to Gilead Raday, RedHill's Chief Operating Officer, to discuss two of our late clinical stage programs.

Thank you, Adi. I will provide a brief update regarding a couple of our leading Phase 3 programs addressing COVID-19 and NTM infection. Slide 11, we are rapidly advancing opaganib, our novel drug candidate for treating COVID-19 patients, which shows promising antiviral and anti-inflammatory properties. Our rigorously designed global Phase 2/3 study has been initiated, and we plan to enroll up to 270 patients across approximately 40 sites in the coming few months. In parallel, our ongoing US randomized, placebo-controlled Phase 2 study is approximately halfway through enrollment of the planned 40 severe patients, and we expect to complete its enrollment later this month. Encouraging data from compassionate use of opaganib has shown substantial benefit to hospitalized severe COVID-19 patients with marked improvement in clinical and inflammatory markers as compared to a matched case control group in the same hospital. Importantly, all the opaganib treated patients were successfully weaned from oxygen supplementation and discharged from the hospital on room air without requiring mechanical ventilation. This, as compared to a third of the matched case control group, who progressed to undergo mechanical ventilation. If our ongoing rigorously designed studies confirm the promising signals from the compassionate use, this could potentially support emergency use application for opaganib as early as Q4 of this year. Slide 12. After extensive preparations, we are advancing RHB-204 into a pivotal Phase 3 study in nontuberculous mycobacterial infections termed NTM. As announced earlier today, the NTM study is now supported by funding from our strategic partner, Cosmo Pharmaceuticals. NTM is a debilitating rare disease with no FDA-approved therapy for first-line treatment. RHB-204 is a simple all-in-one orally administered stand-alone therapy intended to be the first approved first-line therapy if approved by FDA. We have received FDA clearance for our pivotal Phase 3 study, which is planned to enroll 125 patients across approximately 50 sites in the US. With FDA granted QIDP designation, RHB-204 is eligible for fast track development, priority review and potentially 12 years of market exclusivity with orphan drug designation, for which we have already applied. I will now turn it back to Guy Goldberg to update our commercial progress.

Thank you, Gilead. I would now like to talk about the much-anticipated and rapid commercial progress we have made in the last quarter. We're fortunate to have Rick Scruggs leading our commercial efforts. Rick also brought with him many of his colleagues from Salix. Salix was a number one GI-dedicated company in the US before it was purchased by Valeant, and we have several of that highly dedicated and experienced team leading our efforts here, along with many other seasoned pharma executives. Rick is on the call and can answer questions later about our commercial activities. In this part of the call, we are going to show metrics in detail not often shown by pharmaceutical companies in earnings calls. Some of these metrics will be showing just this quarter in order to help investors better understand our markets and appreciate why we are opportunistic -- why we are optimistic right now in these early critical stages of our commercial activities. I'm sure everyone is familiar with the macro-environment that the pandemic has created. The commercial pharma world was put on lockdown just like everything else in the economy, meaning doctor's offices were shut, non-emergency lab work was frozen, and in-person pharma sales activities were largely put on hold. This is environment we are operating in. Fortunately, this is starting to change. This chart shows on an industrywide level, again this is industrywide, it's not a RedHill-specific slide, just want to point that out. The return of new-to-brand scripts. What we see is that the levels fell off considerably during March but have been returning steadily. This is an important metric since launches depend on new brand writing by doctors. Again, I reemphasize the slide, it's industrywide data. We use the time when things were shut down to rev the engines, in addition to remote detailing. We have undertaken multiple campaigns such as direct mail, email, online speaker programs, online advisory boards and many others. RedHill has begun deploying its field sales force. We have progressed pretty quickly from being an almost virtual shut down mode in March, April and May to returning in the field. In June, we averaged about three calls a day, and now, and most recently in July, we're averaging over five calls a day, and that number keeps growing. This is not yet full capacity. What this means is that in the last few weeks, we are getting the impact of the sales force, and we are still not even at full force yet. And just to clarify, what this slide shows is the average number of calls per day done by a field sales representative in person. So, very important part of our launch, and very good to see that number growing. So we will now show some product-specific data about our main growth drivers. We will start with Movantik and then talk about Talicia. This slide shows our successful transition of Movantik to our hands and our initial success with the product in the first few months. Movantik script data before we acquired it is what you see on the left-hand side. And four quarters after we acquired is what you see on the right hand side. The four quarters average is out so that we are doing an apples to apples comparison. And just to be clear, we're talking about the right-hand part of this graph. We are particularly proud of this slide, because it shows we were able to pretty seamlessly takeover Movantik from AstraZeneca, considering how challenging transitions can be and considering the conditions in which we did it in terms of the pandemic and the nationwide shut down. We are very happy with how this has gone. Our team was ready, agile and resilient and it already shows. So, again, this slide shows two phenomena. First, on the left, you see the PAMORA class of drugs for opioid-induced constipation, or OIC, for short-hand, and that's what Movantik is a part of. And you see that it held steady with the pandemic during this period. I think what we see here is that this indication is really all about a very real need faced by these patients. It's debilitating, as one of our KOLs told us, OIC is not dose or time dependent. This is an important and reliably steady market addressing an important medical need. And then, on the right, again, you see the Movantik numbers and you see the great effort made by our commercial team led by Rick, and also David Wasserman, our Senior VP for Alliance and Project Management, to take over this product as quickly and as smooth as possible. Rick and Dave worked together for many years at Salix and did exactly these types of acquisitions and product transition several times. So we benefited from the steep experience as well as the helpful cooperation of our counterparts at AstraZeneca. For a small company to do this so effectively, I think, is pretty remarkable. So the previous slide broke out performance before and after the transition. This slide provides more granularity on the month -- the script performance of Movantik and the larger ProNeura class. Again, Movantik, the launch of this ProNeura class of drugs targeting OIC or opioid-induced constipation. This slide shows both TRx and Rx, so total scripts and new scripts. While it is still very early, we are encouraged to see already a slight uptick in script volume, and we are excited about seeing what the coming quarters will bring with our energized, focused and larger sales force. On that last point, the bottom chart is important because as we have said before, we actually have a larger sales footprint than AstraZeneca had at the time we took over the product. This is comparing Q1 and Q2. We are targeting more physicians, and this chart shows those numbers as of now. As we continue to grow our sales footprint, we plan to reach more than 20,000 healthcare professionals with Movantik. Movantik has excellent coverage and preferred status, and this slide shows that. AstraZeneca did a great job and we inherent that effort. We are thrilled that both with government and commercial coverage and also with overall coverage and preferred status, we are in great shape to begin with right off the bat, and we will continue working to improve coverage. This slide shows our efforts in addition to our sales activities for some creative and important initiatives to drive Movantik growth from the marketing side. And this includes our commercial advisory board, which helped deepen customer insight, our educational program to promote engagement, our segmentation and targeting activities to make sure that additional targets that we're reaching increase our share of voice, and multichannel marketing to make sure we increase digital and non-personal activities. I will now discuss Talicia launch performance. Talicia has a soft spot for all of us here at RedHill as we developed the formulation internally and passed two successful Phase 3 studies and got the drug fast-tracked and approved in an expedited manner and on-time in six months with FDA. And now, we are bringing the product to market. We launched the product in mid-March right into the early heights of the COVID pandemic in the United States. So it has been on the pharmacy shelf around the country since then. Along with the rest of the industry, our sales force were pulled out of the field and worked from home between March and May. We were able to gradually launch this product in the field in the last two months once physician offices opened up, and that's gradually began operating in many parts of the country and patients started coming back to in-person visits to their offices -- to their doctors. Now that things are gradually returning to a new normal, we have been out there with our sales force since early June and are already seeing scripts growing. Talicia's promotional sensitive, and we are excited to see this trend continue and strong growth in the coming quarters and years to capitalize on the immense potential Talicia addressing carcinogenic bacteria that affects 100 million Americans and over half of the world's population. We have put a lot of effort into gaining commercial and government coverage for Talicia, and have had initial success with it. We are off to a great start and we will continue to register wins. This slide shows current commercial and government coverage on the right. And on the left, our growth in preferred coverage since launch. This is a select list of our coverage wins. This includes importantly Express Scripts and Prime, two of the biggest PBMs in the United States in terms of covered lives. And finally, these are some of the select marketing activities -- marketing initiatives for Talicia that we are undertaking to supplement our sales efforts. We have a lot more going on and off fronts. But just to point out, there is increasing activity driving engagement and uptake to sales and non-personal interactions, educational programs, market access wins that we discussed before, and driving growth through the measurement of performance in adjusting execution where needed. I will now turn it over to Micha a discussion of the financial highlights in this quarter.

Thank you, Guy. We are well positioned for reaching planned operational profitability in some point next year. Strong revenue growth with net revenues of approximately $21 million in Q2 and reduced operating loss of $12.5 million due to efficient commercial structure and cost discipline supporting also low cash burn. Cash position of approximately $53 million as of June 30, 2020 and approximately $56 million as of yesterday before additional expected $12 million upfront payment from Cosmo Pharmaceuticals in the coming weeks. Completed acquisition of Movantik, followed by transaction with Daiichi Sankyo to improve gross margin and provide full commercial control over the brand and add Daiichi Sankyo as a shareholder of RedHill. Also favorable terms of Healthcare Royalty financing mostly used for the acquisition of Movantik from AstraZeneca. I will now turn the discussion to Dror Ben-Asher.

Thank you, Micha. Thank you, Guy. Thanks, Adi, and Gilead. As you know, we will now take questions during the remaining time.

Thank you. [Operator Instructions] Our first question comes from the line of David Hoang from SMBC. The line is now open. Please go ahead.

Hey, guys. Congrats on the quarter, and thanks for taking my questions. Good to see Movantik and Talicia off to good start in your hands. I had a few questions first pertaining to Movantik. So, with the number of reps you have out there, can you just give a little bit of color on how you think your strategy differs from what AstraZeneca was doing from products, maybe beyond just kind of pure number of reps and where you think you can drive additional incremental sales over the next few quarters? And in terms of the split of scripts between in-patient and outpatient, my understanding is that you are focusing mostly, if not solely, on outpatients, and do you think you can get the growth in Movantik scripts by promoting in that setting?

Thank you, David. I’ll refer the question to Rick Scruggs, our Chief Commercial Officer, out of Raleigh, North Carolina. Rick, please.

Sure, thanks for the question. Our focus is to increase Movantik business. We are over 75% of the PAMORA class, so we’re the dominant player in that class, but to grow the business, we are going to look to bring more patients from over-the-counter laxatives because that market is huge, so wel’ll bring more patients into that group. And we are focused on -- we're actually focusing over 18,000 prescribers out there with Movantik. So, we have increased - well, that’s our total call file. So, we are increasing our number of physicians. We are making presentations to and driving the business. So, is there some other piece of your question I missed? I heard part of it, but part of that dropped off.

Yes. Thanks. That does address the first part. I think the second part I had was, is there -- historically has there been in-patient hospital component of Movantik, and if so, what -- I guess what percentage of total scripts in the business was that?

So, there is an inpatient part of the businesses, but it's not -- it is not a majority of the business. So, it is an area we are looking at to see if there's something additional we could do there, but it is not the majority – it is not a focal part of the business right now.

Okay, got it. Thanks. And then, I just had a question regarding Talicia. Obviously, we're in the early days of US commercialization here. So, I am sure you want to see how that goes. But in terms of ex-US and in particular Japan where we know there is a higher incidence of stomach cancer and willingness to treat asymptomatic patients, have you had any thoughts about potentially launching Talicia there, and any discussions with potential ex-US partners in that regard?

Thank you, David. I'm glad you brought it up for the benefit of the audience. Over half of the world population is infected with H. pylori. This is a carcinogen class one, meaning it's definitely linked to malignancies, specifically gastric cancer from which probably 900,000 people are dying every year. This is a very serious global public health concern. In China alone, we are probably looking at 700 million, maybe 750 million infected people, and in India, even more. In Japan alone, there’s probably 1.5 million treatments a year, and in the US probably 2 million treatments here to begin with. So, it is a major public health concern outside the US. Indeed, we are in discussions with potential partners in some very important territories. There is a lot at stake with such transactions because you have to make sure the partner is the right one. You have to make sure that the pricing is the right one. You have to make sure that the consideration that RedHill shareholders benefit from is appropriate and so on and so on. Therefore, we are not rushing into an ex-US transaction. If and when we decide to strike one, and we did receive proposals already to be clear, which we declined for the most part. We will announce publicly. I hope that answers your question.

Thanks a lot. That's very helpful. And then, just one last one, if I may. Obviously we're looking forward to getting some data for opaganib towards the year. And I'm just wondering if you thought about sort of the market opportunity in COVID, if you're able to get the emergency use authorization? And to what extent of having, Gilead, pricing on remdesivir out there influence your thinking around the potential economics for opaganib?

Yes. Another very good question. I'm glad you asked. Yes, we have been preparing for ramp up, for pricing strategy, for capacity requirements. We have been doing a lot of work. As of probably March this year, we have engaged in a lot of discussions internally and externally, including with government about those issues. We will be ready with a commercial and pricing strategy by the time that all goes well, the study that we are running currently with opaganib will yield positive results. If the results are positive, and assuming we are able to successfully file applications for emergency use not only in the US but globally, we will have the strategy in place that we have been working on for several months now. I hope that answers your question.

That does. Thanks a lot for all the color there.

Thank you once again. [Operator Instructions] Our next question comes from the line of Scott Henry from Roth Capital. Please go ahead. Your line is now open, Scott.

Thank you, and good morning. Just a couple of questions. First, on the model, the gross margins a lot lower in this quarter, but obviously that's going to change with the new deal. Could you give us a sense of what we should think for Movantik gross margins kind of at a steady state?

Thank you for bringing it up. Scott, Daiichi agreement that we just executed indeed is pretty dramatic when it comes to gross margin, but to provide more color, I’ll refer to Micha, our CFO.

Hi, Scott. Thank you for the question. So, currently we are paying royalties to both Daiichi NKTR and we have cost of goods sold paid to AstraZeneca, as well as some payment with respect to the efforts in the transition period to sell the product. From the next quarter, as we published, our new duty with Daiichi Sankyo will come into effect and will reduce very substantially the cost of goods sold, because the royalties will go down and we will see the impact already from the next quarter.

Okay. Now, in terms of magnitude, would you expect like halving of the cost of goods sold or just trying to get some sense of the magnitude of that reduction.

So we are going to move to mid-teens royalty level with Daiichi from the current level, which will reduce more than 20% from what we paid today.

Okay. Thank you for that color. And then, a question on the COVID-19 trial in the US. If it finishes enrolling in August, is there a possibility we could see data in September?

It is possible. We need to complete enrollment. Right now, we are halfway through. We're adding sites, and it is possible. We cannot commit to that because we think that fluctuates. But the plan is to try to generate the initial results indeed this quarter.

Okay. Great. And then, I guess, shifting to the pipeline, Talicia obviously just launching right now, and I'm hearing about a next-generation product. Could you talk about what the next-generation products could bring to the table that could be additive to what you already have with Talicia?

Thank you. We also think ahead. We just launched Talicia, which is a great product. It will do very, very well. We expect it to become the standard of care relatively quickly. And as soon as patients come back to pre-COVID level of inpatient -- in-person visits to the clinics as long as they become again eligible for testing, the show up at the lab, they show up at the clinics, they are tested, which is a prerequisite for Talicia prescription. We see Talicia growing very nicely in the coming quarters and years. But we think ahead and we are thinking hard, what else can we do in order to provide patients with the next-generation improved Talicia with a number of parameters, which I will not go into. That is the essence of the agreement with Cosmo, which has a very strong well proven formulation capabilities, manufacturing capabilities, and the plan is to be ready with the next-generation Talicia on time as part of the natural cycle of such products. I cannot go into details, given that this is a development program.

Okay. Understandable. Final question, you mentioned breakeven in 2021. The question is, could you give us a sense of what the breakeven revenue level would be necessary perhaps on a quarterly basis for you to reach breakeven? Obviously it depends on the mix, but in general.

Thank you, Scott, for the question. So, the range that we think we can achieve the desired stability breakeven point is in the neighborhood of $30 million, $40 million per quarter of net revenues.

Okay, great. And maybe I'm just going to sneak one last question. The G&A in the quarter of $6 million was a step up from Q1. Is G&A representative of what we should think going forward?

It is representative, taking into account that we got some reduction in our G&A level due to the PPP program of the US government.

Okay, great. Thank you for taking all the questions.

Thank you. [Operator Instructions] Next question comes from the line of Ed Woo from Ascendiant Capital. Please go ahead. Your line is now open.

Yeah. Congratulations on the quarter. My question is more on the sales force ramp-up. I know you mentioned that in June that they started to go back to the field in July. They really started to step up. When do you think that they'll be fully back to speed?

Thank you and good morning. Korea, COVID, we had about 3,500 call a week with the same 100 range give or take. Right now, as we speak, we are at around 2,600 per week or in-person per week. This is up from nearly nothing in April and May obviously. So we are well on our way to get there. Of course, a lot depends on the various restrictions, local, federal that has to do with the pandemic. The spikes happen locally or on a state by state basis. With that said, I'll refer to Rick to provide additional color.

Thanks. Thanks for the question. So, yes, we did pull our sales force out of the field on March 13, kept them out through April and May. And we began in June, but offices were not opening up as rapidly in June. We have been allowed more access to offices. They do want to see us, but there are restrictions. So, some offices are still closed, some are open, but as Dror stated our in-person visits with physicians have increased from June from 3 to 5, and we anticipate this to continue to increase, but it's all and we also have to look at local government regulations as to what is going on as far as ability to cross-state lines and things like that. But we are working in the COVID environment, our guys are working, social distancing, wearing mask, being cognizant of offices where requirements. But we have been welcome back into the offices.

Great. And then, different question is, I know in the past, you guys talked about trying to get to 150 sales rep. Is that still medium-term or short-term goal?

Right now, we are comfortable with 100. We do not see a justification surrounding uncertainties to add another 50 sales representatives. However, over time, we will certainly grow the number of sales representatives and reduce the size of territories and increase the number of call points and so on and so on. I'd say, not only 250 but 200 depending on the number of products that we have and so on. That said, I will refer to Rick to share his thoughts.

So, yes, and you do remember correctly as we did early on May to 140 salespeople and that's where we're targeting. And as we moved into acquiring Movantik and then COVID happen. We realize that access is going to be more difficult. So we reanalyzed and targeted the top prescribers for Movantik and Talicia. And so, therefore we ended up with 100, 102 right now and we're happy that number is good. We feel like we can achieve our goals for this year. And as Dror stated, we'll look into 2021 as we move to a post-COVID environment to see if there is an opportunity or a need to bring on additional sales people. Right now, we're very comfortable with our size of our sales force and also hitting our targets for the year.

Great. Well, thank you for answering my questions, and good luck.

Thank you. The next question comes from the line of Matt Kaplan from Ladenburg. Please go ahead, Matt. The line is now open.

Hi. Good morning, guys, and thanks for taking the question. Wanted to focus in on your NTM program a little bit, potentially a significant opportunity for you. Can you describe your plans for Phase 3 and specifically give some detail in terms of potential timeline for a trial that you plan?

Thank you, Matt, and good morning. Yes, we're very excited about the FDA clearance to initiate the pivotal Phase 3 study. The design of the study is such that it will address safety and efficacy evaluation of RHB-204, evaluating endpoints of microbiological laboratory analysis of conversion and also clinical outcome. And we are in continued discussions with FDA about exactly when and which time points and how to implement the endpoint in the study.

Okay. And when you launch the study, how long do you think it would take to enroll and complete?

So, the study is planned to enroll 125 patients, randomized to RHB -- versus placebo, and of course first-line patients, naive patients, and we hope to enroll in up to 50 sites in the US up to a year of enrollment. And then, the study is for a year of treatment post-conversion. So we hope to have results along that time frame.

Great. Thank you for the detail. And then I guess, maybe a question for Rick. In terms of Talicia and the initial launch here, as you transition from the COVID to post-COVID time in terms of launching, do you anticipate continuing to have kind of the virtual aspect or, in terms of marketing, kind of using Internet and that aspect of marketing, in addition to kind of the in-person calls.

So. Yeah, thanks for the question. Yes, we are. We have been doing webinars. We've been doing launches remotely. We did all these things, and we do have -- actually have a position in our marketing department and the focus is on this area. And so there will be -- will continue to be marketing efforts through the Internet, through additional branding efforts outside of actually the physical sales call. So that's both -- and both of these reviews with all of our products.

Thanks a lot for taking the questions, guys.

No further question at this time. Please continue.

Thank you, Gino. Thank you everybody for joining the call. Please reach out to us if you have any additional questions. We always remain available. Keep safe and wish you all a pleasant day.