Filed Pursuant to Rule 424(b)(3)
Registration No. 333-276979

PROSPECTUS
 
10,600,000 American Depositary Shares representing 4,240,000,000 Ordinary Shares

 
REDHILL BIOPHARMA LTD.
 
This prospectus relates to the resale from time to time by the selling shareholders named in this prospectus of up to an aggregate of 10,600,000 American Depositary Shares (the “Offered ADSs”), with each American Depositary Share (“ADS”) representing 400 of our ordinary shares, par value NIS 0.01 per share (the “Ordinary Shares”), or 4,240,000,000 Ordinary Shares in the aggregate, issued or issuable upon the exercise of warrants (the “Warrants”) that were issued pursuant to (i) a securities purchase agreement (the “Purchase Agreement”), dated as of January 25, 2024, between us and the purchasers named on the signature pages thereto and (ii) an engagement letter (the “Engagement Letter”), dated as of January 24, 2024, between us and H.C. Wainwright & Co., LLC (the “Placement Agent”).
 
We will not receive any of the proceeds from the sale of the Offered ADSs by the selling shareholders. However, we will receive the exercise price upon any exercise of the Warrants, to the extent exercised on a cash basis. Any ADSs subject to resale hereunder will have been issued by us and acquired by the selling shareholders prior to any resale of such shares pursuant to this prospectus.
 
The selling shareholders named in this prospectus and any of their pledgees, assignees and successors-in-interest, may offer or resell the Offered ADSs from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling shareholders will bear all commissions and discounts, if any, attributable to the sale of the Offered ADSs. We will bear all costs, expenses and fees in connection with the registration of the Ordinary Shares. For additional information on the methods of sale that may be used by the selling shareholders, see “Plan of Distribution” beginning on page 159 of this prospectus.
 
The ADSs are listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “RDHL”. On February 14, 2024, the last reported sale price of the ADSs was $0.557 per ADS.
 
Investing in our securities involves a high degree of risk. These risks are discussed in this prospectus under “Risk Factors” beginning on page 5 and, if any, in any applicable prospectus supplement.
 
We are a “foreign private issuer” as defined under the federal securities laws and, as such, are subject to reduced public company reporting requirements. See “Prospectus Summary – Implications of Being a Foreign Private Issuer.”

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
 
The date of this prospectus is February 15, 2024.



TABLE OF CONTENTS

 
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F-1



ABOUT THIS PROSPECTUS

The selling shareholders named in this prospectus may resell, from time to time, in one or more offerings, the Offered ADSs. Information about the selling shareholders may change over time. When the selling shareholders sell Offered ADSs representing Ordinary Shares under this prospectus, we will, if necessary and required by law, provide a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add to, update, modify or replace information contained in this prospectus. If a prospectus supplement is provided and the description of the offering in the prospectus supplement varies from the information in this prospectus, you should rely on the information in the prospectus supplement. You should carefully read this prospectus and the accompanying prospectus supplement, if any before making an investment decision.
 
You should rely only on the information contained in this prospectus or any applicable prospectus supplement. We have not, and the selling shareholders have not, authorized any other person to provide you with different or additional information. If anyone provides you with different or additional information, you should not rely on it. This prospectus is not an offer to sell, nor are the selling shareholders seeking an offer to buy, the Offered ADSs in any jurisdiction where the offer or sale is not permitted. No offers or sales of any of the Offered ADSs are to be made in any jurisdiction in which such an offer or sale is not permitted. You should assume that the information contained in this prospectus or in any applicable prospectus supplement is accurate only as of the date on the front cover thereof, regardless of the time of delivery of this prospectus or any applicable prospectus supplement or any sales of the Offered ADSs offered hereby or thereby.

You should read the entire prospectus and any prospectus supplement and any related issuer free writing prospectus, as well as any prospectus supplement or any related issuer free writing prospectus, before making an investment decision. Neither the delivery of this prospectus or any prospectus supplement or any issuer free writing prospectus nor any sale made hereunder shall under any circumstances imply that the information contained herein or in any prospectus supplement or issuer free writing prospectus is correct as of any date subsequent to the date hereof or of such prospectus supplement or issuer free writing prospectus, as applicable. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date of the applicable documents, regardless of the time of delivery of this prospectus or any sale of securities. Our business, financial condition, results of operations and prospects may have changed since that date.
 
Unless the context otherwise requires, all references to “RedHill,” “we,” “us,” “our,” the “Company” and similar designations refer to RedHill Biopharma Ltd. and its wholly-owned subsidiary, RedHill Biopharma Inc. The term “NIS” refers to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “US$” or “$” refer to U.S. dollars, the lawful currency of the United States (“U.S.”). Our functional and presentation currency is the U.S. dollar. Foreign currency transactions in currencies other than the U.S. dollar are translated in this prospectus into U.S. dollars using exchange rates in effect at the date of the transactions.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
 
This prospectus may include forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms, including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. In addition, certain sections of this prospectus contain information obtained from independent industry and other sources that we have not independently verified. You should not put undue reliance on any forward-looking statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

Our ability to predict our operating results or the effects of various events on our operating results is inherently uncertain. Therefore, we caution you to consider carefully the matters described under the caption “Risk Factors” on page 5 of this prospectus and certain other matters discussed in this prospectus and other publicly available sources. Such factors and many other factors beyond our control could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by the forward-looking statements.
 
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Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
 

the going concern reference in our financial statements and our ability to obtain additional financing or successfully conclude a strategic business transaction;
 

our ability to close a strategic business transactions, including potential divestment of certain of our assets.


our ability to obtain additional financing;


our reduced revenues, business size and scope, market share and opportunities in certain markets following the sale of our rights to Movantik®;
 

estimates of our expenses, future revenues, capital requirements and our needs for additional financing;


the commercialization and market acceptance of our commercial products;
 

our ability to generate sufficient revenues from our commercial products, including obtaining commercial insurance and government reimbursement;
 

our ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or clinical trials, and to complete the development of such therapeutic candidates and obtain approval for marketing by the Food and Drug Administration (“FDA”) or other regulatory authorities;
 

our reliance on third parties to satisfactorily conduct key portions of our commercial operations, including manufacturing and other supply chain functions, market analysis services, safety monitoring, regulatory reporting and sales data analysis and the risk that those third parties may not perform such functions satisfactorily;
 

our ability to maintain an appropriate sales and marketing infrastructure;
 

our ability to establish and maintain corporate collaborations;
 

that our current commercial products or commercial products that we may commercialize or promote in the future may be withdrawn from the market by regulatory authorities and our need to comply with continuing laws, regulations and guidelines to maintain clearances and approvals for those products;
 

our exposure to significant drug product liability claims;
 

the initiation and completion of any postmarketing studies or trials;


our ability to acquire products approved for marketing in the U.S. that achieve commercial success and to maintain our own marketing and commercialization capabilities;
 

our estimates of the markets, their size, characteristics and their potential for our commercial products and therapeutic candidates and our ability to serve those markets;
 

the successful commercialization of products we in-license or acquire;
 

our inability to enforce claims relating to a breach of a representation and warranty by a counterparty;
 
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the hiring and continued employment of executives, sales personnel, and contractors;
 

our receipt and timing of regulatory clarity and approvals for our commercial products and therapeutic candidates, and the timing of other regulatory filings and approvals;
 

the initiation, timing, progress, and results of our research, development, manufacturing, preclinical studies, clinical trials, and other commercial efforts and therapeutic candidate development, as well as the extent and number of additional studies that we may be required to conduct;
 

our ability to advance our therapeutic candidates into clinical trials or to successfully complete our preclinical studies or clinical trials;


our ability to develop or obtain approval for RHB-104 may be adversely impacted if a diagnostic test for MAP will not become available;
 

our reliance on third parties to conduct key portions of our clinical trials, including data management services and the risk that those third parties may not perform such functions satisfactorily;
 

our reliance on third parties to manufacture and supply our therapeutic candidates and their respective active pharmaceutical ingredients with the requisite quality and manufacturing standards in sufficient quantities and within the required timeframes and at an acceptable cost;
 

the research, manufacturing, clinical development, commercialization, and market acceptance of our therapeutic candidates;
 

the interpretation of the properties and characteristics of our commercial products or therapeutic candidates and of the results obtained in research, preclinical studies or clinical trials;
 

the implementation of our business model, strategic plans for our business, commercial products, and therapeutic candidates;
 

the impact of other companies and technologies that compete with us within our industry;
 

the scope of protection we are able to establish and maintain for intellectual property rights covering our commercial products and therapeutic candidates, including from existing or future claims of infringement, and our ability to operate our business without infringing or violating the intellectual property rights of others;
 

parties from whom we license or acquire our intellectual property defaulting in their obligations toward us;
 

the failure by a licensor or a partner of ours to meet their respective obligations under our acquisition, in-license or other development or commercialization agreements or renegotiate the obligations under such agreements, or if other events occur that are not within our control, such as bankruptcy of a licensor or a partner;
 

our reliance on the actions of third parties, including sublicensors and their other sublicensees, to maintain our rights under our in-licenses which are sublicenses;
 

the effect of a potential occurrence of patients suffering serious adverse events using investigative drugs under our Expanded Access Program;
 

our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses and ransomware threats;

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our ability to resolve the disputes regarding the alleged events of default under our term loan facility, if not resolved, could harm our financial condition which could materially adversely affect our financial performance;
 

our ability to maintain compliance with the Nasdaq’s listing standards;
 

the effects of the economic and business environment, including unforeseeable events and the changing market conditions caused by the COVID-19 global pandemic; and
 

the impact on our business of the political and security situation in Israel, the U.S. and other places in which we operate.
 
We have included important factors in the cautionary statements included in this prospectus, particularly in the section entitled “Risk Factors”, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. No forward-looking statement is a guarantee of future performance.
 
You should read this prospectus completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.

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PROSPECTUS SUMMARY
 
This summary highlights selected information about us and information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before investing in the Offered ADSs. You should carefully read and consider this entire prospectus, including the financial statements and related notes and “Risk Factors” starting on page 5 of this prospectus, before making an investment decision. If you invest in our securities, you are assuming a high degree of risk.
 
Our Business
 
We are a specialty biopharmaceutical company, primarily focused on gastrointestinal (“GI”) and infectious diseases. Our primary goal is to become a leading specialty biopharmaceutical company.
 
We are currently focused primarily on the advancement of our development pipeline of clinical-stage therapeutic candidates. We also commercialize in the U.S. GI-related products, Talicia® (omeprazole, amoxicillin, and rifabutin) and Aemcolo® (rifamycin) and continue to explore our strategic plans for such products and activities.
 
Among the therapeutic candidates, we are exploring opaganib is being as a potential treatment for various conditions, including gastrointestinal acute radiation syndrome (“GI-ARS”), COVID-19 and other viruses as part of pandemic preparedness, such as the Ebola virus. Inflammatory conditions and solid tumors are additional areas of focus for opaganib. Furthermore, we are investigating RHB-107 (upamostat) as a potential treatment for COVID-19 and other viruses as part of pandemic preparedness, including the Ebola virus.
 
Our current pipeline consists of five therapeutic candidates, most of which are in clinical development. We generate our pipeline of therapeutic candidates by identifying, validating and in-licensing or acquiring products that are consistent with our product and corporate strategy and that have the potential to exhibit a favorable probability of therapeutic and commercial success. We have one product that we primarily developed internally which has been approved for marketing and, to date, none of our other therapeutic candidates has generated revenues. We have out-licensed one of our commercial products, Talicia® for specific territories outside the U.S. and we plan to commercialize our therapeutic candidates, upon approval, if any, through licensing and other commercialization arrangements with pharmaceutical companies on a global and territorial basis or independently with a dedicated commercial operations or in potential partnership with other commercial-stage companies. We also evaluate, on a case-by-case basis, co-development, co-promotion, licensing, acquisitions and similar arrangements.
 
Summary Risk Factors

The following is a summary of some of the principal risks we face. The list below is not exhaustive, and investors should read the “Risk Factors” section in full.


Our financial statements include a going concern reference. We will need to raise significant additional capital to finance our losses and negative cash flows from operations, and if we were to fail to raise sufficient capital or on favorable terms and/or fail to replace Movantik® with another commercial product on a timely basis or successfully conclude a strategic business transaction, we may need to cease operations. Management has substantial doubt about our ability to continue as a going concern.


We are actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets. There is no assurance that our discussions will result in any strategic business transactions.


Following our sale of our rights to Movantik®, our revenue, business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories is reduced.


Our ability to replace Movantik® with another commercial product, either internal or external, may not occur, and we may never achieve levels of revenue we have achieved through Movantik®.
 

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Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of the ADSs.


Certain obligations under the Credit Agreement, dated February 23, 2020, as amended, and the Asset Purchase Agreement, dated February 2, 2023, entered into with HCR Collateral Management, LLC (“HCRM”) and certain of its affiliates in connection with the sale of Movantik® in exchange for extinguishment of all debt obligations under the Credit Agreement are secured by a lien on Talicia®-related assets. As a result of this security interest, until extinguishment of such security interest, if we were to become insolvent the Talicia® assets would only be available to satisfy claims of our general creditors or to holders of our equity securities to the extent the value of such assets exceeded the amount of our indebtedness and other obligations. In addition, if we lose Talicia® to a foreclosure, we will lose our remaining source of revenue following the sale of Movantik®, assuming we are not able to replace Movantik® with another commercial product. The existence of these security interests may also adversely affect our financial flexibility.


Our current working capital is not sufficient to commercialize our current commercial products or to complete the research and development with respect to any or all of our therapeutic candidates. We will need to raise significant additional capital to achieve our strategic objectives and to execute our business plans. Our failure to raise sufficient capital or on favorable terms would significantly impair our ability to fund the commercialization of our current commercial products, therapeutic candidates, or the products we may commercialize or promote in the future, attract development or commercial partners or retain key personnel, and to fund operations and develop our therapeutic candidates.


If we are successful in developing a COVID-19 therapeutic, we may need to devote significant resources to our manufacturing scale-up and large-scale deployment, including for use by the U.S. or other governments. If one of our COVID-19 therapeutic candidates is approved for marketing or for Emergency Use, we may also need to devote significant resources to further expand our U.S. and non-U.S. sales and marketing activities and increase or maintain personnel to accommodate sales in the U.S. and outside the U.S.


If we or our future development or commercialization partners are unable to obtain or maintain the FDA or other foreign regulatory clearance and approval for our commercial products or therapeutic candidates, we or our commercialization partners will be unable to commercialize our current commercial products, products we may commercialize or promote in the future or our therapeutic candidates, upon approval, if any.

Kukbo Proceedings

We continue our litigation against Kukbo Co. Ltd. (“Kukbo”) which was filed on September 2022 as a result of Kukbo’s default in delivering us a total of $6.5 million under the subscription agreement, dated October 25, 2021 (the “Subscription Agreement”), and the exclusive license agreement, dated March 14, 2022 (the “Exclusive License Agreement”). Kukbo thereafter filed counterclaims with various allegations such as breach of contract, misrepresentation, and the breach of the duty of good faith and failure dealing. The parties are proceeding with discovery and depositions, and we plan to continue to rigorously pursue the Kukbo litigation. On November 20, 2023, we entered into a Contingency Fee Agreement with our legal firm, Haynes and Boone, LLP (“H&B”) under which certain legal costs related to the Kukbo litigation will be assumed by H&B.
 
January 2024 Offering

On January 26, 2024, we issued to certain institutional investors (i) in a registered direct offering, 10,000,000 ADSs at a purchase price of $0.80 per ADS and (ii) in a concurrent private offering, unregistered Warrants to purchase 10,000,000 ADSs (the “January 2024 Offering”). The Warrants have an exercise price of $1.00 per ADS, are exercisable immediately and will expire five years from the date of issuance.

The issuance of the Warrants was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an exemption provided by Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. Pursuant to the Purchase Agreement with the institutional investors, we agreed, among other things, to file this registration statement with the SEC as soon as practicable (and in any event within fifteen (15) calendar days of the date of Purchase Agreement) and to keep such registration statement effective until such time as the investors, their successors and assigns, as applicable, no longer own any Warrants or the ADSs issuable upon exercise thereof.


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As part of the compensation to the Placement Agent in connection with its role as the placement agent in the January 2024 Offering, pursuant to the Engagement Letter, we issued to the Placement Agent’s designees unregistered Warrants to purchase up to an aggregate of 600,000 ADSs at an exercise price of $1.00 per ADS. The Warrants issued to the Placement Agent designees are exercisable immediately and will expire five years from the commencement of the sales pursuant to the January 2024 Offering.
 
We are registering the resale by the selling shareholders of the ADSs issuable upon exercise of the Warrants in order to permit the selling shareholders to offer such ADSs for resale from time to time pursuant to this prospectus. The selling shareholders may also sell, transfer or otherwise dispose of all or a portion of the ADSs in transactions exempt from the registration requirements of the Securities Act, or pursuant to another effective registration statement covering those.

Implications of Being a Foreign Private Issuer
 
We are subject to the information reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are applicable to “foreign private issuers,” and under those requirements we file reports with the United States Securities and Exchange Commission, or SEC. As a foreign private issuer, we are not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we are subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. For example, although we often report our financial results on a quarterly basis, we are not required to issue quarterly reports, proxy statements that comply with the requirements applicable to U.S. domestic reporting companies, or individual executive compensation information that is as detailed as that required of U.S. domestic reporting companies. We also have four months after the end of each fiscal year to file our annual reports with the SEC and are not required to file current reports as frequently or promptly as U.S. domestic reporting companies.

Furthermore, our officers, directors and principal shareholders are exempt from the requirements to report transactions in our equity securities and from the short-swing profit liability provisions contained in Section 16 of the Exchange Act. As a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. In addition, as a foreign private issuer, we are permitted, and follow certain home country corporate governance practices instead of those otherwise required under the listing rules of Nasdaq for domestic U.S. issuers. These exemptions and leniencies reduce the frequency and scope of information and protections available to you in comparison to those applicable to a U.S. domestic reporting company.
 
Corporate Information
 
We were incorporated as a limited liability company under the laws of the State of Israel on August 3, 2009. Our principal executive offices are located at 21 Ha’arba’a Street, Tel-Aviv, Israel and our telephone number is +972 (3) 541-3131. Our website address is http://www.redhillbio.com. The information on, or that can be accessed through, our website does not constitute part of this prospectus. Our registered agent in the U.S. is RedHill Biopharma Inc. (“Redhill U.S.”). The address of RedHill Biopharma Inc. is 8045 Arco Corporate Drive, Raleigh, NC 27617, U.S.A.
 

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THE OFFERING
 
Securities offered by the selling shareholders
Up to 10,600,000 ADSs representing 4,240,000,000 Ordinary Shares.
 
The ADSs
Each ADS represents 400 of our Ordinary Shares. The ADSs will be delivered by The Bank of New York Mellon, as depositary (the “Depositary”).
 
The Depositary, as depositary, or its nominee, will be the holder of the Ordinary Shares underlying the ADSs and you will have rights as provided in the Deposit Agreement, dated as of December 26, 2012, among us, the Depositary and all owners and holders from time to time of ADSs issued thereunder (the “Deposit Agreement”).
 
Subject to the terms of the Deposit Agreement and in compliance with the relevant requirements set out in the prospectus, you may turn in the ADSs to the Depositary for cancellation and withdrawal of the Ordinary Shares underlying the ADSs. The Depositary will charge you fees for such cancellations pursuant to the Deposit Agreement.
 
You should carefully read the Deposit Agreement to better understand the terms of the ADSs.
 
Selling shareholders
All of the Offered ADSs are being offered by the selling shareholders named herein. See “Selling Shareholders” on page 130 of this prospectus for more information on the selling shareholders.
 
Use of proceeds
We will not receive any proceeds from the sale by the selling shareholders of the Offered ADSs issued or issuable upon exercise of the Warrants. However, we may receive the proceeds from any exercise of the Warrants if the holders exercise the Warrants for cash. We intend to use the proceeds from the exercise of the Warrants for cash, if any, for working capital, research and development and general corporate purposes. See the section of this prospectus titled “Use of Proceeds.”

Plan of Distribution
The selling shareholders, and any of their pledgees, and successors-in-interest, may offer or sell the Offered ADSs from time to time through public or private transactions at prevailing market prices, at prices related to prevailing market prices or at privately negotiated prices. The selling shareholders may also resell the Offered ADSs to or through underwriters, broker-dealers or agents, who may receive compensation in the form of discounts, concessions or commissions. See “Plan of Distribution” beginning on page 159 of this prospectus for additional information on the methods of sale that may be used by the selling shareholders.

Risk factors
See “Risk Factors” beginning on page 5 of this prospectus and the other information included elsewhere in this prospectus for a discussion of factors you should carefully consider before deciding to invest in the ADSs.
 
Nasdaq trading symbol for ADSs
The ADSs are listed on Nasdaq under the symbol “RDHL.”
 
Depositary
The Bank of New York Mellon.
 
 
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RISK FACTORS
 
Investing in our securities involves a high degree of risk. In addition to the other information contained in this prospectus, you should carefully consider the risks discussed below before making a decision about investing in our securities. The risks and uncertainties discussed below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. If any of these risks occur, our business, financial condition and operating results could be harmed, the trading price of the ADSs could decline, and you could lose part or all of your investment.
 
Please also read carefully the section above entitled “Cautionary Statement Regarding Forward-Looking Statements.”

Risks Related to Our Business
 
Our financial statements include a going concern reference.  We will need to raise significant additional capital to finance our losses and negative cash flows from operations, and if we were to fail to raise sufficient capital or on favorable terms and/or fail to replace Movantik® with another commercial product on a timely basis or successfully conclude a strategic business transaction, we may need to cease operations. Management has substantial doubt about our ability to continue as a going concern.

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the six months ended on June 30, 2023, our net cash used in operating activities was $17.8 million leaving a cash balance of $16.3 million, including $9.1 million of restricted cash under the Credit Agreement, for which HCRM has exercised control rights and to which we do not currently have access, as of December 31, 2023. Because we do not have sufficient resources to fund our operations for the next twelve months from the date of this filing, management has substantial doubt of our ability to continue as a going concern. Our operational costs include the payment of the remaining pre-closing liabilities relating to Movantik®, which our subsidiary, RedHill U.S., retained under our agreement with HCRM for the extinguishment of all our debt obligations under the Credit Agreement in exchange for the transfer of our rights in Movantik® to an affiliate of HCRM.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Term Loan Facility”.  The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern.
 
We will need to raise significant additional capital to finance our losses and negative cash flows from operations.  We are also actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets.  If we were to fail to raise sufficient capital or on favorable terms or successfully conclude a strategic business transaction, we may need to cease operations. There are no assurances that we will be able to raise significant additional capital on terms favorable to us or at all, particularly given the current difficult conditions in the capital markets and very low market capitalization which makes it more difficult to raise significant amounts of capital. In addition, following the sale of our rights to Movantik® in 2023, we lost our primary revenue source and our ability to operate as a financially viable commercial business has been significantly more difficult. See “ - Following our sale of our rights to Movantik®, our revenue, business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories is reduced”.  If we are unsuccessful in achieving sufficient commercial sales of our products, including replacing Movantik® with another commercial product on a timely basis, or in raising sufficient capital, or successfully concluding a strategic business transaction, we will need to reduce activities and curtail or cease operations.
 
We are actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets. There is no assurance that our discussions will result in any strategic business transactions.
 
We are actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets. The success of any such strategic business transactions, including potential divestment of certain of our assets, is subject to various uncertainties, including but not limited to, market and other conditions, negotiations with potential buyers, regulatory approvals, and other factors beyond our control. There is no assurance that our discussions will result in any strategic business transactions. If we are unable to successfully complete strategic business transactions on favorable terms to us, or at all, our ability to strengthen our balance sheet and enhance our strategic focus could be impacted and could have a material adverse effect on our ability to continue to operate as a going concern.
 
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Following our sale of our rights to Movantik®, our revenue, business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories is reduced. Our ability to replace Movantik® with another commercial product, either internal or external, may not occur, and we may never achieve levels of revenue we have achieved through Movantik®, which could have a material adverse effect on our ability to operate as a going concern.
 
Following the consummation of our sale of our rights to Movantik®, our revenue generated from Movantik® sales was eliminated and our business size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories were substantially reduced. Our ability to realize any value from Movantik® beyond its price in an asset sale was permanently lost. Additionally, following the sale of our rights to Movantik®, we lost our primary revenue source and our ability to operate as a financially viable commercial business has been significantly more difficult. We may not be successful in replacing Movantik® with another commercial product, and we may never achieve levels of revenue we have achieved through Movantik®. We also lost economies of scale in our commercial operations that we were able to benefit from by having Movantik® as a core commercial product. As a result, we have downsized our commercial operations and taken other steps to better align its expenses and revenues, which has adversely affected our ability to sell our commercial products.  If we are not able to replace Movantik® with another commercial product on a timely basis, this could have a material adverse effect on our ability to continue to operate as a going concern.  In addition, in the event we are not able to replace Movantik® with another commercial product on a timely basis or are otherwise unable to achieve levels of revenue we have achieved through Movantik®, we may need to further downsize our commercial operations, which could cause us to incur additional costs and expenses, including severance expenses, and make it more difficult to sell commercial products in the future. See “Management – Compensation – Change in Control Retention Plan and Agreements; Severance Arrangements.”

Certain obligations under the Credit Agreement (as amended), the APA (as defined below) and escrow agreement entered into with HCRM and certain of its affiliates in connection with the sale of Movantik® in exchange for extinguishment of all debt obligations under the Credit Agreement are secured by a lien on Talicia® and Aemcolo®-related assets. As a result of this security interest, until extinguishment of such security interest, if we were to breach our obligations under any of these agreements or become insolvent, the Talicia® and Aemcolo® assets would only be available to satisfy claims of our general creditors or to holders of our equity securities to the extent the value of such assets exceeded the amount of our indebtedness and other obligations. In addition, if we lose these assets to a foreclosure, we will lose our remaining source of revenue following the sale of Movantik®, assuming we are not able to replace Movantik® with another commercial product. The existence of these security interests may also adversely affect our financial flexibility.
 
Certain obligations under the APA (as defined below), the Credit Agreement (as amended) and escrow agreement entered into with HCRM and certain of its affiliates in connection with the sale of Movantik® in exchange for extinguishment of obligations under the Credit Agreement are secured by a lien on Talicia® and Aemcolo®-related assets. See “Business  – Business Overview – Sale of Movantik® to HCRM”. These obligations include the settling of substantially all pre-closing liabilities relating to Movantik as of the closing date of the transaction, which were estimated at approximately $51 million. To fulfill this obligation, an escrow account was established, utilizing the remaining accounts receivable related to Movantik that totals around $32 million, in addition to $5.3 million of restricted cash, and other available resources as required. As of June 30, 2023, the amount held in the escrow account was $9.1 million.  These obligations also included the obligation of RedHill U.S. under the escrow agreement to deposit all cash received from accounts receivable related to Movantik® accrued as of the closing of the APA into the escrow account within a certain period of time in order to pay certain scheduled pre-closing liabilities related to Movantik®.

Accordingly, if an event of default were to occur under the APA, Credit Agreement (as amended) or the escrow agreement, HCRM could foreclose on its security interest and liquidate some or all of the Talicia® and Aemcolo® assets and would have a prior right to these assets, to the exclusion of our general creditors in the event of our bankruptcy, insolvency, liquidation or reorganization. In that event, these assets would first be used to repay in full all indebtedness and other obligations secured by such assets, resulting in a substantial portion of our assets being unavailable to satisfy the claims of our unsecured indebtedness. Only after satisfying the claims of our unsecured creditors would any amount be available for our equity holders. If we were to lose these assets to a foreclosure, we will lose our remaining source of revenue following the sale of Movantik®, assuming we are not able to replace Movantik® with another commercial product, in which case the loss of these assets could have a material adverse effect on our ability to continue to operate as a going concern.   The pledge of these assets may also limit our flexibility in raising capital for other purposes.

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We may never have access to the cash held in an escrow account established in connection with the sale of Movantik® to an affiliate of HCR, which jeopardizes our ability to finance our day-to-day operations.
 
In connection with the sale of our rights in Movantik® to an affiliate of HCR, the $16 million that was held as restricted cash under the Credit Agreement was deposited into an escrow account to pay pre-closing liabilities related to Movantik® that have been retained by RedHill U.S. under the terms of the APA (as defined below), and all cash received from accounts receivable related to Movantik® accrued as of the closing of the Asset Purchase Agreement were also deposited into the escrow account. See “Business – Business Overview – Sale of Movantik® to HCRM – Escrow Agreement.” As of June 30, 2023, the amount held in the escrow account was $9.1 million. We are not currently able to access or otherwise use any of the cash in the escrow account until amounts are released pursuant to the terms of the escrow agreement. In addition, we may never have access to the cash in the escrow account if all of it is used to resolve pre-closing liabilities related to Movantik®. The possible lack of future access to the cash in the escrow account jeopardizes our ability to finance our day-to-day operations and may require us to cease operations.
 
Our current working capital is not sufficient to commercialize our current commercial products or to complete the research and development with respect to any or all of our therapeutic candidates. We will need to raise significant additional capital to achieve our strategic objectives and to execute our business plans. Our failure to raise sufficient capital or on favorable terms would significantly impair our ability to fund the commercialization of our current commercial products, therapeutic candidates, or the products we may commercialize or promote in the future, attract development or commercial partners or retain key personnel, and to fund operations and develop our therapeutic candidates.
 
As of June 30, 2023, we had cash, cash equivalents, short-term investments and restricted cash of approximately $16.3 million, and as of December 31, 2022, we had cash, cash equivalents and short-term investments of approximately $36.1 million. Our restricted cash as of June 30, 2023, was $9.1 million as required by our Credit Agreement with HCRM. Following the sale of our rights to Movantik® under our Asset Purchase Agreement with HCRM, the restricted cash was deposited into an escrow account to pay pre-closing liabilities related to Movantik® that have been retained by RedHill U.S. under the terms of the Asset Purchase Agreement, and all cash received from accounts receivable related to Movantik® accrued as of the closing of the Asset Purchase Agreement were also deposited into the escrow account. See “Business – Business Overview – Sale of Movantik® to HCRM.” We have funded our operations primarily through public and private offerings of our securities, through strategic investments and our Credit Agreement with HCRM. We will need to raise significant additional capital to achieve our strategic objectives of commercializing our current commercial products and other products that we may commercialize or promote in the future and acquiring, in-licensing and developing therapeutic candidates. We plan to fund our future operations through commercialization of Talicia® and Aemcolo®, out-licensing of our therapeutic candidates and commercialization of in-licensed or acquired products, and we will also need to raise significant additional capital through equity or debt financing or non-dilutive financing, including government grants. We are also actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets and/or our commercial operations, which we expect would provide us with additional capital although there is no guarantee that we will complete such a transaction on favorable terms to us, or at all. We are not yet certain of the financial impact of our commercialization activities, and the amounts we raise may not be sufficient to complete the research and development of all of our therapeutic candidates.
 
Our business is not yet profitable. As we plan to continue expending funds to commercialize Talicia® and Aemcolo®, out-license Talicia® and our therapeutic candidates and acquire additional products and therapeutic candidates and expand our efforts in research and development, we will need to raise significant additional capital in the future through equity or debt financing, non-dilutive financing or pursuant to development or commercialization agreements with third parties with respect to particular therapeutic candidates and commercial products approved for sale in the U.S. However, we cannot be certain that we will be able to raise capital on commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated.

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We may have difficulty raising needed capital or securing development or commercialization partners in the future as a result of, among other factors, present and future market conditions, the very low market capitalization of our company which makes it more difficult to make large capital raises, unsuccessful commercialization of Talicia® or Aemcolo® or products that we may commercialize or promote in the future, as well as the inherent business risks associated with our Company, our current commercial products, products that we may commercialize or promote in the future and our therapeutic candidates. In addition, our ability to raise capital would be adversely affected if we are not able to maintain compliance with Nasdaq’s continued listing requirements. Any financing may also involve significant dilution to our shareholders. We have completed financings in the past which resulted in significant dilution to our shareholders, and we may complete additional financings in the future with similar dilutive effects to our shareholders. To the extent we are able to generate meaningful revenues from our current and future commercial products, we may still need to raise capital because the revenues from our current and future commercial products may not be sufficient to cover all of our operating expenses and may not be sufficient to cover our commercial operations expenses. In addition, global and local economic conditions may make it more difficult for us to raise needed capital or secure a development or commercialization partner in the future and may impact our liquidity. The healthcare industry faced a challenging market during 2023 and may continue to cause difficulties for healthcare companies to raise capital in the future. If we are unable to obtain sufficient future financing, we will need to reduce activities and curtail or cease operations.
 
We may not successfully continue the commercialization of Talicia® or Aemcolo®.
 
We may not successfully continue the commercialization of Talicia® or Aemcolo® and our products may not be, or continue to be, commercially successful for various reasons, including but not limited to:
 

difficulty in large-scale manufacturing, including yield and quality, and in shipping product internationally;
 

low market acceptance by physicians, healthcare payors, patients and the medical community as a result of lower demonstrated clinical safety or efficacy compared to products, prevalence, and severity of adverse side effects, or other potential disadvantages relative to alternative treatment methods;
 

changes to the underlying dynamics of the markets for these products;
 

infringement on proprietary rights of others for which we or third parties involved in the development or commercialization of our products or potential future therapeutic candidates have not received licenses;
 

incompatibility with other marketed products;
 

other potential advantages of alternative treatment methods and competitive forces or advancements that may make it more difficult for us to penetrate a particular market segment, if at all;
 

ineffective marketing, sales, and distribution activities and support;
 

lack of significant competitive advantages over other products on the market;
 

lack of cost-effectiveness or unfavorable pricing compared to other alternatives available on the market;
 

pressure from commercial payors and government agencies on gross to net margins;
 

inability to generate sufficient revenues to sustain our business operations in accordance with our plan from the sale or marketing of a product;
 

changes to product labels, indications or other relevant information that may trigger additional regulatory requirements that may have a direct or indirect impact on the commercialization of our products;
 

our inability or unwillingness, for cost or other reasons, to commercialize Talicia® and Aemcolo® to the extent any are approved for commercialization at the time of any such collaboration issues;
 

timing of market introduction of competitive products, including from generic competitors; and
 

changes in any laws, regulations, or other relevant policies related to drug pricing or other marketing conditions and requirements that may directly or indirectly limit, restrict, or otherwise negatively impact our ability or success in marketing or commercializing.

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Physicians, various other healthcare providers, patients, payors or the medical community, in general, may be unwilling to accept, utilize or recommend Talicia® or Aemcolo®. If we are unable, either on our own or through third parties, to manufacture, commercialize or market Talicia®, or to commercialize or market Aemcolo®, we may not achieve or continue to achieve market acceptance or generate meaningful revenues from Talicia® and Aemcolo®. In addition, in order to support our development product portfolio, we will need to achieve revenues from sales of Talicia® consistent with our business expectations, which may prove more difficult than currently expected. Our reputation, business, financial condition and results of operations may be materially adversely affected by any failure to meet such expectations. See “ - We are actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets and/or our commercial operations. There is no assurance that our discussions will result in any strategic business transactions.”
 
If we are unable to successfully continue the commercialization of Talicia®, our business and results of operations will suffer.
 
We expect our future success will significantly depend upon our ability to successfully commercialize Talicia in the U.S. or to find a commercialization partner ng to do so. In addition, there can be no guarantee that we will be able to establish our own manufacturing capabilities, including through third parties, in order to continue the successful commercialization of Talicia®. Our success depends on obtaining reimbursement to patients for our products and there is no guarantee we will be able to secure commercial or government coverage for any of our products. There is significant pressure within the U.S. healthcare reimbursement system to reduce costs of prescription drugs which could adversely affect us. In order to support our growing development product portfolio, we will need to achieve revenues from sales of Talicia® consistent with our business expectations, which may prove more difficult than currently expected. Our reputation, business, financial condition and results of operations may be materially adversely affected by any failure to meet such expectations. See “ - We are actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets. There is no assurance that our discussions will result in any strategic business transactions.”
 
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of December 31, 2022. If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of the ADSs.
 
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures are designed to prevent fraud. Our management is required to assess the effectiveness of our internal controls and procedures and disclose changes in these controls on an annual basis and our independent registered public accounting firm is required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404.
 
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of the ADSs.
 
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting and concluded that our internal control over financial reporting was not effective as of December 31, 2022 due to a lack of sufficient number of financial reporting personnel with an appropriate level of knowledge, experience and training commensurate with our financial reporting requirements, resulting in a failure to maintain an effective control environment and a failure of segregation of duties, and also concluded that our disclosure controls and procedures were not effective as of December 31, 2022, due to material weaknesses in our internal control over financial reporting, all as described in our Annual report on Form 20-F for the year ended December 31, 2022. We have implemented a corrective plan, which we are still monitoring, and we cannot guarantee that our internal control over financial reporting was effective as of December 31, 2023. As defined in Regulation 12b-2 under the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented, or detected on a timely basis.
 
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While management has continued the process of remediating the material weaknesses, as described in Item 15, “Controls and Procedures,” if significant deficiencies or other material weaknesses are identified in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements and the trading price of our shares and ability to obtain any necessary equity or debt financing could suffer. The material weaknesses will not be considered remediated until we have completed implementing the necessary controls and applicable.
 
We have made, and will continue to make, changes in these and other areas. In any event, the process of determining whether our existing internal controls are compliant with Section 404 and sufficiently effective will require the investment of substantial time and resources, including by our chief financial officer and other members of our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this process and whether we will need to implement remedial actions in order to implement effective controls over financial reporting. The determination of whether or not our internal controls are sufficient and any remedial actions required could result in us incurring additional costs that we did not anticipate, including the hiring of outside consultants. We may also fail to complete our evaluation, testing and any required remediation needed to comply with Section 404 in a timely fashion. Irrespective of compliance with Section 404, any additional failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting or results of operations and could result in an adverse opinion on internal controls from our independent auditors.
 
Furthermore, if we are unable to certify that our internal control over financial reporting is effective and in compliance with Section 404, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or stock exchanges, and we could lose investor confidence in the accuracy and completeness of our financial reports, which could hurt our business, the price of the ADSs and our ability to access the capital markets.

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We have a history of operating losses. We may continue to incur significant losses in the coming years.
 
From our incorporation in 2009 until establishment of our commercial presence in the U.S., we focused primarily on the development and acquisition of late-stage clinical therapeutic candidates, and since we established our commercial presence in the U.S., we have focused primarily on the acquisition and commercialization or promotion of products in the U.S. There is no assurance that we will be able to generate substantial positive cash flow or be profitable in the future.
 
We plan to further fund our future operations through commercialization and out-licensing of our therapeutic candidates, commercialization of in-licensed or acquired products and raising significant additional capital through equity or debt financing or through non-dilutive financing, including government grants. We are also actively pursuing and in discussions with multiple parties regarding strategic business transactions, including potential divestment of certain of our assets and/or our commercial operations, which we expect would provide us with additional capital although there is no guarantee that we will complete such a transaction on favorable terms to us, or at all.  Our current cash resources are not sufficient to complete the research and development of any or all of our therapeutic candidates and to fully support our commercial operations until generation of sustainable positive cash flows. We expect that we will incur additional losses as we continue to focus our resources on advancing the development of our therapeutic candidates, as well as advancing our commercial operations, based on a prioritized plan that may result in negative cash flows from operating activities.
 
Most of our therapeutic candidates are in late-stage clinical development. All of our therapeutic candidates will likely require successful additional clinical and non-clinical trials before we can obtain the regulatory approvals in order to initiate commercial sales of them, if at all. We have incurred losses since inception, principally as a result of research and development, selling, marketing, and business development, and general and administrative expenses in support of our operations. We experienced net income of approximately $51 million in the first six months of 2023, net loss of $71.7 million for the twelve months ended December 31, 2022, and net loss of $97.7 million for the twelve months ended December 31, 2021. As of June 30, 2023, we had an accumulated deficit of approximately $382 million. Our ability to generate sufficient revenues to sustain our business operations in accordance with our plan and to achieve profitability depends mainly upon our ability, alone and/or with others, to successfully commercialize or promote our current commercial products and products that we may acquire or for which we may acquire commercialization rights in the future, develop our therapeutic candidates, obtain the required regulatory approvals in various territories. We may be unable to achieve any or all of these goals with regard to our current commercial products, our therapeutic candidates or products we may commercialize or promote in the future. As a result, we may never achieve sufficient revenues to sustain our business operations in accordance with our plan or be profitable.
 
Our capital requirements are subject to numerous risks.
 
Our long-term capital requirements are expected to depend on many potential factors, including but not limited to:
 

whether we are able to complete a strategic business transaction, including a potential divestment of certain of our assets and/or our commercial operations, on favorable terms to us, or at all;

the progress, success, and cost of our clinical and non-clinical trials and research and development programs, including manufacturing;

the number and type of commercial products we commercialize;

our ability to successfully commercialize our current commercial products and products that we may commercialize or promote in the future, including through securing commercialization agreements with third parties and favorable pricing and market share or through our own commercialization capabilities;

the existence and entrance of generics into the market, including entrances into the market as a result of adverse outcomes in Abbreviated New Drug Application (“ANDA”) litigation, that could compete with our products and erode the profitability of our commercial products or products that we may commercialize or promote in the future;

the number and type of therapeutic candidates in development;

our ability to successfully complete our clinical and non-clinical trials and research and development programs, including recruitment and completion of relevant pediatric and oncology studies, since the pediatric population and the very advanced disease state and poor prognosis of the oncology patients in our oncology studies make it particularly difficult to recruit and successfully treat the patients, and to successfully complete the studies;

the identification and acquisition of additional therapeutic candidates and commercial products;

the costs, timing, and outcome of regulatory review and obtaining regulatory clarity and approval of our therapeutic candidates and addressing regulatory and other issues that may arise post-approval;

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the costs of enforcing our issued patents and defending intellectual property-related claims;

the costs of manufacturing, developing and maintaining sales, marketing, and distribution channels for our commercial products;

our consumption of available resources, especially at a more rapid consumption than currently anticipated, resulting in the need for additional funding sooner than anticipated;

the amount and frequency of any milestone or royalty payments for which we are responsible; and

the ability and interest of investors to invest in our products and activities.

We have limited experience achieving regulatory approval or out-licensing our therapeutic candidates, making it difficult to evaluate our business and prospects.
 
Talicia® is our first and only product that was developed internally and approved for marketing by the FDA. We have limited experience in commercializing products and achieving regulatory approval or out-licensing our therapeutic candidates. Consequently, any predictions about our future performance may not be accurate, and we may not be able to fully assess our ability to commercialize our current commercial products or ones we may acquire or develop in the future, complete the development or obtain regulatory approval for our current and future therapeutic candidates or obtain regulatory approvals, reimbursement by third-party payors, achieve market acceptance or competitive pricing of our current commercial products or products that we may commercialize or promote in the future.
 
If we are unable to maintain and train an effective commercial infrastructure, including sales and marketing infrastructure, or maintain compliant and adequate commercial capabilities, we will not be able to successfully commercialize and grow our current commercial products and any products we may commercialize or promote in the future.
 
We and our employees, as well as our contractors, must comply with applicable regulatory requirements and restrictions relating to marketing and advertising. If we are unable to maintain compliant and adequate sales and marketing capabilities, including training our new sales personnel (including sales contractors) regarding applicable regulatory requirements and restrictions, we may not be able to increase our product revenue, may generate increased expenses, and may be subject to regulatory investigations and enforcement actions.
 
Our commercial efforts, including our sales and marketing efforts, must comply with various laws and regulations. Under applicable FDA marketing regulations, prescription drug promotions must be consistent with and not contrary to labeling, present “fair balance” between risks and benefits, be truthful and not false or misleading, be adequately substantiated (when required), and include adequate directions for use. Additionally, our marketing activities may be subject to enforcement by the Federal Trade Commission, state attorneys general, and consumer class-action liability if we engage in any practices that appear misleading or deceptive to the applicable agencies or consumers.
 
In addition to the requirements applicable to approved drug products, we may also be subject to enforcement action in connection with any promotion of an investigational new drug. A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, may not represent in a promotional context that an investigational new drug is safe or effective for the purposes for which it is under investigation or otherwise promote the therapeutic candidate.
 
If the FDA investigates our marketing and promotional materials or other communications and finds that any of our current or future commercial products are being marketed or promoted in violation of the applicable regulatory restrictions, we could be subject to FDA enforcement action. Any enforcement action (or related lawsuit, which could follow such action) brought against us in connection with alleged violations of applicable drug promotion requirements, or prohibitions, could have an adverse effect on our reputation, business, financial condition or results of operations, as well as the reputation of any approved drug products we may commercialize or promote in the future. In addition, we may also be reliant on third parties’ compliance with such regulations.
 
Moreover, laws and regulations covering commercialization activities in the pharmaceutical industry are constantly changing, and we will need to continually update and adjust our policies and sales and marketing and commercialization activities to meet legal and regulatory requirements. Our ability to comply with legal and regulatory requirements at any time in time does not guarantee we will continue to be able to comply in the future.
 
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In addition to complying with applicable laws and regulations covering commercialization activities in the pharmaceutical industry, we must also comply with various contractual terms governing our use of third-party intellectual property in our commercialization materials.
 
In order to maintain and potentially increase our commercialization capabilities in the U.S. and outside the U.S., we may need to maintain and potentially expand, among others, our development, regulatory, manufacturing, sales and marketing capabilities, and to maintain or potentially increase our personnel to accommodate sales. We may experience difficulties in managing this growth and integrating new personnel.
 
To maintain and potentially increase our own commercialization capabilities in the U.S. and outside the U.S. we may need to expand, among others, our development, regulatory, manufacturing, sales and marketing capabilities, and to maintain or potentially increase our personnel to accommodate sales. We may not be able to secure or retain personnel, organizations or vendors that are adequate in number or expertise to successfully and lawfully market and sell our products in the U.S. or outside the U.S. If we are unable to maintain or expand our sales and marketing capabilities, train our sales force or contractors effectively or provide any other capabilities necessary to commercialize products, we may need to contract with third parties to market and sell our products which could have an adverse effect on our financial condition and our results of operations.
 
We may also have difficulty in integrating into our existing U.S. operations sales and other commercial personnel or contractors that we may hire or engage to support the commercialization of Talicia® and Aemcolo®. Sales personnel or contractors' productivity may decrease as we hire new, less experienced sales personnel or contractors who are not yet familiar with our commercial products. In addition, we may be exposed to greater regulatory and compliance risks with an expanded sales force and activities to the extent applicable.
 
Future growth may impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees or contractors. Our U.S. subsidiary, RedHill U.S., has recently experienced high turnover rates due to the overall tightening and increasingly competitive labor market in the U.S. employment market in response to the COVID-19 pandemic. See “– Our business could suffer if we are unable to attract and retain key personnel” below. In addition, management may have to divert a disproportionate amount of its attention away from running our day-to-day activities and devote a substantial amount of time to managing these growth activities.
 
Although Aemcolo® was approved by the FDA before we acquired rights to it, such approval is contingent upon the completion of two additional postmarketing studies in specified pediatric populations.
 
The Pediatric Research Equity Act (PREA) amended the federal Food, Drug, and Cosmetic Act (FDCA) by authorizing the FDA to require that NDA submissions must each contain an assessment of the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations that supports dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, in some cases, grant deferrals for submission of some or all pediatric data until after the product’s approval for use in adults (in addition to full and partial waivers).
 
Aemcolo® received FDA approval on November 16, 2018, for the treatment of travelers’ diarrhea caused by non-invasive strains of Escherichia coli in adults, subject to the completion of the deferred pediatric studies required by PREA as mandatory postmarketing studies. In acquiring the ownership rights to Aemcolo®, we assumed responsibility for completing any postmarketing requirements or commitments that may be required to retain approval. Accordingly, we must conduct two randomized, placebo-controlled studies to evaluate the safety, tolerability, and efficacy of Aemcolo® for the treatment of travelers’ diarrhea in (i) children from 6 to 11 years of age and (ii) children from 12 to 17 years of age, respectively.
 
In conducting the required pediatric postmarketing studies for Aemcolo®, we must comply with various regulatory requirements set forth in, or pursuant to, PREA (in addition to other FDA regulations to which clinical trials are subject, more generally). For example, pediatric study sponsors must submit periodic reports to the FDA on the status of each study and other relevant information, such as (among other things) whether any difficulties have been encountered, as well as annual reports regarding clinical safety. Such sponsors are also required to submit to the FDA a timetable for completion in connection with each pediatric postmarketing study, along with a set of milestone dates (which typically include dates for final protocol submission, clinical study completion, and final report submission) by which the FDA will measure the study’s progress and compliance with applicable requirements. After submitted to and approved by the FDA, pediatric study sponsors must adhere to the agreed-upon timetables and milestones in conducting each study. Any failure to meet the deadlines established by the applicable timetable or milestone dates for a given pediatric study constitutes a violation of the FDCA (per PREA).
 
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The timelines and milestones initially set for the contemplated postmarketing Aemcolo® studies, in relevant part, required that we complete the study in children from 6 to 11 years of age by June 2022 and the study in children from 12 to 17 years of age by December 2022, with submission of the final study reports by December 2022 and 2023, respectively. Due to the impact of COVID-19 and travel restrictions, we submitted a proposal to the FDA and received approval to extend the deadlines for study completion to January 2025 for each of the studies and to extend the corresponding final report submission deadlines to December 2025. Upon completion of the Aemcolo® studies, if achieved, we will submit the required reports containing the safety and efficacy results of each study as supplements to the approved NDA for Aemcolo®, along with the proposed labeling changes (incorporating the relevant dosage and administration information for the studied pediatric populations) that we believe to be warranted based on the data derived from such studies. We cannot be certain that the safety and efficacy results of the pediatric postmarketing studies for Aemcolo® will be favorable, and it is possible that such study results could ultimately cause the FDA to require certain pediatric-specific labeling for Aemcolo® that may negatively affect its reputation, competitive advantages, and/or profitability.
 
If we fail to complete the required pediatric postmarketing studies for Aemcolo® in accordance with PREA, we may be subject to the traditional FDA enforcement actions authorized under most other contexts, such as warning letters, seizure, injunction, and withdrawal or suspension of the marketing approval for Aemcolo®, among others, any of which may have a material adverse effect on our reputation, business, financial condition or results of operations. In addition, the FDA is required to issue PREA-Non-Compliance Letters to any sponsors who fail to meet specified PREA requirements and to publicly post each such Non-Compliance Letter on the designated FDA webpage. The postmarket pediatric obligations we assumed upon acquiring Aemcolo® could subject us to any of the above-described actions, as well as more substantial consequences beyond the scope of the FDA’s traditional enforcement authority. In particular, non-compliance with PREA’s postmarketing pediatric requirements could give rise to civil monetary penalties of up to $250,000 per violation and up to a total of $10 million for all violations adjudicated in a single proceeding. In addition, failure to fulfill any postmarketing commitments that we agreed to assume could also result in our breach of the license agreement with Cosmo Pharmaceuticals N.V. (“Cosmo”) and cause us to lose our rights thereunder.
 
Any collaborative arrangements that we have established or may establish may not be successful, or we may otherwise not realize the anticipated benefits from these collaborations, including commercialization of our current commercial products. We do not control third parties with whom we have or may have collaborative arrangements, and we rely on such third parties to achieve results which may be significant to us. In addition, any current or future collaborative arrangements may place the commercialization of our current commercial products or products that we may commercialize or promote in the future or the development of our therapeutic candidates outside our control and may require us to relinquish important rights or may otherwise be on terms unfavorable to us.
 
Each of our collaborative arrangements requires us to rely on external consultants, advisors, and experts for assistance in several key functions, including clinical development, manufacturing, regulatory, market research, intellectual property, and commercialization. We do not control these third parties, but we rely on such third parties to achieve results, which may be significant to us. With respect to Aemcolo®, we rely on Cosmo, the party responsible for, among others, the manufacture, supply, and other operating responsibilities. With respect to Talicia®, we rely on Recipharm Strängnäs AB (“Recipharm”) and other contracting parties for the manufacture of Talicia® and its components and we rely on Gaelan Medical Trade LLC (“Gaelan Medical”) to obtain necessary approvals and commercialize Talicia® in the UAE.
 
Relying upon collaborative arrangements to commercialize our current commercial products and other products that we may commercialize or promote in the future and to develop our therapeutic candidates, subjects us to a number of risks, including but not limited to the following:
 

we will be responsible for making certain milestones, royalty or other payments under our various in-licenses even if our operating costs exceed the revenues generated from the relevant products;

our collaborators may default on their obligations to us and we may be forced to either terminate, litigate or renegotiate such arrangements;

our collaborators may have claims that we breached our obligations to them which may result in termination, renegotiation, litigation or delays in performance of such arrangements;

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we may not be able to control the amount and timing of resources that our collaborators may devote to our current commercial products, products that we may commercialize or promote in the future or our therapeutic candidates;

our collaborators may fail to comply with applicable laws, rules, or regulations when performing services for us, and we could be held liable for such violations;

our collaborators may experience financial difficulties, making it difficult for them to fulfill their obligations to us, including payment obligations, or they may experience changes in business focus;

our collaborators’ partners may fail to secure adequate commercial supplies for our current commercial products or products that we may commercialize or promote;

our collaborators’ partners may have a shortage of qualified personnel;

we may be required to relinquish important rights, such as marketing and distribution rights;

business combinations or significant changes in a collaborator’s business or business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement;

under certain circumstances, a collaborator could move forward with a competing therapeutic candidate or commercial product developed either independently or in collaboration with others, including our competitors;

collaborative arrangements are often terminated or allowed to expire, which may limit or terminate our rights to commercialize our current commercial products or products we may commercialize or promote in the future, or could delay the development and may increase the cost of developing our therapeutic candidates;

our collaborators may not wish to extend the terms of our agreements related to our commercial products or therapeutic candidates beyond the existing terms, in which case, we will not have access to existing rights upon the expiration and will therefore not be able to develop such therapeutic candidates or commercialize or promote such products following the initial terms of our agreements; and

our collaborators may wish to terminate the collaborative arrangements due to any disagreements or conflicts with us, a change in their assessment that the arrangement is no longer valuable, a change in control or in management or in strategy, changes in product development or business strategies of our collaborators.
 
In addition, our reliance upon our partners in connection with commercial activities subjects us to a number of additional risks, including but not limited to, the following:
 

we do not generally control our partners’ communications with the FDA or other foreign regulatory authorities, and the FDA or other foreign regulatory authorities may determine not to approve or elect to withdraw the products from the market due to various factors including any action or inaction taken by our partners (see “ – Our current commercial products or products which we may commercialize or promote in the future may be subject to recalls or market withdrawal that could have an adverse effect on our reputation, business, financial condition or results of operations.”);

in many instances, we rely on our partners to take enforcement action to protect the IP and regulatory protections, if any, of some of our commercial products. Their failure to diligently protect these products could materially affect our commercial success;

we rely on our partners to be responsible for the manufacture of some of our current commercial products, including through third-party manufacturers with the requisite quality and manufacturing standards as required under applicable laws and regulations, and we also rely on those same partners to supply their respective products and active pharmaceutical ingredients (“APIs”), which may result in us having those respective products and APIs in insufficient quantities or not delivered in as timely a manner as is necessary to achieve adequate or successful promotion and sale of their respective products;

our partners relating to our commercial products may significantly create or change reimbursement agreements or increase or decrease the price of their respective products to a level that could adversely affect our sales or revenues;

our partners may make decisions related to the product and take critical actions to support the product, including with respect to promotion, sales and marketing, medical affairs and pharmacovigilance, and any action or inaction taken by those same partners may adversely affect the approval, promotion and sales of their respective commercial products;

our partners may terminate their agreements with us after an agreed-upon period for reasons set forth in those same partners’ respective agreements with us;

our partners for future commercial products may change or create new agreements with wholesalers, Pharmacy Benefit Managers or other important stakeholders, which may significantly impact our ability to achieve commercial success, or they may fail to negotiate reimbursement agreements with payors which could also negatively affect our commercial success;

our partners may change the price of their respective commercial products to a level that could adversely affect our sales or revenues; and

our partners may not be successful in maintaining or expanding reimbursement from government or third-party payors, such as insurance companies, health maintenance organizations and other health plan administrators, which may adversely affect the sales of their respective products.
 
If any of these or other scenarios materialize, they could have an adverse effect on our reputation, business, financial condition or results of operations.
 
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If we acquire products, technologies, companies or businesses that own rights to, or otherwise acquire commercialization and related rights to, products, such transactions could result in additional costs, integration or operating difficulties, dilution and other adverse consequences. Such acquired products, technologies or businesses that own rights to products may not achieve commercial success or further establish our marketing and commercialization capabilities.
 
Part of our strategy is to identify and acquire rights to products that have been cleared or approved for marketing in the U.S. or elsewhere, and in particular, those with a therapeutic focus on GI and infectious diseases or with therapeutic activities which are overlapping or complementary to our existing commercial activities. Management has evaluated, and expects to continue to evaluate, a wide array of potential strategic acquisitions. From time to time, management may engage in discussions regarding potential acquisitions or licensing of rights to certain products that management believes are important to our business. Any one of these transactions could have a material effect on our reputation, business financial condition or results of operations. In connection with these acquisitions or licensing transactions, we may:
 

issue equity securities that may substantially dilute our shareholders’ percentage of ownership;

be obligated to make upfront milestones, royalty or other contingent or non-contingent payments;

incur debt or non-recurring and other charges, or assume liabilities; and

incur amortization expenses related to intangible assets or incur large and immediate write-offs of assets or goodwill or impairment charges.
 
In addition, the process of integrating an acquired product, technology, company or business may create operating difficulties and expenditures and pose numerous additional risks to our operations, including:
 

difficulty and expense in integrating the acquired product, technology, company or business, and personnel in accordance with our business strategy and existing operations, including the failure to achieve the expected benefits and synergies;

obligations to further develop and commercialize the acquired product, technology, company or business, in particular in jurisdictions outside of those in which we have experience operating;

higher than anticipated acquisition costs and expenses;

failure to manufacture or supply, or procure manufacturers or suppliers for, the acquired product, technology, company or business economically or successfully commercialize or achieve market acceptance of the acquired product;

exposure to liabilities of the acquired product, technology, company or business, including contract terms and conditions that are less favorable to us than our standard contractual terms, known or unknown risks relating to the validity or enforceability of patents, expiration of patents or exclusivity rights, generic competition, product defects or product liability claims, patent and other litigation and clinical, development or other liabilities;

disruption of our business and diversion of our management’s and technical personnel’s time and attention from their day-to-day responsibilities;

adverse effects on our reputation, business, financial condition or results of operations, including due to expenditures or acquisition-related costs, costs of commercialization or amortization or impairment costs for acquired goodwill and other intangible assets;

impairment of relationships with key suppliers and manufacturers due to changes in management and ownership and difficulty in maintaining existing agreements, licenses and other arrangements or rights on substantially similar terms as existed prior to the acquisition;

regulatory changes and market dynamics after the acquisition; and

potential loss of key employees, particularly those of the acquired entity.

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If any of the above events (or more) occur, or if we cannot effectively manage or respond to such events following one or more acquisitions, they may have a material adverse effect on our reputation, business, results of operations or financial condition.
 
Moreover, there can be no assurance that we will accurately or consistently identify products approved or cleared for marketing that will achieve commercial success, that we will be able to successfully acquire or commercialize such products or that such acquisitions would further establish our marketing and commercialization capabilities.
 
Maintaining and potentially expanding our commercial infrastructure in the U.S., is a significant undertaking that requires substantial financial and managerial resources, and we may encounter setbacks or may not be successful in our efforts.
 
Maintaining and potentially expanding the necessary commercial capabilities is competitive and time-consuming, and the commercialization of Talicia® and Aemcolo® requires a significant expenditure of operating, financial and management resources. Even with those investments, we may not be able to effectively commercialize our current commercial products, or we may incur more expenditures than anticipated in order to maximize our sales. We cannot guarantee that we will be able to maintain or expand our sales, marketing, distribution, and market access capabilities and enter into and maintain any agreements necessary for commercialization with payors and third-party providers on acceptable terms, if at all. If we are unable to maintain or expand such capabilities, either on our own or by entering into agreements with others, or are unable to do so in an efficient manner or on a timely basis, we will not be able to maximize the commercialization of our current commercial products or products that we may commercialize or promote in the future, which would adversely affect our reputation, business, financial condition or results of operations.
 
Even if the commercialization of our current and future commercial products is successful, we may fail to further our business strategy as anticipated or to achieve anticipated benefits and success. We may incur higher than expected costs in connection with the commercialization of our current commercial products, and we may encounter general economic or business conditions that adversely affect these products.
 
In addition, if we incur higher than expected costs in connection with the commercialization of our current and future commercial products, we may need to reduce or terminate our commercial activities, which may have a material adverse effect on our reputation, business, financial condition or results of operations.
 
We have a limited history of independently commercializing products that we developed and for which we obtained regulatory approval, such as Talicia®, and a limited history of commercializing products in the U.S. Due to our limited experience, we may have difficulty commercializing current commercial products, including Talicia® and Aemcolo®, or promoting or commercializing any products for which we may obtain FDA approval or to which we may acquire commercialization or promotion rights in the future.
 
Compared to competitors in the industry, we have relatively limited experience marketing and selling products in the U.S. In particular, we have limited experience in commercializing products that we developed and for which we obtained regulatory approval, such as Talicia®, which may materially increase our marketing and sales expenses or cause us to be ineffective in these efforts. Talicia® is the first product that we are commercializing that we developed and for which we obtained regulatory approval.
 
Our prior experience promoting and commercializing several other commercial products in the U.S. that we no longer commercialize or promote was limited and brief.
 
There can be no assurance we will successfully commercialize our current commercial products or any products we may commercialize or promote in the future.
 
In addition, many companies, both public and private, including well-known pharmaceutical companies and smaller niche-focused companies, are currently selling, marketing and distributing drug products that directly compete with our current commercial products and therapeutic candidates that we may seek to commercialize in the future. Many of these companies have significantly greater financial capabilities, marketing, and sales experience and resources than us. As a result, our competitors may be more successful than we are in commercializing products, and we may not be able to generate sufficient revenue to achieve or sustain profitability.
 
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Our failure to accurately forecast demand for our commercial products, or to quickly adjust to forecast changes, could adversely affect our business and financial results.
 
Market uncertainty make it difficult for us to accurately forecast future commercial product demand. We will be setting target levels for the manufacture of our commercial products in advance of purchases based upon our forecasts of commercial product sales.
 
If our forecasts exceed demand, we could experience excess inventory of APIs or of our commercial products, which can increase our inventory costs and result in obsolete inventory. Alternatively, if demand exceeds our forecasts, this may cause a shortage of commercial products, or the APIs used in our products, which could result in an inability to satisfy demand for our commercial products and a resulting material loss of market share and potential revenue. A failure to accurately predict the level of demand for our commercial products could adversely affect our revenues and net income.
 
In addition, some of our suppliers may require extensive advance notice of our requirements in order to produce APIs or commercial products in the quantities we desire. Long lead times may require us to place orders far in advance of the time when the commercial products will be offered for sale, and limitations on our flexibility to change such orders may not only make it difficult for us to accurately forecast demand for our commercial products, but also expose us to risks relating to shifts in consumer demand and trends and adversely affecting our operating results.
 
If third parties do not manufacture, our therapeutic candidates, upon approval, if any, or products we may commercialize or promote in the future in sufficient quantities, within the required timeframes, at an acceptable cost and in accordance with applicable quality standards and other regulatory requirements, the commercialization of our current commercial products or products we may commercialize or promote in the future may be adversely affected, or clinical development of our therapeutic candidates.
 
We do not currently own or operate manufacturing facilities. We rely on, and expect to continue to rely on, third parties to manufacture commercial quantities of our current commercial products and products that we may commercialize or promote in the future and clinical quantities of our therapeutic candidates. We rely on Recipharm and other contracting parties to provide sufficient quantities of Talicia® in the required timeframe. We rely on Cosmo to provide sufficient quantities of Aemcolo® in the required timeframe. We rely on various third parties to satisfy our supply requirements and there is no guarantee they will be able to do so successfully or in a timely manner. Our reliance on third parties includes our reliance on them for quality assurance related to regulatory compliance. Our current and anticipated future reliance upon others for the manufacture of our therapeutic candidates and any products that we may commercialize or promote may adversely affect our future operations and our ability to commercialize our current commercial products and any products that we may commercialize or promote on a timely and competitive basis, and to develop therapeutic candidates.
 
We may not be able to maintain our existing or future third-party manufacturing arrangements on acceptable terms, if at all. If for some reason our manufacturers or our development or commercialization partners’ manufacturers do not perform as agreed or expected or terminate or fail to renew the agreements for any reason, we or our partners may be required to replace them, in which event we may incur added costs and delays in identifying, engaging, qualifying under applicable regulatory requirements and training any such replacements and entering into agreements with such replacements on acceptable terms. In addition, our ability to enter into such alternative arrangements within a reasonable period of time, if at all, may be contractually limited by the terms of our manufacturing agreements existing at that time. Obtaining the necessary FDA or other regulatory approvals or other qualifications required for changes in manufacturing sites, methods or processes under applicable regulatory requirements could result in a significant interruption of supply. In the case of the manufacturer of Talicia®, in particular, the delay in identifying, engaging, qualifying and training its replacement may be extended, leading to a significant interruption of supply. Any such additional costs and delays may adversely impact our ability to obtain regulatory clearances and approvals for our therapeutic candidates or any product we may commercialize or promote or make such commercialization or marketing economically unfeasible.
 
We rely on third parties to manufacture and supply us with high-quality APIs and their starting materials in the quantities and quality we require on a timely basis.
 
We currently do not manufacture any APIs ourselves. Instead, we rely on third-party vendors for the development, manufacture, and supply of our APIs that are used to formulate our current commercial products and products we may commercialize or promote in the future and our therapeutic candidates. If these suppliers are incapable or unwilling to meet our current or future needs on acceptable terms or at all, we could experience delays in supplying product to market or commercial supply shortages that would adversely affect our sales of products we currently or may commercialize or promote in the future, or delays in obtaining regulatory clearances or approvals for our therapeutic candidates.
 
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While there may be several alternative suppliers of APIs on the market, for most of our products we have yet to conclude extensive investigations into the quality or availability of their APIs. Changing API suppliers or finding and qualifying new API suppliers can be costly and take a significant amount of time. Many APIs require significant lead-time to manufacture. There can also be challenges in maintaining similar quality or technical standards from one manufacturing batch to the next.
 
If we are not able to find stable, affordable, high quality, or reliable supplies of our APIs, we may not be able to produce enough supplies of our current commercial products or products we may commercialize or promote in the future, or of our therapeutic candidates, which could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
In addition, while to date there have been no significant disruptions to our supply chain, including to the manufacture of our APIs or their starting materials, there may be unfavorable changes in the availability or cost of raw materials, intermediates, and other materials necessary for production, which may result in disruptions in our supply chain.
 
We anticipate continued reliance on third party manufacturers for our current commercial products, and we expect to rely on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our therapeutic candidates.
 
We rely on, and we expect to continue to rely on, third-party manufacturers to produce commercial quantities of our current commercial products. In addition, we expect to rely on third-party manufacturers to produce products that we may commercialize or promote in the future. To date, other than Talicia®, which the FDA has approved for marketing in the U.S., our therapeutic candidates have been manufactured in relatively small quantities for preclinical testing and clinical trials, as well as for other regulatory purposes by third-party manufacturers. If the FDA or other regulatory agencies approve any of our current or future therapeutic candidates for commercial sale, we expect that we would rely, at least initially, on third-party manufacturers to produce commercial quantities of our approved therapeutic candidates. These manufacturers may not be able to successfully increase or maintain the manufacturing capacity for our current commercial products or any product we may commercialize or promote in the future or any of our therapeutic candidates that may be approved in the future, in a timely or economic manner, or at all. The significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. Foreign regulatory agencies may also require the approval of additional validation studies for scaling up the manufacturing process of any of our therapeutic candidates or current or future commercial products. If the third-party manufacturers are unable to successfully increase or maintain the manufacturing capacity for a therapeutic candidate, current commercial products or for products that we may commercialize or promote in the future, or if we are unable to secure replacement third-party manufacturers or unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed or there may be a shortage in supply. A supply disruption from any of our third-party manufacturers could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Reliance on third party manufacturers entails risks, including, but not limited to:
 

manufacturing delays if our third-party manufacturers give greater priority to the supply of other products over our current or future commercial products, including Talicia® and Aemcolo®, or any future therapeutic candidates, if approved, or otherwise do not satisfactorily perform according to the terms of their agreements with us;

the possible termination or nonrenewal of manufacturing agreements by the third-party manufacturers at a time that is costly or inconvenient for us;

the possible breach of manufacturing agreements by third-party manufacturers;

inability to fulfill all or part of our undertakings and commitments to our current or future commercialization partners in the U.S. and other territories, such as our partner Gaelen Medical, due to, among other things, delays or lack of supply by manufacturers of commercial products or the supply of such products in quantity or quality which is inadequate or not in line with the required regulatory standards or our agreements;

delays in obtaining regulatory approval for any future therapeutic candidates, if our third-party manufacturers fail to satisfy FDA inspection requirements in connection with pre-approval inspections or otherwise fail to comply with regulatory requirements; and

product loss or serious adverse events due to contamination, equipment failure, or improper installation or operation of equipment or operator error.
 
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If we are unable to establish collaborations for our therapeutic candidates or products we may commercialize or promote, or otherwise not be able to raise substantial additional capital, we will likely need to alter or abandon our development and commercialization plans.
 
Our drug development programs and the potential commercialization of our approved products or our therapeutic candidates and products that we may commercialize or promote in the future will require additional cash to fund expenses. As such, our strategy includes either selectively partnering or collaborating with multiple pharmaceutical and biotechnology companies to assist us in furthering the development or potential commercialization of our approved products and therapeutic candidates, if approved, promoting or commercializing products, in whole or in part, in some or all jurisdictions or through our own commercialization capabilities, such as our partnership with Gaelan Medical. With respect to potential new third-party partners for the development or commercialization of our approved products and therapeutic candidates, if approved, and development or commercialization of products that we may commercialize or promote in the future, we may not be successful in entering into collaborations with third parties on acceptable terms, or at all. In addition, if we fail to negotiate and maintain suitable development, commercialization or promotion agreements or otherwise raise substantial additional capital to secure our own commercialization capabilities, we may have to limit the size or scope of our activities or we may have to delay or terminate one or more of our development or commercialization programs. Any failure to enter into (or in the case of Gaelen Medical, any failure to maintain) development or commercialization agreements with respect to the development, marketing and commercialization of any therapeutic candidates or products we may commercialize or promote or failure to develop, market and commercialize such commercial products or therapeutic candidates or products we may commercialize or promote independently may have an adverse effect on our reputation, business, financial condition or results of operations.
 
We may depend on our ability to identify, consummate and integrate in-licenses or acquire additional therapeutic candidates to achieve commercial success, including products approved or cleared for marketing in the U.S. or elsewhere.
 
Talicia®, Aemcolo® and our five clinical-stage development therapeutic candidates were all acquired or licensed by us from third parties and we may in the future pursue in-licenses or acquisitions of additional therapeutic candidates or products and seek to integrate them into our operations as well. We evaluate internally and with external consultants each therapeutic candidate we in-license or acquire. However, there can be no assurance as to our ability to accurately or consistently identify therapeutic candidates or products that have been approved or cleared for marketing in the U.S. or elsewhere that are likely to achieve commercial success. In addition, even if we identify additional therapeutic candidates or products that have been approved or cleared for marketing in the U.S. or elsewhere that are likely to achieve commercial success, there can be no assurance as to our ability to in-license or acquire such therapeutic candidates or products under favorable terms or at all. In-licenses and acquisitions of therapeutic candidates and products involve risks that could adversely affect our future results of operations.
 
We compete with other entities for some in-license or acquisition opportunities.
 
As part of our overall strategy, we pursue opportunities to in-license or acquire therapeutic candidates and products that have been approved or cleared for marketing in the U.S. We may compete for in-license and acquisition opportunities with other companies, including established and well-capitalized companies. As a result, we may be unable to in-license or acquire additional therapeutic candidates or products that have been approved or cleared for marketing in the U.S. at all or on favorable terms. Our failure to further in-license or acquire therapeutic candidates or products that have been approved or cleared for marketing in the U.S. in the future may materially hinder our ability to grow and could materially harm our reputation, business, financial condition or results of operations.
 
If we or a licensor or a partner of ours cannot meet our or their respective obligations under our acquisition, in-license or other development or commercialization agreements or renegotiate the obligations under such agreements, or if other events occur that are not within our control, such as bankruptcy of a licensor or a partner, we could lose the rights to our therapeutic candidates or products we may commercialize or promote, experience delays in developing or commercializing our therapeutic candidates or products we may commercialize or promote or incur additional costs, which could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
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We acquired our rights to Talicia® and two of our other therapeutic candidates, RHB-104, and RHB-106, from a third party pursuant to an asset purchase agreement. In addition, we in-licensed our rights to three other therapeutic candidates, RHB-102 (Bekinda®), opaganib, and RHB-107 (upamostat), pursuant to license agreements in which we received exclusive perpetual licenses to certain patent rights and know-how related to these therapeutic candidates. We have also obtained the exclusive U.S. rights to commercialize Aemcolo® pursuant to a license agreement. These agreements require us to make payments and satisfy various performance obligations in order to maintain our rights and licenses with respect to these marketed products and therapeutic candidates. If we or our collaborators do not meet our or their respective obligations under these or future agreements, or if other events occur that are not within our control, such as the bankruptcy of a licensor, we could lose the rights to commercialize our current and future commercial products or to our therapeutic candidates, experience delays in developing our therapeutic candidates or incur additional costs.
 
In addition, we are responsible for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us. If we do not meet our obligations under these agreements in a timely manner or if other events occur that are not within our control, such as the bankruptcy of a licensor, which impact our ability to prosecute certain patent applications and maintain certain issued patents licensed to us, we could lose the rights to our current and future commercial products or our therapeutic candidates which could have a material adverse effect on our reputation, business, financial condition or results of operations. We manage a large portfolio of patents and may decide to discontinue maintaining certain patents in certain territories for various reasons, including costs, such as a current belief that the commercial market for the therapeutic candidate will not be large or that there is a near-term patent expiration that may reduce the value of the therapeutic candidate. In the event we discontinue maintaining such patents, we may not be able to enforce rights for our therapeutic candidates or protect our therapeutic candidates from competition in those territories.
 
Disputes may arise between us and third parties from whom we have acquired assets or commercialization rights, with which we have license agreements or with which we have commercialization agreement. Any conflict, dispute or disagreement with such third parties may result in disruptions to our business relationships, require us to pay damages and incur costs, adversely affect our results of operations and may lead to loss of rights that are important to our business or costly litigation.
 
Our existing agreements impose, and we expect that future acquisition, commercialization or license agreements will impose, various diligence, milestone payments, royalty or other obligations on us. Such agreements require, or may in the future require, us to remit upfront and royalty payments or performance milestone payments, for commercial products that we in-license and to supply and delivery of know-how for products that we out-license. Any failure on our part to perform our obligations could lead to us losing rights under our licenses or commercialization agreements and could thereby adversely affect our business. If there is any conflict, dispute, disagreement or issue of non-performance between us and our third-party partners regarding our rights or obligations under the acquisition, commercialization or license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement or to perform certain activities or to adhere to any contractual obligation, we may be liable to pay damages and incur costs, and it could lead to delays in the research, development, collaboration, and commercialization of our commercial products, products we may promote or commercialize in the future or our therapeutic candidates. The resolution of such disputes could require or result in litigation or arbitration, which could be time-consuming and expensive. Such third-party partner may have a right to terminate the affected license or commercialization agreement subject to a dispute. If our existing agreements are terminated, it would have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Our business could suffer if we are unable to attract and retain key and other personnel.
 
The loss of the services of members of senior management or other key personnel could delay or otherwise adversely impact the successful completion of our planned clinical trials or the commercialization of our current commercial products and therapeutic candidates, if approved, and any product we may commercialize or promote in the future, or otherwise affect our ability to manage our company effectively and to carry out our business plan. These key personnel are Dror Ben-Asher, our Chief Executive Officer, Reza Fathi, Ph.D., our Senior Vice President for Research and Development, Gilead Raday, our Chief Operating Officer, Adi Frish, our Chief Corporate and Business Development Officer, Guy Goldberg, our Chief Business Officer, Razi Ingber, our Chief Financial Officer, Rick D. Scruggs, our President, RedHill Biopharma Inc. & Chief Commercial Officer, Dr. Mark Levitt, our Chief Scientific Officer and Rob Jackson, our Senior VP, Sales & Marketing. We do not maintain key-man life insurance. Although we have entered into employment or consultancy agreements with all of the members of our senior management team, members of our senior management team may resign at any time. High demand exists for senior management and other key personnel in the pharmaceutical industry. There can be no assurance that we will be able to continue to retain and attract such personnel.
 
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Our growth and success also depend on our ability to attract and retain additional highly qualified scientific, technical, business development, marketing, sales, managerial and finance personnel. We experience intense competition for qualified personnel, and the existence of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals or subject us to liability from their former employers. Our U.S. subsidiary, RedHill U.S., has recently experienced high turnover rates. A sustained labor shortage or increased turnover rates within our employee base, caused by the COVID-19 pandemic or as a result of general macroeconomic or other factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing and distribution facilities and overall business. If we are unable to hire and retain employees capable of performing at a high-level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative effects, our business could be adversely affected. An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by the COVID-19 pandemic or as a result of general macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity or cash flows.
 
In addition, so long as we continue to promote our current commercial products and in the event we promote additional commercial products we may develop, we need to maintain and may need to expand our marketing and sales capabilities and retain key personnel and talented commercial employees including sales representatives. While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have. This has made it more difficult for us to successfully retain and attract key and other personnel that are key to our growth and even the viability of our commercial operations, particularly given the numerous challenges we face, including management’s substantial doubt about our ability to continue as a going concern.  Many of our sales representatives, including some of our must successful ones, have departed our company over time to pursue more lucrative employment opportunities.  We believe this trend may continue in the future and could pose a major challenge to our ability to operate our commercial operations. If we cannot attract and retain sufficiently qualified suitable employees on acceptable terms, we may not be able to develop and commercialize our commercialized products and competitive therapeutic candidates. Further, any failure to effectively integrate new personnel could materially prevent us from successfully growing our company.
 
We face several risks associated with international business.
 
We operate our business in multiple international jurisdictions. Such operations could be materially affected by changes in foreign exchange rates, capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, changes in data privacy laws, trade regulations and procedures and actions affecting approval, production, pricing, and marketing of, reimbursement for and access to, our current commercial products and products we may commercialize or promote, or our therapeutic candidates, as well as by political unrest, unstable governments and legal systems, and inter-governmental disputes. For example, though we entered into an exclusive license agreement with Gaelan Medical for Talicia® in the UAE and the Exclusive License Agreement for opaganib in South Korea (see “ – We face risks associated with the lawsuit we initiated against Kukbo. Regardless of if we prevail in the lawsuit against Kukbo, we may not receive the payments due to us under certain of our license agreements). We may not be able to obtain regulatory approval in South Korea, may experience a termination of the agreements, or may be unable to sell the product or sell the product in sufficient quantities to generate meaningful revenues. In addition, we are subject to global events beyond our control, including war, public health crises, such as pandemics and epidemics (as described above), trade disputes and other international events. In the UAE, for example, threats to the stability of the Abraham Accords between the UAE, the U.S. and Israel may disrupt our ability to supply Talicia®. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations. In addition, the current armed conflict in Ukraine and the subsequent economic sanctions imposed by some countries on Russia and certain territories in Ukraine may negatively impact the supply chain for our commercial products, our R&D activities and our business development activities.
 
We face risks associated with the lawsuit we initiated against Kukbo. Even if we prevail in the lawsuit against Kukbo, we may need to enforce the judgment in South Korea if Kukbo does not promptly pay the judgment.

On September 2, 2022, we filed a lawsuit against Kukbo in the Supreme Court of the State of New York, County of New York, Commercial Division, as a result of Kukbo’s default in delivering to us $5.0 million under the Subscription Agreement, in exchange for the ADSs we were to issue to Kukbo, and in delivering to us the further payment of $1.5 million due under the Exclusive License Agreement. Kukbo thereafter filed counterclaims alleging breach of contract, misrepresentation, and the breach of the duty of good faith and failure dealing. Due to the uncertainties of litigation, we can give no assurance that we will prevail, or that we will be able to collect some or all of the damages awarded to us in the event of a favorable outcome. If we do not prevail in the lawsuit against Kukbo and receive the payments due to us under the Subscription Agreement and Exclusive License Agreement, we may not receive any of the $6.5 million owed to us, or may have to pay associated damages and related expenses and legal fees if Kukbo receives a favorable judgment against us in their counterclaim. The lawsuit against Kukbo may additionally divert management’s attention and resources in preparing for litigation and defending our claim, result in disruptions to our business, and require us to pay legal fees, damages, or associated expenses, all of which could adversely affect our ability to conduct our business.

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Risks Related to Regulatory Matters
 
If we or our future development or commercialization partners are unable to obtain or maintain the FDA or other foreign regulatory clearance and approval for our commercial products or therapeutic candidates, we or our commercialization partners will be unable to commercialize our current commercial products, products we may commercialize or promote in the future or our therapeutic candidates, upon approval, if any.
 
Our current commercial products must maintain, and the products we may commercialize or promote in the future may be required to obtain and maintain, FDA and other foreign regulatory clearance and approval.
 
Aemcolo® was approved by the FDA in 2018 for the treatment of travelers’ diarrhea caused by non-invasive strains of E. coli in adults, and Talicia® was approved for marketing in the U.S. for the treatment of H. pylori infection in adults in November 2019. Pursuant to our license agreement with Gaelan Medical, Gaelan Medical received marketing approval for Talicia in the UAE and that Gaelan Medical had subsequently placed the first commercial order for Talicia, which was dispatched from the contract manufacturing organization (“CMO”) in December 2023. However, future regulatory developments may lead to a loss of the right to commercialize Talicia® or Aemcolo® or any product we may commercialize or promote in the future.
 
We currently have five therapeutic candidates in development, most of which are in clinical stage development, with the goal of eventually seeking FDA or other foreign regulatory approvals. Our commercial products and therapeutic candidates are subject to extensive governmental laws, regulations, and guidelines relating to the development, clinical trials, manufacturing, marketing, promotion, and commercialization of pre- and post-approval prescription drugs. We may not be able to submit for or obtain marketing approval for any of our therapeutic candidates in a timely manner or at all.
 
Any material delay in obtaining or maintaining, or the failure to obtain or maintain, required regulatory clearances and approvals will increase our costs and may materially adversely affect our ability to continue to generate meaningful revenues and could adversely impact our reputation, business, financial condition, results of operations or ability to attain or sustain revenues from other markets. We also are, and will be, subject to numerous regulatory requirements from both the FDA and other foreign regulatory authorities that govern the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. Moreover, clearance or approval by one regulatory authority does not ensure clearance or approval by other regulatory authorities in separate jurisdictions. Each jurisdiction may have different approval processes and requirements and may impose additional testing, development and manufacturing requirements for our current commercial products and products that we may commercialize or promote in the future and for or our therapeutic candidates.
 
Additionally, the FDA or other foreign regulatory authorities may require, or companies may pursue, additional clinical trials after a product is approved for marketing. Such postmarketing studies may be mandated by the FDA or other foreign regulatory authorities as conditions for initial or continued approval for marketing. The FDA or other foreign regulatory authorities have expressed statutory authority to require holders of NDAs to conduct postmarketing trials to specifically address safety and other issues identified by the regulatory authority.
 
Certain changes related to an approved drug, including changes to the product labeling, manufacturing process, indications and other certain specifications set forth within the product’s NDA, may not be made until a new NDA or NDA supplement reflecting the applicable changes is submitted to and approved by the FDA. An NDA supplement for a new indication typically requires clinical data similar to that in the original application, including relevant pediatric data, and the FDA typically uses the same procedures and standards in reviewing NDA supplements as it does in reviewing NDAs.
 
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Even if a therapeutic candidate receives regulatory marketing approval, such approval will be limited to a specific disease state(s) and might contain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictions on distribution, among other possible restrictions. Further, even after regulatory approval is obtained, later discovery of previously unknown information, such as safety risks, problems with a product or such information, the extent or severity of which were previously unknown, may result in restrictions on the product’s ability to be marketed as initially approved or even complete withdrawal of the product’s NDA approval and, in effect, its removal from the market.
 
Additionally, the FDA or other foreign regulatory authorities may change their clearance or approval policies or adopt new laws, regulations or guidelines that materially delay or impair our ability to commercialize our current commercial products and products that we may commercialize or promote in the future, or our ability to obtain the necessary regulatory clearances or approvals for any of our current or future therapeutic candidates.
 
Our current commercial products or products which we may commercialize or promote in the future may be subject to recalls or market withdrawal that could have an adverse effect on our reputation, business, financial condition or results of operations.
 
The FDA and similar foreign governmental authorities have the authority to require the recall of regulated products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the product would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture.
 
Product manufacturers or owners, as applicable, may, on their own initiative, recall a product if any material deficiency in a product is found. A government-mandated or voluntary recall by us or one of our collaborators, as applicable, could occur as a result of manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and will have an adverse effect on our reputation, business, financial condition or results of operations. The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated. Companies are required to maintain certain records of recalls even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they were conducted.
 
Regulatory authorities in other jurisdictions may have similar procedures that may subject any product we may commercialize or promote to limitations or withdrawal requests. In addition, the FDA or other foreign regulatory authorities may determine that the chemistry, manufacturing and controls (“CMC”) of marketed products that we develop, acquire or to which we acquire commercialization rights, such as our current commercial products, is unsatisfactory due to the manufacturing standards of the products. If either of these or any regulatory action is taken, our current commercial products or any product we commercialize or promote in the future could be withdrawn from the market at any time. In addition, we may suffer from delays in further commercialization of any product we commercialize or promote.
 
We and our third-party manufacturers or our partners’ manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities, such as applicable current good manufacturing practices and other quality-based regulations.
 
We and our third-party manufacturers or our partners’ manufacturers are, and will be, required to adhere to laws, regulations, and guidelines of the FDA and other foreign regulatory authorities setting forth current good manufacturing practices (“cGMP”). These laws, regulations, and guidelines cover all aspects of the manufacturing, testing, quality control and recordkeeping relating to our current commercial products and any products we may commercialize or promote, and our therapeutic candidates with varying cGMP rigors depending on what phase each of our respective therapeutic candidates is in with respect to its drug development process. We and our third-party manufacturers and our partners’ manufacturers may not be able to comply with applicable laws, regulations, and guidelines. We and our third-party manufacturers and our partners’ manufacturers are, and will be, subject to unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the U.S. Our failure, or the failure of our third-party manufacturers or our partners’ manufacturers, to comply with applicable laws, regulations and guidelines could result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our current and future commercial products and therapeutic candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our current and future commercial products and therapeutic candidates, and materially and adversely affect our reputation, business, financial condition or results of operations.
 
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Furthermore, changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a change of a third-party manufacturer, will require prior FDA or other regulatory review or approval of the manufacturing process and procedures in accordance with the FDA’s regulations or comparable foreign requirements. This review may be costly and time-consuming and could delay or prevent the launch or commercial production of a product. The new facility will also be subject to pre-approval inspection. In addition, we will have to demonstrate that the product made at the new facility is equivalent to the product made at the former facility by physical and chemical methods, which are costly and time-consuming. It is also possible that the FDA may require clinical testing as a way to prove equivalency, which would result in additional costs and delay, and may also result in delays in approval or commercialization of a product or render it unfeasible.
 
Our current commercial products, and any product we may commercialize or promote in the future, even if all regulatory clearances and approvals are obtained, will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and applicable foreign laws, regulations, and guidelines, we could lose those clearances and approvals, and our reputation, business, financial condition or results of operations may be materially and adversely affected.
 
We or our commercialization partners, as applicable, are and will be subject to ongoing reporting obligations with respect to our current commercial products and any cleared or approved product that we may commercialize or promote in the future, including pharmacovigilance, and with respect to our therapeutic candidates, even if they receive regulatory clearance or approval. In addition, the manufacturing of our current commercial products, and any other product we may commercialize or promote, whether currently or in the future, and our therapeutic candidates, will be subject to continuing regulatory review and approval, including inspections by the FDA and other foreign regulatory authorities. The results of any ongoing review may result in withdrawal from the market of one of our current commercial products or products we may commercialize or promote in the future, interruption of manufacturing operations or imposition of labeling or marketing limitations for such commercial product or therapeutic candidate, or other potentially significant enforcement actions. Since many more patients are exposed to drugs following their marketing clearance or approval, serious adverse reactions that were not observed in clinical trials may occur during the commercial marketing of our current commercial products or any product we may commercialize or promote in the future, including therapeutic candidates.
 
If a product receives regulatory approval, the approval is limited to the specific indications for use identified in the approved marketing application and by any additional requirements, restrictions, and limitations identified at the time of the product’s approval or thereafter, which could restrict the commercial value of the product. As a condition of approval or after approval (if the FDA becomes aware of new safety information), the FDA may require us to implement a Risk Evaluation and Mitigation Strategy (REMS), which may include distribution or use restrictions to manage a known or potential serious risk associated with the product. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (ETASU). ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of a given drug. Once adopted, REMS are subject to periodic assessment and modification. Additionally, the FDA may require post-approval, “Phase 4” clinical trials to generate additional information on safety or efficacy. The results of such postmarketing studies may be negative and could cause the FDA to, among other things, further limit marketing efforts or a product’s approved uses or even withdraw approval.
 
If we or our current or future commercialization partners, as applicable, are required to conduct additional clinical trials or other testing of our current commercial products, or any other product we may commercialize or promote, or of our therapeutic candidates, we may face substantial additional expenses, be delayed in obtaining marketing clearance or approval, if required by the FDA, or may never obtain marketing clearance or approval for such product we may commercialize or promote or therapeutic candidate.
 
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Third-party manufacturers and the manufacturing facilities that we and our development or commercialization partners use to manufacture any of our current commercial products and any other products that we may commercialize or promote, and therapeutic candidate, will be subject to periodic review and inspection by the FDA and may be subject to similar review by other regulatory authorities. Later discovery of previously unknown problems with any of our current commercial products and product we may commercialize or promote, or any therapeutic candidate, manufacturer or manufacturing process, or failure to comply with rules and regulatory requirements, may result in actions, including but not limited to the following:
 

restrictions on such therapeutic candidate, marketed product, manufacturer or manufacturing process;

warning letters from the FDA or other foreign regulatory authorities;

withdrawal of the marketed product from the market;

withdrawal of the therapeutic candidate from use in a clinical trial;

suspension or withdrawal of regulatory approvals;

refusal to approve pending applications or supplements to approved applications that we or our development or commercialization partners submit;

voluntary or mandatory recall;

fines;

refusal to permit the import or export of our current commercial products or products that we may commercialize or promote in the future or our therapeutic candidates;

product seizure or detentions;

injunctions or the imposition of civil or criminal penalties; and

adverse publicity.
 
If we or our current or future commercialization partners, suppliers, third-party contractors or clinical investigators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements or policies, we and our development or commercialization partners may lose marketing clearance or approval for any products already cleared or approved for marketing in any jurisdiction, resulting in decreased or lost revenue from such products and could also result in other civil or criminal sanctions, including fines and penalties, and we may lose marketing clearance or approval of any of our therapeutic candidates, if any of our therapeutic candidates are approved for marketing.
 
We may encounter delays in receipt of FDA approval, if any, for our therapeutic candidates due to CMC, clinical, efficacy, safety, or regulatory or other issues.
 
We may encounter significant delays in receipt of FDA approval, if any, for our therapeutic candidates. For example, the FDA may determine that the CMC of one of our therapeutic candidates is not satisfactory due to the manufacturing standards of the products or that additional CMC work, information or quality assurances are needed. The FDA may also consider the clinical studies conducted with a therapeutic candidate and the additional information provided to be inadequate, or insufficient, or require us to provide additional information, which may require us to conduct additional studies or otherwise significantly delay potential FDA approval of the potential NDA for a therapeutic candidate, if at all. In addition, we cannot guarantee that potential future manufacturers or other vendors related to manufacturing will be able to perform as required, will not terminate their agreements with us, or otherwise will not perform satisfactorily. The potential delay in identifying, engaging, qualifying and training an alternative manufacturer may be extended, leading to a significant delay. Furthermore, the FDA may also change its clearance or approval policies or adopt new laws, regulations or guidelines in a manner that materially delays or impairs our ability to obtain approval of the potential NDA for a therapeutic candidate, if any.
 
If any of these or other issues occur, we may face substantial additional expenses and otherwise experience delays in obtaining FDA approval of the NDAs we may file in the future for our therapeutic candidates, including RHB-104 for Crohn’s disease, or may never obtain the FDA approval for such NDAs.
 
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Clinical trials and related non-clinical studies may involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. We or our development or commercialization partners may not be able to obtain regulatory approvals for our therapeutic candidates or commercialize products we may commercialize or promote without completing such trials in accordance with the applicable regulatory standards, even products that may have already been cleared or approved for marketing.
 
We have limited resources and experience in conducting and managing the clinical trials that are required to obtain or maintain regulatory approvals and commence or continue commercial sales. Clinical trials and related non-clinical studies are expensive, complex, can take many years and have uncertain outcomes. We cannot predict whether we, independently or through third parties, will encounter problems with any of the completed, ongoing or planned clinical trials that will cause delays, including suspension of a clinical trial, delay of data analysis or release of the final report. The clinical trials of our therapeutic candidates may take significantly longer to complete than estimated. Failure can occur at any stage of the testing, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could materially delay or prevent the obtainment of a regulatory approval of current or future therapeutic candidates and delay or prevent their commercialization.
 
In connection with the clinical trials for our therapeutic candidates and other therapeutic candidates that we may seek to develop in the future, either on our own or through licensing or partnering agreements, we face various risks and uncertainties, including but not limited to:
 

delays or failure in securing clinical investigators or trial sites for the clinical trials;

delays or failure in receiving import or other government approvals to ensure appropriate drug supply;

delays or failure in obtaining institutional review board (IRB) and other regulatory approvals to commence or continue a clinical trial;

expiration of clinical trial material before or during our trials as a result of delays, including suspension of a clinical trial, degradation of, or other damage to, the clinical trial material;

negative or inconclusive results or results that are not sufficiently positive from clinical trials;

the FDA or other foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical studies;

the FDA or other foreign regulatory authorities may require us to conduct additional clinical trials or studies in connection with therapeutic candidates in development, as well as for products that have already been cleared and approved for marketing;

inability to monitor patients adequately during or after treatment;

inability to retain patients;

lack of technology to support clinical trials results;

problems with investigator or patient compliance with the trial protocols;

a therapeutic candidate may not prove safe or efficacious; there may be unexpected or even serious adverse events and side effects from the use of a therapeutic candidate;

the results with respect to any therapeutic candidate may not confirm the positive results from earlier preclinical studies or clinical trials;

the results may not meet the level of statistical significance required by the FDA or other foreign regulatory authorities;

the results may justify only limited or restrictive uses, including the inclusion of warnings and contraindications, which could significantly limit the marketability and profitability of a therapeutic candidate;

the clinical trials may be delayed or not completed due to the failure to recruit suitable candidates or if there is a lower rate of suitable candidates than anticipated or if there is a delay in recruiting suitable candidates; and

changes to the current regulatory requirements related to clinical trials, which can delay, hinder or lead to unexpected costs in connection with our receiving the applicable regulatory clearances or approvals.
 
A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. As such, despite the results reported in earlier clinical trials or related non-clinical studies of our therapeutic candidates, we do not know if we will be able to complete the clinical trials or related non-clinical studies we conduct or if such clinical trials will demonstrate adequate safety and efficacy sufficient to request and obtain regulatory approval to market our therapeutic candidates. If any of the clinical trials or related non-clinical studies of any of our current or future therapeutic candidates do not produce favorable results or are found to have been conducted in violation of the FDA’s or other regulatory body’s standards governing such studies, our ability to request and obtain regulatory approval for the therapeutic candidate may be adversely impacted, which could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
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If a diagnostic test for MAP will not become available, our ability to develop or obtain approval for RHB-104 may be adversely impacted.
 
A companion diagnostic for the detection of MAP bacteria in Crohn’s disease patients is required in order to advance this development program. We do not know if and when such a diagnostic test for MAP will become available and we depend on third parties’ resources and expertise in this area. If such a diagnostic test for MAP will not become available, our ability to develop or obtain regulatory approval to market RHB-104 may be adversely impacted.
 
We rely on third parties to conduct our clinical trials and related non-clinical studies and those third parties may not perform satisfactorily, including but not limited to failing to meet established deadlines and compliance with applicable laws and regulations for the completion of such clinical trials.
 
We currently do not have the ability to independently conduct clinical trials and related non-clinical studies for our therapeutic candidates, and we rely on third parties, such as contract research organizations, medical institutions, contract laboratories, development and commercialization partners, clinical investigators and independent study monitors to perform these functions. Our reliance on these third parties for research and development activities reduces our control over these activities. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. Although we have, in the ordinary course of business, entered into agreements with such third parties, we continue to be responsible for confirming that each of our clinical trials and related non-clinical studies is conducted in accordance with its general investigational plan and protocol, as well as all applicable laws and regulations. For example, the FDA requires us to comply with regulations and standards, commonly referred to as good clinical practices (“GCP”), for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected, and regulatory authorities in other jurisdictions may have similar responsibilities and requirements. Our reliance on third parties does not relieve us of these responsibilities and requirements. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them or perform such functions independently. Although we believe that there are a number of other third-party contractors we could engage to continue these activities, it may result in a delay of the affected trial and additional costs. Accordingly, we may be materially delayed in obtaining regulatory approvals, if any, for our therapeutic candidates and may be materially delayed in our commercialization efforts for the targeted indications.
 
In addition, our ability to bring our therapeutic candidates to market depends on the quality and integrity of data that we present to regulatory authorities in order to obtain marketing authorizations. Although we attempt to audit and control the quality of third-party data, we cannot guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not been fraudulently generated. Furthermore, the FDA may consider clinical studies inadequate where steps have not been taken in the design, conduct, reporting, and analysis of the studies to minimize bias. For example, one potential source of bias in clinical studies is a clinical investigator with a financial stake in the outcome of the study. Accordingly, we (or the applicant of the IND or Biologics License Application, as applicable) must submit for all applicable clinical investigators either: (i) a completed Form FDA 3454 attesting to the absence of financial interests and arrangements described in the regulations, dated and signed by the chief financial officer or another responsible corporate official; or (ii) for any investigators for whom a Form FDA 3454 is not submitted, a Form FDA 3455 disclosing completely and accurately the following:
 

any financial arrangement entered into between the sponsor of the covered study and the clinical investigator involved in the conduct of a covered clinical trial, whereby the value of the compensation to the clinical investigator for conducting the study could be influenced by the outcome of the study;

any significant payments of other sorts from the sponsor of the covered study, such as a grant to fund ongoing research, compensation in the form of equipment, retainer for ongoing consultation, or honoraria;

any proprietary interest in the tested product held by any clinical investigator involved in a study;

any significant equity interest in the sponsor of the covered study held by any clinical investigator involved in any study; and

any steps taken to minimize the potential for bias resulting from any of the disclosed arrangements, interests, or payments.
 
The FDA may refuse to accept a filing of an NDA that does not contain the required certifications and disclosures or attestations by the applicant that the applicant has acted with due diligence to obtain the information but was unable to do so and stating the reason. Additionally, FDA refusal of an NDA on potential bias grounds may have a material adverse effect on our reputation, business, financial condition or results of operations and the credibility of our other commercial products or therapeutic candidates.
 
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We rely on contract research organizations for the management of clinical data generated from our studies, and such contract research organizations may not perform satisfactorily.
 
We rely on contract research organizations to provide monitors for and to manage data for our studies. Our reliance on these contract research organizations for data management reduces our control over clinical data management. While we have agreements governing their activities, we have limited influence over their actual performance. If these contract research organizations do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, we may be required to replace them, or our clinical studies may be extended, delayed or terminated. In addition, such failure of our contract research organizations would pose risks to the accuracy and usability of clinical data from our clinical studies. Replacing a contract research organization may result in a delay in our clinical studies and generation of data from such studies. In addition, we face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by contract research organizations, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology.
 
We may fail to receive or maintain the benefits from the orphan drug and QIDP designations granted by the FDA for our applicable products or therapeutic candidates, as applicable.
 
In the U.S., under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the U.S., or a patient population greater than 200,000 in the U.S. where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the U.S. In 2011, the FDA granted RHB-104 orphan drug designation for the treatment of Crohn’s disease in the pediatric population; in 2017, the FDA granted opaganib orphan drug designation for the treatment of cholangiocarcinoma and granted RHB-107 (upamostat, formerly Mesupron) orphan drug designation for the treatment of pancreatic cancer, and in 2020 the FDA granted orphan drug designation to RHB-204 for the treatment of nontuberculous mycobacteria (“NTM”) infections.
 
In the U.S., the orphan drug designation entitles a party to financial incentives, such as opportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has the orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including an NDA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the original manufacturer is unable to assure sufficient product quantity.
 
Exclusive marketing rights from a given orphan drug designation may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective, or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the orphan-designated disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may receive and be approved for the same condition, and only the first applicant to receive approval will receive the benefits of marketing exclusivity. Even after an orphan-designated product is approved, the FDA can subsequently approve a later drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
 
In addition, in 2017, we announced that RHB-204 had been granted QIDP designation by the FDA for the treatment of pulmonary NTM infections. Like orphan drugs, QIDPs may take advantage of market exclusivity, which in the case of QIDPs is five years (total period of twelve years together with the orphan drug designation). However, the five-year exclusivity extension does not apply to a supplement to an application under Section 505(b) of the FDCA for any QIDP for which an extension is in effect or has expired; a subsequent application submitted with respect to a product approved by the FDA for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength; or a product that does not meet the definition of a QIDP under Section 505(g) based upon its approved uses.
 
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Modifications to our current commercial products or to any product that we may commercialize or promote in the future, or our therapeutic candidates, may require new regulatory clearances or approvals or may require us or our development or commercialization partners, as applicable, to recall or cease marketing any of our approved products, or delay further studies of our therapeutic candidates in human subjects until clearances or approvals are obtained.
 
Modifications to our current commercial products and any products we may commercialize or promote, or to our therapeutic candidates, after they have been cleared or approved for marketing, if at all, may require new regulatory clearance or approvals, in particular, if we seek or are required to expand our operations to jurisdictions outside of the U.S., and, if necessitated by a problem with a marketed product, may result in the recall or suspension of marketing of the previously approved and marketed product until clearances or approvals of the modified product are obtained. The FDA and other regulatory authorities require pharmaceutical product and device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine in conformity with applicable laws, regulations, and guidelines that a modification may be implemented without pre-clearance by the FDA or other regulatory authorities. However, the FDA or other regulatory authorities can review a manufacturer’s decision and may disagree. The FDA or other regulatory authorities may also, on their own initiative, determine that a new clearance or approval is required. If the FDA or other regulatory authorities require new clearances or approvals of any pharmaceutical product for which we or our partners, including development or commercialization partners, previously received marketing approval, we or our partners, including development or commercialization partners, may be required to recall and stop marketing such marketed product, which could require us or our partners, including development or commercialization partners, to redesign the marketed product and may cause a material adverse effect on our reputation, business, financial condition or results of operations.
 
Risks Related to Our COVID-19 Therapeutic Candidates and COVID-19 Impact on Our Business
 
Government involvement may limit the commercial success of our COVID-19 therapeutic candidate.
 
The COVID-19 endemic has been previously classified as a pandemic by public health authorities, and it is possible that one or more government entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities. If we were to develop an anti-viral therapeutic to COVID-19, the economic value of such therapeutic to us could be limited.
 
Separately, various government entities, including the U.S. and or other governments, have offered, and may continue offering incentives, such as those we received, grants and contracts to encourage additional investment by commercial organizations and drug development companies into preventative and therapeutic agents against COVID-19, which may have the effect of increasing the number of competitors and/or providing advantages to competitors. Accordingly, there can be no assurance that we will be able to successfully establish a competitive market share for our COVID-19 candidates.
 
If we are successful in developing a COVID-19 therapeutic, we may need to devote significant resources to our manufacturing scale-up and large-scale deployment, including for use by the U.S. or other governments. If one of our COVID-19 therapeutic candidates is approved for marketing or for Emergency Use, we may also need to devote significant resources to further expand our U.S. and non-U.S. sales and marketing activities and increase or maintain personnel to accommodate sales in the U.S. and outside the U.S.
 
In the event that the clinical studies of opaganib and/or RHB-107 as a COVID-19 therapeutic candidate are perceived to be successful, we may need to work toward the large-scale manufacturing scale-up and larger-scale deployment of the potential therapeutic through a variety of U.S. and foreign government or other agency mechanisms, such as an Expanded Access Program or an Emergency Use Authorization program. In this case, we may need to devote significant resources to this program, which would require diversion of resources from our other programs. In addition, since the path to licensure of any COVID-19 therapeutic is unclear, if use of the therapeutic is approved by the U.S. or other governments, we may have a widely used therapeutic in circulation in the U.S. or any another country prior to our full validation of the overall long-term safety and efficacy profile of our therapeutic. Unexpected safety issues in these circumstances could lead to significant reputational damage for us and our therapeutic candidates going forward and other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional financial resources.
 
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In addition, in the event one of our COVID-19 therapeutic candidates is approved for marketing we may also need to further expand our sales and marketing activities in the U.S. and outside the U.S. and increase or maintain personnel to accommodate sales. In this case, we may need to devote significant additional resources to this program, which would require diversion of additional resources from our other programs.
 
Since the beginning of 2020, we have entered into several collaborations with leading manufacturers, including with U.S.-based partners, to expand manufacturing capacity of opaganib for COVID-19 in preparation for potential emergency use applications and to gradually meet subsequent large-scale demand and distribution that could follow potential emergency use authorization and/or full marketing approval, if at all. We cannot guarantee that our ongoing efforts in relation to the drug candidates or their manufacturing, including the scale-up of manufacturing will be successful or that we will be able to supply the potential high demand for opaganib for COVID-19 that could follow potential emergency use authorization and/or full marketing approval, if at all. The exercise of march-in rights by the U.S. government may also adversely affect our ability to supply sufficient quantities of opaganib. See “ – The development of opaganib and RHB 107 have been supported by government-funded programs and thus may be subject to federal regulations such as “march-in” rights and certain reporting requirements, and compliance with such regulations may limit our exclusive rights and our ability to contract with manufacturers. In addition, the government is under no obligation to continue to support development of our products and can cease such support at any time which could be irreplaceable to the development process of our products. ” below.
 
The COVID-19 endemic and its ongoing effects may adversely affect our business, revenues, results of operations and financial condition.
 
In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the declaration of a public health emergency associated with COVID-19 subsequently expired on May 11, 2023. The COVID-19 endemic and its ongoing effects are expected to remain a serious endemic threat for an indefinite future period and may continue to create significant economic uncertainty and volatility in the credit and capital markets, supply chain issues, global shortages of supplies, materials and products, and contribute to rising global inflation. Outbreaks of epidemic, pandemic or contagious diseases, or a resurgence of COVID-19, may adversely affect our business, revenues, financial condition and results of operations. The various precautionary measures taken by many governmental authorities around the world in order to limit the spread of SARS-CoV-2 had and may sometime in the future have an adverse effect on the global markets and its economy and demand for pharmaceutical products, including on the availability and pricing of employees, resources, materials, manufacturing and delivery efforts and other aspects of the global economy. The spread of the pandemic caused significant volatility and uncertainty in U.S. and international markets and resulted in increased risks to our operations.
 
Specifically, there are a number of risks that affected our business related to the pandemic and may in the future in the event of a resurgence of the coronavirus, including the following:
 

Commercial Operations: An extended pandemic would have a material adverse effect on sales of our commercial products. In the past, the COVID-19 pandemic decreased commercial activities, which affected the sales of some of our commercial products due to slower initiation of some promotional activities associated with a significant decrease in in-clinic patient visits, tests and treatments and the impact on our sales force’s ability to engage with healthcare providers in an in-person setting, cancellation of events such as industry conferences and limited local and international travel. In addition, there was a negative impact on our business as a result of COVID-19 within our commercial organization, including reductions in our sales force. The ability to successfully commercialize Aemcolo® and Talicia® depends on in-clinic patient visits and the availability of diagnostics, both of which were negatively affected by the pandemic, especially with respect to Aemcolo® and Talicia®, which we launched shortly before or at the time of the COVID-19 outbreak. In addition, the significant decrease in travel significantly reduced the demand and sales of Aemcolo® for travelers’ diarrhea. We continue to expect a decreased level of demand and sales of Aemcolo® to continue over the coming quarters due to the very limited resources we are investing in the growth of this product. The COVID-19 pandemic also adversely affected our ability to attract commercial partners, our relationships with commercial partners and our ability to sell our commercial products outside the U.S., including sales of Talicia® in the UAE.
 

Supply Chain: A resurgence of the coronavirus could result in broad supply disruptions of the supply of commercial products and difficulty in finding alternative sources in the future which may adversely affect our ability to distribute certain of our commercial products for commercial supply and our therapeutic candidates for clinical supply. For example, if quarantines, shelter-in-place and similar government orders, travel restrictions characteristic of the COVID-19 pandemic are reinstated, the impact, availability or productivity of personnel at third-party manufacturers, distributors, freight carriers and other necessary components of our supply chain could be disrupted. In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in disruptions in our supply chain and could significantly and adversely affect our business if one or more of our manufacturers or suppliers are impacted by any interruption at a particular location or in relation to a particular material. To the extent there are disruptions in the global supply chain (especially those connected to COVID-19-related supply and logistics issues), our business could be adversely affected.
 
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Clinical Trials: In the past, the COVID-19 pandemic adversely affected our clinical and preclinical trials, including our ability to initiate and complete our clinical and preclinical trials within the anticipated timelines, and delays or difficulties in enrolling patients in our clinical trials and recruiting clinical site investigators and clinical site staff. Interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by government officials or entities, employers and others or interruption of clinical trial patient visits and study procedures (particularly any procedures that may be deemed non-essential) due to a resurgence of the pandemic, may impact the completeness of clinical trial data and clinical study endpoints. As a result, our previously anticipated filing and marketing timelines may be adversely impacted. For example, the enrollment of patients for our Phase 3 study with RHB-204 in first-line pulmonary NTM infections was slow, which slowed the progress of the study.

In addition, we may be unable to meet the timelines and milestones established for the contemplated postmarketing studies we are required to conduct for Aemcolo®, in which case we could be subject to FDA enforcement actions and civil monetary penalties, among others, unless the FDA agrees to an extension of the timelines and milestones.
 
Our clinical trials can also be adversely affected by the reduction or diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trial. Any delays or interruption of our clinical trials could have an adverse effect on our development efforts of our therapeutic candidates, and failure to fulfill any postmarketing commitments could subject us to FDA enforcement actions or result in our breach of certain license agreements and cause us to lose our rights thereunder.
 

Regulatory Reviews: The operations of the FDA or other regulatory agencies may be adversely affected. We may also experience delays in necessary interactions with regulatory authorities around the world, including with respect to any anticipated filings.
 
Additionally, because our corporate headquarters are in Israel while our commercial office is in the U.S., there is additional risk in our ability as a company to control the activities occurring in the U.S., due to the geographic separation within our company.
 
Assessment of the complete extent of the impact of COVID-19 endemic and its ongoing effects on our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. The ongoing effects of the COVID-19 endemic could materially disrupt our business and operations and have an adverse effect on the global markets and global economy generally, including on the availability and cost of employees, resources, materials, manufacturing and delivery efforts, and other aspects of the economy. A resurgence of COVID-19 could also in particular materially affect the sales of our commercial products, making it more difficult for us to meet our financial obligations.
 
Supply chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial condition.

Our third-party manufacturers and suppliers have experienced in the past, supply chain disruption and shipping disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of destination, congestion in port terminal facilities, labor supply and shipping container shortages, inadequate equipment and persons to load, dock and offload container vessels, as a result of the COVID-19 pandemic, among others. In addition, recently there have been shipping disruptions in the Red Sea and surrounding waterways due to attacks on marine vessels by the Houthi movement, which controls part of Yemen. These disruptions may impact our ability to receive APIs and other materials and products from our manufacturers and suppliers, to distribute our products to our customers in a cost-effective and timely manner and to meet customer demand, all of which could have an adverse effect on our financial condition and results of operations. There can be no assurance that further unforeseen events impacting the supply chain will not have a material adverse effect on us in the future. Additionally, the impacts that supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. It is not currently possible to predict how long it will take for these supply chain disruptions to cease or ease. Prolonged supply chain disruption that may impact us or our manufacturers and suppliers could interrupt product manufacturing, increase raw material and product lead times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and reputational damage, all of which could have a material adverse effect on our business, financial condition and results of operations.

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Risks Related to Our Industry
 
The market for our current commercial products, for any product we may commercialize or promote in the future and for our therapeutic candidates is rapidly changing and competitive, and new drug delivery mechanisms, drug delivery technologies, new drugs, generic products, treatments and products which may be developed by others could impair our ability to maintain and grow our business and remain competitive.
 
The pharmaceutical and biotechnology industry is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching, developing and marketing products designed to address the indications for which we are currently developing therapeutic candidates or may develop therapeutic candidates in the future or for which we may commercialize or promote products. There are various other companies that currently market, are in the process of developing or may develop in the future products that address all of the indications or diseases treated by our current commercial products, products that we may commercialize or promote in the future, and our therapeutic candidates.
 
New drug delivery mechanisms, drug delivery technologies, new drugs and new treatments that have been developed or that are in the process of being developed or will be developed by others may render our current commercial products, products we may commercialize or promote in the future and our therapeutic candidates noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared to our current commercial products, products we may commercialize or promote in the future and our therapeutic candidates. In addition, our current commercial products and products we may commercialize or promote in the future may compete with products of third parties for market share, and generic drugs or products that treat the same indications as our current commercial products or products we may commercialize or promote in the future, which can have an adverse effect on our revenues by reducing our market share or requiring us to reduce the price of the products we market.
 
Talicia® primarily competes with several branded and generic therapies already approved and used extensively to treat H. pylori.
 
Aemcolo® primarily competes with several competing drugs marketed in the U.S. intended for the treatment of travelers’ diarrhea, including Xifaxan® (marketed by Salix Pharmaceuticals). Aemcolo® also competes with generic antibiotics such as fluoroquinolones and azithromycin. Aemcolo® also competes with prescription and OTC anti-diarrheal medications such as loperamide and bismuth subsalicylate, as well as probiotics and medical foods which may offer symptomatic relief. We may also be exposed to potentially competitive products, which may be under development to treat or prevent travelers’ diarrhea, including new antibiotics, anti-diarrheal medications, and vaccines.
 
Technological competition from, and commercial capabilities of, pharmaceutical and biotechnology companies, universities, governmental entities, and others is intense and is expected to increase. Many of these entities have significantly greater research and development capabilities, human resources, and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial resources. These entities represent significant competition for us. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing, and other resources.
 
The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations, current commercial products or products we may commercialize or promote in the future, even if commercialized and therapeutic candidates. Many of our targeted diseases and conditions can also be treated by other medications or drug delivery technologies. These treatments may be widely accepted in medical communities and have a longer history of use, among other possible advantages. The established use of these competitive drugs may limit the potential for widespread acceptance of our current commercial products and products we may commercialize or promote in the future and may limit the potential for our commercial products and therapeutic candidates to receive widespread acceptance, if commercialized.
 
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Talicia® or any product for which we may obtain regulatory approval or acquire commercialization rights may not become or continue to be commercially viable products.
 
Other than Talicia®, none of our therapeutic candidates have been cleared or approved for marketing, and none of our therapeutic candidates are currently being marketed or commercialized in any jurisdiction. Even if any of our therapeutic candidates or any product we may commercialize or promote receives regulatory clearance or approval, such as Talicia®, or do not require regulatory clearance or approval, it may not become a commercially viable product. For example, even if we or our development or commercialization partners receive regulatory clearance or approval to market a therapeutic candidate or receive regulatory clearance or approval to commercialize or promote any product, the clearance or approval may be subject to limitations on the indicated uses or subject to labeling or marketing restrictions, which could materially and adversely affect their marketability and profitability. In addition, a new therapeutic candidate may appear promising at an early stage of development or after clinical trials but never reach the market, or it may reach the market but not result in sufficient product sales, if any. A therapeutic candidate or any product that we may commercialize or promote, may not result in commercial success for various reasons, including but not limited to:
 

difficulty in large-scale manufacturing, including yield and quality;

low market acceptance by physicians, healthcare payors, patients and the medical community as a result of lower demonstrated clinical safety or efficacy compared to products, prevalence, and severity of adverse side effects, or other potential disadvantages relative to alternative treatment methods;

insufficient or unfavorable levels of reimbursement from government or third-party payors, such as insurance companies, health maintenance organizations and other health plan administrators;

infringement on proprietary rights of others for which we or our development or commercialization partners have not received licenses;

incompatibility with other therapeutic candidates or marketed products;

other potential advantages of alternative treatment methods and competitive forces that may make it more difficult for us to penetrate a particular market segment, if at all;

ineffective marketing, sales, and distribution activities and support;

lack of significant competitive advantages over existing products on the market;

lack of cost-effectiveness or unfavorable pricing compared to other alternatives available on the market;

inability to generate sufficient revenues to sustain our business operations in accordance with our plan from the sale or marketing of a product in view of the economic arrangements that we have with commercialization or other partners;

changes to labels, indications or other regulatory requirements as they relate to the commercialization of our products;

inability to establish collaborations with third-party development or commercialization partners on acceptable terms, or at all, and our inability or unwillingness for cost or other reasons to commercialize the therapeutic candidates or any product we may commercialize or promote on our own; and

timing of market introduction of competitive products, such as Voquezna.
 
Physicians, various other healthcare providers, patients, payors or the medical community, in general, may be unwilling to accept, utilize or recommend Talicia® and any product we may commercialize or promote. If we are unable, either on our own or through third parties, to manufacture, commercialize or market Talicia®, our proposed formulations, therapeutic candidates or any product we may commercialize or promote when planned, or to develop them commercially, we may not achieve any market acceptance or generate meaningful revenue.
 
Unexpected product safety or efficacy concerns may arise and cause any product we may commercialize or promote to fail to gain or lose market acceptance.
 
Unexpected safety or efficacy concerns can arise with respect to any product we may commercialize or promote, whether or not scientifically justified, potentially resulting in product recalls, withdrawals or declining sales, as well as product liability, consumer fraud or other claims. The market perception and reputation of any product we commercialize or may commercialize or promote in the future, and their safety and efficacy are important to our business and the continued acceptance of any such product. Any negative publicity about any of our current or future commercial products, such as the pricing of any product, discovery of safety issues, adverse events, or even public rumors about such events, could have a material adverse effect on our reputation, business, financial condition or results of operations. In addition, the discovery of one or more significant problems with a product similar to any of our current commercial products or products we may commercialize or promote in the future that implicate (or are perceived to implicate) an entire class of products or the withdrawal or recall of such similar products could have an adverse effect on the current or future commercialization of any product we may commercialize or promote. New data about any of our current commercial products or products that we may commercialize or promote in the future, or products similar to any of our current commercial products or those we may commercialize or promote in the future, could cause us reputational harm and could negatively impact demand for such products due to real or perceived side effects or uncertainty regarding safety or efficacy and, in some cases, could result in product withdrawal. Any of the foregoing could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
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The development of opaganib and RHB 107 have been supported by government-funded programs and thus may be subject to federal regulations such as “march-in” rights and certain reporting requirements, and compliance with such regulations may limit our exclusive rights and our ability to contract with manufacturers.  In addition, the government is under no obligation to continue to support development of our products and can cease such support at any time which could be irreplaceable to the development process of our products.
 
Our intellectual property rights to opaganib, which we in-licensed from Apogee Biotechnology Corporation, have been generated through the use of U.S. federal and state government funding and are therefore subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in opaganib pursuant to the Bayh-Dole Act of 1980, or the Bayh-Dole Act. These U.S. government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right, under certain limited circumstances, to require the licensor to grant exclusive, partially exclusive or non-exclusive licenses to any of these inventions to a third party if it determines that (i) adequate steps have not been taken to commercialize the invention, (ii) government action is necessary to meet public health or safety needs or (iii) government action is necessary to meet requirements for public use under federal regulations (also collectively referred to as “march-in rights”). The U.S. government also has the right to take title to these inventions if the licensor fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits. These rights of the government may affect us even though the U.S. government has not previously contacted us with respect to these intellectual property rights. Any exercise by the government of such rights could harm our competitive position, business, financial condition, results of operations and prospects. Intellectual property generated under a government-funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.
 
In addition, the U.S. government requires that any products embodying any of these inventions or produced through the use of any of these inventions be manufactured substantially in the U.S. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the U.S. or that under the circumstances domestic manufacture is not commercially feasible. This preference for having products covered by such intellectual property be substantially manufactured in the U.S. may limit our ability to contract with non-U.S. product manufacturers or even U.S. product manufacturers whose manufacturing capacity is offshore.
 
The development of opaganib and RHB-107 has relied on support by the National Institutes of Health and the U.S. Department of Defense and other government bodies. These government bodies can withdraw, reduce or end their support of our products at any time, and this would significantly impair our ability to develop them further. In addition, the government is under no obligation to continue to support development of our products and can cease such support at any time which could be irreplaceable to the development process of our products.
 
We could be adversely affected if healthcare reform measures substantially change the market for medical care or healthcare coverage in the U.S.
 
On March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111‑148) (the “ACA”) and on March 30, 2010, he signed the “Health Care and Education Reconciliation Act” (P.L. 111‑152), collectively commonly referred to as the “Healthcare Reform Law.” The Healthcare Reform Law included a number of new rules regarding health insurance, the provision of healthcare, conditions to reimbursement for healthcare services provided to Medicare and Medicaid patients, and other healthcare policy reforms. Through the law-making process, substantial changes have been and continue to be made to the current system for paying for healthcare in the U.S., including changes made to extend medical benefits to certain Americans who lacked insurance coverage and to contain or reduce healthcare costs (such as by reducing or conditioning reimbursement amounts for healthcare services and drugs, and imposing additional taxes, fees, and rebate obligations on pharmaceutical and medical device companies). This legislation was one of the most comprehensive and significant reforms ever experienced by the U.S. in the healthcare industry and has significantly changed the way healthcare is financed by both governmental and private insurers. This legislation has impacted the scope of healthcare insurance and incentives for consumers and insurance companies, among others. Additionally, the Healthcare Reform Law’s provisions were designed to encourage providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant portion of the cost of providing care. This environment has caused changes in the purchasing habits of consumers and providers and resulted in specific attention to the pricing negotiation, product selection and utilization review surrounding pharmaceuticals. This attention may result in our current commercial products, products we may commercialize or promote in the future, and our therapeutic candidates, being chosen less frequently or the pricing being substantially lowered. At this stage, it is difficult to estimate the full extent of the direct or indirect impact of the Healthcare Reform Law on us.

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These structural changes could entail further modifications to the existing system of private payors and government programs (such as Medicare, Medicaid, and the State Children’s Health Insurance Program), creation of government-sponsored healthcare insurance sources, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for prescribed drugs and pharmaceuticals, including our current commercial products, those we and our development or commercialization partners are currently developing or those that we may commercialize or promote in the future. If reimbursement for the products we currently commercialize or promote, any product we may commercialize or promote, or approved therapeutic candidates is substantially reduced or otherwise adversely affected in the future, or rebate obligations associated with them are substantially increased, it could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Extending medical benefits to those who currently lack coverage will likely result in substantial costs to the U.S. federal government, which may force significant additional changes to the healthcare system in the U.S. Much of the funding for expanded healthcare coverage may be sought through cost savings. While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care and increased enforcement activities. Cost of care could be reduced further by decreasing the level of reimbursement for medical services or products (including our current commercial products, our development or commercialization partners or any product we may commercialize or promote, or those therapeutic candidates currently being developed by us), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction in the utilization of, or reimbursement for our current commercial products, any product we may commercialize or promote, or any therapeutic candidate, or for which we receive marketing approval in the future, could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Several states and private entities initially mounted legal challenges to the Healthcare Reform Law, in particular, the ACA, and they continue to litigate various aspects of the legislation. On July 26, 2012, the U.S. Supreme Court generally upheld the provisions of the ACA at issue as constitutional. However, the U.S. Supreme Court held that the legislation improperly required the states to expand their Medicaid programs to cover more individuals. As a result, states have a choice as to whether they will expand the number of individuals covered by their respective state Medicaid programs. Some states have not expanded their Medicaid programs and have chosen to develop other cost-saving and coverage measures to provide care to currently uninsured individuals. Many of these efforts to date have included the institution of Medicaid-managed care programs. The manner in which these cost-saving and coverage measures are implemented could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Further, the healthcare regulatory environment has seen significant changes in recent years and is still in flux. Legislative initiatives to modify, limit, replace, or repeal the ACA and judicial challenges have continued. We cannot predict the impact on our business of future legislative and legal challenges to the ACA or other aspects of the Healthcare Reform Law or other changes to the current laws and regulations. The financial impact of U.S. healthcare reform legislation over the next few years will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes for therapeutics affected by the legislation. From time to time, legislation is drafted, introduced and passed in the U.S. Congress that could significantly change the statutory provisions governing coverage, reimbursement, and marketing of pharmaceutical products. In addition, third-party payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our products.
 
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During his time in office, former President Trump supported the repeal of all or portions of the ACA. President Trump also issued an executive order in which he stated that it is his administration’s policy to seek the prompt repeal of the ACA and in which he directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the ACA to the maximum extent permitted by law. Congress has enacted legislation that repeals certain portions of the ACA, including but not limited to the Tax Cuts and Jobs Act, passed in December 2017, which included a provision that eliminates the penalty under the ACA’s individual mandate, effective January 1, 2019, as well as the Bipartisan Budget Act of 2018, passed in February 2018, which, among other things, repealed the Independent Payment Advisory Board (which was established by the ACA and was intended to reduce the rate of growth in Medicare spending).
 
Additionally, in December 2018, a district court in Texas held that the individual mandate is unconstitutional and that the rest of the ACA is, therefore, invalid. On appeal, the Fifth Circuit Court of Appeals affirmed the holding on the individual mandate but remanded the case back to the lower court to reassess whether and how such holding affects the validity of the rest of the ACA. The Fifth Circuit’s decision on the individual mandate was appealed to the U.S. Supreme Court. On June 17, 2021, the Supreme Court held that the plaintiffs (comprised of the state of Texas, as well as numerous other states and certain individuals) did not have standing to challenge the constitutionality of the ACA’s individual mandate and, accordingly, vacated the Fifth Circuit’s decision and instructed the district court to dismiss the case. As a result, the ACA will remain in-effect in its current form for the foreseeable future; however, we cannot predict what additional challenges may arise in the future, the outcome thereof, or the impact any such actions may have on our business.
 
The Biden administration also introduced various measures in 2021 focusing on healthcare and drug pricing, in particular. For example, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021, and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. On the legislative front, the American Rescue Plan Act of 2021 was signed into law on March 11, 2021, which, in relevant part, eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source drugs and innovator multiple source drugs, beginning January 1, 2024. And, in July 2021, the Biden administration released an executive order entitled, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response, on September 9, 2021, HHS released a “Comprehensive Plan for Addressing High Drug Prices” that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.  On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023), and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025). The IRA also authorizes HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. We cannot yet assess the impact that the IRA will have on the pharmaceutical industry, but it will likely be significant.
 
There is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the U.S. or the effect of any future legislation or regulation. Furthermore, we cannot predict what actions the Biden administration will implement in connection with the Health Reform Law. However, it is possible that such initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the U.S. in the future. For example, any changes that reduce, or impede the ability to obtain, reimbursement for the type of products we currently, or intend to, commercialize in the U.S. or that reduce medical procedure volumes could adversely affect our operations and/or future business plans.
 
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Third-party payors may not adequately reimburse customers for any of our products that we may commercialize or promote, including our current commercial products, and may impose coverage restrictions or limitations such as prior authorizations and step edits that affect their use.
 
Our revenues and profits depend heavily upon the availability of adequate reimbursement for the use of our current commercial products, and any products that we may commercialize or promote, from governmental or other third-party payors, both in the U.S. and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that the use of an approved or cleared therapeutic candidate or product is:
 

a covered benefit under its health plan;

safe, effective and medically necessary;

appropriate for the specific patient;

cost-effective; and

neither experimental nor investigational.
 
Obtaining reimbursement approval for a product that we may commercialize or promote, including our current commercial products, from any government, commercial or other third-party payor is a time-consuming and costly process that could require us or our development or commercialization partners to provide supporting scientific, clinical and cost-effectiveness data for the use of our products that we currently, or may, commercialize or promote to each payor. Even when a payor determines that a product that we currently or may commercialize or promote is eligible for reimbursement under its criteria, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or other foreign regulatory authorities, or may impose restrictions, such as prior authorization requirements, or may simply deny coverage altogether. Reimbursement rates may vary according to the use of the product that we commercialize or may commercialize or promote in the future and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for products or services, and may reflect budgetary constraints or imperfections in Medicare, Medicaid or other data used to calculate these rates. In particular, reimbursement for our products may not be available from Medicare or Medicaid, and reimbursement from other third-party payors may be limited, reduced or revoked. Overall, our ability to get reimbursement coverage for our commercial products has historically been limited. Successful commercialization of our commercial products requires a conducive reimbursement environment. If our products do not receive adequate reimbursement coverage, or if reimbursement coverage is reduced or otherwise adversely affected, then their respective commercial prospects could be severely limited. Although certain payors may currently provide some form of coverage for our commercial products, payors may suspend or discontinue reimbursement at any time, may require or increase co-payments from patients, may impose restrictions or limitations on coverage, or may reduce reimbursement rates for our products. If we fail to establish broad adoption of and reimbursement for our commercial products, or if we are unable to maintain any existing reimbursement from payors, our ability to generate revenue could be harmed and this could have a material adverse effect on our reputation, business, financial condition or results of operations. In addition to our existing commercial products, any new product we may commercialize or promote in the future may require that we expend substantial time and resources in order to obtain and retain reimbursement, and any of these efforts may not be successful.
 
In the U.S., there have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for any product that we currently or may commercialize or promote in the U.S. In addition, there is a growing emphasis on comparative effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our products or reimburse our products at a lower rate. Legislation that reduces reimbursement for our current or future commercial products could adversely impact how much or under what circumstances healthcare providers will prescribe or administer those products. This could materially and adversely impact our reputation, business, financial condition or results of operations by reducing our ability to continue to generate meaningful revenue, raise capital, obtain additional collaborators and market share. At this stage, we are unable to estimate the extent of the direct or indirect impact of any such federal and state proposals.
 
Furthermore, the Centers for Medicare and Medicaid Services frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both the Centers for Medicare and Medicaid Services and other third-party payors may have sufficient market power to demand significant price reductions. Price reductions or other significant coverage policies or payment limitations could materially and adversely affect our reputation, business, financial condition or results of operations.
 
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We are subject to U.S. federal and state healthcare laws and regulations relating to our business, and our failure to comply with such laws could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
We are subject to additional healthcare regulation and enforcement by the U.S. federal government and the states in which we conduct or will conduct our business. Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of our current commercial products or any products we may commercialize or promote in the future. Our arrangements with third-party payors, customers, employees, or others may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our products. The laws that may affect our ability to operate include, but are not limited to, the following:
 

the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under government healthcare programs such as the Medicare and Medicaid programs;

the federal Anti-Inducement Law (also known as the Civil Monetary Penalties Law), which prohibits a person from offering or transferring remuneration to a Medicare or State healthcare program beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of any item or service for which payment may be made, in whole or in part, by Medicare or a State healthcare program;

the Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark Law, which prohibits physicians from referring Medicare or Medicaid patients for certain designated health services where that physician or family member has a financial relationship with the entity providing the designated health service, unless an exception applies;

federal false claims laws that prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other government healthcare programs that are false or fraudulent;

the so-called federal “Sunshine Act”, which requires certain pharmaceutical and medical device companies to monitor and report certain financial relationships with physicians and other healthcare providers to the Centers for Medicare and Medicaid Services for disclosure to the public;

the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and its implementing regulations, which impose obligations on certain covered entities and their business associates with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals, regulatory authorities, and potentially the media of certain breaches of security of individually identifiable health information;

HIPAA’s fraud and abuse provision, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

the FDCA, which among other things, strictly regulates drug product and medical device marketing, prohibits manufacturers from marketing such products for off-label use and regulates the distribution of samples;

federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and

state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.
 
Compliance efforts may involve substantial costs, and if our operations or business arrangements with third parties are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can help mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any violation of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition or results of operations.
 
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The Healthcare Reform Law also imposes reporting requirements on certain medical device and pharmaceutical manufacturers, among others, to make annual public disclosures of certain payments and other transfers of value to physicians and teaching hospitals and ownership or investment interests held by physicians or their immediate family members. Failure to submit required information may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests that are not reported. In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing, medical directorships, and other purposes. Some states impose a legal obligation on companies to adhere to voluntary industry codes of behavior (e.g., the PhRMA Code and the AdvaMed Code of Ethics), which apply to pharmaceutical and medical device companies’ interactions with healthcare providers; some mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians, and some states limit or prohibit such gifts.
 
Most recently, there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their marketed products, which has resulted in the enactment (or proposal) of federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. For example, several states have passed or introduced bills designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
 
The scope and enforcement of these laws are uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and guidance. We cannot predict the impact that new legislation or any changes in existing legislation will have on our reputation, business, financial condition, or results of operations. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, financial condition or results of operations. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming and could negatively and adversely affect our business or results of operations.
 
Our marketing, promotional and business practices, including with respect to pricing, as well as the manner in which sales forces interact with purchasers, prescribers and patients, are subject to extensive regulation, including but not limited to, state and federal anti-kickback laws and any material failure to comply could result in significant sanctions against us.
 
The marketing, promotional, and business practices, including with respect to pricing, of pharmaceutical companies, as well as the manner in which companies’ in-house or third-party sales forces interact with purchasers, prescribers, and patients, are subject to extensive regulation, the enforcement of which may result in the imposition of civil or criminal penalties, injunctions, or limitations on marketing practices for some of our products or pricing restrictions or mandated price reductions for some of our products. Many companies have been the subject of claims related to these practices asserted by state or federal authorities. These claims have resulted in fines and other consequences, such as entering into corporate integrity agreements with the U.S. government. Companies may not promote drugs for “off-label” use, that is, uses that are not described in the product’s labeling and that differ from those approved by the FDA or other applicable regulatory agencies. A company that is found to have improperly promoted drug products for off-label use may be subject to significant liability, including civil and administrative remedies, as well as criminal sanctions. In addition, enforcement action against us or any of our current or future commercialization partners could cause management’s attention to be diverted from our business operations and damage our reputation.
 
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We could be exposed to significant drug product liability claims which could be time-consuming and costly to defend, divert management attention and adversely impact our ability to obtain and maintain insurance coverage.
 
The clinical trials that we conduct and the testing, manufacturing, marketing, and commercial sale and use or misuse of our therapeutic candidates and any products we may commercialize or promote, involve and will involve an inherent risk that significant liability claims may be asserted against us or our development or commercial partners. Product liability claims, or other claims related to our therapeutic candidates and any products we may commercialize or promote, regardless of merit or their outcome, could require us to spend significant time and money in litigation or to pay significant settlement amounts or judgments. A product liability claim could also significantly harm our reputation and the market price of our shares and decrease demand for any of our current commercial products, products that we commercialize or promote or that are commercialized or promoted by our commercial partners, and delay market acceptance of our therapeutic candidates or products we may commercialize or promote. In addition, regardless of merit or eventual outcome, product liability claims may result in:
 

decreased demand for approved products;

impairment of our business reputation;

withdrawal of clinical trial participants;

initiation of investigations by regulators;

litigation costs;

distraction of management’s attention from our primary business;

substantial monetary awards to patients or other claimants;

loss of revenues; and

the inability to receive regulatory approval for and commercialize our therapeutic candidates, upon approval, if any, in the future.
 
We and our research and development or commercialization partners currently have product-liability policies that include coverage for our clinical trials and our commercial operations. However, our insurance may prove inadequate to cover claims or litigation costs, especially in the case of wrongful death claims. Any successful product liability or other claim may prevent us from obtaining adequate liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our current commercial products or products we may commercialize or promote in the future, or the development of our therapeutic candidates.
 
Our clinical trials may indicate unexpected serious adverse events or other adverse events or undesirable side effects that may harm our reputation, business, financial condition or results of operations. Serious adverse events identified during one of our Expanded Access Programs (EAPs) may present additional risks that may adversely affect our development of the therapeutic candidates involved in the applicable EAP.
 
As is the case with pharmaceuticals generally, certain side effects and adverse events may emerge as safety risks associated with the use of our therapeutic candidates. Similarly, serious adverse events have occurred and may occur in the future in connection with our clinical trials. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our therapeutic candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may have a material adverse effect on our reputation, business, financial condition or results of operations.
 
Patients who receive access to investigational new drugs that have not yet received regulatory marketing approval through expanded access programs may be suffering from life-threatening illnesses and poor prognosis and may have exhausted all other available therapies. The risk for serious adverse events in this patient population is high, which could have a negative impact on the prospects of our therapeutic candidates that are provided under the EAP.
 
Serious adverse events or other undesirable side effects in connection with the use of our therapeutic candidates provided under the EAP could cause significant delays or an inability to successfully develop or commercialize such therapeutic candidates, which could materially harm our business. In particular, any such serious adverse events or other undesirable side effects could cause us or regulatory authorities to interrupt, delay or halt non-clinical studies and clinical trials, or could make it more difficult for us to enroll patients in our clinical trials. If serious adverse events or other undesirable side effects, or unexpected characteristics of our investigational new drugs that have not yet received regulatory marketing approval are observed in patients who were granted expanded access to our investigational new drugs under the EAP, further clinical development of such therapeutic candidate may be delayed or we may not be able to continue development of such therapeutic candidates at all, and the occurrence of these events could have a material adverse effect on our business. Undesirable side effects caused by our therapeutic candidates could also result in the delay or denial of regulatory approval by the FDA or other regulatory authorities or in a more restrictive label than we expect and could cause us to incur additional costs.
 
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Global economic conditions may make it more difficult for us to commercialize our current commercial products and any products that we may commercialize or promote in the future and develop our therapeutic candidates.
 
The pharmaceutical industry, like other industries and businesses, continues to face the effects of the challenging economic environment. Patients experiencing the effects of the challenging economic environment, including increases in co-pays, may switch to generic products, delay treatments, skip doses or use other less effective treatments to reduce their costs. Challenging economic conditions in the U.S. include the demands by payors for substantial rebates and formulary restrictions limiting access to brand-name drugs. In addition, in Europe and in a number of emerging markets there are government-mandated reductions in prices for certain pharmaceutical products, as well as government-imposed access restrictions in certain countries. All of the aforesaid may make it more difficult for us to commercialize our current commercial products, any products that we may commercialize or promote, and our therapeutic candidates, upon approval, if any.
 
Our business involves risks related to handling regulated substances, which could severely affect our ability to commercialize our current commercial products and any products that we may commercialize or promote in the future and to conduct research and development of our therapeutic candidates.
 
In connection with our or our development or commercialization partners’ research and development activities, as well as the manufacture of commercial products, materials, and therapeutic candidates and any products that we may commercialize or promote in the future, we and our development or commercialization partners are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and waste. We and our research and development or commercialization partners may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Our research and development, as well as the activities of our commercial and clinical manufacturing and commercialization partners, both now and in the future, may involve the controlled use of hazardous materials, including, but not limited to, certain hazardous chemicals. We cannot completely eliminate the risk of accidental contamination or injury from these materials. In the event of such an occurrence, we could be held liable for any damages that could result and any such liability could exceed our resources.
 
Security breaches, loss of data, and other disruptions could compromise sensitive information and expose us to liability, which would cause our business and reputation to suffer.
 
In the ordinary course of our business, we may collect and store sensitive data, including intellectual property, compliance-related data, research data, our proprietary business information and that of our suppliers and business partners, technical information about our products, clinical trial plans as well as personally identifiable information of patients, clinical trial participants and employees. We also have outsourced elements of our information technology structure, and as a result, we are managing independent vendor relationships with third parties who may or could have access to our confidential information. Similarly, our business partners and other third-party providers possess certain of our sensitive data and confidential information. The secure maintenance of this information is critical to our operations and business strategy. Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, ransomware, cyber-fraud, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
 
We, our partners, vendors, and other third-party providers could be susceptible to attacks on our and their information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups. Any such breach could compromise our and their networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, inappropriate disclosure of confidential or proprietary information or other loss of information, including our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information, disrupt our operations, or our product development programs and damage our reputation, any of which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.
 
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We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store this critical information. Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure or modification of confidential information. The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions.
 
A security breach or privacy violation that leads to disclosure or modification of or prevents access to consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer a loss of reputation, financial loss, and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.
 
Any such breach or interruption could compromise our networks, and the information stored there could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as HIPAA and the General Data Protection Regulation (GDPR) in connection with our required maintenance of the global safety database for Movantik®, and regulatory penalties. Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill facilities or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare Company financial information, provide information about our current and future solutions and other patient and clinician education and outreach efforts through our websites, and manage the administrative aspects of our business and damage our reputation, any of which could adversely affect our reputation, business, financial condition or results of operations. Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.
 
In addition, the interpretation and application of consumer, health-related, privacy and data protection laws in the U.S. and elsewhere are often uncertain, contradictory, and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices. If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our reputation, business, financial condition or results of operations. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.
 
Risks Related to Intellectual Property
 
We may be unable to adequately protect or enforce our rights to intellectual property, causing us to lose valuable rights. Loss of patent rights may lead us to lose market share and anticipated profits.
 
Our success depends, in part, on our ability, and the ability of our commercialization or development partners to obtain patent protection for our therapeutic candidates and any products that we may commercialize or promote, maintain the confidentiality of our trade secrets and know-how, operate without infringing or violating on the proprietary rights of others and prevent others from infringing or violating on our proprietary rights.
 
We try to protect our proprietary position by, among other things, filing U.S., European, and other patent applications related to our therapeutic candidates, inventions and improvements that may be important to the continuing development of our commercial products and therapeutic candidates, and we plan to try to do the same with products we may acquire, commercialize or promote in the future, where this is possible.
 
Because the patent position of pharmaceutical companies involves complex legal and factual questions, we cannot predict the scope, validity or enforceability of patents with certainty. Our issued patents and the issued patents of our commercialization or development partners may not provide us with any competitive advantages, may be held invalid or unenforceable as a result of legal challenges by third parties or could be circumvented. Ownership of the patent rights we in-license from our commercialization or development partners or the patent rights to the products already approved for marketing that we develop, acquire or for which we acquire commercialization rights may be challenged, and as a result, the rights we in-license and the rights to products we acquire may turn out not to be exclusive or we may not actually have rights under the patents despite receiving representations from a commercialization or development partner. Our competitors may also independently develop drug delivery technologies or products similar to ours or design around or otherwise circumvent patents issued to, or licensed by, us. Thus, any patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not result in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages. The degree of future protection to be afforded by our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
 
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In the U.S., Europe, and other jurisdictions, patent applications are typically not published until 18 months after filing. In addition, many companies and universities do not publish their discoveries until after patent filings are made. This makes it difficult to be certain that we were the first to file for protection of the inventions or the first to invent the inventions. As a result, we may not be able to obtain or maintain protection for certain inventions. Therefore, the enforceability and scope of our patents and patent applications in the U.S., Europe, and other jurisdictions are uncertain and unpredictable. Any patents that we own may not provide sufficient protection against competitors and may be of insufficient scope to achieve our business objectives. Additionally, the patent filings of others might act as an impediment to our ability to commercialize our current or future commercial products.
 
Patent rights are territorial; thus, the patent protection we do have will only extend to those countries in which we have issued patents. Even so, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and the European Union. Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents or produce drugs in countries where we have not applied for patent protection or that do not respect our patents. Furthermore, it is not possible to know the scope of claims that will be allowed in published applications, and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable in a court of law.
 
In some cases, litigation may be necessary to enforce our patent rights. If we choose to take an infringing third party to court, the third party may challenge the validity or enforceability of our patent rights or may assert that their activities do not infringe our patents. Litigation is expensive and unpredictable, and we may not have the proper resources to pursue such litigation or to protect our patent rights. Moreover, there is the risk that the court will find that our patents are not valid or enforceable, or that the third party does not infringe our rights in these patents. Adverse results in any such litigation could materially impair our patent rights and our ability to prevent generic and other competition for our products. Such results might also materially affect our economics and our ability to require third parties to enter a license with us or to pay us a reasonable royalty for using our technology.
 
After the completion of the development and registration of our patents, third parties may still manufacture or market products in infringement of our patent-protected rights. Such manufacture or market of products in infringement of our patent-protected rights is likely to cause us damage and lead to a reduction in the prices of our current commercial products, any product we may commercialize or promote, or any of our therapeutic candidates, thereby reducing our potential profits.
 
In addition, due to the extensive time needed to develop, test and obtain regulatory approval for our therapeutic candidates or any product we may commercialize or promote, any patents that protect our therapeutic candidate or any product we may commercialize or promote may expire early during commercialization. This may reduce or eliminate any market advantages that such patents may give us. Following patent expiration, we may face increased competition through the entry of generic products into the market and a subsequent decline in market share and profits.
 
In addition, in some cases, we may rely on our licensors to conduct patent and trademark prosecution, patent and trademark maintenance or patent and trademark defense on our behalf. Therefore, our ability to ensure that these patents and trademarks are properly prosecuted, maintained, or defended may be limited, which may adversely affect our rights in the commercialization of our commercial products, development of our therapeutic candidates, and potential approval for marketing of our therapeutic products. Any failure by our licensors or commercialization or development partners to properly conduct patent and trademark prosecution, patent and trademark maintenance, patent and trademark enforcement, or patent defense could materially harm our ability to obtain suitable patent protection covering our commercial products or therapeutic candidates or ensure freedom to commercialize the products in view of third-party patent rights, thereby materially reducing our potential profits.
 
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If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
 
In addition to filing patents, we generally try to protect our trade secrets, know-how, and technology by entering into confidentiality or non-disclosure agreements with parties that have access to them, such as our development or commercialization partners, employees, contractors, and consultants. We also enter into agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research collaborators, contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce or may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to, or independent development by, a competitor of any trade secret, know-how or other technology not protected by a patent could materially adversely affect any competitive advantage we may have over any such competitor.
 
To the extent that any of our employees, advisors, research collaborators, contractors or consultants independently develop, or use independently developed, intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to this type of information. If a dispute arises with respect to any proprietary right, enforcement of our rights can be costly and unpredictable, and a court may determine that the right belongs to a third party.
 
Legal proceedings or third-party claims of intellectual property infringement and other challenges may require us to spend substantial time and money and could prevent us from developing or commercializing any of our commercial products and our therapeutic candidates.
 
The development, manufacture, use, offer for sale, sale or importation of any of our commercial products or any of our therapeutic candidates may infringe on the claims of third-party patents or other intellectual property rights. Patentability, invalidity, freedom-to-operate or other opinions may be required to determine the scope and validity of third-party proprietary rights. The nature of claims contained in unpublished patent filings around the world is unknown to us and it is not possible to know which countries patent holders may choose for an extension of their filings under the Patent Cooperation Treaty or other mechanisms. We may also be subject to claims based on the actions of employees and consultants with respect to the usage or disclosure of intellectual property learned at other employers. The cost to us of any intellectual property litigation or other infringement proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation or defense of intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Intellectual property litigation and other proceedings may also absorb significant management time. Consequently, we are unable to guarantee that we will be able to manufacture, use, offer for sale, sell or import any of our commercial products or of our therapeutic candidates in the event of an infringement action.
 
In the event of patent infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could potentially limit our competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic candidate and any products that we may commercialize or promote or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement or other claims, we are unable to enter into licenses on acceptable terms. This inability to enter into licenses or the ability to exclude others using proprietary rights could have a material adverse effect on our reputation, business, financial condition or results of operations.
 
On February 22, 2021, Aether Therapeutics Inc. (“Aether”) filed a complaint against RedHill U.S. in the United States District Court for the District of Delaware, alleging that the Company’s marketing of the Movantik® product infringes certain patents held by Aether. See “Business - Legal Proceedings.” The Aether litigation has been resolved in all respects and on April 6, 2023, a Stipulation and Order of Dismissal with Prejudice was entered in the matter.
 
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The license agreements we maintain, including our license agreement with Cosmo, may be amended or terminated. If we or the other parties to our license agreements amend or terminate the license agreements, the development, testing, manufacture, production and sale of our products or product candidates may be delayed or terminated, and our business may be adversely affected.
 
We are parties to commercialization or license agreements, which may be terminated, subject to conditions set forth in such agreements. For example, on October 17, 2019, we entered into a strategic collaboration with Cosmo, which included a license agreement (the “Cosmo License Agreement”) with a wholly-owned subsidiary of Cosmo pursuant to which we were granted exclusive rights to commercialize Aemcolo® in the U.S. The Cosmo License Agreement provides that, beginning in October 2022, both parties have the right to terminate the Cosmo License Agreement unilaterally, subject to certain conditions. In December 2021, the parties signed an amendment to the Cosmo License Agreement providing that either party may terminate the Cosmo License Agreement upon advance notice at any time. Subject to and following the termination of the Cosmo License Agreement, we would no longer be able to commercialize Aemcolo® and may never recover the costs we incurred during the term of the Cosmo License Agreement.
 
We may be subject to other patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.
 
In addition to infringement claims against us, we may become a party to other patent litigation or proceedings before regulatory agencies, including post-grant review, inter parties review, interference or re-examination proceedings filed with the U.S. Patent and Trademark Office or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to our therapeutic candidates or any products that we may commercialize or promote, as well as other disputes regarding intellectual property rights with development or commercialization partners, or others with whom we have contractual or other business relationships. Post-issuance proceedings challenging patent claims validity are not uncommon, and we or our development or commercialization partners will be required to defend these procedures as a matter of course. Such procedures may be costly, and there is a risk that we may not prevail, which could harm our business significantly.
 
Risks Related to the ADSs
 
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of the ADSs.
 
The ADSs are currently listed for trading on Nasdaq. While we are currently in compliance, we have been in the past unable to comply with certain of the listing standards that we are required to meet to maintain the listing of the ADSs on Nasdaq which may result in our securities being delisted from Nasdaq. For instance, on May 9, 2023, we received a written notification from the Nasdaq, indicating that we are not in compliance with the minimum MVPHS set forth in the Nasdaq Listing Rules for continued listing on Nasdaq. Additionally, on September 19, 2023, we received a letter from Nasdaq indicating that for the thirty consecutive business days from August 7, 2023, to September 18, 2023, the bid price for the ADSs had closed below the minimum $1.00 per ADS requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5450(a)(1). Both matters have since been closed.

Additionally, in the recent past, we did not meet the minimum closing bid price requirement and only regained compliance with that requirement in April 2023, after completing a ratio change of the ADSs to our non-traded Ordinary Shares from the previous ratio of one ADS representing ten Ordinary Shares to a new ratio of one ADS representing 400 Ordinary Shares. No assurance can be given that the price of the ADSs will not again be in violation of Nasdaq’s minimum bid price rule in the future. Our failure to meet these requirements may result in our securities being delisted from Nasdaq.

A delisting could substantially decrease trading in the ADSs, adversely affect the market liquidity of the ADSs as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws, adversely affect our ability to obtain financing on acceptable terms, if at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. Additionally, the market price of the ADSs may decline further and shareholders may lose some or all of their investment.

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U.S. holders of ADSs may suffer adverse tax consequences if we were characterized as a passive foreign investment company.
 
Based on the current composition of our gross income and assets and on reasonable assumptions and projections no assurance can be given that we will not be treated as a passive foreign investment company (a “PFIC”), for U.S. federal income tax purposes for 2024. If we were characterized as a PFIC, U.S. holders of the ADSs  may suffer adverse tax consequences such as (i) having gains realized on the sale of the ADSs treated as ordinary income rather than capital gain, not qualifying for the preferential rate otherwise applicable to dividends received in respect of the ADSs  by individuals who are U.S. holders, and (ii) having interest charges apply to certain distributions by us and upon certain sales of the ADSs.
 
There has been a limited market for the ADSs. We cannot ensure investors that an active market will continue or be sustained for the ADSs on the Nasdaq and this may limit the ability of our investors to sell the ADSs.
 
In the past, there was limited trading in the ADSs, and there is no assurance that an active trading market of the ADSs will continue or will be sustained. Limited or minimal trading in the ADSs has in the past, and may in the future, lead to dramatic fluctuations in market price and investors may not be able to liquidate their investment at all or at a price that reflects the value of the business.
 
While the ADSs began trading on the Nasdaq Capital Market in December 2012, on the Nasdaq Global Market in July 2018, and on Nasdaq again in December 2023, we cannot assure you that we will maintain compliance with all of the requirements for the ADSs to remain listed. Additionally, there can be no assurance that trading of the ADSs will be sustained or desirable.
 
As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable SEC and Nasdaq Stock Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.
 
As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the Nasdaq Listing Rules for domestic issuers. For instance, we follow the home country practice in Israel with regard to, among other things, director nomination procedures and quorum at shareholders’ meetings. In addition, we follow our home country law, instead of the Nasdaq Listing Rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity-based compensation plans, an issuance that will result in a change in control, certain transactions other than a public offering involving issuances of a 20% or more interest in us and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. domestic issuer listed on the Nasdaq Stock Market may provide less protection than is accorded to investors under the Nasdaq Listing Rules applicable to domestic issuers.
 
In addition, as a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.
 
We currently do not anticipate paying cash dividends, and accordingly, investors must rely on the appreciation in the ADSs for any return on their investment.
 
We currently anticipate that we will retain future earnings, if any, for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. In addition, the terms of our term loan facility prohibit us from paying dividends. Therefore, the success of an investment in the ADSs will depend upon any future appreciation in their value. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which our investors have purchased their securities.
 
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Investors in the ADSs may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, par value NIS 0.01 per share (“Ordinary Shares”), and, in some limited circumstances, investors in the ADSs may not receive dividends or other distributions on our Ordinary Shares and may not receive any value for them, if it is illegal or impractical to make them available to investors in the ADSs.
 
The depositary for the ADSs has agreed to pay to investors in the ADSs the cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. Investors in the ADSs will receive these distributions in proportion to the number of Ordinary Shares such ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended, but that is not properly registered or distributed under an applicable exemption from registration. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, Ordinary Shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares, rights or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions its fees and may withhold amounts on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This means that investors in the ADSs may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, investors in the ADSs may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to investors in the ADSs. These restrictions may cause a material decline in the value of the ADSs.
 
Holders of ADSs must act through the depositary to exercise their rights.
 
Holders of the ADSs do not have the same rights as our holders of Ordinary Shares and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholders’ meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders’ meeting. When a shareholders’ meeting is convened, holders of the ADSs may not receive sufficient advance notice of a shareholders’ meeting to permit them to cancel the ADSs and withdraw their Ordinary Shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of the ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of the ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents are not responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of the ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as an ADS holder, they are not able to call a shareholders’ meeting.
 
The depositary for the ADSs gives us a discretionary proxy to vote our Ordinary Shares underlying ADSs if a holder of the ADSs does not give voting instructions, except in limited circumstances.
 
Under the deposit agreement for the ADSs, the depositary gives us a discretionary proxy to vote our Ordinary Shares underlying ADSs at shareholders’ meetings if a holder of the ADSs does not give voting instructions, unless:
 

we have instructed the depositary that we do not wish a discretionary proxy to be given;

we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; or

we have informed the depositary that a matter to be voted on at the meeting would have a material adverse impact on shareholders.
 
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The effect of this discretionary proxy is that a holder of the ADSs cannot prevent our Ordinary Shares underlying such ADSs from being voted by us at our discretion, absent the situations described above. Holders of our Ordinary Shares are not subject to this discretionary proxy.
 
Risks Related to our Operations in Israel
 
We conduct some of our operations in Israel. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect our operations.

Because we are incorporated under the laws of the State of Israel and some of our operations are conducted in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel. In addition, Israel faces many threats from more distant neighbors, in particular, Iran. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations or results of operations and could make it more difficult for us to raise capital.

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, and an expansion of the attacks on marine vessels in the Red Sea and surrounding waterways by the Houthi movement, which controls part of Yemen, may escalate in the future into a greater regional conflict.

Although we currently do not expect the ongoing conflict to affect our customers, manufacturing, research and development, supply chain, commercialization activities and current clinical studies, which are all located in and/or take place outside of Israel, there can be no assurances that further unforeseen events will not have a material adverse effect on us or our operations in the future.

The Israel Defense Force (the “IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Following the October 7, 2023 attacks, the IDF called up more than 350,000 of its reserve forces to serve. One member of management is currently subject to military service in the IDF and has been called to serve. It is possible that there will be further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, for example, may have unintended negative effects and adversely impact our results of operations, liquidity or cash flows.

Additionally, five members of our management team and 10 of our non-management employees reside in Israel. Four members of our management team and 10 of our non-management employees are currently located in Israel. Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing conflict may temporarily disrupt our management and employees’ ability to effectively perform their daily tasks.

It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources and availability of supply and hamper our ability to raise additional funds or sell our securities, among others.

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Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. The Israeli government is currently committed to cover the reinstatement value of direct damages that are caused by terrorist attacks or acts of war. However, there is no assurance that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business.
 
Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Such business restrictions and boycotts, particularly if they become more widespread, may materially and adversely impact our business.
 
Furthermore, prior to the attacks by Hamas, the Israeli government was pursuing extensive changes to Israel’s judicial system. This led to protests at various levels domestically, and investment banks and other investors have voiced concerns that the proposed changes may negatively impact the business environment in Israel. This may, in turn, could slow the flow of international investment and negatively affect our business, financial condition and prospects.
 
Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuations and inflation.
 
Our reporting and functional currency is the U.S. dollar. Most of our revenues and royalty payments from our agreements with our development or commercialization partners are in U.S. dollars, and we expect our revenues from future licensing and co-promotion agreements to be denominated mainly in U.S. dollars or in Euros. We pay a substantial portion of our expenses in U.S. dollars; however, a portion of our expenses, including salaries of our employees in Israel and payment to part of our service providers in Israel and other territories, are paid in NIS and in other currencies. In addition, a portion of our financial assets is held in NIS and in other currencies. As a result, we are exposed to currency fluctuation risks. For example, if the NIS strengthens against the U.S. dollar, our reported expenses in U.S. dollars may be higher. In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our financial assets held in NIS will decline.
 
Provisions of the RedHill Biopharma Ltd. Award Plan, Israeli law, our articles of association and our change in control retention plan may delay, prevent or otherwise impede a merger with, or an acquisition of, our Company, or an acquisition of a significant portion of our shares, which could prevent a change in control, even when the terms of such a transaction are favorable to us and our shareholders.
 
Our Amended and Restated Award Plan (2010) (the “Award Plan”) provides that all options granted by us will be fully accelerated upon a “hostile takeover” of us. A “hostile takeover” is defined in our Award Plan as an event in which any person, entity or group that was not an “interested party”, as defined in the Israeli Securities Law – 1968, on the date of the initial public offering of our Ordinary Shares on the TASE, will become a “controlling shareholder” as defined in the Israel Securities Law, 1968, or a “holder,” as defined in the Israeli Securities Law – 1968, of 25% or more of our voting rights or any merger or consolidation involving us, in each case without a resolution by our board of directors supporting the transaction. In addition, if a “Significant Event” occurs and following which the employment of a grantee with us or a related company is terminated by us or a related company other than for “Cause”, and unless the applicable agreement provides otherwise, all the outstanding options held by or for the benefit of any such grantee will be accelerated and immediately vested and exercisable. A “Significant Event” is defined in our Award Plan as a consolidation or merger with or into another corporation approved by our board of directors in which we are the continuing or surviving corporation or in which the continuing or surviving corporation assumes the option or substitutes it with an appropriate option in the surviving corporation.
 
The Israeli Companies law, 1999, or the Israeli Companies Law, regulates mergers, requires tender offers for acquisitions of shares or voting rights above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, the Israeli Companies Law provides that certain purchases of securities of a public company are subject to tender offer rules. As a general rule, the Israeli Companies Law prohibits any acquisition of shares or voting power in a public company that would result in the purchaser holding 25% or more, or more than 45% of the voting power in the company, if there is no other person holding 25% or more, or more than 45% of the voting power in a company, respectively, without conducting a special tender offer. The Israeli Companies Law further provides that a purchase of shares or voting power of a public company or a class of shares of a public company which will result in the purchaser’s holding 90% or more of the company’s shares, class of shares or voting rights, is prohibited unless the purchaser conducts a full tender offer for all of the company’s shares or class of shares. The purchaser will be allowed to purchase all of the company’s shares or class of shares (including those shares held by shareholders who did not respond to the offer), if either (i) the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, or (ii) the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class. The shareholders, including those who indicated their acceptance of the tender offer (except if otherwise detailed in the tender offer document), may, at any time within six months following the completion of the tender offer, petition the court to alter the consideration for the acquisition. At the request of an offeree of a full tender offer which was accepted, the court may determine that the consideration for the shares purchased under the tender offer was lower than their fair value and compel the offeror to pay to the offerees the fair value of the shares. Such an application to the court may be filed as a class action.
 
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In addition, the Israeli Companies Law provides for certain limitations on a shareholder that holds more than 90% of the company’s shares, or class of shares.
 
Pursuant to our articles of association, the size of our board of directors may be no less than five persons and no more than eleven, including any external directors whose appointment is required under the law. The directors who are not external directors are divided into three classes, as nearly equal in number as possible. At each annual general meeting, the term of one class of directors expires, and the directors of such class are re-nominated to serve an additional three-year term that expires at the annual general meeting held in the third year following such election (other than any director nominated for election by Cosmo pursuant to the Company’s subscription agreement with Cosmo, whose term of office may expire earlier depending on the beneficial ownership by the Cosmo investor of the Cosmo shares). This process continues indefinitely. Such provisions of our articles of association make it more difficult for a third party to effect a change in control or takeover attempt that our management and board of directors oppose.
 
In addition, we have adopted a change in control employee retention plan and entered into employment agreements providing for compensation to Company officers and employees in the event of a change in control (as defined by the plan and employment agreements), subject to the satisfaction of various conditions. See “Management – Compensation – Change in Control Retention Plan and Agreements; Severance Arrangements.”
 
Furthermore, Israeli tax considerations may, in certain circumstances, make potential transactions unappealing to us or to some of our shareholders. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition of the shares has occurred.
 
These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, or an acquisition of a significant portion of our shares, even if such an acquisition or merger would be beneficial to us or to our shareholders.
 
It may be difficult to enforce a U.S. judgment against us and our directors and officers in Israel or the U.S. or to serve process on our directors and officers.
 
We are incorporated in Israel. Most of our directors and executive officers reside outside of the U.S., and most of the assets of our directors and executive officers may be located outside of the U.S. Therefore, a judgment obtained against us or most of our executive officers and our directors in the U.S., including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the U.S. and may not be enforced by a U.S. or Israeli court. It may also be difficult to effect service of process on these persons in the U.S. or to assert U.S. securities law claims in original actions instituted in Israel.
 
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The obligations and responsibilities of our shareholders are governed by Israeli law, which may differ in some respects from the obligations and responsibilities of shareholders of U.S. companies. Israeli law may impose obligations and responsibilities on a shareholder of an Israeli company that are not imposed upon shareholders of corporations in the U.S.
 
We are incorporated under Israeli law. The obligations and responsibilities of the shareholders are governed by our articles of association and Israeli law. These obligations and responsibilities differ in some respects from the obligations and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and responsibilities on our shareholders that are not typically imposed on shareholders of U.S. corporations.
 
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful shareholder claims against us and may reduce the amount of money available to us.
 
The Israeli Companies Law and our articles of association permit us to indemnify our directors and officers for acts performed by them in their capacity as directors and officers. The Israeli Companies Law provides that a company may not exempt or indemnify a director or an officer nor enter into an insurance contract, which would provide coverage for any monetary liability incurred as a result of: (a) a breach by the director or officer of his duty of loyalty, except for insurance and indemnification where the director or officer acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; (b) a breach by the director or officer of his duty of care if the breach was done intentionally or recklessly, except if the breach was solely as a result of negligence; (c) any act or omission done with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary sanctions, or forfeit imposed on the officer or director. Our articles of association provide that we may exempt or indemnify a director or an officer to the maximum extent permissible under law.
 
We have issued letters of indemnification to our directors and officers, pursuant to which we have agreed to indemnify them in advance for any liability or expense imposed on or incurred by them in connection with acts they perform in their capacity as a director or officer, subject to applicable law. The amount of the advance indemnity is limited to the higher of 25% of our then shareholders’ equity, per our most recent annual financial statements, or $10 million.
 
Our indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their duties as directors by shifting the burden of such losses and expenses to us. Although we have obtained directors’ and officers’ liability insurance, certain liabilities or expenses covered by our indemnification obligations may not be covered by such insurance or the coverage limitation amounts may be exceeded. As a result, we may need to use a significant amount of our funds to satisfy our indemnification obligations, which could severely harm our business or financial condition and limit the funds available to those who may choose to bring a claim against us. These provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their duties and may similarly discourage the filing of derivative litigation by our shareholders against the directors and officers even though such actions, if successful, might otherwise benefit our security holders.
 
Our Amended and Restated Articles of Association designate courts located either within the State of Israel, or the Federal District Courts of the United States, as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to bring a favorable or convenient judicial forum for disputes with us.
 
Our Amended and Restated Articles of Association provide that, unless we consent in writing to the selection of an alternative forum, the Tel Aviv District Court (Economic Division in the State of Israel (or, if the Tel Aviv District Court does not have jurisdiction, and no other Israeli court has jurisdiction, the federal district court for the District of New York) shall be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, and (3) any action asserting a claim arising pursuant to any provision of the Companies Law or the Israeli Securities Law 5728-1968, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. In addition, the federal district courts of the United States for the District of New York shall be the exclusive forum for any complaint asserting a cause of action arising under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to these provisions.
 
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This forum selection provision may limit shareholders’ ability to bring a claim in a judicial forum for disputes that it finds favorable or convenient for disputes with us or our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, a court, including an Israeli court, could find these provisions of our Articles of Association to be inapplicable or unenforceable in respect of one or more of the specified types of actions or proceedings, which may require us to incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.
 
General Risks
 
We must comply with the U.S. Foreign Corrupt Practices Act.
 
The U.S. Foreign Corrupt Practices Act (the “FCPA”) applies to companies, such as us, with a class of securities registered under the Exchange Act. The FCPA to which various of our operations may be subject generally prohibits companies and their intermediaries from engaging in bribery or making other improper payments to officials for the purpose of obtaining or retaining business. In various jurisdictions, our operations require that we and third parties acting on our behalf routinely interact with government officials, including medical personnel who may be considered government officials for purposes of these laws because they are employees of state-owned or controlled facilities. Our policies mandate compliance with these anti-bribery laws; however, we operate in many parts of the world that have experienced governmental or private corruption to some degree. As a result, the existence and implementation of a robust anti-corruption program cannot eliminate all risks that unauthorized reckless or criminal acts have been or will be committed by our employees or agents. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties. Violations of the FCPA, or allegations of such violations, could disrupt our business and result in a material adverse effect on our reputation, business, financial condition or results of operations.
 
Future issuances or sales of ADSs could reduce the market price of the ADSs and result in dilution to our shareholders.
 
As of February 6, 2024, we had outstanding options to purchase up to an aggregate of 39,070,400 Ordinary Shares (equivalent to 97,676 of the ADSs) under our Award Plan and 177,703 outstanding Restricted Share Units (“RSUs”), each with respect to one of the ADSs, which represents 400 of our Ordinary Shares. In addition, as of February 6, 2024, there were 1,400,658,798 Ordinary Shares (equivalent to 3,501,647 ADSs) reserved for issuance under our Award Plan (including Ordinary Shares subject to outstanding options and RSUs under such plan). In addition, as of February 6, 2024, we have sold an aggregate of 34,453 ADSs under our current “at-the-market” equity offering program initiated in July 2021, at a weighted average price per ADS of $74.84, generating  aggregate net proceeds of approximately $2.5 million.
 
As of February 6, 2024, we also had outstanding warrants to purchase an aggregate of 11,872,091 ADSs. All warrants are exercisable at any time before January 26, 2029, subject to certain limitations and exceptions. The weighted average exercise price of the warrants is $1.26 per ADS, which is above the current market price of the ADSs, which was $0.53 per share based on the closing price of the ADS on Nasdaq on February 8, 2024.  The likelihood that the holders of our warrants will exercise their warrants, and the amount of any cash proceeds that we would receive upon such exercise, is dependent upon the market price of the ADSs. However, there is no guarantee that our outstanding warrants will be in the money prior to their respective expirations, and as such, they may expire worthless.
 
Future substantial issuance or sale of the ADSs or of securities exercisable, convertible or exchangeable into ADSs, or the perception that such sales may occur in the future, including sales of ADSs issuable upon vesting of RSUs and the exercise of options, warrants or other equity-based securities, may cause the market price of the ADSs to decline. To the extent that our outstanding options or warrants are exercised, additional shares of the ADSs will be issued, which will result in dilution to the holders of the ADSs and increase the number of shares of the ADSs eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such outstanding options and warrants may be exercised may cause the market price of the ADSs to decline.
 
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The market price of the ADSs is subject to fluctuation, which could result in substantial losses by our investors. Volatility in the financial market could have a material adverse impact on the market price of the ADSs. This may affect the ability of our investors to sell their ADSs, and the value of an investment in the ADSs may decline.
 
The stock market in general and the market price of the ADSs on the Nasdaq, in particular, are subject to fluctuation, and changes in the price of our securities may be unrelated to our operating performance. The market price of the ADSs on the Nasdaq has fluctuated in the past, and we expect they will continue to do so. The market price of the ADSs is and will be subject to a number of factors, including but not limited to:
 

our ability to execute our business plan, including commercialization of our current and future commercial products;

our ability to satisfy our contractual obligations, including our financial obligations associated with our sale of Movantik®;

our continued listing on the Nasdaq Capital Market or another securities exchange;

announcements of technological innovations or new therapeutic candidates or new products approved for marketing by us or others;

announcements by us of significant acquisitions, strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;

expiration or terminations of licenses, research contracts or other commercialization or development agreements;

public concern as to the safety of drugs we, our commercialization or development partners or others market or develop;

the volatility of market prices for shares of biopharmaceutical companies generally;

success or failure of research and development projects;

departure of or major events adversely affecting key personnel;

developments concerning intellectual property rights or regulatory approvals;

variations in our and our competitors’ results of operations;

changes in earnings estimates or recommendations by securities analysts, if the ADSs are covered by analysts;

changes in government regulations or patent proceedings and decisions;

developments by our development or commercialization partners; and

general market conditions, geopolitical conditions and other factors, including factors unrelated to our operating performance.
 
These factors and any corresponding price fluctuations may materially and adversely affect the market price of the ADSs and result in substantial losses by our investors.
 
Additionally, market prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities has from time to time, experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any one company. The COVID-19 pandemic resulted in significant financial market volatility and uncertainty. A resurgence of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of the ADSs. In the past, following periods of market volatility, shareholders have often instituted securities class action litigation and derivative actions. If we were involved in securities or other litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful.
 
We incur significant costs as a result of the listing of the ADSs on the Nasdaq, and we may need to devote substantial time and resources to new and current compliance initiatives and reporting requirements.
 
As a public company in the U.S., we incur significant accounting, legal and other expenses as a result of the listing of our securities on the Nasdaq. These include costs associated with the reporting requirements of the SEC and the requirements of the Nasdaq Listing Rules, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These rules and regulations have increased our legal and financial compliance costs, introduced new costs such as investor relations, travel costs, stock exchange listing fees, and shareholder reporting, and made some activities more time-consuming and costly. Any future changes in the laws and regulations affecting public companies in the U.S. and Israel, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the Nasdaq Listing Rules, as well as applicable Israeli reporting requirements, may result in an increase to our costs as we respond to such changes. These laws, rules, and regulations could make it more difficult and costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers and may require us to pay more for such positions.
 
54


USE OF PROCEEDS

We will not receive any proceeds from the sale by the selling shareholders of the Offered ADSs issued or issuable upon exercise of the Warrants. All net proceeds from the sale of the Offered ADSs covered by this prospectus will go to the selling shareholders.

We may receive proceeds from the exercise of the Warrants to the extent that these Warrants are exercised for cash. If all of the Warrants to purchase 10,600,000 ADSs are exercised for cash in full, the proceeds would be approximately $10,600,000.
 
We intend to use the proceeds from the exercise of the Warrants for cash, if any, for working capital, research and development and general corporate purposes.

55


CAPITALIZATION AND INDEBTEDNESS

The following table sets forth our total capitalization as of June 30, 2023:

•          on an actual basis; and

          on a pro forma basis, after giving effect to (i) the sale of 1,084,923 ADSs and pre-funded warrants (the “July 2023 Pre-funded Warrants”) to purchase up to 217,000 ADSs in the registered direct offering consummated in July 2023 (the “July 2023 Offering”), giving effect to the subsequent exercise in full of the July 2023 Pre-funded Warrants for aggregate cash consideration of $217 and the receipt of the net proceeds of approximately $1.4 million from the July 2023 Offering, after deducting placement agent fees and expenses payable by us, (ii) the Warrant Amendment Agreements, dated July 21, 2023, between us and the investors signatory thereto, entered into in connection with the July 2023 Offering, reducing the exercise price of the warrants issued on May 11, 2022 (as amended, the “May 2022 Warrants”), warrants issued on December 6, 2022 (as amended, the “December 2022 Warrants”), and warrants issued on April 3, 2023 (as amended, the “Class B Warrants”), to $1.80 per ADS, (iii) the exercise of the Class A warrants issued in April 2023 to purchase an aggregate of 1,500,000 ADSs at a reduced exercise price of $1.35 per ADS in July 2023 and issuance of the warrants issued on July 25, 2023 (the “July 2023 Warrant Exercise Transaction”), after deducting placement agent fees and expenses payable by us, , (iv) the issuance of warrants to purchase up to 78,115 ADSs issued to the Placement Agent as part of the compensation to the Placement Agent in connection with the July 2023 Offering (the “July 2023 Placement Agent Warrants”), (v) the issuance of warrants to purchase up to 90,000 ADSs issued to the Placement Agent  as part of the compensation to the Placement Agent  in connection with the July 2023 Warrant Exercise Transaction (the “July 2023 Placement Agent Exercise Warrants”), (vi) the exercise of certain of the May 2022 Warrants, the December 2022 Warrants and the Class B Warrants in September 2023 in connection with a warrant reprice and reload letter, dated as of September 28, 2023, and the receipt of net proceeds of approximately $1.8 million (the “September 2023 Warrant Exercise Transaction”) from the exercise of the May 2022 Warrants, the December 2022 Warrants and the Class B Warrants at a reduced exercise price of $0.47 per ADS for cash, after deducting placement agent fees and expenses payable by us, and the issuance of new unregistered warrants to purchase up to an aggregate of 8,603,846 ADSs to the exercising holders in the September 2023 Warrant Exercise Transaction (the “September 2023 Warrants”), and the issuance of warrants to purchase up to an aggregate of 258,115 ADSs issued to the Placement Agent  as part of the compensation in connection with the September 2023 Warrant Exercise Transaction; (vii) the exercise in full of  the September 2023 Warrants in November 2023 and the receipt of aggregate net proceeds of approximately $4.0 million; (viii) the sale of 10,000,000 ADSs and the Warrants to purchase up to 10,000,000 ADSs in connection with the January 2024 Offering, and the receipt of the net proceeds of approximately $7.1 million from the January 2024 Offering, after deducting placement agent fees and expenses payable by us and (ix) the issuance of warrants to purchase up to 600,000 ADSs issued to the Placement Agent’s designees as partial compensation to the Placement Agent in connection with the January 2024 Offering (the “January 2024 Placement Agent Warrants”) (collectively, the “Pro Forma Adjustments”).

The information set forth in the following table should be read in conjunction with and is qualified in its entirety by reference to the audited and unaudited financial statements and notes thereto included in this prospectus as well as the description of the use of proceeds set forth in the section entitled “Use of Proceeds” in this prospectus.

(In thousands, except share data)
 
Actual
    Pro Forma
 
Total debt(1)
  $ 31,566     $ 40,580  
Ordinary shares, par value NIS 0.01 per share
    4,620
      32,226
 
Additional paid-in capital
    380,860
      377,818
 
Accumulated deficit
    382,009
      399,352
 
Total shareholders' equity
  $ 3,471     $ 10,692  

               
Total capitalization and indebtedness
  $ 35,037     $ 51,272  

(1)
Includes $28.2 million reported as current liabilities, which mainly consist of allowance for deductions from revenue and accrued expenses and account payable, and $3.4 million reported as non-current liabilities, which mainly consist of lease liabilities and derivative financial instruments. The warrants granted in the registered direct offering and concurrent private placement of warrants consummated in May 2022, the underwritten offering consummated in December 2022, the registered direct offering consummated in March 2023, the July 2023 Offering, the July 2023 Warrant Exercise Transaction, the September 2023 Warrant Exercise Transaction and in a concurrent private placement and the Warrants were classified as a financial liability due to a net settlement provision. Therefore, some of the proceeds of the issuances were classified as derivative financial instruments and increased the total debt accordingly.

The above discussion and table are based on 1,576,783,694 Ordinary Shares outstanding as of June 30, 2023. As of June 30, 2023, prior to giving effect to the Pro Forma Adjustments and this offering, we had (i) 44,061,600 Ordinary Shares issuable upon the exercise of outstanding options to purchase Ordinary Shares at a weighted average exercise price of $0.63 per share (equivalent to 110,154 ADSs at a weighted average exercise price of $252.45 per ADS); (ii) 2,059,112,250 Ordinary Shares issuable upon the exercise of outstanding warrants to purchase Ordinary Shares at a weighted average exercise price of $0.01 per share (equivalent to 5,147,781 ADSs at a weighted average exercise price of $4.50 per ADS), and (iii) 47,837 outstanding RSUs, each RSU representing one ADS.

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DIVIDEND POLICY
 
We have never declared or paid any cash dividends to our shareholders. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future.

57


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly those in the section entitled “Risk Factors.”
 
Company Overview
 
We are a specialty biopharmaceutical company, primarily focused on GI and infectious diseases. Our primary goal is to become a leading specialty biopharmaceutical company.
 
We are currently focused primarily on the advancement of our development pipeline of clinical-stage therapeutic candidates. We also commercialize in the U.S. GI-related products, Talicia® (omeprazole, amoxicillin, and rifabutin) and Aemcolo® (rifamycin) and continue to explore our strategic plans for such products and activities.
 
Among the therapeutic candidates, we are exploring opaganib is being as a potential treatment for various conditions, including GI-ARS, COVID-19 and other viruses as part of pandemic preparedness, such as the Ebola virus. Inflammatory conditions and solid tumors are additional areas of focus for opaganib. Furthermore, we are investigating RHB-107 (upamostat) as a potential treatment for COVID-19 and other viruses as part of pandemic preparedness, including the Ebola virus.
 
Our current pipeline consists of five therapeutic candidates, most of which are in clinical development. We generate our pipeline of therapeutic candidates by identifying, validating and in-licensing or acquiring products that are consistent with our product and corporate strategy and that have the potential to exhibit a favorable probability of therapeutic and commercial success. We have one product that we primarily developed internally which has been approved for marketing and, to date, none of our other therapeutic candidates has generated revenues. We have out-licensed one of our commercial products, Talicia® for specific territories outside the U.S. and we plan to commercialize our therapeutic candidates, upon approval, if any, through licensing and other commercialization arrangements with pharmaceutical companies on a global and territorial basis or independently with a dedicated commercial operations or in potential partnership with other commercial-stage companies. We also evaluate, on a case-by-case basis, co-development, co-promotion, licensing, acquisitions and similar arrangements.
 
Since inception, we have funded our operations primarily through public and private offerings of our equity securities, loans and revenues from our commercial activity. As of December 31, 2022, and June 30, 2023, we had approximately $36.1 million and $16.3 million, respectively, of cash, cash equivalents, short-term investments and restricted cash.
 
Sale of Rights in Movantik® and Extinguishment of our Debt Obligations under the Credit Agreement with HCRM
 
On February 23, 2020, we, through RedHill U.S., entered into a credit agreement (the “Credit Agreement”) with HCRM, and the lenders from time to time party thereto. Pursuant to the terms of the Credit Agreement, RedHill U.S. received a $30 million loan following the signing of the Credit Agreement. An additional $50 million tranche was used to fund the acquisition of rights to Movantik® from AstraZeneca. On February 2, 2023, we sold our rights in Movantik® to an affiliate of HCRM and in connection therewith our debt obligations under the Credit Agreement were extinguished.  In connection with this sale, RedHill U.S. retained substantially all pre-closing liabilities relating to Movantik, and $16 million of our cash was deposited into the escrow account to pay pre-closing liabilities related to Movantik®.
 
Following the sale of our rights to Movantik, we lost our primary revenue source, and our ability to operate as a financially viable commercial business became significantly more difficult. We are working to replace Movantik® with another commercial product, either internal or external, but this may not occur, and we may never achieve levels of revenue we have achieved through Movantik. We also lost economies of scale in our commercial operations that we were able to benefit from by having Movantik® as a core commercial product.
 
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In addition, in connection with the sale of Movantik®, the obligation to pay indemnification obligations and scheduled pre-closing liabilities are Movantik are secured by a lien on Talicia® and Aemcolo®-related assets. If we are not able to satisfy such payment obligations, and HCRM forecloses on these assets, we will lose our remaining source of revenue, assuming we are not able to replace Movantik® with another commercial product.
 
Our financial statements include a going concern reference.  We will need to raise significant additional capital to finance our losses and negative cash flows from operations, and if we were to fail to raise sufficient capital or on favorable terms and/or replace Movantik® with another commercial product on a timely basis and/or divest assets on favorable terms or at all, we may need to cease operations.  Management has substantial doubt about our ability to continue as a going concern.
 
Description of our Products
 
The following is a description of our three current commercial products and five therapeutic candidates, most of which are in clinical development:
 
Commercial Products
 
Talicia® is a proprietary new drug approved for marketing in the U.S. for the treatment of H. pylori bacterial infection in adults. Talicia® is a combination of three approved drugs, omeprazole, which is a proton pump inhibitor (prevents the secretion of hydrogen ions necessary for the digestion of food in the stomach), amoxicillin and rifabutin, which are antibiotics. Talicia® is administered to patients orally. On November 1, 2019, the FDA approved Talicia® for marketing in the U.S. for the treatment of H. pylori infection in adults and we launched Talicia® in the U.S. in March 2020. Talicia® is expected to receive a total of eight years of U.S. market exclusivity. Talicia® is the first therapeutic candidate we developed to be approved by the FDA.
 
Aemcolo® (containing 194 mg of rifamycin), is an orally-administered, minimally absorbed antibiotic that is delivered to the colon, approved by the FDA in 2018 for the treatment of travelers’ diarrhea caused by non-invasive strains of E. coli in adults. We acquired the rights to market Aemcolo® in the U.S. from Cosmo pursuant to a license agreement under which we agreed to pay Cosmo a royalty percentage in the high twenties on net sales generated from the commercialization of Aemcolo® as well as potential regulatory and commercial milestone payments to Cosmo totaling up to $100.0 million, which, based on our current expectations and assumptions, are not currently expected to be made in the next 12 months.
 
In December 2019, we commenced the commercialization of Aemcolo® in certain territories in the U.S.
 
Therapeutic Candidates
 
RHB‑204 is a patented fixed-dose combination product of three antibiotics that will simplify administration and optimize compliance. Each capsule contains the same components as RHB‑104 (clarithromycin, clofazimine, and rifabutin) but at unique doses, selected based on modeling to provide optimal balance of the potential safety and efficacy in the treatment of NTM infection.
 
Opaganib is an investigational new drug that is proprietary, first-in-class, orally administered SK2 selective inhibitor, with anti-viral, anti-inflammatory and anti-cancer activities, targeting multiple oncology, inflammatory and GI indications and also targeting pandemic preparedness and GI-ARS (with a U.S. government collaborations). On March 30, 2015, we entered into an exclusive worldwide license agreement with Apogee, pursuant to which Apogee granted us the exclusive worldwide development and commercialization rights to ABC294640 (which we then renamed to ABC294640 (Yeliva®)) and as noted above, received an international non-proprietary name, opaganib, in 2018) and additional intellectual property for all indications. Under the terms of the agreement, as amended, we agreed to pay Apogee initial milestone payments of $3 million, of which the total amount has been paid, as well as up to $2 million in potential development milestone payments, and tiered royalties starting in the low double-digits. For more information regarding this agreement, see “Business – Business Overview – Acquisition, Commercialization and License Agreements – License Agreement for opaganib.”  In March 2022, we entered into the Exclusive License Agreement with Kukbo for opaganib in South Korea. Under the terms of the Exclusive License Agreement, Kukbo was required to pay an upfront payment of $1.5 million, and we are also eligible for milestone payments and royalties on net sales of oral opaganib. See “Business –  Business Overview – Acquisition, Commercialization and License Agreements–- License Agreement with Kukbo” and “Legal Proceedings”.
 
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RHB‑107 (upamostat; formerly Mesupron) (INN: upamostat) is a proprietary small molecule, first-in-class, potent serine protease inhibitor administered by oral capsule. RHB-107 (upamostat) is being investigated as a potential treatment for COVID-19 outpatients and other viruses as part of pandemic preparedness, including the Ebola virus. Additional indications in the area of inflammatory digestive diseases and inflammatory lung diseases could be targeted. On June 30, 2014, we acquired from Heidelberg the exclusive development and commercialization rights to RHB‑107, excluding China, Hong Kong, Taiwan, and Macao, for all indications. We made an upfront payment to Heidelberg of $1.0 million with potential tiered royalties on net revenues, ranging from mid-teens up to 30%. We are responsible for all development, regulatory and commercialization of RHB‑107. See “Business – Business Overview – Acquisition, Commercialization and License Agreements – License Agreement for RHB‑107.”
 
RHB-104 is an investigational new drug intended to treat Crohn’s disease, which is a serious inflammatory disease of the GI system that may cause severe abdominal pain and bloody diarrhea, malnutrition and potentially life-threatening complications. RHB-104 is a patented combination of clarithromycin, clofazimine, and rifabutin, three generic antibiotic ingredients, in a single capsule. The compound was developed to treat Crohn’s disease through the targeting of MAP infection.
 
RHB-102 (Bekinda®) is an investigational once-daily bi-modal extended-release oral formulation of ondansetron, a leading member of the family of 5-HT3 serotonin receptor inhibitors, intended to treat nausea, vomiting and diarrhea symptoms experienced in some people suffering from acute gastroenteritis, gastritis, and IBS-D.
 
Components of Statements of Comprehensive Income (Loss)
 
Revenues
 
Revenues are with respect to commercialization and licensing of our commercial products.
 
Cost of Revenues
 
Direct costs related to the revenues, such as cost of goods sold and royalties to third parties. Additionally, includes intangible assets amortization and impairment.
 
Research and Development Expenses
 
See “ – Research and Development, Patents and Licenses” below.
 
General and Administrative Expenses
 
General and administrative expenses consist primarily of compensation for employees, directors and consultants and professional services. Other significant general and administrative expenses include medical affairs, office-related expenses, travel, conferences, and others.
 
Selling, Marketing and Business Development Expenses
 
Selling, Marketing and Business Development expenses consist primarily of compensation for employees and consultants dedicated to marketing activities with the Company’s commercialized and promoted products and professional services. Other significant selling, marketing and business development expenses include market research, market access, advertising, printed and digital media, product samples, car fleet, travel, conferences, office-related expenses, and others.
 
Financial Income and Expenses
 
Financial income and expenses consist of non-cash financing expenses in connection with changes in the fair value of derivative financial instruments, interest earned on our cash, cash equivalents, and short-term bank deposits, bank fees, interest, and finance changes for lease liabilities and other transactional costs and expense or income resulting from fluctuations of the U.S. dollar against other currencies, in which a portion of our assets and liabilities are denominated like NIS, for example. In addition, as it relates to the extinguishment of all debt obligations of RedHill Inc. under the Credit Agreement in exchange for the transfer of its rights in Movantik®, the portion of the gain from the debt extinguishment, resulting from the difference between the carrying amount (the amortized cost) of the financial liability to HCRM and the fair value of the assets transferred, is included within financial income.
 
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Other income
 
Incorporates the portion of the gain from the sale of Movantik® resulting from the difference between the carrying value and fair value of the assets transferred to HCRM. Additionally, includes service fees relating to transition services provided as part of the sale of Movantik®.
 
Operating Results
 
History of Losses
 
Since inception in 2009, we have generated significant losses in connection with the research and development of our therapeutic candidates and from our commercial operations. We may continue to incur additional losses as we continue our commercial activities and expand our research and development activities over time. As a result, we expect to continue incurring operating losses, which may be substantial over the next several years, and we will need to obtain substantial additional funds. As of December 31, 2022, and June 30, 2023, we had an accumulated deficit of approximately $433.9 million and $382.0 million, respectively.
 
We expect to continue to fund our operations over the next several years through revenues generated from the commercialization of our commercial products, public or private equity offerings, debt financings, non-dilutive financings, including government grants, commercialization of our therapeutic candidates, if approved, or products we may commercialize or promote in the future. Concurrently, we are actively engaged in discussions to explore potential divestment of certain Company assets.
 
Going Concern
 
Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During 2022, our net cash used in operating activities was $29.2 million leaving a cash balance of $36.1 million, including $16.0 million of restricted cash under the Credit Agreement as of December 31, 2022. During the six months ended June 30, 2023, our net cash used in operating activities was $17.8 million leaving a cash balance of $16.3 million, including $9.1 million of restricted cash under the Credit Agreement, as of June 30, 2023. Because we do not have sufficient resources to fund our operations for the next twelve months from the date of this prospectus, management has substantial doubt of our ability to continue as a going concern. Our operational costs include the payment of substantially all pre-closing liabilities relating to Movantik, which our subsidiary, RedHill U.S., retained under our agreement with HCRM for the extinguishment of all our debt obligations under the Credit Agreement in exchange for the transfer of our rights in Movantik® to an affiliate of HCRM.  See “ –Liquidity and Capital Resources – Term Loan Facility”. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should we be unable to continue as a going concern.
 
Following the sale of our rights to Movantik, we lost our primary revenue source.  Substantially all of our operating losses result from expenses incurred in connection with our commercial activities and from general and administrative costs associated with our R&D operations.
 
We will need to raise significant additional capital to finance our losses and negative cash flows from operations, and if we were to fail to raise sufficient capital or on favorable terms, we may need to cease operations. There are no assurances that we will be able to raise significant additional capital on terms favorable to us or at all, particularly given the current difficult conditions in the capital markets and low market capitalization which makes it more difficult to raise significant amounts of capital. In addition, following the sale of our rights to Movantik®, we lost our primary revenue source and our ability to operate as a financially viable commercial business has been significantly more difficult. If we are unsuccessful in achieving sufficient commercial sales of our products, including replacing Movantik® with another commercial product on a timely basis, or in raising sufficient capital, we will need to reduce activities and curtail or cease operations.
 
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Segment Information
 
The Chief Executive Officer is the Company’s Chief Operating Decision Maker (“CODM”). The CODM allocates resources and assesses the Company’s performance based on the following segmentation: Commercial Operations and Research & Development, both on an Adjusted EBITDA basis. The Commercial Operations segment covers all areas relating to the commercial sales and is being performed by the Company’s U.S. subsidiary. The Research and Development segment includes all activities related of research and development and licensing of therapeutic candidates and is being performed by the Company.
 
The Company reports on revenue and segment Adjusted EBITDA. The CODM does not review assets by operating segment. Adjusted EBITDA represents net loss before depreciation, amortization, and financial (expenses( income, adjusted to exclude share-based compensation, gains from early termination of leases and income from transition services provided to HCRM and gain from the sale of Movantik® presented as other income. The following table presents segment profitability and a reconciliation to the consolidated net loss and comprehensive loss for the periods indicated:
   
Six Months Ended June 30,
 
   
2023
   
2022
 
   
U.S. dollars in thousands
 
Commercial Operations Segment Adjusted EBITDA
   
(11,031
)
   
(12,190
)
Research And Development Adjusted EBITDA
   
(5,550
)
   
(6,620
)
Financial income (expenses), net
   
26,330
     
(6,451
)
Share-based compensation to employees and service providers
   
(849
)
   
(2,924
)
Depreciation
   
(1,055
)
   
(1,154
)
Amortization and impairment of intangible assets
   
(530
)
   
(2,900
)
Gain from early termination of leases
   
694
     
 
Other income
   
42,993
     
 
Consolidated Comprehensive income (loss)
   
51,002
     
(32,239
)

   
Year Ended December 31,
 
   
2022
   
2021
   
2020
 
   
U.S. dollars in thousands
 
Commercial Operations Segment Adjusted EBITDA
   
(16,595
)
   
(15,527
)
   
(27,236
)
Research And Development Adjusted EBITDA
   
(12,420
)
   
(37,247
)
   
(23,501
)
Financial expenses, net
   
(28,825
)
   
(16,609
)
   
(12,489
)
Share-based compensation to employees and service providers
   
(5,675
)
   
(10,212
)
   
(4,202
)
Depreciation
   
(2,136
)
   
(1,914
)
   
(1,710
)
Amortization and impairment of intangible assets
   
(6,018
)
   
(16,235
)
   
(7,035
)
Consolidated Comprehensive loss
   
(71,669
)
   
(97,744
)
   
(76,173
)

Except for $2 million licensing revenues reported in the six months ended June 30, 2022, which are allocated to the Research and Development segment, all of the Company’s revenues are allocated to the Commercial Operations segment.

Comparison of the Six Months Ended June 30, 2023, to the Six Months Ended June 30, 2022
 
Net Revenues
 
Net revenues for the six months ended June 30, 2023, were $5.4 million, compared to $31.5 million for the six months ended June 30, 2022. The decrease was primarily attributable to the divestiture of Movantik, resulting in the discontinuation of revenue recognition from this product starting from February 2, 2023. Talicia net revenues for the six months ended June 30, 2023, were $5.1 million, as compared to $4 million for the six months ended June 30, 2022, primarily due to an increase of 10% in units sold.
 
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Cost of Revenues
 
Cost of Revenues for the six months ended June 30, 2023, was $2.4 million, compared to $15.3 million for the six months ended June 30, 2022. This decrease was primarily attributable to the divestiture of Movantik. As a result of this divestiture, both the recognition of revenues and the associated cost of revenues for this product were discontinued starting from February 2, 2023. Additionally, the amortization of the intangible asset related to Movantik was also discontinued as of that date.
 
Gross Profit
 
Gross Profit for the six months ended June 30, 2023, was $3 million, compared to $16.2 million for the six months ended June 30, 2022, in line with the decrease in Net Revenues and Cost of Revenues as explained above and primarily attributable to the divestiture of Movantik.
 
Research and Development Expenses
 
Research and Development Expenses for the six months ended June 30, 2023, were $2.3 million, compared to $4.5 million for the six months ended June 30, 2022. The decrease is attributable to completion of clinical trials related to COVID-19 and ongoing cost-reduction measures.
 
Selling, Marketing and General and Administrative Expenses
 
Selling, Marketing, and General and Administrative Expenses for the six months ended June 30, 2023, were $19 million, compared to $37.4 million for the six months ended June 30, 2022. The difference was primarily attributable to the ongoing cost-reduction measures.
 
Other Income for the six months ended June 30, 2023, was $43 million, compared to no other income recognized for the six months ended June 30, 2022. The other income was comprised of (i) $35.5 million from the divestiture of Movantik, calculated as the difference between the fair value of the rights and the carrying amount of this asset; and (ii) $7.5 million from transitional services provided to the buyer of Movantik
 
Operating Income
 
Operating Income for the six months ended June 30, 2023, was $24.7 million, compared to an operating loss of $25.8 million for the six months ended June 30, 2022, primarily attributable to the changes resulting from the divestiture of Movantik, as detailed above.
 
Financial Income, net
 
Financial Income, net, for the six months ended June 30, 2023, was $26.3 million, compared to Financial Expenses, net of $6.5 million for the six months ended June 30, 2022. The income recognized in the six months ended June 30, 2023, was primarily attributable to gain resulting from the extinguishment of the HCRM debt in exchange for the transfer of rights to Movantik, calculated as the difference between the carrying amount of the financial liability and the fair value of the rights transferred.
 
Net Income
 
Net Income for the six months ended June 30, 2023, was $51 million, compared to Net Loss of $32.2 million for the six months ended June 30, 2022, primarily attributable to the changes resulting from the sale of Movantik, as detailed above.
 
Total Assets
 
Total Assets as of June 30, 2023, were $35 million, compared to $158.9 million as of December 31, 2022. The decrease was primarily attributable to the divestiture of Movantik, resulting in the transfer of the rights to Movantik, as well as to a significant decrease in the Trade Receivables balance (attributed to the fact that the receivables as of December 31, 2022, were primarily associated with Movantik).
 
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Total Liabilities
 
Total Liabilities as of June 30, 2023, were $31.6 million ,compared to $207.3 million as of December 31, 2022. The decrease was primarily attributable to the extinguishment of HCR debt in exchange for the transfer of Movantik rights, assumption of certain liabilities by HCR, and payments made towards pre-closing liabilities related to Movantik. Remaining pre-closing liabilities related to Movantik as of June 30, 2023, are estimated at $14.9 million.
 
Comparison of the Year Ended December 31, 2022, to the Year Ended December 31, 2021
 
Net Revenues
 
Net Revenues for the year ended December 31, 2022, were $61.8 million, compared to $85.8 million for the year ended December 31, 2021. The difference is attributable to an increase in units sold, along with greater increased gross-to-net allowances mainly related to Movantik®.
 
Cost of Revenues
 
Cost of Revenues for the year ended December 31, 2022, was $33.3 million, compared to $49.4 million for the year ended December 31, 2021. The decrease is mainly attributable to the implementation of cost reduction measures and goes hand-in-hand with the reduction in revenues.
 
Gross Profit
 
Gross Profit for the year ended December 31, 2022, was $28.5 million, compared to $36.4 million for the year ended December 31, 2021. The difference is mostly attributable to a $9 million impairment related to Aemcolo recognized in 2021 and in line with the difference in net revenues.
 
Research and Development Expenses
 
Research and Development Expenses were $7.3 million for the year ended December 31, 2022, compared to $29.5 million for the year ended December 31, 2021. The difference is attributable to the ongoing optimization of R&D costs and completion of components of the opaganib and RHB-107 development programs.
 
Selling, Marketing and General and Administrative Expenses
 
Selling, Marketing and General and Administrative Expenses for the year ended December 31, 2022, were $64.0 million, compared to $88.0 million for the year ended December 31, 2021. The difference is mainly attributable to various cost-control measures implemented during the period.
 
Operating Loss
 
Operating Loss for the year ended December 31, 2022, was $42.8 million, compared to $81.1 million for the year ended December 31, 2021. The difference is primarily attributable to a reduction in operating expenses.
 
Financial Expenses, net
 
Financial Expenses, net for the 12 months ended December 31, 2022, was $28.8 million, compared to Financial Expenses, net of $16.6 million for 12 months ended December 31, 2021. The increase was mainly attributed to an adjustment in the carrying amount of the borrowings under the Credit Agreement to reflect all amounts owing or payable under the Credit Agreement as being immediately due.
 
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Liquidity and Capital Resources
 
Since inception, we have funded our operations primarily through public and private offerings of our equity securities, loans and revenues from our commercial activity. Other potential sources of liquidity in the future may include government grants or subordinated indebtedness, other non-dilutive financings, or divestment of certain Company assets. As of December 31, 2022, and June 30, 2023, we had approximately $36.1 million and $16.3 million, respectively, of cash, cash equivalents, short-term investments and restricted cash.
 
Through our U.S. subsidiary, we currently commercialize Talicia® and Aemcolo®. However, our ability to generate profits from the commercialization of our commercial products still remains uncertain. To date, our commercial operations are still generating operational losses. Other than Talicia®, our therapeutic candidates are in research and development stage, and therefore do not yet generate revenues.
 
Until its sale to HCRM on February 2, 2023, we also commercialized Movantik® (naloxegol). Following this sale, we have lost our primary revenue source which will make it more difficult for us to satisfy our payment obligations.  In addition, if we are not able to satisfy our payment obligations to HCRM incurred in connection with the sale of Movantik®, and HCRM forecloses on the lien on Talicia® and Aemcolo®-related assets, which currently secure these payment obligations, we will lose our remaining source of revenue, assuming we are not able to replace Movantik® with another commercial product.  See “- Sale of Rights in Movantik® and Extinguishment of our Debt Obligations under the Credit Agreement with HCRM”.
 
Financing Activities
 
On January 26, 2024, we issued (i) in a registered direct offering 10,000,000 ADSs at a purchase price of $0.80 per ADS and (ii) in a concurrent private offering, warrants to acquire 10,000,000 ADSs in the aggregate at an exercise price of $1.00 per ADS (the “January 2024 Warrants”). The gross proceeds were approximately $8 million, before fees and expenses. The January 2024 Warrants are exercisable immediately after the issuance date and have a term of five years. After the mentioned offerings and the November 2023 warrants’ exercise described below, as of January 31, 2024, the Company’s share capital included 29,703,027 ADSs, the January 2024 Warrants, December 2022 Warrants to purchase 755,861 ADSs (as defined below), and placement agent warrants to purchase 1,116,230 ADSs. These placement agent warrants have exercise prices ranging from $0.5875 per ADS to $5 per ADS and expire between April 3, 2028, and January 25, 2029. These warrants were issued to the placement agent as part of the compensation for the offerings conducted in April, July, and September 2023, as well as January 2024.
 
Between November 27, 2023, and November 29, 2023, the September 2023 Reload Warrants (as defined below) were exercised for a total of approximately $4 million gross proceeds to the Company.
 
On September 28, 2023, we entered into a warrant reprice and reload letter with holders of (i) the May 2022 Warrants (as defined below), as amended as described below, (ii) the December 2022 Warrants (as defined below), as amended as described below, (iii) warrants issued on April 3, 2023 (as amended, the “Class B Warrants”), and (iv) warrants issued on July 25, 2023 (the “July 2023 Warrants”, and together with the May 2022 Warrants, the December 2022 Warrants and the Class B Warrants, the “Existing Warrants”) to purchase up to an aggregate of 4,301,923 ADSs, pursuant to which such investors agreed to exercise their Existing Warrants in full at a reduced exercise price of $0.47 per ADS for aggregate gross proceeds of approximately $2.0 million, before deducting the fees and expenses.  In exchange, the exercising holders received new unregistered warrants to purchase up to an aggregate of 8,603,846 ADSs (the “September 2023 Reload Warrants”) at an exercise price of $0.47 per ADS and with exercise terms ranging from eighteen months to five years.
 
On July 25, 2023, we issued in a registered direct offering 1,084,923 ADSs and pre-funded warrants to purchase 217,000 ADSs for aggregate gross proceeds to us, together with the proceeds of the concurrent Reload Agreement described below, of approximately $3.8 million, before deducting fees and expenses. In connection with the offering, on July 21, 2023, we entered into a warrant reprice and reload letter (the “Reload Agreement”) with a certain holder of Series A Warrants to purchase up to an aggregate of 1,500,000 ADSs and Series B Warrants to purchase up to an aggregate of 1,500,000 ADSs, each issued in April 2023, pursuant to which: (i) such holder exercised its Series A Warrants in full at a reduced exercise price of $1.35 per ADS (the “Series A Warrant Exercise”) in exchange for new unregistered warrants to purchase up to an aggregate of 1,500,000 ADSs at an exercise price of $1.80 per ADS exercisable until April 3, 2028 (the “Reload Warrant”), and (ii) the exercise price of the Series B Warrants was reduced to $1.80 per ADS. We also agreed to reduce the exercise price of (i) the May 2022 Warrants (as defined below), as amended as described below, and (ii) the December 2022 Warrants (defined below) to purchase up to an aggregate of 971,817 ADSs, at an exercise price of $1.80 per ADS (the “Warrant Amendment”).
 
 
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On April 3, 2023, we issued in a registered direct offering (i) 270,000 ADSs and pre-funded warrants to purchase 1,230,000 ADSs, (ii) Series A Warrants to purchase up to an aggregate of 1,500,000 ADSs, and (iii) Series B Warrants to purchase up to an aggregate of 1,500,000 ADSs at a combined offering price of $4.00 per ADS (or pre-funded warrant) and accompanying Series A Warrant and Series B Warrant. The Series A Warrants had an initial exercise price of $4.75 per ADS (subsequently reduced to $1.35 per ADS as described above), were exercisable immediately and had a term of five years following issuance. The Series B Warrants had an initial exercise price of $4.00 per ADS (subsequently reduced to $1.80 as described above), were exercisable immediately and had a term of nine months following issuance. The gross proceeds were approximately $6 million, before fees and expenses.
 
In connection with the April 2023 offering, we reduced the exercise price of the May 2022 Warrants (defined below) to $4.75 per ADS and amended the termination date to April 3, 2028 (subsequently amended in July 2023 as described above).
 
During the year ended December 31, 2023, we sold 2,625 ADSs under the at-the-market (“ATM”) program for total gross proceeds of approximately $20,000, leaving an available balance under the ATM program of approximately $97.4 million.
 
During the year ended December 31, 2022, we sold 30,582 ADSs under the ATM program for total gross proceeds of approximately $2.0 million.
 
On December 6, 2022, we consummated an underwritten offering of 544,375 ADSs and pre-funded warrants to purchase 255,625 ADSs for gross proceeds of approximately $8 million after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering. In addition, the investors in this financing received warrants to purchase 1,727,678 ADSs with an exercise price of $4.6305 per ADS (following a reset on March 31, 2023, in connection with the ratio change of the ADSs to the Company’s ordinary shares) (the “December 2022 Warrants”).
 
On May 11, 2022, we issued (i) in a registered direct offering a total of 126,492 ADSs and pre-funded warrants to purchase 137,592 ADSs and (ii) in a concurrent private offering, warrants to acquire 330,106 ADSs at a purchase price of $59.20 per ADS (“May 2022 Warrants”). The gross proceeds were approximately $15 million, before fees and expenses. The warrants were exercisable six months after the issuance date and had a term of five and one-half years.
 
On November 18, 2021, we consummated an underwritten offering of 117,150 ADSs. The underwriter purchased the ADSs at a price of $128.04 per ADS, for total net proceeds of approximately $14.8 million, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering.
 
On March 4, 2021, we consummated an underwritten offering of 116,185 ADSs at a public offering price of $320.0 per ADS, for total net proceeds of approximately $34.8 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering, including the exercise by the underwriter of its overallotment option.
 
On January 14, 2021, we consummated an underwritten offering of 79,719 ADSs at a public offering price of $313.6 per share, for total net proceeds of approximately $23.1 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us in connection with the offering.
 
Term Loan Facility
 
On February 23, 2020, we, through our wholly-owned subsidiary, RedHill U.S., entered into the Credit Agreement with HCRM, as Administrative Agent, and the lenders from time to time party thereto. Pursuant to the terms of the Credit Agreement, RedHill U.S. received a $30 million loan following the signing of the Credit Agreement. An additional $50 million tranche was used to fund the acquisition of rights to Movantik® from AstraZeneca.

The loans under the Credit Agreement (the “Loans”) bore interest at an annual rate equal to the 3-month LIBOR rate plus 8.20% which was to 6.7% starting April 1, 2021, with a 1.75% 3-month LIBOR floor. The principal and interest under the Credit Agreement were payable quarterly in arrears on the last day of each March, June, September, and December (each an “HCRM Payment Date”). The Loans maturity date was February 23, 2026 (the “Term Loan Maturity Date”), at which time, if not earlier repaid in full, the outstanding principal amount of the Loans, together with any accrued and unpaid interest, was to be due and payable in cash. Upon the prepayment or repayment of all or any portion of the Loans, RedHill U.S. was to pay to the lenders under the Credit Agreement an exit fee in an amount equal to 4% of the aggregate principal amount of the Loans prepaid or repaid on such date. Pursuant to the Credit Agreement, HCRM received a royalty of 4% (on up to $75 million of our annual net revenues (the “Revenue Interest”). Payments of Revenue Interest were to be made quarterly in arrears for nine years, beginning with the first fiscal quarter of 2021.

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Pursuant to the terms of the Credit Agreement, on each HCRM Payment Date, beginning with March 2023 (the “Amortization Date”) through and including the Term Loan Maturity Date, RedHill U.S. was to repay the Loans in equal installments. We were permitted to prepay the Loans at any time under certain terms.

We also entered into a Security Agreement, a Pledge Agreement, an Israeli-law governed Fixed Charge Debenture and an Israeli-law governed Floating Charge Debenture in favor of HCRM, pursuant to which our obligations under the Credit Agreement (and those of RedHill U.S.) are secured by a pledge of all of our holdings of the capital stock of RedHill U.S., substantially all of the assets of RedHill U.S., and all of our assets relating in any material respect to Talicia®. Upon closing of the sale of Movantik® to an affiliate of HCRM and the simultaneous extinguishment of debt obligations under the Credit Agreement, these collateral documents continued in effect were amended to provide HCRM with security interests in (i) the Escrow Account, (ii) Talicia-related assets, (iii) Aemcolo-related assets and (iv) accounts receivable related to Movantik® accrued as of the Closing (as defined in the APA) to secure “Go-Forward Obligations” consisting of indemnification obligations under the APA and the Credit Agreement and scheduled pre-closing liabilities relating to Movantik®. The value of such liens and security interests are capped at the value of the scheduled pre-closing liabilities relating to Movantik®, and all such liens and security interests will be fully released upon the first to occur of (i) the payment of the scheduled pre-closing liabilities related to Movantik® other than certain specified long-dated liabilities and (ii) the first date 90 days after Closing on which RedHill Israel has at least $16.9 million in cash and cash equivalents on hand.

The Credit Agreement contained certain affirmative covenants and certain negative covenants barring us and our subsidiaries from (with limited exceptions) taking certain actions.

On September 13, 2022, we received a notice of events of default and reservation of rights letter (the “Notice”) from HCRM. The Notice asserted that certain events of default occurred as a result of alleged breaches by RedHill U.S. of its representations and warranties and financial covenants under the Credit Agreement. As a result of the alleged events of default, the Notice provided that the outstanding obligations under the Credit Agreement bore interest at the default rate prescribed therein and that the lenders may accelerate the obligations under the Credit Agreement.

On September 29, 2022, HCRM exercised its rights under a Deposit Account Control Agreement to take control of RedHill U.S.’s account at PNC Bank, National Association (“PNC”).  HCRM then instructed PNC to wire $16 million (the “Funds”), which is equivalent to the minimum cash required under the Credit Agreement, from the PNC account to an account held by HCRM.  HCRM acknowledged that, despite receipt of the Funds in an account held in HCRM’s name, the Funds remain the property of RedHill U.S. and are held merely as security for RedHill U.S.’s obligations under the Credit Agreement.

On February 2, 2023, we reached an agreement with HCRM for the extinguishment of all our debt obligations (including all principal, interest, revenue interest, prepayment premiums and exit fees) under the Credit Agreement in exchange for the transfer of our rights in Movantik® to Movantik Acquisition Co., an affiliate of HCRM. HCRM assumed substantially all post-closing liabilities relating to Movantik®, with RedHill U.S. retaining substantially all pre-closing liabilities relating to Movantik. HCRM retains a lien on Talicia® and Aemcolo®-related assets until substantially all pre-closing liabilities relating to Movantik® have been paid or other specific conditions are met. The estimated pre-closing liabilities relating to Movantik® as of the closing date of the transaction, and as of June 30, 2023, are estimated to be approximately $51 million and $14.9 million, respectively.  To fulfill this obligation, an escrow account was established. As of June 30, 2023, $9.1 million were held in the escrow account.

Additional Cash Requirements
 
We are obligated to make various payments upon the achievement of agreed-upon milestones or make certain royalty payments under our in-license agreements with Apogee with respect to opaganib and with Heidelberg with respect to RHB-107, under our asset purchase agreement with Giaconda Limited with respect to Talicia®, RHB-104, and RHB-106 and under our agreement with UCF or the University of Minnesota, pursuant to which we are obligated to make various payments upon the achievement of agreed-upon milestones or make certain royalty payments. See “ - Company Overview – Description of Our Products – Therapeutic Candidates” above. All of our in-licensing agreements are terminable at-will by us upon prior written notice.
 
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In addition, we have future obligations to purchase API, bulk tables and finished goods with respect to Talicia® for an aggregate purchase price of approximately $12.8 million until the end of 2025 in the ordinary course of business. We expect to purchase the inventory in the regular course of business as part of our ongoing commercialization of Talicia®.
 
We continue to have negative cash flows from operations, and our ability to generate sufficient revenues for our operations is significantly limited unless we are successful in replacing Movantik® with another commercial product. We estimate that so long as sufficient revenues to sustain our business operations including to pay the pre-closing obligations of Movantik as described above, are not generated from our  remaining commercial products, we will need to raise substantial additional funds in order to satisfy our payment obligations and continue as a going concern, as our current cash and short-term investments are not sufficient to continuously fund our commercial operations and satisfy our payment obligations. We may also be forced to significantly reduce our operations or divest certain assets, which may have a material adverse effect on our reputation, business, financial condition or results of operations.
 
However, additional financing may not be available on acceptable terms, if at all, including due to the difficult conditions in the capital markets, particularly with respect to securities of biopharmaceutical companies on the U.S. stock exchanges, including the ADSs, and due to the low market capitalization which makes it more difficult to raise significant amounts of capital. If we are not able to maintain compliance with Nasdaq’s continued listing requirements this would also adversely affect our ability to raise capital.
 
Our future capital requirements will depend on many factors including but not limited to:
 

our ability to close a strategic business development transaction, including a potential divestiture of certain of our assets;

our ability to successfully commercialize commercial products and our therapeutic candidates, upon approval, if any, including securing commercialization agreements with third parties and favorable pricing and market share;

we may consume available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner than anticipated;

the regulatory path of each of our therapeutic candidates;

the progress, success, and cost of our clinical trials and research and development programs;

the costs, timing, and outcome of regulatory review and obtaining regulatory approval of our therapeutic candidates and addressing regulatory and other issues that may arise post-approval;

the costs of enforcing our issued patents and defending intellectual property-related claims;

the costs of developing sales, marketing, and distribution channels; and

consumption of available resources more rapidly than currently anticipated, resulting in the need for additional funding sooner than anticipated.
 
Cash Flow
 
Net Cash Used in Operating Activities
 
Net Cash Used in Operating Activities for the six months ended June 30, 2023, was $17.8 million, as compared to $20.7 million for the six months ended June 30, 2022. The difference was primarily attributable to the ongoing cost reductions. In the six months ended June 30, 2023, the cash used in operating activities was primarily directed towards settling pre-closing liabilities related to Movantik.
 
Net Cash Used in Operating Activities for the year ended December 31, 2022, was $29.2 million, compared to $65 million for the year ended December 31, 2021. The difference is attributable to the completion of clinical trials, mainly with respect to COVID-19, which enabled us to spend less cash, as well as various cost reduction measures around our commercial operations.
 
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Net Cash Provided by Financing Activities
 
Net Cash Provided by Financing Activities for the six months ended June 30, 2023, was $4.8 million, comprised primarily from the net proceeds from the offering completed on April 3, 2023, and the decrease in restricted cash, partially offset by repayment of payables in respect of intangible asset purchase.
 
Net Cash Provided by Financing Activities for the year ended December 31, 2022, was $11.5 million, comprised primarily of proceeds from equity offerings, which took place in May 2022 and December 2022, offset by payments in respect of intangible assets. Net Cash Provided by Financing Activities for the year ended December 31, 2021, was $73.5 million, primarily from public offerings, strategic investment by Kukbo, utilization of at-the-market facility and exercise of options.
 
We did not have any material commitments for capital expenditures, including any anticipated material acquisition of plant and equipment or interests in other companies, as of December 31, 2022, and June 30, 2023.
 
Research and Development, Patents and Licenses
 
Our research and development expenses consist primarily of costs of clinical trials, professional services, share-based payments and payroll, and related expenses. The clinical trial costs are mainly related to payments to third parties to manufacture our therapeutic candidates, to perform clinical trials with our therapeutic candidates and to provide us with regulatory services. We charge all research and development expenses to operations as they are incurred. We expect our research and development expenses to remain our primary expense in the near future as we continue to develop our therapeutic candidates.
 
Due to the inherently unpredictable nature of clinical development processes, we are unable to estimate with any certainty the costs we will incur in the continued development of the therapeutic candidates in our pipeline for potential commercialization.
 
Our future research and development expenses will depend on the clinical success of each therapeutic candidate, the rate of patient recruitment and the ongoing assessments of each therapeutic candidate’s commercial potential. In addition, we cannot forecast with any degree of certainty which therapeutic candidates may be subject to future commercialization arrangements, when such commercialization arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. See “Risk Factors – Risks Related to Regulatory Matters – If we or our development or commercialization partners are unable to obtain or maintain FDA or other foreign regulatory clearance and approval for our therapeutic candidates or products we may commercialize or promote, we or our commercialization partners will be unable to commercialize our therapeutic candidates, upon approval, if any, or products we may commercialize or promote.”
 
As we obtain results from clinical trials, we may elect to discontinue or delay the development and clinical trials for certain therapeutic candidates in order to focus our resources on more promising therapeutic candidates or projects. Completion of clinical trials by us or our licensees may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a therapeutic candidate. See “Risk Factors – Risks Related to Regulatory Matters.”
 
We expect our research and development expenses to stay material as we continue the advancement of our clinical trials and therapeutic candidates’ development. The lengthy process of completing clinical trials and seeking regulatory approvals for our therapeutic candidates requires substantial expenditures. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Due to the factors set forth above, we are not able to estimate with any high certainty if and when we would recognize any substantial revenues from our projects.
 
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Trend Information
 
Other than as disclosed elsewhere in this prospectus, we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.
 
Critical Accounting Estimates
 
The preparation of financial statements requires management to make estimates which, by definition, will seldom equal the actual results and will affect the reported amounts in our consolidated financial statements and the accompanying notes. Some of the policies described in Note 2 of our consolidated financial statements included elsewhere in this prospectus involve a high degree of judgment or complexity. We believe that the most critical accounting policies and significant areas of judgment and estimation are in:
 

Recognition and measurement of allowance for rebates and patient discount programs.

Impairment reviews of intangible research and development assets.

Estimated useful economic life of the acquired assets in the Movantik® acquisition.
 
Recognition and Measurement of Allowance for Rebates and Patient Discount Programs
 
We offer various rebate and patient discount programs, which result in discounted prescriptions to qualified patients. Rebates and discounts provided to the wholesalers and to the patients under these arrangements are accounted for as variable consideration, and recognized as a reduction in revenue, for which unsettled amounts are accrued. The allowance for these rebates is calculated based on historical and estimated utilization of the rebate and discount programs at the time the revenues are recognized. The main estimates used in recognizing and measuring this allowance relate to the amount of products sold to customers not yet prescribed to patients (units “in the channel”) and projected duration of the Company to sell the units in the channel. We periodically evaluate our estimates against actual results and, if necessary, updates the estimates accordingly. The report of our independent auditors with regards to the annual report for the year ended December 31, 2022, contained an adverse opinion on the effectiveness of the Company’s internal control over financial reporting related to the Company not designing and maintaining effective controls over the calculation of allowance for deductions from revenues.
 
Impairment Reviews of Intangible Research and Development Assets
 
We review annually or when events or changes in circumstances indicate the carrying value of the research and development assets may not be recoverable.
 
When and if necessary, an impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is determined using discounted cash flow calculations where the asset’s expected post-tax cash flows are risk-adjusted over their estimated remaining useful economic life. The risk-adjusted cash flows are discounted using our estimated post-tax weighted average cost of capital which was 15.9% as of December 31, 2022.
 
The main estimates used in calculating the recoverable amount include: outcome of the therapeutic candidates research and development activities; probability of success in gaining regulatory approval, size of the potential market and our asset’s specific share in it and amount and timing of projected future cash flows.
 
Estimated Useful Life of the Acquired Assets in the Movantik® acquisition
 
In connection with the agreements mentioned in Note 14 of our consolidated financial statements included elsewhere in this prospectus, we accounted for the acquisition of rights to Movantik® as an asset acquisition. Since all acquired assets are intended to generate revenues from sales of Movantik® and have a similar useful life, the Company attributed this consideration to a single intangible asset representing the acquired rights to Movantik®. The Company determined the asset’s useful life, over which the asset will be amortized on a straight-line from its acquisition. The main estimate used in determining the useful life was the anticipated duration of sales of the product after its expected patent expiration. During 2021, as a result of reaching a litigation settlement related to Movantik®’s IP, the Company has re-estimated the useful life of these assets to be 12.5 years from the date of acquisition. On February 2, 2023, we sold our rights in Movantik® to HCRM, resulting in a complete derecognition of the acquired assets from the balance sheet. See “Business – Business Overview – Sale of Movantik® to HCRM.”

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Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact our financial position, results of operations or cash flows. Our overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance.

Risk of Interest Rate Fluctuation and Credit Exposure Risk
 
At present, our exposure to credit risk arises from cash and cash equivalents, deposits with banks, as well as accounts receivable. Some of our liquid instruments are invested in short-term deposits.
 
We estimate that because the liquid instruments are invested mainly for the short-term and with highly-rated institutions, the credit risk associated with these balances is low. The primary objective of our investment activities is to preserve principal while maximizing the income we receive from our investments without significantly increasing risk and loss.
 
We are no longer exposed to a material risk of interest rate fluctuation due to the extinguishment of our Credit Agreement with HCRM and the limited cash held in short-term deposits.
 
Foreign Currency Exchange Risk
 
Although the U.S. dollar is our functional currency and reporting currency, a portion of our expenses is denominated in NIS and in Euro. Our NIS expenses consist principally of payments to employees or service providers and office-related expenses in Israel. Our Euro expenses primarily involve payments to vendors for our therapeutic candidates and certain manufacturers of APIs for Talicia®. Because only a relatively small portion of our transactions are currently denominated in NIS and Euro and a negligible sum is held in NIS, we do not believe we are subject to a material risk of foreign currency exchange risk.
 
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BUSINESS

History and Development of the Company
 
Our legal and commercial name is RedHill Biopharma Ltd. Our company was incorporated on August 3, 2009, and was registered as a private company limited by shares under the laws of the State of Israel. Our principal executive offices are located at 21 Ha’arba’a Street, Tel-Aviv, Israel, and our telephone number is 972‑3‑541‑3131.
 
In February 2011, we completed our initial public offering in Israel, pursuant to which we issued 14,302,300 Ordinary Shares, and 7,151,150 tradable Series 1 Warrants to purchase 7,151,150 Ordinary Shares for aggregate gross proceeds of approximately $14 million. On December 27, 2012, we completed the listing of ADSs on the Nasdaq Capital Market, and on July 20, 2018, the ADSs were listed on the Nasdaq Global Market. On February 13, 2020, our Ordinary Shares were voluntarily delisted from trading on the Tel-Aviv Stock Exchange. On November 15, 2023, the ADSs were transferred from the Nasdaq Global Market to the Nasdaq Capital Market. The ADSs are currently traded on the Nasdaq Capital Market under the symbol "RDHL."
 
The Securities and Exchange Commission, or SEC, maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
 
Our website address is http://www.redhillbio.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus.
 
Our capital expenditures for the six-month period ended June 30, 2023, and the years ended December 31, 2022, and 2021, were approximately $6,000, $25,000 and $115,000, respectively. Our current capital expenditure involves basic equipment and leasehold improvements.
 
Business Overview
 
We are a specialty biopharmaceutical company, primarily focused on GI and infectious diseases. Our primary goal is to become a leading specialty biopharmaceutical company.
 
We are currently focused primarily on the advancement of our development pipeline of clinical-stage therapeutic candidates. We also commercialize in the U.S. GI-related products, Talicia® (omeprazole, amoxicillin, and rifabutin) and Aemcolo® (rifamycin) and continue to explore our strategic plans for such products and activities.
 
Among the therapeutic candidates, we are exploring opaganib is being as a potential treatment for various conditions, including GI-ARS, COVID-19 and other viruses as part of pandemic preparedness, such as the Ebola virus. Inflammatory conditions and solid tumors are additional areas of focus for opaganib. Furthermore, we are investigating RHB-107 (upamostat) as a potential treatment for COVID-19 and other viruses as part of pandemic preparedness, including the Ebola virus.
 
Our current pipeline consists of five therapeutic candidates, most of which are in clinical development. We generate our pipeline of therapeutic candidates by identifying, validating and in-licensing or acquiring products that are consistent with our product and corporate strategy and that have the potential to exhibit a favorable probability of therapeutic and commercial success. We have one product that we primarily developed internally which has been approved for marketing and, to date, none of our other therapeutic candidates has generated revenues. We have out-licensed one of our commercial products, Talicia® for specific territories outside the U.S. and we plan to commercialize our therapeutic candidates, upon approval, if any, through licensing and other commercialization arrangements with pharmaceutical companies on a global and territorial basis or independently with a dedicated commercial operations or in potential partnership with other commercial-stage companies. We also evaluate, on a case-by-case basis, co-development, co-promotion, licensing, acquisitions and similar arrangements.
 
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Our Strategy
 
Our goal is to become a leading specialty pharmaceutical company in the commercialization and development of pharmaceuticals for the treatment of GI and infectious diseases.
 
Key elements of our strategy are to:
 

Identify and acquire rights to products from pharmaceutical companies that have encountered cash flow or operational problems or that decide to divest one or more of their products for various reasons. Specifically, we evaluate acquiring rights to and develop products that are intended to treat pronounced clinical needs, have patent or other protections, and have target markets with significant potential. Additionally, we seek to evaluate acquiring rights to and develop products based on different technologies designed to reduce our dependency on any specific product or technology. We identify such opportunities through our broad network of contacts and other sources in the pharmaceutical field;

Identify and enter into out-licensing or collaborative agreements with third parties to develop and/or commercialize our commercial products or therapeutic candidates;

Enhance existing pharmaceutical products, including broadening their range of indications, or launching innovative and advantageous pharmaceutical products, based on existing active ingredients. Because there is a large knowledge base regarding existing products, the preclinical, clinical and regulatory requirements needed to obtain marketing approval for enhanced formulations are relatively well-defined. In particular, clinical trial designs, inclusion criteria and endpoints previously accepted by regulators may sometimes be re-used. In addition to reducing costs and time to market, we believe that targeting therapeutics with proven safety and efficacy profiles provides us a better prospect of clinical success;

Where applicable, utilize the FDA’s 505(b)(2) regulatory pathway to potentially obtain more timely and efficient approval of our formulations of previously approved products. Under the 505(b)(2) process, we are able to seek FDA approval of a new dosage form, strength, route of administration, formulation, dosage regimen, or indication of a pharmaceutical product that has previously been approved by the FDA. This process enables us to partially rely on the FDA findings of safety or efficacy for previously approved drugs, thus avoiding the duplication of costly and time-consuming preclinical and various human studies. See “ – Business Overview – Government Regulations and Funding – Section 505(b)(2) New Drug Applications”;

Cooperate with third parties to develop or commercialize therapeutic candidates in order to share costs and leverage the expertise of others; and

Consider potential acquisitions of other companies with or without commercial products.

The pharmaceutical and biotechnology industries are intensely competitive. Our therapeutic candidates, if commercialized, and our approved drugs, compete with existing drugs and therapies. In addition, there are many pharmaceutical companies, biotechnology companies, medical device companies, public and private universities, government agencies and research organizations actively engaged in the research and development of products targeting the same markets as our therapeutic candidates. Many of these organizations have substantially greater financial, technical, manufacturing and marketing resources than we do. In certain cases, our competitors may also be able to use alternative technologies that do not infringe upon our patents to formulate the active materials in our therapeutic candidates. They may, therefore, bring to market products that are able to compete with our candidates, or other products that we may develop in the future.
 
Our Approved and Commercial Products in the U.S.
 
We have established the headquarters of our U.S. commercial operations in Raleigh, North Carolina. Our U.S. operations promote Talicia® for the treatment of H. pylori infection in adults and Aemcolo® for the treatment of travelers’ diarrhea in adults. We are actively evaluating various strategic pathways, including divestiture of certain of our assets. In the event of sustained operations, our U.S. operations could potentially serve as the platform for potential launch of our proprietary, late-clinical stage therapeutic candidates in the U.S., if approved by the FDA, and potential in-licensed or acquired commercial-stage products in the U.S.
 
Our U.S. commercial operations consisted of 38 employees as of December 31, 2023. The net revenues for the six months ended June 30, 2023, and the year ended December 31, 2022, from the commercial products were approximately $5.4 million and $59.8 million, respectively. We continue to pursue the acquisition of additional commercial products, including, without limitation, through licensing or promotion transaction, asset purchase, joint venture with, acquisition of, or a merger with or other business combination with, companies with rights to commercial GI and other relevant assets and are continuously working to expand U.S. managed care access and coverage to our commercial products, where appropriate. We plan to pursue such opportunities in the U.S. and, if available, in other jurisdictions; however, we intend to focus our commercial activities in the U.S. We currently promote and commercialize three GI products in the U.S.
 
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Talicia® (omeprazole magnesium, amoxicillin, and rifabutin) delayed-release capsules 10 mg/250 mg/12.5 mg
 
Talicia® is our proprietary new drug approved for marketing in the U.S. for the treatment of H. pylori infection in adults. Talicia® is a combination of three approved drug products – omeprazole, which is a proton pump inhibitor (prevents the secretion of hydrogen ions necessary for the digestion of food in the stomach), plus amoxicillin and rifabutin, which are antibiotics. Talicia® is administered to patients orally. Talicia® is the first product we developed that was approved for marketing in the U.S. We launched Talicia® in the U.S. in March 2020 with our dedicated sales force.
 
Chronic infection with H. pylori irritates the mucosal lining of the stomach and small intestine. The original discovery of the H. pylori bacteria and its association with peptic ulcer disease warranted the Nobel Prize in 2005. H. pylori infection has since been associated with a variety of outcomes, which include: dyspepsia (non-ulcer or functional), peptic ulcer disease (duodenal ulcer and gastric ulcer), primary gastric B-cell lymphoma, vitamin B12 deficiency, iron deficiency, anemia, and gastric cancer.
 
Gastric cancer is one of the most prevalent cancers worldwide and one of the most common causes of cancer-related deaths, accounting for approximately 768,800 deaths in 2020, according to the World Health Organization (“WHO”) GLOBOCAN 2020 estimates. According to a 2010 report by Polk DB et al. published in Nature Reviews Cancer, H. pylori-induced gastritis is the strongest singular risk factor for cancers of the stomach, and eradication of H. pylori significantly decreases the risk of developing cancer in infected individuals without pre-malignant lesions.
 
Talicia® is targeting a significantly broader indication than that of existing H. pylori therapies, as a treatment of H. pylori infection, regardless of ulcer status.
 
We acquired the rights to Talicia® pursuant to an agreement with Giaconda Limited. See “ – Business Overview – Acquisition, Commercialization and License Agreements – Acquisition of Talicia®, RHB‑104, and RHB‑106.”
 
On December 5, 2021, we entered into an exclusive license agreement with Gaelan Medical for Talicia®, in the UAE. See “ – Business Overview – Acquisition, Commercialization and License Agreements License Agreement with Gaelan Medical”. On August 1, 2023, we announced that Gaelan Medical had received marketing approval for Talicia in the UAE and that Gaelan Medical had subsequently placed the first commercial order for Talicia, which was dispatched from the CMO in December 2023.
 
In November 2022, we announced post hoc analyses of the Phase 3 clinical trials of Talicia® supporting the efficacy and safety of Talicia® as empiric first-line treatment for H. pylori infection in patients regardless of obesity, body mass index (BMI) or diabetic status.
 
Regulatory Status
 
On November 1, 2019, Talicia® was approved by the FDA and is eligible for a total of eight years of U.S. market exclusivity.
 
In November 2014, Talicia® was granted QIDP designation by the FDA. The QIDP designation was granted under the FDA’s Generating Antibiotic Incentives Now (GAIN) Act, which is intended to encourage the development of new antibiotic drugs for the treatment of serious or life-threatening infections that have the potential to pose a serious threat to public health.
 
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In September 2023, we announced that the FDA had approved our supplemental new drug application (sNDA) for Talicia®, allowing a change to a more flexible dosing regimen, enabling patients to take Talicia three times daily, at least 4 hours apart with food.  This enables patients to follow a convenient “breakfast, lunch and dinner” dosing routine, which may support increased patient adherence and optimize the potential for successful H. pylori eradication.
 
In November 2023, we announced that the FDA had officially granted Talicia® five years of additional market exclusivity via QIDP designation as provided by the GAIN Act. This grant is on top of the three years’ exclusivity granted for the approval of Talicia® under section 505(b)(2). Talicia® is protected by its broad intellectual property suite to 2034.
 
In January 2024, we announced that U.S. Patent and Trademark Office (USPTO) issued a new patent covering Talicia® as a method for eradicating H. pylori regardless of BMI. The new patent is expected to provide protection for Talicia® until May 2042.
 
Market and Competition
 
The 2017 American College of Gastroenterology clinical guidelines for the treatment of H. pylori infection generally recommend against treating the majority of the U.S. population with current standard-of-care therapies reliant on the antibiotic clarithromycin. The American College of Gastroenterology recommends against using clarithromycin-based triple therapies in cases where the patient has previously failed treatment with clarithromycin-containing regimens, has prior macrolide exposure, in regions with unknown clarithromycin resistance or regions with 15% or more clarithromycin resistance. It is estimated that clarithromycin resistance in the U.S. exceeds 20% prevalence (Park JY, Dig Dis Sci. 2016). Such current clarithromycin and metronidazole-based standard-of-care treatments fail in approximately 25‑40% of the patients due to the development of antibiotic resistance, based on Malfertheiner P. et al. (Gut 2012), O’Connor A. et al. (Helicobacter 2015) and Venerito M. et al. (Digestion 2013). According to a 2015 publication by Shiota et al., it is estimated that H. pylori resistance to clarithromycin, a standard-of-care antibiotic used for the treatment of H. pylori, more than doubled between 2009‑2013. According to a 2021 publication by Graham et al., although clarithromycin is still widely used to treat H. pylori, by the year 2000, increasing resistance resulted in clarithromycin triple therapy becoming generally ineffective. A recent Phase III study demonstrated that treating clarithromycin-resistant patients with a PPI/amoxicillin/clarithromycin combination regimen resulted in only 32% efficacy.
 
Talicia® is designed to address the high resistance of H. pylori bacteria to the antibiotics commonly used in current standard-of-care therapies. Talicia’s approval was supported, in part, by the results of two positive Phase 3 studies in the U.S. for the treatment of H. pylori-positive adult patients complaining of epigastric pain and/or discomfort. The confirmatory Phase 3 study of Talicia® demonstrated 84% eradication of H. pylori infection with Talicia® vs. 58% in the active comparator arm (p<0.0001). Further, in an analysis of data from this study, it was observed that subjects with measurable blood levels of drug at Day 13 had response rates of 90.3% in the Talicia® arm vs. 64.7% in the active comparator arm.
 
H. pylori bacterial infection affects over 50% of the adult population worldwide, according to a 2018 report by Kakelar HM et al., published in Gastric Cancer, and approximately 35% of the U.S. population, according to a report by Hooi JKY et al. published in 2017 in Gastroenterology. In the U.S., we estimate that approximately 2 million patients per annum are treated for H. pylori eradication, based on a 2021 RedHill-funded market assessment performed by IQVIA.
 
Talicia® faces competition in the U.S. from certain branded prescription therapies indicated for the treatment of H. pylori infection including Pylera® (marketed by Allergan plc)and Voquezna (sold by Phathom) as well as from the generic individual components of these branded therapies (Pylera, PrevPac, -). Additionally, the individual components of Talicia® are available in generic form, and while rifabutin is not available in an equivalent dose, there is a risk that some physicians may prescribe the individual components of Talicia® in doses that are not equivalent to the approved drug and regimen. We may also be exposed to potential competitive products that may be under development to treat H. pylori infection.
 
We believe that Talicia® offers a significant benefit over other marketed drugs in part because of the efficacy, tolerability, and resistance profile demonstrated in our Phase 3 program, which showed no bacterial resistance to rifabutin and high resistance to clarithromycin and metronidazole.
 
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Aemcolo®
 
Aemcolo®, containing 194mg of rifamycin, is an orally administered, minimally absorbed antibiotic that is delivered to the colon, approved by the FDA in 2018 for the treatment of travelers’ diarrhea caused by non-invasive strains of E. coli in adults (“Travelers’ Diarrhea”). In October 2019, we entered into a license agreement, as amended, with a wholly-owned subsidiary of Cosmo pursuant to which we were granted exclusive rights to commercialize Aemcolo® in the U.S. (the “Cosmo License Agreement”). In December 2019, we launched the commercialization of Aemcolo® in the U.S. See “ – Business Overview – Acquisition, Commercialization and License Agreements – Exclusive License Agreement for Aemcolo®.”
 
Regulatory Status
 
Aemcolo® received FDA approval on November 16, 2018, for the treatment of travelers’ diarrhea caused by noninvasive strains of Escherichia coli in adults. Cosmo transferred the Aemcolo® NDA and the IND to RedHill U.S., which were accepted on November 27, 2019. This acceptance also includes a commitment to complete any postmarketing requirements or commitments related to the NDA. There are two pediatric studies that are required to be completed to satisfy the PREA requirements and also with required milestone dates:
 

Conduct a randomized, placebo-controlled study to evaluate the safety, tolerability, and efficacy of Aemcolo® (rifamycin) for the treatment of travelers’ diarrhea in children from 6 to 11 years of age.

Conduct a randomized, placebo-controlled study to evaluate the safety, tolerability, and efficacy of Aemcolo® (rifamycin) for the treatment of travelers’ diarrhea in children from 12 to 17 years of age.
 
Market and Competition
 
Aemcolo® is a new pharmaceutical product employing rifamycin SV engineered with MMX® technology. The application of MMX® technology to rifamycin SV allows the antibiotic to be delivered directly into the colon, intended to avoid unwanted effects on the beneficial bacterial flora living in the upper portions of the gastrointestinal tract. The specific dissolution profile of Aemcolo® tablets increases the colonic disposition of the antibiotic so that an optimized intestinal concentration is achieved, thus abating its systemic absorption in the lower intestine.
 
In October 2017, the FDA granted QIDP and Fast Track designations for Aemcolo®. With the QIDP designation, intended for antibacterial or antifungal drugs that treat serious or life-threatening infections, together with new chemical entity (NCE) designation, Aemcolo® enjoys marketing exclusivity until 2028.
 
Due to the significant decrease in travel as a result of the COVID-19 pandemic, the travelers’ diarrhea market was significantly impacted in 2020 and 2021, and we have not generated meaningful revenues from the sale of Aemcolo® since then.  We do not expect Aemcolo® to generate meaningful revenues, and there can be no assurance that we will generate meaningful revenues upon return of U.S. international travel to pre-pandemic levels.
 
In December 2021, we and Cosmo amended the Cosmo License Agreement such that either party may terminate the Cosmo License Agreement upon advance notice at any time.
 
We have implemented plans, including re-launching active field promotion of Aemcolo®, to support, and build on, the initial momentum that Aemcolo® was generating pre-COVID-19 travel restrictions. According to the National Travel and Tourism Office (NTTO), U.S. citizen air passenger departures from the U.S. to foreign countries reached 4.3 million in February 2023 which reflects a 9.3% increase when compared to the February 2019 volume. This data suggests that U.S. international travel is returning to pre-COVID-19 pandemic levels.
 
Travelers’ Diarrhea is the most common travel-related illness according to the Centers for Disease Control and Prevention (CDC). The CDC Yellow Book states that attack rates of Travelers’ Diarrhea range up to 70% of travelers, depending on the destination and season of travel. Travelers’ Diarrhea may often result in short-term morbidity adversely impacting travel plans. Untreated diarrhea can also lead to an underappreciated risk of chronic complications, including functional bowel disorders.
 
There are several competing drugs marketed in the U.S. intended for the treatment of Travelers’ Diarrhea. One of the leading competitors is Xifaxan® (rifaximin, marketed by Salix Pharmaceuticals), a prescription drug approved for the treatment of Travelers’ Diarrhea caused by non-invasive strains of E. coli in adults and pediatric patients, treatment of IBS-D and reduction in risk of overt hepatic encephalopathy recurrence in adults. Aemcolo® also competes with generic antibiotics such as fluoroquinolones and azithromycin. Aemcolo® also competes with prescription and OTC anti-diarrheal medications such as loperamide and bismuth subsalicylate, as well as probiotics and medical foods which may offer symptomatic relief. We may also be exposed to potentially competitive products, which may be under development to treat or prevent Travelers’ Diarrhea, including new antibiotics, anti-diarrheal medications, and vaccines.
 
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Our Therapeutic Candidates
 
Summary
 
The ongoing development programs of our five therapeutic candidates, most in clinical development, include “opaganib”, “RHB-107” (upamostat), “RHB-104”, “RHB-102 (Bekinda®)”, “RHB-204”, and related research and development programs, the most advanced of which are described below.

 
 
   
Potential Advantages
   
 
 
       
Over Most Existing
       
Name of Therapeutic
     
Treatments, if
 
Development
   
Candidate
 
Proposed Indication
 
Approved
 
Stage
 
Rights to the Product
                 
opaganib
 
Patients hospitalized with SARS-CoV-2 severe COVID-19 pneumonia
 
Oral administration, first-in-class SK2 selective inhibitor, with anti-inflammatory and anti-cancer activities
 
U.S. Phase 2 study completed and top-line data received; global Phase 2/3 completed and top-line data received and submitted regulatory packages to regulatory authorities
 
We filed patent applications to protect the proposed commercial use
opaganib
 
Advanced unresectable cholangiocarcinoma
 
Oral administration, first-in-class SK2 selective inhibitor, with anti-inflammatory and anti-cancer activities
 
Phase 2 study in the U.S. patient follow up completed  (ABC-108)
 
Worldwide exclusive license
opaganib
opaganib
 
Prostate cancer
Nuclear radiation protection
 
Oral administration, first-in-class SK2 selective inhibitor, with anti-inflammatory and anti-cancer activities in addition to failing treatment with abiraterone or enzalutamide
Oral, small molecule pill that is stable with a more than five-year shelf-life, easy to administer and distribute, supporting, if approved, potential central stockpiling by governments
 
Investigator-sponsored Phase 2 study in the U.S patient follow up completed
U.S. government-funded in vivo studies completed, and additional validation experiments underway
 
Worldwide exclusive license
Worldwide exclusive license
RHB-107 (upamostat; formerly Mesupron)
 
Outpatients infected with SARS-Co-V-2 (COVID-19 disease)
 
Oral administration, inhibitor of human serine proteases with antiviral activity and established safety profile
 
Part A of Phase 2/3 study completed
Multi-site Phase 2 platform trial ongoing with US governmental funding
 
We filed patent applications
to protect the proposed commercial use
RHB-107 (upamostat; formerly Mesupron) and opaganib
 
Advanced unresectable cholangiocarcinoma
 
Combination of (RHB-107 (upamostat)) and (opaganib )
 
Preclinical
 
We filed patent applications internationally directed to the proposed commercial use
                 
RHB-104
 
Crohn’s disease
 
Novel mechanism of action and improved clinical benefit (targeting suspected underlying cause of Crohn’s disease)
 
First Phase 3 study completed; supportive results from the open-label extension
 
We filed patent applications internationally directed to the proposed commercial formulation and use
RHB-102 (Bekinda®) 24 mg
 
Acute gastroenteritis and gastritis
 
No other approved 5-HT3 serotonin receptor inhibitor for this indication; once-daily dosing
 
First Phase 3 study in the U.S. completed; confirmatory Phase 3 study in planning
 
We filed patent applications internationally to protect the proposed commercial formulation and its use
RHB-102 (Bekinda®) 12 mg
 
IBS-D
 
Potential 5-HT3 serotonin receptor inhibitor with improved safety, while maintaining efficacy
 
Phase 2 in the U.S. completed; Phase 3 program in planning
 
We filed patent applications internationally to protect the proposed commercial formulation and its use
RHB-102 (Bekinda®) 24 mg
 
Oncology support anti-emetic
 
 
Reduced number of drug administrations, improved compliance and adherence
 
MAA pursued in the U.K Additional data required for U.S.
 
We filed patent applications internationally to protect the proposed commercial formulation and its use.
RHB‑204
   Pulmonary nontuberculous mycobacteria (NTM) infections caused by Mycobacterium avium complex (MAC)  
Oral formulation targeting a major cause of pulmonary NTM infections
 
Phase 3 terminated early due to low enrolment rate
 
We filed patent applications internationally directed to the proposed commercial formulation and use

Opaganib
 
Opaganib, a new chemical entity, is a proprietary, first-in-class, orally-administered, sphingosine kinase-2 (SK2) selective inhibitor with observed anticancer, anti-inflammatory, and antiviral activities, targeting multiple oncology, viral, inflammatory, and gastrointestinal indications. The compound originally designated as ABC294640 received an international non-proprietary name, opaganib, in the Recommended INN: List 79, 2018.
 
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Opaganib inhibits SK2, a lipid kinase that catalyzes the formation of the lipid signaling molecule sphingosine 1-phosphate (“S1P”). S1P promotes cancer growth and proliferation and pathological inflammation, including TNFα signaling and other inflammatory cytokine production. Specifically, by inhibiting the SK2 enzyme, opaganib blocks the synthesis of S1P which regulates fundamental biological processes such as cell proliferation, migration, immune cell trafficking and angiogenesis, and is also involved in immune-modulation and suppression of innate immune responses from T cells.
 
Opaganib’s proposed antiviral mechanism, based on pre-clinical studies conducted with the molecule, inhibits the replication of positive-strand single-stranded ribonucleic acid (“RNA”) viruses, of which coronavirus, and specifically SARS-CoV-2, is a member. By binding to SK2, opaganib inhibits SK2 recruited to the viral replication-transcription complex and thus blocks the intracellular viral replication process. Because SK2 is a human host factor, opaganib’s proposed action is expected to maintain effect against known and emerging SARS-CoV-2 variants of concern irrespective of mutations in the viral spike-protein. Additionally, preclinical in vivo studies have demonstrated opaganib's potential to decrease renal fibrosis, have shown decreased fatality rates from influenza virus infection, and amelioration of bacteria-induced pneumonia lung injury by reducing the levels of IL-6 and TNF-alpha in bronchoalveolar lavage fluids.
 
On March 30, 2015, we entered into an exclusive worldwide license agreement with Apogee Biotechnology Corporation (“Apogee”), pursuant to which Apogee granted us the exclusive worldwide development and commercialization rights to ABC294640 (which we then renamed to opaganib and, as noted above, received an international non-proprietary name, opaganib, in 2018) and additional intellectual property for all indications. See “ – Business Overview – Acquisition, Commercialization and License Agreements – License Agreement for opaganib.”
 
In March 2022, we entered into the Exclusive License Agreement with Kukbo for opaganib for the treatment of COVID-19 in South Korea. See “  – Business Overview – Acquisition, Commercialization and License Agreements – License Agreement with Kukbo”.
 
The development of opaganib has been supported by grants and contracts from U.S. federal and state government agencies awarded to Apogee, including from the NCI, BARDA, the U.S. Department of Defense and the FDA Office of Orphan Products Development.
 
Market and Competition
 
Opaganib is currently being developed for several potential indications, including for the treatment of severe COVID-19 pneumonia, cholangiocarcinoma (bile duct cancer), prostate cancer and for nuclear radiation protection.
 
COVID-19 is a disease caused by a coronavirus virus, SARS-CoV-2. The clinical spectrum has not yet been well defined and ranges from asymptomatic infection to pneumonia and Acute Respiratory Distress Syndrome (ARDS) with multiorgan failure, that may lead to death. Patients over 65 years and those with significant comorbidities, such as diabetes, cardiac or pulmonary disease, are more susceptible to developing severe disease and have a relatively higher mortality rate compared to younger, otherwise healthy patients. As of April 6, 2023, there have been over 762 million confirmed cases of COVID-19 worldwide, including over 6.8 million reported deaths according to WHO. Several therapies have been approved by the FDA for the treatment of COVID-19, some under emergency use authorization. These therapies include antiviral drugs such as Veklury® (remdesivir), immune modulators and monoclonal antibodies. The FDA granted Emergency Use Authorization for two oral antiviral drugs intended for patients with mild-to-moderate COVID-19, including Lagevrio™ (molnupiravir) and Paxlovid™ (nirmatrelvir co-packaged with ritonavir). These therapies are intended for the outpatient setting and require treatment initiation within a limited window of five days from symptom onset. As of the filing of this report, no orally-administered antiviral therapy has been approved by the FDA to date for treatment of hospitalized patients with severe disease. Several vaccines for SARS-CoV-2 have also been approved by the FDA and other regulatory agencies to date. Multiple additional drug therapies and vaccines are currently under development for COVID-19.
 
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Cholangiocarcinoma (bile duct cancer) is a highly lethal malignancy. According to the American Cancer Society report, approximately 8,000 people are diagnosed with intrahepatic and extrahepatic bile duct cancers annually in the U.S., with studies reporting an increased incidence of cholangiocarcinoma, mainly attributed to advancements in the diagnosis of this disease (Gores GJ, Hepatology, 2003). Surgery with complete resection is currently known to be the only curative therapy for cholangiocarcinoma; however, only a minority of patients are classified as having a resectable tumor at the time of diagnosis. Additional treatment options include radiation therapy and chemotherapy, but the efficacy of these treatments in cholangiocarcinoma patients is also limited and the prognosis for relapse patients who have failed initial chemotherapy is very poor, with an overall median survival of approximately one year (Valle J, et al. New Eng J, Med 2010). In recent years, the FDA has approved several targeted drug therapies specifically for cholangiocarcinoma. In April 2020, the FDA approved Pemazyre® (pemigatinib, Incyte Corporation), the first drug approved specifically for cholangiocarcinoma, indicated for adults with advanced bile duct cancer whose cancer has grown after at least one previous chemotherapy treatment and whose tumors have a mutation in the FGFR2 gene. FGFR2 gene fusions are found in patients with intrahepatic cholangiocarcinoma, and have a reported incidence rate of 14% to 23% (Prete MG, Explor Target Antitumor Ther., 2021). In August 2021, the FDA approved Tibsovo® (ivosidenib, Servier Pharmaceuticals LLC) for adult patients with previously treated, locally advanced or metastatic cholangiocarcinoma with an isocitrate dehydrogenase-1 (IDH1) mutation as detected by an FDA-approved test. IDH1 mutations are also found in patients with intrahepatic cholangiocarcinoma, and have a reported incidence rate of 7% to 20% (Prete, 2021). In September 2022, the FDA approved the first immunotherapy option, Imfinzi® (durvalumab, AstraZeneca Plc) in combination with gemcitabine and cisplatin for the treatment of patients with metastatic or locally advanced cholangiocarcinoma. We believe there remains a high unmet medical need for new therapies for the majority of cholangiocarcinoma patients. There are several drugs in late-stage clinical development for cholangiocarcinoma. The 5-year relative survival rates of intrahepatic and extrahepatic cholangiocarcinoma patients range between 2% to 24%, depending on the tumor type and stage at diagnosis, according to the American Cancer Society.
 
Prostate cancer is the second most common cancer and the second leading cause of cancer death in American men. The American Cancer Society estimates that approximately 288,300 new cases of prostate cancer will be diagnosed in 2023. Prostate cancer is more likely to develop in older men and in African-American men. Treatment options depend on each case and include surgery, radiotherapy, cryotherapy, chemotherapy, hormone therapy, and immunotherapy. There are several approved drugs indicated for treatment of prostate cancer, as well as several drugs in development for U.S. approval.
 
Acute Radiation Syndrome (ARS) is an acute illness caused by irradiation of the body by a high dose of penetrating radiation in a short period of time. The clinical manifestations of ARS are categorized into several sub-syndromes which include but are not limited to the hematopoietic (H-ARS) and gastrointestinal (GI-ARS) sub-syndromes.

ARS is rare, however, radiation exposure due to a radiological or nuclear event has the potential to affect a large number of people. The U.S. government has recognized the need to develop and expand the availability of suitable medical countermeasures (MCMs) to address radiation injuries, including those of ARS.

The FDA has approved five MCMs for the H-ARS sub-syndrome to date. Neupogen® (filgrastim, Amgen Inc., FDA-approved in 2015), Neulasta® (pegfilgrastim, Amgen Inc., FDA-approved in 2015), and Leukine® (sargramostim, Partner Therapeutics Inc. and originally Sanofi, FDA-approved in 2018) are leukocyte growth factors that stimulate the recovery of neutrophils, while the fourth agent, Nplate® (romiplostim, Amgen Inc., FDA-approved in 2021) is a thrombopoietin receptor agonist that stimulates the body’s production of platelets. In November 2022, the FDA approved the fifth MCM for H-ARS known as Udenyca® (pegfilgrastim-cbqv, Coherus BioSciences, Inc.), also a leukocyte growth factor, and a biosimilar to Neulasta®.

The five MCMs approved by the FDA for the H-ARS sub-syndrome are radiomitigators, or agents administered after radiation exposure (and before the development of ARS symptoms) to stimulate the recovery of injured tissues. To the best of our knowledge, there are no agents approved by the FDA for the H-ARS sub-syndrome that are radioprotectors or agents administered before radiation exposure to prevent tissue injury, or MCMs approved for the GI-ARS sub-syndrome.

In addition to the MCMs approved by the FDA for the H-ARS sub-syndrome, there are additional candidates in development for ARS.

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Clinical Development
 
COVID-19
 
Preclinical data have demonstrated both anti-inflammatory and antiviral activities of opaganib, with the potential to reduce inflammatory lung disorders, such as pneumonia, and mitigate pulmonary fibrotic damage. In September 2020, we announced that opaganib demonstrated potent inhibition of SARS-CoV-2, the virus that causes COVID-19, achieving complete blockage of viral replication in an in vitro model of human lung bronchial tissue. Additionally, preclinical in vivo studies have demonstrated that opaganib decreased fatality rates from influenza virus infection and ameliorated Pseudomonas aeruginosa-induced lung injury by reducing the levels of IL-6 and TNF-alpha in bronchoalveolar lavage fluids.
 
Preliminary results from a preclinical study with opaganib, administered at 250 mg/kg, demonstrated a reduction of thrombosis (blood clotting) in an acute respiratory distress syndrome (ARDS) animal model. The preclinical study was designed to assess the efficacy of opaganib in reducing the incidence of adverse thromboembolic events in situ in the lipopolysaccharide (LPS)-induced model of pulmonary inflammation, a reliable model of ARDS that can mimic COVID-19 inflammation. The preliminary results from our study show opaganib 250 mg/kg reduced blood clot length, weight and total thrombus score in a preclinical model of ARDS. We believe such preliminary results add to the known antiviral and anti-inflammatory activities of opaganib and provide the potential for a unique triple-action effect on the pathophysiological processes associated with COVID-19 disease.
 
In September 2020, Apogee was awarded a grant from Pennsylvania's COVID-19 Vaccines, Treatments and Therapies Program, which supports the rapid advancement of promising novel COVID-19 therapies.
 
ABC-201: Global Phase 2/3 Study
 
In July 2020, we initiated a global Phase 2/3 clinical trial evaluating opaganib in hospitalized patients with severe COVID-19 pneumonia. This global multi-center, randomized, double-blind, parallel-arm, placebo-controlled trial enrolled a total of 475 patients requiring hospitalization and treatment with supplemental oxygen. The study was approved in ten countries.
 
In September 2021, we reported that preliminary top-line data from the opaganib (ABC294640) global Phase 2/3 study in hospitalized patients with severe COVID-19 pneumonia showed that the study did not meet its primary endpoint. Analysis of the study efficacy endpoints did show trends in favor of the opaganib arm as compared to placebo across multiple endpoints, including the primary endpoint, despite not achieving statistical significance.
 
In October 2021, we reported new data from a further analysis of this study, showing that treatment with oral opaganib as compared to the placebo-controlled arm resulted in a 62% statistically significant reduction in mortality as well as statistically significant improved outcomes in time to room air and median time to hospital discharge in a group of 251 hospitalized, moderately severe COVID-19 patients, comprising 54% of the study participants.
 
These results were from a post-hoc analysis of data from the 251 study participants requiring a Fraction of inspired Oxygen (FiO2) up to 60% at baseline. Patients with FiO2 ≤ 60% are still considered to be severely affected and typically require oxygen supplementation via a nasal cannula or face mask.
 
Analyses of the FiO2 up to 60% patient subset from the opaganib Phase 2/3 study, the median for FiO2 levels in the study, who were treated with either opaganib or placebo in addition to standard-of-care (including dexamethasone and/or remdesivir) demonstrated consistent benefit across endpoints, in this subset of hospitalized moderately severe patients. Given the post-hoc characteristics of this subset, statistical inferences of significance cannot be formally attributed (nominal values presented). We also conducted a sensitivity analysis to account for missing data interpretability:
 

Mortality: Opaganib treatment resulted in a statistically significant 62% reduction in mortality (7/117 patients treated with opaganib vs. 21/134 for placebo; nominal p-value=0.019, Relative Risk 2.6) (Sensitivity Analysis: 5/117 vs. 16/134, 64% efficacy benefit; nominal p-value=0.033, Relative Risk - 2.8).
A detailed analysis of baseline risk factors and their potential impact on the mortality outcome in the sensitivity analysis group has also been undertaken, showing that the benefit is robustly maintained irrespective of the subgroups/risk factors, confirming that the positive outcome observed is due to opaganib.
 
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Reaching Room Air by Day 14 (primary endpoint of the study): 77% of opaganib-treated patients reached room air by Day 14 vs. 63.5% for placebo – an efficacy benefit of 21% with opaganib (nominal p-value=0.033).
 

Median time to discharge: Patients treated with opaganib showed median time of 10 days to discharge vs. 14 days for the placebo arm, resulting in a saving of four days hospitalization per opaganib patient and saving a total of 524 cumulative days of hospitalization across the group by Day 42, nominal p-value=0.0195.
 

Safety: Overall adverse events were balanced between the opaganib and placebo groups, suggesting good safety, with no new safety signals emerging, further supporting potential use in this patient population and earlier stage populations.
 
In January 2022, we reported new data from a prespecified analysis of all Phase 2/3 study patients with positive PCR at screening, demonstrating that opaganib improved the median time to viral RNA clearance by at least 4 days. Treatment with opaganib resulted in viral RNA clearance in a median of 10 days while the median for clearance in the placebo arm was not reached by the end of 14-days treatment for placebo (hazard ratio 1.34; nominal p-value=0.043, N=437/463). To the best of our knowledge, opaganib is the first oral novel drug candidate to show improved viral RNA clearance in patients with severe COVID-19 pneumonia. This data provides clinical evidence supporting opaganib's potential antiviral activity.
 
In February 2022, we reported additional results from two prespecified analyses from the Phase 2/3 study. The first analysis showed that opaganib significantly reduced mortality when given to patients who received remdesivir and corticosteroids, the best available standard-of-care (SoC) for hospitalized patients. This analysis, undertaken for all patients from the study who were receiving remdesivir and corticosteroids at baseline, demonstrated a significant 70.2% mortality benefit for opaganib-treated patients, with a mortality rate of 6.98% (n=3/43) for the opaganib arm + SoC versus 23.4% (n=11/47) for placebo + SoC by Day 42 (p-value=0.034).
 
The second analysis further showed that opaganib delivered a significant benefit in time to recovery, defined as achieving a score of 1 or less on the WHO Ordinal Scale by Day 14. The prespecified analysis showed opaganib delivered a significant 34% benefit in time to recovery, with 37.4% of opaganib-treated patients (n=86/230) reaching this event versus 27.9% of patients (n=65/233) treated with placebo + SoC (p-value=0.013, Hazard Ratio 1.49).
 
Safety data for the Phase 2/3 clinical trial showed good tolerability of opaganib, with balanced adverse events between the study arms.
 
Guidance on the potential path to approval including the requirement of a confirmatory study for future emergency use approvals has been received from the EU's EMA, the U.S. FDA, UK's MHRA and others.
 
We are continuing discussions and work with U.S. and other government agencies and non-governmental organizations to support the ongoing development of opaganib in areas of public health interest, including pandemic preparedness and medical countermeasures. These are currently undergoing pre-clinical evaluation. Discussions are also ongoing with potential partners who are interested in the rights to opaganib in various territories.
 
ABC-110: U.S. Phase 2 Study
 
In December 2020, we announced that our randomized, double-blind, placebo-controlled U.S. Phase 2 trial with opaganib in patients hospitalized with COVID-19 pneumonia demonstrated positive safety and efficacy data. The trial, which was not powered for statistical significance, enrolled 40 patients requiring hospitalization and supplemental oxygen.
 
The data from the study was published in May 2022 in Open Forum Infectious Diseases.
 
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Preclinical studies
 
In September 2021, we announced results of a preclinical study demonstrating opaganib’s efficacy in significantly decreasing renal fibrosis in a unilateral ureteral obstruction-induced renal interstitial fibrosis model. Reports suggest that over 20% of hospitalized COVID-19 patients experience acute renal failure. The aim of the in vivo efficacy study was to verify the effect of opaganib on kidney inflammation and fibrosis in a unilateral ureteral obstruction (UUO) model – a well characterized model for renal fibrosis. Results from the study showed that opaganib significantly decreased renal fibrosis.
 
Opaganib demonstrated potent antiviral activity against SARS-CoV-2, the virus that causes COVID-19, completely inhibiting viral replication in an in vitro model of human lung bronchial tissue. In June 2021, we announced that preliminary results from a preclinical study demonstrated potent inhibition of the Beta and Gamma COVID-19 variants of concern by opaganib at non-cytotoxic doses. We further announced in August 2021 that opaganib demonstrated strong inhibition of the Delta variant replication while maintaining cell viability at relevant concentrations in a 3D tissue model of human bronchial epithelial cells. Based on opaganib’s unique host-targeted mechanism and the preliminary results of this study, we believe opaganib is likely to also maintain its activity against emerging variants of COVID-19.
 
In April 2022, we announced study results in which opaganib was observed to have potent in vitro efficacy against the Omicron SARS-CoV-2 variant, while maintaining host cell viability, and in October 2022, we announced study results showing preliminary evidence of in vitro efficacy against the Omicron COVID-19 sub-variant BA.5 by opaganib and RHB-107.
 
In September 2022, we announced new in vitro data demonstrating opaganib’s potential to significantly decrease renal fibrosis in a unilateral ureteral obstruction-induced renal interstitial fibrosis model.
 
In an in-vitro study sponsored by NIAID, opaganib demonstrated activity against Influenza A H1N1 in a human airway epithelial cell line. Upon successful completion of the above assay, further in-vivo studies of opaganib for treatment of influenza A/CA/04/2009 (H1N1pdm) virus infection in C57BL/6 mice were initiated at Utah State University to determine the efficacy of opaganib.  The experiment was technically flawed as the positive control was also only minimally effective. Discussion is underway to repeat the experiment using the more standard Balb-C mice and a higher dose of oseltamivir in Q1/2023.
 
In October 2023, we announced that opaganib delivered a statistically significant increase in survival time when given at 150 mg/kg twice a day (BID) in a United States Army Medical Research Institute of Infectious Diseases (USAMRIID) in vivo Ebola virus study, making it the first host-directed molecule to show activity in Ebola virus disease. The U.S. Army study tested three doses of opaganib (50, 100 and 150 mg/kg BID), against an inactive vehicle control arm. The in vivo study results showed a statistically significant survival increase in mean (SE) survival time of 11.2 (2.6) days in the 150 mg/kg opaganib group (p=0.0279) compared to a mean (SE) survival time of 5.5 (0.4) days in the inactive vehicle control group. A 30% mice survival benefit was observed in the 150 mg/kg treated group compared to the vehicle control. In December 2023, we further announced that opaganib demonstrated a robust synergistic effect when combined with Veklury® (remdesivir, Gilead Sciences, Inc), significantly improving viral inhibition while maintaining cell viability, in a new U.S. Army-funded and conducted Ebola virus in vitro study.
 
ABC‑108: Advanced Unresectable Cholangiocarcinoma
 
A Phase 2a clinical study with opaganib in patients with advanced, unresectable, intrahepatic, perihilar and extrahepatic cholangiocarcinoma is ongoing at Mayo Clinic’s major campuses in Arizona and Minnesota, the Huntsman Cancer Institute, University of Utah Health and at Emory University. In September 2018, we announced that the study achieved its pre-specified efficacy goal for the first stage of the two-stage study design, and as a result, the study has continued to its second stage. Treatment with opaganib, Part 1 of the study, designed to enroll 39 evaluable patients, completed enrollment in January 2020. Preliminary data from this cohort indicated a signal of activity in a number of subjects with advanced cholangiocarcinoma.
 
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In October 2019, an expansion cohort for cotreatment of opaganib and hydroxychloroquine sulfate (HCQ), an anti-autophagy agent, was submitted to the FDA. Enrollment of this cotreatment cohort, Part 2 of the study, began in July 2020. The cohort consists of two phases: Phase 1, an accelerated dose escalation run-in with enrollment of up to 15 patients evaluable for safety and tolerability, and Phase 2, treatment of 20 patients evaluable in the Phase 1 determined dose to determine safety and tolerability. In May 2022, RedHill closed the enrollment to the second dose tier, 500 mg BID of opaganib and 200 mg of HCQ BID. The main reason for the study’s early closure was a significant slowdown in enrollment since the start of the COVID-19 pandemic. The last patient that was enrolled demonstrated stable disease for 10 cycles and tolerated the treatment very well. Accordingly, RedHill in collaboration with the treating physician in Mayo, AZ, arranged to continue the patient’s treatment under a Single Patient IND.
 
A total of 65 patients have been enrolled in the study, 7 of those in the Phase I safety run-in of Part 2. Of the 7 patients that were enrolled in Part 2 (4 evaluable for efficacy), one subject has demonstrated durable stable disease for 10 months and has transitioned to a Single Patient IND.
 
The primary objective of Part 1 is to determine the response rate (RR) of cholangiocarcinoma defined as objective responses (OR), i.e. complete and partial responses (CR, PR) plus stable disease (SD) of at least four months to treatment with opaganib. The primary endpoint of Part 2 is to determine Durable Disease Control Rate (DDCR), defined as Disease Control Rate (DCR) of at least four months’ duration to treatment with opaganib and HCQ.
 
In April 2017, the FDA granted to opaganib orphan drug designation for the treatment of cholangiocarcinoma. The orphan drug designation allows us to benefit from various development incentives to develop opaganib for this indication, including tax credits for qualified clinical testing, the waiver of a prescription drug user fee (PDUFA) upon submission of a potential NDA and, if approved, a seven-year marketing exclusivity period (subject to certain exceptions) for the treatment of cholangiocarcinoma.
 
EAP for the Treatment of Advanced Unresectable Cholangiocarcinoma
 
An EAP is for eligible participants who do not qualify for participation in, or who are otherwise unable to access, the ongoing clinical trial ABC-108 for advanced unresectable cholangiocarcinoma. This program is designed to provide access to opaganib for the treatment of cholangiocarcinoma prior to approval by the local regulatory agency. As noted in the section above, one subject from study ABC-108 has transitioned to a Single Patient IND with the termination of study ABC-108. We cannot predict how long this program will continue, and we may decide for various reasons, including but not limited to resources and availability of opaganib, not to continue with the EAP.
 
ABC‑101: Advanced Solid Tumors
 
A Phase 1 study, first-in-man evaluation of opaganib in advanced solid tumors was completed in the summer of 2015. Final results demonstrated that the study, conducted at the Medical University of South Carolina (MUSC), successfully met its primary and secondary endpoints, demonstrating that the compound is well tolerated and can be safely administered to cancer patients at doses predicted to have therapeutic activity.
 
Twenty-one patients with advanced solid tumors were treated with opaganib in the study, the majority of who were GI cancer patients, including pancreatic, colorectal and cholangiocarcinoma cancers.
 
The study included the first-ever longitudinal analysis of plasma S1P levels as a potential pharmacodynamic biomarker for activity of a sphingolipid-targeted drug. Administration of opaganib resulted in a rapid and pronounced decrease in levels of S1P with several patients having prolonged stabilization of disease.
 
The study was supported by grants from the U.S. National Cancer Institute (NCI) awarded to MUSC Hollings Cancer Center, an NCI-Designated Cancer Center, and from the FDA Office of Orphan Products Development (OOPD) awarded to Apogee.
 
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ABC‑107: Prostate Cancer
 
The investigator-sponsored study “A Phase 2 Study of the Addition of opaganib to Androgen Antagonists in Patients with Prostate Cancer Progression on Enzalutamide or Abiraterone” was initiated in March 2020 at MUSC Hollings Cancer Center and at Emory University. The study is led by Dr. Michael B. Lilly. The study is supported by the National Cancer Institute grant awarded to MUSC.
 
This is a Phase 2 efficacy study of opaganib in patients with metastatic castration-resistant prostate cancer that is progressing during treatment with androgen signaling blockers, abiraterone or enzalutamide. The study will consist of an initial safety “run in” cohort in which patients will receive opaganib along with continuation of prior abiraterone or enzalutamide to document tolerability in this new patient population and to document the effects of opaganib on blood prostate-specific antigen (PSA) levels. Provided that there is no untoward toxicity in these patients, there will be two additional cohorts with up to 27 patients, with each of patients with worsening disease during abiraterone or enzalutamide treatment. These patients will continue previous androgen blocking agents (abiraterone or enzalutamide, and gonadotropin-releasing hormone GnRH receptor agonist/antagonist). The primary objective of the study is to measure the proportion of patients with disease control during opaganib plus abiraterone or enzalutamide treatment using a composite metric based on PSA, bone scan, and RECIST measurements per Prostate Cancer Working Group 3 (PCWG3) criteria.
 
First patient was enrolled in March 2020 and the last patient was enrolled in December 2022, completing enrollment of 66 patients: 3 in cohort 1a (abiraterone + opaganib 250 mg BID), 3 in cohort 1b (enzalutamide + opaganib 250 mg BID), 26 in cohort 2 (abiraterone + opaganib 500 mg BID), 34 in cohort 3 (enzalutamide + opaganib 500 mg BID). All patients are now off study.  Disease control, the primary endpoint of the study, was defined as progression-free for at least 16 weeks and was assessed primarily in the 500 mg opaganib bid cohorts, cohorts 2 and 3.  A total of 11 patients achieved disease control: 3 in the lead-in cohorts combined; 4 (15%;  95% CI 4-35%) in cohort 2 (abiraterone, and 4 (12%;  95% CI 3-27%) in cohort 3 (enzalutamide).  Treatment was generally well tolerated;  toxicity was similar to that noted in prior studies of opaganib, mainly neuropsychiatric.  A new toxicity, subretinal fluid accumulation which manifest as visual disturbance, was noted in one patient who received opaganib and abiraterone.  This resolved in several days after the patient stopped taking opaganib.  While not previously recognized, this toxicity may have been misinterpreted in the past as visual hallucinations. Additional investigator initiated clinical studies of opaganib in prostate cancer are being pursued in possible collaboration with pharma partners.
 
ABC‑104: Oncology Support, Radioprotectant: Prevention of Radiation-Associated Mucositis in the Treatment of Head and Neck Cancer
 
A Phase 1b study to evaluate opaganib as a radioprotectant in head and neck cancer patients undergoing therapeutic radiotherapy is currently on hold.
 
Nuclear Radiation Protection Development Program
 
In November 2022, we announced acceleration of opaganib’s nuclear radiation protection development program, with newly published data from eight U.S. government-funded in vivo studies, and additional experiments, indicating that opaganib was associated with:
 

Protection of normal tissue, including gastrointestinal, from radiation damage due to ionizing radiation exposure or cancer radiotherapy.
 

Improvement of antitumor activity, response to chemoradiation, and enhancement of tolerability and survival.
 

Radioprotective capacity in bone marrow, with opaganib showing enhanced survival in mice irradiated with both lethal and half-lethal whole-body radiation.
 
In addition, in November 2022, we announced additional positive in vivo results from a new pre-clinical study evaluating the effects of opaganib on radiation-induced hematologic and renal toxicity, which suggests that opaganib exerts a protective impact on key hematological and kidney function parameters following total body irradiation (TBI).Development of opaganib as a homeland security nuclear medical countermeasure is currently expected to follow the Animal Rule under which human efficacy studies may not be required, and if approved, may be eligible for a Medical Countermeasure Priority Review Voucher.
 
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In February 2023, we announced that the Radiation and Nuclear Countermeasures Program (RNCP), of the National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, had selected opaganib for the nuclear medical countermeasures product development pipeline as a potential treatment for ARS. As part of this collaboration, contractors directed and supported by the RNCP will undertake studies, designed in collaboration with us, to test opaganib in established ARS models.
 
In July 2023, we announced that Apogee had been awarded a further $1.7 million in U.S. government funding, via a Small Business Innovation Research (SBIR) grant, which will support research to further the development of opaganib as an MCM for GI-ARS. This grant is in addition and complementary to the multimillion dollar-valued U.S. government RNCP product pipeline development contract awarded to opaganib following its selection by the RNCP for ARS development.
 
Ebola
 
In October 2023, we announced that opaganib delivered a statistically significant increase in survival time when given at 150 mg/kg twice a day (BID) in a United States Army Medical Research Institute of Infectious Diseases (USAMRIID) in vivo Ebola virus study, making it the first host-directed molecule to show activity in Ebola virus disease. The U.S. Army study tested three doses of opaganib (50, 100 and 150 mg/kg BID), against an inactive vehicle control arm. The in vivo study results showed a statistically significant survival increase in mean (SE) survival time of 11.2 (2.6) days in the 150 mg/kg opaganib group (p=0.0279) compared to a mean (SE) survival time of 5.5 (0.4) days in the inactive vehicle control group. A 30% mice survival was observed in the 150 mg/kg treated group compared to the vehicle control.
 
In December 2023, we announced opaganib and RHB-107 (upamostat) demonstrated robust synergistic effect when combined individually with remdesivir (a leading COVID-19 therapy sold under the brand name Veklury® by Gilead Sciences, Inc.), significantly improving viral inhibition while maintaining cell viability, in a new U.S. Army-funded and conducted Ebola virus in vitro study.
 
ABC‑105: Moderate to Severe Ulcerative Colitis (“UC”)
 
A Phase 2 study to evaluate the efficacy of opaganib in patients with moderate to severe UC by the proportion of patients who are in remission at the end of treatment is currently on hold.
 
ABC‑109: Food Effect Study in Healthy Subjects
 
A Phase 1, randomized, open-label, single-dose, 3-treatment, 3-period, 6-sequence crossover study designed primarily to evaluate the effect of a standardized meal on the absorption and bioavailability of opaganib in healthy subjects, was completed in the U.S. in January 2018. The study also evaluated the effect of the administration of a solution of opaganib via nasogastric (NG) tube on the absorption and bioavailability of opaganib. Twenty-three eligible, healthy, male and female adult subjects were randomized to receive opaganib orally in a state of fast, fed or as a solution by NG tube (after tube feeding). Seventeen subjects received all three treatments. All three treatments, though maximum concentration was lower when the drug was given orally in the fed state as compared to fasted, nasogastric administration after tube feeding led to intermediate results. Subjects experienced fewer gastrointestinal side effects when the drug was given in the fed state than fasted, but the pharmacodynamic effect, as reflected in the decrease in sphingosine-1-phosphate, the product of the target enzyme, was no lower after fed than fasted administration. Thus, the results indicated that opaganib may be given after eating, with improved tolerance and no loss of pharmacodynamic effect.
 
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The following chart summarizes the clinical trial history and status of opaganib:

               
Planned
       
   
Development
 
Purpose of
     
number of
 
Nature and
   
Clinical trial
 
phase of the
 
the clinical
 
Clinical
 
subjects of
 
status of
   
name
 
clinical trial
 
trial
 
trial site
 
the trial
 
the trial
 
Schedule
ABC-201
 
Phase 2/3
 
A study for the treatment of Opaganib in patients with severe COVID-19 pneumonia
 
Multicenter study
 
464
 
Completed
 
Results reported in 2022
ABC-110
 
Phase 2
 
A study for the treatment of opaganib in patients with severe COVID-19 pneumonia
 
Multicenter study across the U.S.
 
40
 
Completed
 
Results reported in 2021
ABC‑108
 
Phase 2a
 
A study for the treatment of advanced, unresectable intrahepatic, perihilar and extrahepatic cholangiocarcinoma with opaganib and co-treatment with opaganib and HCQ
 
Multicenter study across the U.S.
 
65
 
Completed
 
Results expected H2/2024
ABC‑107 (103193 MUSC Study ID)
 
Phase 2
 
An add-on study for prostate cancer patients who progressed on enzalutamide or abiraterone. The proportion of patients with disease control during treatment with opaganib and enzalutamide or abiraterone will be measured
 
Medical University of South Carolina, Charleston, U.S. and Emory University, Atlanta, Georgia, U.S.
 
65
 
Ongoing
 
Results expected H2/2024
ABC‑103
 
Phase 1b/2
 
Safety and efficacy study in patients with refractory or relapsed multiple myeloma that have previously been treated with proteasome inhibitors and immunomodulatory drugs
 
Duke University, North Carolina, U.S.
 
Ended
 
Ended after Phase 1
 
Ended
ABC‑101
 
Phase 1
 
Safety, PK and pharmacodynamic study in patients with advanced solid tumors
 
Medical University of South Carolina, Charleston, U.S.
 
22
 
Completed. Final results indicate the study drug is well tolerated and can be safely administered to cancer patients
 
Completed 2015
ABC-106
 
Phase 2
 
Investigator-Sponsored Safety and Efficacy Study in Patients with Advanced Hepatocellular Carcinoma Who Have Progressed on Sorafenib
 
Medical University of South Carolina, Charleston, U.S. and collaborating sites (Multicenter, U.S.)
 
From 12 to 39
 
Withdrawn and replaced with ABC-107 in prostate cancer (103193 MUSC Study ID)
 
Withdrawn
ABC-104
 
Phase 1b
 
Safety and efficacy study in the prevention of mucositis in combination with radiotherapy for treatment of squamous head and neck carcinoma
 
Multicenter study across the U.S.
 
Up to 32
 
TBD
 
TBD
ABC‑105
 
Phase 2
 
A study for the treatment of moderate to severe ulcerative colitis
 
Multicenter study
 
Up to 94
 
TBD
 
TBD
ABC‑109
 
Phase 1
 
Assessment of the effect of food on the absorption and bioavailability of opaganib; also as a solution via nasogastric (NG) tube under fed conditions
 
ICON Early Phase Services, San-Antonio, TX, U.S.
 
23 
 
Completed
 
Completed 2018

We cannot predict with certainty our development costs, and such costs may be subject to changes. See “Risk Factors – Risks Related to Our Financial Condition and Capital Requirements.”
 
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RHB‑107 (upamostat; formerly Mesupron)
 
As mentioned under “ – Business Overview – Acquisition, Commercialization and License Agreements – License Agreement for RHB-107” (upamostat; formerly Mesupron)”, on June 30, 2014, we signed an exclusive license agreement with Wilex AG (which later changed its name to Heidelberg Pharma AG) for RHB-107 (INN: upamostat; formerly Mesupron) for all indications and for all uses. Under this agreement, we are responsible for all development, regulatory and commercialization of RHB-107 in the entire world, excluding China, Taiwan, Macao, and Hong Kong.
 
RHB-107 is a proprietary, first-in-class, orally-administered potent inhibitor of several serine proteases, with a unique potency and specificity. In addition to its original development as a potential cancer therapy, work completed by us demonstrated its potential use in inflammatory digestive diseases, inflammatory lung diseases and infectious diseases. Furthermore, RHB-107 shows promise as a potential host-directed anti-viral with applications in pandemic preparedness, including COVID-19 and possibly also ebola.
 
Market and Competition
 
RHB-107 is currently being developed for the treatment of non-hospitalized symptomatic COVID-19, and has previously undergone non-clinical and clinical studies in several oncology indications, including metastatic breast cancer and advanced non-metastatic pancreatic cancer.
 
Non-Clinical and Clinical Development
 
Data from non-clinical studies conducted by us indicate that WX-UK1, the active metabolite of RHB-107, is a specific and potent inhibitor of several human serine proteases (e.g., trypsin-3, trypsin-2, trypsin-1, matriptase-1, and trypsin-6), some of which have been shown to play a role in inflammatory digestive diseases and lung diseases. Additional non-clinical studies indicated that several members of the type II transmembrane serine proteases (TTSPs), some of which are important factors in the spread of infectious diseases, were inhibited by WX-UK1.
 
RHB-107’s safety profile has been demonstrated in approximately 300 participants, including in Phase 2 studies in oncology indications and COVID-19.
 
Oncology
 
Several Phase 1 studies and two Phase 2 proof-of-concept studies have been completed with RHB-107 in cancer patients. The first Phase 2 trial in locally advanced non-metastatic pancreatic cancer and the second trial in metastatic breast cancer established the therapeutic candidate’s safety and tolerability profile. The Phase 2 trials with RHB-107 in both indications failed to demonstrate significant improvement in either progression-free survival or overall survival.
 
None of the prior studies used any molecular markers to target certain patient populations. Using technologies developed since the original clinical trials were performed, we are currently planning several preclinical studies, including biomarker analysis and mechanism of action studies We expect that the findings from these studies can help us determine the patient populations to be studied in subsequent clinical trials.
 
In October 2017, the FDA granted RHB-107 orphan drug designation for the treatment of pancreatic cancer. The orphan drug designation allows us to benefit from various development incentives to develop RHB-107 for this indication, including tax credits for qualified clinical testing, waiver of a PDUFA upon submission of a potential marketing application and, if approved, a seven-year marketing exclusivity period (subject to certain exceptions) for the treatment of pancreatic cancer.
 
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COVID-19
 
RHB-107 was studied in a 3D tissue model of human bronchial epithelial cells (EpiAirway™) which morphologically and functionally resembles the human airway and is similar to the model used to discover SARS-CoV-2. The study was designed to evaluate the in vitro efficacy of RHB-107 in inhibiting SARS-CoV-2 infection and included a positive control of camostat. Results from the study demonstrated strong inhibition of SARS-CoV-2 viral replication.
 
In October 2022, we announced study results showing preliminary evidence of in vitro efficacy against the Omicron COVID-19 sub-variant BA.5 by opaganib and RHB-107.
 
RHB-107-01: Global Phase 2/3 Study
 
A 2-part, Phase 2/3 multicenter, randomized, double-blind, placebo-controlled, parallel-group study with RHB-107 randomized its last patient into Part A of the study November 12, 2021. The study aimed at evaluating treatment in patients with symptomatic COVID-19 early in the course of the disease, with a once-daily oral treatment that can be prescribed and used in the non-hospitalized patient population. The Phase 2 part of the study was designed to evaluate safety for dose selection and to provide preliminary assessment of parameters to be used for efficacy evaluation in Part B. A total of 61 patients were enrolled in Part A and randomized on a 1:1:1 basis to receive one of two dose levels of RHB-107 or a placebo control and was predominantly conducted in the U.S. (60/61 patients) as well as South Africa.
 
RHB-107 was administered once daily for 14 days, with patients receiving follow-up for eight weeks from first dosing. The primary endpoints were time to sustained recovery from symptomatic illness compared to placebo, as well as safety and tolerability of RHB-107. Several secondary and exploratory endpoints are also being assessed. In February 2021, we announced that the first patient had been dosed in the study.
 
In March 2022, we announced the positive Phase 2 study results of Part A of the Phase 2/3 study. Although not powered for efficacy assessment, the study showed highly promising efficacy results delivering a 100% reduction in hospitalization due to COVID-19, with zero patients on RHB-107 hospitalized with COVID-19 (0/41) compared to 15% on the placebo-controlled arm requiring hospitalization (3/20) (nominal p-value=0.0317). Furthermore, the study showed an 87.8% reduction in reported new severe COVID-19 symptoms, with only one patient on RHB-107 (2.4%, 1/41) compared to 20% (4/20) of patients on the placebo-controlled arm experiencing new COVID-19 related severe symptoms (nominal p-value=0.036).
 
The study met its primary outcome measure, demonstrating a favorable safety and tolerability profile of RHB-107. Study arms were well balanced with respect to baseline disease severity, risk factors and vaccination status. Patients were also tested for the specific viral strain, with the most common variant being Delta, found in 62.5% of the patients that had next generation sequencing (NGS).
 
In July 2023, we announced that RHB-107 had been accepted for inclusion in the U.S. Department of Defense- supported Austere environments Consortium for Enhanced Sepsis Outcomes’ (ACESO) PROTECT multinational platform trial for early COVID-19 outpatient treatment. The 300-patient Phase 2 study has received FDA clearance. The study is being conducted in the U.S., Thailand, Ivory Coast, South Africa and Uganda, and is estimated to be completed by end of 2024.
 
The ACESO PROTECT study is an adaptive, randomized, double blind, multi-site Phase 2 platform trial, being conducted by researchers from ACESO and partner organizations, and administered by the Henry M. Jackson Foundation for the Advancement of Military Medicine (HJF). The study will compare investigational products (Ips) to control, in standard-risk, non-hospitalized adult SARS-CoV-2 infected participants with at least two moderate-severe symptoms at baseline. RHB-107 is the initial drug being evaluated in the early treatment arm of the study. The primary efficacy assessment in the early treatment indication will be time to sustained alleviation or resolution of COVID-19 symptoms. Participants will be followed for a period of up to 12 weeks.
 
In December 2023, we announced the receipt of non-dilutive external funding, additional to the previously announced U.S. Government funding, which now covers the entirety of the RHB-107 (upamostat) arm of the ACESO PROTECT adaptive platform trial. 
 
In conjunction with the initiation of the said ACESO PROTECT study, the previously planned part B of study RHB-107-01 was cancelled.
 
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Ebola Virus Disease Therapy
 
In 2022, in collaboration with the Therapeutic Discovery Branch of the USAMRIID (US Army Medical Research Institute of Infectious Diseases) to evaluate opaganib and RHB-107 in high throughput antiviral screening. We completed in-vitro studies against different strains of Ebola virus, including SUDV, Sudan ebolavirus (Boniface), Ebola Virus Disease, EBOV (Makona), and additional viral infectious diseases, including Marburg virus disease, MARV (Ci67), and Rift Valley fever RVFZ (ZH-501). Initial data from high-content imaging assays, provided further support for activities of Redhill candidates against these viral diseases.
 
In December 2023, we announced opaganib and RHB-107) demonstrated robust synergistic effect when combined individually with remdesivir (a leading COVID-19 therapy sold under the brand name Veklury® by Gilead Sciences, Inc.), significantly improving viral inhibition while maintaining cell viability, in a new U.S. Army-funded and conducted Ebola virus in vitro study.
 
RHB-104
 
Crohn’s Disease
 
RHB-104 is an investigational new drug intended to treat Crohn’s disease, which is a serious inflammatory disease of the GI system that may cause severe abdominal pain and bloody diarrhea, malnutrition and potentially life-threatening complications.
 
R