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Research: Healthcare
The ongoing COVID-19 pandemic is causing unprecedented challenges for most companies. According to the latest business update (25 March), the impact on RedHill’s activities remains limited, but the global crisis also provides a significant opportunity for the company. RedHill has identified its anti-cancer/anti-inflammatory asset opaganib (Yeliva, formerly ABC294640) as a potential treatment for COVID-19. It has managed to fast-track compassionate use programmes where opaganib is now offered to COVID-19 patients (first experience also reported). RedHill indicated that it is working with major countries to increase opaganib’s availability via compassionate use programmes, but also on potential clinical development. Until more details are released, we keep our R&D model unchanged (opaganib for cholangiocarcinoma), but there is potential to expand it. RedHill’s shares are now trading at prices higher than pre-COVID-19 levels. Our last published valuation is $638m or $18.1 per ADS.
Written by
RedHill Biopharma |
COVID-19 challenges and opportunities |
Company news |
Pharma & biotech |
16 April 2020 |
Share price performance
Business description
Analyst
RedHill Biopharma is a research client of Edison Investment Research Limited |
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The ongoing COVID-19 pandemic is causing unprecedented challenges for most companies. According to the latest business update (25 March), the impact on RedHill’s activities remains limited, but the global crisis also provides a significant opportunity for the company. RedHill has identified its anti-cancer/anti-inflammatory asset opaganib (Yeliva, formerly ABC294640) as a potential treatment for COVID-19. It has managed to fast-track compassionate use programmes where opaganib is now offered to COVID-19 patients (first experience also reported). RedHill indicated that it is working with major countries to increase opaganib’s availability via compassionate use programmes, but also on potential clinical development. Until more details are released, we keep our R&D model unchanged (opaganib for cholangiocarcinoma), but there is potential to expand it. RedHill’s shares are now trading at prices higher than pre-COVID-19 levels. Our last published valuation is $638m or $18.1 per ADS.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
8.4 |
(38.8) |
(0.17) |
0.0 |
N/A |
N/A |
12/19 |
6.3 |
(42.1) |
(0.14) |
0.0 |
N/A |
N/A |
12/20e |
99.0 |
(14.0) |
(0.03) |
0.0 |
N/A |
N/A |
12/21e |
141.0 |
9.6 |
0.02 |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Opaganib is a sphingosine kinase-2 (SK2) inhibitor and has broad potential in oncology and inflammatory diseases. According to RedHill, it also has an anti-viral effect, which makes it a unique potential treatment for SARS-CoV-2 infections. Theoretically, it not only treats the cause of the disease, the virus, but also alleviates the inflammation, which triggers severe acute respiratory symptoms. Currently opaganib is being investigated in a Phase I/IIa study for cholangiocarcinoma and in another Phase II study in prostate cancer. During Phase I development it has been given to a total of 131 subjects to date (cancer patients and healthy volunteers). A more detailed description of the mechanism of action of opaganib can be found in our initiation report.
RedHill has reported its first experience of treating COVID-19 patients. Two hospitalised patients with moderate to severe symptoms in Israel received opaganib in combination with standard of care and hydroxychloroquine. The patients were administered non-invasive supplemental oxygenation, but were still hypoxic. One of the patients was in the ICU and was considered for intubation. Both patients significantly improved within days of starting opaganib. Although interesting, this is still anecdotal data. A controlled trial would likely be needed for regulatory approval; however, given the global focus on finding a treatment for SARS-CoV-2 infections, we believe RedHill will explore many potential arrangements to fast track and fund the trial.
RedHill has announced compassionate use programmes in Israel and Italy so far, but it is also working with other countries. In total approximately 160 patients are expected to be treated in Italy, so there should be much more data in due course.
COVID-19 impact on business activities
RedHill also released a business update on 25 March, where it described the expected impact from COVID-19 pandemic. There were no disruptions to the supply chain of the commercial drugs (Talicia, Aemcolo and Movantik). Sales representatives, as other personnel, are working remotely, but are able to continue non-personal promotion and remote training. With regards to the ongoing R&D activities, a more material impact is the expected delay of the initiation of the Phase III study with RHB-204 for non-tuberculous mycobacteria (NTM) infections by one quarter to Q320. Given the circumstances, a manageable trial delay is preferable to data loss, in our view.
We make no changes to our estimates or valuation for the time being. A detailed update on RedHill’s activities is in our recent report published on 18 March.
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Research: Healthcare
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