Frost & Sullivan Publishes Q3-2018 Update Report on RedHill Biopharma Ltd.: RedHill published additional data from MAP US Phase III study of RHB-104 in Crohn's Disease; Steady-state sales in GI drugs; target price unchanged

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Summary of Highlights

RedHill published Q3 financial report on 13 November,2018 with the following key highlights:

Top-line results from the confirmatory Phase III study with TALICIA®forH. pyloriinfection are on track to be announced by year-end 2018,with potential NDA filing in early 2019.

Positive top-line results from the Phase III study with RHB-104 for Crohn's disease - the study met both its primary endpoint and key secondary endpoints

Debt-freebalance sheet with$43 million in cash as ofSeptember 30,2018; Net revenues of$2.2 million compared to$1.5 million in 30 September,2017.

RHB-104 on patients suffering from moderate to severe Crohn's disease: Treatment met its primary endpoint of remission on week 26,however as Crohn's is a chronic disease remission from week 16 up to week 52 is required

According to the company,the trial met its primary endpoint of remission on week 26 which was defined as reduction of the total Crohn's Disease Activity Index (CDAI) score to less than 150 (37% vs. 23%,p=0.007).

In our view,the company is likely to achieve FDA approval but the future drug has limited commercial potential. Recall that,in MAP US study,the level of patients in remission from week 16 up to week 52 was 9% (17.7% Vs 8.7% Placebo,p=0.018),meaning that RHB-104 has not yet demonstrated treatment consistency over time.

Financially,RedHill has enough cash to support its clinical and regulatory activities until mid 2019 ($10 million burn rate per quarter with $43 million in cash).

Revenues are in a steady state mood,around $2.3 million per quarter during 2018,although the company added more GI drugs to its portfolio. We have some concerns about future growth.

We maintain our valuation of the company to $157.5 million (NIS 568M) corresponding to a target price ranging between NIS 2.17 and NIS 2.29; a mean of NIS 2.23 ($6.1 per ADS).

We assume future commercial difficulties based on current weak commercial ability with GI sales.

Numerous current and future competing treatments for Crohn's disease with better results at 52 weeks (see our appendix).

In our Annual Report for 2017,published 11 March 2018 we increased the target price to $2.59 from the price of $2.27 set in our Q3-2017 report,published 14 December 2017.

About the company - RedHill Biopharma Ltd. ("the Company" and/or "RedHill") is an Israeli publically-traded specialty biopharmaceutical company focused on the development and commercialization of late clinical-stage drugs candidates. The Company's main focus is advanced clinical development and commercialization in the US of orally-administered,proprietary,small molecule drugs for the treatment of gastrointestinal and inflammatory diseases and cancer. RedHill is currently promoting three gastrointestinal products and is advancing multiple clinical programs: three Phase III for gastrointestinal and inflammation indications and multiple Phase II for various indications including multiple myeloma,hepatocellular carcinoma,pancreatic cancer,and irritable bowel syndrome with diarrhea.

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