Two kibbutz dwellers turned investment bankers and now entrepreneurs are on a quest to bring relief to patients who suffer from debilitative gastrointestinal diseases, including ulcers and Crohn’s disease, by tackling bacteria they believe to be at the root of the ailments.

The biotech company founded by Dror Ben-Asher and Ori Shilo, RedHill Biopharma Ltd., which is traded both in Tel Aviv and on the Nasdaq, is conducting late-stage clinical trials for several drugs, including two that aim to tackle Crohn’s disease and H. pylori, the bacteria that is the root of ulcers and a major cause of gastric cancer.

RedHill also has a pipeline of other advanced clinical-stage experimental medications in the works, as a way to spread out risk, and has recently entered into an accord with Concordia Pharmaceuticals Inc.to promote Donnatal, a drug used to treat irritable bowel syndrome in the US. Last week the company said it signed an exclusive license agreement with US firm Entera Health Inc. for the exclusive rights to a commercially available medical food, EnteraGam, for the management of chronic diarrhea which must be administered under medical supervision.

The two US accords will help the company generate revenues and RedHill is currently setting up its US commercial infrastructure and salesforce, headquartered in Raleigh, North Carolina, as it waits for its other products to ripen and get the potential approvals needed from the US FDA.

Ben-Asher and Shilo are childhood friends who grew up in Givat Brenner, a kibbutz two kilometers south of Rehovot that grows cotton, avocado, wheat and corn. It also overlooks a soothing earth-red hill, sun-drenched and dotted with green shrubs, that became the inspiration for the name of their company.

RedHill's RHB-105 drug for H.pylori (Courtesy)

RedHill’s RHB-105 drug for H.pylori (Courtesy)

Ben-Asher and Shilo are not scientists. Their background, prior to founding RedHill in 2009, is in finance and investments. Ben-Asher, who served in an elite air force commando unit, went on to get law degrees in Oxford and Harvard focusing on pharmaceutical industry related topics, and then decided to set up the business.

Shilo served in the army as an officer in an elite special forces unit, Sayeret Matkal, then traveled the world and graduated in economics and business from Israeli universities. After that he worked as a consultant in Israel. It was then he got a phone call from Ben-Asher, with whom he had not been in touch for many years, to join him in an investment firm he was setting up with European partners. The investment bank they set up focused mainly on assisting life sciences companies, and that is where their interest in the field grew further.

They also became aware of all the financing and regulatory hurdles life sciences firms face: the long development times, the constant lack of money and the difficulties in getting drug regulatory approvals. So they decided to do things differently for RedHill, a company they set up in 2009.

Tackling the root of Crohn’s disease

Instead of creating medications from scratch, RedHill licenses and acquires new or existing drugs under clinical development, or drugs already on the market, and uses a variety of strategies including mixing and matching existing drugs to create new, orally taken drugs to tackle gastrointestinal diseases, inflammatory diseases, and cancer. And their approach to Crohn’s disease was different too: instead of trying to minimize the effects of the illness, like all drugs used today do, they decided to tackle the root of the problem, the bacteria suspected as the cause of the inflammation.

Crohn’s disease is a severe inflammatory disease of the gastrointestinal tract that has no known cure and can lead to abdominal pain, severe diarrhea, fatigue and weight loss. The ailment’s prevalence among Jews is among the highest in the world. The company acquired the drug combination from an Australian company run by Professor Thomas Borody who was using three antibiotics that are used to treat patients with leprosy and tuberculosis.

The drugs showed potential efficacy in treating the mycobacterium avium subspecies paratuberculosis (MAP) bacteria, which has been found in patients suffering from Crohn’s and is a suspected cause of the disease. Borody — who now sits on RedHill’s advisory board — was treating MAP in Crohn’s disease patients with the three pills separately and in different doses. RedHill has now reformulated and combined the three medications into one pill with different doses – its RHB-104.

This drug is now undergoing a first Phase III study in the US and other countries, that may, if successful, lead to a second Phase III study, after which, if successful, the drug may be approved by the FDA.

RedHill's Medical Director, Ira Kalfus (Courtesy)

RedHill’s medical director, Ira Kalfus (Courtesy)

“There is no absolute proof yet that MAP is linked to Crohn’s, and part of what we are doing in our research is try to prove that relationship,” said Dr. Ira Kalfus, RedHill’s Medical director, who is based in NYC.

“If we prove it is, it will completely change the discussion around how to treat Crohn’s,” Goldberg said.

Another drug that RedHill believes has the potential to become a blockbuster, if proven safe and effective, is its RHB-105 pill to fight Helicobacter pylori, the bacterial infection that has been proven to cause peptic ulcer disease and gastric cancer.

This bacteria, which is estimated to infect 30-40 percent of the adult population in the US, is being treated today by medications that combine two antibiotics and a proton pump inhibitor that shuts down the acid formed in the stomach and eradicates the bacteria. A growing problem is that H. pylori is increasingly resistant to the currently approved antibiotic combinations.

The US Food and Drug Administration has listed H. pylori as a high priority bacteria for development of new drugs and in February this year the World Health Organization included it in its list of bacteria for which new and effective antibiotic treatments are needed. Thanks to the high priority of this infection, RedHill’s experimental drug RHB-105 received a Qualified Infectious Disease Product (QIDP) Designation from the FDA, which is intended to incentivize the development of new antibiotic drugs for the treatment of serious or life-threatening infections.

The company’s Phase III study showed over 89 percent efficacy in eradicating H. pylori infection with RHB-105 as compared with historical efficacy levels of 70% with standard of care treatment, Goldberg said. The company plans to initiate a second Phase III study with RHB-105 in the coming months, which, if successful, will potentially lead to a marketing application in the US.

RedHill's Chief Business Officer, Guy Goldberg (Courtesy)

RedHill’s Chief Business Officer, Guy Goldberg (Courtesy)

“It is a high global priority to address this issue and in the last 10 years no new drug has been approved to fight the bacteria,” Goldberg said. “The world is finally catching up with the public health importance of this bacteria and our drug is in its late stage of clinical development, so we are ahead of the game.”

Roth Capital Partners in February reiterated its buy recommendation for the share with a 12-month price target of $26, and said the company’s late-stage gastroenterology programs, including Chron’s and H. pylori, are “underrepresented by the current market cap.”

RedHill’s shares on the Nasdaq closed at $10 on April 11, bringing its market cap to some $171 million.

Even so, as with all biopharma companies, the risks ahead are many. These include failing clinical data targets, not adequately protecting its intellectual property or failure to find financing going forward at reasonable terms, Roth Capital’s report said.

The strategic importance of the co-promotion deal for Donnatal with Concordia “is that RedHill aims to become a vertically integrated, commercial-stage, revenue-generating” gastrointestinal specialty pharma company, research firm Edison wrote in a March 6 note. “Furthermore, RedHill will be able to use the established sales organization to promote and distribute its own developed products.”

Investors in RedHill include Dan Suesskind, a former CFO of Teva, who is also a director in the firm; US investment institutions, including Orbimed, one of the world’s leading healthcare investment funds, and Israeli institutional investors.

With its two key drugs in the late stage of clinical development, its advanced pipeline of other drugs and the distribution of Donnatal and EnteraGam in the US, and with some $66 million in cash in its coffers in the end of 2016, Goldberg said the company is gearing up for the long haul.

“We are making a long-term investment here,” he said. “We want to go the whole way.”