RedHill Biopharma

Kurta Law is investigating broker recommendations of RedHill Biopharma (RDHL). The risks associated with this stock were clearly disclosed in the company’s prospectus. Brokers who recommend high-risk investments and/or fail to inform investors of the risks involved may be in violation of securities industry rules and regulations.

Investors who believe their investment in RedHill Biopharma stock was too risky for their profile should consider seeking out FINRA arbitration. Speak to a securities attorney for free today by contacting our team at (877) 600-0098 or emailing info@kurtalawfirm.com.

What is RedHill Biopharma?

According to its prospectus, RedHill Biopharma Ltd. (RDHL) is a biopharmaceutical company specializing in treatments for gastrointestinal conditions and infectious diseases. Besides the products it currently markets, the company also develops several clinical-stage product candidates.

In this offering RedHill Biopharma offers units consisting of one American Depositary Share (ADS), representing 10 common shares, and one warrant to purchase one ADS. The warrants can be exercised at any time and expire five years after issuance. The offering also includes pre-funded units, consisting of one warrant and one pre-funded warrant to purchase an ADS.

What are the Risks Associated with RedHill Biopharma?

RedHill Biopharma describes major risks associated with its ADSs in its prospectus. Investors should be aware that the list provided in the prospectus is not exhaustive, and additional risks may arise after its publication.

Dilution and Potential Decrease in Market Price

The American Depositary Shares (ADSs) of this offering are subject to immediate and potential future dilution. The prospectus states that investors will experience a dilution of $1.23 per ADS, including ADSs issued upon the exercise of pre-funded warrants, as of September 30, 2022.

Exercise of the warrants and pre-funded warrants of this offering could dilute existing shareholders, and investors may respond to this risk by selling their ADSs, depressing their market price.

Risks Involved in Potential COVID-19 Treatments

Two of RedHill Biopharma’s product candidates are potential treatments for SARS-CoV-2. The effectiveness of these treatments cannot be determined until the products are fully developed, tested, and approved by the FDA. If these products are not successful or are never approved, the company’s financial situation could be negatively affected.

Conversely, if either of these products is approved, RedHill Biopharma “may need to devote significant resources to [its] manufacturing scale-up and large-scale deployment.” That could take away from its other product candidates.

Credit Agreement with HCR Collateral Management

On September 13, 2022, RedHill Biopharma was notified by HCR Collateral Management that the company had met certain events of default under its credit agreement with HCR. RedHill Biopharma disputed these conditions and entered into a new, non-binding agreement to resolve the conflict.

However, this process has placed “significant operating and financial restrictions” on the company, which could in turn affect its ability to make payments.

Further, the prospectus states that RedHill Biopharma’s indebtedness is “secured by substantially all of the current and future assets of RedHill US, all of our assets related in any material respect to [GI treatment] Talicia, and all of the equity interests of RedHill US.” This means that, if RedHill Biopharma were to become insolvent, investors would be unlikely to receive any payments, unless the value of the company’s assets exceeded its debts.

Aegis Capital Corp. Underwriting    

Investors should know that Aegis Capital Corp. served as the underwriter for this offering. Underwriters take on risk in exchange for a fee, which could motivate certain investment banks to underwrite investments that pose too much risk for the average retail investor. Additionally, brokers may have conflicts of interest when they recommend shares that are underwritten by an affiliate of their brokerage firm.  

What Can I Do If I Suffered Losses?

If you have concerns about your investment in RedHill Biopharma, consider contacting Kurta Law for a consultation. Our securities attorneys have experience taking on cases of unsuitable investment recommendations and can help you win a fair settlement through FINRA arbitration. Call (877) 600-0098 or email info@kurtalawfirm.com.