Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Biotherapeutics First Quarter 2021 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I will now turn the conference over to our host, Mr. Chuck Padala of LifeSci Advisors Investor Relations. Chuck, you may now begin the presentation.

Thank you, Rob. Welcome, everyone, to the Protallix Biotherapeutics First Quarter 2021 Financial Results and Business Update Conference Call. With me today are Mr. Dror Bershon, President and CEO of Portalix, and Mr. Eyal Rubin, Chief Financial Officer. The press release announcing the results and the update was issued this morning and is now available on the Portalix website. Please take a moment to read the disclaimer about the forward-looking statements in the press release. The earnings release and the teleconference include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in the Bortalex filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Thank you, Chuck, and welcome everyone to the company's first quarter 2021 financial results and business updates. During the call today, I will review the progress of our key clinical programs and update on the roadmap of our upcoming strategic milestones. Following my remarks, our chief financial officer, Rial Rubin, will review the company's financial results before we open the lines for questions. We were obviously disappointed with the recent receipt of the complete response letter from the FDA last month, but we are encouraged that the FDA did not report any concerns relating to the safety and efficacy of PRX-102. We are working closely with the agency and anticipate the required inspection and subsequent assessment will be completed once the agency's travel restrictions are lifted. I will provide more detailed comments on the CRL shortly. We are continuing to advance our earlier stage pipeline. Additionally, we strengthened our balance sheet during the quarter with a public offering generating $40 million in gross proceeds and feel confident about our ability to continue to fund our clinical programs as we prepare for a potential commercial launch of PRX-102. Now, let me provide more details about our quarter. In late April, we and our development and commercialization partner, Kiesi, received a CRL from the U.S. FDA for PRX-102 for the treatment for adult patients with Fabry disease. In the CRL, the FDA noted the requirement to inspect totalics manufacturing facility in Israel, and that due to travel restrictions as a result of the COVID-19 pandemic, it was unable to conduct the inspection during the review cycle. The FDA explained that it will continue to monitor the public health situation as well as travel restrictions and is actively working to schedule outstanding inspections. For our third-party fit and finish facility for PRX102 in Europe, due to the COVID-19, the FDA reviewed records under Section 704A4 of the Federal Food, Drug, and Cosmetic Act in lieu of a pre-licensing inspection. The FDA stated that that it will communicate any remaining issues related to the facility in order to seek prompt resolution for any pending items. Our third-party fill-in-finish facility received the FDA comments just a few days ago and shared them with us. Together, we are reviewing these comments closely with quality and regulatory consultants. The last significant point was highlighted by FDA in the letter is that Fabrazyme was recently converted to a full approval. This new development will need to be addressed in the context of any potential resubmission seeking accelerated approval of PRX-102. Once again, while we are disappointing to receive the CRL, we intend to work collaboratively with the FDA on resolving issues. These issues are moving forward on the next steps. We are working on scheduling a Type A end-of-review meeting with the FDA, which we plan to request from the FDA by the end of July and should take place approximately 30 days after from our request. Our objective for the meeting is to better understand the issues raised in the CRL and work with the FDA on a plan to resolve these issues. We are confident in the overall clinical profile we have assembled through our development program, and we believe PRS-102 will bring important value to the Fabry patients with unmet clinical needs. We intend to update you on new developments as soon as feasible. During the quarter, we continued to build our clinical profile for PRX102. We released positive top-line results from the Phase 3 BRITE study, which was designed to evaluate the safety and efficacy and pharmacokinetics of PRX102 treatment, two milligrams per kilogram every four weeks in up to 30 patients with Fabry disease, previously treated with commercially available enzyme replacement therapy. Top-line results indicate that two milligrams per kid of PRX102 administered by intravenous infusion every four weeks was found to be well tolerated among treated patients and stable clinical presentation was maintained in adult patients. Our results demonstrate the potential for a more convenient therapy option for patients without compromising safety and efficacy. We expect to receive full interim results from our phase three balance trial in the coming weeks. The balance trial is a double blind head-to-head 24-month trial evaluating the safety and efficacy of PEG-unigalcidase-alpha, one milligram per kilogram, dosed every two weeks in Fabry patients with declining renal functions versus Fabrazine. The interim results are anticipated to serve as our basis for the European EMA filing, together with additional data from various clinical trials. Subject to the results, the balanced trial, we could potentially have a commercial launch in Europe in the first half of 2023. We announced in February an exclusive partnership with Sarcomate USA for the worldwide development and commercialization of Alibornis Alpha or PRX-110 for the use in the treatment of any human respiratory disease or condition including but not limited to sarcoidosis, pulmonary fibrosis, and other related diseases via inhaled delivery. Turning to our balance sheet, we ended the quarter with $70.4 million in cash, which includes the proceeds from a public offering of our common stock in February, and Eyal will provide more details around our financial in a moment. We feel confident about our financial position and our ability to fund our development plans for the year. Before we turn to Eyal, I would like to recognize again what a challenging time has been for all of us, and emphasize to our team how proud I am of their focus and readiness. This has been a challenging week for us, for our local employees in Israel, and we wish for imminent peace and stability for all. I will now turn to Eyal for a review of our financials. Eyal, please.

For the quarter ended March 31st, 2021, we recorded revenue from selling of goods of 4.5 million compared to revenue of 5 million for the same period compared to 16.6 million for the quarter ended March 31st, 2020. Revenues from license agreement represent the revenues the first quarter of 2020 in connection with an updated cost estimation, 2021, an increase of 1.4 million or 41% from cost of goods sold of 3.4 million for the same period last year. The increase in cost of goods sold was primarily three months ended March 31st, 2020. The decrease was primarily due to the completion of SG&A expenses were 3.1 million for the three months ended March 31st, 2021 compared to 3.2 for the same period last year. Financial net expenses were $1.8 million for the three months ended March 31st, 2021, compared to $3 million for the three months ended March 31st, 2020. The decrease was primarily due to a decrease in expenses related to the outstanding convertible notes equal to $1.3 million. As of March 31st, 2021, as you all mentioned, our cash, cash equivalents, and shorts and bank deposits were approximately $70 billion. During the first quarter of 2021, we raised gross proceeds of $8.8 million from the sale of common stock under our ATM program and gross proceeds of $40.2 via public offering of our own stock. Net loss for the three months ended March 31, 2021 was $5.5 million, or 0.13 per share, basic and diluted compared to a net gain of $1.7 million, or 10 cents per share, basic and diluted for the same period of 2020. I'll now turn the call back to you, John.

Thank you, Eyal. We look forward to working closely with the FDA on the path forward of PRS-102 for adult public patients to be able to bring this important drug to commercialization. We are excited about continuing to advance our earlier stage pipeline and continuing to build the company for the long-term success. We look forward to updating you as the year progresses, and let's now take your questions, please.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from the line of Ram Selvaraju with H.C. Wainwright. Please receive your question.

Hi, this is Buvalam dialing in for Ram Selvaraju, and thanks for taking my question. So just to clarify, should the FAA conduct a site inspection on time? PRX-102 would have been approved, correct?

So as we shared publicly, the CRN included the two facilities. One is the drug substance in Israel, and the other one is the feed-in finish at Mons. And the third topic, not in this order, of course, was the fact that Farberzine was fully approved in the U.S., So all these topics have to be discussed with the FDA and will be raised if the type A meeting as planned will take place, of course. And then we will get clarification and direction going forward.

Understood. So are you aware of any cases? when the FDA has waived site inspection due to their inability to conduct site review on time?

Yes, it's possible to hold a virtual inspection. Maybe there is another alternative, like a record review inspection, but again, we are not deciding for the FDA. We are actually, but we will raise all these alternatives again with the FDA and hopefully it will come to a agreed upon solution.

Okay. So you noted in your press release that you will request FDA a type A meeting sometime by the end of July and assuming class one resubmission. So do you have any thoughts when FDA will conduct a site inspection in your site as well as the third party site?

Can you repeat the last two sentences please? I'm sorry.

So assuming Class 1 resubmission, when do you expect the FDA to conduct a site inspection in your site as well as the third-party site?

We don't. I wish I knew. We do not control those schedules. What we meant that we have, by the regulation, we have 90 days as far as I know to request an IP meeting, and from the day of request, the FDA, if agreed, in 30 days, the type A meeting takes place. For the sake of our discussion, if indeed the type A meeting, for the example, will take place in July, then it depends on the discussion of the type A meeting. Following that, we will be able to decide on our pathway for resubmission. Then when the FDA will conduct an inspection in our Israeli side and or in the French side, We wish it would be sooner than later, but, you know, we do not control their timetable.

Understood. So switching gears a little bit, so Fabrazyme was recently converted to full approval. So what impact would this have on PRX102 in addition to a delay in your review process?

So this is what we plan to discuss with the agency. We hope there will not be, I mean, clearly there is a delay because we got the CRM. This is clear. This is exactly what will be discussed at the Type A meeting in order to resubmit as soon as possible. Resubmission after a CRM is a six-month review process. The time to resubmission depends on what will be discussed and decided through these Type A meetings.

So one final question from me. How did KSI react to the CRL and what kind of impact will the FDA inspection site delay, FDA site inspection delay have on your commercialization activity?

So first, KSI is clearly disappointed with the CRL. I would like to mention that KSI actually trusts very much with the product and the potential of PRX102 to be a good alternative for the fabric patient community going forward, both in the U.S. and the EU. And we work closely ahead of, you know, preparing the type A meeting and the EU submission, which is unchanged from a timetable point of view.

Thanks so much for the additional clarity.

You're welcome.

Thank you. As a reminder, you press star one to ask a question. Our next question comes from the line of John Vandermussen with Zacks Investment Research. Pleased to see you with your questions.

Good afternoon, Dr. Oriel. Let me start off with another question on, I guess, the order of events related to the Type A meeting and the inspection. Are those independent of each other, or is it your understanding that you must hold the Type A meeting prior to an inspection taking place?

I think they are not dependent on each other. The Taipei meeting regulatory-wise has its own schedule, as I mentioned. From the day that we received the CRL, I think, I hope I'm not mistaken, there are 90 days to request a Taipei meeting, and from the day of the request, there are 30 days to hold this meeting. Clearly, we would like to do it, I think, sooner than later, but with the right schedule. clear once we are fully prepared. And the inspection-wise, both at the Israeli side and the French side, this is up to the FDA, actually. And this is part of the, if I may say, communication with them.

Okay, so that's still being decided?

Yes, sir, it's now decided.

And then about the French facility, I think you said that there were some issues to resolve, and I guess I'm just trying to understand kind of the bottleneck or order of events. It seems like the inspection is the kind of the main thing and then the just minor issues at the French facility. Is that your understanding at this point?

So, we are not commenting on the specifics here, and we are currently working together with our quality and regulatory consultants on the pace forward, you know, to resolve these issues with FDA.

Okay. And again, I know it's early and you haven't had your Type A meeting, but is there any sense that some of the data from the Bright Balance or Bridge studies might be used as part of a resubmission to the FDA?

You know, as far as I know, let's put it this way. PSV and Protonix are preparing the data right now. The DLA that was submitted a year ago was based on the Phase I-II. plus safety data from some of the other studies, but it's not efficacy data from the other studies. I assume that we will not, you know, combine the parties. Again, the Chiesi and Protarix are working very seriously and closely together, updating, if I may say, the briefing book ahead of this Taipei meeting.

Okay. All right. That's all for me. Thank you, Dror.

Thank you. Thank you. Our next question is from John Hudson, a private investor. Please proceed with your question.

Hello. My question is, do you anticipate any delays with the FDA relative to the Palestinian attacks on Israel?

I don't think so. Actually, I do not. Unfortunately, there are tensions here, security tensions, but I hope it will be – I can't say it will be solved soon, but it will be calmed down soon. And, you know, life will be back to normal, if I may say. I don't know what is normal, but, you know, it's usual. I certainly hope so, too.

You know?

Yes. Yeah, but this is the truth. I mean, nothing changed, you know. It's very unfortunate of what's going on right now. Very unfortunate. And still we hope for, you know, quieter times very, very soon. And then, you know, things are back to normal. Thank you. Usually there are like, I don't know, 10 or 16 flights a day from Tel Aviv to New York or vice versa. So this is not an issue. Yes.

Okay.

Okay.

Thank you.

Thank you. There are no additional questions at this time. I'll hand the floor back to Masher for further remarks.

So first, thank you. I wish to thank everybody for the time. We will keep updating you once we will have relevant data, of course. And I wish everybody a very nice weekend, and I hope for quieter days in Israel very soon. Thank you very much.

Thank you. This will conclude today's conference. Let me disconnect your lines at this time. We thank you for your participation.