Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Portalix Biotherapeutics Third Quarter 2021 Financial Results and Business Update Conference Call. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Chuck Padala of Lifesize Advisors Investor Relations for Portalix. Thank you. You may begin your presentation.

Thank you, Laura. Welcome to the Portalix Biotherapeutics Third Quarter 2021 Financial Results and Business Update Conference Call. With me today are Dror Bishan, President and CEO of Portalix, and Eyal Rubin, Chief Financial Officer. A press release announcing the results and the update was issued this morning and is available on Portalix's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release and this 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 Portalix's filing with the U.S. Securities and Exchange Commission. I will now turn the call over to Portalix CEO, Mr. Jorba Shah. Jor?

Thank you, Chuck, and welcome, everyone, to the company's third quarter 2021 financial results and business update call. During the call today, I will review the progress of our key clinical programs and provide an update on our strategic roadmap for the remainder of 2021 and beyond. Following my remarks, our Chief Financial Officer, Mr. Jan Rubin, will review the company's financial results before we open the line for questions. In September of this year, Propalix and our partner, Kiesi, participated in a Type A meeting with the FDA during which the FDA in principle agreed that the data package proposed to the FDA for a BLA resubmission has the potential to support the traditional approval for PRX102 for the treatment of Fabry disease. The planned data package for the BLA resubmission, given the change regulatory landscape in the United States, will include the final two-year analysis of the balance study, and we were pleased with this outcome, and we intend to continue to work collaboratively with the FDA and resolve the issues noted in the CRA with the goal of commercializing a new alternative drug to treat fabrications. We anticipate the resubmission of the biological license application, BLA, for the PRS-102 to the FDA in the second half of next year. In October of 2021, Brotalix and Chiesi announced that a meeting has been held with the Rapporteur and Co-Rapporteur of the European Medicine Agency regarding PRX-102. At the meeting, Chiesi and Protalic discussed the scope of the anticipated marketing authorization application submission for the European Union. And the Rapporteur and the Co-Rapporteur were generally supportive of a planned MAA submission for PRX-102. This is an important step in the necessary resubmission activities leading up to an MAA submission. Based on the interim analysis of the 12-month data generated from the balance study that the company announced in June of 2021, and in combination with the previously reported positive data from the BRIDE and BRIDGE study, the company and Chiesi expect to submit an MAA to the EMA for PRX102 during the first quarter of 2022. We are confident in the overall clinical profile of PRX102 that we have assembled through our extensive development program. In October, We, together with SCIA-Z, announced the final dosing of the last patients in the balanced study for the proposed treatment of Fabry disease. The balanced study is a 24-month randomized double-blind active control study of PRS-102 in Fabry patients with impaired renal function. We anticipate the release of the unblinded top-line data during the second quarter of 2022 after all remaining patients have completed the 24-month treatment period. We plan to initiate a toxicity study for PRX115, which is a plant cell-expressed recombinant pegylated uricase chemically modified enzyme to treat refractory gout in the first quarter of 2022. And in addition, we are working on the plans for development of PRX119, which is a plant cell-expressed pegylated recombinant human DNA for net-related diseases. PRX115 has been shown in several preclinical studies to have higher specifics. specific activity, and longer half-life. And accordingly, the company intends to explore the possibility of developing PRX115 for treatment every two months, which would lessen the frequency of necessary hospitalization as part of the treatment, thereby reducing the physical and financial burden experienced by patients and the patient community. And with respect to PRX119, several experiments in my CLP model demonstrate the feasibility of PRX119 as a treatment for sepsis. The data showed promising results in determining a dose-dependent response in mice survival. In addition, we've begun working with a third party to develop new methodologies for protein modification. We continue to evaluate potential strategic marketing partnerships and collaboration programs with biotechnology and pharmaceutical companies for PRX110, a plant cell recombinant DNAs, for which we are considering a potential treatment for various respiratory indications, as well as our other early-stage product candidates. We will update you on our early-stage pipeline as events unfold. I would like to close this section of my comments with acknowledging the importance the resiliency and greed of our team members and partners during such a challenging time, and emphasize how much your efforts are making a difference towards our mission of bringing important new medicines to market for patients with high unmet medical needs. I will now turn to Eyal to review our financials. Eyal, please go ahead. Thank you, Jor.

I want to first describe the note exchange the company completed in the end of August. On August 25th, 2021, the company completed exchanges of a substantial majority of our then outstanding 7.5% senior secured convertible notes due in November 2021, which are referred to as the 2021 notes, with institutional note holders. In the exchange, an aggregate of 54.65 million principal amounts of outstanding 2021 notes were exchanged for an aggregate of 28.75 million principal amounts of newly issued 7.5% senior secured convertible notes due 2024. $25.9 million in cash and approximately $1.1 million in cash representing crude and unpaid interest through the closing date of the exchange. Today, is the maturity date of the 2021 notes, and we are required today to sell all of the remaining 2021 notes and pay all accrued but unpaid interest thereon. On November 9th, the company delivered the necessary funds under the indenture governing the 2021 notes to effectively discharge the remaining outstanding 2021 notes. To summarize, the company's debt has been cut by more than half compared to the debt levels As of June 30, 2021, the remaining debt matures in the third quarter of 2024. Accordingly, the company now has additional financial flexibility and has sufficient capital to fund its operations through important milestones in 2022. And now I'll turn to the results. Revenues from selling goods were $4.5 million during the three months end of September 30, 2021, an increase of $1.2 million, or 36%, compared to revenues of 3.3 million for the three months ended September 30th, 2020. The increase of 3.2 million in sales to Brazil resulting from timing difference was partially offset by a decrease of 2 million in sales to Pfizer resulting from time difference as well. Revenues from license and R&D services for the three months ended September 30th, 2021 and September 30th, 2020 were 7.5 million. Revenues from license and R&D services are comprised primarily of revenues the company recognized in connection with its license and supply agreements with Chiesi. The revenue increase of $1 million recognized from the Kirin Invisibility Study was offset by a $1 million decrease in revenue generated under the company's license and supply agreement with Chiesi. Cost of goods sold was $3.7 million for the three-month end of September 30, 2021, an increase of 0.8 million or 28% from cost of goods sold of 2.9 million for the three months ended September 30, 2020. The increase in cost of goods sold was primarily the result of higher sales. Research and development expenses was 7.3 million for the three months ended September 30, 2021, a decrease of 0.4 million or 5% compared to 7.7 million of R&D expenses for the three months ended September 30, 2020. The decrease is primarily the result of completion of two out of the three Phase III clinical trials of PRX-102 and reduced costs related to the balanced study. We expect R&D expenses to continue to be a primary expense as we enter into a more advanced stage of preclinical and clinical trials of certain of our product candidates, as George described previously. Selling general administrative expenses were $3 million, an increase of $0.2 million, or 7%, for the three months ended September 30, 2021, compared to $2.8 million for the same period in 2020. The increase is primarily the result of an increase of $0.4 million in corporate costs, mainly related to insurance, and a 0.2% increase in sales and marketing costs, partially offset by a decrease of 0.5% in share-based compensation. Financial expenses net were $2.3 million for the three months ended September 30, 2021, and $1.9 million for the three months ended September 30, 2020. The increase resulted primarily from loss on extinguishment related to the exchange of our 2021 notes, as I described earlier. As of September 30, 2021, we had $48.7 million in cash, cash equivalents, and short-term bank deposits. I will now turn the call back to you, Jor.

Thank you, Eyal. So we look forward to working closely together with KSI, closely with the FDA and the MEA to bring the PRX102 towards commercialization for adults for pre-patient. In addition, clearly, we'll update you as matters progress. Now, let's have your questions, Steve.

At this time, we'll be conducting a question and answer session If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation symbol will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we pull for questions. The first question comes from the line of Ram Salvaraju with H.C. Wainwright, you may proceed with your questions.

Hello. This is Maz speaking for RAM. Thanks for taking our questions. Thank you for the update on the Type A meeting. We just wanted a little more data. Were the discussions focused on inspecting the manufacturing sites? And if so, can you summarize the key points there? Thank you.

So, you know, the manufacturing part was the power We are now, we agreed with the FDA that they will review the two years' data with an endpoint of non-inferiority. We agreed with the FDA that we will add the one-in-four-week data for the review. And you know, once we will submit, the FDA, as I assume regularly, by their regulations, are supposed to

inspect the facilities there's nothing more than that in essence okay great thanks for the clarity and then there's one more from us so given that your BLA will include the final two-year analysis of the phase three balance study what your baseline and best case expectations regarding these study results so What do you think would be the minimum delta in EGFR you're looking at for between the treatment and the active arms? Do you think demonstrating superiority over the Fabrizyme is a requirement to winning a favorable reimbursement? If yes, why? If no, why not?

First, I suggest we would wait for the outcomes. And second, with regard to reimbursement in future marketing strategies or plans, I suggest, you know, this is Chiesi's, if I may say, area, you can approach them, of course.

All right. Thank you very much for asking the question.

Our next question comes from the line of John Vandermassen with Zach. You may proceed with your question.

Hello, Dror. Eyal, how are you? How are you?

I'm doing well. Is there a specific conference or meeting where you expect to present the balance data?

Can you repeat the question?

Yeah, is there a specific conference or meeting where you expect to present the balance data when it becomes ready in the first half of next year?

Well, you know, first we have to see whatever we will share will be top-line results at the beginning. Then, you know, we will do all the analysis in order to establish a CSR, the clinical study report. I assume following that, you know, there will be conferences where we usually participate to a specific conference to present the data.

Okay. And I would assume that would probably be in the fall. Does that sound about the right timeframe?

We expect that the top-end results will be in Q2. Okay.

Okay. Great. Well, I was thinking you'd present it at a conference at some later point.

Well, I think top-line results are top-line results. So the intent is indeed to further analyze and finalize all the data.

Okay. And a question on the convertible notes. I think there was a small proportion of that amount that was listed on the balance sheet today that was paid down today, November 15th. How much should we reduce that amount going forward that's listed on there for the convertibles.

I think that the amount was approximately 3 million leftovers from the 2021 notes, and that's it.

Okay, very good. And the last one for me is on the gross margin. Is there any guidance or help you could give us for estimating that that proportion of product sales going forward. It seems like it's been rather volatile in recent quarters and wanted to see if there's any things you could help us with in terms of forecasting that in the future.

That could be hard for a simple reason. The margins that we have on the Brazilian sales are different than the ones we have on Pfizer and the ones we have on Chiesi. Obviously, the mixture, at the end of the day, comprises the margins that you see.

Okay. Well, that is helpful.

Thank you, Riel.

You're welcome.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad one moment while we poll for questions. Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Drobachan for closing remarks.

Well, thank you, and thank you, everybody, for the time. And we will continue and update you on our progress going forward. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and enjoy the rest of your day.