Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Full Year 2022 Earnings Call. As a reminder, this conference is being recorded. I will now turn the conference over to your host, Monique Coffey of LifeSci Advisor Investor Relations for Protallix. Thank you. You may begin.

Thank you, Operator, and welcome to the Protallix Biotherapeutics Fiscal Year 2022 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Proctelix, and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the update was issued this morning and is available now on the Proctelix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings released in 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 Protolix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Thank you, Monique, and welcome everyone to our fiscal year 2022 financial results and business update call. I will begin by reviewing our progress and accomplishments over the past year, along with our plans for the coming month. Following my remarks, Eyal will provide a more detailed review of our financial results, and we will then open the line for questions. So 2022 was a strong year for Protonix, and over the last year we made significant progress on multiple fronts. I would like to begin by highlighting our most recent achievement, together with our development and commercialization partner, Chiasi Global Rare Diseases. We are pleased, or very pleased, that the European Medicine Agency's Committee for Medicinal Products for Human Use, or CHMP, adapted a positive opinion and recommended marketing authorization of PRX-102 for the treatment of adults with Fabry disease. This is a significant step towards the potential approval of PRX-102 in Europe and brings us closer to delivering this treatment option to Fabry patients around the world. The final decision is now referred to the European Commission, which is expected to provide a decision marketing authorization in early May of this year. Not only we are approaching potential approval in Europe, but we also look forward to potential approval in the United States. As previously announced, the U.S. FDA accepted our resubmitted biologic license application for review in December. It was resubmitted already in November 9th. We received this acknowledgement letter on December 9th, and are assigned the PDUFA target action date of May 9th, 2023, is quickly approaching. Including in these regulatory submissions to the EMA and FDA were the comprehensive results from our Phase III preclinical program, as well as long-term data from our ongoing open-label extension studies. Final results from our Phase III BRITE and BALANCE trials were completed and announced earlier this year, and both studies met their respective efficacy and safety objectives. This robust set of data represents hundreds of years of patient exposure to PRX102 and we believe provides a compelling case to the regulators to consider this important potential treatment option for adults affected by Fabry disease. We look forward to providing you with updates as we approach potential approval in the EU and the US. If approved, PRX102 will be a second approved drug from our proprietary protein expression system called Procelex, providing even further validation of this unique and innovative platform. As we enter into what will be an exciting year for Protalyx, we would like to reiterate our appreciation for Chiesi's partnership and dedication to this program, and we thank both Protalyx and Chiesi's teams for all their efforts to deliver this potential new treatment to patients with Fabry disease. Turning to our early stage pipeline, we are continuing to develop promising candidates expressed through our prosthetics protein expression system. PRX115 is a novel pegylated uric acid in development for the treatment of severe gout. Final results from the first stage of one month's multiple dosing toxicity study of PRX115 in two species to support the phase one study show no indication of safety concerns. Our current development plan goal is to initiate a Phase I clinical trial in the next couple of weeks. In addition, we continue to make progress on PRX119, a pegylated recombinant human DNase I protein designed to elongate DNase half-life in circulation for the treatment of NETS-related diseases. We have conducted preclinical studies to demonstrate the feasibility of PRX119. and we look forward to providing updates on this program as we progress throughout this year. Finally, our balance sheets provide us with sufficient cash runway to the first quarter of 2024, supporting the company through potential approval, in addition to continuing developing our early-stage pipeline programs, as I mentioned. Now, before I turn to Eyal for review of our financials, I would like to say that with regard to the PROSAP filed earlier this morning, I ask to clarify that the PROSAP was filed with connection to the ATM program, and the company has to emphasize this is not an announcement of a fundraising. Now I'll turn to Eyal. Eyal, please.

Thank you, Dror, and thank you everyone for joining today. Your permission, I'll review our fiscal year 2022 financials. The company recorded revenues from selling goods of 25.3 million for the year ended December 31st, 2022, an increase of 8.6 million or 51% compared to revenues of 16.7 million for the year ended December 31st, 2021. The increase resulted from an increase of 2.2 million in sales to Pfizer, an increase of 3.1 million in sales to Brazil, and an increase of 3.3 million in sales to Chiesi. Revenue from license and R&D services for the year ended December 31st, 2022 were 22.3 million, an increase of 0.7 million or 3% compared to revenues of 21.6 million for the year ended December 31st, 2021. Revenue from license and R&D services represent mainly the revenues we recognize in connection with the Chiesi agreements. Cost of goods sold for the year ended December 31st, 2022 was 19.6 million, an increase of 3.3 million or 20% compared to the cost of goods sold of 16.3 million for the year ended December 31st, 2021. The increasing in cost of goods sold was primarily the result of an increase in sales of goods. Toll research and development expenses For the year ended December 31st, 2022, we're approximately 29.3 million comprised of approximately 17.8 million in subcontractor related expenses, approximately 7.3 million of salary and related expenses, approximately 1.4 million of material related expenses, and approximately 2.8 million of other expenses. For the year ended December 31st, 2021, our total research and development expenses were approximately 29.7 million comprised of approximately 18.4 million in subcontractor related expenses, approximately 7.4 million of salary and related expenses, approximately 1.2 million of material related expenses, and approximately 2.7 million of other expenses. The decrease in research and development expenses of 0.4 million or 1% for the year ended December 31st, 2022, compared to the year ended December 31st, 2021, resulted primarily from 0.6 million decrease in subcontractor related expenses in connection with our PRX-102 clinical trials, partially offset by a 0.2 million increase in materials related expenses. Selling general administrative expenses were 11.7 million for the year ended December 31st, 2022, a decrease of 1 million or 8% from 12.7 million for the year ended December 31st, 2021. The decrease resulted primarily from a decrease in professional fees and salary-related expenses. Financial expenses net was $1.4 million for the year ended December 31, 2022, a decrease of $5.7 million, or 80%, compared to financial expenses of $7.1 million for the year ended December 31, 2021. The decrease resulted primarily from lower interest and debt amortization costs, a decrease in our outstanding notes from an aggregate principal amount of 57.92 million of 2021 notes to an aggregate principal amount of 28.75 million of 2024 notes, and an increase in exchange rate of New Israel Shekel for U.S. dollars over the period. For the year ended December 1, 2022, we recorded income taxes of approximately $530,000.00. We didn't record income taxes for the year ended December 31st, 2021. The income taxes were recorded for 2022 as certain section regarding the deductibility of research and development expenses of the US Tax Cuts and Job Act of 2017 went into effect on January 1st, 2022. Cash, cash equivalents and short-term bank deposits were approximately 22.2 million as of December 31st, 2022. I will now turn the call back to you, Jordan.

Thank you, Eyal. Thank you, everyone, for joining us on today's call. We are excited for the year ahead as we await potential approval of PRX-102 for adult patients with Fabry disease. And we continue to work towards our mission of delivering new medicines to patients with high unmet needs. Now, I will turn the call back to the operator to open the line for questions. Please.

Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad, as the confirmation tone will indicate your lines in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Once again, that's star one to ask a question at this time. One moment while we pull for our first question. Our first question comes from . Please proceed.

Hi, can you hear me okay?

Yes, sir.

All right, great. Congrats on the progress and a few questions from our end. So, we know Casey makes launch decisions for PRX102, but from your perspective, how early could the drug be launched in order for your shareholders to deliver maximum value?

So first, you know, thank you for the question. Now, this is a question to Kezi. As far as we understand, once we get approved, there will be a couple of months, I assume, to finalize reimbursement schemes or programs with relevant insurers in the different countries in Europe. And of course, in parallel, I hope, in the U.S. And then it will be valid commercially. But again, this is a question to Chiesa, but I assume this is the plan.

Okay. In your view, what's the general physician awareness of PRX102 in the European Union?

Can you repeat the question? I could not understand it. I'm sorry.

I'm trying to understand the general physician awareness of PRX102 in the European Union.

So, thank you. I think there is a high awareness. This program is, if I may say, the clinical program is eight, nine years old, and the program itself is even earlier. We work with investigators and physicians throughout the world. We had clinical sites both in Europe and in the U.S., as well as Australia and other places. So as time goes by, and when we mentioned a couple of times that we have hundreds of years of patients' accumulated exposure, clearly a significant portion is also in Europe. So I hope this answers your question.

Okay, clear. Can you frame Fabry disease market opportunity in European Union, and can you discuss any progress or any getting steps to securing reimbursement in European Union?

So, no, the program, first, again, this is a question to Chiesi. The indication is about between $2.1 billion value-wise. It grows globally, and I hope that, and we believe that for Chiesi, we know it will be a very high priority, and I'm sure they will apply... you know, the best effort on their commercial program. And then we'll have, you know, to position this drug well. And that's it. As for specific details with regard to their reimbursement efforts, I suggest you ask Kiasi directly.

Okay, clear. Switching gears, speaking about your 115 GALT program, I know during last call you mentioned that IND will be submitted in the first quarter. So can you clarify the IND has already been submitted and you're ready to launch phase one?

So we are ready to launch phase one. The phase one will be conducted outside the U.S. in the center of excellence in New Zealand. I assume that hopefully we will finalize the phase one successfully We will prepare meanwhile and we will discuss also with the FDA with regard to phase two and the next steps.

Okay. So with respect to 115 again, how many healthy volunteers or patients, I'm not sure which one you're going to, who you're going to target, but how many initial data set patients you need in order to move forward or maybe to get closer to the proof of concept studies?

So what we are planning now is a first in human phase one study. And we will publish everything once we publish the protocol. So you will see all details.

Okay. And maybe one final question. How long do you expect to run the phase one study? And maybe when you ideally would like to see the data?

Which study? I'm sorry. I could not understand that.

So I'm just curious, how long do you expect to run your 115? I apologize.

So we expect to run it until the end of this year. So I hope we will be able to finalize the CSR by the beginning of next year.

Okay, thanks so much for taking my questions. Of course.

Once again, ladies and gentlemen, to ask a question, please press star 1 on your telephone keypad. Our next question comes from . Please proceed.

Thank you, and good afternoon, . Let me start out with a question on just milestones that we expect after May. You know, May is supposed to be a big month with both EMA and FTA expected. But after that, what should we look for on the horizon in terms of milestones for the company?

, please.

Yeah, I think, John, you were referring clinical EMIs, right, not financial ones.

Well, just any major events. I mean, you know, you have the other two programs, which Dror talked about just a little bit on 1.15 in terms of that phase one, but just anything else we should keep an eye out for on the horizon?

Not at this point, as Dror mentioned. We plan to go first in human in the next couple of weeks on the PRX-115, and finish it by the end of this year with possibly potentially we're going to be with early next year, the first you know, main major milestones that we can foresee in the current pipeline.

Okay. Thank you, Al. And in terms of financial cash flows and everything that's related to PRX-102, When do we expect, assuming that sales are made in the second quarter or even the third quarter, when might those cash flows be received and when might they be recognized on the financial statements?

So my selection with the regulatory approvals should be received within 60 days from the event. Obviously, they're going to be recorded as we get them from QA and report them. the street, along with the financials.

Okay, very good. And I saw that you mentioned in the K, and we talked about this before, but you mentioned in the K this time that the PRIV no longer has exclusivity in the EU, and ELISO is marketed globally. What does this mean for future revenues for ELISO?

Since we don't commercialize ELISO, it's been marketed and commercialized by Pfizer, it whether to start the marketing in Europe or, you know, serving them based on the POs we receive from them. They'll have to rethink internally whether to penetrate market by market. We're calling it the EU. At the end of the day, it's a market by market struggle. So they'll have to make up their minds. And we'll be, you know, working with

Okay, great. And I assume that you have regular conversations with them on kind of how things are going with the product sales. So, I mean, you guys obviously have to plan, you know, production and everything like that. So, I assume that you have conversations with them, right?

Yeah, that's correct.

Question for them. They're holding the commercial rights. Got it, got it. And last one for me is I also saw that your agreement with TA's, you fulfill finished activities. And just was wondering what the geographical location was of that, since you're going to be producing the drug product in Israel. And then, I guess, where is it going to be shipped for the further disposition?

It's going to be shipped to Parma. And from there, it's going to be delivered.

Great. All right. Well, thank you, y'all. Thank you, George. Always a pleasure to speak. Thank you.

Thank you. At this time, I would like to turn the call back over to management for closing comments.

So I have to thank everybody very much for their time today, and we are very happy with the recommendation of the CHMP, and we look forward to providing you with further good news down the road. Thank you very much. Have a nice day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation, and have a great day.