Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Biotherapeutics Third Quarter 2023 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 Padilla of LifeSci Advisors Investor Relations for Protallix. You may begin your conference.

Thank you, Operator, and welcome to the Portalix Biotherapeutics Third Quarter 2023 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Portalix, 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 Portalix 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 Portalex's filing 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 our third quarter 2023 financial results and business update call. Before we begin, I would like to take a moment to acknowledge the situation here in Israel. We at Protalyx are horrified by the devastating events that have been taking place in recent weeks. It is an extremely challenging time and we are heartbroken for the victims, families, friends and loved ones, many of us being personally impacted. Our hearts and prayers go out to all those affected, and we remain dedicated to the safety and well-being of our team. We are committed to provide our families, friends, and colleagues any and all support they need at this time. At the same time, we want to reassure you that we are continuing to operate as usual. There have been no disruptions to our facility. and we do not currently anticipate any interruption to the supply of our products El Fabrio and El Elizo. We appreciate all those who have been reached out to Protalyx to express their concern and support, and we thank you for joining us today. I will now review our recent progress and accomplishments. Following my remarks, Eyal will provide a more detailed review of our financial results, and then, of course, we will open the line for questions. Let me now turn to our accomplishments this quarter. Since receiving FDA and EMA approval for El Fabrio, our commercial partner Chiesi has focused on commercial launch in both the United States and the European Union. We are also pleased that El Fabrio has been granted additional regulatory approvals outside the EU, like in Great Britain and Switzerland, and we look forward to continued global growth of El Fabrio. Having now secured the approval of two drug products, Elfabio and Elilizer, we are now focusing our attention to develop our pipeline assets with the potential to address high unmet needs for patients with limited therapeutic options. Our most advanced development candidate is PRX115 for the potential treatment of severe gout. We are currently sponsoring a Phase 1 first in human clinical trial of PRX115 to evaluate its safety, pharmacokinetics, pharmacodynamics, and immunogenicity. It is a double-blind placebo-controlled single ascending dose trial of up to 56 participants. 42 participants have been dosed today in this first in human trial. We expect to announce top-line results from this study in mid-2024. We believe PRX115 is potentially a good candidate to target this market. Our next pipeline candidate is PRX119 for the potential treatment of NETS-related diseases. NETS are web-like structures released by activated neutrophils that trap and kill a variety of microorganisms. Excessive formation or ineffective clearance of NETS can result in different pathological effects. and has been observed in various autoimmune, inflammatory, and fibrotic conditions. We look forward to providing with updates on these programs as they progress. There are currently several other preclinical programs, and we will update regarding these programs once applicable. On the corporate side, we welcome Dr. Elliot Fosser as chairman of our board of directors, succeeding Mr. Ze'ev Bornfeld, who retired from his position on our board. As an independent director, Dr. Foster was also appointed to our nominating committee. Elliot's reputation in management and leadership in the life science field speaks for itself, and he has a record of success in the United States, the European Union, and Asia. We are grateful to Ze'ev for his dedication and leadership since the founding of Protonix many, many years ago, and we look forward to working with Elliot and leveraging his expertise as we enter this exciting phase of development for this company. Before turning the call over to Eyal, I want to note that our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near-term capital infusion. With that, it is now my pleasure to turn the call over to Eyal to review our financials. Eyal, please.

Thank you, George, and thank you, everyone, for joining today's call. Let me review our third quarter 2023 financials. We recorded revenues from selling goods of $10.2 million during the three months ended September 30th, 2023, an increase of $1.4 million, or 16%, compared to revenues of $8.8 million for the three months ended September 30th, 2022. The increase resulted primarily from an increase of $3 million in sales to Chiesi, following the approval by the FDA and the EMA, as Ron mentioned, of Fabrio. and of 0.6 million in sales to brazil partially offset by 2.2 million decrease in sales to fight recorded revenues from license and r d services of 0.2 million for the three months ended september 30th 2023 a decrease of 5.2 million or 96 compared to revenues of 5.4 million for the three months ended september 30th 2022. Revenues from licensed and R&D services are comprised primarily of revenue we recognize in connection with the Chiesi Agreement. As of March 1, 2023, sponsorship of the extension studies was transferred to Chiesi, and Chiesi is now administrating all open-label extension studies. Cost of goods sold was $4.9 million for the three months ended September 30, 2023, a decrease of $2.2 million, or 31%, from cost of goods sold of $7.1 million for the three months ended September 30th, 2022. The decrease in cost of goods sold was primarily the result of decrease in sales to Pfizer, partially offset by an increase in sales of El Fabio to Chiesi and of Eliza to Brazil. For the three months ended September 30th, 2023, our total research and development expenses were approximately $3.7 million, comprised of approximately $1 million for subcontractor related expenses, approximately $1.9 million of salary and related expenses, approximately $2.2 million of material related expenses, and approximately $0.6 million of other expenses. For the three months ended September 30th, 2022, the total research and development expenses were approximately $7.4 million comprised of approximately $4.9 million in subcontractor related expenses, approximately $1.7 million of salary and related expenses, approximately $0.2 million of material-related expenses, and approximately $0.6 million of other expenses. Total decrease in research and development expenses was $3.7 million, or 50%, compared to the three months ended September 30, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry Clinical Program and the regulatory process related to the BLA and the MAA review of the fabric of the applicable regulatory agency. Selling, general and administrative expenses were 3.7 million for the three months ended September 30th, 2023, an increase of 0.9 million or 32% compared to 2.8 million for the three months ended September 30th, 2022. The increase resulted primarily from an increase of approximately 0.6 million in salary and related expenses due to one-time cash bonus and an increase in share-based compensation. Financial income net were 0.2 million for the three months ended September 30th, 2023, compared to financial expenses net of 0.4 million for the three months ended September 30th, 2022. The change resulted primarily from an increase of 0.3 million in interest income. In the three months ended September 30th, 2023, we recorded income taxes of approximately 0.1 million, which were primarily the result of the provision for current taxes in respect of Section 174 of the U.S. tax cuts and jobs act which was enacted in december 2017. cash and cash equivalents and short-term bank deposits were approximately 41 million september 30th 2023 net loss for the three months ended september 30th 2023 was approximately 1.9 million or 0.03 dollars per share basic and 0.04 dollars per share diluted compared to an end loss of 3.6 million or 0.7 dollars to share basic and diluted for the same period in 2022. I will now turn the call back to you, Dror.

Thank you, Eyal. In concluding this earnings call, I would like to know that we at Protalyx are proud of our accomplishments. We have a proven platform technology with two approved therapeutics driving a rich and sustainable pipeline of assets. A world-class team, a strong balance sheet supporting our strategic plans. and a strategic vision to creating a long-term value for our stockholders. We look forward to updating you in the future on our progress. Before we start taking questions, I would like to note that we are praying for our friends and families during this challenging time, one that is filled with pain. I am grateful for our entire Portalix team, their enduring commitment and resolve at this time as we develop a portfolio for patients with unmet medical needs is noteworthy. Now I would like to ask the operator to open the call for questions, please.

Thank you. We will now 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 tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions 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. The first question comes from the line of Pubalan Pachayappan with Etsy Wainwright. Please go ahead.

Hi, this is Boo Balan. Sorry for the voice. I'm still recovering from sore throat. So thanks for taking our questions. Firstly, with respect to revenue from selling goods, I see that the revenue dropped from 15 million in second quarter to 10 million in the third quarter. Can you discuss the underlying factors for this drop in revenue? And also, what are your expectations for revenue in the fourth quarter?

Thank you, Bobalon, for the question.

So in terms of the decrease, part of the decrease is decrease in sales to Pfizer, and part of it is decrease in sales to KSB. As I mentioned in the previous call, the sales to KSB are basically their inventory buildup. At this point, the sales to KSB are not indicative of the penetration of sales in the market. So obviously, as they build their inventory, there's going to be fluctuation in the next year and a half or even two. during the term that they're building the inventory and slowly but surely also penetrating the market and building their presence in the markets. With respect to your second question about guidance on revenue for the fourth quarter, we usually don't provide guidance for revenue, especially since the POs from Chiesi and from Brazil and FISA are dynamic, especially at this point where Chiesi is the majority of the sales. and they are building up their presence in the market. So I guess that it's going to take time until we'll be able to share forecasts and feel comfortable giving those four meeting statements.

Okay, fair enough. And then congrats on winning the regulatory approval in UK and Switzerland. So I was wondering if you could provide or maybe at a high level discuss the poverty disease market opportunity in the UK and Switzerland And also, which countries can we expect to approve El Fabrio in the upcoming quarters?

So, actually, you know, the drug was approved already in most of the, if I may say, Western countries in Europe. So, you know, the United Kingdom is not part of the EU, but it's certainly an important market. Also in Switzerland it was approved. And the idea is indeed to move on to other markets outside the EU, including Japan, where Chiesi initiated the study in order to register the drug later on, and other markets as well. As for the specific size of the Fabry market in the UK, I don't have it in front of me. And also this is Chiesi's, if I may say, role right now. So once we will have more data or Casey will release more data, we will be able to share it with you. But certainly the UK is a very important market in Europe, let's put it this way.

Okay, thanks for the color. Let's switch gears and discuss your clinical programs, especially PRX115, the ongoing phase one study. So I'd like to get some additional color on some of the items that you listed in the exclusion criteria. So I was looking at the clinicaltrials.gov website, and some of the criteria, especially the exclusion criteria, so it says you're excluding patients with one or more gout flare in the last one year, and those with subcutaneous topi or those with advanced renal diseases, they're also excluded. So I'm trying to understand, is the strategy to target mild or moderate forms of gout without renal complication If I may, so you can clarify more on that.

Yes, sure. Thank you for that. So actually, you know, it's a phase one study. It's a single dose, so it's the first time we actually infuse it to participants. The participants are actually volunteers with hyperuricemia. They are not, and the idea is first to check safety, of course. and then to see if indeed we reduce the hyperuricemia to normal levels or acceptable levels, and then take it further. So we measure multiple aspects in order to be able to move on, of course subject to safety, to a multiple ascending dose later on in 2024. So it does not indicate right now The idea is not to indicate for mild patients at all. Actually, it's for severe gout patients.

Okay. Thank you for the color. One last question, if I may. Again, with respect to PRX1 on 5, I know you're collecting immunogenicity data and blood uric acid levels as well. I'm curious, what do you expect to see in these two data? especially if it's a phase one study. What are your expectations?

So again, we would like to see safety for sure, and then we will analyze from a PKPD point of view, you know, additional measurements to see if we have indications for reduction of cause of the hyperuricemia and other parameters in order, again, to see frequency of dosing and other signals that we'll enable us, if I may say, to take, you know, further steps or more calculated steps for the next study.

Okay, thank you for taking all my questions.

Yes, and again, just to make sure, the intent at least is to enroll up to 56 subjects, so I think it's enough of a number to, or we hope it's enough of a number to get enough information to move on, you know, I won't say minimize the risk, but, you know, with less risk, of course. Safety, for sure, but more than that.

Thank you. Next question comes from the line of John Vandermosten with Zax. Please go ahead.

All right. Thank you, Andrew. Good day to you. Beyond calls, how much of your expense structure is oriented towards the El Fabio business now?

Can you repeat the question?

I can hardly hear you. I'm sorry.

Oh, I'm sorry. Beyond cost, how much of your expense structure is oriented towards the El Fabrio business now?

In terms of cost structure, other than manufacturing, which takes something like three to four months a year, and the production of three to four months a year is sufficient to, you know, supply and provide half of the patient population worldwide, we're not investing at present in Alphabet.

Okay, perfect. And how do you see your capital structure changing now that you have two revenue generating products and then also keeping in mind that there's the convertible bet on the balance sheet?

That's a good question.

A, it's true that we have two revenue generating products out there. Since we are not doing anything in the equity capital markets, obviously, I guess, gradually, slowly but surely, when revenues are going to start to ramp up, the big boys are going to join the party and they're going to see that we have a stable streamline of revenues and we're accumulating cash. It's a different company. It's not a biotech, a typical the biotech company in the development stage. At present, we don't see this change. As we said, the company at this point is self-sustained. We don't see any need to raise money in the foreseeable future for the ongoing operations. So I guess that's going to take time.

Over time, I guess that the capital structure is going to change.

Okay. And I think they're coming due next year, in about a year from now. And then quarterly cash burn, can you give us some help on how to forecast that going forward? I noticed it was a little bit greater than net income for the quarter. And I just wanted to see if you could help us understand how that might flow through for the next several quarters.

Yeah, so I think that I responded to this one previously to Buvalam. Since we're just in a phase of revenue ramp-up and Keyesia is just starting to penetrate the market and building the presence slowly but surely, I guess that's going to fluctuate. We don't feel comfortable at this point sharing the forecasts for the next couple of quarters. I think it's very, very, very fluctuating. They can decide that they're pulling two batches, one batch, for even technical reasons, you know, delaying one. So I think at this point it's going to be irresponsible to share for the short term. Long term, as I said, in the next year and a half or two, that's going to be mostly an inventory buildup with a run rate that will ramp up. I'm talking about sales, obviously. It will ramp over time. Okay.

And then shifting to Purex 115 and assuming that top line comes out as expected or better in the middle of next year, what are the next steps there? Would it be a phase two or I guess I'm just wondering what we should expect to see from that development program?

So we intend to do a multiple dose following the single dose that we do now. And then, you know, once we have, which is actually a phase two, And then we will continue from there.

Okay. And just one last one on 119. What are the next steps for that program?

Thank you for that. So we will gather information in the near future, if I may say, from the different preclinical studies and other data that we have, and we'll go for if I may say, kind of a portfolio go-no-go meeting. And if indeed we decide to go ahead, we will share and continue, you know, to toxicology and phase one.

Okay. I appreciate it, Dara. Yael, thank you. Thank you.

This concludes today's question and answer session. I would now like to turn the floor over to Dara Bashan for closing comments.

So thank you. So thank you, everybody, for your participation. And I appreciate the time. And we look forward to speaking with you on our next call for 2023 results. And I hope with a more peaceful time for us here in Israel. Thank you all.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Thank you.