Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Biotherapeutics First Quarter 2024 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. Mike Moyer of LifeSci Advisors, Investor Relations for Protallix. You may begin your conference.

Thank you, Operator, and welcome to the Protallix Biotherapeutics First Quarter 2024 Financial Results and Business Update Conference Call. With me today are Drew Arubashan, President and CEO of Bratalex, and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the business and clinical updates was issued this morning and is available now on the Bratalex 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 Procalix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Dror Bashan. Dror?

Thank you, Mike, and welcome, everyone, to our first quarter of 2024 Financial Results and Business Update Call. I will begin by reviewing our recent accomplishments before handing the call to Eyal, who will provide a more detailed review of our financial results. And we will then open the line for questions. I will turn first to PRX115. As announced this morning, given the encouraging initial top line results from the first seven cohorts of the company's phase one first study, of our recombinant URICAS candidate, PRX115, and following the review and acceptance of the safety data by the Safety and Monitoring Committee, the company has decided to expand the study by adding an eighth cohort. Consistent with the initial seven cohorts, the new cohort will consist of eight new subjects and will analyze a higher dose of PRX115 and the potential of a higher dose will result in increased exposure time. In addition to the expansion of the first in-human study, the company also decided to commence preparations for a Phase II clinical trial of PRX115. PRX115, to remind you, is a recombinant pegylated uricase product candidate produced using our ProCellExpress platform. The study is a double-blind, placebo-controlled, single ascending dose, First in human phase one clinical trial, the company designed to evaluate the safety pharmacokinetics and pharmacodynamics following a single dose of PRX115 in subjects with elevated uric acid levels. Of the 56 randomized subjects enrolled in the study across seven cohorts, 42 subjects were treated with PRX115 and 14 subjects were treated with placebo. Gout is the most common inflammatory arthritis, and it affects approximately 14 million adults in the US, over 7 million in Europe, and over 190 million in China. It is estimated that about 5% of the gout patients are considered to have chronic refractory disease. The preliminary results from the first seven cohorts demonstrate the exposure to PRX115 increased in a dose-dependent manner and the PRX115 rapidly reduced plasma uric acid concentration to below 6 milligram per deciliter over time following a single administration. With regard to the safety, a PRX115 was found to be well tolerated. Twenty-six percent of the subjects treated with PRX115 reported the study-related adverse events, and the majority of these were mild to moderate and transient in nature. One subject in cohort number two experienced an anaphylactic reaction immediately following the start of the infusion, but the reaction was fully resolved. There were no other serious adverse events reported, and no adverse events were reported in the highest dose cohort number six and seven. We look forward to updating you on the full results from the expanded trial following the completion of the new cohort. Our next pipeline candidate, Abel also being expressed through Procellex is PRX119. PRX119 is a pegylated recombinant human DNase-1 candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps or NETs. Excessive formation of accumulation of the NETs can result in different pathological effects and have been observed in various autoimmune, inflammatory, and fibrotic conditions. Animal studies with PRX119 have shown that our product candidate has the potential to be an effective treatment for these conditions. And additional proclinical studies of PRX119 are ongoing. In addition to PRX119 and PRX115, the company is focusing its research and development efforts on early stage development assets to build its product development pipeline. We look forward to providing you with updates on potential development candidates as they become more mature. Finally, as you know, our second approved drug, Alfabrio, continues to gain approvals, regulatory approvals, for the treatment of adult patients with Fabry disease. Most recently, in January of this year, it was approved in Israel, and our commercial partner, Chiesi, global rare disease, is committed to successful commercialization of Alfabrio, with launches underway in the United States, throughout the European Union, the UK, Switzerland, Israel, and additional markets where approvals were granted. We are confident that Chiesi will continue to position El Fabio for success, and we look forward to the continued growth of El Fabio franchise. Before turning the call to Eyal, I want to emphasize our strong cash position provides us with sufficient cash to enable the repayment of our convertible notes due in September of this year. and for our ongoing operations. In addition, we expect sales to Kiesi to gradually continue as they anticipate future approvals and launches in additional countries. With that, it is now my pleasure to turn the call over to Eyal for a review of the financials.

Please, Eyal.

Thank you, George, and thank you, everyone, for joining today's call. Let me review our first quarter 2024 financials. We recorded revenues from selling goods of $3.7 million for the three months ended March 31, 2024, a decrease of $1.4 million, or 27%, compared to revenues of $5.1 million for the three months ended March 31, 2023. The decrease resulted primarily from a decrease of $1.1 million in sales to Pfizer and of $0.3 million in sales to Brazil, which decreases resulted primarily from the timing of deliveries. We recorded revenues from licensed and R&D services of $0.1 million for the three months ended March 31st, 2024, a decrease of $4.4 million or 98% compared to revenues of $4.5 million for the three months ended March 31st, 2023. Revenues from licensed and R&D services are comprised primarily of revenues we recognize in connection with the KFA agreement. The decrease resulted primarily from the completion of our research and development obligations with respect to Alfabrio, and as Alfabrio was approved in the US and the EU in May 2023, from the completion of the regulatory processes related to the review of the BLA and the MEA for Alfabrio by the FDA and the EMA, respectively. Cost of goods sold was $2.6 million for the three months ended March 31st, 2024. a decrease of 0.5 million or 16% from cost of goods sold of 3.1 million for the three months ended March 31st, 2023. The decrease in cost of goods sold was primarily the result of the decrease in sales to Pfizer and to Brazil. For the three months ended March 31st, 2024, our total research and development expenses were approximately 2.9 million, comprised of approximately 0.5 million subcontractor-related expenses, approximately $1.5 million of salary-related expenses, approximately $0.2 million of materials-related expenses, and approximately $0.7 million of other expenses. For the three months ended March 31, 2023, our total research and development expenses were approximately $5.8 million, comprised of approximately $3.5 million of subcontractor-related expenses, approximately $1.5 million of salary-related expenses, approximately 0.1 million of material related expenses and approximately 0.7 million of other expenses. Total decrease in research development expenses for the three months ended March 31st, 2024 was 2.9 million or 50% compared to the three months ended March 31st, 2023. The decrease in research and development expenses primarily resulted from the completion of our Fabric Clinical Program and the regulatory processes related to the BLA and the MEA review of El Fabio by the applicable regulatory agencies. Selling general administrative expenses were 3.1 million from the three months ended March 31st, 2024, and for the three months ended March 31st, 2023. Financial income net were 0.1 million for the three months ended March 31st, 2024, compared to financial expenses net of 0.5 million for the three months ended March 31st, 2023. The change resulted primarily from high interest income and bank deposits and lower notes interest expenses due to note conversions executed in 2023. For the three months ended March 31st, 2024, we recorded the tax benefit of approximately 0.1 million compared to income taxes of 0.2 million for the three months ended March 31st, 2023. Income taxes recorded are primarily from the provision for current taxes and income mainly derived from U.S. taxable global intangible low-tax income, GILTI, mainly in respect of Section 134 of the U.S. Tax Cuts and Jobs Act. Cash and cash equivalents and short-term bank deposits were approximately $48.5 million at March 31, 2024. As Joel mentioned, we believe our cash position is sufficient to enable the repayment of our convertible notes due September 2024 and for our ongoing operations. Net loss for the three months ended March 31st, 2024 was approximately 4.6 million or 0.06 dollar per share basic and diluted compared to an end loss of 3.1 million or 0.05 dollars per share basic and diluted for the same period in 2023. I will now turn the call back to you, Dror.

Dr. Thanks, Eyal. In closing, I would like to express my confidence in Protalyx and its current standing. We have reviewed with you our strong cash position. We have three streams of revenues, sales to Brazil, sales to Pfizer, and of course, sales to Chiesi. We are pleased with the interim results from our PRX115 clinical study, and we look forward to the continued momentum through the rest of this year. We are continuing to leverage our expertise to develop a pipeline of early-stage assets, with the potential to address rare diseases with high unmet needs. We look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stakeholders. Now, I would like to ask the operator to open the line for questions.

Thank you. If you'd like to ask a question at this time, please press star 1 from your telephone keypad and a confirmation tone to indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants that are 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. Thank you, and the first question comes from the line of Ram Selvaraju with HC Wainwright.

Pleased to see you with your questions.

Hi, thanks very much for taking my questions. I wanted to ask specifically about PRX115. and whether you could delineate for us the specific gout subpopulation in which you anticipate this drug candidate might be utilized if approved, and what the competitive landscape currently looks like, as well as what types of advantages you anticipate 115 might have against those drugs. I think in particular, you know, we are talking about a commercially available product called Cristexa, So perhaps you can enumerate for us whether you believe 115 will have advantages on efficacy, safety, and convenience, or if you anticipate advantages on only one or two of the three categories and how you expect the drug's advantages to ultimately demonstrate themselves. I realize that it's relatively early in the drug's development process. But we're hoping you could enlighten us on this one.

Thank you. So thanks, Ram. As you know, we have finalized the first seven cohorts. It's the first single-dose study. So we want to be careful, but still we are optimistic. We're moving to cohort number eight, as we mentioned. And we potentially think that this potential drug will address, I would say, uncontrolled gout patients. As mentioned, we initiate the preparations for a phase two study, which will be, of course, a multiple dose study, and we will be much smarter. Right now, we hope to see, we hope to see, I want to be careful, improved safety and better frequency of the drug thank you you know from efficacy by the end of the day we want to reduce the uric acid of course below six away way below six in in a way which will be as consistent as possible throughout a full year along the years But let's see. We think that the results we see right now are encouraging. This is why we move on and we did not close the study or put a CSR. And, of course, we discussed it not only with the safety committee, but, of course, also with our board when we got the green light to prepare a phase two. Right now, today, as you know, Cristexa is on the market with once in two weeks, as far as we know. And there is a product by Sobi that's supposed to enter the market next year or something like this.

Just to clarify, assuming that you move into phase two, would you expect the efficacy endpoints used in phase two to include things like reduction in flares or reduction in TOFI? And... are you expecting to be able to position 115 as a competitor, a direct competitor to Cristexa, or do you expect ultimately 115 to be utilized in patients who either are not considered candidates for Cristexa because of some safety concerns or are refractory to Cristexa?

I think, look, first we have to finalize, of course, and we are planning a meeting with the regulators, both in the U.S. and the EU, to address our potential design of the Phase 2 and the overall clinical program, then I think we will be smarter to answer you on the first one. On the second one, yes, the intent is indeed to compete on the market of the uncontrolled gout patients.

Thank you very much. Thank you.

As a reminder, to ask a question today, we press star 1. The next question is from the line of John Vandermossen with Zax. Please proceed with your questions.

Thank you, and good afternoon to our NEL. So for 115, I believe the patients are infused once, and then you're observing them over a three-month period. How do the PK levels trend over that period?

You're asking about the enumerating? first seven cohorts?

Yes, exactly. Yeah, and I'm assuming that, you know, depending on the dose, it's probably a similar decline, right?

So, you know, we did not yet. We wanted to show the full picture once we have the full data of all eight cohorts. So once we will have everything together, including, of course, the safety data, which is most important, we will share it properly.

We didn't want to show, I would say, half job.

Okay. And does that three-month period seem like the right interval to use or maybe more frequently? And as you mentioned, one of the competitors has a much shorter interval between dosing, and that does seem like a little bit longer period of three months. Do you think in the future it might change for the phase two, or how do you think about that?

So, John, maybe I missed. What do you mean? Three months. Can you repeat it, please?

So, yeah, just looking at the clinical trials, I think you're observing patients over a three-month period with one infusion, and I'm wondering what the ultimate infusion periodicity would be based on what you've seen so far.

I think I don't follow your question.

I'm very sorry. Okay, no problem.

We can follow up later.

No, no, please. What we see, and we are very much encouraged, is good results reducing the uric acid level, of course, fast and significant. And therefore, we move into cohort number eight. Once we will have all the data, we will share it transparently, of course.

Okay. I think, John, that the fact that we are monitoring patients over three months doesn't necessarily indicate that the infusion intervals are going to be once every three months. Obviously, we have to follow, as you mentioned, the full set of data, the PK, the PD, and the safety, and then make a judgment call ahead of the phase two, obviously, what the intervals and what the dosing is going to be.

Okay, great. And then you had mentioned that one of the patients experienced anaphylactic reaction. What did you do to alleviate it? It seems like it was easily resolved, but I'm just wondering if there was any specific characteristics of that patient or if it was... No, I mean, it's...

I think it was the first patient or second patient cohort number two. It was six minutes into the infusion, meaning very fast. And it was resolved, was taken care of by the physicians and the team of the center. And this is the only one that had such a reaction. And that's it. As we mentioned, the majority of the patients Side effect, if I may say, were mild to moderate. And as we went up the cohorts in six and seven, no AEs were recorded.

Okay. And then looking ahead to a phase two, I think you just have sites in Australia right now. I guess as you look towards a more advanced trial, would those sites be more scattered around the globe? And are there any particular geographies that look attractive for that?

So we will, you know, we did not choose yet, but we have, you know, the last very few candidates to choose from as a CRO. I think it will be, we will move probably to the U.S. and other continents as well. Okay.

Okay. Sounds good. And then there was also a mention of looking forward R&D spend, and I guess the three areas are 115, 119, and other early stage assets. And how do you think about the breakdown of R&D towards those three different areas? I mean, it sounds like probably 115 is going to be the main consumer of R&D, but what about the other two?

So, look, the main consumer of R&D, I would say, of products under R&D, as you mentioned, would be 115. We want to be careful with the spend. As we mentioned, We sit on, I would say, $48 million end of the quarter, which would be enough. I'm emphasizing, and I will close the loop in a minute, which would be enough to pay the debt by the beginning of September of this year, so meaning we will be by the end of the year, from the beginning of September, a company with no debt and enough cash to maintain our operations. Now, this is why the PRX115 is our main R&D expand, And in addition, we will invest, I would say, in early research candidates to, you know, potentially address real-time maintenance in blood disease. But, you know, the intent is not to go, I would say, above our capabilities at this moment, of course, because we want to keep the company solid and stable. We enjoy three streams of revenues. We assume the ones to PSE will gradually And we are pretty much confident, of course. We trust Chiesi and we think they do a very good job. So gradually this will grow and will enable us to be, I would say, financially stronger.

Got it. And then looking at the cash flow statement, there was an increase in contracts liability that added to your cash, positive cash flow from operations. And I was wondering if you could give us, give me a clue. And maybe it was obvious, I just missed it. But Chiesi, what that was related to on that contract's liability.

Yeah, so as I mentioned a couple of times in the past, our sales to Chiesi are based on either projections, and as you mentioned, we feel, believe, and we see, evidently, that they're doing a good job in terms of penetration. But the orders that they're putting, obviously, depending on their levels of inventory and the timings, of release of the batches. As you all know, Chiesi is also the fill-in-finish contractor. So the increase in contractual obligations is batches that basically Chiesi are releasing now, but they already paid for it. And it's going to go, obviously, into revenues in the next quarter or two. So we didn't record the revenues there, but the cash is there. Obviously, cash doesn't grow on the trees. The fact that the crash grew, as you mentioned, on contractual obligations means that they keep on selling. We keep on selling to them. And as you mentioned, gradually we believe that they're going to take a significant market share and position themselves in a very strong and meaningful way.

Great. Very good. And last question regarding the RISE study in Japan. You know, I know you're not conducting that, but I was wondering if Kiezi had given you any indication on when a BLA might be submitted to the Japanese authorities.

I don't have the details. Maybe you have. As far as I know, the study is ongoing.

Yeah, the study is ongoing. Obviously, we have the data. We know how many patients were obviously enrolled. But since it's a KMV proprietary data, obviously we're not allowed to share it. They are working, as Roy mentioned, and I mentioned a couple of times. We see the progress and we see their seriousness in terms of the trials that they're conducting, the robustness of the programs, and obviously the commercial operations on the ground, both in the US and outside the US. So as soon as they complete the study, that will probably allow us to announce the BLA submission in Japan.

Okay, great. And is Keezy already selling some rare disease products in the Japanese market?

I don't control that. I'm sorry.

I know they've got a bunch of different products. Yeah, I hadn't thought to look that up. All right, well, thank you, guys. Appreciate the responses to my questions. Take care. Thank you.

Thank you. Thank you. Thank you. At this time, there are no additional questions. I will hand the floor back to management for any further remarks.

So all I have to say is thank you again for the time. And actually, we will look forward to updating you on the next development of the companies. And of course, we will meet at the next earnings later this year in August.

So thank you very much, and that's it.

Thank you. This will conclude today's conference. I'm going to disconnect your lines at this time. Thank you for your participation.