Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the ProTalix Biotherapeutics Second 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 LifeSite Advisors. You may begin your conference.

Thank you, Operator, and welcome to the ProTalix Biotherapeutics Second Quarter 2024 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Pertalex, and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the financial results and corporate updates was issued this morning and is available now on the Pertalex 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 portalics filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Bashan Dror.

Thank you, Mike, and thank you, everyone, for joining our second quarter 2024 Financial Results and Business Update Group. I will begin by by reviewing our recent accomplishments before handing the call to Eyal, who will provide a review of our financial results. We will then, of course, open the line for questions. I will turn first to PRX115, which is our recombinant pegylated Eureka's candidate produced through our Procelex platform in development for the treatment of uncontrolled gout. We recently announced encouraging results, initial top-line results, from the first seven cohorts of the first in human phase one clinical study of PRX115. As a reminder, this study is a double-blind, placebo-controlled, single ascending dose study designed to evaluate safety, tolerability, pharmacokinetics, and pharmacodynamics following a single dose of PRX115 in subjects with elevated uric acid levels. The preliminary results from the first seven cohorts demonstrated that PRX115 exposure increased in dose-dependent manner, and PRX115 rapidly reduced plasma uric acid concentrations to below the guideline level of 6 mg per dl. PRX115 was also generally well-tolerated. Based on the initial top-line results of these initial seven cohorts, and the review and acceptance of the safety data by the safety monitoring committee for those escalating, we expanded the phase one study by adding an eight cohort so we can analyze a higher dose of PRX115 and its potential to result in an increased exposure time. Dosing in this eight cohort is now complete and the 85 days follow up period is in progress. We expect Top line results from the full study to be available in the fourth quarter of this year. In addition to the expansion of the phase one study, we have also initiated already preparations for a phase two trial of PRX115 in patients with uncontrolled gout. We plan to meet and communicate with the regulatory authorities in the US, Europe, and Europe to discuss our phase two plans and the overall clinical program. with the goal of initiating the phase two study in the middle of next year. Our commercial partner, Chiesi Global Rare Disease, remains committed to a successful commercialization of Alfabrio and has a wealth of experience on their team. Chiesi has invested heavily in the rare disease space and we are confident that they will continue to penetrate the market and build a Fabry franchise for the longer term. Our next pipeline candidate Also expressed for POSELEX is PRX119. PRX119 is a pegylated recombinant uricase human DNA candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps or NETs. Excessive formation or accumulation of NETs can result in different pathological effects which have been observed in various autoimmune, inflammatory, and fibrotic conditions. Beyond PRX115 and PRX119, we are focusing our R&D efforts on early-stage development assets to build our product development pipeline. We have fine-tuned our pathway going forward to focus on leveraging our Procellix platform and prioritizing renal rare disease indications. With regard to the therapeutic areas, our strategy moving forward is to prioritize renal rare disease as the core of portalic development pipeline. This is a logical focus for our company given our existing experience and the network and resources we build through the diligent and dedicated efforts owned throughout the Fabry Development Program. For example, PRX119 is being evaluated for NET-related renal autoimmune-associated diseases. In addition, we have identified potential key high unmet need indication on which we plan to focus our initial efforts. such as ADPKD, Alport syndrome, FSGS, and others. Work is currently ongoing to identify assets for these and other indications. In order to expand our platform, we are evaluating novel plant-based drug delivery systems that may allow protective delivery of different modalities into specific tissues. These exploratory studies are ongoing, and we look forward to updating you on the progress of these efforts as they progress. In addition to our Procellex platform, we intend to explore other modalities, such as small molecules and oligonucleotides to take advantage of highly innovative opportunities. Before turning the call to Eyal, I want to note that our strong cash position will enable the repayment of our convertible notes due next month in September, actually in September 1st, and to maintain our ongoing operation, including the Phase 2 study in GAUT. In addition, we expect sales to Chiesi to gradually continue as Chiesi anticipates future approvals and launches in additional markets. With that, it is now my pleasure to turn the call over to Eyal for review of our financials. Eyal, please.

Thank you, Dror, and thank you, everyone, for joining today's call. I'm a reviewer of second quarter 2024 financials. We recorded revenues from selling goods of $13.3 million during the three months ended June 30, 2024, a decrease of $1.8 million, or 12%, compared to revenues of $15.1 million for the three months ended June 30, 2023. The decrease resulted primarily from a decrease of $10 million in sales to Chiesi, partially offset by an increase of $4.7 million in sales to Brazil, and an increase of $3.5 million in sales to Pfizer. Sales to KS in three months ended June 30, 2023, requiring connection with a commercial launch and inventory build-up of El Fabrio after its approval for marketing in the United States and the European Union. The increases in sales to Brazil and Pfizer during the three months ended June 30, 2024, resulted primarily from the timing of delivery. We recorded revenues from licensed and R&D services of 0.2 million for the three months ended June 30, 2024, a decrease of $19.8 million, or 99%, compared to revenues of $20 million for the three months ended June 30, 2023. Revenues from licensed and R&D services are comprised primarily of revenues the company recognized in connection with the Chiesi agreement. The revenues from licensed and R&D services for the three months ended June 30, 2023 were the result of the $20 million regulatory milestone payment from Chiesi in connection with the FDA approval of El Fabrio granted during that period. Cost of goods sold was $9.5 million for the three months ended June 30, 2024, an increase of $3.4 million or 56% from cost of goods sold of $6.1 million for the three months ended June 30, 2023. The increase in cost of goods sold was primarily the result of an increase in sales to Pfizer and to Brazil. For the three months ended June 30th, 2024, the company total research and development expenses were approximately 3 million, comprised of approximately half a million subcontractor related expenses, approximately 1.6 million of salary related expenses, approximately 0.2 million of material related expenses, and approximately 0.7 million of other expenses. For the three months ended June 30th, 2023, the company total research and development expenses were approximately 4.5 million, comprised of approximately 1.7 million of subcontractor related expenses, approximately 2 million of salary and related expenses, approximately 0.1 million of material related expenses, and approximately 0.7 million of other expenses. Total decrease in research and development expenses for the three months ended June 30th, 2024 was 1.5 million or 33% compared to the three months ended June 30th, 2023. The decrease in research and development expenses resulted primarily from the completion of the company's Fabry Clinical Program and the regulatory process related to the review of Alfabrio, BLA in the U.S. and the MAA in the European Union by the applicable regulatory agencies. Selling general administrative expenses were $3.5 million for the three months ended June 30, 2024, a decrease of $0.5 million or 13% compared to $4 million for the three months ended June 30, 2023. The decrease resulted primarily from a decrease of $0.5 million in salary and related expenses. Financial income net were $0.2 million for the three months ended June 30, 2024, compared to financial expenses net of $0.8 million for the three months ended June 30, 2023. The difference resulted primarily from a higher interest income on bank deposits, a lower notes interest expenses due to the notes conversion executed in 2023. In the three months ended June 30th, 2024 recorded the tax benefits of approximately 0.1 million compared to income taxes of 0.3 million for three months ended June 30th, 2023. Income taxes recorded are primarily the result of the provision for current taxes in respect of section 174 of the US Tax Cuts and Jobs Act which was enacted in December 2017. Cash, cash equivalents, and short-term bank deposits were approximately 45 million at June 30th, 2024. As Dror mentioned, we believe our cash position is sufficient to enable the repayment of our convertible notes due September 1st, 2024, and for our ongoing operations. Net loss for the three months ended June 30th, 2024 was approximately 2.2 million, or three cents per share, basic and diluted compared to a net income of 19.3 million or 29 cents per share basic and 21 cents per share diluted for the same period in 2023. Since the end of the quarter and the June 30th, 2024, the company collected approximately 4.6 million in the aggregate from sales to Pfizer and approximately 2.3 million from the sales to Brazil. I will now turn the call back to you, Dror.

Thanks, Eyal. To conclude, I would like to express my confidence in Portalix and our enhanced strategy to enable the next phase of pipeline development. We have three streams of revenues, sales in Brazil to Pfizer and to Piesi, and we expect our revenues to continue and grow. We are pleased with the interim results from our PRX115 clinical study, and we are eager to report the top-line results soon. We also, we are continuing to leverage our platform and expertise to develop a pipeline of early stage assets with the potential to address rare renal diseases. And we look forward to updating our progress as we continue to drive innovation and create long-term value for both patients and stockholders. Thank you very much. And I will return now to the operator to open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate the line is 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.

One moment, please, while we pull forward questions. Our first question comes from the line of John Vandermosten with Zach.

Please proceed with your question.

Great. Thank you. And hello to all. How has uptake been for El Fabrio by payers? Can you give us a sense of how negotiations have been going there to get it, to make it available and to get in on formularies? Can you give us a sense of that? And have you been able to, or has CAZ been able to, sign any of the big payers to get it and make it available.

So, John, I think we have discussed it in the past. You know, Chiesi is a private company, so all I can say from what we know is that they are doing well and they are, I don't know, payer by payer, but as far as we see the numbers of what we know, they do well. and they plan to penetrate in a more significant way going forward, of course, both in the U.S. and also in other markets in Europe and outside of Europe. So actually, we are very pleased. We are now about a year, give or take, from their launch in the U.S., and about seven months, I believe, since the drug is available in Germany, for example, which is one of the biggest markets outside the U.S., and the outcomes are good and they do very well. And we expect them to expect them. What we expect from what we understand is that this will continue to be so.

Okay. And another thing I'm hoping you can help us with is to estimate the sales numbers. I know that it's pretty lumpy still. We're probably still kind of inventory building and getting a sense of what the sales would need to be. But do you have an idea when you can provide some guidance in terms of what the sales to Chiesi might be?

Not at the moment. You know, it depends on shipment. So right now what we do, as you rightly said, they order batches of the drug product to their stock. This is also the agreement. Since we are now in the first year, and I assume... In the next 12 months, it's more or less the same because they're also penetrating to Europe and they had stock before. So it will take a while until we'll have, I would say, ongoing basis forecasts. Right now, we try just to be cautious. It's not that we try to hide something, God forbid. It is just that, you know, it could be that one batch is not stamped on the 25th of November or 25th of end of a quarter and it slips to the next quarter because of some, I don't know, QA situation. concern or only God knows what. So we don't want to say we will hit X millions of dollars, then it will be minus five or minus seven million because, you know, a bet to Brazil, a bet to Chiesi, only God knows what. So we think we need a bit more time. But again, I want to emphasize we are pleased with what Chiesi is doing. I'm not saying in order to make a V on the checkbox. We are very much pleased. They are focused. They put a lot of effort and we see good results. And the anticipation that this will continue and will gradually continue going forward the next years ahead of us.

Do they provide, do you have ongoing meetings with the team where they update you kind of on how it's going or is it a little bit more arm's length? Okay.

No, no. Not only myself, but they also sit with our team on multiple disciplines, you know, medical operations, et cetera, and also update management and board. Okay. So the relationship, just to make it clear, the relationship are very good. And whenever we ask, we don't do it every other week, of course. But whenever we ask for an update or discussion with our board or management, so Chiesi and Giacomo Chiesi, you know, they're happy to do so.

Great. Yeah, you guys had that KOL event last year, which was pretty helpful, and they presented. So maybe we can do that again. Are there any milestones that you might expect in the next year related to sales? I don't think you've disclosed the details on that, but might there be one in the next 12 months or so, or is it further out than that based on your view at this point?

It depends, of course, on the pace of the sales. It's difficult for me to tell you today.

And we do apologize for technical difficulties. It do seem that we have... Oh, it cut out.

I'm back. Is Dror, are you still there?

He seems to have lost Dror.

He's dialing back. He's dialing back again.

Okay. Great. Well, I can ask another one why he's doing that, Eyal, for you. Are there any conferences that you're targeting... for PRX115 to report the phase one data coming up this fall. I think you said that it'll be ready soon and was wondering if there's like a certain conference that you're targeting.

No, we just participated in one. It was early June and the full set of data from all eight cohorts actually are going to be released sometime around early November. So I guess that until then, obviously, we're going to work behind the scenes to get everything done, meet with the agencies, as Joe mentioned, getting prepared for the phase two. And I guess that the next fall is going to probably be the next conference that we will be joining.

Okay.

By the way, we do plan to attend the ACR.

Okay. All right. Thank you, Eyal. Thanks, John. Thank you. We do have George back as well. Yes, I apologize for being cut off. All right.

Thank you. Our next question comes from the line of Raghu Ram Selvaraju with AC Wainwright. Please proceed with your question.

Good morning. This is Dan Anforam. Thanks for taking our question. Where does Protolix envision positioning PRX115 with respect to Cristexa? How does Protolix see PRX115 stacking up against SEL212 from Sobe? We'd like to have some follow-ups if we could.

So, you know, we are now, as we mentioned, we are finalizing the phase one. The phase two will be with a multiple dose. Hopefully, phase two will mimic what we see in the phase one. I think we have a very interesting alternative to both enzymes. Let you know. we hope this will fly. This is the intent. This is the aim and the goal. I would say again, and I think I said it also at the investment event, if we would have seen outcomes which are, let's say, good or fit only once in two weeks in fusion as Chris Texas does today, we probably wouldn't continue the program. This is not the intent.

Awesome. That makes sense. Could you elucidate on some of your early stage R&D efforts and which programs you find promising? Do you expect to monetize or partner the oral anti-TNF candidate or has that program been suspended?

Well, this program has been off. We are evaluating, I would say, more than half a dozen programs. They're very early stage right now. Once we sign or bring them in With validated, I would say, preclinical data, we will share, of course. Until then, we don't want to be seen dreaming or something like this. So we operate. We are looking, I would say, very diligently at any opportunity. We believe we have the right resources to do so. And we hope to be able to update in the next, I don't know, quarter or two. on the first or two first, maybe even two programs that will get into the pipe.

Thanks. That's really exciting. We look forward to hearing about it. Assuming full repayment of the convertible notes due next month, does the company plan to repay these or replace the notes with new notes with a different maturity date? And what position do you guys have related to debt or future cap structure?

Currently, and we plan, I mean currently and not because I try to be cautious, we plan to pay the notes by September 1st. We do not intend to refinance or take a new debt, if I may say. As both of us mentioned, I believe both Eyal and myself, we have sufficient resources to maintain our ongoing operations, inclusive of the phase two of the of the gout. As we mentioned, we have three streams of range venues, which we extend, expect them to grow in the future.

Uh, you know, so this is the situation right now.

Awesome. That makes sense.

I would summarize that.

I would add that certainly portalics moved from, I would say from a financial point of view, kind of a danger zone to a much more stabilized, uh, financial position. always good to have more money but you know we didn't raise even one dime in the last I believe five or six quarters so we will do it cautiously.

Thank you so much for answering my questions. Thank you. Thank you. There are no further questions at this time.

I would like to turn the floor back to Jor for closing remarks.

So thank you everybody again. Thank you for the time and the patience. We look forward to meeting with you in our next quarter and hopefully we'll have good news to report.

Thank you very much.

Thank you. And this does conclude the teleconference. We thank you for your participation. You may disconnect your line.