Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Biotherapeutics Third Quarter 2024 Financial Business Results Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Moya, Lifestyle Advisors for Protallix. Please, thank you. You may begin.

Thank you, Operator, and welcome to the Protallix Biotherapeutics Third Quarter 2024 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Pertalex, and Ayal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the financial results and business and clinical 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 release and the 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 in Portalix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Bishan. Gerard?

Thank you, Mike, and thank you, everyone, for joining our third 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 review of our financial results. We will then open the line for questions, of course. I will start with PRX115, which is our common unpegulated uricase candidate produced through our prosthetics platform in development for treatment of uncontrolled gout. As we have announced this morning in our press release, all eight cohorts of the first in human phase one clinical trial of PRX115 are now complete and data analysis ongoing. 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. Preliminary results from the eight cohorts are consistent with the initial promising results from the seven cohorts. Overall, 64 subjects were randomized across the eight cohorts. 48 of these subjects were treated with a single administration of PRX115, and 16 subjects were treated with a placebo. All of the subjects completed the study. Exposure to PRX115 increased in a dose-dependent manner. PRX115 levels were observed for up to 12 weeks in cohorts 6, 7, and 8, the cohorts with the highest doses. In all tested doses, a single dose of PRX115 rapidly reduced plasma uric acid levels. The effect and duration of response were found to be dose-dependent. Following a single dose, mean plasma uric acid levels remained below 6 mg per deciliter for up to 12 weeks at the highest dose levels. PRX115 was also generally well tolerated. Only 25% of subjects receiving PRX115 have reported study drug-related adverse events. The majority of these were mild to moderate and transient in nature. We are encouraged by these preliminary results. The findings from the study suggest PRX115 has the potential to be a promising treatment option for patients with gout. We believe the results demonstrate that PRX115 may offer an effective uric acid lowering treatment with an added benefit of a potential wide dosing interval, which may enhance patient compliance and treatment flexibility. Further studies are needed to confirm the long-term safety and efficacy of PRX115 in the gout patient population. Preliminary results from this study are being presented at the late-breaking poster of the American College of Rheumatology annual meeting, ACR Convergence, which begins today in Washington, D.C. We are continuing our preparations for a Phase II trial of PRX115 in patients with uncontrolled gout. We plan to continue our dialogue with regulatory authorities in the U.S. and Europe regarding our Phase II plans with the goal of initiating the Phase II study in the second half of 2025. And now for El Fabrio. In past course, we have discussed the strong commitment of our commercial partner, Chiesi Global Rare Diseases, to the successful commercialization of El Fabrio and the wealth of experience the team brings to such efforts. Chiesi continues to increase its focus on El Fabrio and invest heavily in its medical and commercial program. As part of its program, Chiesi is sponsoring a number of studies El Fabio, including in a trial in Japan, a pediatric and adult trial, and the maternal and postnatal outcomes study, and other global and international multicenter studies. We look forward to continuing to collaborate with Chiesi in its goal to bring El Fabio to as many patients as possible. Our next pipeline candidate, also being expressed through POSELEX, is PRX119. PRX119 is a regulator that complements human DNA as one candidate in development for potential treatment of diseases associated with neutrophil extracellular traps, or NETs. 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 prosthetics platform and prioritize renal disease indications. In addition, we have begun to evaluate plant-based drug delivery systems that may allow protective delivery of different modalities. These efforts are in preliminary stages, and we look forward to updating you on the progress as these efforts, as they progress, of course. With regard to the therapeutic areas, our strategy moving forward is to prioritize rare renal diseases as the core of proteomics development pipeline. This is a logical focus to us. Given the existing experience, network, and resources we build through the diligent and dedicated efforts earned throughout the Fabry Development Program, we have identified potential key high unmet need indications on which we plan to focus our initial efforts, such as ADPKD, Alport Syndrome, and FSGS and others. Work is currently ongoing to identify assets for the treatment indications. We intend to use the prosthetics platform and the pigulation capabilities as well as other modalities such as small molecules and oligos to take advantage of highly innovative opportunities. We are also exploring novel platform technologies. Finally, in September, we repaid in full all of our outstanding principal and interest under the 7.5% senior secured convertible promissory notes. The repayment was financed entirely with the available cash. This is significant for Portalix as we are now a debt-free company. Our financial discipline and strong balance sheet enable us to support our ongoing operations. And with that, it is now my pleasure to turn the call over to Eyal and review our financials. Eyal, please.

Thank you, Jor. And thank you, everyone, for joining today's call. Let me review our third quarter 2024 financials. We recorded revenues from selling goods of 17.8 million during the three months ended September 30, 2024, an increase of 7.6 million or 75% compared to revenues of 10.2 million for the three months ended September 30, 2023. The increase resulted primarily from an increase of 6.8 million in sales to Chiesi and an increase of 1.1 million in sales to Pfizer, partially offset by a decrease of 0.3 million in sales to Brazil. We recorded revenues from licensed and R&D services of 0.1 million for the three months ended September 30, 2024, a decrease of 0.1 million or 50% compared to the revenues of 0.2 million for the three months ended September 30, 2023. Revenues from licensed and R&D services are comprised primarily of revenues we recognize in connection with our license agreement with Chiesi. Cost of goods sold was 8.4 million for the three months ended September 30, 2024, an increase of 3.5 million or 71% from cost of goods sold of 4.9 million for the three months ended September 30, 2023. The increase in cost of goods sold was primarily the result of an increase in sales to Chiesi and Pfizer. For the three months ended September 30, 2024, the company's total research and development expenses were approximately 3 million comprised of approximately 0.6 million subcontractor-related expenses, approximately 1.6 million salary-related expenses, approximately 0.2 million of material-related expenses, and approximately 0.6 million of other expenses. For the three months ended September 30, 2023, our total research and development expenses were approximately 3.7 million, comprised of approximately 1 million of subcontractor-related expenses, approximately 1.9 million of salary-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 for the three months ended September 30, 2024 was $0.7 million, or 19%, compared to the three months ended September 30, 2023. The decrease in research and development expenses resulted primarily from the completion of a Fabry clinical program and the regulatory process related to a Fabry biological license application in the United States and the marketing authorization application in the European Union for El Fabio by the applicable regulatory agencies. Selling general and administrative expenses will point toward $2.6 million for the three months end of September 30, 2024, a decrease of $1.1 million or 30% compared to $3.7 million for the three months end of September 30, 2023. The decrease resulted primarily from a decrease of 0.5 million in salary-related expenses and a decrease of 0.4 million in professional fees. Financial expenses net was 0.1 million for the three months ended September 30, 2024, compared to financial income net of 0.2 million for the three months ended September 30, 2023. The difference resulted primarily from lower interest income on bank deposits, higher exchange rates, costs partially offset by lower note interest expenses, due to the September 2024 repayment, as Jor mentioned, where we paid in full all of the outstanding principal and interest payable under the 2024 notes. In the three months ended September 30, 2024, we recorded income taxes of approximately $0.6 million compared to income taxes of $0.1 million for the three months ended September 30, 2023. Income taxes recorded are primarily the result of the tax expenses in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017. Cash and cash equivalents were approximately 27.4 million in September 30, 2024. That income for the three months of September 30, 2024 was approximately 3.2 million or 0.04 per share basic and 0.03 per share diluted compared to a net loss of 1.9 million or 0.03 per share basic and 0.04 per share diluted for the same period in 2023. Since the end of the quarter, end of September 30, 2024, the company collected approximately 3.9 million from sales to Chiesi. And with that, I will now turn the call back to you, Jor.

Thank you, Yael. To conclude, I'm pleased with our progress this quarter, especially for our PRX115 development program. pending discussions, of course, with regulatory agencies. We plan to begin a phase two program for PRX 115 next year. I'm confident that our strategy balance sheet and three streams of revenues will enable the next phase of pipeline development for Protonix. And 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. And stockholders, I'm sorry. Now, I would like to ask the operator to open the call 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 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 yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 at this time.

One moment while we pose for our first question. Once again, that's star one at this time.

Our first question comes from John Vandermosten with SACS. Please proceed.

Thank you, and hello to all. I'm going to start off with a question on the QIESI revenues. Are those all product revenues or are there any other categories of revenue in there? And I'm talking about the, I guess it's the $12.4 million that was broken out.

The revenues from Chiesi, it's all product revenues. As you remember and we've indicated in the past, numerous times we are selling to Chiesi the vials. Actually, we're selling to their inventory at this point. However, the sales and the revenues that we record are all revenues that are recorded in connection with the actual goods sold to KeyAzzy.

Okay. I guess the reason I'm asking is just to calculate the gross margin and make sure that that's the right number to use for calculating that. And I shouldn't subtract anything. Is that right?

You shouldn't subtract that. Yeah, but I think that the gross margin of this product is not just adding up all the revenues and the Dividing the margins on Fabrio are obviously way higher than the old other product, the Eliza. So trying to allude and interpret the numbers by simply dividing the COGS, taking it out from the sales and getting the margin, I don't think that that's going to give you the right number.

Okay. All right. I have to figure something out there, Vince. And also, as you had mentioned on the call, Chiesi put out a study, or at least indicated there was a study on Bright looking at the longer duration in between infusions for those patients. Were there any takeaways from that that are new that may help change the label in terms of the periodicity of infusion?

Sure. So John, the, um, you know, the extensions, the extension of the bright study is like already three or four years old. So Casey put, uh, you know, uh, an article or an abstract about the outcomes of, I think, three years of extension. Uh, and Casey is, uh, in a discussion with authorities to know if, if, and when there will be any news, we will of course update the market.

Okay. Great. Well, let me hop back in, too. Thank you.

The next question comes from Raghuram with Selvajoo with H.C. Wainwright. Please proceed.

Good morning, Jordan and y'all. This is Dan Anforam. Thanks for taking our questions, and congratulations on the quarter. We wanted to know, what are some of the market factors you're seeing affecting uptake of alfalfa in the U.S., and how do you view the competitive landscape in treatment for factory gout? Are you expecting to do comparative controlled pivotal studies, and might this be a part of the Phase II plan or only Phase III? And I'd like to ask a follow-up if I could.

Yes, please. So let's go one by one. About KSE, you know, we think we bring a good or a very good alternative options to the Fabry or the adult Fabry patient community. It's a new ELT after, I think, close to actually over 20 years in the U.S., It has its merits. We show that we are as good as Fabrozyne. We think we have a good, or the drug has a good safety and immunogenicity profile. Piazzi is conducting additional studies as part of their medical plan, like a patriotic study, a registry pregnant woman study, et cetera. And we think it's a very good alternative. So I think these are the main points. And with regard to 115, can you repeat the question, please?

Sure. Sorry about that. It was a long one. How do you view the competitive landscape in treatment refractory gout? Are you expecting to do compared or controlled pivotal studies? And might this be a part of the phase two plan, or would that only come in at phase three?

Now we are actually planning a phase two study. We are in, if I may say, a communication discussion with the agencies, both in the U.S., of course, and in Europe. And, you know, this is what I can share right now. We think if, let's put it this way, if indeed the outcomes of the phase two study as we plan will be close or the same or will mimic what we see in phase one, I think we have a very interesting potential drug in refractory gout. Thank you.

Awesome. That makes sense. And for a follow-up, are you engaged in establishing manufacturing contracts with other companies to deploy your proprietary manufacturing platform to produce other firms' products? And if not, why?

At the moment, no. I mean, actually, we have the agreement, as you know, with Pfizer and KSE. With the GAU study right now, we do it our own, of course. We have the policies to continue this way right now. And, you know, we are not trying to build a CMO business. We try to develop, you know, new, I would say, therapies for real unmet needs, and we will go up the ladder innovation-wise. So we think this way is our pathway forward, and we'll bring way more value, you know, to the shareholders than becoming a CDMO or something like this. I do not underestimate it, but I think Portalix is more, I would say, a boutique development company than way closer to that than to become a CMO.

That makes sense. Thank you for your answers.

Which is not a bad business, please. It's not to put any criticism on CMOs, but I think our structure and the way we operate, it's way closer to becoming to be a development company than a CMO, let's put it this way.

The next question comes from Robert Sansone with Water Tower Research.

Please proceed.

Hi, thanks. Thanks for taking my question. I'm just talking about the PRX115 and the profile of the 64 participants, the patients. What sort of plasma uric acid levels did they actually start off with? What was the range?

I don't remember by heart, and I know this is published right now with the abstract that we have shared at ACR, but I can get back to you and share with you. I'm sorry.

Just a follow-up on that. The patient that actually had the anaphylactic episode, was there anything sort of different about his profile compared to the others that did the procedure?

So thank you for that. There was one subject, I would say. It's not a patient. One subject, I think, in cohort number two, that after three or six minutes into the infusion, developed, if I may say, an anaphylactic reaction. It was taken care of immediately. And the subject is, you know, health is not important. So he recovered, if I may say. It was the only one out of the 64 subjects. Right.

I understand that.

There was no consistency across the subjects. It's one subject out of 64.

What I'm trying to get at is if there was anything particular about this particular subject compared to the others that may have been a factor.

It may have been that he got a drug before or some ingredient that actually developed antibodies against the enzyme, I would say, in a robust way or exponentially. It was really literally, I think, three or six minutes from the beginning of the infusion, meaning a very small amount of the enzyme into the body or the plasma. Right. Unfortunately, but, you know, subject is fine and alive, of course, and was taken care of immediately.

All right. Okay. Let's just check that out. Okay. Thanks very much for the question. You're welcome.

Once again, to ask a question, it's star 1 on your telephone keypad. We have a follow-up from John Vandermoson with Zacks. Please proceed.

Thank you again. So for the PRX115 trial coming up in the second half of next year, what's the anticipated duration of that? Is that a year-long trial? I mean, I know it's still probably early in terms of design, but can you give us a sense of how long that might take?

I think so. Correct me if I'm wrong. It's a six or 12-month duration study. I just don't have it in front of my eyes. It's a 12-month. 12 months, okay. And we plan to initiate it actually in the second half of 2025. And hopefully, if indeed the pace of enrollment will be as we expect, I want to be careful. So I believe at the end or beginning of 2027, it will be top-line results.

Okay. Very good. And on Japan, I know I've asked this in the past, and I think the trial has progressed since then, but any idea when that might – be complete? And is there anything else required to get sales in Japan? And then thirdly on that, are the economics for sales in Japan the same as they are in other regions?

So no, the study is ongoing. So once it will be done, they will move to submission. I think that, you know, nothing, you know, what do you mean if it's similar? You know, Japan is Japan. It's a unique market. You know, it has its own characteristics, if I may say.

You know, this is what I can say about it.

Okay. Thank you, Dror. Thank you. At this time, there are no further questions in queue. I would like to turn the call back to Mr. Dror Bashan for closing comments.

Thank you.

Mr. Bashan, any closing comments?

Thank you, everybody, for the time. We look forward to continue updating you. Thank you very much.

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