Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Portalix Biotherapeutics Fiscal Year 2024 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I'll now turn the conference over to your host, Mr. Mike Moyer of LifeSci Advisors Investor Relations for Portalix. You may begin your conference.

Thank you, Operator, and welcome to the Portalix Biotherapeutics Fiscal Year 2024 Financial Results and Business Update Conference Call. With me today are Dhruva Shahan, President and CEO of Pertalex, and IL 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 in portalics as filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Michon. Gerard?

Thank you, Mike, and thank you, everyone, for joining the Fiscal Year of 2024 Financial Results and Business Update Board. I will begin by reviewing our accomplishments over the past year and recent progress. Following my remarks, Eyal will provide a detailed review of our financial results. We will then open the line for questions, of course. 2024 was a very good year for Protonix, as we brought record revenues from our partners, fully repaid our outstanding debt, and continued to focus R&D efforts on PRX115, PRX119, and other early-stage candidates. I would like to start with PRX115, which is our recombinant pegylated uric health candidate in development for the treatment of uncontrolled gout. We produced PRX115 through our ProCelix platform. As we have announced last quarter, we completed all cohorts in the first in-human phase 1 clinical trial of PRX115. This study was 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 results from this study were presented in the late-breaking poster at ACR Convergent Conference in November of 2024. A copy of the poster is available in the publication section of the Protalix website. We are pleased with the results from this first inhuman study and believe they support moving forward into patients. To that end, we have been preparing for a Phase II clinical trial of PRX115 and have been in dialogue with regulatory authorities in the U.S. regarding such a proposed trial. Our goal is to initiate the Phase II study during the second half of this year. Turning now to El Fabrio. Throughout 2024, our commercial partner, Chiesi Global Rare Diseases, continued to increase its focus on Elfabrio and invest heavily in its medical and commercial program. In December of 2024, we and Chiesi announced that the European Medicine Agency, or EMA, validated the variation submission for PEG-unigal CIDAS-alpha to label an additional, less frequent dose in regimen of 2 mg per kick, administered every in adult patients with Fabry disease in the European Union. The currently approved dose is 1 mg per kg administered every two weeks. This application was supported by a revised population PK model and a new exposure response analysis from the clinical data from the previously completed BRITE Phase 3 program, as well as its extension study. We look forward to working closely with both Chiesi and DMA throughout their review process. And I would like to emphasize that Chiesi deserves our sincere gratitude for their partnership with Protalyx and their dedications to patients with Fabry disease. Our next pipeline candidate, also being expressed for Porcelix, is PRX119. PRX119 is a pegylated recombinant human DNA1 product candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps, or NETs. Preclinical studies are ongoing. As we have been discussing throughout the past year, we have been focusing our R&D efforts on early-stage development assets to expand our product development pipeline. This includes leveraging our Procelex platform and pegylation capabilities, evaluating drug delivery systems that may allow protective delivery of different modalities, and focusing our therapeutic areas to renal rare diseases. We intend to continue this effort throughout 2025 and hope to provide you with further updates as these programs become more mature. For now, let me say that I am excited about our R&D efforts and we are laying the groundwork for future developments that may be truly transformative. Finally, in September of 2024, we repaid in full All of the outstanding principal and interest are under our 7.5% senior secured convertible promissory notes. The repayment was financed entirely with available cash. In addition, since December 31st of 2024, we have issued 908,000 shares of our common stock in connection with the exercise of warrants we issued in 2020, generating proceeds of approximately $2.1 million. The warrants expired on March 11th of 2025. Accordingly, no warrants remain outstanding. This is significant for Protonix, making our balance sheet stronger and enable us to continue executing our strategy. 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. Let me review our fiscal year 2024 financials. We recorded revenues from selling goods of 53 million for the year ended December 31st, 2024, an increase of 12.6 million, or 31%, compared to revenues of 40.4 million for the year ended December 31st, 2023. The increase resulted primarily from an increase of 11.8 million in sales to Chiesi, an increase of 0.6 million, in sales to Brazil and an increase of 0.1 million in sales to Pfizer. We recorded revenues from license and R&D services of 0.4 million for the year ended December 31st, 2024, a decrease of 24.7 million or 98% compared to revenues of 25.1 million for the year ended December 31st, 2023. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with our license and supply agreements with Chiesi. The revenues from license and R&D services for the year ended December 31st, 2023 included the 20 million regulatory milestone payment from Chiesi in connection with the approval by the U.S. Food and Drug Administration, the FDA of El Fabrio granted during that period. The remaining decrease resulted from the completion of our revenue generating research and development obligation with respect to El Fabrio and as El Fabrio was approved in the United States and the European Union in May 2023 from the completion of the regulatory process related to the review of the biologic license application, the BLA, and the marketing authorization application, the MEA, for El Fabrio by the FDA and the EMA respectively. As a result of the completion of the Fabrico Link Up program in 2023, we expect to generate minimal revenues from licensed and R&D services other than potential regulatory and commercial miles containers. Cost of goods sold was $24.3 million for the year ended December 31st, 2024, an increase of $1.3 million or 6% compared to costs of goods sold of $23 million for the year ended December 31st, 2023. The increase in cost of goods sold was primarily the result of the increase in sales to Chiesi. During the year ended December 31st, 2023, a portion of the costs for certain drug substance sold were recognized as research and development expenses, not cost of goods sold as such drug substance was produced as part of our research and development activities. For the year ended December 31st, 2024, our total research and development expenses were approximately $30 million, comprised of approximately 7.1 million of salary related expenses, approximately 2.4 million subcontractor related expenses, approximately 0.9 million of materials related expenses, and approximately 2.6 million of other expenses. For the year ended December 31st, 2023, our total research and development expenses were approximately 17.1 million comprised of approximately 7.8 million of salary related expenses, approximately 6.3 million subcontractor related expenses, approximately 0.6 million of materials-related expenses, and approximately 2.4 million of other expenses. Total decrease in research and development expenses was 4.1 million, or 24%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in research and development expenses resulted primarily from the completion of our Fabric Clinical Program and the regulatory process related to the BLA and the MAA, review of El Fabrio by the applicable regulatory agency. Selling general administrative expenses were $12.2 million for the end of December 31, 2024, a decrease of $2.8 million, or 19%, from $15 million for the end of December 31, 2023. The decrease resulted primarily from a decrease of $1.8 million in professional fees and approximately $1 million in salaries and related expenses. Financial income net was $0.2 million for the end of December 1st, 2024, compared to financial expenses net of $1.9 million for the end of December 1st, 2023. The difference resulted primarily from a decrease of approximately $1.4 million in lower interest and related expenses due to the conversion of notes in 2023 and the September 2004 payment in full of the outstanding principal interest table under the remaining notes as well as an increased interest income net of $0.7 million. For the year ended December 1, 2024, we recorded income taxes of approximately $1.2 million, an increase of $0.9 million, or 300%, compared to income taxes of $0.3 million for the year ended December 1, 2023. The income taxes resulted primarily from the provision for the current taxes on income mainly derived from guilty income, mainly in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, or the TCJA. Effective in 2022, Section 174 of the TCJA requires all U.S. companies for tax purposes to capitalize and subsequently amortize R&D expenses that fall within the scope of Section 174 over five years for research activities conducted in the U.S. and over 15 years for research activities conducted outside of the U.S. rather than deducting such costs in the current year. Cash, cash equivalents and short-term bank deposits were approximately 34.8 million at December 31st, 2024. Net income for the year ended December 31st, 2024 was approximately 2.9 million or 0.04 per share, basic and diluted compared to 8.3 million or $0.12 per share, basic and $0.09 per share diluted for the same period in 2023. I will now turn the call back to you, Dvor.

Thank you, Eyal. To conclude, 2024 was an exciting year for Protalyx as we are building our foundation for the future. We are gearing up for our anticipated Phase 2 study of our GAUD candidate, PRX115, and we continue to make progress on our early-stage R&D efforts. I'm confident that our strategy, balance sheet, and three streams of revenues will enable the next phase of pipeline development for Protonix. We look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stockholders. Now, I would like to ask the operator to open the call for questions, please.

Thank you. If you'd 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'd 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 keys. Our first question comes from the line of Ram Selvaraju with HC Wainwright. Please proceed with your question.

Thank you very much for taking my questions and congratulations on what has been an excellent and landmark year for Portalix. I wanted to first of all ask about in the long run what you expect to be able to provide in terms of revenue guidance based in particular on the royalty stream from El Fabrio and what you anticipate Chiesi would permit you to say about how the revenues from El Fabrio are progressing.

The line was bad. Can you repeat the question, please?

Yes, it was specifically about revenue guidance, when you expect you might be able to be in a position to provide such guidance, particularly as it pertains to the royalty-based revenue coming from El Fabrio. and what you expect Chiesi to permit you to say about how revenues from Alfabrio are progressing.

So, first, thank you. You know, Chiesi is a private company. We've discussed it in the past, so we are not revealing data on the number of patients and or, I would say, estimated revenues from Chiesi. What we can say that they do well, actually, every week that passes, they add patients onto El Fabrio globally. We have reported now, if I may say, we think a nice outcome of revenues from different three streams, including Chiesi. Chiesi, along the years, will grow. Clearly, you can... I mean, royalty... Most of the revenues will be based on royalty from Chiesi to Protallix, which is a higher margin. We say it also in our... website. It is written over there that we estimate north to $100 million in revenues from Chiesi 2030. Estimation, of course, under what we see in front of our eyes. You know, if the once in four weeks we fly, it's a nice upside. It will be higher, of course. And we can, as I mentioned, it's a higher margin revenue. So as time goes by, and it cannot be I think, judged by the quarter, we have to understand that we sell to Chiesi's inventory. So we do not sell to their, I would say, direct sales. So in time, in a year and a half, two years, it will be more ongoing, if I may say, and then we can see a growing, I assume, we expect at least, steady stream of revenues of higher margins than what we sell to Brazil or to Pfizer from L.A. Lysol. But we cannot and we cannot give guidance for 2025. As I mentioned, we sell to inventory. But again, just to emphasize, Chiesi does well. We are pleased with the picture, and we consider this collaboration as positively strategic to Portalix.

Great. And then with respect to PRX119, I was wondering if you could briefly delineate the differences between PRX119 and your historical program that I believe was designated PRX110, and also if you could provide us with some framework, some frame of reference regarding the size of the market opportunity in NETs that you previously mentioned for PRX119 going forward. Thank you.

Sure. So what I can say is that PRX119 is actually a long-acting DNS. PRX 110 was, you know, an acute one. We are finalizing, as we speak, if I may say, the indication selection. We would like to finalize a couple of activities in addition to another, I would say, preclinical model. And then we will update the market, I hope, within the coming one or two quarters on the size you know, once we have the indication, we can update about the potential size at least, you know.

Okay. And then lastly, with respect to PRX115, I was just wondering if you could provide us with any details regarding the total aggregate cost of the Phase 2 study that you are running, as well as the timeline to release of potential top-line data, as well as strategically what you anticipate doing assuming positive results from this study. Would you expect to take forward clinical development of this asset yourself or at that juncture look to identify a potential development and commercialization partner? Thank you.

So currently we plan to finance the Phase II without current means. And we have the means, as we mentioned, we have sufficient, if I may say, resources to finance our operations, including the early R&D and the phase two of the 115. You know, about the cost, you know, we see something, I would say, north to $20 million on the third party's expenses or expected payments. This is not including labor or internally. Don't forget we produce it with our own procelecs, so there is a portion which we do a significant portion by ourselves. As for a top line result, we estimate something like two years from today. It depends on the pace of enrollment, of course. Please understand, first patient in will be the plan to be in the second half of this year. I assume that if indeed the outcomes will be positive, it makes sense that we look for a commercial partner.

Thank you very much.

Of course.

Thank you. As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question comes from the line of John Vandermosten with Zacks SCR. Please proceed with your question.

Thank you. And, Eyal, do you have the 4Q El Fabio revenue number handy?

I can pull them up. Go on, John.

Yeah. I'll ask another one while you're pulling that up.

Okay.

So on 115, I saw you guys had a poster out, and I was wondering if you could elaborate on the mechanism of action for 115 and its impact on the uric crystals. Does it actually go after them? I just wanted some clarity on how that mechanism is.

John, I don't fully understand what you mean. Maybe you can define it differently.

Sure. So PUREX-115, I was reading through the poster, and it provided a small amount of detail on how it works. And I assume it eliminates the uric crystals, or does it have some other mechanism of action of how it affects gallop? And I wanted to see if you had some clarity on that.

What we use is uric acid from gallop. you know, a certain source, which is different than Pristexa, for the sake of our discussion. We have our, I would say, specific peg to cover the enzyme, which is covered, I would say, almost completely. You know, what we see so far, and I want to be careful, in humans, with hyperurethemia, which participate in the Phase I study, that we reduce the uric acid in humans, I would say quickly, of course, and we see pretty long periods of time that actually the level of uric acid is very low. Once we get into patients with, I would say, refractory gout or severe gout and have results, we can update about the effect of how it does with the TOFIs and the overall disease.

Okay, great. And I just, are you all able to find that? I know you're going to file the 10-K later. I just was going to put it in my model.

10-K was filed already, by the way.

Oh, it was? Okay, I didn't see it. All right, well, I'll just find it there. That's all I have this morning. Thank you.

Okay. Thank you. Ladies and gentlemen, there are no other questions at this time. I'll turn the floor back to Mr. Bashan for any final comments.

So thank you, and thank you everybody that joined the call. We hope to continue and provide good results in the following quarters, of course. We see with high probability, I would say, a bright future for Protonix. So thank you very much.

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