Protalix BioTherapeutics, Inc. (DE)

Good morning, ladies and gentlemen, and welcome to the Protallix Biotherapeutics First Quarter 2025 Financial and Business Results Conference Call. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mike Moyer of LifeSci Advisors, Investor Relations for Protallix. Thank you. Please go ahead.

Thank you, operator, and welcome to the Protallix Biotherapeutics First Quarter. 2025 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Bratallix, and Ayal Rubin, Senior Vice President and Chief Financial Officer. Press release announcing the financial results for the quarter and corporate updates was issued this morning and is available now on the Bratallix website. Please take a moment to read the disclaimer and 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 Protox's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Michaud. Sure.

Thank you, Mike. And thank you, everyone, for joining for our first quarter of 2025 financial results and business update quote. I will begin with the reviewing of our accomplishments over the quarter in recent weeks. Following my remarks, Eyal will provide a detailed review of our financial results. And then we will open the line for your questions, of course. With another solid quarter, with an increase in revenues from selling goods compared to the same period last year, giving the promising results obtained in 2024 from our first inhuman study, of our GOUT product candidate, PRX115. We are focused on building on the momentum and working towards initiating a phase two clinical trial in patients with GOUT later this year. At the same time, we continue to evaluate additional pipeline candidates for potential further development, including PRX119, as well as other early stage clinical assets. Eyal will discuss the details of our financial achievements in a few minutes, and I would like to start with PRX115. As we announced with our results for 2024, we completed all cohorts in the first in human phase one clinical trial of PRX115. The study involved a single dose of PRX115 in subjects with elevated uric acid levels. Overall, PRX115 exposures increased, and in a single dose of PRX115, rapidly reduced plasma uric acid levels, both in dose-dependent manner both in dose-dependent manner, I'm sorry. Their encouraging results from these studies suggest a long-acting effect and may enable us to potentially widen the dosing interval, which could enhance patients' compliance and treatment flexibility. I encourage you to check the publication section of our website where we have uploaded a poster that was presented at the ACR conference in November of 2024 describing the results. We are excited to progress with the clinical development of PRX115, and our goal continues to be initiation of this phase two study in the second half of this year. I now turn to Olfabrio. Last year, our commercial partner, Chiesi, Global Royal Diseases, continued to increase its focus on Olfabrio and invest substantially in medical and commercial programs. Last December, Chiesi announced I'm sorry. The European Medicine Agency, or EMA, validated a variation submission for PEG-UNIGR-C-DAS-alpha. This submission is to reduce the dosing frequency in the label to be 2 mg per kg every four weeks. The currently approved dose is 1 mg per kg administered every two weeks. The application was supported by the revised population PK model and a new exposure response analysis of the clinical data from the previously completed Bright Phase III clinical study, as well as the related extension study. We look forward to working closely with both Chiesi and the EMA throughout the review process, and we expect to hear from the EMA during the fourth quarter of this year. We continue to appreciate Chiesi's partnership and dedication to Fabry disease patients and patient community. Our next pipeline candidate, also expressed for Procelex, is PRS119. PRX109 is a pegylated recombinant human DNase-1 candidate in development of the production treatments of diseases associated with no-to-fill extracellular traps or NETs. The clinical of PRX119 remain ongoing. As we have been discussing throughout the past year, we have been focusing our early efforts on early stage development assets to build our product development pipeline. This includes leveraging our ProCEDEX platform and pegylation capabilities. evaluating drug delivery systems that may allow protective delivery of different modalities, and focusing on therapeutic areas to renal rare diseases. We will continue these efforts throughout 2025, and we hope to provide with further updates as these programs become more mature. For now, let me say that I'm excited about our R&D efforts, and we are laying the groundwork for future developments. With that, It is now my pleasure to turn the call over to Eyal to review our financials. Eyal, please go ahead.

Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our first quarter 2025 financials. We recorded revenues from selling goods of $10 million during the three months ended March 31, 2025, an increase of $6.3 million, or 170%, compared to revenues of 3.7 million for the three months ended March 31st, 2024. Increases resulted primarily from an increase of 5.9 million in sales to Pfizer and an increase of 0.4 million in sales to Fear Cruise in Brazil. We recorded revenues from licensed and R&D services of 0.1 million for the three months ended March 31st, 2025 and March 31st, 2024. Revenues from licensed and R&D services are comprised primarily of revenues we recognize in connection with our licensed supply agreements with Chiesi. Going forward, we expect to generate minimal revenues from licensed and R&D services other than potential regulatory milestone payments. Cost of goods sold was $8.2 million for the three months ended March 31, 2025, an increase of $5.6 million, or 215%, from cost of goods sold of 2.6 million for the three months ended March 31st, 2024. The increase in cost of goods sold was primarily the result of an increase in sales to Pfizer and to U-Cruise in Brazil. For the three months ended March 31st, 2025, our total research and development expenses were approximately 3.5 million, comprised of approximately 1.8 million of salary related expenses, approximately 0.8 million of subcontractor 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, 2024, our total research and development expenses were approximately $2.9 million, comprised of approximately $1.5 million of salary-related expenses, approximately $0.5 million of subcontractor-related expenses, approximately $0.2 million of materials-related expenses, and approximately $0.7 million of other expenses. Full increase in research and development expenses for the three months ended March 31st, 2025 was 0.6 million or 21% compared to the three months ended March 31st, 2024. The increase in research and development expenses resulted primarily from the advance in our clinical pipeline. Selling general administrative expenses were 2.6 million for the three months ended March 31st, 2025, a decrease of 0.5 million or 16% compared to 3.1 million for the three months ended March 31st, 2024. The decrease resulted primarily from a decrease of 0.4 million in salary-related expenses and a decrease of 0.1 million in selling expenses. Financial income net was 0.4 million for the three months ended March 31st, 2025, compared to financial income net of 0.1 million for the three months ended March 31st, 2024. The difference resulted primarily from lower notes interest expenses due to the September 2024 repayment in full of all the outstanding principal interest payable under our then outstanding 7.5% senior secured provisory notes, partially offset by a lower interest income on bank deposits and higher exchange rate costs. For the three months ended March of each March 31st, 2025 and March 31st, 2024, We recorded the tax benefit of approximately 0.1 million. The tax benefit resulted primarily from deferred taxes on income mainly derived from guilty income, mainly in respect of Section 174 of the U.S. Tax Cuts and Jobs Act of 2017, 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 134 over five years for research activities conducted in the U.S. and over 15 years for research activities conducted outside the United States, rather than deducting such costs in the current year. Cash, cash equivalents and short-term bank deposits were approximately $34.7 billion at March 31, 2025. Net loss for the quarter ended March 31st, 2025 was approximately $3.6 million or $0.05 per share basically diluted compared to $4.6 million or $0.06 per share basically diluted for the same period in 2024. I will now turn the call back to you, Jor.

Thank you Eyal. To conclude 2025 is off to a good start and promises to be exciting year for Portalix as we continue to build out the foundations for the future. We are excited to begin a phase two program for PRX 115 later this year, and we continue to make progress on our early stage R&D efforts. I'm confident in our strategy, balance sheet and three streams of revenue 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. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your 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 the handset before pressing the star keys. Again, that's star one to register a question at this time. Our first question today is coming from John Vandermorsten of ZACS. Please go ahead.

Great. Thank you. And how are you doing, Dror and you all? I thought I'd start out with any visibility that you might have on an El Fabrio milestone. You know, I know in the past we've talked about that, and we've, you know, advanced a quarter since then, and I wanted to know if we're close to anything and what you have to say on that.

You know, all I can say, I mean, I think we've discussed it multiple times, and I can emphasize it today, of course. It's very relevant. that Chiesi sales efforts and outcomes are strong. Okay, the pace of recruitment of commercial patients is very good and above our expectations. And, you know, Protalic sales, as we discussed, are to Chiesi's inventory. They are not directly to the market. Managing the inventory does not reflect, you know, one-to-one with actual sales, which I think I emphasized. And actually, they are actually improving every quarter. This is, you know, What we can say, Chiesi is a private company. We are obliged by the agreement to not detail specific numbers, but I say loudly and I hope clear that they are doing very well and actually improving every quarter.

Okay. And you mentioned on the call about the change in dosing frequency in the EMA and in the EU. Is there any effort going to be made for a similar approach in the United States to gain that dosing here?

Currently, first, what we discussed is an application we submitted. Okay, it's not a done deal. I hope it will be approved, of course. It's ongoing. We don't have any red flags present. So it's ongoing and we are encouraged. With regard to the U.S., once there will be something to update, we will update, of course.

Okay. And I was looking at the list of medications for gout, and I know we've talked about Cristefa previously on these calls and in our other meetings. I also noticed that there was Novartis' Ilaris out there and wanted to know how that fits into the treatment of gout.

You know, we will know more, I would say. Let's put it this way. From the phase one, we are very much encouraged from the outcomes of the phase one, which are single dose. Once we initiate the phase two, and especially once we have the top-line results, we will know much, much more. This is a well-designed study, double-blind, a high, I would say, statistical power, even very high. It was discussed with the FDA recently. So if indeed it will mimic or will be close to the phase one results, we have potentially a very good asset in hand, including, you know, at least what we see for now, want to be careful, future competition. You don't expect me to refer to this product or the other products.

Okay. Yeah, I know it's indicated for a bunch of different things, including gouts. I didn't know.

No, no, no complaints. But, you know, I cannot refer to, you know, specific potential competition, you know, the market is or the pipeline is bigger than one program.

Got it. And final question for me is just on the options. I think you had some options that were both close to expiration and close to their exercise price last quarter. Did those get cleared out or what was the disposition of that?

So I think I would refer to that if it's okay.

Yeah, sure, George. So, John, thanks for the question. The warrants that you're referring to from the 2020 pipe transaction, they all expired other than a minimal amount. The disclosure, obviously, is in the thank you. 908,000 warrants were exercised, all the rest, if I remember correctly, 12.5 million shares awards actually expired without being access rights.

Okay. Very good. Thank you, Al. Thank you, Dror. Thank you.

Thank you, John.

Thank you. The next question is coming from Ben Akshashudi of Parental Securities. Please go ahead.

Hello, Dror. Thank you for taking my questions and congrats on the continued progress. Just small questions on the phase two trial planned in Gout? Do you also, I'm not sure if I missed that one, where do you also plan to enroll US patients? And then the other question is more a bit general. What other benefits could you kind of mention versus like with DEXA besides the injection frequency? What else would you like that is worth highlighting and looking at? Thank you.

So thank you for that. The answer for the first question is yes, the majority of the patients will be enrolled in the US. And as for the second one, of course, this is the plan. And to your second question, beyond the frequency, which is, by the way, very much important, which will be significant, we will need to see the outcomes in order to to say that we have a better immunogenicity profile or others. So, you know, we, of course, we hope to have a very good safety profile and a very good immunogenicity profile, but, you know, let's see the results. But certainly this is the intent as well.

Okay, thank you very much.

Thank you. The next question is coming from Robert Raju of HC Wainwright.

Please go ahead.

Hi. Good morning to all. This is Dan on for ROM. Thanks for taking our question. So I guess just to start, we were wondering, and just to confirm, as there's been a lot of recent changes in the FDA, even more so as of I think it's Tuesday, the Procellex products are regulated by CEDAR in the US, right?

As far as I know, if I remember well, and I can really look at it, maybe I don't remember at all, Fabio was approved by the Rare Disease Division.

Got it. Okay. And then secondly, can you discuss any effects that the planned U.S. pharmaceutical tariffs may have on cost of goods sold? Would those be booked when you sell the inventories, or would you have an after-sale agreement on that?

Better than I do.

Of course, of course. Actually, we're not selling to the U.S. We're selling to Chiesi from Zurich, the Italian company. So our relationship with Chiesi is basically a relationship between an Israeli company and an Italian company in Texas. But they are now in the news. Obviously, they're not going to impact our relationship with Chiesi. With regards to the way the key is, they're going to ship those, actually the vials, the Fabrio vials to the U.S. That's, I guess, going to be an intercompany transaction between two of their entities held by the same parent company. So I'm not even sure that that's going to impact them, but that is a question for them.

Got it. And kind of a follow-up on that, can you confirm if – Has Chiesi discussed any increase in the list price or plans to increase the list price of El Fabrio in the U.S.

in response to those tariffs? The answer is no.

As far as we know, and again, it's not that we can share their pricing strategy that's confidential and protected under the license agreement, but as far as we understand to date, this is not part of the plan. But obviously it might change once and if The taxes are going to be taxed in place. We'll see how this impacts the prices in the market. And I guess they're going to focus.

But, you know, it's difficult to see today what will be, you know, the changes in the tariffs. It's a bit volatile. And ETS is a very, you know, well-established company. They know what they're doing. So I'm sure we are in very good hands, like, you know, in very good commercial hands, by the way.

Got it. Thank you.

Thank you. The next question is coming from Dar Vashish of Private Investor.

Please go ahead.

Thank you very much for taking my call, gentlemen. You said in your statement this morning that you expect minimal revenues going forward on the R&D line item, basically from Kiese. Can you tell me what the approximate amount of the value of the contract left to be paid out by Kiese is? Thank you.

Yeah, so let me explain what I said.

So research and development revenues that we recorded in the past were associated in connection with a license and R&D agreement with Kiese. It means to say that when they invested in El Fabrio back then, so they funded part of the development cost. They put a down payment. All of this, according to US GAAP, has to be linearly divided along the years of the life of the agreement or the development. This is the reason that in past years, this line item was way greater than the minimal revenues that we're showing. Going forward, the only thing that will appear It's not going to be a commercial milestone because that's going to be part of the sales, but only the regulatory milestones. And the regulatory milestones, if I have to, and again, that's a very, you know, and it's a far estimate. Nobody knows. It has to do with the once every two weeks, once every four weeks in the U.S., if it's true, once every four weeks in Europe, if it's true, if in the future we're going to be able to show superiority. Basically, those are the regulatory milestones that are left. So if you want to quantify them, they can be up to something like $75 million. But the, obviously, I think it's at this point because it's a milestone by milestone, and it depends on when they should get it.

If I could simply clarify, you're saying that there's approximately $75 million left to pay out on the agreement with Kiese?

No, that's not what I'm saying. I'm saying that under this line item, the research and development revenues, the $75 million. Potential milestones, the global potential milestones on the key agreement, which includes commercial milestones and regulatory milestones, any number between, I don't know, up to half a billion dollars, that makes sense. It all depends on their sales. And when they hit the various thresholds in the various agreements, I just remind everybody on the call, So we're talking about two separate agreements, ex-U.S. and U.S., and the milestones are separately paid and accrued. So in theory, the overall, you know, milestones to be paid can be potentially up to half a billion dollars.

Okay. Thank you very much. Appreciate your answer. You're welcome.

Thank you.

We're showing no further questions at this time. I'd like to turn the floor back over to Mr. Bashan for closing comments.

So thank you, and thank you everybody that joined the call. I would like to emphasize again that what we have said in the past, as I mentioned, KSE sales efforts are strong. The pace of recruitment of commercial patients is very good and actually beyond our expectations, and Protalix sales to KIES's inventory to actually manage the inventory sales and not directly to the market. And beyond that, we are focused on building our pipeline. Of course, we will initiate the phase two in GAUT later this year. So we look forward to update you as the progress continues.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.