PolyPid Ltd.

Thank you all for participating in PolyPede's Third Quarter 2022 Earnings Conference Call. Joining me on the call today will be Dikla Chachkas-Oxelbrad, Chief Executive Officer of PolyPede, and Ori Warshawski, Chief Operating Officer for U.S. Operations. Earlier today, the company released financial results for the three and nine months ended September 30th, 2022. A copy of the press release is available in the Investors section on the company's website, www.polyped.com. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. For example, management is making a forward-looking statement when it discusses our ongoing clinical trials and the timing thereof, our expectation to extend the company's cash runway, into the third quarter of 2023. Our attention to publish important results from the SHIELD-1 study in a medical journal as soon as it is practical, that the top-line results indicate that patients undergoing complex surgeries with large incisions or patients with risk factors could potentially benefit from DPLEX-100. Our attention to use the impressive data from Shield 1 in discussions with potential partners regarding future pipeline products, including in oncology. Our belief that significant reduction in superficial and deep SSIs and large surgical abdominal colorectal wounds and in high-risk patients, as well as the safety data, are very encouraging. Our intention to discuss with the FDA the lower than anticipated overall infection rate in the study, driven by COVID-19 safety restrictions that were in place while our trial was being conducted. Our intention to discuss the regulatory pathway for D-Plex 100 for the prevention of SSIs and abdominal surgery with US and EU regulatory authorities in the first quarter of 2023 and the potential of D-Plex 100 to prevent SSIs and abdominal surgery. The potential innovation behind our lead product and preparations with Advanced Pharma and discussions with other potential partners and the potential outcome of our anticipated meeting with the FDA and EU regulatory authorities. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks described from time to time in our SEC filings. Our results may differ materially from those projections. These statements involve material risks and uncertainties which could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on such statements. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Form 20F, which identifies specific risk factors that may cause actual results or events to differ materially from those described in forward-looking statements. PolyP disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, November 9, 2022. A copy of the slides The management team will review on this call can be found on the investor section, Polypeed's website at investors.polypeed.com. With the completion of those prepared remarks, it's my pleasure to turn the call over to Dikla Traskas-Oxabrod, CEO of Polypeed. Dikla?

Thank you, Bob. On behalf of our team at Polypeed, I would like to welcome everyone to our third quarter 2022 earning call. I'm pleased to have the opportunity to provide you with a corporate update today during such an eventful period for policy. I will begin with a discussion of the top line results from the SHIELD-1 phase 3 study of DPLEX-100 for the prevention of surgical site infections or SSIs in abdominal surgeries, which we announced in early September. Beginning with slide three, as a reminder, SHIELD1, the largest study of infection prevention in colorectal surgery in over a decade, is a prospective global randomized double-blind phase three trial designed to assess the efficacy and safety of TPAX100 administrated along with standards of care compared to standards of care alone in a prevention of post-abdominal surgery incisional infection. The primary endpoint of the trial is the combination of incisional SSI, mortality, and surgical re-intervention due to SSI or wound complication and determined by a blinded and independent adjudication committee within 30 days post-surgery. A total of 977 patients were randomized into the study consisting of 488 subjects in the DIPLEX-100 treatment arm and 489 patients in the control arm. The study was well designed and well executed, as it was balanced on all baseline characteristics and demographic parameters. Importantly, the trials took place during the COVID-19 global pandemic, with the first patient recruited in July 2020 and the last in May 2022. We believe the precautionary measures put in place in hospitals during this time reduced overall infection rates. These precautionary measures included a reduced number of surgeries being conducted, disallowing visitors and increased personnel and hospital hygiene practices. We believe that these critical external factors significantly impacted the trial statistical plan. On slide four, we take a closer look at the study population. Per FDA request, a pre-specified subgroup analysis was done based on incision length. The circle on the left indicates that 43% of total study subjects underwent complex surgeries with large incisions. The middle circle shows that nearly 70% of the total patients in the trial had at least one personal risk factor, including a BMI of over 30, smoking or COPD, diabetes, and hypertension. Of significance, each of these risk factors has the potential to increase the risk for SSI and other post-surgical complications. The circle on the right demonstrates that more than three-quarters of the total study subjects were cancer patients. Let's move on to the top line results on slide five. As we previously reported, in the intent to treat population, the local administration of DPLEX-100 and standard of care in 485 patients resulted in a decrease in the primary endpoint of 23% compared to standard of care alone in 489 subjects, representing a p-value equal to 0.15. However, in a pre-specified subgroup analysis, requested by the FDA of a total of 423 subjects with incision lengths greater than 20 centimeters, the local administration of DPLEX-100 resulted in a statistically significant reduction of 54% in the primary endpoint compared to standards of care alone, representing a p-value of 0.0032. As I highlighted, On the previous slide, this statistically significant reduction was achieved in a large subgroup representing over 43% of the patients in the intent to treat population. Since the initial top line readout was announced, we have continued to gather and analyze additional data from SHIELD1. These data have been increasingly encouraging. While we cannot get to granular at this time, As we intend to publish this important result in a medical journal, as soon as practical, I would like to highlight that in a post-hoc analysis, DPLEX-100 also demonstrated a clinically important reduction of 34% in the primary endpoint in high-risk surgical patients, those with at least one personal risk factor representing a p-value of 0.04 seconds. Now, let's take a deeper dive into the large incision subgroup on slide 6. Most importantly, we see a large effect size in all efficacy parameters. I've highlighted the decrease in the first few secondary endpoints where the infection rate at 30 days post-abdominal surgery was 10% in the standard of care only arm. versus 4% in the DPLEX-100 treatment arm. I'd also point out the lower mortality rate in the DPLEX-100 treatment arm, as well as significantly fewer patients treated with IV antibiotics as treatment for adjudicated SSI. So, to conclude, on the efficacy aspects of the trial, we believe that the top-line results indicate that patients undergoing complex surgeries with large incisions or patients with one or more risk factors could potentially benefit from DIPLEX-100. As you can see on slide seven, DIPLEX-100 showed good safety profile in SHIELD-1. Of significance, there was no impact on mortality in the DIPLEX-100 arm compared to the standard of care. In addition, there was 40% reduction in surgical re-intervention in the DPLEX-100 treatment arm versus standard of care alone arm. Also, severe treatment adverse events occurred in 12% of the patients receiving DPLEX-100 versus 16% in the standard of care arm. And serious treatment adverse events occurred in 14% of the patients receiving DPLEX-100 versus 20% in the standard of care alone arm. Moving to slide eight. I think it is important to highlight how the overall results of SHIELD1 truly validate the ability of our proprietary Plex technology to locally deliver treatment over a prolonged predetermined period with minimal systemic effects. PK data collected in the trials showed very low concentration of doxycycline in the plasma for a prolonged period of 30 days, as designed. We intend to use this impressive data in discussions with potential partners regarding future pipeline products, including in oncology. In summary, on slide 9, while the overall top line result for DIPLEX-100 did not meet study's statistical assumptions, the significant reduction in superficial and deep SSI in large surgical abdominals, colorectal wounds, and in high-risk patients as well as the safety data, we believe are very encouraging. As such, we are in the process of preparing a package of data from Shield 1 and prior positive phase 2 studies for submission to the FDA and intend to discuss with the agency the lower than anticipated overall infection rate in the study driven by COVID-19 safety restrictions that were in place while our trial was being conducted. As previously stated, we expect to meet with the FDA regarding the regulatory pathway for DIPLEX-100 for the prevention of SSI in abdominal surgery in the first quarter of next year. We plan to meet with EU regulatory authorities shortly thereafter. Based on the totality of the data generated today, we remain confident in the potential of DIPLEX-100 to prevent SSI in abdominal surgery. As we approach this anticipated meeting with the FDA, it is critical to contemplate a few potential outcomes. For example, the FDA may potentially agree that data could be sufficient for seeking approval in a narrower patient population based on the current collective data set. The FDA could require us to conduct another clinical trial or generate additional data. If we were to conduct another pre-approval trial, we currently believe that this trial would be a smaller, more targeted study. Also, from a regulatory perspective, we were pleased to recently receive confirmation from the European Medicine Agency, or EMA, that DPEX-100 is eligible for submission of marketing authorization applications in the EU under the agency's centralized procedures. The centralized procedures allows the submission of a single marketing application to the EMAA that, if approved, enables the product to be marketed in all EU member states, as well as in Iceland, Liechtenstein, and Norway. The centralized process eligibility is granted to DPLS 100 under the therapeutic innovation criteria, which underscores that DPLS 100 provides a new innovative alternative to patients in preventing abdominal exercise. On a related note, I think it is important to also highlight that we proceed with our regulatory preparations with our European partner, Advanced Pharma. In addition, we remain engaged in partnering discussions in multiple additional geographies for DPLEX-100. Of course, it is unlikely that we will enter into any additional partnerships prior to the receipt of regulatory feedback. I would now like to provide a brief update on OncoPlex, our lead intratumoral product candidate in oncology, applied as a paste to the tumor resection area during surgery. OncoPlex remains a priority for policy, and we are currently finalizing C&C processes as we continue our efforts to begin clinical development for these promising product candidates. Moving on, as you know, we recently announced the cost reduction plan, including a 20% decrease in headcount across all departments. As we prepare for our planned regulatory interactions regarding DX100 early next year, we expect that these decisive actions will extend our cash runway into the third quarter of 2023 and further enhance the company's long-term growth strategy. That is a good transition to now move into a review of our current financials. As of September 30, 2022, the company had cash, cash equivalents, and short-term deposits of $18.1 million, which includes the $2.6 million upfront payment from advanced pharma received in the third quarter. Also, as it relates to our balance sheet, during the third quarter of 2022, we sold approximately 600,000 worth of ordinary shares from our existing at-the-market facilities. To reiterate, we expect that our current cash runways will extend into the third quarter of next year. Now let's turn to our income statements. Research and development expenses for the three-month end of September 30, 2022, were $6.2 million compared to $7.3 million in the same three-month period of 2021. The decrease in R&D expenses resulted primarily from the completion of the SHIELD I Phase III clinical trial. Marketing and business development expenses for the third quarter of 2022 were $840,000 compared to $445,000 for the same period of 2021. General and administrative expenses for the third quarter of 2022 were $1.7 million compared to $2.1 million recorded in the prior year period. For the third quarter of 2022, the company had a net loss of $9.3 million as compared to $9.9 million in the prior year period. We will now open the call to your question. Operator?

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone keypad. Star 1 and 1 to ask a question, and please wait for your name to be announced. We will now take our first question.

One moment, please.

And your first question comes from the line of Brandon Foulkes from Cantor Fitzgerald. Please go ahead. Your line is open.

Hi. Thanks for taking my questions. I appreciate all the color today. I'd love to just get, you know, just any color if there's precedent to get a sort of label for a certain size incision above 20 centimeters, whether, you know, in the U.S. or ex-U.S. And then how do you think that affects the commercial opportunity? You know, I can see it sort of playing out both ways where, It gets on formulary and maybe gets used a little bit more broadly or maybe stays on formulary. So just any color in terms of your market research at this stage, if you did get sort of that narrower label, how do you think that may play out in practice? Thank you.

Thank you, Brandon, and good morning. I will start and I'll let Ori elaborate more on the commercial opportunities. In terms of the labeling, our first discussions, our coming discussion with the FDA is regarding the regulatory path and the path for an NDA. Labeling will be discussed on a later stage. We do see very nicely with the, if you, for example, look at some of the negative wound pressure, that the labeling is around prevention of, They refer it's wound complication. They refer to wound complication. So you do see that, for example, if you look at the heroin therapeutic, the extension of the indication that was granted, I think it was around May or June last year, the labeling is referring in their case to small to mid incision. So the reference to length of incision does exist. I think for us it's the next step. We first want to make sure that we have a clear regulatory path for NDA submission. But definitely this is something that we are evaluating and will be discussing with the regulatory. But you do see, as I gave these two off my head example, you see reference in this line.

And maybe I'll take the commercial opportunity part. So I think first, you know, maybe generally we need to understand that the trial was done during COVID. And even with COVID, we see almost close, almost 20% infection rate in these high-risk groups. One in six, one in five patients. So, you know, you can see how this can expand and even be, broader implications once hospitals go back to kind of, let's say, baseline or to normal operations. When we looked in market research, actually, earlier this year, we asked doctors about their processes, how do they look at patients, what do they see. Doctors know before the operation which patients are their high risk which operations will be more and more complex, which patients are more prone for infections. We asked them and we asked them to assess or quantify this part of the population. And in abdominal surgery, which was actually a little bit surprising to us, it's 40% of surgeries are patients that are high risk. And the way we want doctors, surgeons to look at our products, is one more tool in their toolkit when they think of a prophylaxis, when they think of, okay, I need to do whatever I can to prevent infection in this high-risk group. Now they have another tool in the toolbox that showed 50% reduction in complex surgeries and similar trends in the high-risk patients. So overall, I think there's an attractive starting point here. Of course, the plan is always and was from the beginning, let's get the approval and then generate more data and expand into a broader label. And we believe that with COVID going away and volumes in the hospitals going back up and kind of returning to baseline, we will see the need just growing more and more.

Thanks very much, I appreciate the colour.

Thank you. Thank you. We will now go to our next question. One moment, please.

And your next question comes from the line of Elliot Wilburn from Raymond James. Please go ahead. Hello, Elliot, is your line on mute?

Yes, can you hear me all right?

We can hear you now.

Okay.

Good morning.

Good morning. I want to ask a question about the additional post hoc data that you presented today in subpopulation with one or more risk factors. I mean, it looks like that is in isolation independent of incision size, and I just wanted to confirm that. And I'm just thinking about the interaction of the two categories. If in fact you've looked at data in large incisions with the additional inclusion criteria of having one or more risk factors. So just you want to get your thoughts on that idea. And then for Ori, perhaps, just thinking about some of the additional secondary data points that have been presented, you know, it seems like quite a few of those are going to resonate well with payers and on the commercial side, but just, you know, wondering if you think any of these sort of stand out or maybe more favorable than original expectations, you know, heading into the trial and specifically thinking about number of reinterventions post-infection or a number of subjects treated with antibiotics in order to adjudicate SSIs. But just any thoughts on some of the additional secondary efficacy endpoints that you think will resonate really well on the payer side. Thanks.

Thank you, Elliot. So with regard to the head-up analysis regarding risk factor, you are correct. It's separate, and it's a separate group. It's 70%, by the way, of the patient population of this trial that has at least one patient-related risk factor versus the complex surgery with long incision is about 43% of the patient population in the trial. So, of course, there is some overlap. quite significant overlap because in many cases the patient that are requiring more complex surgery also have risk factor when most of the patients in the trial had at least one patient related risk factor but those are two different analysis I can tell before I turn to already that in general we this is the largest phase III in abdominal colorectal than in over a decade. There is so much data that was gathered, both in terms of medical relevance, health economics. As we said in our today's prepared remarks, we can't get too granular about things because we do plan to publish it in a medical journal or more than one article, but we wanted to give a sense to investors and analysts since this is the first call since we published the top line of how much information and how much data has been gathered since and give the understanding of where we are focusing both our discussions with the regulator as well as with our partner and potential marketing. Ori, you want to follow up on the second point?

Yeah. Hi, Alice. You know, what I'm looking at, I think, as a whole, is around the complication. And I think this is the message that will really resonate with the hospital, the reducing complications and time in the hospital. And this is kind of a collection of what you mentioned is reinterventions and IV antibiotics, and time at the hospital, and readmissions, and all this data. A lot of this data we're still working on, and some of this data we will need to further investigate, but I think there's a nice trend here around wound complications. Another thing that actually the client and I were talking earlier today with this with this complexity you can see you can think of impact on pricing for example you know there's there's the the high risk group is the the there's a you know from where from the manufacturer there's maybe an opportunity here to look at the it's more a more more very expensive a product here so this there's a few things where we're looking into around around this data

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Balaji Prasad from Barclays.

Please go ahead.

Good morning. This is actually Michaela on for Balaji, but thank you for taking our questions. You mentioned you're engaged in partnering discussions across multiple additional geographies. I was wondering if you could provide a bit more color on what we can expect here and really just the key criteria you're looking for in additional partners. Thank you.

So thank you, Hanai. Good morning. As we also said in our preferred remarks, we are continuing the discussions that started prior to the top line. Surprisingly for us, all of those discussions are continuing. We were very clear to say, and we don't think it's in our best interest before we have a farther clarity on the regulatory pathway forward to go into any final discussion even. And it's just to reassure the interest and the continued interest and the unmet need. I think that Ari mentioned it a bit in his previous answer, but if investors and listeners and stakeholder really think about it, D-Plex was tested in the best condition maybe ever existed for a hospital for surgery. Best in terms of hygiene, best in terms of the overload in the hospital. There was never before such a period that surgeon, hospital, patient had this extreme precautionary measures. And still in this condition, especially in the complex surgery and with the lung incision, you see an overall reduction. And this is indicated in slide five. You see an overall reduction in the primary endpoint from 18% to eight. So companies that are focusing on this area are very much engaged and interested. I think that it's too early to set expectation here because we think it's in our interest to first meet with the FDA, as we said before, this is planned for the first quarter of next year, and only after that we can make a better assessment

on what's the path forward in this discussion. Thank you. We will now go to our final question. One moment. And your final question comes from the line of Roy Buchanan from JMP Securities.

Please go ahead.

Hey, thanks for taking the questions. I had a few. I guess Shield 2, does that remain in slow mode pending the regulatory meetings? And have those meetings actually been scheduled for the first quarter? It sounds like you have an agreement from the EMA that you can submit to MMA. So I guess what do you need to get out of the meeting in one queue?

So let me first start with the last part. What we got from the EMA is a very lucrative path for a centralized process. It's not yet any indication of how they will evaluate the data or how they will review. As we also said in today's release, after meeting with the FDA, shortly after, we intend to meet with the European authority, again, for an advisory meeting. Once we follow that, we will have the option to then approve the product in a centralized procedure, which will enable us to get an approval at one time, and we will not be required to go country by country. But this is not really an indication on the path forward in terms of actual approval, but just a very lucrative process in the sense that it's granted to products that showed innovation, and it's strengthened our understanding of how they view the results that we've submitted from the phase two, as well as the innovativity that DIPLEX suggests in the anti-infective space. So that's with the European authorities. As we, again, we said in the prepared remark, we are now in the process of preparing the package We are in the last stages of preparing it and intend to submit it quite in the next few weeks. And knowing the timeframe that is required from the time we submit the package to have a meeting, we are confident that we can meet with the FDA at the first quarter of next year. But to answer your question, there is still not a specific date that was set.

Okay, great.

Oh, sorry, and before you also asked about Shield 2. So, yes, you described it correctly. It's in a very low-key mode, waiting for clarity on the path forward, and then we will decide if we can use this infrastructure or maybe convert it into a post-approval. We'll need to decide once we know what's the path forward.

Okay, great. Sorry, maybe I missed it, but how do you estimate the proportion of colorectal surgeries in the U.S. that have an incision larger than 20 centimeters, and that I think there was a directive in Shield 1 to use two vials of D-Plex 100 if the incision was larger than 20 centimeters, I believe. Was that followed, and is that a possible explanation for the superior results in that group, basically a dose effect? Thanks.

So, I'll start with the second part, and Ori will relate to the first part. The dosing, it It is not specific to this trial. The dosing in abdominal surgery is based on the length of the incision. Up to 10 centimeter, one vial is sufficient. Moving on to 10 to 20, two vials are required. And over 20 centimeter, it is three vials that are administrated. We did not see any indication at this stage that there were dosing issues. And we don't believe this is the case. We do see, and if we need to explain or based on the information that we have now on why there wasn't a statistically significant or an effect, statistically significant effect in the lower the 20 centimeter, What we think is that the best explanation for that is that because of the various precautions that measures that we're taking during COVID, the overall infection rate in the standard of care arm was very, very low, less than 5%, which we haven't seen ever reported in open abdominal colorectal resection. prior to that, and this really created a situation where there wasn't enough events to show a statistically significant effect.

And maybe just your question on the market. So what we looked at in the past, what I mentioned before, is looking at the complexity or the risk for infection. This was part of the market research, and this was 40% of patients coming into colorectal resection. It was all over abdominal surgeries, but colorectal was very much in that same numbers. We're now looking into these large incisions. This was a group that we did not look previously in market research, so we're looking into that as well. But again, just to reiterate this, in any case, this is the starting point. the initial label at approval and we'll expand the label from there.

Okay, thank you. Thank you. I will now hand the call back for closing remarks.

Thank you for joining our third quarter earnings conference call. I would like to emphasize how firmly we continue to believe in our long-term prospects. We remain grateful to our team members and all our external partners for their commitment to our mission and their support in continuing to advance towards achieving our goal of bringing DIPLEX 100 to healthcare providers and patients as quickly as possible. We look forward to speaking with you again on our next call.