PolyPid Ltd.

greetings and welcome to the polypete third quarter 2023 conference call at this time participants are in listen only mode as a reminder this call is recorded and i would like now to introduce your host for today's conference brian ritchie from life science advisors mr ritchie you may begin

Thank you all for participating in PolyPete's third quarter 2023 earnings conference call. Joining me on the call today will be Dikla Chachkis-Axelbrad, Chief Executive Officer of PolyPete, Johnny Misalawan, PolyPete's Chief Financial Officer, and Ori Warshawski, Chief Operating Officer of PolyPete. Earlier today, PolyPete released financial results for the three and nine months ended September 30th, 2023. A copy of the press release is available in the Investors section on the company's website, www.polyp.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 forward-looking statements when it discusses recruitment of additional patients into Shield 2, total recruitment time into the study, and the timing of the top-line results therefrom. It's intention to conduct an unblinded interim analysis once a total of approximately 400 patients complete their 30 day follow up the potential new drug application submission for deplex 100 in the US and EU marketing authorization application regulatory filings. It's expectation to have 40 centers open by the end of 2023. Factors essential in the execution of Shield 2. The potential of D-Plex 100 in addressing the persistent challenge of surgical site infections. D-Plex 100's potential to provide prophylactic efficacy benefits in patients with increased SSI risk factors. The company's competitive advantages. Potential clinical evaluation of D-Plex 100 in the pediatric population. potential commercial demand for DPLEX 100, and the company's expectations regarding its cash balance. 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 that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these 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 factors that may cause actual results or events to differ materially from those described in the 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 8th, 2023. With the completion of these prepared remarks, it is my pleasure to turn the call over to Dikla Chachkis-Axelrod, CEO of PolyP. Dikla?

Thank you, Brian. On behalf of our team at PolyPEED, I would like to welcome everyone to our third quarter 2023 earning goals. To begin, I would like to extend our gratitude to so many of you who have continued to reach out to us to express your concern regarding the health and safety of our employees and their families, given the horrible acts of violence that took place in Israel on October 7th. Despite the terrible news over the last few weeks, we at PolyPID remain focused on ensuring the uninterrupted progress of our ongoing SHIELD2 pivotal trial for DPEX100 for the prevention of abdominal colorectal surgical site infection, or SSI. To date, there has been no material impact on our operations and specifically on SHIELD2. In fact, As we said would be the case by this time, we currently have approximately 20 centers open, the majority of which are outside of Israel. The vast majority of these 20 centers have opened only in the last few weeks. Therefore, while we currently have approximately 50 patients recruited into the SRIL2 trial, we expect enrollment to ramp up shortly. To this end, we anticipate having approximately 40 centers open by the end of 2023. To give you a better sense of the expected pace of enrollment, once the site is fully up and running, which takes several weeks following its being formally open, we expect approximately 1.5 patients to be recruited into the trial per center per month. We intend to conduct an unblinded interim analysis once a total of approximately 400 patients complete their 30-day follow-up, and top-line results are expected in the second half of 2024. I should also add that while surgical incision length is widely known independent procedural risk factor for SSI and abdominal surgeries, it is not the only one. In the SHIELD-1 study, we also observed a positive effect of DIPLEX-100 in postdoc analysis of subgroup of patients with patient-specific risk factors, such as obesity, diabetes, hypertension, and COPD. Based on these results, we believe DIPLEX-100 has the potential to provide prophylactic efficacy benefits in patients with increased SSI risk factors, both procedural and patient-specific. Patients in either of these risk categories are relatively easily identified by the surgeon in the pre- and intraoperative periods and could be ideal candidates for DPLEX-100 at the time of incision closure, particularly when there is a need for enhanced SSI antimicrobial prophylaxis. Moving on. As you know, we have a clear regulatory pathway for the potential NDA submission for DPLEX-100 in the U.S. Earlier this year, the FDA acknowledged not only that the SHIELD-1 result may provide supportive evidence of the safety and efficacy of DPLEX-100 in patients with large surgical incisions, but also confirmed that if successful, SHIELD-2 is sufficient to support a potential NDA submission. We continue to strongly believe that SHIELD2 is a de-risk phase retrial, giving the more focused patient population in which we have already generated highly positive data in SHIELD1, and the fact that it will not be conducted within the tight COVID-related restrictions that were in place during the pandemic and throughout the duration of SHIELD1. We are also leveraging key learnings from SHIELD1 related to the sites involved in the study. While we are targeting approximately 50 centers for SHIELD2, around the same number as SHIELD1, we now have firm knowledge of the best performing sites and countries from SHIELD1 in terms of recruitment, patient monitoring, and good clinical practice. We believe this to be essential in the execution of SHIELD2. We have also enhanced our clinical operations team, another key step towards supporting a successful study. While we focus on enrollment into SHIELD2, we have also recently achieved several key DPLEX100 manufacturing-related milestones that have helped evolve PolyPIT into a fully integrated biopharmaceutical company. First, we successfully completed the production and release of three process validation batches of DPLEX100. This significant accomplishment completes a substantial requirement towards our planned submission of DPLEX 100 NDA and EU marketing authorization application regulatory filing. I should highlight that the successful validation of the production process at commercial scale is the result of a significant facility expansion and scale-up that's more than tripled the company's capacity to manufacture DPLEX 100 for the US, EU, and global markets. Our in-house state-of-the-art good manufacturing practice, or GMP, sterile production facility, provides us with full control of Duplex 100 manufacturing from clinical stage to commercial supply and serve as a key competitive advantage going forward. Most recently, we completed a successful GMP audit by the Israeli Ministry of Health of our manufacturing facility without any critical or major findings. This audit is also valid for European regulators. Importantly, we can now produce Duplex 100 at scale in order to fulfill the expected commercial demand for the product. Moving on, we also continue to augment the published and presented research in support of Duplex 100. To this end, a paper highlighting positive preclinical results that demonstrated for the first time the safety profile of DPLEX-100 and the Plex technology platform in juvenile animals, was published in the peer-reviewed journal, International Journal of Toxicology. These results have the potential to support the clinical evaluation of DPLEX-100 in the pediatric population. In addition, we recently presented the result of the SHIELD-1 phase 3 trial for the first time at a medical meeting the American College of Surgeons Clinical Congress 2023, which took place last month in Boston. I am pleased to report that polypid's progress in the advancement of DIPLEX-100 has not gone unnoticed. Last month, DIPLEX-100 was selected as the winner of the 2023 Overall Biopharma Solution of the Year as part of the third annual Biotech Breakthrough Awards which recognize the world's best biotech and life science companies, products, and services. Shifting gear, I'd like to highlight that we recently regained compliance with NASDAQ's minimum closing bid price rule. Also, while Johnny will review our current financials momentarily, I'd like to emphasize the ongoing cost containment efforts throughout our business, including in clinical operations, GNA, and manufacturing. For the first nine months of 2023, our net cash used in operating activities decreased by 56% as compared to the first nine months of 2022. Finally, I would like to take this opportunity to welcome Dr. Nuit Tweezer-Zachs, who was recently appointed to Polyped's Board of Directors. Dr. Tweezer-Zachs is a biopharmaceutical industry veteran with extensive executive business development, clinical, and R&D expertise. She is an experienced sector investor and was a practicing physician for nearly 15 years. We look forward to leveraging her vast expertise across the BD, clinical, R&D, and financial functions. As we approach critical, clinical, and regulatory months, as well as potential commercialization of LIPLEX 100. On behalf of everyone at Polipede, I would also like to express my thanks to Anat Sursegal, who is retiring from our board following 15 years of distinguished service. Mr. Sursegal has provided critical counsel over the years that has helped grow and advance our business. We wish her the best in all our future initiatives. With that, I am pleased to turn the call over to Johnny. Johnny?

Thank you, Nikla. As of September 30, 2023, the company had cash and short-term deposits of $10.2 million. We continue to expect that our cash balance will be sufficient to fund operations into late first quarter 2024. Now let's turn to our income statement. Research and development expenses for the three months ended September 30, 2023 were $3.8 million compared to $6.2 million in the same three-month period of 2022. The decrease in R&D expenses resulted primarily from the completion of the Shield 1 Phase 3 clinical trial and reflects the impact of the cost reduction plan that was executed in the fourth quarter of 2022. Marketing and business development expenses for the third quarter of 2023 were $261,000, a decrease from the $840,000 during the prior year three-month period. General and administrative expenses for the third quarter of 2023 were $1.2 million compared to $1.7 million recorded in the same three-month period of 2022. For the third quarter of 2023, the company had a net loss of $5.6 million as compared to $9.3 million in the third quarter of 2022. Finally, as Dikla noted, we continue to execute well on our cost containment initiatives. As such, our net cash used in operating activities for the first nine months of 2023 decreased by $16.1 million as compared to the same period in 2022, from $28.9 million to $12.8 million. With that, We will now open the call to your questions. Operator?

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.

We will take our first question.

And our first question comes from the line of Balaji Prasad from Barclays. Please go ahead. Your line is open.

Good morning. This is Shao for Balaji. Thanks for taking our question. As we are going into 2024, could you highlight the key upcoming milestone events and catalysts down the road so that we should be mindful of those events? Thank you.

Thank you, Shao, and good morning. Yes, sure. So I think that obviously looking at our clinical trial, our SHIELD2 phase 3 trial, the first milestone will be completion of recruitment for the interim analysis, 430, almost 430 patients. And this will be expected towards the end of the first quarter, early second quarter. And two months after that, we should have the feedback from the DMC committee on the interim analysis. So we're talking about around July. Assuming continue of recruitment, a quarter post last patient for the interim, we should have last patient in. And shortly after that, the top line from the last patient, from the top line actually. And obviously, this is our main focus today and our main investment in the company, all the companies targeted towards the clinical trial and everything that is associated with that. In parallel to that, as we previously said, we are in different discussions on commercializing DIPLEX in different geographies, and we would expect as we get closer to the interim similar to what we had with Shield1. As we were getting closer to top line and interim, discussions were much more robust, and shortly before publishing the data, we signed our European licensing deal, so we would expect to see this also in the front of other geographies. And obviously, lastly, we're looking on our platform-related deal, our OncoPlex, These are also discussions that are ongoing. There is work that is done there. Obviously, at this stage, investors are less exposed to everything that is done. But once we do have what to share, we will share. So, this is mainly the main catalyst that we will be looking for. And as we get the interim data, obviously, there will be other catalysts that are related to commercialization.

Thank you.

Thank you. Thank you. We will take our next question.

Your next question comes from the line of Roy Buchanan from JMP. Please go ahead. Your line is open.

Hi, great. Thanks for hosting the call and thanks for taking the question. I guess the first one, and thanks for providing the timelines for the, potential timelines for the interim Just can you remind us the potential outcomes for the interim? And again, is the potential for resizing the trial, as was the case with Shield 1, a potential in Shield 2?

So, good morning, Roy, and thank you. So, the potential outcome of the interim could be, and I would want to remind everyone that if you remember in Shield 1, at 423 patients on the same focused patient population, we had 54% reduction of infection with p-value of 0.0032. So very much in line of what the FDA would want to see with the potential early stop for efficacy. So the first option is obviously early stop for efficacy if the data and the statistic plan is robust enough. If we are mimicking what we saw in SHIELD1, this should be more than sufficient for an early stop for secrecy. As always with clinical trial, the other option is that the DMC will tell us that the trial is fatal and there's no chance to succeeding. And there is also a room for resizing. Yes. And as we get data and understanding the overall infection rate, we can start sharing that as well.

Okay. That's actually my next question, the blinded infection rate. Just wondering if you had a sense of it. Is it in line with your expectations going into the trial?

So, it is in line, but I think that, you know, saying that from our experience, we need to have the first 100 patients to see a trend. Because as you can imagine, as we start recruiting, patients are coming from a handful of centers. And as we start opening the centers, we now have 20. By the end of the year, we will have 40. And beginning of 2024, we expect to have another 10. And with an average recruitment rate of one and a half patients per center, we will start seeing recruitment rate ramping up pretty quickly. And at that point, where patients are more spread geographically and center-wise, we believe the trend will be much more visible and much more indicative. But for now, we definitely see the infection rate in line with expectations.

Okay, great. Thanks. And maybe could you just elaborate a little bit on the, I guess, cadence of the potential partnering discussions? And you mentioned Oncoplex. Are you actively out there looking to partner Oncoplex or doing internal work with it to be able to present potential partners? That's a bit unclear on that. And then just more broadly, just how are you thinking about your capital runway and potential you know, addressing the need to get to the data. Thanks.

So, obviously, I can't say much on the partnering, but maybe to give a bit of coloring on that. So, we are, and we said before, we are in discussions on both fronts, the DPLEX front as well as the platform-related slash oncology program. And we are also doing internal work that is not at this stage Requiring heavy investment because obviously our cash is all Focused on shield 2 and getting the program to top line that we do Have an internal program that is more targeting supporting potential collaboration, what we believe will be needed or what we are hearing from those discussions that is needed in order to promote a potential partnership. And you were also asking about our financial runway. So as we've indicated, our cash, you've seen that we've entered the quarter with over $10 million, and we've indicated that this is sufficient to take us all the way through the end of the first quarter. Obviously with running the trial full speed ahead, full recruitment rate, so it takes all that into consideration. I should remind everyone that once we have the top line result from our phase three trial, we have a potential milestone from Advanced Pharma. So this is an immediate milestone that is expected once we have phase three data. And obviously, we are looking at different alternatives on financing the trial. And I must say that what makes us very encouraged is the level of support that our largest shareholder have shown in the past and are showing now.

Great. Thank you.

Thank you. Thank you. We will take our next question.

Your next question comes from the line of Raghuram Salvaraju from HC Wainwright. Please go ahead. Your line is open.

Thanks very much for taking my questions. Firstly, I was just wondering if it would be possible at all for you to give us an update on the number of patients in SHIELD2 who have completed their 30-day follow-up at this time?

Right. So, yeah, sure, we could do that. As I said in the prepared remark, we have about 50 patients already enrolled, and I would say that around 40 have finished their 30 days.

Also, in the context of partnering discussions, maybe you can just comment a little bit on the extent to which the fact that you have commercial scale-up work already significantly accomplished plays a role in increasing the attractiveness of this asset for potential partners. And if you could give us a sense of what your preferred working arrangement might be in the future with a potential licensee, partner, or distributor with respect to the manufacturing? If this is something that you would like to continue to maintain in-house, or if it's something that you anticipate potentially doing tech transfer on in the future?

So first of all, thank you for this question, because we believe that it is essential And it's not just a belief. We've seen that in our discussions with our European partner, Advanced Pharma. It was essential to the discussion, and it was essential to their due diligence. They obviously came to Israel, reviewed the facility, reviewed the process, reviewed the line of approval that the facility has. The manufacturing is not trivial. It's not trivial. the triggering for us going into this adventure of building our own manufacturing facility because we understood that we're not going to get a good enough solution from a CRO or a CMO. And this was the motivation to make the investment five, six years ago and build our own manufacturing facility. And we believe it is essential. going forward to, and we see that in all of our discussion, our ability to be a fully integrated biopharmaceutical partner of the big pharma is really important. And looking forward an additional partnering, I think it's something that we would suggest obviously to maintain. I think it's an added value that we are bringing. And the facility that we have is sufficient for the first several years of full commercialization, so we are on a solid ground there. But saying that, if in some different geographies the margin will motivate us and the partner to have a different facility, we are open to that. I can tell you that our full control of the manufacturer gives us obviously a larger portion of the end sale and this is something that we would want to maintain.

And lastly, outside of the U.S. and Europe, can you just enumerate for us again which other non-core territories might be economically interesting from a partnering perspective with regard to the broader global commercial opportunity for Dplex?

So, obviously, there are the obvious countries, the western type of countries, Canada, Australia, Japan, South Korea. This is obviously an obvious market opportunity. But we are also seeing that looking on margin and level of infection and structure of payment or repayment, South America is a definite opportunity, China, India, so obviously Middle East here. But those are all potential territories. We've seen some reports on that. also as part of our discussions with the potential cost and margin there. So it's really globally.

Thank you. Thank you.

Thank you. There seems to be no further questions. I would like to hand back for closing remarks.

Thank you for joining Polypeat's third quarter 2023 earning conference call. We remain highly confident in our long-term prospects, especially the potential of our promising late-stage product candidate, DIPLEX 100. As always, we are grateful to our team members, shareholders, and all our external partners for their commitment to our mission and their support in continuing to advance toward our goal of bringing DPLEX 100 to healthcare providers and patients as quickly as possible. We look forward to speaking with you again on our next conference call.

This concludes today's conference call. Thank you for participating. You may now disconnect.