Protalix BioTherapeutics, Inc. Q3 FY2022 Earnings Call

Greetings, and welcome to the Protalix BioTherapeutics Third Quarter 2022 Financial and Business Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. Sir, you may begin your conference.

Thank you, operator, and welcome to the Protalix BioTherapeutics Third Quarter 2022 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the update was issued this morning and is available on the Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release and 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 on the Protalix filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Thank you, Chuck, and welcome, everyone, to our third quarter 2022 financial results and business update call. I will begin with a review of our progress and accomplishments over the quarter, along with our plans for the coming months. Following my remarks, Eyal will provide a more detailed review of our financial results, and we'll then open the line for questions. I’ll begin with a significant milestone recently achieved: we are pleased to report that last week we, together with our development and commercialization partner, Chiesi Global Rare Disease, resubmitted the biologic license application, or BLA, to the U.S. FDA for PRX-102 for the proposed treatment of adults with Fabry disease. The data package contained in the BLA resubmission includes, in addition to the Phase I and II studies, the final two years analysis of our Phase III BALANCE clinical trial and the final Phase III open-label BRIGHT study report. In addition, we have provided data from our long-term open-label extension studies. Achieving this milestone is a testament to the dedication of Protalix and Chiesi teams to delivering this potential new treatment to patients with Fabry disease, and we are grateful for their hard work and commitment to our program. We and Chiesi anticipate that the FDA will complete its review of the resubmission BLA within six months of receipt. With respect to the PRX MMA submitted to the European Medicine Agency (EMA) earlier this year, the EMA is currently reviewing our application, and our dialogue with the EMA is ongoing. As we approach year-end, Protalix is entering into an exciting time as we are moving closer to a potential approval of PRX-102 for the treatment of adult patients with Fabry disease. We believe that PRX-102 has significant potential for patients and families affected by Fabry disease, and we remain committed to continue collaboration with the FDA and EMA to work towards our goal of successfully bringing this much-needed treatment to patients in need. Turning to our earlier-stage pipeline, we are continuing to develop additional programs expressed through our proprietary protein expression system. PRX-115 is an over-PEGylated uricase in development for treatment of severe gout. We are on track to initiate a first-in-human Phase I clinical study of PRX-115 in the first quarter of 2023. In support of this first-in-human study, we are finalizing our toxicology package. In addition, we continue to make progress on PRX-119, a PEGylated recombinant human DNS1 protein, designed to elongate DNS half-life in circulation for treatment of NET-related diseases. We have conducted preclinical studies to demonstrate feasibility of PRX-119, and we look forward to providing updates on these two and other programs as we progress. Finally, our balance sheet provides us with sufficient cash runway to the fourth quarter of 2023, enough to support the company through the potential approval in addition to continuing to develop our early-stage pipeline programs. I will now turn to Eyal to review our financials. Eyal, go ahead.

Thank you, Dror, and thank you, everyone, for joining today's call. Let me please review our third quarter 2022 financials. The company recorded revenues from selling goods of $8.8 million during the three months ended September 30, 2022, an increase of $4.3 million, or 96%, compared to revenue of $4.5 million for the three months ended September 30, 2021. This increase included a $3.4 million increase in sales to Pfizer resulting from timing differences and a $2.4 million increase in sales to Chiesi, which was partially offset by a $1.5 million decrease in sales to Brazil resulting from timing differences. Revenue from license and R&D services for the three months ended September 30, 2022, was $5.4 million, a decrease of $2.1 million, or 28%, compared to the revenue of $7.5 million for the three months ended September 30, 2021. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi agreement. Cost of goods sold was $7.1 million for the three months ended September 30, 2022, an increase of $3.4 million, or 91%, from cost of goods sold of $3.7 million for the three months ended September 30, 2021. The increase in cost of goods sold was primarily the result of the increase in sales of goods. For the three months ended September 30, 2022, our total research and development expenses were approximately $7.4 million, comprised of approximately $4.9 million in subcontractor-related expenses, approximately $1.7 million of salary and related expenses, approximately $0.2 million on material-related expenses, and approximately $0.6 million of other expenses. For the three months ended September 30, 2021, our total research and development expenses were approximately $7.3 million, comprised of approximately $4.8 million in subcontractor-related expenses, approximately $1.6 million of salary and related expenses, approximately $0.1 million of material-related expenses, and approximately $0.8 million of other expenses. The total decrease in research and development expenses was $0.1 million, or 1%, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. Selling, general, and administrative expenses were $2.8 million for the three months ended September 30, 2022, a decrease of $0.2 million, or 7%, compared to $3 million for the three months ended September 30, 2021. The decrease was primarily due to the decrease in salary-related and selling costs. Financial expenses net were $0.4 million for the three months ended September 30, 2022, compared to financial expenses net of $2.3 million for the three months ended September 30, 2021. The decrease resulted primarily from lower interest and debt amortization costs due to a decrease in our outstanding notes from an aggregate principal amount of $57.92 million of 2021 notes to an aggregate principal amount of $28.75 million of 2024 notes and an increase in the exchange rate of new Israeli shekel for U.S. dollars over the period. Cash, cash equivalents, and short-term bank deposits were approximately $20.8 million at September 30, 2022. As Dror mentioned, we believe that our current financial position provides us with a sufficient cash runway through the fourth quarter of 2023. I will now turn the call back to you, Dror.

Thank you. Sir, should we now open the floor for questions?

Yes, please.

We have a first question from Boobalan Pachaiyappan with H.C. Wainwright.

Can you hear me okay?

Yes.

Great. Congrats on the BLA submission. This is great news for Protalix shareholders. A couple of questions from us. So firstly, some investors are curious to know at what point you'll be able to share the full details of the agreement within Protalix and Chiesi with respect to PRX-102?

Eyal, would you like to refer to that?

Yes. Given the agreement between the parties, we will not make the agreement public, and the agreement is redacted for obviously legal reasons, and it will stay this way. As soon as they hit the relevant milestones, whether it's going to be commercial, regulatory, or the royalty, obviously, it's going to be disclosed as part of the financial reports or the relevant press releases, if required.

Okay, clear. All right. Understood. With respect to PRX-115, so I was wondering if you could talk about maybe on a preclinical level, what kind of efficacy are you seeing? And also, are you seeing any ADAs or undesired human response?

So I will say the following that I think that with the data that we have at present, we feel comfortable to continue, of course. And since uricase does not exist in the human body, it’s better that we speak once we have final results of the Phase I study with human beings, of course. This will be by far more substantial to discuss upon and not just to say things which are from preclinical studies. So the data that we have supports and gives us the comfort to continue, of course. But I don't want to put hopes before we get results from human beings that will hopefully participate and finalize the study as we plan. This will be far better.

Okay. Understood. And then maybe within PRX-115 – speaking about PRX-115 competitive landscape. As you probably know, Horizon has a drug, KRYSTEXXA, and there is also a company that we cover called Selecta Biosciences, and they are currently in Phase III, and the readout is expected in the first quarter of 2023. So I'm just curious how your PRX-115 gout program is differentiated from KRYSTEXXA and SEL-212?

So I think that once we see results, it will be much easier to explain where we see the differentiation. Clearly, the intent is not to develop a drug that will be identical to any others; the intent is to differentiate either through the frequency of the infusion and/or through immunogenicity. And before we share more, I will say it is not a big secret because it has to be based on data. We prefer to base it on even early-stage clinical data from Phase I/II rather than on preclinical and scientific data only.

We have the next question from John Vandermosten with Zacks.

I wanted to start off with a question on Brazil. They recently had an election, which changed the government there. And I'm wondering if you might expect any differences due to that change, maybe a little bit more liberal demand for pharmaceutical products?

I don't foresee – I don't think there will be any major changes at present. This drug has existed in Brazil for a couple of good years already. I don't foresee – we sell at competitive prices, of course, compared to Sanofi and others. I think, right now, we are fine. But we will see.

Okay. Very good. Do you know if Pfizer had any sales in Europe? I believe we talked last time about the end of exclusivity for VPRIV, which was on August 30. Were they able to make any inroads into the European market with the drug?

First, it's a question for Pfizer, but I'm not aware that they have launched in Europe as of yet.

Okay. I was going to ask about 115 and the competitive environment there, which I think we've already addressed. It's about a $1 billion market. Is there a specific portion of the market that you're targeting? It seems to be dominated by about three products. How do you see yourself fitting into the current offerings available?

So I think, first, Chiesi is responsible for the marketing, of course. But we believe that in light of the safety, immunogenicity, the efficacy data, and the two potential regimens we have, if I may say, a good, even a very good alternative for the patients for all these aspects. And by the end of the day, it is a drug for the patients. I hope that Chiesi will do a good job; they are clearly taking care of it and preparing themselves well, and we will do fairly in the market.

And then on Chiesi.

Combination. A good combination of the safety, the immunogenicity, the efficacy data, the robustness of the program, and, of course, the potential two regimens is a very good alternative, potentially, of course.

Great. Yes. I guess we'll keep an eye out for that Phase I data. And just on that Phase I data from 115, I guess we would expect that to come out somewhere around midyear next year. Does that sound about right?

I believe it's something like – it's about 12 months from the initiation of the study. I assume end of next year, beginning of Q1 the year after. I mean, we are speaking about the final results.

Okay. Maybe we have some kind of top line prior to that, just to get a sense of.

We would see along the way.

I have a question about Chiesi's rare disease subsidiary, which I believe is located in Boston. Have they begun marketing any products yet? I'm curious about their progress in ramping up activities. I know there are other rare disease products still in development, but I'm unsure about their current status regarding commercialization efforts. How are they doing in that area?

So Chiesi, no, they have established a rare disease division already a couple of years ago. They bought a couple of rare disease assets, so they have, I think, a couple of drugs on the market. Actually, they have their own site, of course. It’s not a secret. And right now, for the last year, I believe they are preparing themselves for a launch, hopefully.

Okay. All right. Well, congratulations on the BLA submission and look forward to hearing good news back from the FDA and EMA in the near term.

Thank you. Looking forward to that.

As there are no further questions from the participants, I would now like to turn the call back over to Dror Bashan, President and CEO for closing remarks. Over to you, sir.

Thank you. So thanks, again, everybody, for joining our call, and looking forward to speaking with you next time. Thank you.

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