Protalix BioTherapeutics, Inc. Q1 FY2023 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics First Quarter 2023 Financial Business Results Conference Call. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. You may now begin.

Thank you, Tina. Welcome, everyone, to the Protalix BioTherapeutics First Quarter 2023 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 now 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 statements made. Factors that could cause actual results to differ are described in the disclaimer and Protalix's filing 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 First Quarter 2023 Financial Results and Business Update Call. I will begin by reviewing our recent progress and accomplishments. Following my remarks, Eyal Rubin will provide a more detailed review of our financial results. We will then open the line for questions. As we updated earlier this morning, we, together with our development and commercialization partner, Chiesi Global Rare Diseases, are waiting on an EC decision, which should be announced in the next couple of days. In addition to the EU, we are also quickly approaching potential approval in the United States. Our signed PDUFA target action date is next week, May 9, 2023, and we look forward to providing you with an update when we hear from the FDA. We are grateful for the Protalix team as well as our partnership with Chiesi that has brought us to this stage. We are confident that if approved, Chiesi is well-equipped to realize the full potential of PRX-102. They have ramped up commercial activities and are prepared for launch. Fabry disease represents a potentially significant opportunity in a multibillion-dollar market that is in need of an alternative treatment option and we, together with Chiesi, are prepared to deliver. Now turning to our pipeline. We are continuing to make progress in our earlier stage programs. PRX-115 is a novel PEGylated uricase in development for the treatment of severe gout. In March of 2023, the first patient was dosed in our Phase I first-in-human clinical trial for PRX-115 in patients with elevated uric acid levels. And the trial is a double-blind placebo-controlled single-ascending dose study designed to evaluate the safety, pharmacokinetics, pharmacodynamics, and immunogenicity of PRX-115 in up to 56 patients. The study is being conducted in New Zealand. And to date, 9 patients have already been dosed in this trial. We look forward to continued enrollment and dosing of patients. We also continued to progress on PRX-119, a PEGylated recombinant human DNase I protein designed to elongate DNase half-life in circulation for treatment of NETs-related diseases. We have conducted preclinical studies to demonstrate the feasibility of PRX-119. We look forward to providing updates on these programs and others as we look to build our growing pipeline. You may recall that last December in 2022, we announced our decision that it was in our company's best interest to voluntarily delist our common stock from the Tel Aviv Stock Exchange. On March 22 of this year, 2023, our common stock was delisted from the Tel Aviv Stock Exchange, and the last trading day on the Tel Aviv Stock Exchange was March 20, 2023. Finally, our balance sheet provides us with sufficient runway to the third quarter of 2023, supporting the company through potential approvals in addition to continuing to develop our earlier-stage pipeline programs. I will now turn to Eyal for a review of our financials. Eyal, please?

Well, thank you, Dror. And just to make it clear, obviously, the cash runway is until the third quarter of 2024. Thank you, everybody, for joining the call today. Let me review our first quarter 2023 financials. We recorded revenues from selling goods of $5.1 million during the 3 months ended March 31, 2023, a decrease of $3.9 million or 43% compared to revenue of $9 million for the 3 months ended March 31, 2022. The decrease resulted primarily from a decrease of $2.7 million in sales to Brazil and a decrease of $1.1 million in sales to Pfizer, both resulting from timing differences. We recorded revenues from license and R&D services of $4.5 million for the 3 months ended March 31, 2023, a decrease of $2.6 million or 37% compared to revenues of $7.1 million for the 3 months ended March 31, 2022. Revenues from license and R&D services are comprised primarily of the revenue we recognized in connection with the Chiesi agreement. Cost of goods sold was $3.1 million for the 3 months ended March 31, 2023, a decrease of $2.9 million or 48% from cost of goods sold of $6 million for the 3 months ended March 31, 2022. The decrease in cost of goods sold was primarily the result of a decrease in sales of goods. For the 3 months ended March 31, 2023, our total research and development expenses were approximately $5.8 million comprised of approximately $3.5 million in subcontractor-related expenses, approximately $1.5 million of salary and related expenses, approximately $0.1 million of material-related expenses, and approximately $0.7 million of other expenses. For the 3 months ended March 31, 2022, our total research and development expenses were approximately $8.8 million comprised of approximately $5.8 million in subcontractor-related expenses, approximately $2 million of salary and related expenses, approximately $0.2 million of material-related expenses, and approximately $0.8 million of other expenses. The total decrease in research and development expenses was $3 million or 34% for the 3 months ended March 31, 2023, compared to the year ended March 31, 2022. The decrease in research and development expenses primarily resulted from the completion of both our Fabry clinical program and a substantial portion of the regulatory process related to the BLA and the MMA submission for PRX-102 as Dror described earlier. Selling, general and administrative expenses were $3.1 million for the 3 months ended March 31, 2023, a decrease of $0.1 million or 3% compared to $3.2 million for the 3 months ended March 31, 2022. A decrease of approximately $0.4 million in salary and related expenses was partially offset by an increase of $0.3 million in professional fees. Financial expenses net were $0.5 million for the 3 months ended March 31, 2023, compared to financial expenses net of $0.4 million for the 3 months ended March 31, 2022. In the 3 months ended March 31, 2022, we recorded income taxes of approximately $0.2 million. Cash and cash equivalents were approximately $33 million at March 31, 2023. Net loss for the 3 months ended March 31, 2023, was approximately $3.1 million or $0.05 per share basic and diluted compared to a net loss of $2.3 million or $0.05 per share basic and diluted for the same period in 2022. I will now turn the call back to you, Dror.

So thank you very much, Eyal, and thanks, everybody, for joining us on today's call. I'm sure everybody is under anticipation for the upcoming approvals. Clearly, it's an exciting time for us. We are looking forward to providing you, of course, with the update once we have them, both from the EU and the FDA. And in addition, we are planning on hosting an investor event in late June to discuss Protalix's strategic priorities going forward. Now I will turn back to the operator and open the line for questions.

The first question comes from John Vandermosten of Zacks.

Dror, and Eyal, how are you guys doing?

We are doing fine. Thank you, John.

That's good to hear. Next week is going to definitely be a big week for you guys, so we're all over here looking forward to that. But I thought I would spend a little time on PRX-115, just to understand kind of that a little bit better. I guess you're running the trial in New Zealand, as you've mentioned many times. Are there any incentives that you're getting from running it there? I know that that's a pretty favorable place to do early-stage trials just because of the benefits that the Australian and New Zealand government provide developers there.

John, can you repeat? I don't understand the question. What is the question exactly?

Sure. So in the Oceania area, in New Zealand and Australia, I noted frequently that there are very supportive environments in terms of tax benefits and credits and things like that to run trials down there. Is that something that you're benefiting from for PRX-115 down there?

Eyal?

Yes, that's correct, but that's not the reason we are running the trial there. We didn't apply in order to benefit from a tax credit. You need to open an on-site, on-the-ground site there in New Zealand and in Australia. And they obviously are running for at least the Phase I. We saw that it's too big of a burden. The reason was that the CRO that we picked and the sites have expertise and their enrollment capabilities are good for such reasons that we would pick the site and the CRO.

Okay. Great. And obviously, this is the Phase I where the primary goal is safety. But I wanted to see if you could share some of the secondary endpoints that you're looking at that might look at efficacy. And then also, if we're successful in these early stages, what might some of the endpoints be for a pivotal trial in terms of efficacy?

So, John, we planned to include up to 56 patients. Along with safety, which is our primary focus, we are interested in evaluating immunogenicity. We want to determine how effectively we can lower uric acid levels and gather any indications regarding dosing frequency. However, we are still in the early stages. There’s nothing to showcase at this moment. Once we receive the final reports, including the pharmacokinetics and pharmacodynamics, we aim to analyze the data more effectively to guide our Phase II trial.

Sounds good. And one of the major players in gout right now is KRYSTEXXA. And I'm just wondering if you have a comparison of how PRX-115 goes up against that guy.

No. We will have to see results before we can say anything.

Okay. Well, I was thinking in terms of mechanism of action or kind of the unmet need perhaps that 115 may address. Not the ultimate efficacy, but just how it might work in terms of the MOA.

By the end of the day, we hope to have a differentiation in at least one important aspect. We will have to see if it will be the frequency of dosing, immunogenicity, or a combination.

Great. That's helpful. Just one last thing from me. Next week is a significant week, and what are the next steps we should expect? I know you mentioned a call with investors in a month to discuss priorities, but what should we expect from you and Chiesi regarding commercialization and preparations, assuming we receive positive news?

So we will clearly update immediately the market once, hopefully, of course, we get the approval from the EU and following that with the FDA. This is the sequence we see right now, of course, or anticipate. So we will, of course, update and explain. And I'm not familiar with anything else right now. Once Chiesi plans the launch of the product, then we'll update, of course.

We have no further questions at this time. I will now hand the call back to our speakers for any final remarks.

All I have to say, thank you, everybody, for this time. And we are looking forward, of course, to update you very, very soon. Thank you very much.

Thank you. This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you. Have a good day.