Earnings Call Transcript - PLX Q1 2022

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the Protalix First Quarter 2022 Financial and Business Results Conference Call. I want to remind you that this conference call is being recorded. I will now hand it over to our host, Alexandra Schuman of LifeSci Advisors, Investor Relations for Protalix. You may begin your conference.

Alexandra Schuman, Investor Relations

Thank you, operator, and welcome to the Protalix BioTherapeutics’ first 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 now 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 in Protalix’ filings with the United States Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Dror Bashan, President and CEO

Thank you, Alexandra, and welcome everyone to our first quarter 2022 financial results and business update call. I will begin with a review of our progress and accomplishments over the first quarter, along with our plans for the coming months. Following my remarks, Eyal will provide a more detailed review of our financial results. We will then open the line for questions, of course. Let me begin with a summary of the positive topline results announced in April from our Phase III BALANCE clinical trial of PRX-102 for the treatment of Fabry disease. We were very pleased to report that the trial successfully met its primary endpoint, and the data showed a favorable tolerability and immunogenicity profile for PRX-102. We plan to provide the final analysis of the BALANCE study in the third quarter of this year after we have completed all analysis and discussions of the collected data. At our KOL event, which also took place in April, Dr. David Warnock from the University of Alabama at Birmingham described the BALANCE study, the topline results of the BALANCE study, and our next steps. We also provided an overview of the $2 billion Fabry market, describing the need for additional therapies and the potential of PRX-102 to meet a significant unmet need of the Fabry community. The company, together with its development and collaboration partner, Chiesi Global Rare Disease, is currently planning to resubmit the biological license application (BLA) to the FDA in the second half of this year and continues to be on track to achieve that goal. It is intended that the BLA package will include positive results from the company's three Phase III clinical trials: the BALANCE, BRIDGE, and BRIGHT studies, along with our Phase I/II study conducted previously. As announced last October, the company and Chiesi participated in a Type A, End of Review meeting with the FDA, where they gained clarity on the pathway for approval. The company believes that the compelling and consistent data sets from both treatment-naive and enzyme replacement therapy-experienced patients are appropriate for inclusion in the BLA resubmission. In Europe, we and Chiesi submitted the Marketing Authorization Application (MAA) for PRX-102 to the European Medicines Agency (EMA) on February 7, 2022, which was subsequently validated by the EMA. We believe Protalix is entering a transitional period. There were impressive data from the three Phase III studies, demonstrating the potential of PRX-102 as a beneficial treatment for patients with Fabry disease. We have full in-house manufacturing capabilities, commercialization planning with our global partner Chiesi, and a clear pathway towards the anticipated approval of PRX-102. Additionally, we have a pipeline of existing early-stage programs that we will highlight as progress develops. Our strategy is to continue investing in new product candidates to support our goal of becoming a global, world-class biopharmaceutical company. Finally, our balance sheet provides us with sufficient cash runway until Q3 of 2023, enough to support our claims for resubmission potential approval in addition to continuing the development of our early-stage pipeline. We continue advancing our early-stage pipeline and will showcase progress made once available. I will now turn to Eyal to review our financial results. Eyal, please go ahead.

Eyal Rubin, CFO

Thank you, Dror, and thank you everyone for joining today's call. Let me review our first quarter 2022 financials. For the quarter ended March 31, 2022, we recorded revenues from the sale of goods of $9 million, an increase of $4.5 million or 100% compared to revenues of $4.5 million for the same period in 2021. Revenues from license and R&D services for the quarter ended March 31, 2022, were $7.1 million compared to $6.8 million for the quarter ended March 31, 2021. Revenues from license and R&D services represent revenues the company recognized in connection with its license and supply agreement with Chiesi. Cost of goods sold was $6 million for the three months ended March 31, 2022, an increase of $1.2 million or 25% versus $4.8 million for the same period last year. The increase in cost of goods sold was primarily the result of higher sales. Research and development expenses for the three months ended March 31, 2022, were $8.8 million, an increase of $1.7 million or 24% compared to $7.1 million for the same period last year. The increase is primarily the result of subcontractor costs related to the completion of the company's Phase III clinical trial of PRX-102 and maintenance of the company’s related extension study. Selling, general, and administrative expenses were $3.2 million for the three months ended March 31, 2022, an increase of $0.1 million or 3% versus $3.1 million for the same period last year. Financial expenses net were $0.4 million for the three months ended March 31, 2022, a decrease of $1.4 million or 78% compared to $1.8 million for the same period last year. The decrease resulted primarily from lower interest and debt amortization costs due to a decrease in the total principal amount of the company's outstanding notes. In the August 2021 exchange transaction, the company exchanged an aggregate principal amount of $57.92 million of the 2021 Notes for cash and an aggregate principal amount of $28.75 million of newly issued 2024 notes, effectively recouping the debt by about 50%. As of March 31, 2022, our cash, cash equivalents, and short-term bank deposits were approximately $32.9 million compared to $39 million as of December 31, 2021. We believe that our current financial position provides us with sufficient cash runway through the third quarter of 2023. I will now turn the call back to Dror.

Dror Bashan, President and CEO

Thank you, Eyal. So, thank you everyone for joining us on today's call. We look forward to the BLA submission in the U.S., hearing from the EMA on the MAA submission in Europe, and working closely with our partner Chiesi to successfully bring PRX-102 to the market. We are extremely excited about the opportunity ahead of us and look forward to bringing this important potential treatment option to adult patients with Fabry disease. Now, I will turn the call back to the operator and open the line for questions, please.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. Our first question comes from John Vandermosten with Zacks. Please proceed with your questions.

John Vandermosten, Analyst

Thank you, and good afternoon, Dror and Eyal. Hope you guys are doing well. I wanted to ask about the clock stop coming up pretty soon for the EMA submission. Does the EMA give an indication of things that they may ask prior to the clock stop, or do you pretty much have to wait and see what they want to know?

Dror Bashan, President and CEO

We are waiting for the input.

John Vandermosten, Analyst

Okay. Very good. Another thing related to the EU. Now that the UK is out of the EU, what's the process there to get access to that market? I think I looked at and I saw about 900 individuals that might benefit from PRX-102. Is there anything additional that needs to be done, or are they still kind of hanging on in terms of accepting approvals by the EMA?

Dror Bashan, President and CEO

So John, this topic, I have to verify and get back to you maybe later today or tomorrow. Okay? I think I know the answer, but I prefer to answer you accurately, okay? If it's okay.

John Vandermosten, Analyst

Okay. Yeah. No problem. I mean, there is some kind of weird thing right now, and I actually, I don't even know myself kind of help.

Dror Bashan, President and CEO

But it's a very good question, John. So, I will get back to you shortly.

John Vandermosten, Analyst

Sounds good. Is there anything in particular that stands out to you that needs to be addressed now that we've completed the BALANCE trial for the FDA submission? I assume you're gathering information and preparing for the second half. What do you think is especially important in that regard?

Dror Bashan, President and CEO

Everything is reported, if I may say. So, indeed we are analyzing and finalizing the comprehensive analysis of the BALANCE, looking at all four clinical trials back and forth, including all the safety data. We have many hundreds of years of exposure on the drug, which reflect a very good safety profile. So, it is actually, just to look, if I may say, to connect the dots and see the full picture and strengthen the totality of the data, if I may say.

John Vandermosten, Analyst

Okay. Last one for me is just a finance cash flow question. Can you explain the difference between the net loss and the cash from operations, so the cash used in operations and what was attributable to that difference?

Eyal Rubin, CFO

Obviously, the net loss includes depreciation and non-cash items such as share-based compensation. It doesn't transfer one-to-one into the cash position. As we mentioned many times in the past, our quarterly net burn rate is approximately $6 million in the quarter. And I think that if you run the numbers, that’s where we are for the past two plus years.

John Vandermosten, Analyst

Sure. Exactly. Okay, all right. Thank you so much. I appreciate it. That's all from me.

Dror Bashan, President and CEO

Thank you, John, and I will get back to you.

Operator, Operator

Thank you. There are no further questions at this time. On behalf of Protalix, this concludes today's teleconference. We appreciate your participation. You may disconnect your lines now. Enjoy the rest of your day.