Earnings Call Transcript - PLX Q3 2020

Operator, Operator

Greetings and welcome to the Protalix Biopharmaceuticals Third Quarter 2020 Financial Results and Business Update. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Investor Relations. Chuck Padala. Thank you, Chuck, you may begin.

Chuck Padala, Investor Relations

Thank you, Paul. Welcome to the Protalix BioTherapeutics, Third Quarter 2020 Finance Results and Business Update Conference Call. With me today are Dror Bashan, Protalix's President and CEO, as well as Eyal Rubin, Protalix's CFO. A press release announcing results and the update was issued yesterday morning and it's 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 the 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 in our filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan.

Dror Bashan, President and CEO

Thank you, Chuck, and welcome everyone to the company's third quarter of 2020 financial results and business update. Before we start, I would like to thank everyone for making themselves available for today's call, as we had to reschedule due to some technical difficulties with our conference call provider hosting the call yesterday. So we apologize for the inconvenience. And as always, we appreciate your time and support of Protalix. During this call, I will provide an overview on the progress of our clinical program and key corporate developments. Following my remarks, our Chief Financial Officer, Mr. Eyal Rubin, will review the company's financial results, before we open the lines for questions. We have accomplished a lot over the last several months. Importantly, we have announced that the FDA accepted the BLA filing of PRX-102 for Fabry disease and set a cutoff date of January 27, 2021. The last patient completed treatment in our PHASE-III BRIGHT study, and we expect to report top line data from this study in the first quarter of 2021. We, together with our development and commercialization partner Chiesi Global Rare Diseases, launched an expanded access program in the US, which will help us to continue indeed, our clinical data set. Finally, we regained New York Stock Exchange compliance in early September and announced an entry into a $30 million in-the-market equity offering program with Bank of America Securities in October. Clearly, it was a highly productive quarter in our commitment to advancing our pipeline programs and achieving progress for the treatment of the underserved genetic disorder, such as Fabry disease. Now, let me review our recent highlights in more detail. Our lead fighting candidate is the pegunigalsidase alfa, or PRX-102, which is a therapeutic protein candidate for the treatment of Fabry disease. In May 2020, Chiesi Global Rare Diseases, with our cooperation, submitted the BLA to the US FDA under an accelerated approval pathway. In August of this year, we announced that the FDA has accepted the BLA and granted a priority-review designation. The FDA also indicated in the BLA filing communication that it does not currently plan to hold an advisory committee meeting to discuss the application. The FDA set the PDUFA action date of January 27, 2021, and the FDA has advised that as part of the review process, it will have to inspect our Israeli manufacturing facility and that of our third-party partner in Europe who performs the finishing process of pegunigalsidase. Due to the COVID-19 pandemic and related FDA travel restrictions, the FDA has advised that it may be unable to conduct these inspections prior to the PDUFA date. Therefore, we, together with Chiesi, are in active dialogue with the FDA and have submitted a request for a Type A meeting to seek resolution on the issue of the pre-license inspection of these two manufacturing facilities, both in Israel and France. We anticipate an FDA response to this request in the first week of November 2020. In August 2020, we, together with Chiesi, announced the completion of the treatment period of the Phase III BRIGHT study. We expect to release the results from the BRIGHT study in the first quarter of 2021. The BRIGHT study is a 12-month, open-label switch-over study, designed to assess the safety and efficacy and pharmacokinetics of PRX-102, 2 milligrams per kilogram, administered by intravenous infusion every four weeks for 52 weeks in patients with Fabry disease, previously treated with enzyme replacement therapy such as Fabrazyme and Replagal. The BRIGHT study is our second Phase III trial for PRX-102 in Fabry patients, and follows the positive results of the BRIDGE trial that we announced earlier in May of this year. We anticipate results from an interim analysis of our main study PRX-102 Phase III head-to-head clinical study, called the BALANCE study, in the first half of 2021. I'm grateful for the collaboration between our teams, as well as for all of the patients and clinicians who have been dedicated to this development program, despite the challenges presented by COVID-19. We are pleased to announce that we received notification from the New York Stock Exchange in early September that Protalix has regained compliance with all of the continued listing standards set forth in the New York Stock Exchange American Company guide. On September 4, Protalix was removed from the list of non-compliant securities on the New York Stock Exchange American website. In early October, Protalix and Chiesi announced the launch of an expanded access program (EAP) in the United States for PRX-102. The EAP allows access to Pegunigalsidase alfa for a broader group of physicians and patients beyond those in our Phase III program. This EAP is open to patients with a clinical diagnosis of Fabry disease, who, in the opinion of their treating physicians, have no comparable or satisfactory alternative treatment options with currently available FDA-approved therapies for Fabry disease. We are thrilled for this opportunity to provide access to this important therapy option for as many eligible patients as possible. More details regarding the program can be viewed on the clinicaltrials.gov website. Finally, I would like to share that we continue to focus on our balance sheet and capital structure to ensure we have the necessary resources to prepare for a potential commercial launch in early 2021 and to advance our other development programs. In early October, we entered into at-the-market equity offering agreement with Bank of America Securities as an agent; this agreement enables us to sell from time to time up to an aggregate of $30 million equities of Bank of America at terms and conditions set forth in this agreement. This financing arrangement provides the company with greater capital raising ability to execute our commercialization and development strategies. Before I turn the call over to Eyal for an update on the financials, I would like once again to thank our employees for their professionalism, collaboration, and tireless efforts during these challenging times in 2020. The pandemic continues to impact our business and lives in Israel and globally, and we know it is not easy to stay focused and positive. We are continuing to operate very well as a team, and we are very much encouraged about the exciting period ahead of us. With that, we now turn the call over to Eyal for an overview of our financials. Eyal, please.

Eyal Rubin, CFO

Thank you, Dror. And thank you everyone again for joining today's call despite the inconvenience of the rescheduling. Let me review our third quarter 2020 financials. For the three months ended September 30, 2020, we recorded revenues from selling goods of $3.3 million compared to revenues of $5.1 million for the same period of 2019. The decrease is primarily due to the timing difference in sales to Brazil in 2020 compared to 2019. In 2019, the shipments were scheduled for the third quarter; this year they are scheduled for the fourth quarter. This timing difference was partially offset by an increase in sales to Pfizer. Revenue from licensed and R&D services for the three months ended September 30, 2020, was $7.5 million compared to $9.1 million for the same period of 2019. Revenue from licensed and R&D services is primarily comprised of revenues we recognize in connection with our license and supply agreements with Chiesi. The decrease is primarily due to the completion of two out of the three Phase III clinical trials, as well as lower costs related to our BALANCE study, which led to a lower revenue that we recorded based on U.S. GAAP. Cost of goods sold for the three months ended September 30, 2020, was $2.9 million compared to $3.2 million for the same period in 2019. The decrease is primarily due to a change in our cost structure, as well as lower royalties due to the Israel Innovation Authority. Research and development expenses for the three months ended September 30, 2020, were $7.7 million compared to $10 million for the same period of 2019. The decrease in expenses is similar to the decrease in R&D and licensed revenues, which is due to the completion of two out of three Phase III clinical trials of PRX-102, and reduced costs related to the BALANCE study, as well as a decrease in costs related to the manufacturing of our drug in development, as some of those manufactured drug products and related costs have been recorded as inventory. Selling and general administrative expenses were $2.8 million for the three months ended September 30, compared to $2.6 million for the same period in 2019. Financial net expenses were $1.9 million for the three months ended September 30, 2020, compared to $2 million for the same period in 2019. As of September 30, 2020, our cash equivalents and short-term bank deposits were approximately $41.3 million compared to approximately $18 million at December 31, 2019. I will now turn the call back to Dror.

Dror Bashan, President and CEO

Thank you, Eyal. As many of you heard, we had a very productive 2020 so far. We are looking forward to another productive quarter. We are also anticipating another productive year in 2021. Clearly the next two to three quarters are critical for Protalix, and we are very optimistic ahead of our potentially positive results of the different studies during 2021. And of course, improving our pipeline and prioritizing our development going forward based on our unique technology. Thank you very much and stay well.

Operator, Operator

Thank you, we will now be conducting a question and answer session. Our first question comes from Ram Selvaraju from H.C. Wainwright. Please proceed with your question.

Boobalan Pachaiyappan, Analyst

Hi, this is Boobalan dialing in for Ram Selvaraju. Few questions, first to start off, approximately how many US and European patients were diagnosed with Fabry disease during 2019? And what percentage of these patients are treated with standard-of-care, Fabrazyme?

Dror Bashan, President and CEO

I think the crucial question is how many patients there are. I believe there are a few thousand on each continent, and many are undiagnosed. I estimate there are around 3,000 to 4,000 patients on each continent currently, with likely a larger number not receiving treatment at this time. Could you please repeat the second question regarding the existing therapies?

Boobalan Pachaiyappan, Analyst

Yes, so what percentage of these patients are treated with Fabrazyme?

Dror Bashan, President and CEO

Some of them, I believe, hold the majority of the market; they have close to 90% in the U.S. The rest is a mix of other treatments. There is another enzyme replacement therapy developed by Shire called Replagal, which is not approved in the U.S.; however, it is approved everywhere outside of the U.S. So that would size the U.S. Fabrazyme and Replagal market share; I don't know, about 35% to 40% each, with Galafold holding something like 20%. And we can see more details in the reports later this year. As you can understand, Fabrazyme is the gold standard, if I may say, as it is approved both in the U.S. and outside of the U.S.

Boobalan Pachaiyappan, Analyst

Okay, great. With this secure expanded access program in the United States for PRX-102, how many patients are expected to be treated overall? Do you plan to use this data with your ongoing Phase III for your future marketing activities?

Dror Bashan, President and CEO

The expanded access program is not exactly part of the Phase III; it's actually an opportunity for patients who do not tolerate or are not satisfied with the current treatment to move into our product. It's actually separate from the ongoing BALANCE study. How many patients, I don't know. We just started about a month ago, and I hope there will be as many patients as possible, but any number would be misleading.

Boobalan Pachaiyappan, Analyst

And then moving on, assuming PRX-102 shows positive results during early 2021, what factors could potentially drive the market penetration during the early years, and what factors might slow down the market penetration?

Dror Bashan, President and CEO

I think first securing the program indication; we expect it to be for all Fabry patients. As with Fabrazyme, our drug would need to have initiation of periodic studies for potential approval for children. I think that the outcomes of our Phase I/II of the BRIDGE study, along with hopefully positive outcomes of our once-in-four-weeks regimen, would represent a significant improvement for the relevant patients, which would be a great win for our launch in Q1 of 2021. On the positive side, we are supposed to publish results of an interim analysis of our BALANCE study, which means all patients up to 12 months. This is for the European authorities and is expected to be positive. This is clearly a strong sign for our launch in the U.S. We will then proceed with submission to the European authorities. If it is not positive, it may hinder the launch. However, so far the outcomes from the Phase I/II studies are encouraging, showing decreases in GB3 accumulation in tissues, with positive results from the switch from Replagal to our drug and hopefully good results from our new regimen would strongly support the launch of this product.

Boobalan Pachaiyappan, Analyst

Great. And I'm glad you mentioned that. And last one for me. Do you plan to ink additional collaboration data on your platform over the next six to twelve months?

Dror Bashan, President and CEO

We are working on that. We are discussing with multiple parties, both licensing out of our platform and also licensing various technologies or ideas that can also be implemented with our technology. So I hope within the next six to twelve months, we will really be able to provide updates and strengthen our pipeline, which is very important.

Boobalan Pachaiyappan, Analyst

Okay, all right. That's it from me. Thanks so much.

Operator, Operator

At this time, there are no further questions. I would like to turn the floor back over management for any closing comments.

Dror Bashan, President and CEO

This is Dror speaking, and I wish everybody to continue and be well. Thank you for your time, and I encourage everybody who has any questions or queries to reach out to us directly via emails or phone numbers, etc. We will be happy to respond. Thank you very much again.

Operator, Operator

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