Earnings Call Transcript - PLX Q2 2024

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Second Quarter 2024 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I will now turn the conference over to our host, Mr. Mike Moyer of LifeSci Advisors. You may begin your conference.

Mike Moyer, Host

Thank you, operator, and welcome to the Protalix BioTherapeutics second quarter 2024 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 financial results and corporate updates 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's filings with the U.S. Securities and Exchange Commission. I’ll now turn the call over to Mr. Bashan. Dror?

Dror Bashan, CEO

Thank you, Mike, and thank you everyone for joining our second quarter 2024 financial results and business update call. I will begin by reviewing our recent accomplishments before handing the call to Eyal, who will provide a review of our financial results. We will then, of course, open the line for questions. I will turn first to PRX-115, which is our recombinant PEGylated Uricase candidate produced through our ProCellEx platform in development for the treatment of uncontrolled gout. We recently announced encouraging initial top-line results from the first seven cohorts of the first in human Phase 1 clinical study with PRX-115. As a reminder, this study is a double-blind placebo-controlled single ascending dose study designed to evaluate safety, tolerability, pharmacokinetics, and pharmacodynamics following a single dose of PRX-115 in subjects with elevated uric acid levels. The preliminary results from the first seven cohorts demonstrated that PRX-115 exposure increased in a dose-dependent manner and PRX-115 rapidly reduced plasma uric acid concentrations to below the guideline level of 6 mg/dl. PRX-115 was also generally well-tolerated based on the initial top-line results of these seven cohorts, and the review and acceptance of the safety data by the safety monitoring committee for dose escalation allowed us to expand the Phase 1 study by adding an eighth cohort so we can analyze a higher dose of PRX-115 and its potential to result in an increased exposure time. Dosing in this eighth cohort is now complete, and the 85-day follow-up period is in progress. We expect top-line results from the full study to be available in the fourth quarter of this year. In addition to the expansion of the Phase 1 study, we've also initiated preparations for the Phase 2 trial of PRX-115 in patients with uncontrolled gout. We plan to meet and communicate with regulatory authorities in the U.S. and Europe to discuss our Phase 2 plans and the overall clinical progress with the goal of initiating the Phase 2 study in the middle of next year. Our commercial partner, Chiesi Global Rare Diseases, remains committed to the successful commercialization of Elfabrio and has a wealth of experience on their team. Chiesi has invested heavily in the rare disease space, and we are confident that they will continue to penetrate the market and build a Fabry franchise for the long term. Our next pipeline candidate is PRX-119, a PEGylated recombinant Uricase candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps or NETs. Excessive formation or accumulation of NETs can result in different pathological effects, which have been observed in various autoimmune inflammatory and fibrotic conditions. Beyond PRX-115 and PRX-119, we are focusing our R&D efforts on early-stage development assets to build our product development pipeline. We have fine-tuned our pathway going forward to focus on leveraging our ProCellEx platform and prioritizing renal rare disease indications. With regard to the therapeutic areas, our strategy moving forward is to prioritize renal rare disease as the core of Protalix's development pipeline. This is a logical focus for our company given our existing experience and the network and resources we have built through our dedicated efforts throughout the Fabry development program. For example, PRX-119 is being evaluated for NETs related renal autoimmune-associated diseases. In addition, we have identified potential key high unmet need indications on which we plan to focus our initial efforts, such as ADPKD, Alport Syndrome, FSGS, and others. Work is currently ongoing to identify assets for these and other indications. In order to expand our platform, we are evaluating novel plant-based drug delivery systems that may allow protective delivery of different modalities into specific tissues. These exploratory studies are ongoing, and we look forward to updating you on the progress of these efforts as they unfold. In addition to our ProCellEx platform, we intend to explore other modalities, such as small molecules and oligonucleotides to take advantage of highly innovative opportunities. Before turning the call to Eyal, I want to note that our strong cash position will enable the repayment of our convertible notes due next month, specifically on September 1st, and to maintain our ongoing operations, including the Phase 2 study in gout. Additionally, we expect Phase 2 operations with Chiesi to gradually continue as they anticipate future approvals and launches in additional markets. With that, it is now my pleasure to turn the call over to Eyal for a review of our financials. Eyal, please?

Eyal Rubin, CFO

Thank you, Dror, and thank you everyone for joining today's call. Let me review our second quarter 2024 financials. We recorded revenues from selling goods of $13.3 million during the three months ended June 30, 2024, a decrease of $1.8 million or 12% compared to revenues of $15.1 million for the three months ended June 30, 2023. The decrease resulted primarily from a decrease of $10 million in sales to Chiesi, partially offset by an increase of $4.7 million in sales to Brazil and an increase of $3.5 million in sales to Pfizer. Sales to Chiesi in the three months ended June 30, 2023, were in connection with the commercial launch and inventory buildup of Elfabrio after its approval for marketing in the United States and the European Union. The increases in sales to Brazil and Pfizer during the three months ended June 30, 2024, resulted primarily from the timing of delivery. We recorded revenues from license and R&D services of $0.2 million for the three months ended June 30, 2024, a decrease of $19.8 million or 99% compared to revenues of $20 million for the three months ended June 30, 2023. Revenues from license and R&D services are comprised primarily of revenues the company recognized in connection with the Chiesi agreement. The revenues from license and R&D services for the three months ended June 30, 2023, were the result of the $20 million regulatory milestone payments from Chiesi in connection with the FDA approval of Elfabrio granted during that period. Cost of goods sold was $9.5 million for the three months ended June 30, 2024, an increase of $3.4 million or 56% from cost of goods sold of $6.1 million for the three months ended June 30, 2023. The increase in cost of goods sold was primarily the result of increased sales to Pfizer and Brazil. For the three months ended June 30, 2024, the company’s total research and development expenses were approximately $3 million, comprised of approximately $0.5 million in subcontractor-related expenses, approximately $1.6 million in salary-related expenses, approximately $0.2 million in material-related expenses, and approximately $0.7 million in other expenses. For the three months ended June 30, 2023, the company total research and development expenses were approximately $4.5 million, comprised of approximately $1.7 million in subcontractor-related expenses, approximately $2 million in salary-related expenses, approximately $0.1 million in material-related expenses, and approximately $0.7 million in other expenses. The total decrease in research and development expenses for the three months ended June 30, 2024, was $1.5 million or 33% compared to the three months ended June 30, 2023. The decrease in research and development expenses resulted primarily from the completion of the company's Fabry clinical program and the regulatory process related to the review of Elfabrio's BLA in the U.S. and the MAA in the European Union by the applicable regulatory agencies. Selling, general, and administrative expenses were $3.5 million for the three months ended June 30, 2024, a decrease of $0.5 million or 13% compared to $4 million for the three months ended June 30, 2023. The decrease resulted primarily from a decrease of $0.5 million in salary and related expenses. Financial income net were $0.2 million for the three months ended June 30, 2024, compared to financial expenses net of $0.8 million for the three months ended June 30, 2023. This difference resulted primarily from higher interest income on bank deposits and lower note interest expenses due to the notes conversion executed in 2023. In the three months ended June 30, 2024, we recorded a tax benefit of approximately $0.1 million compared to income taxes of $0.3 million for the three months ended June 30, 2023. Income taxes recorded are primarily the result of the provision for current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017. Cash, cash equivalents, and short-term bank deposits were approximately $45 million at June 30, 2024. As Dror mentioned, we believe our cash position is sufficient to enable the repayment of our convertible notes due on September 1, 2024, and for our ongoing operations. The net loss for the three months ended June 30, 2024 was approximately $2.2 million or $0.03 per share basic and diluted, compared to a net income of $19.3 million or $0.29 per share basic and $0.21 per share diluted for the same period in 2023. Since the end of the quarter ended June 30, 2024, the company collected approximately $4.6 million in total from sales to Pfizer and approximately $2.3 million from sales to Brazil. I will now turn the call back to you, Dror.

Dror Bashan, CEO

Thanks, Eyal. To conclude, I would like to express my confidence in Protalix and our enhanced strategy to enable the next phase of pipeline development. We have three streams of revenues: sales in Brazil, to Pfizer, and to Chiesi, and we expect our revenue to continue and grow. We are pleased with the interim results from our PRX-115 clinical study, and we are eager to report the top-line results soon. We are continuing to leverage our platform and expertise to develop a pipeline of early-stage assets with the potential to address rare renal diseases, and we look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stockholders. Thank you very much. I will return now to the operator to open the call for questions.

Operator, Operator

Thank you. Our first question comes from John Vandermosten with Zacks. Please go ahead with your questions.

John Vandermosten, Analyst

Great, thank you, and hello Dror and Eyal. How has uptake been for Elfabrio by payers, and can you give us a sense of how negotiations have been going there to make it available and to get it on formularies? Can you give us a sense of that, and have you or has Chiesi been able to sign any of the big payers to get it and make it available?

Dror Bashan, CEO

So John, I think we have discussed it in the past. Chiesi is a private company, so all I can say from what we know is that they are doing well, and I don't know payer by payer, but as far as we see their numbers, they are doing well and they claim to penetrate in a more significant way going forward, of course, both in the U.S. and also in other markets in Europe and outside of Europe. So actually, we are very pleased. We are now about a year, give or take, from the launch in the U.S. and about seven months, I believe, since the drug is available in Germany, for example, which is one of the biggest markets outside the U.S. And the outcomes are good, and they do very well. We expect this to continue.

John Vandermosten, Analyst

Okay. And another thing I'm hoping you can help us with is to estimate the sales numbers. I know that it's pretty lumpy still. We're probably still inventory building and getting a sense of what the sales would need to be. But do you have an idea when you can provide some guidance in terms of what the sales to Chiesi might be?

Dror Bashan, CEO

Not at the moment. It depends on shipments. Right now, as you rightly said, they order batches of the drug product to their stock. This is also the agreement. Since we are now in the first year, and I assume in the next 12 months it's more or less the same because they're also penetrating to Europe and they had stocked before. It will take a while until we will have, I would say, ongoing basis forecasts. Right now, we are trying to be cautious. It's not that we are trying to hide something, god forbid. It could be that one batch is not stamped on the 25th of November or the end of the quarter and it slips to the next quarter because of some QA concern; only god knows what. So we don't want to say we will hit X million dollars, then it would be minus $5 million or minus $7 million because of a batch to Brazil or Chiesi. So we think we need a bit more time. But again, I want to emphasize we are pleased with what Chiesi is doing. I'm not saying this just to tick the box. We are very much pleased. They are focused, they put a lot of effort in, and we see good results. We anticipate that this will continue gradually in the next years ahead of us.

John Vandermosten, Analyst

Do you have ongoing meetings with the team where they update you on how things are progressing, or is it more of a situation where you’re not as informed?

Dror Bashan, CEO

Yes. Not only myself, but they also sit with our team on multiple disciplines, medical operations, etc. They also update Management and the Board of Protalix. So just to make it clear, the relationship is very good. Whenever we ask, we don't do it every other week, of course, but whenever we ask for updates or discussions with our Board or Management, Chiesi and Giacomo Chiesi are happy to do so.

John Vandermosten, Analyst

Great. You had that KOL event last year, which was quite beneficial and they presented. Perhaps we can do that again. Are there any sales milestones you expect in the next year? I know you've shared some details, but could there be one in the next 12 months, or is it likely further out based on your current perspective?

Dror Bashan, CEO

It depends on, of course, on the pace of the sales. It's difficult for me to tell you today.

Operator, Operator

We do apologize for the technical difficulty. It does seem that we have... Cut out, I'm back.

John Vandermosten, Analyst

Great. Well, I can ask another one while he's doing that. Eyal, are there any conferences that you're targeting for PRX-115 to report the Phase 1 data coming up this fall? I think you said that it will be ready soon, and I was wondering if there's a certain conference that you're targeting?

Eyal Rubin, CFO

No. We just participated in one in early June, and the full set of data from the eight cohorts, from all eight cohorts, will be released sometime around early November. So until then, obviously, we're going to work behind the scenes to finalize everything, meet with the agencies as Dror mentioned, and get prepared for the Phase 2. I guess that the next fall is going to probably be the next conference that we will be joining. By the way, we do plan to attend the ACR.

John Vandermosten, Analyst

Okay. Thank you, Eyal.

Eyal Rubin, CFO

Thanks, John.

Operator, Operator

Thank you. We do have Dror back again.

Dror Bashan, CEO

Yes, I apologize for being cut off.

Operator, Operator

Thank you. Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Please proceed with your questions.

Unidentified Analyst, Analyst

Good morning. This is Dan filling in for Ram. Thanks for taking our questions. How does Protalix plan to position PRX-115? How does PRX-115 compare to SEL-212 from Sobi? We would like to ask some follow-up questions.

Dror Bashan, CEO

So we are now, as we mentioned, finalizing the Phase 2. The Phase 2 will involve multiple doses, hopefully. The Phase 2 will mirror what we see in Phase 1. I think we have a very interesting alternative to both enzymes. But you know we hope this will fly; this is the intent and the goal. I would say again, and I said this at the investment event, if we would have seen outcomes that are, let's say, good or fit only once in two weeks, infusion, we probably wouldn't continue with the program. This is not the intent.

Unidentified Analyst, Analyst

Awesome, that makes sense. Could you elucidate on some of your early-stage R&D efforts and which programs you find promising? Do you expect to monetize or partner the oral anti-TNF candidate or has that program been suspended?

Dror Bashan, CEO

No, this program has been dropped. We are evaluating, I would say, more than half a dozen programs. They are very early stage right now. Once we sign or bring them in with validated, I would say, preclinical data, we will share, of course. Until then we don't want to seem like we are dreaming about something. We operate, we are looking at very diligently any opportunity. We believe we have the right resources to do so, and we hope to update in the next, I don't know, quarter or two on the first or first maybe even two programs that will get into the pipeline.

Unidentified Analyst, Analyst

Thanks. That's really exciting. We look forward to hearing about it. Assuming full repayment of the convertible notes due next month, does the company plan to repay these or replace the notes with new notes with a different maturity date, and what position do you guys have related to debt or future capital structure?

Dror Bashan, CEO

So currently, we plan to pay the notes by September 1st. We do not intend to refinance or take on new debt. As both Eyal and I mentioned, we have sufficient resources to maintain our ongoing operations, including the Phase 2 of gout. We have three streams of revenues which we expect to grow in the future. So this is the situation right now. I would summarize that I would add that certainly, Protalix moved from a financial point of view, kind of a danger zone to a much more stabilized financial position. It's always good to have more money, but we haven't raised even one dime in the last, I believe, five or six quarters. We will do it cautiously.

Unidentified Analyst, Analyst

Thank you so much for answering my questions.

Dror Bashan, CEO

Thank you.

Operator, Operator

Thank you. And there are no further questions at this time. I would like to turn the floor back to Dror for closing remarks.

Dror Bashan, CEO

So thanks everybody again. Thank you for the time and patience. We look forward to meeting with you on our next quarter, and hopefully, we'll have good news to report. Thank you very much.

Eyal Rubin, CFO

Thank you.

Operator, Operator

And this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.