Earnings Call Transcript - PLX Q1 2021

Operator, Operator

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics First Quarter 2021 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. Chuck Padala of LifeSci Advisors Investor Relations. Chuck, you may now begin the presentation.

Charles Padala, Investor Relations

Thank you, Rob. Welcome, everyone, to the Protalix BioTherapeutics first quarter 2021 financial results and business update conference call. With me today are Mr. Dror Bashan, President and CEO of Protalix; and Mr. Eyal Rubin, Chief Financial Officer. The 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 the 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 the statements made. Factors that could cause actual results to differ are described in the disclaimer and in the Protalix filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Dror Bashan, President and CEO

Thank you, Chuck, and welcome, everyone, to the company's first quarter 2021 financial results and business update. During the call today, I will review the progress of our key clinical programs and update on the roadmap of our upcoming strategic milestones. Following my remarks, our Chief Financial Officer, Eyal Rubin, will review the company's financial results before we open the lines for questions. We were obviously disappointed with the recent receipt of the complete response letter from the FDA last month, but we are encouraged that the FDA did not report any concerns relating to the safety and efficacy of PRX-102. We are working closely with the agency and anticipate the required inspection and subsequent assessment will be completed once the agency's travel restrictions are lifted. I will provide more detailed comments on the CRL shortly. We are continuing to advance our earlier stage pipeline. Additionally, we strengthened our balance sheet during the quarter with a public offering generating $40 million in gross proceeds and feel confident about our ability to continue to fund our clinical programs as we prepare for a potential commercial launch of PRX-102. Now let me provide more details about our quarter. In late April, we and our development and commercialization partner, Chiesi, received the CRL from the U.S. FDA for PRX-102 for the treatment for adult patients with Fabry disease. In the CRL, the FDA noted the requirement to inspect Protalix's manufacturing facility in Karmiel in Israel. And that due to travel restrictions as a result of the COVID-19 pandemic, it was unable to conduct the inspection during the review cycle. The FDA explained that it will continue to monitor the public health situation as well as travel restrictions and is actively working to schedule outstanding inspections. For our third-party fill and finish facility for PRX-102 in Europe, due to the COVID-19, the FDA reviewed records under Section 704(a)(4) of the Federal Food, Drug, and Cosmetic Act in Europe pre-relicensing inspection. The FDA stated that it will communicate any remaining issues related to the facility in order to seek prompt resolution for any pending items. Our third-party fill and finish facility received the FDA comments just a few days ago and shared them with us. Together, we are reviewing these comments closely with quality and regulatory consultants. The last significant point was highlighted by the FDA in the letter that Fabrazyme was recently converted to a full approval. This new development will need to be addressed in the context of any potential resubmission seeking accelerated approval of PRX-102. Once again, while we are disappointed to receive the CRL, we intend to work collaboratively with the FDA on resolving issues. These issues are moving forward on the next steps. We are working on scheduling a Type A end-of-review meeting with the FDA, which we plan to request from the FDA by the end of July and to take place approximately 30 days from our request. Our objective for the meeting is to better understand the issues raised in the CRL and work with the FDA on a plan to resolve these issues. We are confident in the overall clinical profile we have assembled through our development program, and we believe PRX-102 will bring important value to the Fabry patients with unmet clinical needs. We intend to update you on new developments as soon as feasible. During the quarter, we continued to build our clinical profile for PRX-102. We released positive top line results from the Phase III BRIGHT study, which was designed to evaluate the safety and efficacy and pharmacokinetics of PRX-102 treatment, 2 mg/kg every 4 weeks in up to 30 patients with Fabry disease previously treated with commercially available enzyme replacement therapy. Top line results indicate that 2 mg/kg of PRX-102 administered by intravenous infusion every 4 weeks was found to be well tolerated among treated patients, and stable clinical presentation was maintained in adult Fabry patients. Our results demonstrate the potential for a more convenient therapy option for patients without compromising safety and efficacy. We expect to receive full interim results from our Phase III BALANCE trial in the coming weeks. The BALANCE trial is a double-blind head-to-head 24-month trial evaluating the safety and efficacy of pegunigalsidase alfa, 1 mg/kg dosed every 2 weeks in Fabry patients, with declining renal functions versus Fabrazyme. The incremental results are anticipated to serve as our basis for the European EMA filing together with additional data from the various clinical trials. Subject to the results of the BALANCE trial, we could potentially have a commercial launch in Europe in the first half of 2023. We announced in February an exclusive partnership with SarcoMed USA for the worldwide development and commercialization of alidornase alfa, or PRX-110, for the use in the treatment of any human respiratory disease or condition, including, but not limited to, sarcoidosis, pulmonary fibrosis, and other related diseases via inhaled delivery. Turning to our balance sheet. We ended the quarter with $70.4 million in cash, which includes the proceeds from a public offering of our common stock in February, and Eyal will provide more details around our financials in a moment. We feel confident about our financial position and our ability to fund our development plans for the year. Before I turn to Eyal, I would like to recognize again what a challenging time it has been for all of us and emphasize to our team how proud I am of their focus and resilience. This has been a challenging week for our local employees in Israel, and we wish for imminent peace and stability for all. I will now turn it to Eyal for a review of our financials. Eyal, please?

Eyal Rubin, Chief Financial Officer

For the quarter ended March 31, 2021, we recorded revenue from the sale of goods of $4.5 million compared to revenue of $5 million for the same period. The cost of goods sold was $6.8 million compared to $16.6 million for the quarter ended March 31, 2020. Financial net expenses were $1.8 million for the 3 months ended March 31, 2021, compared to $3 million for the 3 months ended March 31, 2020. The decrease was primarily due to a decrease in expenses related to the outstanding convertible notes equal to $1.3 million. As of March 31, 2021, as Dror mentioned, our cash, cash equivalents, and short-term bank deposits were approximately $70.4 million. During the first quarter of 2021, we raised gross proceeds of $8.8 million from the sale of common stock under our ATM program and gross proceeds of $40.2 million via public offering of our own stock. Net loss for the 3 months ended March 31, 2021, was $5.5 million or $0.13 per share, basic and diluted, compared to a net gain of $1.7 million or $0.10 per share, basic and diluted, for the same period of 2020. I'll now turn the call back to you, Dror.

Dror Bashan, President and CEO

Thank you, Eyal. We look forward to working closely with the FDA on the pathway forward for PRX-102 for adult Fabry patients to be able to bring this important drug to commercialization. We're excited about continuing to advance our earlier-stage pipeline and build the company for long-term success. We look forward to updating you as the year progresses. And let's now take your questions, please.

Operator, Operator

Our first question is from the line of Ram Selvaraju with H.C. Wainwright.

Boobalan Pachaiyappan, Analyst

This is Boobalan dialing in for Ram Selvaraju. So just to clarify, should the FDA have conducted the site inspection on time, PRX-102 would have been approved, correct?

Dror Bashan, President and CEO

As we publicly shared, the Complete Response Letter included two facilities: one being the drug substance facility in Israel and the other the fill-finish facility. Additionally, Fabrazyme has been fully approved in the U.S. All these topics need to be discussed with the FDA and will be addressed in the upcoming Type A meeting as planned. We will then receive clarification and direction moving forward.

Boobalan Pachaiyappan, Analyst

Understood. So are you aware of any cases where the FDA has waived site inspection due to their inability to conduct site reviews on time?

Dror Bashan, President and CEO

Yes. It is possible to conduct a virtual inspection, or perhaps consider an alternative like a record review inspection. However, the decision ultimately lies with the FDA. We will present all these alternatives to the FDA and hope to reach an agreed-upon solution.

Boobalan Pachaiyappan, Analyst

Okay. So you noted in your press release that you will request from the FDA a Type A meeting sometime by the end of July. Then assuming a Class I resubmission, do you have any thoughts on when the FDA will conduct a site inspection at your site as well as the third-party site?

Dror Bashan, President and CEO

We don't have control over those schedules. What we meant is that by regulation, we have 90 days to request a Type A meeting. If the FDA agrees to the request, the meeting occurs within 30 days. For instance, if the Type A meeting takes place in July, the outcome will depend on the discussions during that meeting.

Boobalan Pachaiyappan, Analyst

Understood. So switching gears a little bit. Fabrazyme was recently converted to full approval. So what impact would this have on PRX-102 in addition to a delay in your review process?

Dror Bashan, President and CEO

So this is what we plan to discuss with the agency. We hope there will not be a delay because we received the CRL. This is clear. Following this, we will discuss exactly what will be addressed at the Type A meeting in order to resubmit as soon as possible. Resubmission after a CRL involves a 6-month review process. The timing of the resubmission depends on what will be discussed and decided at this meeting.

Boobalan Pachaiyappan, Analyst

So one final question from me. How did Chiesi react to the CRL? And what kind of impact will the FDA inspection site delay have on your commercialization activity?

Dror Bashan, President and CEO

So first, Chiesi is clearly disappointed with the CRL. I would like to mention that Chiesi actually trusts very much in the product and the potential of PRX-102 to be a good alternative for the Fabry patient community going forward, both in the U.S. and the EU. And we worked closely ahead of preparing the Type A meeting and the EU submission, which is unchanged from a timetable point of view.

Operator, Operator

Our next question comes from the line of John Vandermosten with Zacks Investment Research.

John Vandermosten, Analyst

Let me start off with another question on, I guess, the order of events related to the Type A meeting and the inspection. Are those independent of each other? Or is it your understanding that you must hold the Type A meeting prior to an inspection taking place?

Dror Bashan, President and CEO

I believe they are independent of each other. The Type A meeting has its own regulatory schedule. After we received the CRL, we have 90 days to request a Type A meeting. Once we make that request, we have 30 days to hold the meeting. I would prefer to do it sooner rather than later, but we need to be fully prepared first.

John Vandermosten, Analyst

Okay. And then about the French facility, I think you said that there were some issues to resolve, and I guess I'm just trying to understand the bottleneck or order of events. It seems like the inspection is the kind of the main thing and then just minor issues at the French facility. Is that your understanding at this point?

Dror Bashan, President and CEO

So we are not commenting on the specifics here. And we are currently working together with our quality and regulatory consultant on the path forward to resolve these issues with the FDA.

John Vandermosten, Analyst

Okay. And again, I know it's early and you haven't had your Type A meeting, but is there any sense that some of the data from the BRIGHT, BALANCE, or BRIDGE studies might be used as part of a resubmission to the FDA?

Dror Bashan, President and CEO

Chiesi and Protalix are currently preparing the necessary data. The Biologics License Application submitted a year ago included the Phase I/II and safety data from other studies, but it did not include efficacy data from those studies. We will collaborate with the two parties. Chiesi and Protalix are working diligently and closely together, updating the briefing book in preparation for the upcoming Type A meeting.

Operator, Operator

Our next question is from John Hudson, a private investor.

John Hudson, Investor

My question is, do you anticipate any delays with the FDA relative to the Palestinian attacks on Israel?

Dror Bashan, President and CEO

I do not believe so. There are currently security tensions, but I hope it will be resolved soon. While I can't guarantee a quick resolution, I believe the situation will stabilize and things will return to a sense of normalcy.

John Hudson, Investor

I certainly hope so too.

Dror Bashan, President and CEO

Yes, nothing has changed. It's very unfortunate what's happening right now. We hope for quieter times very soon so things can return to normal. Usually, there are about 10 to 16 flights a day from Tel Aviv to New York or vice versa, so that’s not the issue.

Operator, Operator

There are no additional questions at this time. I'll hand the floor back to management for further remarks.

Dror Bashan, President and CEO

So first, thank you. I wish to thank everybody for their time. We will keep updating you once we have relevant data, of course. And I wish everybody a very nice weekend. And I hope for quieter days in Israel very soon. Thank you very much.

Operator, Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.