Earnings Call Transcript - PYPD Q4 2023

Operator, Operator

Good morning and welcome to the PolyPid Fourth Quarter and Full Year 2023 Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this call is being recorded. And I would now like to introduce your host for today's conference, Brian Ritchie from LifeSci Advisors. Mr. Ritchie, you may begin.

Brian Ritchie, Host

Thank you all for participating in PolyPid's fourth quarter and full year 2023 earnings conference call. Joining me on the call today will be Frank Laukien, Chief Executive Officer of PolyPid; Gerald Herman, PolyPid's Chief Financial Officer; and Gerald Herman, Chief Operating Officer of PolyPid. Earlier today, PolyPid released financial results for the three and twelve months ended December 31, 2023. A copy of the press release is available in the Investors section on the company's website, www.polypid.com. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. For example, management is making forward-looking statements when it discusses the expected timing for recruitment and top line results from the SHIELD II trial and of the unblinded interim analysis, the planned new drug application submission for D-PLEX100, the potential impacts and uses for OncoPLEX and the PLEX platform, the company's expected cash runway and the potential to receive additional funds if warrants are exercised. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks described from time to time in our SEC filings. Our results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Form 20-F, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. PolyPid disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, February 14, 2024. With the completion of these prepared remarks, it is my pleasure to turn the call over to Dikla Czaczkes Akselbrad, CEO of PolyPid. Dikla?

Dikla Czaczkes Akselbrad, CEO

Thank you, Brian. On behalf of our team at PolyPid, I would like to welcome everyone, including our new shareholders, to our fourth quarter and full year 2023 earnings call. We are thrilled with the significant progress recently achieved throughout our business. As we expected, enrollment in our ongoing SHIELD II pivotal trial for D-PLEX100 for the prevention of dominant colorectal surgical site infection has begun to ramp up. We have also generated some new highly compelling preclinical data with OncoPLEX that demonstrates its potential in oncology. Moreover, to support our robust clinical development efforts, we successfully completed a $16 million financing that included participation from multiple new U.S. life sciences-focused investors. I will discuss all of this in greater detail shortly, but let's begin with the status of SHIELD II. The study has now enrolled more than 100 subjects, and approximately 40 centers are currently open. As a reminder, we intend to conduct an unblinded interim analysis once approximately 400 patients, of a planned total of 600 subjects, complete the 30-day follow-up, which is expected to occur in mid-2024. Top-line results are anticipated in the second half of this year. With respect to the expected recruitment rate, as we said on our last call, once the site is fully up and running— which takes several weeks following its formal opening— we anticipate approximately 1.5 patients being recruited into the trial per center per month, and we expect to have overall approximately 60 centers opened and recruiting patients. Moving on, to reiterate what we have said previously, we have a clear regulatory pathway for the potential NDA submission for D-PLEX100 in the U.S. Last year, the FDA acknowledged that the SHIELD I result may provide supportive evidence of the safety and efficacy of D-PLEX100 in patients with large surgical incision and also confirmed that if successful, SHIELD II is sufficient to support a potential NDA submission. We continue to strongly believe that SHIELD II is a derisked stage for each trial, giving the more focused patient population in which we have already generated highly positive data in SHIELD I and the fact that it will not be conducted within the tight COVID-related restrictions that were in place during the pandemic and throughout the duration of SHIELD I. We are also leveraging key learnings from SHIELD I related to the sites involved in the study. While we are targeting approximately 60 centers for SHIELD II—around the same number as SHIELD I—we now have firm knowledge of the best-performing sites from SHIELD I in terms of recruitment, patient monitoring, and good clinical practice. We believe this to be essential in the execution of SHIELD II. We have also enhanced our clinical operations team, another key step towards supporting the successful study. Moving on, I'm excited to report today some new preclinical data generated with our OncoPLEX product candidate. We have recently demonstrated the ability of OncoPLEX to be injected intratumorally while having an effective and prolonged antitumor impact. A single intratumoral injection of OncoPLEX significantly reduced tumor growth and increased survival in two well-established and commonly used tumor animal models: murine melanoma and murine colon carcinoma. OncoPLEX has now shown a complete tumor response in all models it has been tested and across the various therapeutic approaches. Whether as a neoadjuvant via intratumoral injection or as an adjuvant via post-resection application in the tumor bed, OncoPLEX has been tested in six different models and applications, all with highly effective results. The effect of OncoPLEX is attributable to the PLEX Technologies' unique mechanism of action that allows constant and prolonged release of the therapeutic drug, docetaxel. The locality, combined with the prolonged and constant release rate, can promote deep penetration of the drug into the tumor with minimal systemic exposure to the chemotherapeutic agent. The intratumoral injection of the PLEX platform could enable it to be used as an interventional oncology treatment, not only with docetaxel but also with additional chemotherapeutics or other types of molecules, such as antibodies. Shifting gears, we were pleased to recently significantly strengthen our balance sheet by successfully closing a private placement financing, or PIPE, for $16 million of gross proceeds. The PIPE syndicate was comprised of new and existing investors, including participation from U.S. life science-focused investors, Dafna Capital Management and Roslin Advancer. Due to the PIPE, the investor purchased $3,371,312 of the company's ordinary shares, all prefunded words in lieu thereof at a purchase price of $4.81 per share for gross proceeds of $16 million, and received warrants to purchase up to the same amount of shares of common stock with an exercise price of $5.5 per share for a total exercise price of $19 million. The warrants expired upon the earlier of two years from the date of issuance and 10 trading days following PolyPid's announcement of a positive recommendation by the data safety monitoring board regarding the company's unblinded interim analysis in its SHIELD II Phase III trial of D-PLEX100, resulting in the stopping of the trial due to positive efficacy. The initial $16 million extended our cash runway until late in the third quarter of 2024 and aligns with the anticipated timing of SHIELD II's planned unblinded interim analysis. If the results of the unblinded interim analysis are positive and all warrants issued in the financing are exercised, the additional $19 million would fund PolyPid to the start of the planned new drug application submission for D-PLEX100. I'd like to take the opportunity to thank all of the investors who participated in this financing for their confidence and support. With that, it is my pleasure to turn the call over to Jonny. Jonny?

Jonny Missulawin, CFO

Thank you, Dikla. As of December 31, 2023, the company had cash and short-term deposits of $5.3 million as compared to $12.6 million at the end of 2022. This does not include the net proceeds of approximately $15 million generated from the PIPE financing closed in January 2024. As Dikla noted, we expect that our pro forma cash balance will be sufficient to fund operations into late third quarter of 2024. Now let's turn to our income statement. Research and development expenses for the three months ended December 31, 2023, were $4.6 million compared to $4.7 million in the same three-month period of 2022. R&D expenses in the most recently completed fourth quarter were driven by the ramp-up of the ongoing SHIELD II Phase III trial. For the full year ended December 31, 2023, R&D expenses were $16.1 million compared to $28 million in 2022. Marketing and business development expenses for the fourth quarter of 2023 were $193,000 compared to $350,000 during the prior year period. General and administrative expenses for the fourth quarter of 2023 were $1.2 million compared to $1.6 million recorded in the same three-month period of 2022. For the fourth quarter of 2023, the company had a net loss of $6.4 million as compared to $6.6 million in the fourth quarter of 2022. For the calendar year 2023, the company had a net loss of $23.9 million compared to a loss of $39.6 million in the full year 2022. Finally, we continue to execute well on our cost containment initiatives. As such, our net cash used in operating activities for the full year 2023 decreased by $17 million as compared to calendar year 2022, from $34.3 million to $17.3 million. With that, we will now open the call to your questions.

Operator, Operator

We will take our first question. Your first question comes from Roy Buchanan from JMP.

Roy Buchanan, Analyst

First, I had a couple on the SHIELD II interim. Just can you remind us the powering of the interim for a successful efficacy outcome, i.e., stopping the trial early for efficacy? And then what is the alpha spend for the interim?

Dikla Czaczkes Akselbrad, CEO

The alpha depends on the overall number in general. In order to get to an early stop, the powering on the interim itself allows the committee to tell us that we should stop the trial for positive data. The alpha should be 0.01. The overall— the penalty of the alpha depends on the overall size of the trial. So if we have sent to 600 or whether we are sent to 800, the alpha will be different because it gives you an earlier look into the data. I can tell you that at the end of the day, in SHIELD I, the alpha on the interim was very minimal. We had the interim at 750. If I recall, an overall of 1,000 patients, and it was very minimal. And the powering is 90%.

Roy Buchanan, Analyst

And then just to be clear on the potential warrant exercise, again, for the interim success is considered to be a recommendation to continue the trial unchanged, correct? You don't need to stop early for efficacy to be considered a success?

Dikla Czaczkes Akselbrad, CEO

So the 10-day period is only effective if the study stops for positive data. The overall—at that time, we will have around the year for the warrants. All other scenarios will require a different approach.

Roy Buchanan, Analyst

And then just on the pipeline, can you just discuss a bit the partnering outlook or progress for the PLEX technology outside of D-PLEX100 and then just on other development activities you have planned for this year?

Dikla Czaczkes Akselbrad, CEO

Sure. We are continuing and also initiating some additional discussions around the platform part of the OncoPLEX. The new data that we published today or referred to today is part of input that we're getting from some of those discussions or understanding what the next step should be or what partners would want to see in terms of potential efficacy of the product, helping our research and development to direct the internal development, obviously. And some of this animal data are part of our understanding from these discussions, and we are continuing robustly to discuss both potential future collaborations for D-PLEX as well as platform-related collaborations. Within that, we see complex opportunities. Obviously, the timing of— the maturity of these discussions is something that we cannot predict and cannot discuss, but we are very pleased with the kind of companies that are discussing with us. The level of the companies that are discussing and showing interest in our approach is encouraging.

Operator, Operator

We will take our next question. Your next question comes from the line of Balaji Prasad from Barclays.

Unidentified Analyst, Analyst

This is Sean on for Balaji. I'm wondering if it is possible for you to provide an update on the number of patients who have completed their follow-up at this time.

Dikla Czaczkes Akselbrad, CEO

Sure. So first of all, thank you for your question. We recently announced that we recruited 100 patients. And if you noticed in our— in today's press release, we've already indicated that we have more than 100 patients, although only a few days have passed, I think, two or three days. So things are progressing, and we started to see— we obviously had some slowdown around the end of the year and beginning of the year due to the holidays and the winter break. But we do start to see the similar trend that we saw in SHIELD I of ramping up. Most of the patients that finished the follow-up— most of the 100 patients finished their 30-day follow-up. We did not go into specific numbers, but I can tell you that we expect to see recruitment, if we're looking at the next quarter, significantly ramping up both in terms of having additional centers opened and some of the centers that were opened but only recently started to recruit patients.

Operator, Operator

We will take our next question. Your next question comes from the line of Boobalan Pachaiyappan from HC Wainwright.

Boobalan Pachaiyappan, Analyst

So a couple of questions from our side. First, as we think about commercial batch production, I'm curious how the expected COGS of D-PLEX100 compares to other platform technologies involving polymers or lipids attached to small molecules.

Dikla Czaczkes Akselbrad, CEO

As we see things now and for a long time, because we've built our own manufacturing facility and we have full control over the manufacturing, we actually just a few months ago passed a GMP review by the Israel Ministry of Health that is also applicable for the European authority for the commercial stage. So our facility is now approved for GMP commercial stage. And we have all indications that the COGS will be less than 5%. Again, it's a bit early to be very specific because we do not know exactly the final selling price of the product, but all indications show that it should be— the COGS should be less than 5% of this.

Boobalan Pachaiyappan, Analyst

And then you mentioned about positive preclinical data in melanoma and colon carcinoma animal models. I'm just curious, can you discuss the rationale behind choosing these tumor indications and also potential commercial opportunities associated with D-PLEX100?

Dikla Czaczkes Akselbrad, CEO

It's not that we are pursuing these specifically for clinical trials, but the idea was to look at these as this is an intratumoral approach. We are injecting our OncoPLEX directly into the tumor, and the chemotherapy is released within the tumor environment for three weeks. The goal was to look at models that have fast-growing cells and observe the local approach—the prolonged local approach in the tumor—and see the effect. We were very pleased with the results as they reflected similar results that we saw as an adjuvant. This was a neoadjuvant approach, and we saw similar effects as an adjuvant that is applied into the tumor bed post-resection, also in an animal model. The idea was to expand our preclinical data into a neoadjuvant approach in a fast-growing cell model.

Operator, Operator

There seems to be no further questions. I would like to hand back for closing remarks.

Dikla Czaczkes Akselbrad, CEO

Thank you for joining PolyPid's fourth quarter and year-end 2023 earnings conference call. We remain highly confident in our long-term prospects, especially the potential of our promising late-stage product candidate, D-PLEX100. As always, we are grateful to our team members, existing and new shareholders, and all our external partners for their commitment to our mission and their support in continuing to advance towards our goal of bringing D-PLEX100 to healthcare providers and patients as quickly as possible. We look forward to speaking with you again on our next conference call.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.