Earnings Call Transcript - PYPD Q1 2023

Operator, Operator

Greetings, and welcome to the PolyPid First Quarter 2023 Conference Call. At this time participants are in a listen-only mode. As a reminder this call is 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 first quarter 2023 earnings conference call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Chief Executive Officer of PolyPid; Jonny Missulawin, PolyPid's Chief Financial Officer; and Ori Warshavsky, Chief Operating Officer. Earlier today, PolyPid released financial results for the three months ended March 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 resumption of recruitment for the SHIELD II Phase III trial and the timing of top line results therefrom; potential MAA and NDA submissions; the expected timing of completion of the commercial manufacturing process and packaging validation for D-PLEX100; potential partnering and collaboration opportunities; and the company's expectations regarding its cash balance and additional compelling financing opportunities. 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 place no 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, May 10, 2023. 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 to our first quarter 2023 earnings call. To begin, we are thrilled with the recent progress we have achieved throughout our business, including the significant strengthening of our balance sheet, which I will review a bit later in my remarks. From a clinical perspective, we have submitted the revised protocol for SHIELD II to the FDA and await their feedback. Assuming no major comments from the agency, we expect very soon to be in a position to begin recruiting new patients into SHIELD II, which to date has enrolled approximately 40 target patients. As a reminder, we now have a clear regulatory pathway for the potential NDA submission for D-PLEX100 in the US. Earlier this year, the FDA acknowledged that the SHIELD I result may provide supportive evidence of safety and efficacy of D-PLEX100 in patients with surgical incisions greater than 20 centimeters. The agency also recommended that the company conduct an additional study on this focus patient population to support a potential NDA submission and confirmed that SHIELD II could serve this purpose. To reiterate what we said on our last call, we intend to recruit a total of approximately 600 patients, or an additional 550 subjects beyond the 40 patients already recruited into SHIELD II. Total recruitment time into the study is expected to be approximately 12 months from the time we resume SHIELD II. Top line results are expected mid next year. We also plan to conduct an unblinded interim analysis once a total of approximately 400 patients complete their 30-day follow-up. As we prepare to resume recruiting for SHIELD II, one of the key learnings from SHIELD I is the sites involved in the study. While we are targeting approximately 50 centers for SHIELD II, around the same number as SHIELD I, we now have firm knowledge of the best performing site 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 made modest modifications to the SHIELD II protocol based on the SHIELD I results, but the design of the SHIELD II trial is very similar to the SHIELD I study in terms of primary and secondary endpoints. Patients in the intervention arm will receive D-PLEX100 on top of standard of care, while subjects in the control arm will receive standard of care alone. The primary endpoint of the trial will be a combination of SSI, reintervention, and mortality rate at 30 days post-index surgery as defined in the CDC SSI guidelines. Patient safety will be monitored for an additional 30 days. The study will take place in the U.S., Europe, and Israel. As we have said previously, I would like to emphasize that we view SHIELD II as a de-risked entry trial, given the more focused patient population in which we have already generated highly positive data in SHIELD I, alongside the fact that it will not be conducted under the tight COVID-related restrictions that were in place during the pandemic and throughout the duration of SHIELD I. In addition, as I noted a moment ago, we are leveraging the key learnings from the SHIELD I study. In Europe, we recently received feedback in a National Scientific Advice meeting from the Swedish Medical Products Agency (Swedish MPA) that was in line with the feedback we received from the FDA following the Type D Meeting. Specifically, similar to the FDA, the Swedish MPA acknowledged that the SHIELD I result may provide supportive evidence in patients with large surgical incisions and recommended that the company confirm the results with an additional Phase 3 study to support an MAA submission. The Swedish MPA also noted that clinical safety data obtained to date is sufficient for an MAA solution. Importantly, we continue to work closely with our European partner Advance Pharma concerning the European development pathway and are fully aligned on the regulatory strategy for this region, including the preparation surrounding our recent meetings with the Swedish MPA. I should add that we expect to complete the commercial manufacturing process and packaging validation for D-PLEX100 in the next few months. We continue to expect to have the CMC and preclinical data needed to support an NDA submission well in advance of the top line results. In regard to our financial strength, we completed a series of financial transactions late in the first quarter to further solidify our financial position. First, we closed on an underwritten public offering that included the full exercise of the underwriters' option to purchase additional ordinary shares and a concurrent private placement of pre-funded warrants with certain existing shareholders for total gross proceeds of approximately $11.4 million. In addition, we restructured our existing secured loan agreement with Kreos Capital, resulting in over $3 million of deferred repayments which will be paid from August 2024 onwards, in line with the expected timing of our top line results from SHIELD II. The proceeds from the financing transactions, combined with the loan repayment deferral, extend our cash runway into late Q1 of next year. Looking ahead, we anticipate having a number of additional compelling financing opportunities to further enhance our balance sheet later in 2023 in order to fund SHIELD II to a successful completion. With that said, we are grateful for the continued support shown by our largest institutional shareholders as well as our new investors who participated in the March public offering. Moving on, we also continue to advance our business development initiatives. As a reminder, we are focused on two key areas. First, we are targeting additional strong partners for D-PLEX100 in different geographies like the U.S. and Asia. Second, we are pursuing PLEX platform-related collaborations that are becoming more focused in specific therapeutic areas such as oncology. As we said on our last call, our planned objective is to formalize two partnerships in 2023, although the exact pace of partnership discussions is inherently difficult to predict. With that, it is my pleasure to turn the call over to Jonny, to review our current financials. Jonny?

Jonny Missulawin, CFO

Thank you, Dikla. As of March 31, 2023, the company had cash, cash equivalents, and short-term deposits of $19.6 million, including the $6.2 million net received from the underwritten public offering in April 2023. To reiterate what Dikla previously stated, we expect that our cash balance will be sufficient to expand operations into late first quarter of 2024. Now let's turn to our income statement. Research and development expenses for the three months ended March 31, 2023, were $3.8 million compared to $8.7 million in the same three-month period of 2022. The decrease in R&D expenses resulted primarily from the completion of the SHIELD I Phase 3 clinical trial and reflecting the cost reduction plan that was executed in Q4 2022. Marketing and business development expenses for the first quarter of 2023 were $385,000, a decrease from $775,000 during the prior year three-month period. General and administrative expenses for the first quarter of 2023 were $1.6 million compared to $2.5 million recorded in the same three-month period of 2022. For the first quarter of 2023, the company had a net loss of $6.1 million as compared to $11.9 million in the first quarter of 2022. With that, I will turn the call back over to Dikla. Dikla?

Dikla Czaczkes Akselbrad, CEO

Thank you, Jonny. Before opening the call to your questions, I would like to discuss some recent updates to our Board and senior leadership team. First, we are excited to welcome Yossi BenAmram as an independent Director on our Board. Yossi is a highly accomplished senior leader in the biopharmaceutical industry having spent over 30 years in commercial operations. He previously served as an SVP and President of Merck & Co's Europe, Russia, Africa and Middle East region, a $4 billion business with 10,000 employees in multiple divisions in more than 100 countries. In this role, Yossi led Merck from the fifth position to market leader in pharmaceutical sales in this region. As we approach the potential commercialization of D-PLEX100, we are thrilled to add Yossi and his significant commercial expertise to our Board. Also, as it relates to the Board, Chaim Hurvitz, a member of our Board since 2016, will no longer serve as a Director. On behalf of everyone at PolyPid, I would like to thank Chaim for his significant contribution to our company over the years. We are grateful for his dedication to PolyPid. Finally, I'm pleased to announce that Jonny Missulawin, our SVP Finance, has been promoted to Chief Financial Officer. We will now open the call to your questions. Operator?

Operator, Operator

Thank you. We will take our first question. Our first question comes from Brandon Folkes from Cantor Fitzgerald. Please go ahead. Your line is open.

Brandon Folkes, Analyst

Hi, thanks for taking the question, and congratulations on the progress during the quarter. Maybe just starting firstly in the Type D meeting, was there any discussion in terms of what a label may or may not include should it be successful in the trial under the new protocol? And I'll stop there.

Dikla Czaczkes Akselbrad, CEO

Hi, good morning. Thank you for that, Brandon. There were specific discussions on the label and what the label should be. It was focused more on the clinical pathway and what's needed for an NDA. But we did have in the past some communication regarding labeling both in Europe and with the FDA that leads us to believe that we will be starting with some indication around abdominal surgery. From that, we can expand later on as we gather more information and more safety data.

Brandon Folkes, Analyst

Great. Thanks. And then maybe just switching gears to Europe. Can you talk about if there were any differences that the Swedish MPA had compared to the FDA? I know you did both pretty similar there. And then just staying on Europe maybe just a three-part question I guess I'll ask all at once. How do we think about the Swedish authority and the feedback with regard to the rest of Europe? Do you think you still have to discuss with any other regulatory agencies in Europe? And then similarly, just talk about sort of antibiotic expenses again coming out of Europe. Anything in there for a product such as D-PLEX just given the active ingredient you use in it? Thank you.

Dikla Czaczkes Akselbrad, CEO

Regarding Europe, we have a partner there, ADVANZ PHARMA, which is a hospital specialty pharma-based pan-European company. Our strategy is aligned with our partner. We believe that the Swedish authorities represent what we can expect from the MAA European authorities in general. We do not think we need additional advice. However, as with any regulatory agency, changes can occur frequently based on results or discussions with different divisions or countries. The feedback was clear, so we do not anticipate needing further consultation. I can't identify any major differences because the overall feedback was similar. They acknowledged our data and noted it could be supportive, comparable to the FDA. They requested another trial, which is also similar to the FDA's request. They were more explicit about the safety data we have generated, but aside from that, I don’t see anything significant to highlight, which gives us confidence and clarity regarding our data. Both agencies provided similar feedback, highlighting what steps we need to take next.

Brandon Folkes, Analyst

Thank you very much. Great. Positive. That's it from me and congrats on your progress.

Dikla Czaczkes Akselbrad, CEO

Thank you so much.

Operator, Operator

Thank you. We will take our next question. Please standby. Your next question comes from the line of Bala Prasad from Barclays. Please go ahead. Your line is open.

Unidentified Analyst, Analyst

Hi. Good morning. This is John on for Balaji. Thanks for taking our question. Just a quick one on your business development plan. You mentioned that you will focus on opportunities on the platform itself. So just wondering, have you ever considered alternative uses of your platform in other areas such as animal health? Thank you.

Ori Warshavsky, COO

Hi, John. This is Ori. So the quick answer is, yes. Animal health is one avenue we are looking into. But there’s much more that can be done with the platform. We are starting to hear more and more conversations around delivery of RNA, which is currently a hot topic in the industry. There are also discussions around aesthetics, as we can use the platform for a prolonged release of fillers, fat melting acids, and so on. These are all venues we are looking into. So let's keep it at that. It's still all very early in conversations, but there are definitely more avenues than just antibiotics.

Unidentified Analyst, Analyst

Got it. Very helpful. Thank you.

Operator, Operator

Thank you. We will take our next question. Please standby. Your next question comes from the line of Roy Buchanan from JPMorgan. Please go ahead. Your line is open.

Roy Buchanan, Analyst

Not quite JMP Securities maybe, yes. Anyway. Thanks for taking the question. I'm trying to gauge timing for the unblinded interim. Can we assume linear enrollment from when you start the trial to the 550 patients? And then is there an option to upsize the trial? Can you talk about how big the trial could get if there is? And then can you talk a little bit about the powering and your assumptions for infection rates?

Dikla Czaczkes Akselbrad, CEO

Sure. First of all, good morning. Thank you. With regards to the number of patients and the interim, the interim is at 400 patients. This is an additional 550 patients. As we mentioned, we expect to be able to finalize the recruitment for the interim during the first quarter, so less than a year to go, with an overall target of 12 months for the recruitment of the additional 550 patients, which gets us to 600. We do have an option to upsize. I think it's more sensible to discuss this once we get specific feedback from the FDA. The underlying assumptions are very important for investors and analysts, as they try to determine where PolyPid stands and what the value drivers are for us. This Phase 3 trial has been de-risked from the strength of the underlying assumptions, drawn from SHIELD I for the group with larger incisions. The infection rate we are taking as the underlying assumption is 9.7%, as seen in the standard of care arm. Mortality, again, is based on the standard of care arm's data. It's fair to assume that when we do not have COVID restrictions today, there should be a different infection rate, but we are sticking to our assumption for planning purposes. I hope this answers your question.

Roy Buchanan, Analyst

Yes. No, that's very helpful. Just to confirm, you are expecting the interim in Q1 2024. Is that what I heard?

Dikla Czaczkes Akselbrad, CEO

Yes. Yes.

Roy Buchanan, Analyst

Okay. Got it. And will you be able to submit the NDA in the second half of next year? Also, are you planning to announce when you will restart enrollment of SHIELD II?

Dikla Czaczkes Akselbrad, CEO

Yes. We will announce when we start enrollment. And since this is a very fine refinement, we still maintain our timeline of about 12 months for recruitment and everything else. We believe it’s reasonable to expect that we will begin submitting the NDA package in the second half of next year.

Roy Buchanan, Analyst

Okay. Great. And then just one more on the sites that are being changed. Can you give us a sense of how many sites are being changed from SHIELD I? Is it half, 10%, 90%? Thanks.

Dikla Czaczkes Akselbrad, CEO

This is something that is hard for me to quantify in terms of percentage, because not all the centers are yet open. We are opening the centers right now. So once we have all the centers, I can tell you in percentage-wise what's changed. I can tell you that we are going after all the countries and most of the centers that we worked with want to participate. We performed the trial of SHIELD I in around 50 centers. This is the plan for this trial as well. Overall, we opened around 60 centers in SHIELD I, out of which 50 were actually recruiting. This is the plan now, too; many of the centers that were active in SHIELD I will also participate in SHIELD II. Until we have all of them fully open, it's hard to specify what's changed.

Roy Buchanan, Analyst

Okay. But it sounds like a minority of the sites are going to be excluded from SHIELD II. Is that fair to assume? Hard to say.

Dikla Czaczkes Akselbrad, CEO

Yes. It is easier to say that most of the centers that were in SHIELD I are going to be in SHIELD II.

Roy Buchanan, Analyst

Got it. Okay. Thanks.

Dikla Czaczkes Akselbrad, CEO

We will keep investors updated on that.

Roy Buchanan, Analyst

Okay. Thanks for taking the questions.

Dikla Czaczkes Akselbrad, CEO

Thank you.

Operator, Operator

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

Dikla Czaczkes Akselbrad, CEO

Thank you for joining PolyPid's first quarter 2023 earnings call conference. 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 of our external partners for their commitment to our mission and their support in continuing to advance towards achieving 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 call and throughout the year.

Operator, Operator

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