Earnings Call Transcript - PYPD Q1 2021

Operator, Operator

Greetings and welcome to the PolyPid's First Quarter 2021 Conference Call. At this time, participants are in listen-only mode. As a reminder, this call is recorded and I would now like to introduce your host for today's conference, Mr. Bob Yedid from lifestyle advisors. Mr. Yedid, you may begin.

Bob Yedid, Host

Thank you, and thank you all for participating in PolyPid's first quarter 2021 earnings conference call. Joining me on the call today will be Amir Weisberg, Chief Executive Officer, and Dikla Czaczkes Akselbrad, Executive Vice President and Chief Financial Officer of PolyPid. Earlier today, PolyPid released results for the three months ended March 31st, 2021. A copy of the press release is available on the Investors section of the company’s website. I’d like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to differ materially. Therefore, you should not place undue reliance on these statements. I encourage you to review the company’s filings with the SEC, including, without limitation, the Company’s Forms F-1 and 6-K, which identify 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 12, 2021. With that completion of those prepared remarks, it’s my pleasure to turn the call over to Amir Weisberg, CEO. Amir?

Amir Weisberg, CEO

Thank you, Bob. On behalf of our team at PolyPid, I would like to welcome everyone to our first quarter 2021 earnings call. I will begin today with some brief introductory comments and then Dikla will provide an update on our business and review our financial results, after which we will open the call for questions. I am very pleased with the recent focus we have achieved in advancing our development program and in continuing our evolution towards becoming a commercial company. As you know, we are currently in a large phase 3 program with our lead asset, D-PLEX100, for the prevention of surgical site infection, or SSI. Dikla will provide further details on this program shortly, but I am excited to report today that our ongoing SHIELD I trial is proceeding as planned and we are having great success accelerating enrollment into this study. Moreover, our second Phase 3 trial in abdominal surgery, SHIELD II, is also advancing as expected with new sites opening at a robust pace. As a reminder, these two Phase 3 clinical trials will serve as the basis for PolyPid’s first new drug application submission and we believe they will contribute to support a bold label for the prevention of SSI. Importantly, our D-PLEX100 development program is supported by a vast patent portfolio. In fact, we now have 101 patents granted and allowed worldwide for our platform and products. I am also pleased to report today that our manufacturing facility is now fully scaled up. This facility will be able to support the first 13 months of product demand worldwide. As you can see, PolyPid has recently achieved important progress in all aspects of its business. We also continue to be supported by a strong balance sheet, which we expect to be sufficient to complete the SHIELD I study, conduct SHIELD II, and prepare for the submission of our NDA, as well as further advance our OncoPLEX development platform with the cash on hand. I will now turn the call over to Dikla to provide you with some further details on our business. Dikla, please take it from here.

Dikla Czaczkes Akselbrad, CFO

Thank you, Amir, and thank you all again for joining us on the call. I would like to begin with a brief discussion on the status of our pipeline. The pace of enrollment in the SHIELD I trial has been strong to date and is expected to continue to accelerate. The recruitment rate in the SHIELD I trial doubled in the last three weeks, and we now have nearly 200 patients enrolled in the study. We believe the recruitment rate will continue to increase as several centers have recently opened and new ones will open throughout the current month. Importantly, approximately 70% of the patients currently enrolled in SHIELD I have a colorectal cancer diagnosis, a rate similar to the 74% seen in our successfully completed phase 2 trial, meaning that we are dealing with high-priority surgical procedures that are less influenced by the COVID-19 pandemic worldwide. Moreover, the data safety monitoring committee in charge of reviewing the cumulative safety data and study conduct for SHIELD I has now recommended, for the second time, to continue the study without modification, meaning that no safety issues related to D-PLEX100 have been observed in SHIELD I to date. Based on these collective data points, we continue to anticipate the availability of top-line data from SHIELD I by the end of this year. As a reminder, our plan is to enroll 600 to 900 patients within 60 centers in the U.S., EU, and Israel. Following the enrollment of 500 patients, the study design provides for blinded sample size re-estimation based on the overall infection rate observed in the study. Moving on to SHIELD II, it has broader eligibility criteria than SHIELD I, including minimally invasive surgical procedures, and also continues to progress as planned, though our initial focus here remains on opening centers. The second trial will enroll approximately 900 to 1,400 patients across 60 hospitals that are different from the ones participating in the SHIELD I study. From a commercial perspective, to reiterate what we have said previously, in order to maximize our commercial success in the U.S., we have begun establishing our own footprint in the U.S. to initiate commercial preparation activities, while also exploring potential partnering opportunities with leading pharmaceutical companies. We recently completed a large U.S. market research project to ensure optimal positioning and coverage of D-PLEX100, which included a total of approximately 90 in-depth one-hour interviews with pharmacy directors and other hospital administrators, as well as a mix of general, cardiac, and orthopedic surgeons. The results of this work have only strengthened our confidence in the U.S. commercial prospects for D-PLEX100, especially in abdominal surgery. Most interestingly, while both hospital administrators and surgeons reported a significant need for a product like D-PLEX100, the hospital administrators were especially enthusiastic. Typically, hospital administrators push back on new technologies more so than surgeons, but this does not appear to be the case for D-PLEX100. We believe the views of hospital administrators are indicative of the significant cost burden of treating surgical site infection, with associated long lengths of stay and the fact that hospital readmissions of Medicare patients for SSIs are not reimbursed by CMS. Ultimately, this market research will support our efforts to demonstrate favorable health economics for hospitals to drive the commercial potential of our drug candidate. In parallel, we also remain in active discussions with potential partners for the U.S., EU, and Asian markets. Before I move on to the rest of our pipeline, I'd like to take a moment to discuss manufacturing, another key area where we have recently made significant progress. As Amir noted earlier, our manufacturing facility is now fully scaled and can produce the first 30 months of anticipated commercial demand for D-PLEX100. We recently ramped up our capacity by two and a half times to achieve this critical milestone. This is a key milestone in our vision to become a fully integrated biopharmaceutical company. Looking further ahead, we are currently evaluating potential plans for additional manufacturing capabilities to address product demand beyond the first 30 months. Now I'd like to elaborate on the status of OncoPLEX, our intratumoral chemotherapy product candidate for solid tumors, including tumors that are resistant to chemotherapeutics. OncoPLEX provides prolonged and controlled exposure to docetaxel, one of the most widely used chemotherapy agents in the intra-operative tumor resection setting. The control over the prolonged exposure at the tumor resected site has a critical impact on preventing local tumor recurrence, the potential spreading of cancer cells, and ultimately improving the overall survival of cancer patients. In addition, OncoPLEX is expected to significantly reduce the known toxic systemic exposure, one of the important attributes of successful local delivery in cancer therapy. You will recall that late in 2020, we announced positive preclinical data from this program in the syngeneic mouse model for solid tumors of colon carcinoma, using cancer cells highly resistant to docetaxel, which is one of the most treatment-resistant tumor cell types. A single local application of OncoPLEX generated significantly better results compared to the group treated with six cycles of systemic docetaxel treatment in multiple key measures, including overall tumor clearance, overall survival, and overall tumor-free survival. Moreover, we recently generated additional compelling safety data in animals that we are excited about, including positive safety data in a promising solid tumor indication. We are also in parallel building a network of top experts and key opinion leaders around our OncoPLEX development program to accompany us during the development stages. We continue to conduct preclinical safety studies of OncoPLEX in various types of solid tumors and are advancing towards the completion of a preclinical package for the filing of a pre-IND request with the FDA later this year, in order to potentially initiate the Phase 1 clinical trial next year. We believe that OncoPLEX has the potential to become part of the standard of care in the tumor resection surgical setting across multiple solid cancer types, including glioblastoma, prostate cancer, and head and neck cancer. With that, I will now review our recent financial results. Let's begin with PolyPid's balance sheet information as of March 31st, 2021. The company had cash, cash equivalents, short-term deposits, and long-term deposits of $61.4 million, compared to $66.6 million as of December 31st, 2020. Cash used in operations for the three months ended March 31st, 2021, totaled $5.6 million. We continue to expect that our current cash runway will extend into 2022 and remain confident that this strong balance sheet will allow us to complete our first phase 3 trial, SHIELD I, in abdominal soft tissue infections, to conduct the second abdominal surgery study, SHIELD II, and to prepare for the submission of an NDA for D-PLEX100. Now, let's turn to our income statement. Research and development expenses for the three months ended March 31st, 2021, were $6 million, compared to $3.4 million in the same three-month period of 2020, as spending increased due to the ongoing SHIELD I and SHIELD II phase 3 clinical trials in abdominal surgery. Marketing and business development expenses for the first quarter of 2021 were $700,000 compared to $300,000 for the same period of 2020. These expenses increased primarily due to an increase in marketing and business development personnel in our offices in New Jersey and an increase in market-facing activities as we began building our commercial infrastructure. General and administrative expenses for the first quarter of 2021 were $2.1 million compared to $700,000 in the prior year period, as costs increased due to being a publicly traded company, with higher D&O insurance costs, and an increase in non-cash-based compensation. For the first quarter of 2021, the company had a net loss attributable to ordinary shares of $8.7 million, compared to $5.9 million in the prior year period. We will now open the call for your questions. Operator?

Operator, Operator

Thank you. If you wish to ask a question, press the star and one on your telephone key.

Unidentified Analyst, Analyst

Good morning. And thanks for the questions. A couple on SHIELD I. Could you remind us of how many sites have been activated? You reassured us with the patient enrollment data, especially in the last three weeks. Can we expect that this trend is likely to continue based on our earlier discussion that sites are being activated and patient enrollment is going faster? So, is this the trend that's going to be for Q2? And does that mean we would be going through a sample size re-estimation in mid-2020 as planned earlier? That's one. Two, do you have any updated thoughts around raising capital? You mentioned that your cash balance is sufficient until the end of 2022, but any thoughts around that would be appreciated. Thanks.

Dikla Czaczkes Akselbrad, CFO

Thank you. Good morning again. So I'll start with the first question. The plan was to open that we now have about 40 sites activated and running, and opening is going pretty fast. We have increased recruitment, and we expect it to continue. As we said, we have nearly recruited 200 patients, which aligns with the plan and the timeline remains as expected. We anticipate having the sample size re-estimation after recruiting around 500 patients, likely in early Q3. In regards to financing, we ended the quarter with over $61 million in cash and cash equivalents. We are well positioned with cash to finance both SHIELD I and SHIELD II along with our OncoPLEX oncology program, so we don't see any immediate need to raise money. We think any substantial raise will only be made after the top-line results.

Unidentified Analyst, Analyst

Great. Thank you, Dikla Czaczkes. Just one follow-up, maybe you called out interviews at hospitals and hospital administrators recently. So in terms of findings, how different were your takeaways from the earlier research that you conducted around a year ago? Any incremental finding that was different from what you had done earlier? Thanks.

Dikla Czaczkes Akselbrad, CFO

It was very similar, which is again reassuring. I think what was different is that the product is more mature, the clinical trials are maturing, and when we describe the product to surgeons, we do so with actual positioning in terms of the anticipated NDA, because we are clearer on the phase 3 and how many patients are involved. The aspects of hospital administrators seeing the economic value of products are similar to what we've seen in the past. Price sensitivity was similar as well, so this is still a consistent trend.

Unidentified Analyst, Analyst

Answered, thank you.

Gary Mattan, Analyst

Hi, good morning. Good to hear all the progress. As you accelerate the rate of enrollment for SHIELD I, does that hold back the enrollment for SHIELD II in any way? So, just remind me how much overlap is there between the sites in those two studies. And then also, what's the average number of patients being enrolled per site at this point in SHIELD I? What number do you think you need to get to in order to get the data by the third quarter?

Dikla Czaczkes Akselbrad, CFO

Sure. So first of all, good morning, and thank you. Those are very good questions. With regards to SHIELD II, those are different centers, as we mentioned earlier. There is only one center shared and that's by strategic decision. We want to have different centers in order to avoid competition between the two trials. We are actively recruiting patients at several centers, and we can transfer them, but there won't be any overlap during either trial. As for patient distribution between the centers, it's still early to say, as we have 200 patients of the expected 600 patients. We expect a fair distribution among centers and countries. On average, we expect each center to recruit about one patient per month over the course of the trial, and we do see that trend continuing.

Gary Mattan, Analyst

Okay, that's very helpful. And then just to follow up on OncoPLEX, what are the gating factors to starting a phase 1 study? Is it just resources? It sounds like you're confident you'll have the pre-IND meeting before the end of the year. What is your confidence that you'll be able to have that meeting before the end of the year? What point next year do you think you’ll be ready to start the phase 1?

Dikla Czaczkes Akselbrad, CFO

Sure. We are very excited about this program. We have gained valuable experience throughout our development processes. We believe we can shorten timelines considerably compared to earlier programs. We are confident we can meet the pre-IND requirements. Our assumption is that we should be in a good position to start first-in-man trials next year, based on our understanding of pre-IND requirements. However, we will need input from the FDA and will see if they agree with our plans. We plan to share more information with investors on these programs as we approach the start.

Gary Mattan, Analyst

Okay, great. Thank you very much. Thank you.

Operator, Operator

Your next question comes from the line of Kelly Schaeffer at Raymond James.

Kelly, Analyst

Thank you. Good morning or good afternoon. Good to hear your voice and thoughts are with you and your families during these very difficult times. My first question is regarding the OncoPLEX program. There's been a lot of progress in a very short period of time. When might we expect additional data points, publications, etc., anything we might see before the end of the year on that program? And as you consider initial first-in-man trials, are you thinking about a specific tumor type at this point, or would you expect to initiate trials across the range of tumors that you outlined earlier?

Dikla Czaczkes Akselbrad, CFO

Thank you for your kind words. We have made progress and do expect to be able to share more around this program during this year in terms of both safety, indication, and plan, as well as efficacy. When it comes to specific indications, while we have some thoughts on probable candidates, we want to ensure that the data from animal studies aligns with our expectations before making a final decision and submitting that to the FDA. Our goal is to start with one indication and approve the product first before bundling approvals for multiple indications. However, we plan to share data before the end of the year as we meet with the FDA.

Kelly, Analyst

I also have a question regarding the market research study that you mentioned earlier. It's encouraging to hear the favorable feedback from hospital administrators. If there were any specifics shared regarding impressions of price points that you have discussed for the product, I'd be curious to hear how receptive they were. Additionally, anything learned about the commercial positioning of the product, particularly their feedback on surgeons?

Dikla Czaczkes Akselbrad, CFO

Regarding pricing, we got reassurance that our pricing strategies are valid, and hospital administrators recognized the significant cost burden that surgical site infections present. Our initial assumptions are still holding; however, there might be room for a higher price than originally thought depending on the results of our phase 3 trials. We've also seen a critical need for D-PLEX100 in colorectal surgery specifically, as infections can hinder patient recovery and oncology protocols. This benefit for patient health as well as the economic aspects is evident from the market research.

Kelly, Analyst

Lastly, with the incremental spend tied to commercialization efforts in the U.S., can you share any specific key hires or what exactly the investment has been targeted towards?

Dikla Czaczkes Akselbrad, CFO

We are being cautious about budgeting and expenses. We are focusing on critical paths necessary to meet commercialization timelines. The market research we performed is integral to developing our plan for successful commercialization. We have personnel in place and are engaged in discussions that contribute to our commercialization efforts, particularly around critical aspects such as packaging and product naming, which need attention for successful market entry.

Amir Weisberg, CEO

I just want to add to the market research discussion. This research clarified our understanding compared to previous findings. There is a very clear need for this product, as echoed by both doctors and administrators, which gives us strong support moving forward.

Operator, Operator

We have no further questions. If you wish to continue.

Amir Weisberg, CEO

Yes. Thank you for joining our first quarter 2021 earnings conference call. I would like to repeat how excited we are about the focus we have achieved to date, as well as the compelling opportunities that lay ahead of us. We will remain grateful to our team members and our external partners for their strong commitment to our mission and their collaboration to ensure we continue to advance by achieving our goals of bringing D-PLEX100 to healthcare providers and patients as quickly as possible. Thank you very much.

Operator, Operator

And that does conclude your conference for today. Thank you all for participating, and you may now disconnect.