Earnings Call Transcript - PYPD Q4 2022

Operator, Operator

Greetings, and welcome to the PolyPid Fourth Quarter and Full Year 2022 Conference Call. 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 Fourth Quarter and Full Year 2022 Financial Results Conference Call. Joining me on the call today will be Dikla Akselbrad, Chief Executive Officer of PolyPid; Ori Warshavsky, Chief Operating Officer for PolyPid's U.S. operations; and Jonny Missulawin, PolyPid's SVP Finance. Earlier today, PolyPid released financial results for the 3 and 12 months ended December 31, 2022. 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 be making forward-looking statements within the meaning of the federal securities laws. For example, management is making forward-looking statements when it discusses the regulatory pathway for the potential NDA submission for D-PLEX100, including the potential of the SHIELD I results and SHIELD II study to provide support, the potential for wide use of D-PLEX100, the timing of resumption, completion of patient recruitment, the design and top line results of the revised SHIELD II study, the company's expectations regarding its cash runway and financing opportunities, goals for 2023, including with respect to interactions with European regulatory authorities, its ability to attract additional partners and enter collaborations and the potential timing thereof and the expected timing for the commercial manufacturing process and packaging validation for D-PLEX100. 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. It speaks only as of the live broadcast today, February 8, 2023. With the completion of those prepared remarks, it is my pleasure to turn the call over to Dikla. Dikla?

Dikla Akselbrad, CEO

Thank you, Brian. On behalf of our team at PolyPid, I would like to welcome everyone to our fourth quarter and full year 2022 earnings call. Before discussing the details of our clinical program, I would like to reiterate how thrilled we are to now have a clear regulatory pathway for the potential NDA submissions for D-PLEX100 in the U.S. following a positive Type C meeting communication with the U.S. FDA on the SHIELD I Phase 3 data. As a reminder, in advance of the Type D meeting, we provided the FDA currently available data from the SHIELD I study evaluating D-PLEX100 in abdominal colorectal surgeries. Based on these data, particularly the 54% reduction observed in the primary endpoint in a prespecified subgroup analysis of 423 patients with surgical incisions greater than 20 centimeters compared to standard of care, which represented a p-value of 0.0032. The FDA acknowledged that the SHIELD I results may provide supportive evidence on this population. The agency also recommended that the company conduct an additional study to support a potential NDA submission. The FDA confirmed that the ongoing SHIELD II study, which to date, has enrolled approximately 40 patients with the appropriate large surgical incisions could potentially serve as such a study. Importantly, the FDA also recognized that since D-PLEX100 proposed indication is for the prevention of infection, this has potential for wide use. While we are currently working expeditiously to finalize the design of the revised Q2 trial and expect to resume patient recruitment next quarter, we wanted to take the opportunity today to provide some color around what this study will look like. First, we view SHIELD II as a derisked Phase III trial, given 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. Moreover, we have the opportunity to leverage the key learnings from the SHIELD-1 study, notably with regard to countries and specific site and patient profile. In order to ensure we are properly leveraging these key learnings, we conducted a Clinical Advisory Board meeting late last year to gather clinical feedback from key U.S. opinion leaders specialized in SSI, including both surgeons and infectious disease specialists. We intend to recruit a total of approximately 600 patients or an additional 550 subjects behind 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 resumed SHIELD II enrollment next quarter. Top line results are expected mid next year, 3 months from completion of enrollment. I would highlight that this anticipated timeline is similar to the one seen in SHIELD I. We also plan to conduct an unblinded interim analysis once a total of approximately 400 patients have completed their 30 days follow-up. To put this in context, you will recall that it took us 22 months to recruit 977 patients into SHIELD I, and it was during the most challenging period of the COVID pandemic. Importantly, the ability to leverage the ongoing SHIELD II study will significantly reduce the time and resources needed as compared to having to initiate a new trial. The design of the SHIELD II trial will be very similar to the SHIELD I study in terms of primary and secondary endpoints with the patient intervention arm receiving D-PLEX100 on top of standards of care and subjects in the control arm receiving 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., EU, and Israel. In Europe, as we have done with the FDA in the U.S., we are also preparing for expected near-term interactions anticipated in the first half of this year with the European regulatory authorities regarding D-PLEX100. I should add that we are working closely with our European partner, Advanz Pharma, regarding the EU pathway and are fully aligned on the regulatory strategy for this region. In regard to our financial position, we continue to expect our current cash runway to extend well into the third quarter of this year. With that said, we anticipate having a number of compelling financing opportunities to enhance our balance sheet in 2023 and to fund Q2 to a successful completion. We are grateful for the continued support shown by our largest institutional shareholders. Moving on, we have a number of operational goals in 2023. I will now ask Ori to review those.

Ori Warshavsky, COO

Thank you, Dikla. We view 2023 as a potentially transformational year, not only in the clinical and regulatory areas, but also on business development and manufacturing fronts. From a business development perspective, first, we intend to focus on attracting additional strong partners for D-PLEX100 in different geographic territories like the U.S. and China. Second, SHIELD I validated the PLEX technology platform in a large clinical trial, providing local and controlled release of drug molecules directly at the disease target organ over a predetermined period of time. This validation of the platform can serve as a starting point for platform-related collaborations. Importantly, we have in-house research development and GMP manufacturing that can support various potential partnership opportunities. Using our in-house capabilities, it is a matter of only months to encapsulate new API into the PLEX platform and achieve proof of concept. PLEX platform collaborations will focus on 2 key areas. The first is the delivery of innovative drug specifically local delivery, where systemic delivery is either not effective enough or too toxic, for example, in oncology. Second, the lifecycle management of an approved drug, where prolonged local delivery provides significant clinical benefits. Specialty companies are always looking to differentiate their existing product portfolios, and leveraging the PLEX technology is an excellent way to accomplish this. Our planned objective is to formalize 2 partnerships in 2023, although the exact pace of partnership discussions is inherently difficult to predict. On the operations side, we expect to complete the commercial manufacturing process validation and packaging validation for D-PLEX100 in the first half of this year. We plan on having the CMC and preclinical data needed to support an NDA submission by the end of the year. With that, it is my pleasure to turn the call over to Jonny to review our current financials.

Jonny Missulawin, SVP Finance

Thank you, Ori. As of December 31, 2022, the company had cash, cash equivalents, and short-term deposits of $12.6 million as compared to $32.2 million at the end of 2021. Now let's turn to our income statement. Research and development expenses for the 3 months ended December 31, 2022, were $4.7 million compared to $9.6 million in the same 3-month period of 2021. The decrease in R&D expenses resulted primarily from the completion of the SHIELD I Phase III clinical trial. For the full year ended December 31, 2022, and 2021, R&D expenses were $28 million and $30.6 million, respectively. Marketing and business development expenses for the fourth quarter of 2022 were $350,000, a decrease from $1.1 million during the prior year period. General and administrative expenses for the fourth quarter of 2022 were $1.6 million compared to $2.9 million recorded in the same 3-month period of 2021. For the fourth quarter of 2022, the company had a net loss attributable to ordinary shares of $6.5 million as compared to $13.5 million in the fourth quarter of 2021. For the calendar year 2022, the company had a loss attributable to ordinary shares of $39.5 million, compared to a loss of $42.6 million in the full year 2021. We will now open the call to your questions.

Operator, Operator

And your first question comes from the line of Brandon Folkes from Cantor Fitzgerald.

Brandon Folkes, Analyst

Congratulations on the progress. I have a few questions if you don't mind. As we consider SHIELD II, can you explain how you address the possibility of a lower infection rate in the comparator arm? Also, how do we evaluate the health economic benefit? Assuming SHIELD II is successful, what should we consider regarding the proposition to hospitals for commercializing the product in larger incision surgeries? Any insights on that? Finally, regarding the interim analysis, what can we expect? Is there any chance we could stop early?

Dikla Akselbrad, CEO

Thank you for joining us, Brandon. I will begin by discussing infection rates in relation to SHIELD II, after which Ori will expand on health economics, and I will address the interim aspect. We now have a robust data set of nearly 1,000 patients that informs our assumptions. While all data was collected during COVID, which affects the infection rate, we are using this period as our baseline, even though it may be somewhat conservative. This is relevant to our de-risk program, as we believe this is a de-risked Phase 3 trial by using infection rates from the two years of COVID. Research indicates there was a decrease in infections during this time, which is advantageous for us. Additionally, we mentioned in our prepared remarks that we have evaluated lessons learned with both internal teams and external advisors. Last year, we held a Clinical Advisory Board to assess the patient population and various parameters, including potential health economics and how hospitals and surgeons might view the product in the future, as well as considering specific countries and centers. All these factors are now integrated into the protocol and operational planning. Regarding the interim analysis, there is a chance for an early stopping due to efficacy, as well as potential size modifications, and we may halt for futility if results do not meet our expectations. We also have, as we did in SHIELD I, blinded assessments prior to entry to help refine our approach throughout the process.

Ori Warshavsky, COO

Brandon, what we see in this trial is that the overall narrative from a health economic perspective hasn't changed. If anything, we've clarified things a bit more for the hospitals. We're better defining the population, which helps surgeons understand where potential issues may arise. If a patient presents with either risk factors related to their condition or the procedure, the surgeon can identify this as a patient at risk and apply D-PLEX. When hospitals evaluate the risk factors for problems, we believe we're providing clearer guidance. Furthermore, when an infection occurs, there are additional costs associated with extended hospital stays, reinterventions, readmissions, and more. So, if anything, we've made the situation clearer for the hospital.

Operator, Operator

And your next question comes from the line of Balaji Prasad from Barclays.

Unidentified Analyst, Analyst

You noted that it took about 22 months to enroll 990 patients for SHIELD I. Considering that the eligibility criteria may vary between the two trials, what is your expectation for the timing of patient enrollment for SHIELD II?

Dikla Akselbrad, CEO

Thank you for your question. We anticipate that the recruitment period will last 12 months. We have also analyzed the recruitment pace of patients in SHIELD I, focusing on specific populations, to gauge how quickly we reached our numbers. We are optimistic that we might achieve a faster recruitment rate. However, our assumptions are based on our experience with SHIELD I, which was conducted during the COVID period, causing delays in opening centers and patients undergoing necessary surgeries and tests. Despite these challenges, we ultimately recruited about 250 patients per quarter, with nearly 45% of those patients having incision lengths greater than 20 centimeters. This gives you an idea of our recruitment expectations at its peak.

Operator, Operator

And your next question comes from the line of Roy Buchanan from JMP Securities.

Douglas Buchanan, Analyst

I just want to follow up on the previous questions to ensure I'm clear about the specified patient group for the primary endpoint in SHIELD II. Is the incision requirement over 20 centimeters, and are there any additional criteria? I believe you mentioned something earlier, but I may have missed it. If I recall correctly, there were around 200 patients in SHIELD II, with 40 having the large incision, which suggests that about 20% meet the criteria. Is that correct?

Dikla Akselbrad, CEO

So first, yes, this is right. We had about 20% of SHIELD II meeting the prespecified criteria or the more focused population that we are targeting in SHIELD II. I'll just remind everyone that SHIELD II originally had a broader eligibility criteria. It wasn't just open abdominal colorectal, but also minimally invasive. So it makes sense that you wouldn't see the same ratio of large incisions that we've seen in SHIELD I. And this is why in SHIELD I, we had around 45% of the patients having longer incisions, and in SHIELD II, with the 200, it's about 20%. But now that we are focusing the trial based on the FDA feedback, we expect to see this number grow. Now you had another point that you wanted to cover, Roy? Did you get it?

Douglas Buchanan, Analyst

Yes, exactly.

Dikla Akselbrad, CEO

So same type of surgery, same patient population that we had in SHIELD II, we are just focusing on the subgroup, the prespecified subgroup that we had in SHIELD I, which was the longer incision where we received a p-value of 0.0032 and also discussed this with the FDA and the FDA viewed it as supportive data and recommended that we add additional data focusing on this group.

Douglas Buchanan, Analyst

Okay. Great. And then a couple on the interim. On SHIELD I, you had a max enrollment threshold, does that also apply for the unblinded interim in SHIELD II? And you mentioned some blinded assessments prior to the unblinded assessment. Do you have a sense of when you can expect the first blinded assessment to occur?

Dikla Akselbrad, CEO

The blinded assessments are conducted internally on a continuous basis. There isn’t much value in doing that until we have enough patients to gain some understanding. This was part of SHIELD I and will continue in SHIELD II. It helps us confirm that we are adhering to the statistical plan and the underlying assumptions. While there is no blinding involved regarding the effect, it gives us insight into the overall management of the trial and indicates that things are progressing well. Regarding the interim, we have the option to reassess the sample size. It's a bit premature to delve into specifics since the blinded assessment focuses on the primary endpoint and its alignment with our assumptions. As we monitor progress, we can discuss this in more depth. However, we do have the capability to reassess the sample size if necessary.

Douglas Buchanan, Analyst

Okay, I have a couple more questions. Are the discussions about partnering for D-PLEX100 still ongoing, or do you need to reassess following the SHIELD I data? Also, what is the status of partnering for OncoPLEX? Will that be on hold for a year or more as you focus on D-PLEX100? Is there any way to advance that process more quickly?

Dikla Akselbrad, CEO

Again, I'll start with the latter part of your question. Our top priority right now is, obviously, D-PLEX100, but we are fully intending to continue the development of OncoPLEX and potentially also other products in our pipeline, and it's remained a priority. What we have done up until now is developing the CMC processes. As we continue our effort to begin clinical development, this will be a very valuable asset to get to this stage. I think another thing that is quite in a good stage is the preclinical package. Obviously, we will need a decent study to go into the clinical stage. But this is a priority. But you're right, as I said before, our focus is on D-PLEX100, so obviously, the resources that are invested in OncoPLEX in the near terms are limited.

Ori Warshavsky, COO

Yes. And I can add on the D-PLEX partnerships. All of the conversations that we had in the past, we're still in contact with all of these potential partners. There's actually a few new ones from other geographies that showed interest in partnering for different territories. So this is all ongoing. Obviously, a lot of it will depend on the trial, but no one really stepped back and lost interest in the product.

Dikla Akselbrad, CEO

I would add to that one thing, which is the new interest that we are seeing with the robust clinical data that we have from SHIELD I is a better understanding and some additional interest around our platform. We're collaborating around the PLEX platform, pairing it with novel or known molecules in different areas, and this is very encouraging for us.

Operator, Operator

There are currently no further questions. I will hand the call back to you.

Dikla Akselbrad, CEO

Thank you for joining PolyPid's Fourth Quarter and Year-End 2022 Financial Results Conference Call. I would like to emphasize how firmly we continue to believe in our long-term prospects, especially the potential of our promising late-stage product candidate D-PLEX100. We remain grateful to our team members 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 health care providers and patients as quickly as possible. We look forward to speaking with you again on our next call.

Operator, Operator

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