Earnings Call Transcript - PYPD Q3 2024

Operator, Operator

Greetings, and welcome to the PolyPid Third Quarter 2024 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 third quarter 2024 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 U.S. of PolyPid. Earlier today, PolyPid released its financial results for the three and nine months ended September 30, 2024. A copy of the press release is available in the Investors section on 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 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 the company's annual report on 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. This conference call contains time-sensitive information and speaks only as of the live broadcast today, November 13, 2024. With the completion of those prepared remarks, it's 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 third quarter 2024 earnings conference call. We are very pleased with the recent critical advancements in our business, most notably the significant acceleration in enrollment in our ongoing SHIELD II pivotal trial for D-PLEX100 for the prevention of abdominal colorectal surgical site infections. Moreover, we are operating from a position of financial strength as we are funded beyond the upcoming interim analysis and into 2026 if all the warrants issued in both of our most recent private placement financings are exercised. We will further discuss our cash runway shortly, but I'd like to begin with the status of SHIELD II. We recently announced that the study enrolled the last patient required to conduct the planned unblinded interim analysis. We will have the outcome of the analysis during the current quarter now that the 30-days follow-up assessment for the last patient has been completed. The unblinded interim analysis may allow for early trial conclusion due to positive efficacy, continuation to planned patient recruitment which is up to 630 subjects, sample size reassessment, or futility. I'm pleased to report today that the study has now enrolled approximately 550 subjects, and approximately 60 centers are currently opened in multiple countries around the world including in Eastern Europe, the U.S., Germany, Ireland, Portugal, and Israel. All of the planned centers are now open, and the vast majority are currently recruiting patients. This achievement, along with the increase in the volume of surgical procedures following the conclusion of the slower summer months, has led to a substantial ramp-up in recruitment recently. More than 80 subjects were enrolled every month since the end of the summer. This important progress should allow us to complete patient enrollment for the full trial in December with top-line results anticipated in the coming quarter. As we have said on prior calls, we view SHIELD II as a de-risked Phase 3 trial. One of the primary reasons for this is that the trial is being conducted in a focused patient population in which we have already generated positive, statistically significant data in SHIELD I, our first Phase 3 study with D-PLEX100. This view was further supported by the recent publication of the full data set of SHIELD I in the highly regarded peer-reviewed journal, the International Journal of Surgery.

Ori Warshavsky, CFO

Thank you, Dikla. On October 17, the Phase 3 SHIELD I trial results including efficacy and safety were published in the International Journal of Surgery, which is ranked second by impact factor out of 212 surgery-focused medical journals worldwide. Of note, SHIELD I is one of the largest Phase 3 trials for the prevention of surgical site infections in colorectal resection conducted in over a decade. SHIELD I included close to 1,000 patients in total and was a prospective multinational, randomized, double-blind Phase 3 trial designed to assess the efficacy and safety of D-PLEX100 administered alongside the standard of care compared to a standard of care alone arm in the prevention of post-abdominal surgery incisional infections. The paper highlights key takeaways from SHIELD I that informed the execution of SHIELD II, including the compelling data generated in the pre-specified analysis of the subgroup of patients with surgical incisions greater than 20 centimeters. In these patients, significant improvements were observed in the primary endpoint, which was a combination of incisional SSI, incisional reinterventions, or all-cause mortality in the D-PLEX100 treated patients with a p-value of less than 0.01. Additionally, in the key secondary efficacy outcome, incisional SSI, a statistically significant reduction was observed with a p-value of less than 0.05. Exploratory analysis of additional secondary efficacy outcomes, including superficial SSI, deep SSI, all-cause mortality, time to adjudicated SSI, incisional reintervention, or any surgical intervention also show differences in favor of D-PLEX100 in the greater than 20-centimeter incisional length subgroup. Overall, the pre-specified and post-hoc analysis of the SHIELD I study suggests that D-PLEX100 may benefit patients with increased SSI risk, including those with lengthy incisions. I would also add that unlike SHIELD I, the currently enrolling SHIELD II is not being conducted under the tight COVID-related safety restrictions that were in place during the pandemic and significantly impacted the overall infection rate in the study.

Jonny Missulawin, CFO

Thank you, Ori. As of September 30, 2024, the company had cash and cash equivalents and short-term deposits of $9.5 million. We expect that our current cash balance will be sufficient to fund operations into the first quarter of 2025. However, I'd like to take a moment to review the terms of the two financing transactions closed in January and August of 2024 which provide the opportunity for our cash runway to be significantly expanded. Under the terms of the January 2024 financing, we have the potential to secure an additional $18.5 million if the unblinded interim analysis of SHIELD II trial results in the stopping of the study due to positive efficacy and all warrants are exercised. In addition, under the terms of the August 2024 financing, we have the potential to secure an additional $6.1 million if the unblinded interim analysis results in either the stopping of the trial due to positive efficacy or continuation to planned patient recruitment and all warrants are exercised. If all the warrants issued in the August financing are exercised, the company would be funded beyond top-line results. If all warrants issued in both January and August financings are exercised, the company would be funded into 2026. For both transactions, investors have 10 trading days to exercise their warrants following the interim outcome. Now let's turn to our income statement. Research and development expenses for the three months ended September 30, 2024 were $6 million compared to $3.8 million in the same 3-month period of 2023. The increase in R&D expenses was driven by the ramp-up in patient enrollment in the SHIELD II Phase 3 trial. Marketing and business development expenses for the same period were $246,000 compared to $261,000 in the same 3-month period of 2023. General and administrative expenses for the same period were $1.2 million, similar to the same 3-month period of 2023. For the three months ended September 30, 2024, the company had a net loss of $7.8 million as compared to $5.6 million in the third quarter of 2023.

Operator, Operator

We will take our first question. Your first question comes from Roy Buchanan from JMP. Please go ahead. Your line is open.

Roy Buchanan, Analyst

Thanks for taking the question. Just a couple of quick ones. SHIELD II, can you just give us a sense of the blinded infection rate in line with your expectations and just maybe a sense of what that is? And then can you just remind us what the bar is that you need to achieve to stop for efficacy on the interim?

Dikla Czaczkes Akselbrad, CEO

Roy, thank you. I can give you two points. First of all, it is in line with our expectations. But we are blinded, so we don't really know how the infection rate is divided between the two arms. However, we don't see anything alarming in terms of our expectations. I can refer to a report published by the CDC just last week, covering the hospital-acquired infection report for 2023, which indicates an infection rate change from 2022. The report indicated there was a 3% increase in SSI overall, with an 8% increase in specific surgeries like hysterectomy. This report is significant as it is the first indication in the U.S. of infection rates post-COVID. We anticipated a slight increase in infection rates, but we can't specify anything about the Phase 3 trial since we are blinded. This information is encouraging for the SHIELD II study.

Roy Buchanan, Analyst

Okay. That's helpful. And then maybe just on the heels of that, just what's the breakdown in patients U.S. versus ex U.S?

Dikla Czaczkes Akselbrad, CEO

Most of the patients are outside the U.S. You were also asking about the criteria needed for the interim analysis, which is a p-value of 0.01 or lower. We haven't given an indication of what effect will create 0.01 or less. However, if you look at SHIELD I, with the high-risk patient population, the long incisions are comparable in size to the interim analysis we are conducting now. In that study, we achieved an alpha level of - or a p-value of 0.0032 and an overall effect of 54%. This gives you a sense of what kind of effect will imply an early stop for efficacy at the interim.

Roy Buchanan, Analyst

Perfect. Thank you.

Operator, Operator

We will take our next question. Your next question comes from Chase Knickerbocker from Craig-Hallum. Please go ahead. Your line is open.

Chase Knickerbocker, Analyst

Good morning. Thanks for taking the questions. Maybe just to level set on what investors should be expecting on the interim analysis here, the resampling. Should we just be expecting that there's a press release with kind of the Data Safety Monitoring Board's recommendation as far as the path forward, whether that's resampling to 624 or stopping for overwhelming efficacy? Is it just a simple statement of fact that we should expect later this month or early December?

Dikla Czaczkes Akselbrad, CEO

Chase, thank you for joining us. It's exactly that. Whatever we hear from the DSMB Committee, they are unblinded, but we are blinded. They will provide a formal recommendation indicating whether we should stop due to efficacy, continue to the planned study of up to 630 or should we raise the numbers or consider futility—which is something we do not think is a possibility. We will issue a press release reporting what we've heard from the DSMB Committee this quarter.

Chase Knickerbocker, Analyst

Got it. And then nice to see the accelerating patient enrollment trends. Any reason not to expect that to continue? Regardless of the outcome, you've got a fairly robust pace of patient enrollment from here?

Dikla Czaczkes Akselbrad, CEO

No, nothing comes to mind. We have seen recruitment stabilize at about 80 patients per month since the end of the summer, which is very encouraging for us. Our clinical and regulatory teams put in substantial effort to ensure all centers are open, and we do not expect any significant changes. We still aim to recruit the last patient in December without being impacted by year-end vacations.

Chase Knickerbocker, Analyst

Great. Maybe just last for me. Any incremental conversations with KOLs in the space regarding the commercial opportunity for you guys? Can you elaborate on the unmet need in colorectal surgery and beyond?

Dikla Czaczkes Akselbrad, CEO

There are ongoing conversations, some as part of the clinical trial. Recently, our medical director visited U.S. centers to gather insights on their experiences in open colorectal surgery and the unmet needs they see. We have heard from various sources about the unmet need, particularly in the broader abdominal area. Surgeons and infection specialists alike report that a product like ours could significantly improve surgeries. We also recently discussed the health economics associated with such a product, considering penalties hospitals face. Interestingly, in interviews with a candidate we were considering, he noted that typically, he hears a mix of views on new products, but here he found no one saying this is not needed or wouldn't make a significant change. We see similar positive responses in the orthopedic area as well.

Operator, Operator

We will take our next question. The next question comes from Ram Selvaraju from HC Wainwright. Please go ahead. Your line is open.

Unidentified Analyst, Analyst

Hi there. This is Ram. I had a question regarding the commercial infrastructure you plan to establish for D-PLEX100 assuming it gets approved. Do you have any insights on the scale or potential commercial partners?

Dikla Czaczkes Akselbrad, CEO

Sure. Yes, thank you. As mentioned in the past, we are looking for a strategic partner to commercialize the product in the U.S. We are currently in discussions regarding this, and I expect those conversations to accelerate substantially once we have top-line results in the first quarter. There are not many assets like D-PLEX100 with such potential. So, our strategy is to commercialize D-PLEX with a partner. We are also exploring opportunities in other regions, and some discussions could mature before the end of the year.

Unidentified Analyst, Analyst

Great. That's really helpful. And speaking of areas outside of the U.S., what other principal regional markets do you think are of greatest value?

Dikla Czaczkes Akselbrad, CEO

D-PLEX100 has a global market. Surgeries and infection post-surgery are global issues. Besides the U.S. and Europe, valuable markets include South America, China, India, and Japan. Regions like Vietnam, Canada, Africa, and South Africa also represent significant opportunities, particularly where post-trauma infections are prevalent. A holistic solution that can be administered immediately, even at accident sites, could greatly benefit patients.

Unidentified Analyst, Analyst

That's great. And regarding regulatory submission to the FDA, do you have a timeline for that? How quickly do you think you could complete your submission after the SHIELD II trial completes?

Dikla Czaczkes Akselbrad, CEO

We have a detailed plan for the day we get the top-line results. However, we haven't publicly disclosed the specific timeline yet. Generally, we expect that with the breakthrough therapy designation we have and with the anticipated NDA submission, assuming we achieve top-line results in the first quarter, we anticipate submitting the NDA with the breakthrough therapy designation during 2026. More details will be provided as we get closer to that date.

Unidentified Analyst, Analyst

Great. Thanks so much.

Operator, Operator

Thank you. There seem to be no further questions at this time. I will hand back for closing remarks.

Dikla Czaczkes Akselbrad, CEO

Thank you for joining PolyPid's third quarter 2024 earnings conference call. We remain highly confident in our long-term prospects, especially the potential of our promising late-stage product candidate, D-PLEX100, and look forward to multiple upcoming potential catalysts. As always, we are grateful to our team members, shareholders, and all external partners for their commitment to our mission and support in continuing to advance toward 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.