Earnings Call Transcript - PYPD Q4 2024

Operator, Operator

Greetings, and welcome to the PolyPid Fourth Quarter 2024 Conference Call. As a reminder, this call is recorded. 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 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 12-months ended December 31, 2024. 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 potential efficiency of D-PLEX100 and the probability of success of the trial that the gross proceeds from the company's recent financing extend the company's cash runway into the third quarter of 2025 beyond the expected top-line results from SHIELD II. The expected timing for completion of enrollment of the SHIELD II trial, the expected timing for top-line results from the SHIELD II trial, potential NDA submission, accelerating preparations for regulatory submissions and pre-launch activities, potential clinical benefits of D-PLEX100, potential market size for D-PLEX100 in the United States, potential partnership opportunities, potential benefits from the collaboration with ImmunoGenesis, that the exercise of the warrants from the pipe in full would result in an additional $27 million in gross proceeds, that the proceeds of all warrants issued in the pipe, if exercised, would provide the company with capital beyond NDA approval, opportunities for the use of D-PLEX100 in additional procedures, and the company's long-term prospects. 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. The company's 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 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. 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 12, 2025. With the completion of those 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 fourth quarter and full year 2024 earnings conference call. We are very pleased with the recent critical advancements in our business, most notably, as it relates to the recommendation by the independent Data Safety Monitoring Board or DSMB to conclude the SHIELD II Phase 3 trial assessing the efficacy of D-PLEX100 for the prevention of surgical site infections in patients undergoing abdominal colorectal surgery upon enrollment of 800 patients, which is the lowest sample size reassessment staff after the minimum planned number of patients. We view the DSMB's recommendation to conclude SHIELD II upon the enrollment of 800 patients as a favorable outcome, as it is suggestive of positive efficacy signals from D-PLEX100. As a reminder, the data generated from SHIELD II to date remain fully blinded to PolyPid and others outside of the DSMB until top-line results are available. As previously reported, we concurrently announced that we entered into a securities purchase agreement for a private placement financing, led by existing institutional shareholders for $14.5 million in gross proceeds. The gross proceeds from the financings extend PolyPid's cash runway into the third quarter of 2025 beyond the expected top-line results from SHIELD II. More on this transaction in a moment. First, however, some further discussions around the DSMB recommendation and our planned next steps. Most importantly, the sample size reassessment is an opportunity to ensure the study has sufficient power to conclusively confirm D-PLEX100's treatment benefit, and we believe this increases the trial's overall probability of success. The study has enrolled over 700 patients to date and at the current enrollment rate of roughly 20 patients per week, we expect to complete enrollment of SHIELD II next month. We anticipate reporting top-line results in the second quarter of 2025. Upon potential positive Phase 3 data, PolyPid expects to submit a new drug application or NDA with the advantages of Fast Track and Breakthrough Therapy designations. We are thrilled to welcome Mr. Yitzchak Jacobovitz to the company's Board of Directors. Mr. Jacobovitz is a partner and a lead healthcare analyst at AIGH Capital Management and Affiliates, the lead investor from the December financing. He is also a board member at Myomo Inc. Mr. Jacobovitz earned his MBA from Johns Hopkins University and is a Chartered Financial Analyst. We look forward to completing the trial and are focused on accelerating preparations for our regulatory submissions, pre-launch activities, and expediting partnership discussions in and outside of the United States. I will now turn the call over to Ori to discuss market potential, partnering efforts, and our recently announced technology collaboration. Ori?

Ori Warshavsky, CFO

Thank you, Dikla. I would like to provide some additional color on our market potential for D-PLEX100 and our related partnering discussions. We believe the total addressable market for D-PLEX100 in the U.S. is just over 12 million surgeries per year based on IQVIA data, the leading industry source on procedure and prescription data. There are approximately 4.4 million abdominal soft patient surgeries annually, both open and minimally invasive procedures, principally comprised of hernia repair, appendectomy, and colorectal surgeries. We also believe there is an opportunity for the use of D-PLEX100 in an additional $2.1 million abdominal procedures in gynecology and urology, including hysterectomies and related procedures. Other D-PLEX100 potentially relevant surgeries, which either have high SSI rates or have high clinical and financial costs, if an infection develops, include sternotomies and joint replacements. According to the CDC, SSIs are a substantial cause of morbidity, prolonged hospitalization, and mortality. It is reported that SSI accounts for 20% of all hospital-acquired infections and is associated with a 2 to 11 fold increase in the risk of mortality, with 75% of SSI-associated deaths directly attributable to the SSI. SSI is the most costly hospital-acquired infection type with an estimated annual cost of $3.3 billion and extends hospital length of stay by 9.7 days, with the cost of hospitalization increased by more than $20,000 per admission. A CDC report published in November 2024 tracking hospital-acquired infections in over 3,000 hospitals showed an increase of 3% in SSIs across all surgeries in 2023, as compared to 2022. The outcome of this report confirms what we have seen in our own clinical data: a reduction in SSI in the COVID years and subsequently an increase in SSI post-COVID. Collectively, this market data reflects a large and broad unmet need and commercial opportunity for D-PLEX100 in the U.S. without even considering the more substantial global market. If approved, D-PLEX100 could potentially significantly transform the surgical landscape, where postoperative SSIs remain a costly problem. Turning to our partnering efforts, we remain in active discussions with several potential partners for the commercialization of D-PLEX100 in different regions, with the U.S. being our priority after the exclusive licensing agreement already signed with Advanced Pharma for Europe. Following the recent interim results and DSMB recommendations, we have seen an uptick in discussions with potential partners, and just as important, a positive shift in the tone of those conversations. We are also focused on partnering efforts centered on our proprietary drug delivery technology that enables controlled and prolonged intratumoral drug delivery. As such, last December, PolyPid and ImmunoGenesis, a Houston-based, clinical-stage biotechnology company, announced a research and development collaboration focused on combining PolyPid's technology with ImmunoGenesis’ potent STimulator of INterferon Genes or STING agonist drug candidate to enhance treatment for solid tumors. STING agonists are very potent but have a short half-life in the tumor microenvironment, limiting their ability to shrink tumors when administered alone. This collaboration aims to take advantage of prolonged drug release enabled by our delivery technology, with the goal of enhanced STING antitumor activity. This strategy could potentially overcome existing challenges of uneven distribution and limited exposure in dense tumor tissues while enhancing immune cell infiltration and activation within the tumor microenvironment. We believe this collaboration could create a cutting-edge approach to immuno-oncology and will continue to explore additional opportunities to bring value to innovative partnerships. With that, it is my pleasure to now turn the call over to Jonny to review the financials. Jonny?

Jonny Missulawin, CFO

Thank you, Ori. We are thrilled to advance each of our initiatives from a significantly enhanced financial position. As of December 31, 2024, the company had cash and cash equivalents of $15.6 million. We expect that our cash flow will be sufficient to fund operations into the third quarter of 2025. Now let me briefly review the highlights of the private placements we recently entered into with existing investors for $14.5 million in gross proceeds. The investors also received warrants, which will expire upon the earlier of 9 months from the date of issuance and 10 trading days following our announcement of top-line results. Exercise of the warrants in full would result in an additional $27 million in gross proceeds. Proceeds of old warrants issued in this transaction exercise would provide the company with capital beyond NDA approval. We believe that the participation in this transaction from a leading group of life sciences-focused existing investors is indicative of the substantial transformative potential of D-PLEX100. We are grateful for this continued demonstration of confidence and support. Now let's turn to our income statement. Research and development expenses for the 3 months ended December 31, 2024, were $7 million compared to $4.6 million in the same 3-month period of 2023. R&D expenses in the most recently completed fourth quarter were driven by the ramp-up of the ongoing SHIELD II Phase 3 trial. For the full year ended December 31, 2024 and 2023, R&D expenses were $22.8 million and $16.1 million, respectively. Marketing and business development expenses for the fourth quarter of 2024 were $0.2 million compared to $0.2 million during the prior year period. General and administrative expenses for the fourth quarter of 2024 were $1 million compared to $1.2 million recorded in the same 3-month period of 2023. For the fourth quarter of 2024, the company had a net loss of $8.5 million as compared to $6.4 million in the fourth quarter of 2023. For calendar year 2024, the company had a net loss of $29 million compared to a net loss of $23.9 million in the full year 2023. With that, we will now open the call to your questions. Operator?

Operator, Operator

We will now take our first question from Roy Buchanan from JMP.

Roy Buchanan, Analyst

I just wanted to start by asking about your expectations for the label, assuming the data is positive, which we expect. Additionally, could you elaborate on how you plan to target the different segments and your readiness for commercialization?

Dikla Czaczkes Akselbrad, CEO

Thank you. Our expectation is that initially, we will have labeling for both the U.S. and Europe that focuses on abdominal surgery. This is how we plan to launch the product generally, potentially concentrating more on larger incisions or similar situations. This reflects our expectations, and we have a comprehensive plan in place for further expansion. Now, regarding commercialization and marketing efforts.

Roy Buchanan, Analyst

Yes. Yes.

Ori Warshavsky, CFO

Yes, I'll take it. There are two parts to the sensor. As we mentioned, about half of the total addressable market relates to soft tissue, including abdominal, gynecology, urology, and areas such as C-section and breast reconstruction. From our perspective, it's crucial to find a strong partner who can engage effectively with surgeons, pharmacy directors, and infectious disease specialists. We recognize that selling into hospitals is a complex task, and having the right partner is essential. This is a priority for us — to identify a partner who can facilitate meaningful discussions. It will be a gradual process; we're not expecting all 12 million surgeries to happen at once or even just in the abdominal area. We're beginning with colorectal surgeries and will expand as Dikla mentioned in relation to the label. Based on my conversations with surgeons, I've noticed that once our product is on formulary, they understand that incisions made for colorectal resections or appendectomies are essentially similar. Once it's included in the formulary, they tend to use it more broadly and gain experience with the product.

Operator, Operator

We will now take the next question from the line of Chase Knickerbocker from Craig-Hallum.

Chase Knickerbocker, Analyst

Can you provide a general idea of how similar the subsequent 270 patients are compared to the baseline characteristics, such as the geographies of the facilities enrolling these patients, when compared to the initial 200 to 430 that informed the interim analysis? I’m trying to understand how similar these patients are to those in the interim analysis from a baseline perspective.

Dikla Czaczkes Akselbrad, CEO

Sure. Thank you for the question. So it is in line with our expectation. We outlined it so we don't really know how the infection rate is divided between the two arms. But we don't see anything that is alarming us in a sense that it is not in line with our expectation or what we've seen up until now along the recruitment and in the interim. Again, also the interim was blinded, but overall; and in terms of geography, again, it's very similar since all the centers were open and recruiting at the time that we recruited the patient for the interim data. So we don't have new geographies or new centers so this is also continuing. We are very pleased with the rate of recruitment. And I expect that within a few weeks, we will be announcing last patient team.

Chase Knickerbocker, Analyst

Great. So yes, regarding those enrollment dynamics, you have returned to about 80 patients per month after the slowdown around Christmas and the holiday season. On the readout timing, for the primary data we need to consider a 30-day follow-up, followed by approximately one or two months for data cleanup and typical processes. If enrollment is completed next month, we can anticipate the top-line readout around late Q2.

Dikla Czaczkes Akselbrad, CEO

Yes. Yes. Very confident. I would expect that we will be announcing in March, hopefully, at the beginning of the first half of March, last patient in. And from that point, exactly, as you said, two months for a follow-up or one month for follow-up for the primary and sometimes for the cleaning of the data. So a quarter from the time that we announced last patient in; this is around the time that we will be announcing top-line results.

Operator, Operator

We will now take the next question from the line of Ram Selvaraju from H.C. Wainwright & Co.

Ram Selvaraju, Analyst

Firstly, on the commercial front, I was wondering if you could give us some more insight into what you expect the properties of an ideal commercial partner to be specifically in the U.S. for D-PLEX100. And also, if you could give us some sense of if we think about the hypothetical ideal scenario, how the responsibilities might be divided between yourselves and a potential commercial partner. Would you expect to have any involvement in sales and promotional activities? If so, in what specific sales and promotional activities would be targeted to a specific subpopulation of prescribers, for example? And also, if you could elaborate on the extent to which you expect to have sole control over the manufacturing and supply of D-PLEX100 for the U.S. market.

Dikla Czaczkes Akselbrad, CEO

Thank you, Ram. The ideal partner is one that has a presence in the surgery suite and the hospital, frequently visiting the surgeon. A larger sales force in these areas is advantageous. Companies that fit this profile can generally be categorized into two groups: large pharmaceutical companies and large medical device companies. Both are strong partners and have shown interest in addressing surgical site infections as part of their growth strategy. Recently, we have seen the approval of new products and treatments in hospital-acquired infections that had not been introduced in years. These products are being well-received by clinics and hospitals, and we see ourselves leading the way in surgical site infection alongside these new launches, even as we explore other avenues not directly associated with SSI. Regarding manufacturing, we are prepared to produce the product ourselves. We consider this one of our strengths as an integrated biopharma company. We have invested considerable time and resources to reach this stage, knowing that getting ready for commercial production requires commitment. About 1.5 years ago, we underwent a GMP review for commercial readiness by both European and Israeli health authorities, and we are now preparing for FDA inspection after submitting the NDA. This is a favorable position for us. Our manufacturing process is unique and specialized, and we believe this gives us a competitive edge. Ori, would you like to briefly discuss what responsibilities we expect to retain and what will fall to our partners?

Ori Warshavsky, CFO

Yes. I'll take it. I believe much of this will depend on the partner and their capabilities. In an ideal scenario, we would like the partner to handle day-to-day activities, such as the sales representatives and medical science liaisons who interact with the hospitals. Our role would focus on a global perspective, which includes expanding indications, overseeing global medical activities, publications, and conducting health economics and outcomes research. Looking ahead, there is considerable potential for D-PLEX beyond just prevention. Essentially, in terms of traditional pharmaceutical operations, global marketing, global medical affairs, and global health economics and outcomes research will remain with us, while the day-to-day activities on the ground will be managed by the partner.

Ram Selvaraju, Analyst

That's very helpful. I have two quick questions regarding R&D. Could you remind us of some of the existing approved APIs you have knowledge of, along with data evidence, that your platform could effectively reformulate, potentially reposition, and optimize beyond D-PLEX100? Also, could you elaborate on your collaboration with ImmunoGenesis? What specific clinical development activities are currently ongoing with their candidates, and how do you envision integrating your technology into future development plans for that candidate? Additionally, how broadly do you expect to develop that asset, and in combination with what drugs? You previously mentioned that STING agonists have historically been challenging as monotherapy due to their short half-life. Do you believe that pairing the ImmunoGenesis candidate with your platform could enable better combinations with other existing approved treatments, like checkpoint inhibitors, for solid tumors?

Dikla Czaczkes Akselbrad, CEO

Thank you. Regarding the D-PLEX platform and the drugs we've worked on, I can only discuss those that are public. We do have some new programs in our pipeline around approved drugs and known compounds that haven't been disclosed yet. For instance, we've worked with chemotherapy and have OncoPLEX related to it. In the past, we've also explored growth factors, steroids, and analgesics, all of which have been preclinically tested in vivo and in vitro. I believe there is significant potential here that we have only just begun to explore. This is the extent of what I can share publicly. Additionally, we've done some preliminary work with unproven options like siRNA, certain peptides, and proteins. In terms of the D-PLEX platform's capabilities, we have all of that in our toolkit, and we've been developing new areas over the past two years. We are looking forward to sharing top-line results with investors and progressing further, possibly in collaboration in marketable sectors, which will illustrate the D-PLEX potential. For the STING agonist, while it has a short life and is quickly released from tumors, we believe that, combined with STING’s strong immune response, delivering the drug directly to the tumor site and maintaining prolonged exposure could address these issues. ImmunoGenesis also sees this approach as a way to enhance drug efficacy, potentially in conjunction with other treatment modalities. We believe that the best outcomes for patients will come from combinations with immune checkpoint inhibitors. As we move into preclinical development, we will also consider this in collaboration with ImmunoGenesis to determine the most effective model for demonstrating the efficacy of the combination.

Operator, Operator

We will now take the next question from the line of Brandon Folkes from Rodman & Renshaw.

Brandon Folkes, Analyst

Congratulations on all the progress. Maybe just firstly for me, you talked about the potential label language, right, being sort of maybe just abdominal surgery or large incisions. Can you just talk about the pushes and pulls that we should expect in terms of the different label language possibilities? Is it just how compelling the Shield II results are how much color do you think you get sort of post Shield II in terms of whether the label may be going or how much color partner may get post Shield II you versus sort of this just being regular way, you submit the NDA for the broadest indication and sort of during regular way approval process kind of that's where you get the color on the label.

Dikla Czaczkes Akselbrad, CEO

I'm not certain I captured all your points, as there was a gap in the connection. If I've overlooked anything, please Brandon, feel free to elaborate. The key aspect is the Phase 3 data and its effectiveness. As you may remember, in SHIELD I, we had a pre-specified subgroup that serves as the foundation for SHIELD II, which showed an effect on re-intervention and mortality. This could also affect the agency’s perspective on the data. In this study, we also have a group of patients who are not included in the primary endpoint but underwent smaller incisions, with about 170 patients in SHIELD II not part of the primary. They are in addition to the 800 in the primary group who had smaller incisions. We will need to review the data with the agency, but our intention is to meet with the FDA soon for a pre-NDA meeting. Once we meet with the agency, we will also initiate discussions about the label and potential label expansion.

Brandon Folkes, Analyst

That's very helpful. And then maybe just secondly, just a bit more sort of strategically, post the partnership, how do we think about PolyPid's capital allocation and development strategy? Obviously, we expect you to sort of deploy funds into future development of new indications across the platform, which you partner out. But do you look to take those molecules through the approval process as you've done with D-PLEX100? Or do you look at perhaps a partnering strategy at an earlier stage, given the validation that D-PLEX100's approval would bring to the platform?

Dikla Czaczkes Akselbrad, CEO

Thank you for the question; it's very important to emphasize this point. We are considering earlier partnerships not only because of the validation we received from D-PLEX100 but also because we are focusing on areas for our next initiatives where pharmaceutical companies have been engaging in partnerships at an earlier stage. Our goal is to establish these partnerships sooner and have the majority of the clinical development work handled either by the partner or in collaboration with them.

Brandon Folkes, Analyst

Congrats on all the progress.

Operator, Operator

Thank you. I would now like to turn the conference back to Akselbrad for closing remarks.

Dikla Czaczkes Akselbrad, CEO

Thank you for joining PolyPid's fourth quarter and full year 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 enrollment completion and top-line results. 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 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.