Protalix Biotherapeutics Inc (PLX) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Inc. Second Quarter 2017 Financial Results and Corporate Update Conference. (Operator Instructions) As a reminder, today's program may be recorded.

I would now like to introduce your host for today's program, Yossi Maimon, Chief Financial Officer. Please go ahead.

Thanks, Jonathan. Thank you, everybody. Good morning and welcome to the Protalix BioTherapeutics first half of '17 earnings results and corporate update. With me today is Moshe Manor, our President and CEO. Just like to remind you that we have just issued a press release announcing the results, which is now available on our website.

Also we'd like to remind you to take a moment to read the disclaimer about forward-looking statement in the press release, the earnings release and this conference call includes some forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the US SEC, the Form 10-Q we will file for the second quarter of '17 will also include the detailed discussion of applicable risk factor, as well as our 10-K that we have filed for 2016.

With that, I will turn the call to Mr. Moshe Manor.

Thank you, Yossi. Good morning and thank you for joining us. I'm delighted to be here today to discuss the progress Protalix has achieved over the past few months. We have been able to continue our momentum in the second quarter with enrollment progressing for Pegunigalsidase, which is PRX-102 and now Oral PRX-106, deepening partner discussions for Alidornase PRX-110, recording additional sales in Brazil and most recently completing a refinancing and financing to preserve the Company's cash runway into 2019, following the conversion of note that were paid out in cash during the first quarter.

On today's call, we will first review our earnings result for the first six months of 2017 and then provide a brief corporate update. I will now turn the call over to Yossi to review the Company's financials.

Thanks, Moshe. So let's begin. For the six months ended June 30, 2017, we reported a net loss of $20.6 million or $0.16 per share, excluding onetime non-cash charge of $38.1 million in connection with the re-measurement of an embedded derivative, compared to a net loss of $19.5 million or $0.20 per share for the same period in '16.

The conversion feature as you may recall from the last quarter we discussed, for the Company's 7.5% convertible note was [accounting] for as a derivative until April 12. On that date, we basically got the shareholder approval for the nice market 20% rule. The derivative was separated from the debt component of the convertible note and was measured at fair value in each of the different cut off period.

Given the fluctuation in our share and as a result notes fair value, the derivative was increased or decreased against a non-cash charge to the P&L through April 12. Following date, after the shareholders meeting approval, the derivative was reversed in its entirety into the shareholders' section and will not be re-measured again and will not figure any additional non-cash charges going forward.

We recorded total revenues of $9.2 million for the period, compared to $2.4 during the same period in '16. The increase is attributed mainly to the increase in sales of drug that we have shipped to Brazil and from drug substance that we have sold to Pfizer.

R&D expenses were $15.2 million (sic -- see press release, "$13.5 million"), compared to $17.3 million (sic -- see press release, "$13.8 million") for the same period in '16. Selling General and Administrative expense were $5.4 million, compared to $4.2 million incurred in the same period in '16. The increase is mainly attributed to the increase of activities in Brazil.

As of June 30, we had $34.5 million of cash and cash equivalents, and in July, we added additional $10 million from the debt financing we recently announced. During the six months ended June 30, we had investors converted approximately $10.8 million of the 7.5% notes, of those about $7.7 million of face value were settled for approximately $11 million in cash, which includes accrued interest and make whole payments. This was prior to us having the approval for the 20% rule and going forward conversions will be completed in stock. With that conversion, we decided to make ourselves whole by reloading and issuing additional $10 million of the 7.5% notes, which allows us to keep the same run way of 2019.

Also just recently, a principal amount of $3.6 million of the 4.5% convertible notes due 2022, which have refinanced have been converted to about 4.2 million shares. That happened after the refinancing.

At this point, I'd like to maybe take a chance and recap where we are and in terms of total face value of convertible notes that we have. So we have $5.9 million or 4.5% maturing in September '18; we have $61.9 million, 7.5% maturing in November '21; and we have $5 million, 4.5% maturing in 2022.

Also maybe I'd like to take this chance to walk you through and explain what these notes and the conversion mean in terms of dilution. All of these notes that we have just mentioned represents approximately potential 85 million shares upon conversion, which we believe the market basically took into account upon issuance as it's the case usually with all convertible notes being priced. Going forward, any conversion for us is a positive event as debt is reduced and turned into equity and this has already been priced in as I said.

And with that, I will turn the call back to Moshe, who will provide an update on our clinical programs.

Thank you, Yossi. Starting with our lead product candidate, PRX-102 for Fabry Disease, we are making great progress with all three clinical trials, where enrollment is ongoing in over 25 active clinical sites globally with most in the U.S. Of significant interest we can share with you today that today all patient switching from pegunigalsidase -- to pegunigalsidase from Fabrazyme in the Balance study has been made with excellent tolerability and without any infusion reaction observed. This is an important piece of information and a new piece of data for us as we have seen great safety results from naive patient only and seeing this excellent trend in patient switching from a different ERT is reassuring.

Also another important milestone is our clinical trial is that an increasing number of patients in our studies have been moved to home care therapy following successful initial infusion period in the infusion center. This is yet another important indicator as the PIs in the study are becoming increasingly confident in our product candidate, safety profile and the tolerability of the patient to safely switch from a different ERT to our drug.

This quarter, we also received FDA approval for our manufacturing facility to develop not only our current commercial drug to treat Gaucher Disease, but also our clinical drug candidate PRX-102 to treat Fabry Disease.

We are very confident and extremely optimistic regarding the potential of our drug candidate to become the drug of choice for all Fabry patients globally with both the potential and superiority in our once every two weeks infusion with our 1 milligram per kilogram dosing regimen and the maintenance of clinical stability with our once monthly 2 milligram per kilogram regimen.

Turning to PRX-110, our CF product as I mentioned earlier, our Phase 2 data was recently the subject of an oral presentation at European Cystic Fibrosis Society Conference. The data was not only well received but also gave us great exposure among the physician industry and patient communities and has been instrumental in our interaction with the Cystic Fibrosis Foundation and other potential industry partners.

I'm really excited to report that we have concluded a big step in the engagement with the Cystic Fibrosis Foundation as they reviewed and approve our letter of intent application enabling us to fight for a grant funding to support the development of PRX-110.

[We feel] discussing with multiple potential industry partner has also deepened and thus we are making very good focus on this front. We strongly believe in the potential of PRX-110 to improve the quality of life of patients leading with CF and look forward to the continued development of these assets alongside a strong partner in the space.

Next, I want to discuss our commercial product, alfataliglicerase, for the treatment of Gaucher Disease and the progress made to date with our activity in the Brazilian market. As everybody knows, Fiocruz submitted a letter of intent to purchase approximately $24 million of drug product; and on March 22, we received a formal purchase order of $24.3 million of drug product. Shipment of approximately $3.6 million of the product was completed in June with an additional shipment of $1.3 million completed in July and $2.2 million scheduled to be shipped later this quarter.

According to the purchase order received by the company, additional shipments are scheduled to be made during fourth quarter. We are working closely with Fiocruz and our people on the ground and engaging with patient advocacy group and treating physicians.

We look forward to updating you on our next quarterly call with our continued progress both on the clinical and business development front. As we continue to execute on our goal of bringing improved [and other version] of existing drugs to patient as rapidly as possible.

I will now turn the call over to the operator to take any questions you may have.

(Operator Instructions) Our first question comes from the line of Unidentified Participant from Rodman & Renshaw. Your question please.

Hey, this is [Mitchell] on for Ram. Thank you for taking our questions. My first question is when does the company anticipate moving PRX-110 into late stage comparator controlled trials in cystic fibrosis?

Can you please repeat your -- we can't -- barely hear you.

Yes. When does the company anticipate moving PRX-110 into a late stage comparator controlled trial in cystic fibrosis patients?

Yes, we actually are now in discussion as we pointed out with -- both with preparing with the regulatory and with our medical advisory board to design the best, what should be the best study and based on the discussion, [it was then] and our discussion with partner, we'll take decisions on the next phase, Ram.

Okay. And how does the FDA's decision on permitting the NDA submission for Galafold potentially impact the regulatory timeline for completion of development and possible marketing authorization for PRX-102 to treat Fabry Disease?

Well, I think this is a positive development from our side whereas we see the FDA is more open and more flexible in terms of bringing new product based on the need to bring new products to the market. So based on what we understand now, it would provide us the opportunity to actually engage with the FDA after they say once we have the interim analysis also and to talk about earlier submission after one year -- with one year data.

Okay. And what's likely to be the cost of the pivotal development of PRX-102?

So, the total cost of the trial for the development, we estimate it to be in the neighborhood of $40 million fully loaded all the way through approval.

Thank you. Our next question comes from the line Peter Welford from Jefferies. Your question please.

Thanks for taking my questions. Just speaking first of all is the 102, wondering if there are any final thought to go to the FDA ahead of time, the interim data, to understand the potential [cultures of pools] that maybe needed for them to consider as the [passage] or would you only consider going to the FDA once the interim data are in hand next year?

And then on the finances, I just wonder if you could I guess talk a little bit about -- it looks as though the shipments to Pfizer were particularly high this quarter if I think 3.6 million were to Brazil, presumably the balance were to Pfizer this quarter. Is that just phasing or should we read anything into that? And can you also then perhaps talk about why the COGS as well was relatively high this quarter compared to what we've seen in prior periods? Thank you.

Sure. Thanks, Peter, for the -- it's Yossi, I'll try to take these questions one at a time so.

The first one, I think it's a good question. I think that our current thinking is to generate the data first, set of data and once we'll have the one-year data from the Balance study, by that time, we will have longer term data from the Phase 1 to additional data from other studies. I think that that will give us a very robust set of data to go into the FDA and see how we can proceed. So that's with -- in connection with the FDA. So we see it as a very positive change in the FDA recently. And I think it's good for us and for the entire Fabry community.

As for the shipments that we're shipping to Pfizer, the way to think about it is basically we're selling, we're building up inventory. Pfizer is doing -- is one of our supplier for the lyophilization for the fill and finish process. So the way we do it is we sell it to Pfizer and then we buy it back from Pfizer when it's a fully packaged vial, so some these increased revenues that you see coming from Pfizer basically is kind of an inventory buildup if you will for the shipments -- for future shipments into Brazil. Directly related to that, the COGS is higher because those shipments that we're making through Pfizer are basically done at cost with a de minimis gross profit on those.

Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.