Protalix Biotherapeutics Inc (PLX) 2020 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Second Quarter Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mr. Chuck Padala of LifeSci Advisors Investor Relations. Mr. Padala, you may begin.

Yes. Thank you, Jerry. Welcome to Protalix BioTherapeutics Second Quarter 2020 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Chief Financial Officer.

The press release announcing the results and the update was issued this morning and is available now on the Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release and this teleconference include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the U.S. Securities and Exchange Commission.

I will now turn the call over to Mr. Dror Bashan, CEO.

Thank you, Chuck, and welcome, everyone. Thank you for joining us today for the company's second quarter 2020 financial results and business update. Today, this call, during this one, I will provide an overview on the progress of our clinical programs and key corporate developments. Following my remarks, our Chief Financial Officer, Eyal Rubin, will review the company's financial results before we open the line for questions.

I'm pleased to report that the last several months have been very productive. We announced positive top line data from our Phase III BRIDGE study and importantly, a BLA for PRX-102 was submitted to the U.S. FDA on May 27 in 2020, of course, under the FDA's accelerated approval pathway. We accomplished these important milestones while facing the challenges caused by the COVID-19 pandemic, and I'm very much appreciative and proud for the dedication of our entire company shown during these unprecedented times to accomplish this entire -- to accomplish this goal. It is evidence of our commitments to advancing our ProCellEx development programs, achieving superior solutions for the treatment of underserved genetic disorders such as Fabry disease. Now please let me review the recent highlights in a little more detail.

On May 28, 2020, we have announced a very significant milestones for our company, the submission of a BLA for PRX-102 for the treatment of adult patients with Fabry disease to the U.S. FDA under the FDA's accelerated approval pathway. The BLA was submitted under FDA's accelerated approval pathway in collaboration with our development and commercialization partner, Chiesi Global Rare Disease (sic) [Chiesi Global Rare Diseases]. We are now awaiting a response from the FDA regarding the PDUFA date, which we expect, based on the FDA guidance, to occur any day. We also received the filing notification from the FDA, the 60-day filing notification. And in the meantime, we are working with Chiesi on the commercial launch preparation, and we hope to have more to say about that in the coming months.

The BLA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our completed Phase I/II clinical trial of PRX-102, including the related extension study succeeding the Phase I/II clinical trial of PRX-102; the interim clinical data from our Phase III BRIDGE study, which is a switch-over study; as well as safety data for our growing clinical studies of PRX-102, including extension studies. As mentioned above, the BLA includes an interim data from our Phase III BRIDGE clinical trial for PRX-102, for which we announced additional positive top line results following the completion of this study. This 12 months open-label single-arm switch-over study, evaluating the safety and efficacy of pegunigalsidase alfa, 1 milligram per kilogram infused every 2 weeks, met its main objective for safety and efficacy and indicated substantial improvement in renal function in both male and female patients switched from agalsidase alfa marketed by Takeda, known as Replagal, to PRX-102.

The study confirms our belief that PRX-102 could be an important part of the enzyme replacement therapy market and potentially offer the patients -- the Fabry patients a new treatment option for the Fabry disease. We are continuing our investigation of PRX-102 in Fabry disease in 2 additional Phase III studies: the BALANCE study, which is our confirmatory head-to-head double-blind study, where its interim analysis results will support our European filing at the first stage and will serve, once completed, to convert the expected BLA from accelerated approval to a traditional one. The second ongoing study is the BRIGHT study, which is an alternative dosing regimen study, for which we expect to publish top line results during the fourth quarter of this year, again, subject to COVID-19 pandemic illustration as it is going on worldwide. These 2 clinical trials will complete our overall Phase III development program for Fabry, which is a very, very robust one.

Now please let me turn to our pipeline. By the end of July, we announced a new nonbinding development and commercialization collaboration for PRX–110 with SarcoMed USA, intending to develop it for the treatment of Pulmonary Sarcoidosis, which is a rare disease caused by inflammation, usually occurring in the lungs and lymph nodes. SarcoMed was formed in 2017 to investigate chronic pulmonary inflammation seen in patients with Pulmonary Sarcoidosis. PRX-1010 (sic) [PRX-110] is a very promising therapy.

As we continue to expand and advance our pipeline of products, I want to highlight an important new addition to the company's research and development team. At the beginning of July, we have announced the appointment of Yael Hayon, Ph. D. as the Vice President, Research and Development. Yael is a great addition to our team and brings valuable perspective with her extensive experience and background in pharmaceutical R&D in both scientific operations, administrative functions. She will be valuable -- she will be a valuable asset to the company and will play a key role in our future success.

I also want to take the opportunity and thank our Founder, Dr. Yossi Shaaltiel, who retired as our previous Head of Research and Development. We thank Yossi for his scientific and [entrepreneurial] vision and his tireless efforts that led to this foundation, founding and building Protalix. We wish him a great success in the future.

Now before turning over to Eyal for an update on our financials. I want to say thanks to our employees for their tireless efforts, especially during the last 6 months of this COVID-19 pandemic and restrictions. While businesses are starting to open, the pandemic is still impacting businesses in Israel and globally. We are continuing to operate, and we have much to look forward in the next few months. We are very excited here by our progress, but even more excited by the nature in front of us.

With that, I will now turn the call over to Eyal to review our financials. Eyal, please?

Thank you, Dror, and thank you, everyone, for joining today's call. Briefly reviewing the financials for the 3 months ended June 30, 2020, we recorded revenue from selling of goods of $3.6 million compared to revenues of $3.4 million for the same period of 2019. Revenue from license and R&D services for the 3 months ended June 30, 2020, were $7.3 million compared to revenue of $8.8 million for the same period of 2019. Revenues from license and R&D are comprised primarily of revenues we recognized in connection with our license and supply agreement with Chiesi. The decrease is primarily due to the completion of 2 out of the 3 Phase III clinical trials of PRX-102 as well as lower costs related to our Phase III BALANCE clinical trial of PRX-102 for the treatment of Fabry disease.

Cost of goods sold for the 3 months ended June 30, 2020, were $1.8 million compared to $2.7 million. The decrease is primarily due to a change in cost structure as well as lower royalties paid to the Israeli Innovation Authority.

R&D expenses for the 3 months ended June 30 were $9.2 million compared to $13.3 million for the same period of 2019. The decrease, as I previously mentioned, was primarily due to the completion of 2 out of the 3 Phase III clinical trials, reduced costs related to our Phase III BALANCE clinical trial as well as a decrease in costs related to manufacturing of our drug in development. And some of those manufacturing drug [AR] costs have been recorded as inventory already. We expect research and development expenses to continue to be up from our primary expense as we enter into a more advanced stage of preclinical and clinical trials for certain of our product candidates, as Dror mentioned.

SG&A expenses were $2.2 million for the 3 months ended June 30, 2020, compared to $2.1 million for the same period in 2019. At June 30, 2020, our cash, cash equivalents and short-term bank deposits were approximately $40 million compared to approximately $17.8 million on December of last year.

I will now turn the call back to you, Dror.

Thank you, Eyal. So we have had a very productive first half of 2020, and we are excited about the rest of this year. It is rewarding to see the progress we have made on the development of a life-saving drug, utilizing our special technology in Protalix.

With that, I would like to thank everybody, and we'll open the line for questions, please.

(Operator Instructions) Ladies and gentlemen, we have a question from Mr. Pachaiyappan of H.C. Wainwright.

This is Boobalan dialing in for Ram Selvaraju. Can you hear me okay?

Yes, we hear you well.

Okay. So I wanted to start off by requesting your comments on Elelyso sales. So how did COVID-19 affect the sales of Elelyso during 2Q '20 versus 1Q '20? And then maybe if you can give me some quantitative metrics, that will be helpful. And do you expect significant headwinds for the remainder of the year? And if so, what kind of strategy you have in place to mitigate the COVID-19-related impact on Elelyso sales in Brazil?

So thank you for the call. I have to say that so far, during the first half of 2020 and comparing the 2 quarters, yes, we don't see any impact of COVID-19 on our sales based on the forecast and the shipments that were already released. We believe that 2020 is going to be in the same neighborhood as 2019. So all in all, we can say that for now, at least, we don't see any impact. We took various measures to make sure that we switch patients to home care. And we're monitoring, obviously, the impact and the pandemic very closely. So at this point, there's nothing really to report.

Okay. That's very helpful. So I want to switch gears a little bit. So let's assume PRX-102 is approved by the FDA by the end of this year. And how soon will the drug be launched in the U.S.A.? And then I wonder whether you have any thoughts related to pricing? And whether the pricing would be at a discount to Fabrazyme? Or would it be at a premium to Fabrazyme?

So thank you for that. So once we receive the PDUFA letter, we will know when is the expected approval date. And I assume the drug will be launched shortly after.

As for pricing, this is something which is with Chiesi. They are our commercial partner, actually our global partner for sales and marketing. And this is not -- to the best of my knowledge, is not done yet. And I'm sure that we will update accordingly once we know something.

Okay. That's very helpful. Yes, and then with respect to the SarcoMed collaboration, so what can you say beyond what's stated in your opening remarks? And when would the nonbinding term sheet be converted into a binding contract? Will any financial details be disclosed at a later date? And yes, I have some follow-up on that.

Yes. So thank you for the question. We are working on, obviously, the full license agreement. Once it's going to be ready to publish, the company, we will obviously issue a press release.

And with regards to the financial terms of the deal, I guess that they -- like most of those licensing deals, the financial terms are going to be redacted. Other than this, I guess that the parties will have to agree, if and when we will disclose those financial aspects of the agreement.

Okay. And with respect to the same question, does this potential license cover only Pulmonary Sarcoidosis? Or does it include other indications?

It's only for Pulmonary Sarcoidosis. Yes.

They have options for additional indications. But right now, this is the main development, and this is the main effort.

And how strongly capitalized is SarcoMed? And what is the extent of the clinical development plan that SarcoMed intends to pursue with PRX-110?

As you know, SarcoMed is a private company, so -- and we signed an agreement. If indeed the full license agreement will be signed, it means that for this, we will not sign a full license agreement if there is no backup -- financial backup on SarcoMed to move on this indication forward.

Okay. One -- okay, sorry.

Excuse me?

Sorry, sorry, yes. Sorry, go ahead.

No. Just -- again, just to emphasize, a full license agreement will be signed, I mean, with many other terms and conditions on both sides, of course. But clearly, after we will verify that there is enough resources, if I may say, to move this product forward into a later clinical stage, of course.

Okay. And one final from me. This is the last one. How should we think about modeling the R&D cost for the remainder of the year?

Can you repeat the question? I could hardly hear you. I'm sorry.

How should we think about modeling the R&D cost for the remainder of the year?

Yes. So thank you for the question. The R&D cost, they should stay in the same pace as the first half, but obviously, gradually, it's going to keep on decreasing. Don't forget that as more and more patients are being switched from the main studies to the extension studies who are fully funded by Chiesi, obviously, the R&D expenses that we record are lower, hopefully. And so far, we haven't seen any material impact of the COVID-19. So hopefully, if that stays the same, you will see a decrease in R&D expenses over time, until all the patients are going to be switched to the OLE, and then the only R&D expenses are going to be on our pipeline. Obviously, as Dror mentioned, we are working to advance the pipeline. So you might see an increase there. But again, nothing that you can compare to a full-fledged Phase III, actually 3 clinical trials Phase III that we conducted in the last couple years.

Ladies and gentlemen, there are no further questions at this time. I'd like to turn the floor back over to Mr. Dror Bashan, CEO, for closing remarks.

So thank you for that. And all I have to say is thank you for the time. We were pleased to report our results, and we are optimistic to have very soon the PDUFA letter from the FDA and to continue our progress of the clinical program and report accordingly. So thank you, and be safe, everybody.

This concludes today's teleconference. You may disconnect your lines at this time. And thank you for your participation.