Protalix Biotherapeutics Inc (PLX) 2021 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Third Quarter 2021 Financial Results and Business Update Conference Call. As a reminder, this conference is being recorded.

I would now like to turn this conference over to your host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. Thank you. You may begin your presentation. .

Thank you, Laura. Welcome to the Protalix BioTherapeutics Third Quarter 2021 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Chief Financial Officer. A press release announcing the results and the update was issued this morning and is available on 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 the statements made. Factors that could cause actual results to differ are described in the disclaimer and in Protalix' filing with the U.S. Securities and Exchange Commission.

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

Thank you, Chuck, and welcome, everyone, to the company's Third Quarter 2021 Financial Results and Business Update Call. During the call today, I will review the progress of our key clinical programs and provide an update on our strategic road map for the remainder of 2021 and beyond. Following my remarks, our Chief Financial Officer, Mr. Eyal Rubin, will review the company's financial results before we open the line for questions.

In September of this year, Protalix and our partner, Chiesi, participate in a tight planned meeting with the FDA, during which the FDA in principle, agreed that the data pack has proposed to the FDA for a BLA resubmission has the potential to support the traditional approval for PRX-102 for the treatment of Fabry disease. The planned data package for the BLA resubmission, given the changed regulatory landscape in the United States, will include the final 2-year analysis of the BALANCE study, and we were pleased with this outcome, and we intend to continue to work collaboratively with the FDA and resolve the issues noted in the CRL with the goal of commercializing a new alternative drug to treat Fabry patients. We anticipate the resubmission of the biological license application, BLA, for the PRX-102 to the FDA in the second half of next year.

In October of 2021, Protalix and Chiesi announced that the meeting has been held with the rapporteur and co-rapporteur of the European Medicine Agency regarding PRX-102. At a meeting, Chiesi and Protalix discussed the scope of the anticipated marketing authorization application submission for the European Union. And the rapporteur and co-rapporteur were generally supportive of a planned MAA submission for PRX-102. This is an important step in the necessary resubmission activities leading up to an MAA submission.

Based on the interim analysis of the 12-months data generated from the BALANCE study that the company announced in June of 2021, and in combination with the previously reported positive data from the BRIGHT and BRIDGE study, the company and Chiesi expect to submit an MAA to the EMA for PRX-102 during the first quarter of 2022.

We are confident in the overall clinical profile of PRX-102 that we have assembled through our extensive development program. In October, we, together with Chiesi, announced the final dosing of the last patient in the BALANCE study for the proposed treatment of Fabry disease. The BALANCE study is a 24-month randomized double-blind active-controlled study of PRX-102 in Fabry patients with impaired renal function. We anticipate the release of the unblinded top line data during the second quarter of 2022 after all remaining patients have completed the 24 months' treatment period.

We plan to initiate the toxicity study for PRX-115, which is a plant cell-expressed recombinant PEGylated uricase chemically modified enzyme to treat refractory gout in the first quarter of 2022. And in addition, we are working on the plans for development of PRX-119, which is a plant cell-expressed PEGylated recombinant human DNase for NET-related diseases.

PRX-115 has been shown in several preclinical studies to have higher specific activity and longer half-life. And accordingly, the company intends to explore the possibility of developing PRX-115 for treatment every 2 months, which would lessen the frequency of necessary hospitalization as part of the treatment thereby reducing the physical and financial burden experienced by patient and the patient community.

And with respect to PRX-119, several experiments in my CLP model demonstrate the feasibility of PRX-119 as a treatment for sepsis. The data showed promising results in determining a dose-dependent response in mice survival. In addition, we've begun working with a third party to develop a new methodologies for protein modification. We continue to evaluate potential strategic marketing partnerships and collaboration programs with biotechnology and pharmaceutical companies for PRX-110, the plant cell recombinant DNase for which we are considering the potential treatment for various [clinical] indication as well as our other early stage product candidates. We will update you on our early-stage pipeline and events unfold, I'm sorry.

I would like to close this section of my comments with acknowledging the resiliency and grit of our team members and partners during such a tragedy in time and emphasize how much your efforts are making a difference all to our mission of bringing and importing new medicines to market for patients with high unmet medical needs.

I will now turn to Eyal to review our financials. Eyal, please go ahead.

Thank you, Dror. I want to first describe the note exchange, the company completed in the end of August. On August 25, 2021, the company completed exchange or the exchanges while a substantial majority of our then outstanding 7.5% senior secured convertible notes due in November 2021, which I referred to as the 2021 notes with institutional noteholders. In the exchange, an aggregate of 54.65 million principal amount of outstanding 2021 notes were exchanged for an aggregate of 28.75 million principal amount of newly issued 7.5% senior secured convertible notes due 2024, $45.9 million in cash and approximately $1.1 million in cash, representing crude and unpaid interest through the closing date of the Exchange.

Today is the maturity date of the 2021 notes, and we are required today to sell all of the remaining 2021 notes and pay all the crude but unpaid interest thereon. On November 9, the company delivered the necessary funds under the indenture governing the 2021 notes to the effectively discharge -- to effectively discharge the remaining outstanding 2021 notes.

To summarize, the company's debt has been cut by more than half compared to the net level at June 30, 2021. The remaining debt matures in the third quarter of 2024. Accordingly, the company now has additional financial flexibility and has sufficient capital to fund its operations through important milestones in 2022.

And now I'll turn to the results. Revenues from selling of goods were $4.5 million during the 3 months ended September 30, 2021, an increase of $1.2 million, or 36%, compared to revenues of $3.3 million for the 3 months ended September 30, 2020. The increase of $3.2 million in sales to Brazil holding from timing difference was partially offset by a decrease of $2 million in sales to Pfizer resulting from time difference as well.

Revenues from license and R&D services for the 3 months ended September 30, 2021 and September 30, 2020, were $7.5 million. Revenues from license and R&D services are comprised primarily of revenues the company recognized in connection with the supply agreement with Chiesi. The revenue increase of $1 million recognized from the curing feasibility study was offset by a $1 million decrease in revenue generated under the company's license and supply agreement with Chiesi.

Cost of goods sold were $3.7 million for the 3 months ended September 30, 2021, an increase of $0.8 million, or 28%, from cost of goods sold of $2.9 million for the 3 months ended September 30, in 2020. The increase in cost of goods sold was primarily the result of higher sales.

Research and development expenses were $7.3 million for the 3 months ended September 30, 2021, a decrease of $0.4 million, or 5%, compared to $7.7 million of R&D expenses for the 3 months ended September 30, 2020. The decrease is primarily the result of completion of 2 out of the 3 Phase III clinical trials of PRX-102 and reduced costs related to the BALANCE study. We expect R&D expenses to continue to be our primary expense as we enter into a more advanced stage of preclinical and clinical trials with certain of our product candidates, as Dror described previously.

Selling, general and administrative expenses were $3 million, an increase of $0.2 million, or 7%, for the 3 months ended September 30, 2021, compared to $2.8 million for the same period in 2020. The increase is primarily the result of an increase of $0.4 million in corporate costs, mainly related to insurance ended in a $0.2 million increase in sales and marketing costs, partially offset by a decrease of $0.5 million in share-based compensation.

Financial expenses net were $2.3 million for the 3 months ended September 30, 2021, and $1.9 million for the 3 months ended September 30, 2020. The increase resulted primarily from loss on extinguishment related to the exchange of our 2021 notes, as I described earlier. As of September 30, 2021, we had $48.7 million in cash, cash equivalents and short-term bank deposits.

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

Thank you, Eyal. So we look forward working closely together with Chiesi, closely with the FDA and EMA, to bring the PRX-102 towards commercialization for adult for prepatient. And in addition, clearly, we will update you as matters progress. Now let's have your questions, please.

(Operator Instructions) The first question comes from the line of Ram Selvaraju with H. C. Wainwright.

This is [Maz] speaking for Ram. Thanks for the update on the type A meeting. We just wanted a little more data. Were the discussions focused on inspecting the manufacturing sites. And if so, can you summarize the key points there?

So the manufacturing part was the part of it. We are now -- we agreed with FDA that they will review the 2 years' data with an endpoint of noninferiority. We agreed with the FDA that we will add the once in 4-week data for the review. And once we will submit the FDA as, I assume, regularly by their regulations are supposed to inspect the facilities. There's nothing more than that in essence.

Okay. Great. And then there's one more from us. So given that your BLA will include the final 2-year analysis of the Phase III BALANCE study, what your baseline and best case expectations regarding the study results? So what do you think be the minimum delta in EGFR you're looking at for between the treatment and the active arms? Do you think demonstrating superiority over the Fabrazyme is a requirement to winning a favorable reimbursement? If yes, why? If no, why not?

So I first, I suggest we will wait for the outcomes. And second, with regard to reimbursement and future marketing strategies or plan, I suggest this is -- clearly is, if I may say, area, you can approach them, of course.

Next question comes from the line of John Vandermosten with Zacks.

Dror, Eyal, is there a specific conference or meeting where you expect to present the BALANCE data?

Can you repeat the question, please?

Yes. Is there a specific conference or meeting where you expect to present the BALANCE data when it becomes ready in the first half of next year?

First, we have to see whatever we will share with the top line results at the beginning. Then we will do all the analysis in order to establish a CSR, the clinical study report. I assume following that, there will be a conference as where we usually participate or a specific conference to present the data.

Okay. And I would assume that will probably be in the fall. Does that sound about the right time frame?

We expect that the top line results will be in Q2.

Okay. Great. Well, I was thinking you'd present it at a conference at some later point.

Well, I think, top line results are top line results. So the intent is indeed to further analyze and finalize all the data.

Okay. And a question on the convertible notes. I think there was a small proportion of that amount that was listed on the balance sheet today that was paid down today on November 15. How much should we reduce that amount going forward that's listed on there for the convertibles?

I think -- the amount was approximately $3 million left over from the 2021 notes. That's it.

Okay. Very good. And last one from me is on the gross margin. Is there any guidance or help you could give us for estimating that proportion of product sales going forward? It seems like it's been rather volatile in recent quarters, and I wanted to see if there's anything you could help us with in terms of forecasting that in the future.

That could be hard for a simple reason. The margins that we have on the Brazilian sales are different than the ones we have with Pfizer and the ones that we have in Chiesi. And obviously, the mixture at the end of the day, comprises the margins that you see.

(Operator Instructions) Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Dror Bashan for closing remarks.

Well, thank you, and thank you, everybody, for the time. And we will continue and update you on our progress going forward. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and enjoy the rest of your day.