Protalix Biotherapeutics Inc (PLX) 2023 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics third quarter 2023 financial and business results conference call. As a reminder, this conference call is being recorded. I'll now turn the conference over to our host, Mr. Chuck Butler of LifeSci Advisors, Investor Relations for Protalix. You may begin your conference.

Thank you, operator, and welcome to the Protalix BioTherapeutics third quarter 2023 financial results and business update conference call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer.

A 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 released in 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 the Protalix's filing with the US Securities and Exchange Commission.

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

Thank you, Chuck, and welcome, everyone, to our third quarter 2023 financial results and business update call.

Before we begin, I would like to take a moment to acknowledge the situation here in Israel. We at Protalix are horrified by the devastating events that have been taken place in recent weeks. It is an extremely challenging time and we are heartbroken for the victims, families, friends, and loved ones; many of us being personally impacted. Our hearts and prayers go out to all those affected and we remain dedicated to the safety and well-being of our team. We are committed to provide our families, friends, and colleagues any and all support they need at this time.

At the same time, we want to reassure you that we are continuing to operate as usual. There have been no disruptions to our facilities, and we do not currently anticipate any interruption to the supply of our products, Elfabrio and Elelyso.

We appreciate all those who have been reached out to Protalix to express their concern and support, and we thank you for joining us today. I will now review our recent progress and accomplishments. Following my remarks, Eyal will provide a more detailed review of our financial results. And then of course, we will open the line for questions.

Let me now turn to our accomplishments this quarter. Since receiving FDA and EMA approval for Elfabrio, our commercial partner, Chiesi has focused on commercial launch in both the United States and European Union. We are also pleased that Elfabrio has been granted additional regulatory approvals outside the EU, like in Great Britain and Switzerland. And we look forward to continued global growth of Elfabrio.

Having now secured the approval of two drug products, Elfabrio and Elelyso, we are now focusing our attention to develop our pipeline assets with the potential to address high unmet needs for patients with limited therapeutic options. Our most advanced development candidate is PRX-115 for the potential treatment of severe gout.

We are currently sponsoring a Phase 1 first-in-human clinical trial of PRX-115 to evaluate the safety, pharmacokinetics, pharmacodynamics, and immunogenicity. It is a double-blind, placebo-controlled, single ascending dose trial of up to 56 participants. 32 participants have been dosed to date in this first-in-human trial. We expect to announce top-line results from this study in mid-2024. We believe PRX-115 is potentially a good candidate to target this market.

Our next pipeline candidate is PRX-119 for the potential treatment of NETs-related diseases. NET, a web-like structure released by activated neutrophils, they trap and kill a variety of microorganisms. Excessive formation or ineffective clearance of NET can result in different pathological effect and has been observed in various autoimmune, inflammatory, and fibrotic conditions. We look forward to providing with updates on these programs as they progress. There are currently several other preclinical programs, and we will update regarding these programs once applicable.

On the corporate side, we welcome Dr. Eliot Forster as Chairman of our Board of Directors, succeeding Zeev Bronfeld, who retired from his position on our Board. As an Independent Director, Dr. Forster was also appointed to our nominating committee. Eliot's reputation in management and leadership in the life science field speaks for itself. And he has a record of success in United States, European Union, and Asia.

We are grateful to Zeev for his dedication and leadership since the founding of Protonix many, many years ago. And we look forward to working with a Eliot and leveraging his expertise as we enter this exciting phase of development for this company.

Before turning the call over to Eyal, I want to note that our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near term capital infusion.

With that, it is now my pleasure to turn the call over to Eyal to review our financials. Eyal, please.

Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our third quarter 2023 financials. We recorded revenues from selling goods of $10.2 million during the three months ended September 30, 2023, an increase of $1.4 million or 16% compared to revenues of $8.8 million for the three months ended September 30, 2022. The increase resulted primarily from an increase of $3 million in sales to Chiesi following the approval by the FDA and EMA instrument of Elfabrio, and of $0.6 million in sales to Brazil, partially offset by $2.2 million decrease in sales to Pfizer.

We recorded revenues from license and R&D services of $0.2 million for the three months ended September 30, 2023, a decrease of $5.2 million or 96% compared to revenues of $5.4 million for the three months ended September 30, 2022. Revenues from license and R&D services are comprised primarily of revenue we recognized in connection with the Chiesi Agreement. As of March 1, 2023, sponsorship of the extension studies was transferred to Chiesi, and Chiesi is now administrating all open label extension studies.

Cost of goods sold was $4.9 million for the three months ended September 30, 2023, a decrease of $2.2 million or 31% from cost of goods sold of $7.1 million for the three months ended September 30, 2022. The decrease in cost of goods sold was primarily the result of decrease in sales to Pfizer, partially offset by increase in sales of Elfabrio to Chiesi and of Elelyso to Brazil.

For the three months ended September 30, 2023, our total research and development expenses were approximately $3.7 million, comprised of approximately $1 million for subcontractor related expenses, approximately $1.9 million of salary and related expenses, approximately $2.2 million of material related expenses, and approximately $0.6 million of other expense.

For the three months ended September 30, 2022, a total research and development expenses were approximately $7.4 million, comprised of approximately $4.9 million subcontractor related expenses, approximately $1.7 million of salaries and related expenses, approximately $0.2 million of material related expenses, and approximately $0.6 million of other expenses.

Total decrease in research and development expenses were $3.7 million or 50% compared to the three months ended September 30, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulatory process related to the BLA and the MAA review of Elfabrio, the applicable regulatory agencies.

Selling, general, and administrative expenses were $3.7 million for the three months ended September 30, 2023, an increase of $0.9 million or 32% compared to $2.8 million for the three months ended September 30, 2022. The increase resulted primarily from an increase of approximately $0.6 million in salary and related expenses due to onetime cash bonus and an increase in share-based compensation.

Financial income, net were $0.2 million for the three months ended September 30, 2023, compared to financial expenses net of $0.4 million for the three months ended September 30, 2022. The change resulted primarily from an increase of $0.3 million in interest income.

In the three months ended September 30, 2023, we recorded income taxes of approximately $0.1 million, which were primarily the result of the provision for current taxes in respect of Section 174, the US Tax Cut and Jobs Act which was enacted in December 2017.

Cash and cash equivalents in short-term bank deposits were approximately $41 million at September 30, 2023. Net loss for the three months ended September 30, 2023, was approximately $1.9 million or $0.03 per share basic and $0.04 per share diluted compared to a net loss of $3.6 million or $0.7 per share basic and diluted for the same period in 2022.

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

Thank you, Eyal. In concluding this earnings call, I would like to note that we at Protalix are proud of our accomplishments. We have a proven platform technology with two approved therapeutics, driving a rich and sustainable pipeline of assets, a world-class team, a strong balance sheet supporting our strategic plans, and a strategic vision to creating the long-term value for our stockholders. We look forward to updating you in the future on our progress.

Before we start taking questions, I would like to note that we are praying for our friends and families during these challenging times, one that is filled with pain. I'm grateful for our entire Protalix team, their enduring commitment and resolve at this time as we develop a portfolio for patients with unmet medical need is noteworthy.

Now I would like to ask the operator to open the call for questions, please.

(Operator Instructions)

Boobalan Pachaiyappan, H.C. Wainwright.

This is Boobalan. Sorry for the voice, I'm still recovering from sore throat. So thanks for taking our questions. Firstly, with respect to revenue from selling goods, so I see that the revenue dropped from $15 million in second quarter to $10 million in the third quarter. Can you discuss the underlying factors for this drop in revenue? And also what are your expectations for revenue for the fourth quarter?

Thank you, Boobalan for the question. So in terms of the decrease, the part of the decrease is decrease in sales to Pfizer and part of it is decrease in sales to Chiesi as I mentioned in the previous call. The sales for Chiesi are basically their inventory buildup.

At this point the sales to Chiesi are not indicative of the penetration of sales in the market. So obviously, as they build inventory, there's going to be fluctuation in next year-and-half or even two during the term that they're building the inventory and slowly but surely also penetrating the market and building the presence in the markets.

With respect to your second question about guidance on revenue for the fourth quarter, we usually don't provide guidance for revenue, especially since the POs from Chiesi and from Brazil and Pfizer dynamic, especially at this point where Chiesi is the majority of the sales and they are building up their presence in the market. So I guess that it's going to take time to be able to share forecasts and feel comfortable giving those forward-looking statements.

Okay. Fair enough. And then a congrats on winning the regulatory approval in UK and Switzerland. So I was wondering if you could provide or maybe at a high level discuss the Fabry disease market opportunity in the UK and Switzerland. And also which countries can we expect to approve Elfabrio in the upcoming quarters?

So actually the drug was approved already in most of the, if I may say, western country in Europe. So the United Kingdom is not part of the EU, but it's certainly an important market. Also in Switzerland, it was approved. And the idea is indeed to move on to other markets outside the EU, including Japan, where Chiesi initiated a study in order to register the drug later on in other markets as well.

As what's best for the specific size of the Fabry market in the UK, I don't have it in front of me and also this is a -- Chiesi is, if I may say, a roll right now. So once we will have more data, or Chiesi will release more data, we will be able to share it with you. But certainly the UK is a very important market in Europe, let's put this way.

Okay. Thanks for the color. And let's switch gears and discuss your clinical programs, especially PRX-115, the ongoing Phase 1 study. So I would like to get some additional color on some of the items that you've listed in the exclusion criteria. So I was looking at the clinicaltrials.gov website and -- so some of the criteria, especially the clinical criteria of those -- it says, you're excluding patients with one or more gout flare the last one year. And those with subcutaneous tophi or those with advanced renal diseases, they're also excluded. I'm trying to understand, is the strategy to target mild or moderate forms of gout without renal complications, if I may, so you can clarify more up?

Yes, sure. Thank you for that. So they actually, it's a Phase 1 study. It's a single dose, so it's the first time we actually infuse into a -- to participants. The participants are actually volunteers with hyperuricemia. They are not -- and the idea is first to check safety, of course. And then to see if indeed we reduce the hyperuricemia to normal a levels or acceptable levels and then take it further.

So we measure multiple aspects in order to be able to move on, of course, subject to safety, to a multiple -- to like a multiple ascending dose later on in 2024. So it does not indicate right now -- the idea is not to indicate for mild patients at all, actually it's for severe gout patients.

Okay. Thank you for the color. One last question, if I may. So again, with respect to PRX-115, so I know you're collecting immunogenicity data and blood uric acid levels as well. So I'm curious like what are your -- what do you expect to see in these two data, especially it's a Phase 1 study. What are your expectations?

So again, we would like to see a safety for sure. And then we will analyze from a PK/PD point of view additional measurements to see if we have indications for reduction, of course, of the hyperuricemia and other parameters in order, again to see frequency of dosing and other signals that will enable us, if I may say to take further steps or more calculated steps for the next study.

Okay. Thank you for taking all my questions.

And again, just to make sure we -- the intent of this is to enroll up to 56 subjects. So I think it's enough of a number to or we hope it's enough of a number to get enough information to move on a -- I won't say minimize the risk, but with less risk, of course. Safety for sure, but more than that.

John Vandermosten, Zacks.

All right. Thank you. Dror, Eyal good day to you. Beyond COGS, how much of your expense structure is oriented towards Elfabrio business?

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

No, I'm sorry. Beyond COGS, how much of your expense structure is oriented towards the Elfabrio business now?

In terms of cost structure other than manufacturing, which takes something like three to four months a year. And the production on three to four months a year is sufficient to supply and provide half of the patient population worldwide. We're not investing at present in Elfabrio.

Okay. Perfect. And how do you see your capital structure changing now that you have two revenue-generating products and then also keeping in mind that there's the convertible debt on the balance sheet?

That's a good question. Truly we have two revenue generating prior-year product out there. Since we are not doing anything in the equity capital markets, so obviously I guess, gradually, slowly but surely revenues are going to start to ramp up. The big boys are going to join the party and we're going to see that we have the stable stream of revenues and we are accumulating cash. So it's a different company, it's not a biotech -- typical biotech company in the development stage.

At present, we don't see this change. As we said, the company at this point is still sustained. We don't see any need to raise money in the foreseeable future, so the ongoing operations. So I guess that's going to take time. Over time, I guess the capital structure is going to change.

Okay. And I think that's coming due next year, in about a year. And then quarterly cash burn, I think you gave us some help on how to forecast that going forward? I noticed it was a little bit greater than net income for the quarter. And I just wanted to see if you could help us understand how that might flow through for the next several quarters?

Yeah. So I think I've responded to this one previously to Boobalan. It seems we are adjusting an phase of revenue ramp up. And Chiesi are just starting to penetrate the market and building the presence slowly, but surely. I guess that's going to fluctuate. So you don't feel comfortable at this point sharing the forecasts for the next couple of quarters.

I think it's a very, very, very fluctuative. They can decide that they're pulling two batch as one batch for even technical reason; delaying, one. So I think at this point it'll be responsible to share your forecast for the short term. Long term, as I said in the next year-and-half, two, that's going to be mostly an inventory buildup.

With a run rate that will ramp up -- I'm talking about sales obviously will ramp over time.

Okay. And then shifting to PRX-115. And assuming that the top line comes out as expected or better in the middle of next year, what are the next steps there? Would it be a Phase 2? Or I guess I'm just wondering what we should expect to see from that development program.

So we intend to do a multiple dose following the single dose that we do now. And then once we have -- which is actually a Phase 2 and then we will continue from there.

Okay. And just one last one on 119, what are the next steps for that program [right now]?

Thank you for that. So we will gather information in the next -- in the near future, if I may say, from the different preclinical studies and other data that we have. And we'll go for, if I may say, kind of a portfolio go-no-go meeting and if indeed we decide to go ahead, we will share and continue toxicology and Phase 1.

Okay. I appreciate it, Dror, Eyal. Thank you.

Thank you. This concludes today's question and answer session. I would now like to turn the floor over to Dror Bashan for closing comments.

So thank you, everybody, for your participation, and I appreciate the time and we look forward to speaking with you on our next call for 2023 results. And I hope with a more peaceful time for us here in Israel. Thank you, all.

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

Thank you.