Protalix Biotherapeutics Inc (PLX) 2024 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics third quarter 2024 financial business results conference call. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mike Moyer, LifeSci Advisors for Protalix. Please, thank you. You may begin.

Thank you, operator, and welcome to the Protalix BioTherapeutics third quarter 2024 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 financial results and business and clinical updates 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 the 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 in Protalix's filings with the US Securities and Exchange Commission.

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

Thank you, Mike, and thank you, everyone, for joining our third quarter of 2024 financial results and business update call. I will begin by reviewing our recent accomplishments before handing the call to Eyal, who will provide a review of our financial results.

We will then open the line for questions, of course. I will start with PRX-115, which is recombinant PEGylated uricase candidate, produced through our prosthetics platform in development for treatment of uncontrolled gout. As we have announced this morning in our press release, all eight cohorts of the first-in-human Phase I clinical trial of PRX-115 are now complete and data analysis ongoing.

As a reminder, this study is a double-blind, placebo-controlled, single ascending dose study designed to evaluate safety, tolerability, pharmacokinetics and pharmacodynamics, following a single dose of PRX-115 in subjects with elevated uric acid levels. Preliminary results from the eight cohorts are consistent with the initial promising results from the seven cohorts.

Overall, 64 subjects were randomized across the eight cohorts, 48 of these subjects were treated with a single administration of PRX-115 and 16 subjects were treated with a placebo. All of the subjects completed the study. Exposure to PRX-115 increased in a dose-dependent manner. PRX-115 levels were observed for up to 12 weeks in subjects in cohorts six, seven and eight, the cohorts with the highest doses.

In all tested doses, a single dose of PRX-115 rapidly reduced plasma uric acid levels. the effect and duration of response were found to be dose dependent. Following a single dose, mean plasma uric acid levels remain below 6 mig per dL for up to 12 weeks at the highest dose levels. PRX-115 was also generally well tolerated.

It's only 25% of subjects receiving PRX-115 having reported study drug-related adverse events. The majority of these were mild to moderate and transient in nature. We are encouraged by these preliminary results. The findings from the study suggest the PRX-115 has the potential to be a promising treatment option for patients with gout.

We believe the results demonstrate that PRX-115 may offer an effective uric acid lowering treatment with an added benefit of a potential wide dosing interval, which may enhance patient compliance and treatment flexibility. Further studies are needed to confirm the long-term safety and efficacy of PRX-115 in the gout patient population.

Preliminary results from this study are being presented at a late-breaking poster of the American College of Rheumatology Annual Meeting, ACR Convergence, which begins today in Washington, DC. We are continuing our preparations for a Phase II trial of PRX-115 in patients with uncontrolled gout.

We plan to continue our dialogue with regulatory authorities in the US and Europe regarding our Phase II plans, with the goal of initiating the Phase II study in the second half of 2025. And now for Elfabrio. In past calls, we have discussed the strong commitment of our commercial partner, Chiesi Global Rare Diseases with the successful commercialization of Elfabrio and the wealth of experience the team brings to such efforts.

Chiesi continues to increase its focus on Elfabrio and invest heavily in its medical and commercial program. As part of its program, Chiesi is sponsoring a number of studies, Elfabrio including in a trial in Japan in pediatric and adults trial in the maternal and postnatal outcome study and other global and international multicenter studies.

We look forward to continuing to collaborate with Chiesi in its goal to bringing Elfabrio to as many patients as possible. Our next pipeline candidate also being expressed ProCellEx is PRX-119. PRX-119 is a PEGylated recombinant human DNase I candidate in development for potential treatment of diseases associated with neutrophil extracellular traps or NETs.

We are focusing our R&D efforts on early stage development assets to build our product development pipeline. We have fine-tuned our pathway going forward to focus on leveraging our prosthetics platform and prioritize renal rare disease indications.

In addition, we have begun to evaluate plant-based drug delivery system that may allow protective delivery of different modalities. These efforts are in preliminary stages, and we look forward to updating you on the progress as these efforts as they progress, of course.

With regard to the therapeutic areas, our strategy moving forward is to prioritize rare renal diseases as a core Protalix development pipeline. This is a logical focus to us, given the existing experience, network and resources we built through the diligent and dedicated efforts shown throughout the Fabry development program.

We have identified potential key high unmet need indications on which we plan to focus our initial efforts such as ADPKD, Alport syndrome and FSGS and others. Work is currently ongoing to identify assets for the treatment indications. We intend to use the prosthetics platform and the PEGylation capabilities as well as other modalities, such as small molecules and oligos to take advantage of highly innovative opportunities.

We are also exploring novel platform technologies. Finally, in September, we repaid in full all of our outstanding principal and interest under the 7.5% senior secured convertible promissory notes. The repayment was financed entirely with our available cash.

This is significant for Protalix, as we are now a debt-free company. Our financial discipline and strong balance sheet enable us to support our ongoing operations.

And with that, it is now my pleasure to turn the call over to Eyal and review our financials. Eyal, please?

Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our third quarter 2024 financials.

We recorded revenues from selling goods of $17.8 million during the three months ended September 30, 2024, an increase of $7.6 million or 75% compared to revenues of $10.2 million for the three months ended September 30, 2023. The increase resulted primarily from an increase of $6.8 million in sales to Chiesi and an increase of $1.1 million in sales to Pfizer, partially offset by a decrease of $0.3 million in sales to Brazil.

We recorded revenues from license and R&D services of $0.1 million for the three months ended September 30, 2024, a decrease of $0.1 million or 50% compared to revenues of $0.2 million for the three months ended September 30, 2023. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with our license agreement with Chiesi.

Cost of goods sold was $8.4 million for the three months ended September 30, 2024, an increase of $3.5 million or 71% from cost of goods sold of $4.9 million for the three months ended September 30, 2023. The increase in cost of goods sold was primarily the result of an increase in itself Chiesi and Pfizer.

For the three months ended September 30, 2024, the company's total research and development expenses were approximately $3 million, comprised of approximately $0.6 million in subcontractor-related expenses, approximately $1.6 million of salary-related expenses, approximately $0.2 million of material-related expenses and approximately $0.6 million of other expenses.

For the three months ended September 30, 2023, our total research and development expenses were approximately $3.7 million comprised of approximately $1 million of subcontractor-related expenses, approximately $1.9 million of salary-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 for the three months ended September 30, 2024, was $0.7 million or 19% compared to the three months ended September 30, 2023. The decrease in research and development expenses resulted primarily from the completion of our Fabry clinical program and the regulatory process related to the Fabry biological license application in the United States and the marketing authorization application in the European Union for Elfabrio by the applicable regulatory agencies.

Selling, general and administrative expenses will point towards $2.6 million for the three months ended September 30, 2024, a decrease of $1.1 million or 30% compared to $3.7 million for the three months ended September 30, 2023. The decrease resulted primarily from a decrease of $0.5 million in salary-related expenses and a decrease of $0.4 million in professional fees.

Financial expenses net was $0.1 million for the three months ended September 30, 2024, compared to financial income net of $0.2 million for the three months ended September 30, 2023. The difference resulted primarily from lower interest income on bank deposits, high exchange rate costs, partially offset by lower note interest expenses due to the September 2024 repayment, as Dror mentioned were repaid in full all the outstanding principal and interest payable under the 2024 notes.

In the three months ended September 30, 2024, we recorded income taxes of approximately $0.6 million compared to income taxes of $0.1 million for the three months ended September 30, 2023. Income taxes recorded are primarily the result of the tax expenses in respect of Section 174 of the US Tax Cuts and Jobs Act, which was enacted in December 2017.

Cash and cash equivalents were approximately $27.4 million at September 30, 2024. Net income for the three months ended September 30, 2024, was approximately $3.2 million or $0.04 per share basic and $0.03 per share diluted compared to a net loss of $1.9 million or $0.03 per share basic and $0.04 per share diluted for the same period in 2023. Since the end of the quarter ended September 30, 2024, the company collected approximately $3.9 million from sales to Chiesi.

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

Thank you, Eyal. To conclude, I'm pleased with our progress this quarter, especially for our PRX-115 development program. Pending discussions, of course, with regulatory agencies, we plan to begin a Phase II program for PRX-115 next year.

I'm confident that our strategy, balance sheet and three streams of revenues will enable the next phase of pipeline development for Protalix, and we look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stakeholders -- and stockholders, I'm sorry.

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

(Operator Instructions) John Vandermosten, Zacks.

I'm going to start off with a question on the Chiesi revenues. Are those all product revenues or are there any other categories of revenue in there? And I'm talking about the -- I guess, it's the $12.4 million that was broken out.

The revenues from Chiesi all product revenues. As you remember, and we've indicated in the past, numerous times we are selling to Chiesi the vials actually, we're selling to their inventory at this point. However, the sales and the revenue that we record are all revenues that are recorded in connection with the actual goods sold to Chiesi.

Okay. I guess the reason I'm asking is just to calculate the gross margin to make sure that that's the right number to use for calculating that and I shouldn't subtract anything, is that right?

Yes, you shouldn't subtract that. Yes. But I think that in order to calculate the gross margin on this product, it's not just adding up all the revenues and dividing them the margins on Elfabrio are obviously way higher than the all the other products with the Elelyso.

So trying to allude them -- interpret the numbers by simply dividing the COGS, taking it out from the sales and getting the margin, I don't think that that's going to give you the right number.

Okay. All right. I have to figure something out there then. And also, as you had mentioned on the call, Chiesi put out a study or at least indicated there was a study on BRIGHT, looking at the longer duration in between infusions for those patients. Were there any takeaways from that, that are new that -- that may help change the label in terms of the creativity of infusion?

So John, the extensions -- the extension of the BRIGHT study is like already three or four years old. So Chiesi put an article or an abstract about the outcomes of, I think, three years of extension. And Chiesi is in discussion with the authorities if and when there will be any news, we will, of course, update the market.

Raghuram Selvaraju, H.C. Wainwright.

This is [Dan] on for Ram. Congratulations on the quarter. We wanted to know what are some of the market factors you're seeing affecting uptake of Elfabrio in the US?

And how do you view the competitive landscape in treatment of refractory gout? Are you expecting to do comparator controlled pivotal studies? And might this be a part of the Phase II plan or only Phase III? And I'd like to ask a follow-up, if I could.

Yes, please. So let's go one by one. About Chiesi, we think we bring a good or very good alternative options to the Fabry or the adult Fabry patient community. It's a new ERT after, I think, close to actually over 20 years in the US. It has its merits. We show that we are as good as Fabrazyme.

We think we have a good or the drug has a good safety and immunogenicity profile. Chiesi is conducting additional studies as part of their medical plan, like pediatric study, registry pregnant women study, et cetera.

And we think it's a very good alternative. So I think these are the main points and Chiesi does well. With regard to 115, can you repeat the question, please?

Sure. Sorry about that. It was a long one. How do you view the competitive landscape in treatment refractory gout? Are you expecting to do comparator-controlled pivotal studies? And might this be a part of the Phase II plan? Or would that only come in at Phase III?

No, no, we are actually planning a Phase II study. We are in, if I may say, communication and discussion with the agencies, both in the US, of course, and Europe.

And this is what I can share right now. We think if -- let's put this way, if indeed the outcomes of the Phase II study as we plan will be close or the same or will mimic what we see in Phase I, I think we have a very interesting potential drug in refractory gout.

Awesome. That makes sense. And for a follow-up, are you engaged in establishing manufacturing contracts with other companies to deploy your proprietary manufacturing platform to produce other firms' products? And if not, why?

At the moment, no. I mean, actually, we are -- we have the agreement, as you know, with Pfizer and Chiesi. With the gout study right now, we do it our own, of course. We have the BALANCE is to continue this way right now. And we are not trying to build a CMO business.

We try to develop new, I would say, therapies for real unmet needs, and we will go up the ladder innovation-wise. So we think this way is our best way forward and will bring way more value to the shareholders than becoming a CDMO or something like this.

I do not underestimate it, but I think our -- Protalix is more, I would say, a boutique development company than way closer to that than to become a CMO.

Makes sense.

Which is not a bad business, please. It's not to put any criticism on CMOs, but I think our structure and the way we operate, it's way closer to become -- to be a development company than a CMO, let's put it this way.

Robert Sassoon, Water Tower Research.

Just talking on the -- about the PRX-115 and the profile of the 64 participants or the patients. What plasma uric acid levels did they actually start off with, what was the range?

I don't remember by heart, and I don't know if this is published right now with the abstract that we have shared at AACR, but I can get back to you and share with you. I'm sorry.

Sure. Just a follow-up on that. The patient that actually had the anaphylactic episode, was there anything different about his profile compared to the others --

So thank you for that. There was one subject, I would say, it's not a patient. One subject, I think in cohort number two that after 3 or 6 minutes into the infusion developed, if I may say, an anaphylactic reaction, it was taken care immediately and the subject is -- health is not important. So he recovered, if I may say. It was the only one out of the 64 subjects.

No. I understand that. Yes.

Nothing more than that and no consistency across the subjects. It's one subject out of 64. So it's --

But I was trying to -- what I'm trying to get at is what -- if there was anything particular about this particular subject compared to the others that may have been a factor?

It may have been that you got a drug before or some ingredients that became -- that actually developed antibodies against the enzyme, I would say, in a robust way or exponential way. It was really literally, I think, 3 to 6 minutes from the beginning of the infusion, meaning a very small amount of the enzyme into the body or the plasma. So unfortunately, but subject is fine and alive, of course, and was taken care immediately.

(Operator Instructions) John Vandermosten, Zacks.

So for the PRX-115 trial coming up in the second half of next year, what's the anticipated duration of that? Is that a year-long trial? Or I mean, I know it's still probably early in terms of design, but can you give us a sense of how long that might take?

I think -- so Eyal correct me if I'm wrong, it's a 6 or 12 months duration study. I just don't have it in front of my eyes.

Yes. It's 12 months.

12 months, okay. And we plan to initiate it actually in the second half of 2025. And hopefully, if indeed the pace of enrollment will be as we expect, I want to be careful. So I believe at the end or beginning of 2027, we will give top line results.

Okay. Very good. And -- on Japan, I know I've asked this in the past, and I think the trial has progressed since then. But any idea when that might be complete? And is there anything else required to get sales in Japan? And then thirdly on that, are the economics for sales in Japan the same as they are in other regions?

So. No, the study is ongoing. So once it will be done, they will -- I assume in case we will move to submission. I think that nothing -- what do you mean if it's similar? Japan is Japan. It's a unique market. It has its own characteristics, if I may say. This is what I can say about it.

At this time, there are no further questions in queue. I would like to turn the call back to Mr. Dror Bashan for closing comments.

Thank you, everybody, for the time. We look forward to continue updating you. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.