PolarityTE Inc (PTE) 2021 Q4 法說會逐字稿

Good day, and welcome to the PolarityTE Fiscal Year 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Cameron Hoyler. Please go ahead, sir.

Thank you, operator. Good morning, and thank you for joining PolarityTE's call to discuss fiscal year 2021 results. I'm Cameron Hoyler, General Counsel. On the call today are members of the executive team, which includes Richard Hague, Chief Executive Officer and President; and Jake Patterson, Chief Financial Officer.

Before we begin, I would like to remind everyone that today's discussion will include statements about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors, including, but not limited to, those detailed under the caption Risk Factors that are described in our annual report on Form 10-K for the year ended December 31, 2021, and the subsequent reports filed with the SEC.

Any forward-looking statements made on this call speak only as of today's date, Wednesday, March 30, 2022, and we disclaim any obligation to update such statements to reflect events or circumstances that occur after today's call, except as required by law.

I'd like to highlight to participants that the call is being recorded. A replay of the recorded call will be available on our website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of PolarityTE and any redistribution, retransmission or rebroadcast of the call in any form without PolarityTE's express written consent is strictly prohibited. I would now like to turn the call over to Richard Hague, CEO.

Thank you, Cameron, and good morning, and welcome, everyone. I'll kick off today's call with an update on our progress related to our IND for SkinTE as well as share other highlights in the quarter, then turn the call over to Jake Patterson, who will provide a financial update.

Clearly, our most critical accomplishment was receiving approval from FDA for our IND to evaluate SkinTE for the treatment of chronic cutaneous ulcers in mid-January. Since that approval, we have been working diligently to prepare for the launch of our first pivotal study under IND, a multicenter randomized controlled trial evaluating SkinTE in the treatment of Wagner 2 diabetic foot ulcers entitled "Closure Obtained with Vascularized Epithelial Regeneration for DFUs with SkinTE" or "Cover DFUs."

I am very pleased to report that as of last week, we greenlighted several clinical trial sites to begin identifying patients for enrollment. And as a result, our first patient was consented on Monday.

We are targeting up to 20 trial sites for the study and are on track to have approximately 16 sites fully operational by the end of May. As a reminder, this is a 100-patient study with 24-week follow-up and a planned interim data readout targeted for Q3 of next year.

For those of you that have followed our story closely, you are well aware that we have a great deal of positive outcomes with SkinTE, treating many types of hard to treat chronic cutaneous ulcers while registered as a 361 HCT/P product.

This includes outcome data from our prior DFU and VLU RCT studies, that commenced during the 361 marketing period. Both studies showed statistical significance versus standard of care at 12 weeks for complete wound closure and percent area reduction, with the vast majority of patients needing only one application of SkinTE. As we've discussed previously, it is this data that gives us a great deal of confidence in our ability to successfully execute on our upcoming pivotal trials.

Jake will provide more detail in a moment, but I wanted to highlight that we very recently raised $5 million in gross proceeds through a registered direct offering. That offering was intended to both -- to provide us with additional balance sheet strength and is also expected to help us achieve the reverse stock split that is on our proxy for the special meeting of stockholders that we have -- be held in May.

Additionally, we continue to see solid execution in terms of fiscal discipline: the $22.6 million or $1.9 million per month of cash used in operations during the 12 months ended December 31, 2021, compared to $37.8 million or an average of $3.2 million per month during the prior year.

I'd now like to turn the call over to our CFO, Jake Patterson. Jake?

Thank you, Richard, and good morning, everyone. I want to emphasize that we have now completed our transition into a clinical stage development company. We will continue to be fiscally disciplined by managing our costs effectively and looking for ways to extend our balance sheet.

Operating costs and expenses decreased $12.9 million or 25% for the year ended December 31, 2021, compared to the year ended December 31, 2020. The reduction in operating costs and expenses is attributable to reductions in general and administrative expenses, sales and marketing expenses and restructuring and other charges that were partially offset by increases in research and development expenses.

As Richard noted, cash used in operations for the 12 months ended December 31, 2021, was $22.6 million or an average of $1.9 million per month, compared to $37.8 million of cash used in operations for the 12 months ended December 31, 2020, or an average of $3.2 million per month.

Our goal continues to be maintaining a base operational cash burn which excludes costs associated with clinical trials and BLA-related activities, below $2 million per month on average.

We finished 2021 with approximately $19.4 million of cash and cash equivalents and $17.7 million of working capital. We believe the cash and cash equivalents on our balance sheet will fund our business activities into the fourth quarter of 2022.

I'd now like to turn the call back over to Richard for some concluding remarks.

Thank you, Jake. Before I close, I'd like to briefly revisit the impact that chronic cutaneous ulcers have on patients and our entire health care system, and the opportunity that these hardly healed wounds present to PolarityTE.

Chronic cutaneous ulcers are wounds that have failed to progress through the orderly and timely tissue repair process necessary to restore the normal function of anatomy and anatomy of skin.

Diabetic foot ulcers, pressure injuries and venous leg ulcers make up the vast majority of chronic cutaneous ulcers and affect an estimated 8 million patients annually or approximately 2% of the U.S. population.

The prevalence is expected to increase as the population ages and the incidence of diabetes, cardiovascular disease and obesity continue to rise. Accordingly, these ulcers represent an enormous unmet multibillion-dollar market opportunity, and we expect that market to continue to grow over time. The direct impact to patients into the health care system is enormous.

Chronic cutaneous ulcers often persist for years and some remain unhealed for decades. Due to their chronicity, these ulcers increase the patient's vulnerability to infection and have significant morbidity and mortality risk, which is increased in larger wounds or wounds that extend to greater depth.

For these patients, there is a very real possibility of partial or full limb amputation with associated disability. 85% of non-traumatic limb amputations are associated with chronic cutaneous ulcers, with an estimated limb amputation occurring every 30 seconds. And finally, recent studies have shown a 2x to 6x greater risk of mortality for chronic cutaneous ulcer patients compared to matched cohorts.

It is for these reasons that everyone on our team is elated to begin treating patients again under our IND. I'm incredibly proud of our team for the significant progress we've made in the 10 months since we ceased our 361 marketing efforts.

Lastly, during the latter half of 2021, we engaged in discussions with certain third parties regarding M&A and strategic initiatives. Due to the volatile market conditions, a deal was not completed. However, we were highly encouraged by the fact that this opportunity was in part initiated by positive feedback regarding SkinTE from physicians that was communicated directly to potential strategic partners.

I am confident that our recent accomplishments, combined with the tangible milestones we expect to achieve in the coming quarters, will effectively position the company to consider future potential strategic opportunities and/or to pursue the commercialization of SkinTE upon BLA approval. Thank you. I'd now like to open the call for Q&A.

(Operator Instructions)

We'll now take our first question from Kristen Kluska from Cantor Fitzgerald.

I wanted to first ask if the previous guidance that you laid out in terms of Wagner 2 DFU trial, the 24- to 30-month enrollment, if you still think this is a fair way to look at things in light of some of your comments around enrollment right now, but also around the sites that you plan to work with as well.

Kristen, thanks for your question. Yes, I still feel very confident about the timing. Based on our past experience, we think that those time frames are achievable. And we're excited to start enrolling this month and looking forward to our first SkinTE patient being treated later this month ideally.

Okay. And is there any update around running a second trial, if this is something that you think you could potentially do in parallel? Or if the agency wants to see the data from the Wagner 2 DFU study before starting that trial?

Sure. Great question. So we have had some informal communication with FDA, and we're actually going to be requesting a formal discussion with them to make sure that we're aligned on that second study. Our plan is to most definitely start that study before year-end.

But we want to make sure that we communicate with the FDA to get alignment about study size and design and criteria, et cetera. As of now, we would expect to most likely run a study in VLU patients. But that's still to be determined. And as I said, the timing hopes to be before year-end that we'll get that kicked off.

(Operator Instructions)

And the next question comes from Cobb Sadler from Catamount Advisors.

Richard, I just had a question on your strategic initiatives. So could you talk a little bit about maybe how that came about, what happened there? And then maybe what you might look to do going forward as it relates to partnerships or maybe an acquisition, maybe you're acquired. What are your thoughts here? Because -- anyway, I'll do a follow-up if you have an answer for that.

Sure. Well, I'm very limited to how much I can discuss related to the non-disclosure that we have with other parties. But as I mentioned on the call, the outreach was initiated actually based on the feedback from previous SkinTE users who have given feedback to various companies around our technology, very positive feedback. So that was the genesis of the initial outreach.

And ultimately, as I said, after a fair amount of time expended on the process, it ultimately didn't come to fruition because of the market conditions that everyone's been experiencing over the last quarter or so.

Our plan, as always, has been to continue to keep our eyes and ears open and to look for different options available to us in order to ensure that the company can successfully achieve its strategy of obtaining a BLA for SkinTE. And that will continue to be our strategy going forward.

Okay. Okay. That sounds good. Because I look at the market opportunity, your trial results, and I would think -- look, there's got to be interest from -- definitely from a capital raising perspective, but also from a strategic perspective.

And so I guess, would you open up a formal process? Or are you just going to execute daily versus your FDA initiatives? Or like -- so what would be the plan? Are you going to -- because it sounds like maybe this came to you, if I have that right -- I may not have that right. But would you do -- would you open up a more formal process at some point? Because at some point, to definitely get through -- I mean your results are great, but you're probably going to need more capital to get to FDA approval.

So you've got to do something at some point, maybe towards the end of the year. And so what would be the plan there? Just execute, see what happens? Or would you open up some sort of process?

Sure. We'll certainly going to continue to focus on executing on our current clinical trial and working with FDA to get the second trial cleared and up and running as well. I mean that's absolutely priority #1.

And certainly, in parallel to that, as I said before, we're going to continue to keep our options open and to work with various parties to identify various methods to ensure that we can continue to execute from a financial perspective. And that could take on various forms. As we've mentioned in the past, on past calls, we are certainly open to discussing potential strategic opportunities such as partnerships and such.

And we'd also obviously continue to want to tell our story to the investment community, to build momentum behind what we think is a very exciting story and very exciting progress that we've made and we expect to make.

So -- at a high level, we're going to continue to keep all options open, and we will be very thoughtful and aggressive as we need to be in order to ensure that we can be properly positioned to execute on our clinical development strategy.

Okay. Well, -- congrats on the progress. I mean, you're definitely doing as well as you can based on what you could control and that's really all you can do at this point. But yes, I mean, you're executing as well as you possibly can on what you can control. So that's good.

With this, I'd like to hand the call back over to you, Cameron, for any closing remarks.

We'd just like to thank everyone for joining today's call. And thank you for your support. We appreciate it.

Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.