PolyPid Ltd (PYPD) 2020 Q4 法說會逐字稿

Greetings, and welcome to the PolyPid Fourth Quarter and Full Year 2020 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I will now like to introduce your host for today's conference, Mr. Bob Yedid from LifeSci Advisors. Mr. Oswald (sic) [Yedid], you may begin.

Thank you all for participating in PolyPid's Fourth Quarter and Full Year 2020 Earnings Conference Call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Executive Vice President and Chief Financial Officer of PolyPid; and Dr. Noam Emanuel, Founder and Chief Scientific Officer.

Earlier today, PolyPid released results for the 3 and 12 months ended December 31, 2020. A copy of the press release is available on the Investors section of the company's website.

I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to differ materially. Accordingly, you should not place undue reliance on these statements.

I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Forms F-1 and 6-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. PolyPid disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, December 10, 2021 (sic) [February 10, 2021].

With the completion of those prepared remarks, it's my pleasure to turn the call over to Dikla Czaczkes. Dikla, go ahead.

Thank you, Bob. On behalf of our team at PolyPid, I would like to welcome everyone to our fourth quarter and full year 2020 earnings call. I will begin today with an overview of our accomplishments in 2020, and then we will provide a detailed update of our business. Dr. Emanuel, our Founder and Chief Scientist Officer, will review our recent progress with our OncoPLEX oncology program. Finally, I will review our financial results, after which we will open the call for questions.

Unfortunately, Amir Weisberg, our Chief Executive Officer, is having a medical procedure and cannot be with us today. We wish Amir well and expect him to be back at work shortly.

As we enter what we expect to be an exciting year, I would like to take a moment to reflect on what was truly a remarkable 2020 for PolyPid. Most importantly, we have achieved significant progress in advancing our development programs and in continuing our evolution towards becoming a commercial company. Our Phase III program for our lead asset, D-PLEX100, for the prevention of surgical site infection, or SSI, is well underway. Our ongoing SHIELD I trial is enrolling well, and our second Phase III trial in abdominal surgery, SHIELD II, was recently initiated. We are thrilled to have both Phase III trials now opened and enrolling patients in the U.S., Europe and Israel. The execution of these 2 clinical trials will be a core focus for PolyPid in 2021.

As a reminder, these 2 Phase III clinical trials will serve as the basis for PolyPid's first New Drug Application, or NDA, submission. Beyond our lead indication, we also have an ongoing clinical development program for D-PLEX100 for the prevention of SSI in bone tissue, such as the sternum in open heart surgeries. In addition, our promising OncoPLEX local intra-tumoral therapy preclinical program, for which we recently announced promising preclinical data, continues to advance as planned.

From a regulatory standpoint, we were excited in the fourth quarter to have received Breakthrough Therapy designation for D-PLEX100 from the FDA for the prevention of SSIs in patients undergoing elective colorectal surgery. D-PLEX100 previously received 2 Fast Track designations from the FDA for the prevention of post-abdominal surgery, incisional infection and for the prevention of sternal wound infections post-cardiac surgery as well as 2 Qualified Infection Disease Program designations, or QIDPs, in the same indication.

We closed the year by hosting a well-attended KOL call on D-PLEX100 that featured presentation by Dr. Hartzell Schaff of the Mayo Clinic; Dr. Anthony Senegore, formerly of UTMB at Galveston; and Dr. Oded Zmora from Shamir Medical Center, Israel, who discussed the burden and challenges related to SSIs in post-colorectal and cardiovascular surgeries. And the opportunity of D-PLEX100 to change the current treatment landscape.

PolyPid's robust ongoing development program for our innovative PLEX technology is supported by a strong balance sheet, which was further strengthened by the successful completion of our IPO on the NASDAQ in June 2020. We raised $62.8 million in net profits from the IPO and added several other well-respected new investors. We continue to expect that our current cash position will be sufficient to complete the SHIELD I study and to conduct SHIELD II as well as prepare for the submission of an NDA to the FDA.

Let's shift gear, and I would like to provide a brief discussion on the status of our pipeline. Following the enrollment of our first patient in the SHIELD I trial in July 2020 and the initiation of the SHIELD II trial in December, we have continued to open clinical trial centers at an impressive pace. I'm pleased to report today that we have now enrolled a total of 100 patients in our 2 Phase III studies with the vast majority of those subjects in our ongoing SHIELD I trial.

As we have said previously, for SHIELD I, our plan is to enroll 600 to 900 patients within 60 centers in the U.S., EU and Israel. Following the enrollment of 500 patients, the study design provides for a blinded sample size re-estimation based on the overall infection rate observed in the study in order to determine final target enrollment for the study. We continue to anticipate the top line results for SHIELD I will be available by year-end 2021.

Late in 2020, we were pleased to initiate SHIELD II, which has broader eligibility criteria, including minimally invasive surgical procedures. This is important because it will provide additional clinical evaluation of the potential of D-PLEX100 to prevent SSIs in broader surgical population. This second trial will enroll approximately 900 to 1,400 patients across the same number of centers as SHIELD I. Enrollment in SHIELD II is advancing as anticipated.

From a commercial perspective, to reiterate what we have said previously, in order to maximize our commercial success, we have begun to establish our own footprint in the U.S. to initiate commercial preparation activities while also exploring potential partnering opportunities with leading pharmaceutical companies. We are in discussion with potential partners for the U.S., EU and Asian market. In the U.S., we are thoroughly evaluating the market access and reimbursement landscape as well as key hospital economic parameters to ensure optimal positioning and coverage of D-PLEX100.

As part of this work, we are conducting extensive market research with surgeons, pharmacists and hospital administrators to further assess the attractiveness of D-PLEX100. This research will help us identify critical opportunities and any potential challenges for adoptions. Through those initiatives and our clinical trial, our goal is to generate data that demonstrate positive clinical outcome for D-PLEX100 as well as favorable health economics for hospitals to drive the commercial potential of our drug candidate.

For the prevention of SSI in bone tissue, as you know, we initiate our Phase III bone model trial in open heart surgery earlier last year. We focused on bone tissue due to the high risk of morbidity and mortality in cases of deep surgical site infection in these procedures. We are currently evaluating next clinical steps for an open heart surgery Phase III trial while we ensure that the SHIELD I and SHIELD II trial continues to progress as planned. The company intends to submit the bone surgery data as a supplement after the approval of the NDA for abdominal soft tissue surgery.

From a regulatory perspective, we received Breakthrough Therapy designation for D-PLEX100 from the FDA for the prevention of SSI in patients undergoing elective colorectal surgery. Of significance, Breakthrough Therapy designation for anti-infective drug is relatively rare and we believe is indicative of the urgency to adopt new, innovative therapies to prevent surgical site infection. It is also important to note that Breakthrough Therapy designation is granted based on preliminary clinical evidence indicating that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints.

At this point, I'd like to turn the call over to Noam, our Chief Scientist Officer, to discuss our OncoPLEX program. Noam?

Thank you, Dikla. It is my pleasure to join this quarterly call, especially following the informative KOL call in which I participated with 3 KOLs in mid-December. As background, I'm the founder of PolyPid and serve as the Chief Scientific Officer.

Now I would like to further elaborate on the potential of OncoPLEX, our intra-tumoral chemotherapy product candidate to overcome tumors, including those that are chemotherapeutic resistant. OncoPLEX is controlling the local exposure of tumor cells to docetaxel, one of the most widely used chemotherapy agents. As you know, systemic chemotherapeutic treatment is significantly limited in eradicating solid tumors, mainly due to the limited penetration and the high toxicity to noninvolved tissues. OncoPLEX utilize the PolyPid novel PLEX technology to provide prolonged and controlled local exposure to docetaxel in the interoperative tumor resection setting.

The control over the exposure to chemotherapy will have critical impact on both the efficacy and the safety of the treatment. The release of the drug is immediate after the surgery and continue over weeks to follow with minimal systemic and toxic exposure. These combined attributes may become critical to overcoming tumor reoccurrence and to prevent spreading of cancer cells during the post-operative period.

You will recall that late in 2020, we announced positive preclinical data from this program. In the syngeneic mouse model for solid tumors of colon carcinoma using cancer cells highly resistant to docetaxel, among the most treatment-resistant tumor cell type, a single local application of OncoPLEX generated significantly better results compared to the group treated with 6 cycles of systemic docetaxel treatment in multiple K measures, including overall tumor reoccurrence, overall survival and overall tumor-free survival. Based on these compelling preclinical results in chemotherapeutic-resistant tumor model, we intended to conduct additional preclinical safety studies of OncoPLEX in various type of solid tumors in order to complete preclinical package for the filing of pre-IND meeting request with the FDA later this year and potentially initiate a Phase I clinical trial in 2022.

We believe OncoPLEX could have the potential to become part of the standard of care in the resection setting with multiple solid cancer types, including glioblastoma, prostate cancer and head and neck cancer.

With that, Dikla will now review our recent financial results. Dikla?

Let's start with PolyPid's balance sheet information. As of December 31, 2020, the company had cash, cash equivalents, short-term and long-term deposits of $66.6 million as compared to $26.6 million as of December 31, 2019. Cash used in operations for the 12 months ended December 31, 2020, totaled $22 million. We expect that our current cash runway will extend into 2022. We believe our strong balance sheet will allow us to complete our first Phase III trial, SHIELD I, in abdominal soft tissue infections; to conduct the second abdominal surgery study, SHIELD II; and to prepare for the submission of an NDA.

On another positive note, PolyPid is very proud that our company's share as of December 2020 were helped by the ARK Israeli Innovative Technology ETF. This is one of the active funds managed by Cathie Wood, a well-known investor who founded ARK Investment Management.

Now let's turn to our income statement. Research and development expenses for the 3 months ended December 31, 2020, were $5 million compared to $3.3 million in the same 3-month period of 2019 as spending increased due to the initiation of the Phase III SHIELD I and SHIELD II clinical trials. General and administrative expenses for the fourth quarter of 2020 were $2.2 million compared to $800,000 to the prior year period as cost increased due to being a publicly traded company with higher D&O insurance costs and an increase in noncash share-based compensation.

Marketing and business development expense for the fourth quarter of 2020 were $700,000 compared to $300,000 for the same period of 2019. This spending increase is mainly due to an increase in marketing and business development personnel in our new offices in New Jersey. And an increase in market-facing activities as we start building our commercial infrastructure. For the fourth quarter of 2020, the company had a net loss attributable to ordinary shares of $7.3 million compared to $3.9 million in the prior year period.

We will now open the call to your questions. Operator?

(Operator Instructions) And the first question comes from the line of -- bear with me 1 second. The first question comes from the line of Elliot Wilbur from Raymond James.

This is actually [Michael Paralari] on for Elliot. So 2 main ones for you guys today. First one going on the basis of R&D and SG&A. How should we look at spending over the course of 2021? Is it going to be in line with 2020 levels? And is it expected to peak at any particular point in time throughout the year? And then second question on the OncoPLEX program. The Phase I studies, are you guys expecting to conduct those in any specific tumor type? Or is it just general solid tumors? And then is it for sure going to be using the docetaxel? Or are there any other taxanes or chemo agents that we should be considering?

Okay. So we'll go one by one. With regards to research and development expense, we do expect to see some increase as we recruit more patients. As you might recall, we started the Phase III, the SHIELD I this last July and the second one in December. So this will be the first full year when we have the 2 trials running. So we do expect them to increase, and this is budgeted. We don't see much of an increase -- expected increase in the G&A, just the fact of being a full -- for a full year, a publicly traded company.

So the 2 -- the last 2 quarters are quite indicative of the coming year, but we do expect an increase in the research and development to reflect the clinical cost. But still, we are very comfortable with our statement in today's press release that our cash is sufficient in 2022 while running those 2 trials.

With regards to the OncoPLEX, I'll add -- I'll have Noam to add, you were asking 2 questions. One with -- regarding to the type of cancer that we will be conducting trial on. And the second one was with regarding to the taxanes that we will be using. So in terms of timing, we said very clearly that we expect to meet the FDA this year for pre-IND meeting and start Phase I on the following year. And we have seen very nice results in our preclinical data that support that the approach could be used in different cancer types, not just in one. We are targeting one tumor at this stage, but we do see potential for more than one tumor.

And we'll need to see based on our discussions with the FDA what is the best strategic approach in terms of the clinical trial, whether it's to focus on one tumor and then expand or have more of what the FDA has called a bundled type of trial that will check more than one cancer. But this still remains to be seen. Noam, would you like to add?

Yes. Thank you, Dikla. I would add that we selected docetaxel, and we keep using docetaxel in the OncoPLEX. Although we can use different drugs with the PLEX technology because docetaxel has a very wide activity against many very important and central type of cancer. And have a mechanism of action against this type of tumors that is very, very centered in the [microtubule]. So with that, it should be effective against wide varieties of tumors.

Now if we are going to mention head and neck cancers, so they can be divided to several type of tumors. And we believe, as I said earlier, that with the FDA, we will decide together how bundle and how we'll collect that and how we'll divide that, either to target one of them or a group of them. Same with brain cancers, primary brain cancers. So it should be still discussed, but we believe that OncoPLEX has wide activity against many.

And the next question comes from the line of Gary Nachman from BMO Capital Markets.

It's Rafay Sardar on for Gary. Could you comment on what portion of the sites are activated for both SHIELD I and SHIELD II? And specifically for SHIELD I, could you talk a bit more about your level of confidence in the sample size re-estimation still occurring in mid-2021? How is the current pace of enrollment trending relative to your expectations? And what kind of impact are you seeing from COVID-19 on enrollment?

Thank you, Rafay, and you're raising very -- some very good points. With regards to the number of centers that are open in SHIELD I, SHIELD II, we just opened in December, so it's too early to relate to the number of centers. But we are very happy with the numbers of centers that are opened for SHIELD I. We said that we plan to have 60 centers in place and majority of the centers are open and active. I think that one of the things that we've done since we've initiated those trials when COVID was already out there, so we understood that we might face some issues. We, to start with, decided to open relatively a large number of centers, 60. And we've also separated the centers between SHIELD I and SHIELD II. Those are different centers.

So they are not competing in one another, and they are not holding back any of the recruitment. And also in SHIELD II, the plan is to have 60 centers. And we've also assumed a relatively modest number of patients per center, one patient per center per month in average along the trial. So this is quite conservative. And with that, we are still very much confident that we will reach the 500 patients around middle of this year and finalize the recruitment before the end of the year. So we are on track on that, and we are very confident. The world out there is surprising us, but unless we have other surprises, we are quite confident that we are on track.

Sure. That's good to hear. Could you comment on what you are able to see in the blinded data for SHIELD I and specifically, the overall rate of infections and whether that is trending in line with your expectations?

I can only say that it's early with about 100 patients overall. And we do expect to be reporting 100 patients for SHIELD I separately, although the majority is there. But I can say that it is in line with our expectations.

Got it. And then just last one for me, it'd be helpful if you could comment on your key objectives in 2021 with respect to market research and commercial preparation. How much further do you plan to expand your organization over the next year?

So we are now conducting the quite robust market research, as we said, that would help us really evaluate again if there's anything that needs to be dealt with in advance in terms of challenges and pricing. So this is still in progress, and we hope to be able to give some more color on the outcome of this as we progress. On the other hand, we said quite clearly that we are evaluating and we are in discussion with the pharma companies for the different markets, and we will continue that with our business development strategy that is clearly to commercialize D-PLEX100 with partners in Europe and the rest of the world and with some strategic partnering in North America while having our footsteps. So we've increased our office in Summit, New Jersey, and this is part of the increase in expenses that you see in the sales and marketing.

But we will continue to do it in a moderate way. We are not expanding our expense here without seeing data coming because things will be accelerating one another. So once we have the data out there, which we hope will be very positive, this will be helpful also in all our commercial discussions. So we are doing it step-by-step in terms of the expense, but we did increase the personnel there, and we are spending more cash there in terms of market researches that are required and supporting the discussions and evaluation process that we have.

Got it. That's helpful. Just one more for me actually. Could you comment on your current thinking around the resumption of the cardiac external trial? What would you need to see to move forward there? And is that something that could potentially happen this year?

So because we are prioritizing SHIELD I and SHIELD II that -- to have the path to an NDA, we don't want to risk our financial resources by expanding too much, and we are also budgeting the oncology program. So we are holding on that to make sure we have the sufficient resources. But in any case, the sternum indication is planned to be submitted as a supplement to the NDA. This was to start with. So it shouldn't hold us into the commercial stage. But we will need additional -- as we said in the last year, we'll need additional resources in order to complete this trial.

Congratulations on the progress.

Thank you so much.

And now we will take our next question that comes from the line of Cindy Li from Barclays.

This is Cindy on for Balaji. We just had a couple of questions. Are you guys seeing any greater or nearer KOL interest as you guys continue to flag D-PLEX potential? And if there are any updates on commercial outlook based on any new insights you may have?

Could you repeat the first half of your question? We couldn't hear you well.

Yes. If you guys are seeing greater or nearer KOL interest as you guys continue to flag D-PLEX potential?

Sure. Sure. So definitely, we see that, by the way, both from the surgeon that we are with discussions with, the hospital. So we see it in different areas. We see it with the ease to get surgeons engaged and hospital engage and be part of our SHIELD I, SHIELD II trial. And the clear messaging of the unmet need, I think this was also very nicely covered in our last KOL event in December. But we also see it in discussions with pharma companies.

That's helpful. And then if you guys could just comment on any updates for partnerships or licensing on PLEX matrix development or future commercialization?

So as always in our industry, it's very hard to comment on that as they are in process because those processes take a long time and there are different consideration that needs to be taken. So it's hard to comment. I could only repeat what we said that we are in discussions and our strategy -- to strengthen our strategy. And we've also, in that respect, because of the need, broadened the personnel in our Summit, New Jersey office with personnel that is coming from business development in sales and marketing.

(Operator Instructions) And the next question comes from the line of Jim Molloy from Alliance Global.

Could you walk us through how you allocate between SHIELD I versus SHIELD II, just on the -- just thinking that -- I know that SHIELD I, potentially, the data looks good enough, you're fileable right there on SHIELD I alone. So how do you sort of base out the algorithm to put people in SHIELD II when getting SHIELD I done as soon as possible is potentially the fastest route to market?

Jim, thank you. This is a good question. So it's quite simple in the sense that we've separated the center. So it's not the same center. So once the center is open, it's either open for SHIELD I or for SHIELD II. So they don't have this dilemma whatsoever. But what we have done, we've opened first, as fast as possible, centers for SHIELD I exactly because of what you've mentioned because this is the first trial that will end and potentially could serve as a trial for approval for the NDA that will be sufficient for approval. And in Europe, it is sufficient.

So we won't -- we don't need -- for the European approval, we don't need any additional trial. But potentially also for U.S., this could have, certainly, pivotal trial for approval. So this is our priorities, and we opened first center for SHIELD I. SHIELD I is also up and running since July. So we had more time to open, and we're pleased to say that more than 50% of the centers are recruiting patients.

Okay. And then how will you guys know or how will us as outsiders looking in know that you'll definitely be able to hit the fourth -- I think fourth quarter '21 for SHIELD I data? And I guess also -- I'll start with that and then I have one final follow-up question, please.

Sure. Sure. Sure. So -- as we promised in our last quarterly call, we said we'll update next once we reach 100 patients. We have overall 100 patients and next our end -- our next press release will be when we reach 100 patient in SHIELD I, which will probably be very soon from now. And we will continue to update that, not every patient that is recruited, but we'll make sure that investors are aware of our progress and can evaluate where we stand in terms of recruitment. We put a lot of efforts on that internally and externally. This is our main objectives for this year, and the company is very much focused on that.

Yes. I guess, final question would be then, how would -- obviously, you started in July of last year. You're almost at 100 in the first trial. Obviously, it needs to accelerate dramatically. At what point will you know that acceleration of recruitment is happening and when will we know on the outside looking in?

Right. The main hurdle here or the main obstacle to get to this point is to open the centers. The thing that takes the longest is to have all the centers in place. Once the centers are up and running, we see them recruiting quite nicely. And this is something that is working very nicely with centers that are open. So we do expect you to -- the next time we will report on recruitment, you'll be able to judge what the pace of recruitment now that centers are recruiting -- are up, open and recruiting.

There are no further questions at the moment. So please go ahead for the closing comments.

Thank you. Thank you for joining our fourth quarter and full year 2020 earnings conference call. I would like to repeat how excited we are about the progress we have achieved to date as well as the compelling opportunities that lay ahead of us. We remain grateful to our team members and all our external partners for their strong commitment to our mission and their collaboration to ensure we continue to advance towards achieving our goals of bringing D-PLEX100 to health care providers and patients as quickly as possible. Thank you all.

Thank you so much. That does conclude our conference for today. Thank you for participating. You may all disconnect.