PolyPid Ltd (PYPD) 2020 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. And thank you for standing by. Welcome to today's PolyPid Third Quarter 2020 Conference Call. (Operator Instructions) I must also advise you, meeting is being recorded today, on Wednesday, the 11th of November 2020.

And I would now like to hand the meeting over to your speakers today. Please go ahead.

Thank you for participating in PolyPid's Third Quarter 2020 Earnings Conference Call. Joining me on the call will be Amir Weisberg, Chief Executive Officer of PolyPid; and Dikla Czaczkes Akselbrad, Executive Vice President and Chief Financial Officer.

Earlier today, PolyPid released financial results for the 3 and 9 months ended September 30, 2020. A copy of the press release is available on the Investors section of the company's website, www.polypid.com.

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.

Our results may differ materially from those projections. These statements involve material risks and uncertainties that can cause actual results or events materially to differ. 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 identifies 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, November 11, 2020.

With that completion of those prepared remarks, it's my pleasure to turn the call over to Amir Weisberg, CEO. Amir?

Thank you, Bob. On behalf of our team at PolyPid, I would like to welcome everyone to our third quarter 2020 earnings call.

I will begin today with some brief introductory comments, and then Dikla will provide a detailed update on our business and will review our financial results, after which we will open the call for questions.

I'm extremely pleased with the recent progress we have achieved in advancing our development program and in continuing our evolution towards becoming a commercial company. As you know, we are currently in Phase III with our lead asset D-PLEX100 for the prevention of surgical site infection or SSI. Dikla will provide further details on this program shortly.

I'm excited to report today that our ongoing SHIELD I trial is proceeding as planned, and we are having great success in adding new clinical centers for our trials. This is the first of our 2 planned Phase III clinical trials in soft tissue surgery. We are also preparing to conduct our second Phase III trial in abdominal surgery, SHIELD II, which we expect initiated before the end of this year. Importantly, these 2 Phase III trials will serve as a basis for PolyPid's first new drug application, or NDA submission, and we believe will contribute to support a broad label for the prevention of SSI.

Beyond our lead indication, we also have ongoing clinical development program for D-PLEX100 for the prevention of SSI in bone tissue, such as the sternum in open heart surgery. In addition, our promising OncoPLEX local intra-tumoral therapy preclinical program continues to generate promising early results. Dikla will also provide update on these 2 programs shortly.

As you can see, PolyPid has a robust ongoing development program for our innovative PLEX technology. Our aggressive R&D initiatives are supported by a strong balance sheet, which we expect to be sufficient to complete the SHIELD I study and to initiate and conduct SHIELD II as well as prepare for the submission of an NDA to the FDA.

I will now turn the call over to Dikla to provide you with some further details on our business. Dikla, please take it from here.

Thank you, Amir, and thank you all again for joining us on the call. I would like to begin with a brief discussion on the status of our pipeline.

Following the enrollment of our first patient in the SHIELD I trial in July, we have continued to open clinical trial centers at an impressive pace. In fact, in just a few months since the enrollment of the first patient in the study, over 50% of the planned 60 centers have already received IRB approval. And the vast majority of these sites are now open to enrollment.

As a reminder, 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.

We continue to anticipate the top line results from SHIELD I will be available in the second half of 2021. We also expect that the initiation of our second abdominal surgery study, SHIELD II, which will have a broader eligibility criteria, including minimally invasive surgical procedure will occur before year-end. This second trial will enroll approximately 900 to 1,400 patients across the same number of centers.

We have contracted with a leading CRO to support this study and have already engaged with a number of centers globally to participate in the trial. We are very excited about the important progress we have achieved in advancing our pivotal development program for D-PLEX100 in abdominal surgeries, and we look forward to providing investors and analysts with an update once the first 100 patients have been enrolled in SHIELD I study.

While the operating environment for conducting clinical trials continues to evolve due to the ongoing global COVID-19 pandemic, it is important to note that we can reasonably expect that over 70% of the colorectal resection surgery patients to be enrolled into these 2 clinical trials will have cancer diagnoses. In our previous Phase II study in 200 patients, 74% of enrolled patients had colorectal cancer. Therefore, these will be deemed high priority surgical procedure in hospital.

From a commercial perspective, in order to maximize our commercial success in the U.S., we have begun to establish our own footprint in U.S. to initiate commercial preparation activities while also exploring potential partnering opportunities with leading pharmaceutical companies. In the U.S., we are beginning work around branding, packaging and distributing, conducting market research on the current landscape and significant unmet need for the prevention of SSIs and have started to establish our team in the U.S. to support the anticipated commercial launch of the product.

In Europe, we are currently evaluating commercial strategic partners to maximize the future commercial value of D-PLEX100 in this market.

As we have said in the past, significant commercial opportunity exists for the prevention of SSIs. Based on industry data, out of 30 million hospital inpatient surgical procedures conducted in the U.S. in 2015, there are around 14 million procedure or about 45% of all inpatient procedure defined as our target market.

These are major surgical procedures with a high-risk of SSI, such as those in soft tissue for open abdominal procedure as well as those in orthopedic or cardiac procedures where SSIs often leads to disabling and sometimes even life-threatening complications. For the prevention of SSI's in bone tissue, we intend to evaluate next clinical steps for an open heart surgery Phase III trial in the first half of 2021, which will allow us time to ensure SHIELD II is progressing as planned.

As a reminder, in our randomized Phase Ib/II trial of 81 patients having open heart surgery, there were no infections in the 58 patients treated with D-PLEX100 compared to a 4.3% infection rate in the standard of care arm. 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 initiated our Phase III bone model trial in open heart surgery earlier this year and intend to submit the data as a supplement to the abdominal soft tissue surgery NDA submission. This trial will enroll 1,300 to 1,600 patients in 45 centers across the U.S., EU and Israel.

Both abdominal and bone tissue surgery pose significant rates of SSIs for hospital. Patients developing infections following surgery very often incur prolonged length of stays, readmissions and when deep infection occurred, increased rate of reoperation.

In cases with more superficial infection, additional cost for debridement, wound cleaning, negative pressure wound therapy and other medical treatments are often incurred. Moreover, since infection rates and readmissions are used by CMS as one of the quality measures in setting a hospital reimbursement level, high infection rates can negatively impact the overall payment rate by CMS to the hospital.

For example, in 2019, Medicare penalized the NewYork-Presbyterian/Weill Cornell Medical Center with more than $9 million in penalties tied to the hospital-acquired infection reduction, HAC program, and readmission reduction, HRRT program. That includes the SSI mix. These types of penalties can have a significant impact on a hospital's total budget.

As Amir said, we are also very excited about the potential of our pipeline candidate, OncoPLEX, which is an intra-tumoral chemotherapy currently in preclinical stage. By the end of this year, we expect the availability of preclinical data for this compelling opportunity. In addition, we plan at that time to be in a position to provide anticipated time line for a planned pre-investigational NDA meeting with the FDA and for the initiation of the first human study.

Moving on to the balance sheet. As of September 30, 2020, the company had cash, cash equivalents and short-term deposits of $71.8 million as compared to $26.6 million as of December 31, 2019. Cash used in operations for the first 9 months of 2020 totaled $16.8 million. To reiterate what Amir said, we believe our strong cash position will allow us to complete our first Phase III trial, SHIELD I, in abdominal soft tissue infection; to initiate and conduct the second abdominal surgery study, SHIELD II; and to prepare for the submission of an NDA.

Now let's turn to our income statement. R&D expenses for the 3 months ended September 30, 2020, were $4.2 million compared to $3.8 million in the same 3-month period of last year.

As spending increased due to the initiation of the Phase III SHIELD I clinical trial and preparation for the Phase III SHIELD II clinical trial, G&A expenses for the 3 months ended September 30, 2020, were $2.2 million compared to $1.2 million for the same period of last year. Cost increased as we became a publicly traded company with higher D&O insurance costs, and we also had an increase in noncash share-based compensation. For the 3 months ended September 30, 2020, the company had a net loss attributable to ordinary shares of $6.5 million compared to a net loss of $2.1 million in the 3 months period ended September 30, 2019.

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

(Operator Instructions) And your first question is from the line of Gary Nachman of BMO Capital Markets.

For the first abdominal -- for the first abdominal Phase III, you've had good progress activating sites. But how long to get to the full 60 target that you've highlighted? And then will you consider fewer sites, if it becomes more challenging to activate them? And have you been enrolling your target of around 1.5 patients per month per site? How has that been going?

So, Gary, and thank you for that. If you recall, in our previous call, we've discussed the fact that we expected by -- within a quarter, we will be opening 50% of the centers and this has worked very well for us, and we're very pleased that with just 4 months' time, we have over 30 centers globally in the U.S., EU and Israel, that have already received IRB approval. And our assumption is that this will become easier as we go because you can imagine if we are not now starting the other, but all the other are in the process. So they should be coming as we go along.

We indicated that we assume that the rate of recruitment, which will be between 1 to 1.5 patients per month per center. We are not considering at this stage opening less centers. And the reason is that we want to be ready if there is any change in the environment due to COVID-19, any specific hospitals closing their surgery department for a period of time, giving space for COVID patients. So we are still going to open the 60. And up until today, we haven't seen any reason to change it or any problem with it due to the COVID.

With regards to the recruitment, the pace of recruitment of patients, as we said, the next time we are going to update will be when we reach the first 100. And our assumption is that this will be early next year, 2021, early 2021.

Okay. So the sample size reestimation. Did you want to add something, Amir, I'm sorry?

Sorry?

No, I'd just say that until now it looks good. And we believe that these 65 centers can support us if something will happen with the COVID-19 but until now, everything is not perfect.

Okay. So the sample size reestimation, that should still be in the middle of next year, around July time frame. You said data in the second half but it sounds like you're on track for the reestimation midyear?

Correct.

Yes.

Okay. Okay. And then for the second abdominal Phase III. If it's more minimally invasive procedures, how much might that be delayed by the whole COVID situation? How can you potentially get around that? And could you have data on that study later next year? Or would it more likely be into 2022?

So this plan is going to start in the coming few weeks, just before -- within 1.5 months, less than that. So you can imagine that a lot of work for initiation has already been done, and we are feeling comfortable about this trial. The fact that there are more minimally invasive, still over 70% of the patient will be cancer patients. So still, although in some cases, there is a possibility to do the surgery in a laparoscopy manner, still those are cancer patients. So those are still a high-priority surgeries. And we do not see at the moment, and we don't foresee for the coming few months that these high -- deemed high-priority surgeries will be delayed. So again, we did give a gap between the 2 trials. So we started the first SHIELD on the second -- at the beginning of the third quarter, this July, and we are now starting the second one, and we are holding off on the sternal trial to make sure -- or each trial is up and running and all the centers are in place. But for now, we don't see any reason that those will be delayed because those are -- these are still similar population in terms of the reason for surgery.

And with regards to your question regarding read-outs. So not to -- it doesn't have anything to do with COVID-19. The fact that this is a more balanced trial in terms of minimally invasive versus open, and a larger trial is sized between 100 to 1,400 opposed that it won't -- the readout will not be next year, it will be on 2022 -- around 2022.

2022.

Yes. And it has nothing to do -- this was our plan to start with COVID. It didn't had any change here or anything.

Okay. And then lastly, I think, Amir, in your opening remarks, you said that with these 2 initial Phase III studies, you could submit, and that should be enough for a broad label, but that would just be in soft tissue, right? To have a broader label in bone, you would need to then submit the sternum study as a supplemental filing? Just want to confirm that?

Correct. Correct.

(Operator Instructions) Your next request is from the line of Balaji Prasad of Barclays.

Just a couple more from me. Firstly, on -- can you update us on the developments on the commercial build out site? And how do you see that impacting either OpEx or cash runway if it's materially different versus your earlier communication? And maybe that's also a good segue to discuss the current cash balance and the run rate provides for you with your various activities?

Thanks, Balaji. Good to speak with you. So with regards to our U.S. operations, so we are increasing it slightly. It's not going to be -- it's going to be instead of 1 person that was there, we are looking to have 3 persons there. So it's not going to impact our cash flow. But we are having the ability to do some more infrastructure work with regards to commercialization. We've mentioned in today's press release, some points regarding health economics, branding, packaging, things that need a bit more runway in order to reach to the point of commercial NDA with all the right data. So we don't envision this changing in any way our runway.

And with regards to our cash position, again, as we said, since earlier this year, we expect our cash to be sufficient into 2022.

2022.

Yes.

Great. And on your OncoPLEX program. So you're planning to meet the FDA at the end of the year, is that right, my understanding? And so if so, would the pre-investigational NDA meeting from there till -- so what's the gap or duration before you start trials on the oncology side?

So you understand it almost correctly. We are going to give by the end of this year. Since this program was an early stage program as we were going public, there wasn't much valuable information to investors. And by the end of this year, we will be in a position to share much more in the form of preclinical data, some characteristic of the OncoPLEX products as well as a time line to NDA and to first demand. So it's not yet before the end of this year the meeting, but rather a time line for that. And we do expect that we should be in a position that next year, we will have an IND meeting with the FDA -- pre-IND, sorry. Pre-IND, of course.

Your next question is from the line of Elliot Wilbur from Raymond James.

I wanted to ask a follow-up question to your earlier commentary, Dikla, around the update in SHIELD I with respect to the 100-patient enrollment milestone. I just wanted to confirm that, that, in fact, is just going to be an update in terms of when you hit that enrollment point, and we're not actually going to see any associated data with that update?

You are correct. We wanted -- because the operating environment and around the COVID and some companies experiencing delays, we are not in this position, but we wanted to make sure investors have an ongoing insight to the progress in terms of the operating progress. And this is why today, we've updated that over 50% of the centers have received IRB approval in just 4 months down from first-in-human, and we are -- the next point that we will be updating is once we hit, as you said, one -- the first 100. So investors can see that we are in line with our expectation.

Okay. Then a follow-up to that, just in terms of thinking about the overall efficiency of the program. Do you have a sense yet of what the expected overlap would be in terms of participating centers between SHIELD II and SHIELD I?

That's a good point. We do expect that there will be some overlap, but it's hard for us to say at this point. But we do see that. We already see centers that we were at some point thinking about them for SHIELD I but then decided they are more appropriate in terms of the patient population to be for SHIELD II and already converted them. So this is very helpful for us. And hopefully, this will shorten time lines for SHIELD II. But it's still early before we actually start and can update after a quarter or 2 where this situation is, it's hard to say. But obviously, once SHIELD I is -- we'll finalize recruiting, we will be able to convert all of those centers.

Okay. Then with respect to SHIELD II, obviously, I presume the primary endpoints will be identical with that of SHIELD I. But are there any noteworthy differences in terms of secondary endpoints between SHIELD II and SHIELD I?

No. The primary and secondary endpoints are quite similar, and they are quite similar to what we had in Phase II that we published exactly a year ago.

Okay. And then final question. Just shifting more to the commercial front, just to get maybe your high-level thoughts on the time line for and sort of range of possibilities around a European partnership. I guess my assumption would be that you -- at least at this point, you would strongly prefer a pan-European partnership, but I wouldn't also expect anything to be finalized probably until we saw some of the initial data, at least from SHIELD I or maybe at the earliest, the -- at the sample size reestimation. So I'm just wondering if that's consistent with your thinking? Or if you think maybe that actually we could see something before that initial clinical data point?

Thanks, Elliot. So it's -- of course, we cannot relate specifically to time line, especially when it comes to commercialization because those are -- vary from company to company, from negotiation to negotiation, from product to product. But what we can say is that we are continuing with our strategy that we -- it reiterates for quite some time regarding having our own footprint in the U.S. and still initiate commercial preparation activity, while also exploring potential partnering opportunities with leading pharmaceutical companies.

And with the European territory -- geography as well as the rest of the world, we are evaluating commercial strategic partners. We think D-PLEX has a very good market value opportunity in this geography, and this is the feedback that we are getting, but it's very hard to give time line on that. It could only create expectation that we do not want to be either of meeting or un-meeting. What we can say is that we are very happy with the process to date.

Thank you. There are currently no further questions. Please continue.

Thank you for joining our third quarter 2020 earnings conference call. I would like to emphasize how excited we are about the progress we have achieved to date as well as the company long-term prospects. We are grateful to our team members and all of our external partners for their commitment to our mission, and then collaboration to ensure we continue to progress toward achieving our goals of bringing D-PLEX100 to health care providers and patients as soon as possible.

Thank you. With that, we conclude the presentation. Thank you for participating.