Protalix BioTherapeutics - Q2 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics second quarter 2024 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I will now turn the conference over to our host, Mr. Mike Moyer of LifeSci Advisors. You may begin your conference.

Mike Moyer (Managing Director)

Thank you, operator, and welcome to the Protalix BioTherapeutics second 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 corporate 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 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 in Protalix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Bashan. Dror?

Dror Bashan (CEO)

Thank you, Mike, and thank you everyone for joining our second quarter 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, of course, open the line for questions. I will turn first to PRX-115, which is our recombinant pegylated uricase candidate, produced through our ProCellEx platform in development for the treatment of uncontrolled gout. We recently announced encouraging results, initial top-line results from the first seven cohorts of the first-in-humanphase I, clinical study of PRX-115. 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.

The preliminary results from the first seven cohorts demonstrated that PRX-115 exposure increased in dose-dependent manner, and PRX-115 rapidly reduced plasma uric acid concentrations to below the guideline level of six milligrams per deciliter. PRX-115 was also generally well-tolerated. Based on the initial top-line results of these initial seven cohorts and the review and acceptance of the safety data by the Safety Monitoring Committee for dose escalating, we expanded the phase I study by adding 1/8 cohort so we can analyze a higher dose of PRX-115 and its potential to result in an increased exposure time. Dosing in this eighth cohort is now complete, and the 85-day follow-up period is in progress.

We expect top-line results from the full study to be available in the fourth quarter of this year. In addition to the expansion of the phase I study, we have also initiated already preparations for a phase II trial of PRX-115 in patients with uncontrolled gout. We plan to meet and communicate with the regulatory authorities in the US, Europe, and Brazil to discuss our phase II plans and our overall clinical program, with the goal of initiating the phase II study in the mid of next year. Our commercial partner, Chiesi Global Rare Disease, remains committed to a successful commercialization of Elfabrio and has a wealth of experience on their team. Chiesi has invested heavily in the rare disease space, and we are confident that they will continue to penetrate the market and build the Fabry franchise for the longer term.

Our next pipeline candidate, also expressed through ProCellEx, is PRX-119. PRX-119 is a pegylated recombinant human DNase candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps or NETs. Excessive formation or accumulation of NETs can result in different pathological effects, which have been observed in various autoimmune, inflammatory, and fibrotic conditions. Beyond PRX-115 and PRX-119, 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 ProCellEx platform and prioritizing renal rare disease indications. With regard to the therapeutic areas, our strategy moving forward is to prioritize renal rare disease as the core of Protalix development pipeline.

This is a logical focus for our company, given our existing experience and the network and resources we built through the diligent and dedicated efforts throughout the Fabry development program. For example, PRX-119 is being evaluated for NETs-related renal autoimmune-associated diseases. In addition, we have identified potential key high unmet need indication, on which we plan to focus our initial efforts, such as ADPKD, Alport syndrome, FSGS, and others. Work is currently ongoing to identify assets for these and other indications. In order to expand our platform, we are evaluating novel plant-based drug delivery system that may allow protective delivery of different modalities into specific tissues. These exploratory studies are ongoing, and we look forward to updating you on the progress of these efforts as they progress.

In addition to our ProCellEx platform, we intend to explore other modalities, such as small molecules and oligonucleotides, to take advantage of highly innovative opportunities. Before turning the call to Eyal, I want to note that our strong cash position will enable the repayment of our convertible notes due next, next month in September, actually in September 1st, and to maintain our ongoing operation, including the phase II study in gout. In addition, we expect sales to Chiesi to gradually continue as Chiesi anticipates future approvals and launches in additional markets. With that, it is now my pleasure to turn the call over to Eyal for review of our financials. Eyal, Eyal, please.

Eyal Rubin (CFO)

Thank you, Dror, and thank you everyone for joining today's call. Let me review our second quarter 2024 financials. We recorded revenues from selling goods of $13.3 million during the three months ended June 30th, 2024, a decrease of $1.8 million, or 12%, compared to revenues of $15.1 million for the three months ended June 30th, 2023. The decrease resulted primarily from a decrease of $10 million in sales to Chiesi, partially offset by an increase of $4.7 million in sales to Brazil, and an increase of $3.5 million in sales to Pfizer. Sales to Chiesi in three months, ended June 30th, 2023, were in connection with a commercial launch and inventory buildup of Elfabrio after its approval for marketing in the United States and the European Union.

The increases in sales to Brazil and Pfizer during the three months ended June 30th, 2024, resulted primarily from the timing of delivery. We recorded revenues from license and R&D services of $0.2 million for the three months ended June 30th, 2024, a decrease of $19.8 million, or 99%, compared to revenues of $20 million for the three months ended June 30th, 2023. Revenues from license and R&D services are comprised primarily of revenues the company recognized in connection with the Chiesi agreement. The revenues from license and R&D services for the three months ended June 30th, 2023, were the result of the $20 million regulatory milestone payment from Chiesi in connection with the FDA approval of Elfabrio, granted during that period.

Cost of goods sold was $9.5 million for the three months ended June 30th, 2024, an increase of $3.4 million, or 56%, from cost of goods sold of $6.1 million for the three months ended June 30th, 2023. The increase in cost of goods sold was primarily the result of an increase in sales to Pfizer and to Brazil. For the three months ended June 30th, 2024, the Company's total research and development expenses were approximately $3 million, comprised of approximately $0.5 million subcontractor-related expenses, approximately $1.6 million of salary and related expenses, approximately $0.2 million of material-related expenses, and approximately $0.7 million of other expenses.

For the three months ended June 30th, 2023, the company total research and development expenses were approximately $4.5 million, comprised of approximately $1.7 million of subcontractor-related expenses, approximately $2 million of salary and related expenses, approximately $0.1 million of material-related expenses, and approximately $0.7 million of other expenses. Total decrease in research and R&D expenses for the three months ended June 30th, 2024, was $1.5 million, or 33%, compared to the three months ended June 30th, 2023. The decrease in research and development expenses resulted primarily from the completion of the company's Fabry clinical program and the regulatory process related to the review of Elfabrio BLA in the U.S. and the MAA in the European Union by the applicable regulatory agencies.

Selling general administrative expenses were $3.5 million for the three months ended June 30th, 2024, a decrease of $0.5 million, or 13%, compared to $4 million for the three months ended June 30th, 2023. The decrease resulted primarily from a decrease of $0.5 million in salary and related expenses. Financial income net were $0.2 million for three months, ended June 30th, 2024, compared to financial expenses net of $0.8 million for the three months ended June 30th, 2023. Difference resulted primarily from a higher interest income on bank deposits and lower notes interest expenses due to the notes conversion executed in 2023. In the three months ended June 30th, 2024, we recorded a tax benefit of approximately $0.1 million, compared to income taxes of $0.3 million for the three months ended June 30th, 2023.

Income taxes recorded are primarily the result of the provision for current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017. Cash, cash equivalents and short-term bank deposits were approximately $45 million at June 30th, 2024. As Dror mentioned, we believe our cash position is sufficient to enable the repayment of our convertible notes due September 1st, 2024, and for our ongoing operations. Net loss for the three months ended June 30th, 2024, was approximately $2.2 million, or $0.03 per share, basic and diluted, compared to a net income of $19.3 million, or $0.29 per share basic and $0.21 per share diluted for the same period in 2023.

Since the end of the quarter ended June 30th, 2024, the company collected approximately $4.6 million in the aggregate from sales to Pfizer and approximately $2.3 million from the sales to Brazil. I will now turn the call back to you, Dror.

Dror Bashan (CEO)

...Thanks, Eyal. To conclude, I would like to express my confidence in Protalix and our enhanced strategy to enable the next phase of pipeline development. We have three streams of revenues, sales in Brazil, to Pfizer and to Chiesi, and we expect our revenues to continue and grow. We are pleased with the interim results from our PRX-115 clinical study, and we are eager to report the top line results soon. We also, we are continuing to leverage our platform and expertise to develop a pipeline of early-stage assets with the potential to address rare renal diseases, 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 stockholders. Thank you very much, and I will return now to the operator to open the call for questions.

Operator (participant)

Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions. Our first question comes from the line of John Vandermosen with Zacks. Please proceed with your question.

John Vandermosten (Analyst)

Great, thank you, and hello to all. How has uptake been for Elfabrio by payers? Can you give us a sense of how negotiations have been going there to get it to make it available and to get in on formularies? Can you give us a sense of that? And have you been able to, or has Chiesi been able to sign any of the big payers to get it and make it available?

Dror Bashan (CEO)

So, John, I think we have discussed in the past, you know, Chiesi is a private company, so all I can say from what we know is that they are doing well, and they are, I don't know, payer by payer, but as far as we see the numbers of what we know, they do well, and they plan to penetrate in a more significant way going forward, of course, both in the U.S. and also in other markets in Europe and outside of Europe. So actually we are very pleased from the... We are now about a year, give or take, from their launch in the U.S., and about seven months, I believe, since the drug is available in Germany, for example, which is one of the biggest market outside the U.S.

The outcomes are good, and they do very well, and we expect them to expect them. What we expect from what we understand is that this will continue to be so.

John Vandermosten (Analyst)

Okay. Another thing I'm hoping you can help us with is to estimate, you know, the sales, the sales numbers. I know that it's pretty lumpy still. We know we're probably still kind of inventory building and getting a sense of what, you know, the sales would need to be. But do you have an idea when you can provide some guidance in terms of what the sales to Chiesi might be?

Dror Bashan (CEO)

Not at the moment. You know, it depends on shipment. So right now, what we do, as you rightly said, we, they order batches of the drug product to their stock. This is also the agreement. Since we are now in the first year, and I assume in the next 12 months it's more or less the same, because they're also penetrating to Europe, and they had stock before, so it will take a while until we'll have, I would say, ongoing basis forecasts. Right now we try just to be cautious.

It's not that we try to hide something, God forbid, it is just that, you know, it could be that one batch is not stamped on the 25th of November or 25th at end of a quarter, and it slips to the next quarter because of some, I don't know, QA concern, or only God knows what. So we don't want to say we will hit X million dollars, then it will be -$5 million or -$7 million because, you know, a batch to Brazil or a batch to Chiesi, only God knows what. So we think we need a bit more time, but again, I want to emphasize, we are pleased with what Chiesi is doing. I'm not saying in order to make a V on the checkbox. We are very much pleased.

They are focused, they put a lot of effort, and we see good results. The anticipation that this will continue and will gradually continue going forward, the next years ahead of us.

John Vandermosten (Analyst)

Do you have ongoing meetings with the team to where they update you kind of on how it's going, or is it a little bit more arm's length?

Dror Bashan (CEO)

Yes.

John Vandermosten (Analyst)

Okay.

Dror Bashan (CEO)

No, no. They, they... Not only myself, but they also sit with our team on multiple disciplines, you know, medical operations, etc., and also update management and board of Protalix.

John Vandermosten (Analyst)

Okay. And other-

Dror Bashan (CEO)

So the relationship, just to make it clear, the relationship are very good, and whenever we ask, we don't do it every other week, of course, but whenever we ask for an update or discussion with our board or management, so, Chiesi and Giacomo Chiesi, you know, they're happy to do so.

John Vandermosten (Analyst)

Great. Yeah, that you guys had that KOL event last year, which was pretty helpful and they presented, so maybe we can do that again.

Dror Bashan (CEO)

Yes.

John Vandermosten (Analyst)

Are there any milestones that you might expect in the next year related to sales? I don't think you've disclosed kind of the details on that, but I mean, might there be one in the next 12 months or so, or is it further out than that based on your kind of view at this point?

Dror Bashan (CEO)

You know, it depends on, of course, on the pace of the sales. It's difficult for me to tell you today, even if-

Operator (participant)

... We do apologize for the technical difficulties. It does seem that we have.

John Vandermosten (Analyst)

Oh, it cut out. I'm back. Is, Dror, are you still there?

Operator (participant)

It seems like we lost Dror.

Eyal Rubin (CFO)

He's dialing back. He's dialing back again.

Operator (participant)

Okay.

John Vandermosten (Analyst)

Great. Well, I can ask another one while he's doing that, Eyal, for you. Are there any conferences that you're targeting for PRX-115 to report the phase I data coming up this fall? I think you said that it'll be ready soon, and was wondering if there's, like, a certain conference that you're targeting.

Eyal Rubin (CFO)

No, we just participated in one. Yeah, it was there early June, and the full set of data from the eighth cohort, from all eight cohorts, actually, are gonna be released sometime around the early November. So I guess then until then, obviously, we're gonna work behind the scenes to get everything done, meet with the agencies. As Dror mentioned, getting prepared for the phase II, and I guess that the next fall is gonna probably be the next conference that we will be joining.

John Vandermosten (Analyst)

Okay.

Eyal Rubin (CFO)

By the way, we do plan to attend the ACR.

John Vandermosten (Analyst)

Okay. All right. Thank you, Eyal.

Eyal Rubin (CFO)

Thanks, John.

Operator (participant)

Thank you. We do have Dror back as well.

Dror Bashan (CEO)

Yes. I apologize for being cut off.

Operator (participant)

All right. Thank you. Our next question comes from the line of Raghuram Selvaraju with H.C. Wainwright. Please proceed with your question.

Dan Efron (Analyst)

Good morning. This is Dan Efron. Thanks for taking our questions. Where does Protalix envision positioning PRX-115 with respect to KRYSTEXXA? How does Protalix see PRX-115 stacking up against SEL-212 from Sobi? And we'd like to ask some follow-ups, if we could.

Dror Bashan (CEO)

So, you know, we are now, as we mentioned, we are finalizing the phase I. The phase II will be with the multiple dose. Hopefully, if phase II will mimic what we saw - what we see in the phase I, I think we have a very interesting alternative to both enzymes. But, you know, we hope this will fly. This is the intent. This is the aim and the goal. I would say again, and I said, I think I said it also at the investment event. If we would have seen outcomes which are, let's say, good or fit only once in two weeks infusion, as KRYSTEXXA does today, we will probably wouldn't continue with the program. This is not the intent.

Dan Efron (Analyst)

Awesome. That makes sense. Could you elucidate on some of your early-stage R&D efforts and which programs you find promising? And do you expect to monetize or partner the oral anti-TNF candidate, or has that program been suspended?

Dror Bashan (CEO)

Well, this program has been off. We are evaluating, I would say, more than half a dozen program. They're very early stage right now. Once we sign or bring them in, with validated, I would say, preclinical data, we will, we will share, of course. You know, until then, we don't want to be seen, you know, dreaming or something like this. So we operate. We are looking, I would say, very diligently in any opportunity. We believe we have the right resources to do so, and we hope to be able to update in the next, I don't know, quarter or two, on the first or two firsts, maybe even two programs that will get into the pipeline.

Dan Efron (Analyst)

Thanks. That's really exciting. We look forward to hearing about it.

Dror Bashan (CEO)

Yes.

Dan Efron (Analyst)

Assuming full repayment of the convertible notes due next month, does the company plan to repay these or replace the notes with new notes with a different maturity date? And what position do you guys have related to debt or future cap structure?

Dror Bashan (CEO)

So currently, I mean, currently, and not because I try to be cautious. We plan to pay the notes by September first. We do not intend to refinance or take a new debt, if I may say. As both of us mentioned, I believe both Eyal and myself, we have sufficient resources to maintain our ongoing operations, inclusive of the phase II of the gout. As we mentioned, we have three streams of range revenues, which we expect them to grow in the future. You know, so this is the situation right now.

Dan Efron (Analyst)

Awesome. That makes sense.

Dror Bashan (CEO)

Certainly-

Dan Efron (Analyst)

Thank you so much for-

Dror Bashan (CEO)

I would summarize that. I would add that certainly Protalix moved from, I would say, from a financial point of view, kind of a danger zone to a much more stabilized financial position. It's always good to have more money, but, you know, we didn't raise even one dime in the last, I believe, five or six quarters, so we will do it cautiously.

Dan Efron (Analyst)

Thank you so much for answering my questions.

Dror Bashan (CEO)

Thank you.

Operator (participant)

Thank you. There are no further questions at this time. I would like to turn the floor back to Dror for closing remarks.

Dror Bashan (CEO)

So, thanks everybody again, thank you for the time and the patience. We look forward to meeting with you on our next quarter, and hopefully we'll have good news to report. Thank you very much.

John Vandermosten (Analyst)

Thank you.

Eyal Rubin (CFO)

Thank you.

Operator (participant)

This does conclude today's teleconference. We thank you for your participation. You may disconnect your line at this time.