PolyPid - Q2 2024

Transcript

Operator (participant)

Greetings, and welcome to the PolyPid Second Quarter 2024 Conference Call. At this time, participants are in listen-only mode. As a reminder, this call is recorded, and I would now like to introduce your host for today's conference, Brian Ritchie, from LifeSci Advisors. Mr. Ritchie, you may begin.

Brian Ritchie (Managing Director)

Thank you all for participating in PolyPid's Second Quarter 2024 Earnings Conference Call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Chief Executive Officer of PolyPid, Jonny Cohen, PolyPid's Chief Financial Officer, and Ori Warshavsky, Chief Operating Officer, United States, of PolyPid. Earlier today, PolyPid released its financial results for the three and six months ended June 30, 2024. A copy of the press release is available in the Investors section on 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.

For example, management is making forward-looking statements when it discusses the expected timing for recruitment, number of centers, top-line results from the SHIELD II trial, and of the unblinded interim analysis, the planned new drug application submission for D-PLEX100, and the company's expected cash runway, and the potential to secure additional funds if all the warrants issued through its recent PIPE are exercised. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks 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 could cause actual results or events to materially 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 annual report on Form 20-F, 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, August 14, 2024. With the completion of those prepared remarks, it is my pleasure to turn the call over to Dikla Czaczkes Akselbrad, CEO of PolyPid. Dikla?

Dikla Czaczkes Akselbrad (CEO)

Thank you, Brian. On behalf of our team at PolyPid, I would like to welcome everyone to our Second Quarter 2024 Earnings Conference Call. We are thrilled with the important clinical and operational progress achieved recently, most critically as it relates to continued study enrollment in our ongoing SHIELD II pivotal trial for D-PLEX100 for the prevention of abdominal colorectal surgical site infection. Further, the recent successful financing extends our cash runway throughout expected interim analysis result in the fourth quarter of this year and the completion of the full planned patient enrollment in early 2025. In addition, assuming the full exercise of the warrants for this financing, our cash runway will be further extended into the second quarter of 2025, beyond the anticipated timing of SHIELD II top-line results. Let's begin with the status of SHIELD II.

I am pleased to report today that the study has now enrolled approximately 320 subjects, and approximately 50 centers are currently open in multiple countries around the world, including the U.S., Germany, Italy, Ireland, Portugal, Hungary, and Israel. As a reminder, we intend to conduct an unblinded interim analysis once approximately 400 patients of the planned total of approximately 600 subjects complete the 30-day follow-up, which is expected to occur in the fourth quarter of 2024. Top-line results are anticipated in the first quarter of next year. Therefore, SHIELD II is now three quarters enrolled for the interim analysis and more than halfway to full planned enrollment. Importantly, enrollment is progressing at a consistent and robust pace. Of significance, the key patient enrollment trends we identified on our last call have continued.

The median age, male-female split, and percentage of enrolled patients suffering from cancer in SHIELD II are all similar to the patient in the SHIELD I large incision pre-specified subgroup. This is important because these similar demographics are being observed in the more focused patient population in which we have already generated highly positive data in SHIELD I. We continue to strongly believe that SHIELD II is a de-risk phase III trial. Unlike SHIELD I, the currently enrolling SHIELD II is not being conducted under the tight COVID-related restrictions that were in place during the pandemic. Later in the call, Ori will further discuss the surgical site infection risk currently being observed in the clinic, as viewed by a key opinion leader in the field. Of course, we are also leveraging key learning from SHIELD I related to the sites involved in this study.

As discussed on prior earnings call, while we are targeting approximately 60 centers for SHIELD II, around the same number as SHIELD I, we identified the best performing sites and countries from SHIELD I in terms of recruitment, patient monitoring, and good clinical practice, and have focused on these sites and countries in SHIELD II. We believe this to be essential in the execution of SHIELD II. Moreover, the Data Safety Monitoring Committee in charge of the review of accumulating safety data and study conduct for SHIELD II, has recommended 3x to continue the study without modifications. Meaning that no safety issues related to D-PLEX100 have been observed in SHIELD II to date. Moving on. To reiterate what we have said previously, we have a clear regulatory pathway for the potential NDA submission for D-PLEX100 in the U.S.

Last year, the FDA acknowledged not only that SHIELD I result may provide supportive evidence of the safety and efficacy of D-PLEX100 in patients with large surgical incision, but also confirmed that if successful, SHIELD II is sufficient to support a potential NDA submission. Shifting gears, we were pleased to recently fortify our balance sheet by successfully closing a financing of $8.1 million of gross proceeds. The PIPE syndicate was comprised of new and existing investors, including participation from multiple top-tier U.S. life science focused investors. The PIPE extends the company's cash runway into the first quarter of 2025, beyond expected interim analysis results and the completion of enrollment of approximately 600 patients in SHIELD II.

PolyPid has the potential to secure an additional $6.1 million if the unblinded interim analysis of its SHIELD II, Phase III trial of D-PLEX100 results in either the stopping of the trial due to positive efficacy or continuation to planned patient recruitment of up to 630 subjects. If all warrants issued in this recent financing are exercised, the company will be funded beyond top-line results and into the second quarter of 2025. In addition, the company announced that it has restructured its existing secured loan agreement with Kreos, with over $2 million of deferred repayment, which will be paid from April 2025 onwards. I'd like to take the opportunity to thank all the investors who participated in the financing for their confidence and support.

Finally, I am pleased to announce today that Ms. Dalit Hazan, our EVP, R&D, Clinical and Regulatory Affairs, has been promoted to the role of Deputy CEO, EVP, R&D, Clinical and Regulatory Affairs. Dalit has been instrumental in the planning and execution of our clinical strategy, R&D, and the company's strategy with the FDA and European regulatory authorities, and we look forward to her continued contributions to the advancement of PolyPid as we approach potential commercialization of D-PLEX100. Now, I'd like to turn the call over to Ori to review the recent KOL event PolyPid hosted with Professor Charles Edmiston. Ori?

Ori Warshavsky (COO)

Thank you, Dikla. This last June, we hosted a key opinion leader webcast and conference call featuring Professor Charles E. Edmiston, Emeritus Professor of Surgery, Division of Vascular Surgery, Medical College of Wisconsin. We discussed several key topics surrounding the prevention of surgical site infections. A replay of this virtual event can be found on the Events and Presentations page under the Investor heading of the company's website. Key takeaways from this call included: one, the increase in surgical site infections back to pre-COVID rates due to a rebound in the number of elective surgeries conducted and the surgical environment normalizing to that found prior to 2020. Two, widespread underreporting of surgical site infections, with up to 30%-35% of colorectal infections missed due to suboptimal surveillance strategies.

Three, procedural and patient-related risk factors significantly heightened the possibility of developing a surgical site infection, and this increased possibility is compounded when patients have multiple risk factors. Four, the long-term cost to commercial payers of a single colorectal surgical site infection event over a period of 24 months remains substantial, ranging from $44,000 in superficial infections to $64,000 in deep infections, and the cost for Medicare ranging from $20,000-$45,000, respectively. The fifth and final takeaway, the risk of surgical site infection is reduced when using surgical care bundles in patients undergoing colorectal surgery. Dr. Edmiston commented that the 30-day high concentration release of antibiotics achieved with D-PLEX100 has the potential to add additional clinical and economic benefits to infection prevention bundles. With that, it is my pleasure to turn the call over to Jonny to review the financials. Jonny?

Jonny Cohen (CFO)

Thank you, Ori. As of June 30, 2024, the company had cash, cash equivalents, and short-term deposits of $9.3 million. This does not include the gross proceeds of approximately $8.1 million generated from the PIPE financing closed in August. We expect that our pro forma cash balance will be sufficient to fund operations into the first quarter of 2025, not including a potential additional $6.1 million if all warrants from the recent financing are exercised. Now let's turn to our income statement. Research and development expenses for the three months ended June 30, 2024, were $4.8 million, compared to $4 million in the same three-month period of 2023. The increase in R&D expenses in the most recently completed quarter was driven by the ramp-up of the ongoing SHIELD II, Phase III trial.

Marketing and business development expenses for the three months ended June 30, 2024, were $265,000, compared to $357,000 during the prior year period. General and administrative expenses for the three months ended June 30, 2024, were $1.1 million, compared to $1.5 million recorded in the same three-month period of 2023. This decrease reflects our ongoing cost containment efforts. For the three months ended June 30, 2024, the company had a net loss of $6.3 million, as compared to $5.8 million in the second quarter of 2023. With that, we will now open the call to your questions. Operator?

Operator (participant)

Thank you. To ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Thank you. We are now going to proceed with our first question. The question comes from the line of Roy Buchanan from JMP. Please ask your question.

Roy Buchanan (Managing Director)

Hey, thanks for taking the questions. I guess the first one, just the interim analysis coming up in the next quarter. Just what are the options of what you can announce? What should we expect? I guess if the trial continues to the final results, are you going to disclose the infection rate?

Dikla Czaczkes Akselbrad (CEO)

So hi, good morning, Roy. So first, I'll start with the letter. We will not be aware of the infection rate. We will only get the endpoint of the study. So the options of the interim, the DSMB, who is also monitoring the safety data, will come back to us with several. One of three options. Either they can say that, which we do not expect, but they can say that we need to stop because the study is futile, will not reach the endpoint. They can say, which is obviously what we are hoping, that we need to stop the study at the 400 due to efficacy, that we reach the point, or they can send us to the end of the study, the lower end of the study, which is expected to be below 630.

They also have a fourth option of upscaling the study, and then they will tell us just the overall patient number that is required. At no point before unblinding the data, we will actually know the infection rate.

Roy Buchanan (Managing Director)

Okay, great. That's helpful. Thanks. And then, I guess, still on that point, the warrants, are they eligible for exercise if they recommend that the trial size goes above the 630? And can you remind us any potential advance on milestones on the interim?

Dikla Czaczkes Akselbrad (CEO)

Sure. So, the warrants are exercisable at any time within the coming two years. There is a triggering event that shortened the time for exercise if we are either stopping the study early due to efficacy or if we are sent to the minimum sample size, which is the end of the study, which is up to 630. We're sent to a lower number, there will be exercise within 10 days from that point.

Roy Buchanan (Managing Director)

Okay, great. And then any ADVANZ?

Dikla Czaczkes Akselbrad (CEO)

You were asking about ADVANZ. Yes. So ADVANZ have several development milestones in the agreement, and the first one being positive top-line results.

Roy Buchanan (Managing Director)

Okay, great. And then last one for me. I guess I know you guys are 110% focused on SHIELD II in the interim, but just anything you can say about, progress with partnering D-PLEX100 in, in additional geographies or with the broader platform? Thanks.

Dikla Czaczkes Akselbrad (CEO)

So as part of being 100% and more than 100% focused on D-PLEX100, we are also progressing on commercialization discussions. We said this early in the year, that we expect to see commercialization deals coming this year, and we are focusing on that, different geographies in Europe that we've already have an agreement. We've also indicated that in previous quarter, I can say that we are in discussions on that, and something that has been some time, and we still expect to sign before the data. You were also asking on transformational deal. This is another point, another aspect of our business development activities that is progressing. Again, I would expect to see a deal before the end of the year, as we said in our objectives.

Roy Buchanan (Managing Director)

Okay, thank you.

Operator (participant)

Thank you. Once again, to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to proceed with our next question. The question comes from the line of Ram Selvaraju from H.C. Wainwright. Please ask your question.

Ram Selvaraju (Equity Research Analyst)

Thank you very much for taking my questions. Can you hear me?

Dikla Czaczkes Akselbrad (CEO)

Yeah, we hear you well. Good morning, Ram.

Ram Selvaraju (Equity Research Analyst)

Good morning. So, I wanted to, first of all, ask if you could provide a little bit more granularity around the timing of the completion of the interim analysis? So once you are in a position to conduct the interim analysis, can you share with us approximately how long you expect that process to take? And if you have a sense at this juncture, depending on when you start that process, when in the first quarter of 2025 you might have the results? Would it be earlier in the quarter or later in the quarter?

Dikla Czaczkes Akselbrad (CEO)

So let me try to clarify some of the points. You raised very good points. The interim is based on 400 patients. And I expect that we will announce that we've reached 400 patients. Once we reach 400 patients, it is about two months until we get the DSMB recommendation, or once we get the full 400, approximately 400 patients for the interim, for that point, it's two months. It's 30 days for follow-up, and another 30 days for cleanup of the data and then getting the top-line data to the DSMB and a recommendation. So that would give you better clarity on timeline. This is why we said that we expect that the interim data will be at the fourth quarter of this year.

With regards to the top line, since we are continuing to recruit the patient, towards the end of the year, we should also be in a position that we've raised the full 600 patients. And then, top line is taking a little bit longer in terms of cleaning data and getting the unblinded data, because you close the data, you cannot go back to the data. After that, it's unblinding. There is no going back to the data. So it's a bit longer than that. It's more of in a quarter, and this is why we said the first quarter of next year.

Ram Selvaraju (Equity Research Analyst)

Okay. Now, that's very helpful. Thank you. The second question I had was with respect to the underlying market dynamics for the SHIELD II target indication, and if you can maybe comment on, what you are seeing specifically with respect to a return to the pre-COVID environment and the extent to which you expect that to persist going forward. In other words, you know, should we, at this point, assume that for all intents and purposes, if nothing changes from a market environment perspective, that, you know, essentially you will be reporting your top-line data into a situation that effectively, for all intents and purposes, in every way, resembles the pre-COVID-19 market situation? And what are the implications of that for, the market demand for a product like this?

Dikla Czaczkes Akselbrad (CEO)

So this is part of the reason that we wanted to hold a KOL event with Professor Charles E. Edmiston, to really not give our opinion, but rather someone with a surgical site infection specialist, working with hospital, working with teams within the hospital, to try to reduce the infection rate and try to educate teams on how to lower the surgical site infection rate and give his perspective on what was the baseline prior to COVID, what happened during COVID, and what he's seeing these days when we are out of COVID. To be more specific on your question, we do assume that when we publish the data, we will be similar to what we are—what is being observed now, that we will be at the more close to baseline infection rate prior to COVID.

Obviously, with regards to the study itself, we are blinded, so we are not exposed to the data, and we cannot. The only thing that we can say is, and we said this in this, in today's formal presentation, that the key patient enrollment trends that we identified on our last call are continuing. We see a comparability between SHIELD I and SHIELD II in the demographic, in the patient population, obviously comparing the large incision to the large incision. And for us, this is very encouraging, and we view this as de-risking of the study.

Ram Selvaraju (Equity Research Analyst)

Okay, great. And then the last question from me is, assuming a hypothetical situation, which I think obviously we all are expecting, that the interim analysis is positive, can you give us a sense of how you expect your G&A spending to evolve from that point? In other words, are you going to engage in any additional market preparation, activities prior to the release of the final top-line data, but after release of positive interim analysis results? Or are you going to effectively keep G&A expenses at a more modulated run rate until after the top-line analysis? In other words, what I'm really asking is, when do you expect G&A spending to ramp up as you contemplate the possibility of introducing the product into the market?

Dikla Czaczkes Akselbrad (CEO)

This is a very good point. I would start by saying that from our perspective, and also, the investor that participated in the last round, a positive interim will be either stopping at the interim or going to the minimum size of 600 patients. Both, on our view, is, is a good income with the interim, and this is why this is how the triggering event is defined for, for the warrant. With regards to the NDA, we do not see we do not foresee a substantial increase in the expenditure there. Obviously, there will be some modification as we grow and as we continue to sign additional collaboration deal around D-PLEX100.

But again, looking at the agreement that we have with ADVANZ, most of the responsibility on the marketing, on the medical affairs, on reaching out to the hospital, is on the partners. So there will be some increase, but we do not foresee something that will immediately change significantly our P&L.

Ram Selvaraju (Equity Research Analyst)

Thank you very much.

Operator (participant)

Thank you. We have no further questions at this time. I will now hand back to Dikla Czaczkes Akselbrad for closing remarks.

Dikla Czaczkes Akselbrad (CEO)

Thank you for joining PolyPid's second quarter 2024 earnings conference call. We remain highly confident in our long-term prospects, especially the potential of our promising late-stage product candidate, D-PLEX100. As always, we are grateful to our team members, shareholders, and all external partners for their commitment to our mission and support in continuing to advance toward our goal of bringing D-PLEX100 to healthcare providers and patient as quickly as possible. We look forward to speaking with you again on our next conference call.

Operator (participant)

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.