Protalix BioTherapeutics, Inc.
Q1 2024 Earnings Call Transcript

Published: 10 May 2024

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics First 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, Investor Relations for Protalix. You may begin your conference.:]

[Mike Moyer:]

Thank you, operator. and welcome to the Protalix BioTherapeutics First 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 results and the business and clinical 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 and in Protalix's filings with the U.S. Securities and Exchange Commission.:]

[I will now turn the call over to Dror Bashan. Dror?:]

[Dror Bashan:]

Thank you, Mike, and welcome, everyone, to our First Quarter of 2024 Financial Results and Business Update Call. I will begin by reviewing our recent accomplishment before handing the call to Eyal, who will provide a more detailed review of our financial results. And we will then open the line for questions.

[I will turn first to PRX-115. As announced this morning, given the encouraging initial top line results from the first 7 cohorts of the company's Phase I first-in-human study of our recombinant uricase candidate, PRX-115, and following the review and acceptance of the safety data by the safety and monitoring committee, the company has decided to expand the study by adding an eighth cohort. Consistent with the initial 7 cohorts, the new cohort will consist of 8 new subjects and will analyze a higher dose of PRX-115 and the potential of a higher dose resulting in increased exposure time. In addition to the extension of the first-in-human study, the company also decided to commence preparations for a Phase II clinical trial of PRX-115.:]

[PRX-115, to remind you is a recombinant PEGylated uricase product candidate produced using our ProCellEx cell platform. The study is a double-blind, placebo-controlled, single ascending dose, first-in-human Phase I clinical trial that the company designed to evaluate the safety, pharmacokinetics and pharmacodynamics following a single dose of PRX-115 in subjects with elevated uric acid levels. Of the 56 randomized subjects enrolled in this study across 7 cohorts. 42 subjects were treated with PRX-115 and 14 subjects were treated with placebo.:]

[Gout is the most common inflammatory arthritis, and it is -- and it affects approximately 14 million adults in the U.S., over 7 million in Europe and over 190 million in China. It is estimated that about 5% of the gout patients are considered to have chronic refractory disease.:]

[The preliminary results from the first 7 cohorts demonstrate the exposure to PRX-115 increased in a dose-dependent manner, and that PRX-115 rapidly reduced plasma uric acid concentration to below 6-milligram per deciliter over time following a single administration.:]

[With regard to the safety. PRX-115 was found to be well tolerated. 26% of the subject treated with PRX-115 reported study-related adverse events, and the majority of these were mild to moderate and transient in nature. One subject in cohort #2 experienced an anaphylactic reaction immediately following the start of the infusion, but the reaction was fully resolved. There were no other serious adverse events reported and no adverse events were reported in the highest-dose cohort, #6 and #7. We look forward to updating you on the full results from the expanded trial following the completion of the new cohort.:]

[Our next pipeline candidate also being expressed for ProCellEx is PRX-119. PRX-119 is a PEGylated recombinant human DNase I candidate in development for the potential treatment of diseases associated with neutrophil extracellular trap, or NETs. Excessive formation of accumulation of the NETs can result in different pathological effects and has been observed with various autoimmune, inflammatory and fibrotic conditions. Animal studies with PRX-119 have shown that our product candidate has the potential to be an effective treatment for these conditions and additional preclinical studies of PRX-119 are ongoing.:]

[In addition to PRX-119 and PRX-115, the company is focusing its research and development efforts on early stage development assets to build its product development pipeline. We look forward to providing you with updates on potential development candidates as they become more mature.:]

[Finally, as you know, our second approved drug, Elfabrio, continues to gain approvals, regulatory approvals for the treatment of adult patients with Fabry disease. Most recently, in January of this year, it was approved in Israel. And our commercial partner, Chiesi Global Rare Disease, is committed to successful commercialization of Elfabrio, with launches underway in the United States, throughout the European Union, the U.K., Switzerland, Israel and additional markets where approvals were granted. We are confident that Chiesi will continue to position Elfabrio for success, and we look forward to the continued growth of Elfabrio franchise.:]

[Before turning the call to Eyal, I want to emphasize our strong cash position provides us with sufficient cash to enable the repayment of our convertible notes due in September of this year and for our ongoing operations. In addition, we expect sales to Chiesi to gradually continue as they anticipate future approvals and launches in additional countries.:]

[With that, it is now my pleasure to turn the call over to Eyal for a review of the financials. Please, Eyal.:]

[Eyal Rubin:]

Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our first quarter 2024 financials. We recorded revenues from selling goods of $3.7 million for the 3 months ended March 31, 2024, a decrease of $1.4 million or 27% compared to revenues of $5.1 million for the 3 months ended March 31, 2023. The decrease resulted primarily from a decrease of $1.1 million in sales to Pfizer and of $0.3 million in sales to Brazil, which decreases resulted primarily from the timing of delivery.

[We recorded revenues from license and R&D services of $0.1 million for the 3 months ended March 31, 2024, a decrease of $4.4 million or 98% compared to revenues of $4.5 million for the 3 months ended March 31, 2023.:]

[Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi agreement. The decrease resulted primarily from the completion of our research and development obligations with respect to Elfabrio, and as Elfabrio was approved in the U.S. and the EU in May 2023 from the completion of the regulatory processes related to the review of the BLA and the NDA for Elfabrio by the FDA and the EMA, respectively.:]

[Cost of goods sold was $2.6 million for the 3 months ended March 31, 2024, a decrease of $0.5 million or 16% from cost of goods sold of $3.1 million for the 3 months ended March 31, 2023. The decrease in cost of goods sold was primarily the result of the decrease in sales to Pfizer and to Brazil.:]

[For the 3 months ended March 31, 2024, our total research and development expenses were approximately $2.9 million, comprised of approximately $0.5 million subcontractor-related expenses, approximately $1.5 million of salary-related expenses, approximately $0.2 million of materials-related expenses and approximately $0.7 million of other expenses.:]

[For the 3 months ended March 31, 2023, our total research and development expenses were approximately $5.8 million, comprised of approximately $3.5 million of subcontractor-related expenses, approximately $1.5 million of salary-related expenses, approximately $0.1 million of material-related expenses and approximately $0.7 million of other expenses.:]

[Total decrease in research and development expenses for the 3 months ended March 31, 2024, was $2.9 million or 50% compared to the 3 months ended March 31, 2023. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulatory processes related to the BLA and the NDA review of Elfabrio by the applicable regulatory agencies.:]

[Selling, general and administrative expenses were $3.1 million for the 3 months ended March 31, 2024, and for the 3 months ended March 31, 2023.:]

[Financial income, net, were $0.1 million for the 3 months ended March 31, 2024; compared to financial expenses, net, of $0.5 million for the 3 months ended March 31, 2023. The change resulted primarily from high interest income on bank deposits and lower notes interest expenses due to note conversions executed in 2023.:]

[For the 3 months ended March 31, 2024, we recorded a tax benefit of approximately $0.1 million compared to income taxes of $0.2 million for the 3 months ended March 31, 2023. The income taxes recorded are primarily from the provision for current taxes and income mainly derived from U.S. taxable global intangible low-taxed income, GILTI, mainly in respect of Section 124 of the U.S. Tax Cuts and Jobs Act.:]

[Cash and cash equivalents and short-term bank deposits were approximately $48.5 million at March 31, 2024. As Dror mentioned, we believe our cash position is sufficient to enable the repayment of our convert notes due September 2024 and for our ongoing operations.:]

[Net loss for the 3 months ended March 31, 2024, is approximately $4.6 million or $0.06 per share, basic and diluted; compared to a net loss of $3.1 million or $0.05 per share, basic and diluted, for the same period in 2023.:]

[I will now turn the call back to you, Dror.:]

[Dror Bashan:]

Thanks, Eyal. In closing, I would like to express my confidence in Protalix and its current standing. We have reviewed with you our strong cash position. We have 3 streams of revenues

[We are continuing to leverage our expertise to develop a pipeline of early stage assets with the potential to address rare diseases with high unmet needs. We look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stakeholders.:]

[Now I would like to ask the operator to open the line for questions.:]

[Operator:]

[Operator Instructions] And the first question comes from the line of Ram Selvaraju with H.C. Wainwright.

[Raghuram Selvaraju:]

I wanted to ask specifically about PRX-115 and whether you could delineate for us the specific gout subpopulation in which you anticipate this drug candidate might be utilized, if approved, and what the competitive landscape currently looks like. As well as what types of advantages you anticipate 115 might have against those drugs.

[I think in particular, we are talking about commercially available product called KRYSTEXXA. So perhaps you can enumerate for us whether you believe 115 will have advantages on efficacy, safety and convenience, or if you anticipate advantages on only 1 or 2 of the 3 categories. And how you expect the drug's advantages to ultimately demonstrate themselves. I realize that it's relatively early in the drug's development process, but I was hoping you could enlighten us on those parts.:]

[Dror Bashan:]

So thanks, Ram. As you know, we have finalized -- the first 7 cohorts, the first, it's a single-dose study. So we want to be careful. But still, we are optimistic. We're moving to cohort #8, as we mentioned. And we are potentially think that this potential drug will address, I would say, uncontrolled gout patients.

[As mentioned, we initiated the preparations for a Phase II study, which will be of course a multiple-dose study, and we will be much smarter. Right now, we hope to see, I want to be careful, improved safety and better frequency of the drug.:]

[From efficacy, by the end of the day, we want to reduce the uric acid, of course, below 6 or way, way below 6, in a way which will be as consistent as possible throughout a full year or along the years. But let's see. We think that the results we see right now are encouraging. This is why we move on we did not close the study or put a CSR. And of course, we got -- we discussed it not only with the safety component, but of course, also with our Board, we got the green light to prepare a Phase II.:]

[Right now, today, as you know, KRYSTEXXA is on the market with once in 2 weeks, as far as we know. And there is a product by Sobi that's supposed to enter the market, I don't know, next year, something like this.:]

[Raghuram Selvaraju:]

Just to clarify, assuming that you move into Phase II, would you expect the efficacy endpoints used in Phase II to include things like reduction in flares or reduction in tophi?

[And are you expecting to be able to position 115 as a competitor, a direct competitor to KRYSTEXXA? Or do you expect ultimately 115 to be utilized in patients who either are not considered candidates for KRYSTEXXA because of some safety concerns or are refractory to KRYSTEXXA?:]

[Dror Bashan:]

I think -- look, first, we have to finalize, of course, and we are planning a meeting with the regulators, both in the U.S. and the EU, to address our potential design of the Phase II and the overall clinical program. Then I think we will be smarter to answer you on the first one.

[On the second one, yes, the intent is indeed to compete on the market of the uncontrolled gout patients.:]

[Operator:]

[Operator Instructions] The next question is from the line of John Vandermosten with Zacks.

[John Vandermosten:]

So for 115, I believe the patients are infused once and then you're observing them over a 3-month period. How do the PK levels trend over that period?

[Dror Bashan:]

You're asking about the first 7 cohorts?

[John Vandermosten:]

Yes, exactly. Yes. And I'm assuming that there's probably a similar decline, right?

[Dror Bashan:]

So we did not yet. We wanted to show the full picture once we have the full data of all 8 cohorts. So once we will have everything together, including of course the safety data, which is most important, we will share it properly. And we didn't want to show, I would say, a half job.

[John Vandermosten:]

Okay. And does that 3-month period seem like the right interval to use, or maybe more frequently? And as you mentioned, one of the competitors has a much shorter interval between dosing, and that does seem like a little bit longer period of 3 months. Do you think, in the future, it might change for the Phase II? Or how do you think about that?

[Dror Bashan:]

So John, maybe I missed. What do you mean 3 months? Can you repeat it, please?

[John Vandermosten:]

So yes, just looking at the trial design in the clinical trials, I think you're observing patients over a 3-month period with one infusion. And I'm wondering what the ultimate infusion periodicity would be based on what you've seen so far.

[Dror Bashan:]

Well, I think I don't follow your question. I'm very sorry.

[John Vandermosten:]

No problem. We can follow up...

[Dror Bashan:]

No, no, please. What we see, and we are very much encouraged is good results reducing the uric acid level, of course, fast and significant. And therefore, we move into cohort #8. Once we will have all the data, we will share it transparency, of course.

[Eyal Rubin:]

I think, John, the fact that we are monitoring patients over 3 months doesn't necessarily indicate that the infusion intervals are going to be once every 3 months. Obviously, we have to follow, as Dror mentioned, the full set of data, the PK, the PD and the safety and then make a judgement call ahead of the Phase II, obviously, what the interval or what the dosing is going to be.

[John Vandermosten:]

Okay. Great. And then you had mentioned that one of the patients experienced anaphylactic reaction. What did you do to alleviate it? It seems like it was easily resolved, but I was just wondering if there was any specific characteristics of that patient? Or if it was...

[Dror Bashan:]

It was -- I think it was the first patient or second patient, cohort #2. It was 6 minutes into the infusion, meaning very fast, and it was resolved. It was taken care by the physicians and the team of the center. And this is the only one that had this such a reaction. And that's it. As we mentioned, the majority of the side effect, if I may say, were mild to moderate. And as we went up the cohorts, in 6 and 7, no AEs were recorded.

[John Vandermosten:]

Okay. And then looking ahead to a Phase II, I think you just have sites in Australia right now. I guess as you look towards a more advanced trial, would those sites be more scattered around the globe? And are there any particular geographies that look attractive for that?

[Dror Bashan:]

So we will -- we did not choose yet, but we have the last very few candidates to choose from as a CRO. I think it will be we will move probably to the U.S. and other continents as well. Okay?

[John Vandermosten:]

Okay. Sounds good. And then there was also a mention of looking-forward r&D spend. And I guess the 3 areas are 115, 119 and other early stage assets. And how do you think about the breakdown of R&D towards those 3 different areas? I mean, it sounds like probably 115 is going to be the main consumer of R&D. But what about the other two?

[Dror Bashan:]

Yes. So look, the main consumer of R&D, I would say, of product under R&D, as you mentioned, will be 115. We want to be careful with the spend. As we mentioned, we sit on, I would say, $48 million end of the quarter, which would be enough -- I emphasize it and I will close the loop in a minute. Which will be enough to pay the debt by the beginning of September of this year. So meaning we will be, by the end of the year, from the beginning of September, a company with no debt and enough cash to maintain our operations.

[Now this is why the PRX-115 is our main R&D expense. And in addition, we will invest, I would say, in early research candidates to potentially address real unmet needs in current disease. But the intent is not to grow, I would say, above our capabilities at this moment, of course, because we want to keep the company solid and stable.:]

[We enjoy three streams of revenues. We assume the ones Chiesi to will gradually, and we are pretty much confident of course, we trust Chiesi and we think they do a very good job. So gradually, this will grow, and will enable us to be, I would say, financially stronger.:]

[John Vandermosten:]

Got it. And then looking at the cash flow statement, there was an increase in contract liability that added to your cash -- positive cash flow from operations. And Eyal, I was wondering if you could give us -- give me a clue. And maybe it was obvious, I just missed it, but what that was related to on that contract liability.

[Eyal Rubin:]

Yes. So as I mentioned a couple of times in the past, our sales to Chiesi are based on their projections. And as Dror mentioned, we feel, believe and we see evidently they are doing a good job in terms of penetration. But the orders that they're putting obviously depending on their levels of inventory and the timing of release of the batches. As you all know, Chiesi is also the fill and finish factory contractor.

[So the increase in contractual obligation is batches that they, basically Chiesi, are releasing now, but they already paid for, and it's going to go obviously into revenues in the next quarter or 2. So we didn't record the revenues there, but the cash is there. Obviously, cash doesn't grow on the trees. The effect that the cash grew, as you mentioned, on contractual obligations means that they keep on selling, we keep on selling to them.:]

[And as Dror mentioned, gradually, we believe that they're going to take a significant market share and position themselves in a very strong and meaningful way.:]

[John Vandermosten:]

Great. Very good. And last question regarding the [ RISE ] study in Japan. I know you're not conducting that, but I was wondering if Chiesi had given you any indication on when a BLA might be submitted to the Japanese authorities.

[Dror Bashan:]

I don't have the details. Eyal, maybe you have? As far as I know, the study is ongoing.

[Eyal Rubin:]

Yes. The study is ongoing. Obviously, we have the data. We know how many patients were obviously enrolled. But since it's Chiesi proprietary data, obviously, when I allowed to share it. They are working, as Dror mentioned and I mentioned a couple of times, we see the progress, and we see the seriousness in terms of the trials that they are conducting, the robustness of the programs and obviously the commercial operations on the ground both in the U.S. and out of the U.S.

[So as soon as they complete the study, they will probably announce or allow us to announce the BLA submission in Japan.:]

[John Vandermosten:]

Okay. Great. And is Chiesi already selling some rare disease products in Japanese market?

[Dror Bashan:]

I don't control that. I'm sorry.

[John Vandermosten:]

I know they've got a bunch of different products. I was -- yes, I hadn't sought to look that up. All right. Well, thank you. Appreciate the responses to my questions.

[Operator:]

At this time, there are no additional questions. I will hand the floor back to management for any further remarks.

[Dror Bashan:]

So all I have to say is thank you again for the time. And actually, we will look forward to updating you on the next development of the company. And of course, we will meet at the next earnings later this year in August. So thank you very much. And that's it.

[Operator:]

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.