Protalix BioTherapeutics, Inc.
Q1 2020 Earnings Call Transcript

Published: 1 Jun 2020

[Operator:]

Greetings and welcome to the Protalix Bio Therapeutics first quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chuck Padala with Protalix Investor Relations. Thank you sir, you may begin.

[Chuck Padala:]

Thank you Operator. Hello everyone and welcome to Protalix Bio Therapeutics first quarter 2020 financial results and business update conference call. With me today is Mr. Dror Bashan, President and CEO of Protalix, and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing results and the update is available 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 our filings with the U.S. Securities and Exchange Commission. I now turn the call over to Mr. Dror Bashan.

[Dror Bashan:]

Thank you. Good morning and thank you for joining us today to review the company’s first quarter 2020 operations and recent highlights. During this call, I will provide an update on our clinical and corporate progress and then I will ask our CFO, Eyal Rubin to review the company’s financial results before opening the lines for questions. The first quarter of 2020 has been certainly transformational for Protalix despite the COVID-19 pandemic that affected global markets. I am proud to say that despite the pandemic, Protalix was able to keep the company running smoothly and adapt quickly to the changing environment. As we anticipated, last week Protalix, together with our development and commercialization partner, Chiesi Global Rare Disease, a unit of the mother company Chiesi, submitted a biological license application to the U.S. FDA for PRX-102 via the FDA accelerated approval pathway. PRX-102 was granted fast track designation by the FDA in January 2018. The BLA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our completed Phase I/II clinical trial of PRX-102, including the related extension study succeeding the Phase I/II clinical trial of PRX-102, the interim clinical data from our Phase III Bridge switch over study as well as Phase III data from our ongoing clinical studies of PRX-102, including extension studies. Upon the BLA approval, if approved, Protalix would be eligible to receive a milestone payment from Chiesi. Earlier in May, we have announced our positive top line results from the completion of the Phase III Bridge clinical trial of PRX-102. This open label switch over study met its main objective for safety and efficacy and indicated substantial improvement in renal function in patients switched from Replagal to PRX-102. This important study confirms our belief that PRX-102 can be an important enzyme replacement therapy and a new treatment option for Fabry disease. Together with our two ongoing fully involved Phase III clinical trials, the Balance and the Bright studies, we believe we have the most comprehensive and robust Phase III clinical program for Fabry disease currently in progress. Additionally in February of this year, we have announced together with our development and commercialization partner, Chiesi, the receipt of an agreement letter from the FDA for the initial pediatric study planned for PRX-102, outlining an agreed upon approach to address the needs of pediatric Fabry patients as well. On March 16 of this year, we had announced an agreement to conduct a feasibility study with Kirin Holdings Company to evaluate the production of another complex protein using ProCellEx, and the company received a non-refundable payment of $1 million and Kirin has agreed to provide research funding for Protalix scientists to conduct cell line engineering and protein expression studies on the target protein. I will now turn over the call to Eyal, our CFO to review our financials.

[Eyal Rubin:]

Thank you Dror, and thank you everyone for joining today’s call. As we previously announced in March, Protalix entered into a securities purchase agreement with certain existing and new institutional and other accredited investors in a private placement. In connection with the private placement, we issued approximately 17.6 million unregistered shares of our common stock at a purchase price of $2.485 per share and warrants to purchase an additional approximately 17.6 million shares of common stock at an exercise price of $2.36 per share in exchange for aggregate estimated proceeds equal to approximately $41.3 million. Net proceeds from the financing are being used to advance our clinical programs and commercialization of PRX-102 for the treatment of Fabry disease, as well as to further develop our early stage pipeline of therapeutics and for general corporate purposes. Now for the numbers, for the three months ending March 31, 2020, Protalix recorded revenues from selling goods of $5 million, an increase of $1.5 million or 43% compared to revenues of $3.5 million for the same period of 2019. The increase resulted primarily from an increase of $0.8 million in sales of drug product to Brazil as well as an increase of $0.7 million in sales of drug substance to Pfizer. Revenue from license and research and development for the three months ended March 31, 2020 were $16.6 million, an increase of $9.7 million or 140% compared to revenues of $6.9 million for the same period of 2019. The revenue from license agreements represented revenues recognized in connection with the previously announced agreement with Chiesi. Cost of goods sold was $3.4 million for the three months ended March 31, 2020, an increase of $1.4 million or 68% from the cost of goods sold of $2 million for the same period of 2019. R&D expenses were $10.3 million for the three months ended March 31, 2020, a decrease of $1.4 million or 12% compared to $11.7 million of R&D expenses for the same period of 2019. SG&A expenses were $3.2 million for the three months ended March 31, 2020, an increase of $1 million or 43% compared to $2.2 million for the same period of 2019. Finally, net income for the three months ended March 31, 2020 was $1.7 million or a profit of $0.10 per share basic and diluted, compared to a net loss of $7.3 million or $5.50 per share basic and diluted loss for the same period of 2019. Now I’ll turn the call back to Dror.

[Dror Bashan:]

Thank you Eyal. During the last quarter, we were able to close a $43.7 million private placement. Furthermore, the top line results from our Phase III Bridge study and the subsequent BLA submission recently for PRX-102, which were announced in May, show that Protalix has actually gained momentum by leaning into an unprecedented challenge. I’m convinced now more than ever that our team is positioned for long term success and look forward to continuing that momentum through the rest of this year and into 2021. To my team and to our many investors, partners and colleagues, I thank you and appreciate this very much. With that, I will now turn the call back to the Operator, who will open the call for questions from the audience.

[Operator:]

[Operator instructions] Our first question comes from the line of Ram Selvaraju with HC Wainwright. Please proceed with your question.

[Boobalan Pachaiyappan:]

Hi, this is Boobalan dialing in for Ram Selvaraju. Thanks for taking my question. The first one, how long is it likely to take for the FDA to render a decision on whether or not to accept the BLA for PRX-102 for review?

[Dror Bashan:]

I’m sorry, but I did not understand the question. We have submitted the file and we are waiting for the FDA to decide on the PDUFA date.

[Boobalan Pachaiyappan:]

Yes, I’m curious--we are wondering how long would it take in order to hear from that?

[Dror Bashan:]

I missed that, I’m sorry. It depends upon the FDA. The FDA decision, if it considers to give priority or not, it takes between two months to two months and 14 days, two months and a half. It’s upon their decision.

[Boobalan Pachaiyappan:]

Okay, understood. With respect to PRX-102, will it be manufactured solely in Israel or are you planning to manufacture the drug at an alternate site?

[Dror Bashan:]

The drug substance is currently manufactured in Israel and the final product actually is being manufactured outside of Israel. If there will be any decision to add a site, it will be updated of course. At present, this is the situation.

[Boobalan Pachaiyappan:]

Okay, understood. How are you planning to handle market access and reimbursement, and what kind of experience does your partner have in this area in the context of orphan drugs within the U.S. market?

[Dror Bashan:]

Chiesi has extensively been in the rare disease business globally. It is based in Boston. They have bought a couple of assets already and they have teams on the ground both in the U.S. and in Europe. I think the vast majority of the teams, probably all of them are with extensive experience and track record in rare disease. Many of them come from specific rare disease companies, ex-Genzyme and others, so in this respect I believe that they will do a very good job. If we count heads, if I may say, they have probably thousands of years of experience combined in both continents already, and they are actually strengthening up ahead of the hopefully approval and launch next year.

[Boobalan Pachaiyappan:]

Great. Did COVID-19 have any impact on [indiscernible] Brazil? If so, could it be quantified?

[Dror Bashan:]

At present--I want to be careful, at present at least for the first half, we don’t see any influence, and I hope this will continue into the second half of 2020. So currently, not.

[Boobalan Pachaiyappan:]

Okay, great. One final question, are you making any progress on identifying potential license fees for OPRX-106 and PRX-110, and when we might see development on these fronts?

[Dror Bashan:]

We are working on potential collaborations. Once there would be something to report, of course we will report accordingly.

[Boobalan Pachaiyappan:]

Okay, that’s it from me. Thank you so much.

[Dror Bashan:]

Thank you.

[Operator:]

Thank you. Once again ladies and gentlemen, to queue a question at this time, please press star, one on your telephone keypad. Our next question comes from the line of Philippa Gardner of Jefferies. Please proceed with your question.

[Philippa Gardner:]

Hi there, just two questions from me. It’s possibly too early to say, but I was just wondering if you expect to have an FDA advisory committee meeting as part of the review of the regulatory submission. Then my second question was just again on manufacturing. I think the product currently being made at the facility, that’s already been inspected, so do you think that the FDA review will require another inspection at the facility, or how do you think the FDA might handle that? Thank you.

[Dror Bashan:]

I will start with the second question because I did not--I apologize, but I did not understand the first one, the line was not clear. With regard to the second question, our site was audited and inspected in July of 2019 successfully with no 483. Still, we are ready for another inspection if it will happen. Again, I don’t know due to the COVID-19 it will happen, but clearly we are ready and there is no issue with that. If you don’t mind, could you repeat your first question?

[Philippa Gardner:]

Yes, it was just whether you thought there’d be an advisory committee meeting as part of the FDA review.

[Dror Bashan:]

You know, the BLA was submitted and we will follow the regular procedure. First to get the PDUFA date and then the review cycle, and as part of it probably--I don’t know what will happen due to the COVID-19, but we expect inspections by the FDA and a review, and that’s it, and clearly a discussion.

[Philippa Gardner:]

Okay, thank you.

[Dror Bashan:]

Thank you.

[Operator:]

Thank you. As a final reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star, one on your telephone keypad. Please hold while we poll for any additional questions. Thank you. We’ve received a question from the line of Walter Goering [ph], a private investor. Please proceed with your question.

[Walter Goering:]

Good morning gentlemen. Congratulations on your progress. I have four little questions. How many warrants have been exercised since the financing?

[Eyal Rubin:]

I’ll take the question. The warrants are non-exercisable. They’re blocked for six months according to the deal, so none of them were exercised at this point.

[Walter Goering:]

Okay, thank you. Are you aware of a company called Kentucky BioProcessing that works with a tobacco protein and what they are doing with that product line?

[Dror Bashan:]

I am not aware of, but probably my team is aware of. This is Dror speaking.

[Walter Goering:]

Right, okay. What is the plant protein behind the Eleyso product?

[Dror Bashan:]

The Eleyso product is carrots and the rest are BY2, which are tobacco cells.

[Walter Goering:]

Okay. When will 102 be given a marketing name, and who will do that?

[Dror Bashan:]

This is a good question. It’s up to Chiesi to decide. Clearly they consult with us, but it’s Chiesi’s decision, and I hope soon. It’s something that they propose a name or list of names with the FDA, I believe, and then they get approval.

[Walter Goering:]

I see. Okay, thank you very much. Congratulations on the progress.

[Dror Bashan:]

Thank you, sir.

[Operator:]

Thank you. It appears we have no additional questions at this time, so I’d like to pass the floor back over to management for any additional closing comments.

[Dror Bashan:]

Thank you. I have to thank everybody for their time and I wish all of us good health and to continue with improvement in Protalix. Thank you very much.

[Operator:]

Ladies and gentlemen, this does conclude today’s teleconference. We thank you for your participation and you may disconnect your lines at this time.