Protalix BioTherapeutics, Inc.
Q3 2019 Earnings Call Transcript

Published: 7 Nov 2019

[Operator:]

Good day. And welcome to the Protalix Biotherapeutics Third Quarter 2019 Earnings Call. Today's call is being recorded. At this time, I'd like to turn the conference over to [Mani Kasi] of LifeSci Advisors. Please go ahead.

[Unidentified Company Representative:]

Thank you. Hello, everyone and welcome Protalix Biotherapeutics third quarter earnings results and corporate update conference call. With me today are Dror Bashan, Protalix's President and CEO and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results is available on the Protalix's website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release in this teleconference includes 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 here today. 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. The Form 10-K we filed for fiscal year 2018 and Form 10-Q filed for the period ending June 30, 2019, and September 30, 209 included a detailed discussion of applicable risk factors.I will now turn the call over to Mr. Bashan.

[Dror Bashan:]

Thank you, Mani. And good morning, everyone. Thank you for joining us today to review the company's third quarter operation and recent highlights. During this call I'll provide an update on our clinical and corporate progress. And then I'll ask our CFO, Eyal Rubin to review the company's financial before opening the lines for questions.But before we get started, I want to take this opportunity and introduce Eyal. And this is his first conference call with us. Eyal joined Protalix late September as our CFO. He brings more than 20 years of experience in finance and capital market. And extensive background in financial planning and operations and a deep knowledge of the biotechnology and pharmaceutical industry. It has been pleasure working with him since he joined and we are very pleased to have him on board.I will like also to acknowledge new Chairman, Zeev Bronfeld. Zeev was one of the earliest investors in Protalix and was an emotionally elected Chairman by the Board in August of 2019. He has served as a Director of Protalix since 1996 and he is a Director of company named Protalix Ltd which is the Israel Company, I am sorry since 1996 and he is a Director of the company since December of 2006. Zeev is an experienced businessman and have been involved in management of biotechnology and life science companies for many years. He has participated in the management of numerous private and public Israeli companies and in the number of technology and biotechnology incubators in Israel. On behalf of myself and the entire management team at Protalix, I want to express to you our commitment to Protalix potential.The data from the ongoing clinical studies with all for great product candidate which we have announced in the previous quarter continue to be outstanding. I believe we are very close to achieving the potential of adding a commercial drug candidate that super passes the current standard of care for the patient in the Fabry community.A very encouraging development in this regard was the completion enrollment of our head-to-head double blind BALANCE Phase III study. Our BALANCE study is designed to evaluate the safety and efficacy of PRX-102 agalsidase beta or Fabrazyme on renal function in Fabry patients with progressing kidney disease previously treated with Fabrazyme.PRX-102 also called Pegunigalsidase alfa is our product candidate development for the treatment of Fabry disease. The BALANCE study is the third of three phase study for PRX-102, which we are all know -- which are all know fully enrolled and ongoing. This represents a robust and thorough clinical program for Fabry. We are confident in the outcome of the study based on data from completed PRX-102 study with adult untreated patients.Another major development for our drug is our plan BLA submission anticipated by April 2020. We together with our collaboration partner Chiesi Farmaceutici are planning the submission under an accelerated approval pathway. This submission will be based on the data from our completed Phase 1, 2 clinical studies of PRX-102 and from our ongoing Phase 111 BRIDGE clinical study as well as safety data from all ongoing studies. The unmet medical need for Fabry remains despite years of current enzyme replacement treatment.Fabry patients continue to show progressive loss of kidney function. Accelerated approval of PRX-102 will potentially bring hope to these patients. And that is the goal we are working towards. Lastly, we recently announced an increment design from our BRIDGE open label to switch over study. These Phase III study analyzes patient treated with our PRX-102 Fabry product candidates that were previously treated with Replagal.Interim results from 12-month dozing of one treatment data from the first 16 out of 22 adult patients enrolled in this BRIDGE study indicate a mean improvement in kidney function, in both male and female patients that were switched from Replagal to our products PRX-102. The switch was well tolerated and the majority of the patients who completed the study rolled over to a long-term extension study. Accordingly, those patients continue to be treated with PRX-102. The 12-months results continue to track with our previously announced six months result and suggest that strong potential benefit of PRX-102 on renal function for Fabry patients.We together with Chiesi plan to include the data from this study in the anticipated FDA BLA filing for PRX-102 under the Federal approval [Indiscernible]. This quarter we have taken important steps to secure financial foundations and we'll share all those with you while we worked on our important goals. Accordingly, the company has convened a special meeting with stockholders to approve an amendment to this certificate of incorporation proposing the following.One is a reverse stock split at a ratio of not less than 1 for 10 and not greater for 1 to 20, with exact ratio to be set at the discretion of the Board of Directors of Protalix before the day prior to the special meeting of the stockholders and the reduction in the total number of shares of the company's common stock that we are authorized to issue from 350 million to 120 million shares. If the proposal to amend ours difficult of incorporation is approved, our Board of Directors will set the timing for the reverse stock split and select a specific ratio from the proceeding range of ratios.With that I would like to turn the call over to Eyal, our CFO for review of the financials.

[Eyal Rubin:]

Thank you, Dror. So Protalix recorded revenues from selling goods of $12.1 million during the nine-month period ended September 30, 2019, an increase of $4.9 million, or 67%, compared to the revenues of $7.2 million for the same period of 2018. This increase is primarily due to higher sales of Elelyso in Brazil.Research and development expenses, net, were $35 million for the nine months ended September 30, 2019, an increase of $11.3 million, or 47%, compared to $23.8 million for the same period of 2018. The increase resulted primarily from an increase of $8.5 million in clinical trial related costs, as well as a decrease of $1.8 million in grants received from the Israeli Innovation Authority.Selling, general and administrative expenses for the nine months ended September 30, 2019 were $6.9 million, a decrease of $1.9 million, or 21%, compared to $8.7 million for the same period in 2018. The decrease is primarily due to costs related to the Chiesi US Agreement we entered into in the third quarter of 2018, which were not incurred in the third quarter of 2019.Net loss for the nine months ended September 30, 2019 was $18.6 million, or $0.13 per share, basic and diluted, compared to a net loss of $21 million, or $0.14 per share, basic and diluted, for the nine months ended September 30, 2018.At September 30, 2019, the Company had $21.4 million in cash and cash equivalents.Now I would like to turn the call back to Dror.

[Dror Bashan:]

Thank you, Eyal. I would like to summarize, we are making tremendous progress as a company. This has been a very meaningful quarter for Protalix and I want to take a moment to thank the many Fabry patients and investigators in all three pivotal trials around the world. Our tremendous scientific and technical staff for their dedication and our shareholders for their patience and support.With that I will now turn the call back to the operator who will open up the line for questions from the audience.

[Operator:]

[Operator Instructions]We'll go first Ram Selvaraju with H.C. Wainwright.

[UnidentifiedAnalyst:]

[Question inaudible]

[DrorBashan:]

Ram, this is Dror. I apologize I mean I could hardly hear you. Can you repeat the question or the operator --I

[UnidentifiedAnalyst:]

[Question inaudible]

[DrorBashan:]

I apologize. I mean I cannot hear you. I don't know why. I am sorry for that.

[Operator:]

We will go next to [Indiscernible] at Jefferies.

[UnidentifiedAnalyst:]

Hi, there. Thank you for taking my question. Just two for me. I just wanted to confirm whether the pre BLA meeting with the FDA has taken place yet? And then also just then we should expect the final BRIDGE data should include by market data around the end of the year or in the first quarter next year. Thank you.

[DrorBashan:]

Thank you. So a pre BLA meeting with FDA took place through October, clearly until we received a minute from this meeting we can't share anything. Once we will receive the minutes, we will put it publicly of course.As for your second question, last patient out for the BRIDGE is planned for December of this year. I assumed that, I hope that toward the end of Q1, we will be able to share final and final analyze results officially of course.

[Operator:]

We will move next to [Indiscernible] a Private Investor.

[UnidentifiedAnalyst:]

Good morning, gentlemen. I have about five questions relative to the proposed reverse split. Number one is does your market maker vote the shares that he has in inventory?

[EyalRubin:]

Hi, Walter. So thank you for the question. At this point the shares weren't voted yet but and again I guess that since it's confidential and once it is voted the company will know about it, but thus far I can say that we didn't see it voted.

[UnidentifiedAnalyst:]

Okay. But they have the right to vote them, correct?

[EyalRubin:]

I have to look into it. If you want I'll get back to you. I need to see what is right. If it's directly that the votes or how this things works.

[UnidentifiedAnalyst:]

Right. Unfortunately with what's happened to the value of our company. And he has obligation to take those shares and inventory. He might have a big block of shares to vote. Would you agree with that?

[DrorBashan:]

Again as I said, I'll have to check and see what's the inventory that he has.

[UnidentifiedAnalyst:]

Right. I mean --

[EyalRubin:]

I can definitely get back to you.

[UnidentifiedAnalyst:]

Okay. I appreciate that. Putting this proposal out to shareholders, does that suggest that you don't have a partner potential for OPX-106?

[EyalRubin:]

No. It doesn't suggest anything. As you all know, made public, the company receives the deficiency letter from the NYC American, yes, an essential step to regain compliance is the year two to do the reverse stock split in order to allow institutional investors and retail investors to bargain the marker in the market investors that are basically prohibited based on their charters touch a penny stock or share with our price. It doesn't suggest anything on our ability to complete or execute a partnership deal collaboration non-dilutive funding or any other means or vehicle that they can be used to support the company overall financial structure and liquidity.

[UnidentifiedAnalyst:]

Yes. Well this proposal is massively diluted to present shareholders. I mean is this acceptable to the board and management?

[EyalRubin:]

A, the proposal is not diluted to shareholders since they -- we are not suggesting anything. We are asking, a, to do a reverse split which is a technical move and obviously we are decreasing the number of authorized shares to make sense to the markets from 350 to 120. To your question, if it's acceptable to the board and the management, yes, this is correct. It is acceptable. That's the reason that obviously we put via this proxy and plan in place.

[UnidentifiedAnalyst:]

Well, if I vote yes tomorrow then two days before the meeting the board is going to execute, I once say for example 1 to 50 at that point; I will do with present shareholders, will be substantially diluted?

[EyalRubin:]

No. So just to explain the technical move that we're doing here. Reverse stock split by itself doesn't dilute anybody. A reverse stock split means that's while the share price, the current share price is $0.22, $0.23, if we're doing a reverse stock split of 1 to 10, it means that the share price a minute after is going to be $2.2. You will hold one share for 10 every share that you held previously, but nothing was added then there's no dilution to the existing shareholders.

[UnidentifiedAnalyst:]

What happens when you did -- what happens when you declare the 1 to 10?

[EyalRubin:]

It's a technical thing that actually every shareholder that has X amount of shares, the day after the reverse split, he has the X amount divided by 10, but also the float is divided by 10 as well. So your proportional ratio, holdings in the company didn't change.

[UnidentifiedAnalyst:]

Well, if -148 million shares outstanding now.

[EyalRubin:]

True.

[UnidentifiedAnalyst:]

They'll be --

[EyalRubin:]

If we do a reverse split 1 to 2, 14.8 and price is going to jump from $0.22 to $2.2. This will allow the retail investor the more, bigger retail investors, institutional investors to buy long in the market if they are interested because right now they are blocked from buying in the market based on their charter. They can't even get close to our -- to the company to our shares given the share price.

[DrorBashan:]

So again, this is Dror. The reverse split by itself is a technical process. Each shareholder will hold same percentage as they owned before. The number is changing. But it is just technical arithmetic procedure.

[UnidentifiedAnalyst:]

Well, presently --

[DrorBashan:]

As, yes please, I am sorry.

[UnidentifiedAnalyst:]

Presently you have on the present structure; you have 79 million shares available for future financing. Under 1 to 10 split that number will go to 93 million. Is that correct?

[EyalRubin:]

No. It will not go to 1 to -- just to explain again how this mechanism works. When we do a reverse split what gets basically split of the reverse with it is the float, means to say that if we have 148 million shares in our float, the day after we're going to have at the 1 to 10 ratio, it's going to be 14.8. The proportional holding of the equity does not change. We announced concurrently with this offer to reduce the authorized shares so in a way instead of having 300 million and more the day after reverse split, we will have 120 million altogether authorized shares, out of which 10 million or 14 actually, 15; 14.8 are going to be our float and obviously we have also secured shares on a fully diluted basis for the conversion of the notes.So again to explain this technical move should not change your holdings in the company or anything else.

[UnidentifiedAnalyst:]

Well but they --if you did 1 to 10 on the present capitalization that would be 35 million shares, correct?

[EyalRubin:]

No. The authorized 35 basically your reverse split. But also I suggest that you send me an email, let's set up a time and we'll take those questions offline just to explain the mechanism.

[UnidentifiedAnalyst:]

Okay. I appreciate.

[EyalRubin:]

So appreciate and I'll be happy to address all of your questions on one on one, if you'd like you can send me an email and I'll definitely set up a time and wil take this discussion.

[UnidentifiedAnalyst:]

Okay, if you would give me your email address please?

[EyalRubin:]

Yes, sure. The email is [e-mail]

[Operator:]

We will go back to Ram Selvaraju at H C Wainwright.

[UnidentifiedAnalyst:]

Hi. This is Gopalan in for Ram Selvaraju. And thanks for taking my question. I wanted to ask few questions about taliglucerase. First and then maybe dive into PRX-102 and to start off with respect to taliglucerase, can you please offer some perspectives on the usage patterns and government ordering in Brazil?

[DrorBashan:]

So what we see as of 2019, we see alignment or correlation between the orders and on the number of vials that we produce. Actually, we see this year that we get to something around 23% market shares. We see growth of average of about 15% year-over-year in the next few years. I don't want to give expectation beyond the next two, three years, it will not be responsible but we see a steady growth with taliglucerase in Brazil and right now we are very happy with it.

[UnidentifiedAnalyst:]

Okay. Great, appreciate that. And then as an add-on to the previous question maybe you can walk us through which x US territories outside Brazil might in future provide growth opportunities for taliglucerase?

[DrorBashan:]

Currently we have an agreement with Pfizer where they have the global right, sales and marketing rights globally except Brazil. This is a situation as of today. If there will be of course any change, update the market.

[UnidentifiedAnalyst:]

Okay. I appreciate that and I'm going to switch gears a little bit and maybe wanted to ask few questions regarding PRX-102, just pretty exciting. So do you happen to know when the balance data of PRX-102 slated to be released?

[DrorBashan:]

So this -- the balance data I will explain. We finished enrollment by the end of September 2019 which is about five, six weeks ago. By the FDA, we have two years dosing to show superiority, meaning end of September or early October 2021, we will finish the two years dosing, okay. Then there is a data log, analysis, it takes a couple of months in order to have final official results. As for the EU authorities, the request is one year of the balance, into the balance study which means that by the beginning of October next year 2020, we will conduct an interim analysis. And if it is positive, we will start begin our preparation for submitting a BLA in the European territory.

[UnidentifiedAnalyst:]

Okay, great, thanks. Can you please enumerate few gating items remaining for the completion of the FDA submission for PRX-102 and specifically which items are in Protalix responsibility and what elements is in Chiesi's desk.

[DrorBashan:]

I think we work closely together and transparently together. So I assume every item is done hand in hand. Clearly, Protalix developed the product so we have certain inputs in our company and Chiesi has their own input of course as time goes by. They're establishing their own relative business in US and then later on Europe. So we work very closely together. It's on the daily basis.

[Unidentified Analyst:]

Okay, great, Thanks. And this is the last question. Has Chiesi provided any feedback regarding its commercial preparations for the potential future US launch of PRX-102? Do you have any idea how many sales people likely to be deployed? And what kind of marketing campaign would it look like?

[Dror Bashan:]

I don't know to share the details right now. We know the preparation started and we are in again in direct contact with Chiesi. It's a private company, Chiesi. Right now we are pleased with their preparation.End of Q&A

[Operator:]

There are no further questions at this time. I'll turn the conference over to management for any closing remarks.

[Dror Bashan:]

Okay. So, I again I would like to thank everybody for taking the time and listening and asking me questions. Happy to answer any further questions offline of course and good day to everybody.

[Operator:]

And that does conclude today's conference. Again thank you for your participation.