Protalix BioTherapeutics, Inc.
Q4 2017 Earnings Call Transcript

Published: 6 Mar 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Year End 2017 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a Q&A session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Yossi Maimon, CFO. Sir, you may begin.

[Yossi Maimon:]

Thank you. Good morning, everybody. And welcome to Protalix BioTherapeutics full year 2017 earnings results and corporate update conference call. With me today is Moshe Manor, our President and CEO. A press release announcing our result is now available on our website. Before we start, I would just like to ask you to take a moment and read the disclaimer about the forward-looking statements in the press release. The Form 10-K we will file for the full year of 2017 will also include a detailed discussion about the applicable risks under Item 1A Risk Factors. The Form 10-K, we intend to file later tonight. I will now turn the call over to Mr. Moshe Manor.

[Moshe Manor:]

Thank you, Yossi. Good morning and thank you for joining us. I'm delighted to be here today to discuss the progress Protalix has achieved over the past year, focusing of the past few months - on the past few months. On today's call, I will provide a corporate update and then turn the call over to Yossi to review the company's financials. In the past year, we achieved multiple milestones for our lead clinical program pegunigalsidase alfa, PRX-102, for the treatment of Fabry disease. First, we have successfully opened over 40 clinical trial sites globally, of which many are in the U.S. They are all actively recruiting and we expect that we will see end of enrollment in the trial in 2018. We also achieved another milestone for pegunigalsidase alfa this quarter as the United States FDA recently granted pegunigalsidase alfa Fast Track designation. Fast Track designation is designed to facilitate the development and expedite the review of drugs to treat serious condition and fill an unmet medical need. In addition, the European Commission granted pegunigalsidase alfa Orphan Drug Designation, which was based on the fact that we will be able to establish the potential significant benefit of pegunigalsidase alfa over the existing treatment. All of these accomplishments and ongoing effort have positioned us to reach an even broader number of patients for pegunigalsidase alfa, as we look forward to 2018 and beyond. Moving on to alidornase PRX-110 for cystic fibrosis, as you will recall, we received positive traits to data and submit an application to the CF Foundation for a grant to support clinical development. We continue to expect a response on the CF Foundation as soon as the review of our application reaches the final stage of completion. If our grant application is approved, the typical size of a grant is a few million dollars. And in parallel, we continue to be in active discussion with potential partners for PRX-110 with the goal of maximizing the value of these assets. Next, we showed positive interim results for our drug candidate OPRX-106. We're expecting top-line data from our Phase II study for the treatment of ulcerative colitis in the coming weeks. We remain on track to announce full results on this study at a medical conference later this year. We have also begun some preliminary discussions regarding a potential partnership. But we will not move forward meaningfully in discussion until after we have seen the full data. In terms of our early development pipeline, we mentioned this year that we are developing an oral version of Humira, the most prescribed anti-TNF alfa product. We continue to complete additional work on that product candidate and may elect to move it forward into the clinic sometime in the future. Finally, I want to discuss our commercial product alfataliglicerase for the treatment of Gaucher disease. We have made shipments of approximately $7.1 million for 2017 with an additional shipment of approximately $2.6 million already shipped in the first quarter of 2018. As stated last quarter, with our current cash we are solidly funded into 2020, which excludes any potential increase in our revenue run-rate above that what we have seen this year from Brazil or any other potential partnership. And with that, I will turn the call over to Yossi, who will provide the financial overview.

[Yossi Maimon:]

Thanks, Moshe. So we'll start with the P&L and starting with revenue. We recorded total revenues of $19.2 million for the year compared to $9.2 million for 2016. The increase resulted from an increase of $3 million of product we sold in Brazil, and $7 million for drug substance we sold to Pfizer. I wanted to draw your attention that in accordance with revenue recognition standard, we deferred all payments received from Chiesi, including the $25 million upfront until we will start the commercial manufacturing of PRX-102, so revenues do not include any payments from Chiesi, which we received. As for research and development expenses there were $28.8 million compared to $24.6 million for 2016, driven mainly by the increased activity in our Fabry program, which as you've heard we are now enrolling in over 45 globally for all of our trials. Selling, general and administrative expenses were $11.5 million for 2017 compared to $9.4 million in 2016. The decrease is - the increase is mainly attributable to the increased activities in Brazil in 2017 compared to 2016. For the year-ended December 31, 2017, we reported a net loss of $47.2 million or $0.36 per share, basic and diluted, that exclude the onetime non-cash charge of $38 million in connection with remeasurement of derivative compared to a net loss from continued operation of $29 million - $29.4 million or $0.29 per share basic and diluted for 2016. As a reminder, the conversion feature of the company, 7.5% convertible notes was accounted for as a derivative until April 12, 2017 and following that day the derivative was reversed in its entirety to the shareholders' equity section and has not been remeasured again since that date. As of December 31, 2017, we had $51.2 million of cash and cash equivalents, and at this point our convertible notes composed of 4.5% notes due September 2018 with aggregate principal of $5.9 million and senior secured notes 7.5% due November 2021 with principal amount of $59.1 million. An important point I wanted to make is that we believe that the milestone payments to which we are entitled out of the Chiesi agreement could potentially payoff a significant portion of our existing debt, if not, all of it. To conclude, I would like to reiterate that with our current cash, we are funded into 2020, as Moshe said, and that is without including any milestone payments we are entitled from Chiesi or any increase in revenue run-rate above what we've seen this year or any other potential partnerships. I will now turn the call back to the operator, who will open up the call for questions. Operator?

[Operator:]

Thank you, ladies and gentlemen. [Operator Instructions] And our first question comes from the line of Ram Selvaraju from H.C. Wainwright. Your line is now open.

[Raghuram Selvaraju:]

Thanks very much for taking my questions. So just a couple of quick clarificatory points, on the Fabry program, you indicated that you expect to finalize enrollment in all three studies, so that what would be BRIGHT, BALANCE and the BRIDGE during 2018, is that correct?

[Moshe Manor:]

Correct.

[Yossi Maimon:]

Yeah.

[Raghuram Selvaraju:]

And can you give us a sense at this juncture of what the sequence might be of data readout from those three trials, and if you anticipate potentially having any of those data readouts before the end of this year or if we should expect all of these to be potentially 2019 events?

[Moshe Manor:]

I think it's too early to say which is going to get to the finish line first. And I think for conservative, I would say 2019 will be readout.

[Raghuram Selvaraju:]

Okay. And then just with respect to the alidornase alfa program, can you give us a sense of when we might see additional potential clinical development on that front and what you regard as the necessary gating items ahead of conducting further clinical testing on this candidate? And what your strategic plan is with regard to its future? How long potentially you might continue to develop it independently? And what factors would influence you're potentially looking for a partner now versus later? Thank you.

[Moshe Manor:]

Basically, thank you for the question. This is Moshe. We just said that we are looking - we are talking to couple of partners. We do believe that the next stage probably will be a larger Phase IIb study. And we'll see - we are waiting for the response from the CF Foundation and we need to take all of that in consideration and see what the next step and do we wait for the partner or do we start and then ask the partner to join us. Strategically, as we said, since we want to focus our efforts on PRX-102 with all the studies, our initial preference will be to go with a partner and design a study that will bring us forward in Phase III and onward as well. So that would be our first choice.

[Raghuram Selvaraju:]

Okay. And then just a quick question on potential guidance that you can provide for 2018, to what extent do you expect top-line revenues, particularly with respect to alfataliglicerase to be meaningfully higher than what was recorded in 2017? And what are the potential factors that could impact this, in particular in terms of what you see as the potential ordering pattern from Brazil with respect to alfataliglicerase? Thank you.

[Moshe Manor:]

So, Ram, I think it's being challenging to give correct guidance on what's happening in Brazil and the ordering have been choppy and not - it's hard to sense out of them. What I can say is that we do have an increasing number of patients getting on the drug. So in terms of momentum, it is a positive one that we are seeing. I just want to refrain from giving any forward-looking statements on that topic.

[Raghuram Selvaraju:]

Okay. Thank you very much, guys.

[Moshe Manor:]

Sure. Thanks.

[Operator:]

And our next question comes from the line of Peter Welford from Jefferies. Your line is now open.

[Peter Welford:]

Hi, sorry. You could you hear me now?

[Moshe Manor:]

Yes, Peter, go head.

[Peter Welford:]

Yes, sorry. Sorry, I apologize. Sorry. Thanks for taking my questions. So just a couple, coming back to the 102 timeline, I appreciate that the trials will probably fully enroll this year. But when could be potentially do you think to see the interim data from the BALANCE study? Do you think that could potentially still be available later this year or do you think the interim is also likely to fall in 2019?

[Moshe Manor:]

So I think the BALANCE study is one year from the last patient enrolled. And so I think that will be in 2019.

[Peter Welford:]

And then - great, thanks. And then, sorry, just on the revenue recognition in Chiesi, so you said that won't begin until commercial production begins. I guess, can you give us some sort of idea, given the timelines of the trial and given when obviously you need to start commercial production in advance, I guess, of the regulatory filings and the reviews et cetera. I mean, when should we think about, I guess, that revenue potentially being recognized just for the purpose of modeling. I appreciate it. It's probably pretty hard to know at this point in time precisely.

[Moshe Manor:]

Yeah. You're right, Peter. I think that is going to be challenging to say now, when actual production for commercial purposes will start, I think that may be - as a rough guidance, may be after results. So may be that would be a - would make sense that this will be a good timeframe for you to think about in terms of revenue recognition.

[Peter Welford:]

Great. And then finally, just on the 106, you mentioned you'd have initial discussions with partnerships. But you don't want to move forward until the final data, which I mean it makes complete sense. But I guess, are you thinking about 106 together with your Humira products as a sort of, if you like, basket or an asset, essentially I guess oral delivery of PNS [ph]? Do you think they're very distinct assets? And, I guess, importantly, how are partners considering these? Is this something that a partner wants to lock up or you think would likely want to lock up both rather than obviously just secure one or are, I guess, partners having different views on the two different assets? Thank you.

[Moshe Manor:]

Well, Peter. Well, without preliminary discussion with partner, what we hear is the first initial positive response on the data. Obviously, they want to see the full data, as we mentioned, on the 106 as a product. But I think all of them relating to the platform, so whether they can actually develop additional product based on the oral - unique oral platform. Humira will be the first, let's say, natural candidate, because we have done some work. And it is same concept or same group of anti-TNF alfa. But it's not limited to that. So I think the interest is both on the product and on the platform, what can be done. So it could be a kind of potential mix, I would say mixed deal or mixed intention from companies with product or with product plus platform, the oral platform.

[Peter Welford:]

That's great. Thank you very much.

[Operator:]

And our next question comes from the line of Ian Scime from ‎Highbridge Capital. Your line is now open.

[Ian Scime:]

Hi, guys. Thanks for taking the questions. Most of mine have actually been touched on already. So this should be pretty quick. Understood the CF Foundation is also doing their work. But, I guess, in relation to cystic fibrosis and also 106, I guess, how are you thinking about potential timeline for partnerships? I know, you said, people are waiting for data. But is it something you think we can see in the near-term? And I guess, to the extent you can elaborate, is there any - do you have any sense of what forms you're likely to take and would it be something similar to Chiesi with upfront in royalties or are these discussions [is not as advanced as that] [ph] point? But if there is any color you could give, that would be great. Thanks.

[Moshe Manor:]

Thanks, Ian. So, yeah, we did discuss. I think, that first maybe we'll start with 106. This is - and I'll be very clear, the discussions we have had have been limited and been mostly substantially oral, I guess have been from companies that have reverse enquiries into this. So it's been very intriguing for a lot of these companies. We haven't gone into any discussions, before we'll see the full data. And that's a mutual interest for both us and them. We are optimistic that we'll have more to discuss maybe when we meet again next quarter. In terms of the CF, I think, that's - this is something that we have more advanced, obviously, in terms of timing. I think that both us and the parties we're talking to are also waiting to see what the CFF, the CF Foundation will come up with. I think, it's safe to say that maybe one of them will be - could still be having in 2018. In terms of structure it's too early to say. As you know, there is many ways we can craft it, but there is definitely a lot of interest at this point. So we are optimistic.

[Ian Scime:]

Okay, great. That's it for me. Thank you.

[Operator:]

And I'm currently seeing no further questions. And this concludes today's program. Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone have a great day.