Protalix BioTherapeutics, Inc.
Q4 2016 Earnings Call Transcript

Published: 16 Mar 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Protalix Full Year 2016 Financial Results and Corporate Update Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer 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 Yossi Maimon, CFO. You may begin.

[Yossi Maimon:]

Thank you, good morning everyone and welcome to Protalix BioTherapeutics financial year 2016 earnings results conference call. With me today is Moshe Manor, our President and CEO. A press release announcing a result is available on our website. Please take a moment to read disclaimer about forward-looking statements in the press release, the earnings release and teleconference includes some forward-looking statements. These statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statement 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 the Form 10-K. We will file for financial year 2016 will also include a detailed discussion of applicable risk under item 1-A Risk Factor. With that I'll now turn the call to Mr. Moshe Manor.

[Moshe Manor:]

Thank you, Yossi. Good morning and thank you for joining us. On today's call we will first review our 2016 year-end earnings results and then provide a brief corporate update. I'll now turn the call over to Yossi, to review the company's financials.

[Yossi Maimon:]

Thank you, Moshe. For the year-ended December 31, 2016, Protalix reported a net loss of $29.4 million, or $0.29 per share, basic and diluted, compared to a net loss from continuing operation of $27.3 million, or $0.29 per share, basic and diluted for 2015. In 2015, we also recognized a onetime income of approximately $58 million from the sale of our share and collaboration to further except for the Brazil market, which we classified as discontinued operation. Protalix recorded a total revenue of $9.2 million for the full-year of 2016, compared to $4.4 million during the same period for 2015. The increase is mostly in connection with sales of drug substance to Pfizer for their inventory buildup. Research and development expenses for the full year of 2016 were $24.6 million, compared to $20 million for the same period of 2015. Selling, general and administrative expenses for the full-year 2016 were $9.4 million, compared to $7.3 million incurred for the full-year 2015. As you may recall on December 1, 2016, we exchange $54.1 million principle amount was our $69 million, 4.5% Convertible Notes due in 2018 for $40.2 million principle amount of newly issued 7.5 Senior Secured Convertible Notes due 2021 and approximately 23.8 million shares of common stock. Concurrent to this note exchange, we also sold $22.5 million principal amount of 2012 notes in private placement. The accounting treatment for this transaction was extinguishments of old notes, as a result we've recognized a financial gain which was the difference between the net carrying value of the 4.5% notes and the fair value of the newly issued 7.5% notes of approximately $7 million. As of December 31, 2016, we had $63.3 million of cash and cash equivalents compared to $76.4 million in December 31, 2015. We project that our current cash will fund operations into 2019. Before turning the call back to Moshe, who will review our clinical programs, I'll touch briefly on our approved product Uplyso for the treatment of Gaucher disease for which we sold the commercial write to Pfizer excluding Brazil, which we retain full note. In November 2016, we were pleased to announced that Uplyso received pediatric approval in Brazil for the treatment of Gaucher disease in children four years of age and older. Following this approval Protalix received a letter detailing and confirming purchases of approximately $24 million of drug from Fiocruz, arm of the Brazilian Ministry of Health. The order comprises a number of shipments each increasing in volume, which will start by mid-year 2017. In 2016, we sold approximately $4 million worth drug to Brazil with additional $1.2 million already shipped in early 2017. I'll now turn the call back to Moshe, who will provide an update on our clinical progress.

[Moshe Manor:]

Thank you, Yossi. 2016 was a splendid [ph] year, which nicely set the stage for two Phase II data readout targets for 2017 and the third Phase III the interim data readout anticipated in 2018. I would like to first provide an update on our pegunigalsidase alfa or PRX-102 for the treatment of fabry disease. In 2016, we announced positive interim and final results from our Phase II trial of pegunigalsidase alfa. The same results were presented at the Society of Inborn Errors of Metabolism Annual Symposium in September of 2016 and the 13th Annual World Symposium in February 2017. We believe these results were well received by the medical communities and have generated additional interest in pegunigalsidase alfa for both physicians and patients. On receipt [ph] of the positive Phase II data for pegunigalsidase alfa, we worked closely with the FDA and EMA to design our Phase III clinical program and launched a Phase III pivotal trial for pegunigalsidase alfa, which we call the Balance study. This study is a 24-month multicenter randomized double-blind active control study of pegunigalsidase alfa in Fabry patients with inferred renal functions. 78 patients previously treated with Fabrazyme are being enrolled and then randomized to continue treatment with 1 milligram per kilogram with either pegunigalsidase alfa or Fabrazyme a 2

[Operator:]

Thank you. [Operator Instructions] The first question is from Ram Selvaraju of Rodman and Renshaw. Your line is open.

[Raghuram Selvaraju:]

Hi, thank you very much for taking my question. I just wanted to ask about what would be considered a positive result in the alidornase alfa Phase II study, if you could walk us through, what you anticipate as an efficacy signal that would be unequivocal indication of this product candidate success?

[Moshe Manor:]

I tried to [indiscernible] the question what is that we anticipate from the Phase II results. So, absolutely - yes okay. Thank you. So actually when we talk to physicians, they indicated to us that if we will reach an improvement of two points in FEV1 that will be good result because every point is really matter. So, I think that any number above two will be a good number for us and a good and solid proof of concept of clinical efficacy.

[Raghuram Selvaraju:]

Okay. And do you have an indication at this time as to whether you would potentially partner this on a global basis or if you would look to do something regional?

[Moshe Manor:]

Well I think, first of all we need to fully analyze the data and I think that we will - once we have the full data we will look at that and decide on our next step and pace both on the R&D front and both on the commercial. So we don't have any fix idea at this point of time, whether a global partner or regional partner, but that's something that we'll be discussing in the next months.

[Raghuram Selvaraju:]

Okay. And then just with respect to the trajectory in Brazil, could you maybe give us a little bit more color on what you anticipate in terms of revenue from Brazil with regard to the Uplyso products and how that is likely to compared to what you saw at the end of 2016?

[Yossi Maimon:]

Thanks Ram for the question it's Yossi. I think that we - as we indicated in the call today, the revenue that we have generated in 2016 was about $4 million, which is kind of inline of the level of revenues we have seen in Brazil, up until this point in time. As we indicated we did receive appeal from the Brazilian Government with a confirmation there and we can reiterate that we expect to see a total of approximately $24 million. And I think that the first shipment we expect it to be around mid-year. We did indicate and we can reiterate that the last shipment represents approximately a run rate, an annual run rate of about $40 million. So, we are - we remain optimistic and we will update as things will progress.

[Raghuram Selvaraju:]

Okay. And then just housekeeping question, can you remind us what the convergent price is for the 7.5% Senior Secured Convertible Notes?

[Yossi Maimon:]

Sorry, I think couldn't hear you Ram, again could repeat the question.

[Raghuram Selvaraju:]

The convergent price for the senior secured convertible notes?

[Yossi Maimon:]

Yes, the strike price for 7.5% notes that we issued are $0.85.

[Raghuram Selvaraju:]

Okay, thank you.

[Operator:]

Thank you. And that next question is from Peter Welford of Jefferies. Your line is open.

[Peter Welford:]

Hi, yes, thanks for taking my questions. I've got a couple, firstly just on the SG&A spend, can you give us some sort of idea, is that in terms of the spending in Brazil abnormally high this year due to negotiations obviously in the discussion to secure the contract? Or should we be using 2016 is a reasonable run rate for the future? Just then secondly, on the Pfizer revenues, can you possibly give us any sort of insights into what the end-market sales Pfizer achieved during 2016 are? At least perhaps some sort of guide relative to last year or possible number? And then finally just on the pipeline and just with regard to Fabry study, can you give I guess some sort of insights into the speed of enrolment that you're seeing there, is it accelerating across the sites? And all the sites that are online of the movement largely U.S. sites or are they mostly so far the European site that are online and which of the sites that still need to come online? Thank you.

[Yossi Maimon:]

Okay. Thanks, Peter for the questions I will try to tackle them one at a time let me know if I dropped something. So the first one for the SG&A, I think that with the increased activities and sales anticipated in Brazil, I think that the 2016 should serve as a good proxy going forward. As for the sales for Pfizer, I think that we deliver according to their request; we haven't seen any unusual increase. It's just a 2016 kind of made up or 2015 where we focusing on manufacturing product for fabry trails. So we kind of resumed operations for Uplyso in 2016. As for the pipeline in terms of fabry enrolment so I think as Moshe indicated, these are the number of sites is exactly as we planned. And I would say that most of them are in the U.S. And we do have some sites in Europe. And I think we are on track in terms of number of patients, number of sites, entailments, et cetera in general. We are pleased with what we've seeing to-date.

[Peter Welford:]

That's, great. Thank you.

[Operator:]

Thank you. And at this time I would like to thank everyone for joining today's conference call. You may now disconnect. Good day.