CollPlant Biotechnologies Ltd. (CLGN) Q4 2022 Earnings Report, Transcript and Summary

Welcome to the CollPlant Biotechnologies investor conference call to discuss financial results for the full-year 2022 and corporate updates. A question-and-answer session will follow the formal presentation. [Operator Instructions] Now, I'd like to turn the call over to Dory Kurowski of LifeSci Advisors. Please go ahead ma'am.

Good morning. I would like to welcome everyone to CollPlant Biotechnologies' first financial results conference call for the full-year ended December 31, 2022. With us on the call today from CollPlant are Yehiel Tal, Chief Executive Officer, who will provide an overview of the company's programs and forthcoming updates; and Eran Rotem, Chief Financial Officer, who will provide a summary of CollPlant's financial results for the full-year ending December 31, 2022. Before we get started, I would like to remind everyone that statements made on this conference call may include forward-looking statements. Actual events or results could differ materially from those expressed or implied by any forward-looking statements as a result of various risks, uncertainties, and other factors, including those set forth in the Risk Factors section of CollPlant's filings with the Securities and Exchange Commission, which could be found at www.sec.gov or on CollPlant's Web site at www.collplant.com. In addition, any forward-looking statements made on this call represent CollPlant's views only as of today, March 29, 2023, and should not be relied upon as representing the company's views as of any subsequent dates. And CollPlant management specifically disclaims any obligation to update or revise any of these forward-looking statements. With that, let me turn the call over to Yehiel Tal, Chief Executive Officer of CollPlant Biotechnologies. Please go ahead, sir.

Good morning, everyone. We are very pleased to have you join us today on CollPlant's very first investor conference call to discuss the 2022 financial results and corporate developments. Since this is the first call with investors, we wanted to remind you about the mission of our company. CollPlant is developing and delivering collagen technology and regenerative medicine products to improve and prolong life. And now, imagine a future where there will be an unlimited supply of spare parts for the human body, including life-saving organs. And also imagine that in the future medical treatment will be tailored for the individual characteristics of each patient. And then also imagine that drugs will be developed without the need for animal testing. We at CollPlant aspire to become the leaders in regenerative medicine, helping people live longer and better, and creating improvements in science through our regenerative technology. Since being a Nasdaq listed, in 2018, we have drawn on the collective strength of our company management in regenerative medicine, medical devices and engineering, as well as our strong IP position, human capital and partnerships to derive the company's value and innovation and become market leader in regenerative anesthetic medicine. Collagen is the primary scaffolding molecule in the body's connective tissues and organs. And it is our goal to become global leader in regenerative medicine by applying our non-animal-derived recombinant human collagen, or rhCollagen, to novel medical and aesthetic products. Now, let's move to recent developments that relate to our novel programs that rely on rhCollagen technology. The first category that we are applying our technology is in aesthetic medicine with our dermal filler product candidates. Our long-term collaboration with AbbVie to develop a paradigm shift in regenerative dermal and soft-tissue filler continues to move forward according to plan. Per the agreement, CollPlant has the potential to receive additional milestones and option payments regarding the two products that we are developing, and we'll receive royalties on any product sales should we obtain approval. AbbVie continues to advance the filler program, and CollPlant expects that the first of these milestones could be achieved in 2023. In addition, we are moving forward with a third-generation photocurable dermal and soft-tissue filler. Our goal with the development of this filler is to create a product with three capabilities; lifting capacity, regeneration of new tissue, and [contouring] (ph) capabilities. Recently, we generated additional supporting data from a 12-months pivotal preclinical study of this filler, demonstrating superior tissue regeneration, lifting capacity, and volume retention compared to the industry gold standard. This promising result combining the regenerative properties of collagen and the advantages of photocuring technology position CollPlant's product candidate as a revolutionary platform technology with the potential to create a paradigm shift in the evolving medical aesthetic market. We believe that this third-generation filler has the potential to be highly competitive by providing both refined and natural-looking aesthetic results as well as uniquely regenerative long-term benefits. CollPlant has granted its global pharmaceutical partner, AbbVie, the right of first negotiation to obtain a worldwide exclusive license to this product candidate. Our second area of focus is regenerative aesthetics with our regenerative breast implant program. Earlier this year, we announced positive results from a preclinical study evaluating our regenerative implants in a large animal model. Results from this study demonstrated progressive stages of tissue regeneration after three months, as highlighted by the formation of maturing connective tissue and neovascular networks within the implants with no adverse events reported. No regenerative breast implant currently exists in the market, and these implants would be the first of their kind also having beneficial regenerative properties. Importantly, since these implants are made of our rhCollagen and other biomaterials versus animal-derived collagen, there is less chance of rejection by the body or what is known as acute rejection. According to the U.S. Food and Drug Administration, approximately 350,000 Americans have reported adverse events involving breast implants between 2009 and 2019. Reports range from autoimmune symptoms to breast implant-associated anaplastic large cell lymphoma. CollPlant's implants are expected to regenerate breast tissue without eliciting the immune response, and thus may provide a revolutionary alternative for both aesthetic and reconstructive procedures, including postmastectomy for cancer patients. Later this year, we plan to initiate another study in large animals with commercial-sized implants to generate additional safety data in support of commercialization. And we look forward to reporting results of that study. We also made a decision to strategically expand into personalized medicine. And we signed a collaboration agreement, in November 2022, with Tel Aviv University and Sheba Medical Hospital for our gut-on-a-chip program. Our agreement with these two research institutions is to co-develop bioprinted human intestine model for drug discovery and personalized treatment of ulcerative colitis. The 3D bioprinted model is designed to emulate the human intestine tissue in order to allow medical professionals to identify drug targets and personalized therapeutic responses that can lead to improved patient outcomes. We expect that this approach could be groundbreaking improvement over existing use of animal models. CollPlant will have the right to commercialize the product once ready to market. Now, let me turn to our commercial portfolio of BioInks, which is another program of ours that falls within our focused area of regenerative medicine. We expanded our commercial portfolio of collagen-based BioInks with two new products, including Collink.3D 90 which offers increased mechanical properties, and Collink.3D 50L with our first BioInk available in powder form to provide enhanced operational flexibility. Our BioInk platform, which was established in 2021 with the launch of Collink.3D 50 allows our biopharma and academia customers to streamline their process of new product development by utilizing animal free alternatives that delivers improved biofunctionality, safety, and reproducibility. CollPlant remains engaged in partnering discussions with several industry leaders and academic institutions interested in the company's technology and expertise in 3D bioprinting to develop therapeutics and medical applications. We are confident that our collaboration with a worldwide pharmaceutical leader as well as other numerous collaborations and partnership agreements has validated our technology and its multiple areas of applicability. We have also made strides in developing a proprietary aseptic process to mass produce sterile collagen. The sterile collagen will serve as an ideal substrate for stem cells, induced pluripotent stem cells, and all kinds of primary human cells. It will also address production processes where collagen as major constituent should be sterilized. And now I will turn the call over to our Deputy CEO and Chief Financial Officer, Eran Rotem to provide a recap of our financial results, Eran?

Thank you, Yehiel. Good morning, everyone. I will now review our financial results for the full-year period ending December 31, 2022. GAAP revenue for the year 2022 was $299,000 and included income from sales of the company's BioInk and rhCollagen. Revenues decreased by $15.3 million, compared to $15.6 million for the year ended December 31, 2021. The revenues in the year 2021 were mainly derived from the $14 million upfront payment from AbbVie in return for the rights CollPlant granted to AbbVie. As we said previously, according to the agreement with AbbVie, CollPlant has the potential to receive additional milestone payments based on product development milestone suite. Note that in 2022, CollPlant did not receive any such payments, and CollPlant expects that the first of these milestones could be achieved in 2023. GAAP cost of revenue for the year ended December 31, 2022 was $400,000, a decrease of 80% compared to $2 million in the year 2021. Cost of revenue includes mainly the cost for the company's rhCollagen-based BioInk products and royalties to the Israel Innovation Authority, or IIA for our sales. The decrease in cost of revenue in the amount of approximately $1.6 million is mainly comprised of the decrease of approximately $460,000 in royalty expenses to the IIA and a decrease in the amount of approximately $1 million relating to BioInk and rhCollagen sales. GAAP gross loss for the year-ended December 31, 2022 was $101,000 compared to gross profit of $13.6 million in the year-ended December 31, 2021. GAAP operating expenses for the year ended December 31, 2022, was $17 million compared to $13.6 million in 2021. The increase in expenses amounting to approximately $3.4 million is mainly comprised of $1.4 million in research and further development activities including process development. And these costs are mainly associated with the successful development of aseptic process. So, now we can supply sterile collagen products to our business partners, and $1 million in employee salaries and share-based compensation including recruitment of new employees for development of new product in 3D bioprinting in medical aesthetics. And lastly, an increase of $900,000 in general and administrative expenses related to employees and director's salaries and insurance policy expenses. On a non-GAAP basis, the operating expenses for the year ended December 31st 2022 was $15.2 million compared to $11.9 million for the year ended December 31st 2021. Non-GAAP measures exclude certain non-cash expenses. GAAP financial income net for each of the years ended December 31st 2022 and 2021 totaled $172,000. Financial income net is mainly attributed to interest received from the company's short-term cash deposits. GAAP net loss for the year ended December 31st 2022 was $16.9 million, or $1.53 basic loss per share compared to a net income of $237 or $0.02 income per share for year ended December 31, 2021. Non-GAAP net loss for the year ended December 31, 2022 was $15.2 million. Or, $1.37 basic loss per share compared to $1.9 million income or $0.19 basic income per share for the year ended December 31st 2021. Cash and cash equivalents and short-term deposits as of December 31, 2022, was $29.7 million. Cash used by operating activities during the year 2022 was $13.7 million compared to $2.5 million cash provided by operating activities in the year 2021. Cash provided by investing activities during the year 2022 was $28.9 million compared to $31.6 million in cash used in the year 2021. The change is mainly attributed to repayment and investment in short-term cash deposits. Cash provided by financing activities during the year 2022 was $1.9 million compared to cash provided in financing activities of $38.8 million in the year 2021. In 2022, the company received $1.9 million mainly from the exercise of warrants into the company's shares. In 2021, the company executed a registered director offering which resulted in net proceeds of $32 million. And realized proceeds in the amount of additional $6 million from exercise of options and warrants. This now concludes the financial summary. Operator, I believe that we can now open up the call for questions.

Thank you. [Operator Instructions] Our first question comes from the line of Ben Haynor with Alliance Global Partners. Please proceed with your questions. Q – Ben Haynor: Good day, gentlemen. Thanks for taking the questions, and congrats on the progress. First off from me, what's next in terms of the photocurable filler in the clinical studies that you'll conduct there?

Thank you for the question. We just recently concluded a preclinical package that was submitted to AbbVie, and being reviewed by AbbVie. This may require some further steps of development later on in order to trigger the [option] (ph) product.

Okay. And do you have a timeline that you expect to hear back on the package from AbbVie?

No, this product, at the moment, it's our product, it's CollPlant product and we are developing that product as was published before in the last four year. AbbVie has a right of first negotiation for that product, so we are in progress. It is in a preclinical phase. And once we will have news, of course, we will update.

Okay, got it. And then I was just curious on the product, you mentioned in the press release it's the third-generation version. Can you talk a little bit about the improvements that have been made to get to that third generation?

Yes. So, the third-generation product is basically the photocurable dermal filler which if you compare it to the currently sold products, like the HA products that provide only lifting capacity, this photocurable filler will provide two additional features. One is regeneration of the tissue, and the second one is the contouring ability, which means that it enables also contouring of tissue by the physician.

Okay, got it. And then lastly for me on the R&D expenditures, you do the full-sized breast implant study later this year. What should we expect in terms of R&D expenses this year? How should those track? Do they pick up in the second-half of the year? Any thoughts there would be helpful. And that's it for me. Thanks a lot, gentlemen.

So, thanks. So, generally speaking, we are not disclosing -- we are not giving future information. So, what I can say is that this program is still in a preclinical stage. So, it's not the dramatic expenses like clinical expenses. So, like it should, in that kind of an environment in the market, and when in the global situation we will not, of course, go into a clinical study this year. So, we are expecting preclinical expenses. It's a decent amount as we saw in the last few years.

Thank you. Our next questions come from the line of RK with H.C. Wainwright. Please proceed with your questions.

Thank you. Good afternoon, Yehiel and Eran. Thanks for doing this call. So, just to make sure that I understand this properly, on the dermal filler, so there are two products, right, one is currently in collaboration with AbbVie, and the second one is the third-generation product which is where AbbVie has the right for first negotiation. Is that true? And the other question is where is AbbVie with the first product in terms of development, not the third-generation, the first product?

With respect to your first question, this is -- as you suggested, this is the right of first negotiations that AbbVie has for this product.

And regarding your second question, so as you know, RK, we are not allowed to disclose the phase of AbbVie with the dermal filler products. They are our partners, and we are respecting their requests. What we are allowed to say, and say that, and it's very important, is that we are expecting to achieve the milestone with AbbVie -- the AbbVie program, the dermal filler, this year. And this is super important, and this is what we are allowed to say now.

Okay, thanks for that. And then on the breast implant program, what's the next steps you would be doing?

So as I indicated earlier in my talk, the next step would be to launch a large animal trial with clinically relevant size implants which are going to be like 100 cc in size. So, this will be during this year, 2023.

And so, this is a study that you are conducting on your dollar. And do you have an idea of how long it would take for you to get the data that you need to take it to the clinic?

Well, first of all, the study -- a preclinical study with follow-ups takes about one year. And then you have all the [postmortem] (ph) analysis for the 12-months endpoint. And then it depends on the results. And we will, of course, need to get this point of time to decide whether another animal study would be required as a pivotal study towards submission to the regulatory authorities or maybe this study would be sufficient; it's too early to say at this point of time.

Okay. And then regarding the breast implant program, I am assuming you are looking for a collaborator. Can you comment anything on that progress?

Regarding collaborator, we're continuously looking for collaborations. And at this point of time, of course, we cannot elaborate on our discussions. And you know the situation with respect to collaboration.

Great, thank you very much. Thanks for taking all my questions.

Thank you, RK.

Thank you. I believe that is our last question from our live audience participant. So, I'll now turn the call back over to Mr. Eran Rotem to read any written questions that came in from the audience in advance or during this call.

Thank you. So, the first question is as follows, would the patient require any allergy testing prior to receiving a plant-based collagen filler?

So, allergy testing prior to receiving a plant-based collagen filler is not required at all. This test was required in past when filler made of tissue-extracted collagen were used. And our plant-derived collagen does not elicit immune response or allergies since it is pure and does not carry residues like growth factors from the host tissue. So, the answer is a allergy test prior to receiving the plant-derived collagen filler is not required.

Okay, the next question is the following. What are production cost differences between animal-extracted tissue and the process of producing your collagen in tobacco plants? Are these easy to procure?

So, the CollPlant production process is very efficient. And we believe that in commercial scale, the cost is going to be competitive with the cost of tissue-extracted collagen.

Okay, so the last question that is see here is regarding rhCollagen production capacity. So, what we can say about that?

So, our production capacity is scalable. And we believe that we can satisfy the upcoming commercial demand for our products or our partners' products in the coming years.

Okay, so that concludes our great questions from the audience. And I'll now pass it back to Yehiel Tal, CollPlant's Chief Executive Officer for any closing remarks, Yehiel?

Yes, thank you. So, in closing, I want to reiterate our upcoming goals for 2023: continue to advance development of paradigm shifting regenerative, dermal and soft tissue fillers with AbbVie, expecting first milestone achievement in 2023, initiate study in large animals with commercial sized breast implants to generate additional safety data in support of commercialization, advanced development of the Gut-on-a-Chip tissue model for drug discovery and personalized treatment of ulcerative colitis. We continue to expand our commercial portfolio of rhCollagen-based BioInks and the last one is form new collaborations with industry leaders to co-develop therapeutics and medical applications. I would like to thank everyone for joining us on our first conference call. I want to reiterate that we are committed to becoming the leaders in regenerative medicine and supporting more sustainable ecosystems that benefits all stakeholders, including patients, our shareholders, our employees and providing innovation to the life science industry. As mentioned, our vision is to enable a world with unlimited organ supply, regenerative tissue products and novel drugs and diagnostics that do not rely on animal trials. We are targeting substantial and attractive markets to do this, and we look forward to a promising and exciting year ahead. Thank you.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.