Protalix BioTherapeutics, Inc. (PLX) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Protalix Second Quarter 2018 Financial Results and Corporate Update Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Yossi Maimon, Chief Financial Officer. Sir, you may begin.

Thank you. Hello, and good morning, everybody. Welcome to the Protalix BioTherapeutics second quarter earnings result and corporate update conference call. With me today is Mr. Moshe Manor, our President and CEO. A press release results is available on our website from about an hour ago. I would like to ask you to please take a moment to read the disclaimer about the forward-looking statements in the press release -- the earning release and this teleconference includes forward-looking statements. These statements are subject to known and unknown risk and uncertainties that may cause actual future experience and 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 SEC. I will now turn the call to Mr. Moshe Manor.

Thank you, Yossi. Good morning, and thank you for joining us. I'm happy to be here today to discuss the progress Protalix has made over the past quarter. During the call, I will provide a corporate update and then turn the call over to Yossi to review the company's financials. Starting first with our lead program, pegunigalsidase alfa, or PRX-102, for the treatment of Fabry disease, we have 2 updates. First, as everyone has seen, we expanded our partnership with Chiesi to include exclusive U.S. rights for the development and commercialization of PRX-102. Terms of the agreement included an upfront payment of $25 million, up to $20 million in development cost, additional up to $760 million in regulatory and commercial milestones and tiered royalties ranging from 15% to 40%. With this influx of cash and additional development cost, Protalix is now funded through the readout of all of our studies for PRX-102. The more we work with Chiesi and learn about them and more they learn about the product and the market opportunity, the more they wanted to expand our existing relationship. We found Chiesi to be extremely dedicated to the field in general and to our program specifically, applying a lot of resources already in this clinical stage and long-term strategy as well. We believe Chiesi's recent expansion in the U.S. has well made them an ideal partner for PRX-102 in this territory as well. This expansion of the partnership allows the option for Protalix to, not only complete the trial without additional capital, but that is in such a way that we will meaningfully serve in the commercial success. The second piece of the news which could be potentially very good for our ongoing program is a drug guideline the FDA released last month regarding enzyme replacement therapies. We think that this changed the way that the FDA looks to a [ poor drug ] like PRX-102. With Chiesi, we will talk to advisor and decide if there is another potentially quicker that to market in the United States. As enrolment continues across the study, we are beginning to see some preliminary data from BRIDGE study, pegunigals switch over study and planning to report data in the first half of next year. A reminder how it allows a study -- the BALANCE study will have interim data approximately 1 year after completion of the enrolment which we will press release. Our BRIGHT study, every 4-weeks, the infusion is also enrolling. In the coming quarter, we will provide guidance on when to expect interim data. Also during the past quarter, we reported positive data from our Phase II trial of OPRX-106 in ulcerative colitis. We were very happy with the result which show mucosal improvement in 61 patients, mucosal healing in 33% of patient and clinical remission in 28% of patients. We believe that this is a very interesting drug candidate and during the remaining of the year, we plan to have a deep-dive to review the different path possible for us to move forward in development. I will now turn call back to Yossi who will provide the financial overview.

Thanks, Moshe. So for the first 6 months ended on June 30, 2018, we reported a net loss of $20.7 million or $0.14 per share basic and diluted compared to a net loss of $20.6 million or $0.16 per share basic and diluted for the period -- for the same period in '17. We recorded total revenues of $6.6 million for the first half of '18 compared to $9.2 million for the same period of '17. The decrease is attributed primarily to the decrease of sales of drug substance to Pfizer and also for the drug into Brazil. R&D expenses were $14.7 million for the first half of '18 compared to $15.3 million for the same period of '17. Selling, general and administrative expenses were $4.6 million for the first half of '18 compared to $5.4 million for the same period of 2017. As of June 30, 2018, before the expansion of the deal with Chiesi, we had $28.3 million in cash and cash equivalents. Pro forma cash with the upfront from such U.S. license deal is approximately $53 million. We expect also to realize a further reduction in operating cash consumption going forward mainly as the full effect of Chiesi's R&D supports will come into play along with the U.S. agreement. Lastly, I would like to remind you that at this point, we only have the '20, '21 convertible notes with a balance $58 million as we discharge -- effectively discharged remaining of the 2018 notes earlier this quarter. With that, I will now turn the call back to the operator who will open up the call for questions from the audience. Operator?

[Operator Instructions] Our first question comes from Ram Selvaraju with H.C. Wainwright.

This is Julian on for Ram Selvaraju. First, beyond PRX-102, do you think Chiesi might have an interest in your other pipeline candidates as well? Is that something you're able to comment on?

Well, basically, we focused our discussion with Chiesi on the -- obviously on the 102. As we mentioned in the past, we continue to discuss with partners on other -- the other products and opportunities. And basically we need to go on partners that they have the initiative and the activities in those related area. So this is an ongoing process and that might be one of the opportunities that we need to explore further as we discuss for both products.

Okay, got it. And I guess in light of this expanded partnership, would you say it's more likely that you'll move your other pipeline candidates forward internally?

I think that this is something that we are going to have to look into. I think that we're going to take the balance of the year to think thoroughly on -- as things have changed, what do we want to do and can do on our own and can we push further. Additionally, at this point, as we mentioned, we do not -- we did not allocate additional resources into different programs. We want to be very careful. We're very excited about the prospect of PRX-102 for Fabry. We want to make sure we get to the finish line in a more efficient way. But we are very excited as well with the result, as Moshe indicated before, for the 106, the UC, the oral anti-TNF and we will take the balance of the year to see what makes sense best at this point.

Our next question comes from [ Philippe Gardner ] with Jefferies.

It's Peter Welford. Couple of questions. Firstly, I wonder if you could disclose the actual revenues that you got from Brazil during 2Q either the 6-K being filed. Secondly then just with the greater cash balance, do you have any thoughts on the longer-term convert that is by 2021, or are you happy to leave that outstanding? And then just thirdly with regards to the R&D now for 102, I guess are there any thoughts on how the Phase III trials could evolve based on the recent FDA guidance [ did what, probably ] look at it. Is the -- I guess clearly the main balance trial is probably obviously still ongoing and it's going to take some time to read out. I guess is there any thoughts as to whether the guidance could potentially expedite that? Or is it more just a case of giving you greater confidence that you're not going to need any additional studies or requirements to get approval?

Thanks, Peter. All great questions, I'll start with the easy one. So we recorded $2.6 million in total from Brazil for the 6 months. In terms of the cash balance that we have and with respect to the convert, I think that we have said it before and I think that now it even speaks in more volume, I think we are confident to the extent needed the milestones that should come in from the now global relationship with Chiesi should be more than enough to cover the notes. So this is something that I don't think we have any short-term thinking on doing something, but to the extent we will need to repay those, then I think that we are in a better position now even than we were before given the significant milestones we're facing. In terms of the recent guidelines of the FDA, I think that's we -- it's very early to say what the -- how they really affect us, but I think it could be both in terms of how confident we are in the plan we have right now and potentially -- but again, we have to be very careful, potentially expedite the process of approval in general, but as we said, this is very early.

Yes, Peter, let me -- this is Moshe, let me add to that. I think what we read from the FDA guidelines is they acknowledge the challenges in terms of the studies and the -- and although you see the benefits over time such diseases. We believe that once we study the -- definitely the -- more the guidelines since we have quite a robust plan in terms -- we are running 3 studies, 130 patients, we think that it's -- we read carefully that and we can -- I think potentially we can translate it into benefit for us in such a way that potentially can expedite time to market basically because we have quite a robust plan -- development plan and definitely we can establish the safety based on the number of patients. So we see positive signs there that might affect the time to market in a positive way.

I'm not showing any further questions at this time. I would now like to turn the call back over to Moshe Manor for any closing remarks.

Thank you. Thank you guys for joining us on the call this morning. We look forward to a very exciting new future for the company on multiple fronts as we believe we could be unlocking a lot of value mainly with the clinical data and regulatory updates for our PRX-102 program. So thank you again for your continued support and have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a great day.