Protalix BioTherapeutics, Inc. (PLX) Q2 2019 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen and welcome to the Protalix Second Quarter 2019 Financial Results and Corporate 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 is being recorded. I will now like to turn the conference over to our host, Ms. Solata [ph], Investors Relations. You may begin your conference.

Thank you. Hello, everyone and welcome Protalix Biotherapeutics second quarter earnings results and corporate update conference call. With me today is Dror Bashan, Protalix's President and CEO. 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 future experiences 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 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, included a detailed discussion of applicable risk factors. I will now turn the call over to Mr. Dror Bashan.

Good morning and thank you for joining us today to review the company's second quarter and recent highlights. During the call this morning, I will provide a corporate update and review the company's financials before opening the lines for questions. Before reviewing the events of the past quarter, I would like to take this opportunity to more formally introduce myself and explain why I have decided to lead the Protalix team. By way of background, I've worked in the pharma business for over 20 years with experience in almost all verticals of the business. Most recently I was Teva's Senior Vice President of Global Business Development, where I was involved in certain -- in creation of strategic alliances. I've supervised complex cross-company projects and oversaw acquisitions and divestitures of certain assets. I joined Protalix for many reasons. On a personal level, I'm excited for the challenge and opportunity and to work with established intelligent team management has picked. Protalix is well known in Israel as a company with great science. They have successfully developed a drug to the point of commercialization. However, to me, the company's potential in the future is much more exciting. The data to date, from our product for Fabry has been fantastic. We clearly have a drug candidate with a potential to be a much better than the current standard of care. Protalix has a strong and promising relationship with Chiesi, which is our marketing partner for our product in Fabry which I look forward to continuing in building on. I recognize that the company has its challenges and I plan to be thoughtful and diligence to deal with them to the best of my ability. To that end, I believe that there are resources out there that can utilize to bring much-needed improvements to our capital structure. Overall, Protalix is a company with a promising future. And I'm happy that I was approached and joined Protalix to move the company in a positive direction. Now, let me please discuss the past quarter of the company. Other than myself, we were also happy to announce that we will be bringing in Eyal Rubin currently the CFO at Brainstorm Cell Therapeutics as the CFO to replace Yossi. Eyal will introduce himself next quarter. But we feel that his skillset will complement well with my own and those of others as a company. We wish the best to Moshe and Yossi and thank them both for the many years of service to Protalix. Moving now to our pipeline. Most importantly, as we have already announced, we have received communication from the FDA that will allow us to file a BLA for an accelerated approval for PRX 102. I'm happy to report today that we have scheduled the pre-BLA meeting with the FDA in the fourth quarter, keeping us on track to apply for the BLA through the first quarter of 2020. We were also happy to report in June the completion of enrollment in our BRIGHT in which patients are treated with 2-milligram of our product every four weeks. We expect to present the data from this study at the upcoming medical conference after completion. To date, almost all of the patients are continuing on the four weeks treatment in an applicable extension study. In over our three studies, we have currently have more than 55 patients on extension studies, which I believe to be a great sign that patients want to continue to be treated with our product. Our pivotal drive, the balance drive is 95% enrolled and I'm confident that we'll be able to announce the completion of [indiscernible]. I will now review the financial position. For the quarter ended June 30, 2019, Protalix reported a net loss of $15 million or $0.10 per share, basic and diluted compared to the net -- to a net loss from continuing operations or $15.7 million or $0.11 per share basic and diluted for the same period in 2018. Protalix recorded total revenues of $22.7 million for the first six months of 2019 compared to $11.6 million for the same period of 2018. The increase can be attributed to the recognition of $15.7 million of license revenues in the six months ended in June 30, 2019, compared to the $5 million in the same period of 2018. Research and Development expenses were $25 million for the first six months of 2019 compared to $17.7 million for the same period of 2018. Selling and general administrative expenses were $4.3 million for the first three months of 2019 compared to $4.7 million in the same period of 2018. As of June 2018, we had $25.1 million of cash and cash equivalents and as we are previously guided our current cash position would take us into 2020. Given the current cash balance, we are within 12 months of cash leading to the going concern disclosures in the documents we have filed with the SEC and our press release this morning. This should not come as a surprise to anyone. We are discussing and have started negotiation with relevant parties regarding ways to improve our capital position. I believe that this discussion will evolve and enable Protalix to continue its main effort through to 2022. Beyond both of the potential accelerated approval, which is expected, hopefully, things go smoothly end of 2020 and ultimately a U.S. approval after we have results of the BALANCE study which we've designed to analyze the priority of our products over fabrazyme. With that, I will now turn the call back to the operator who will open up the call for questions from the audience.

[Operator Instructions] The first question coming from Peter Welford with Jefferies.

Hi. Yes, thanks for taking my questions. A few please. Firstly, to some of the financials, presumably the R&D burn rate within 2Q is abnormally high. That was just comments to a little bit on that and then what we should be thinking about for the R&D, I guess, the second half of the year. Secondly, then just on the milestones, can you confirm that the first milestone due from Chiesi would be the approval by the FDA? And that importantly, that an accelerated approval would still constitute that to be able to receive that milestone and the form of full approval is not required to trickle -- to trigger the milestone from Chiesi I guess on completion of the larger Phase 3. And then just finally, then obviously I appreciate you haven't had long within the company, but just looking at beyond 102, some of the other assets, obviously and technology within the company, I guess I'd love to hear your view on the potential avenues that you could pursue to I guess, crystallize the value or bringing cash with some of those other assets and platforms you have within the company and perhaps, where you think potentially things could be improved over what was done in the past. Given obviously, there were efforts already to try and pursue that avenue. Thank you.

So the first question, I believe, is the R&D expenses. So first, thank you for that. You're correct. It was a number which is way higher than the former period last year. And there are three main reasons. First, during these 12 months, there were way more patients enrolled into the studies so it adds a lot of costs. Two, many of the patients are -- a pretty significant portion of the patient went into extension study that we also finance. And the third one, we buy fabrazyme in the market at the full price, of course. And this is part of the clinical trials. With regards to the fact if we will -- for the second half of this year, so I assume it will be more or less the same, at least, for the first two reasons, maybe even be a bit higher because we have more patients. And second, with regard to the fabrazyme purchases, this is -- it will be more or less the same but it's a matter of a timing issue right now. But indeed, we do need to further buy fabrazyme as the patient are -- once they are finished, they still have two years. Each of them on the balance study. This is on the first question. The second question on the milestone. It's not a done deal. We believe that approval is approval. So accelerated process is just a vehicle of how to hopefully get an approval. So the first milestone from Chiesi should be upon approval of -- if indeed we received of the accelerated approval path. And the third one. And if you don't mind, just to repeat the third question, please.

Yes, sorry. Just with regards to the other assets within the company beyond 102 and the platform instead of your thinking, I guess on those and perhaps the way you think perhaps, management -- what happened in the past could be improved upon to try and crystallize the value of those assets within the company that clearly at the moment are basically just treading water.

So thank you for that. You're correct. I don't like to use the excuse that I'm only five weeks in the company. I do believe that the technology and the infrastructure and knowledge and capabilities gained in Protalix along the years are significant, a lighter way of unique or uniqueness. And still for me to further evaluate the pipeline assets, I believe that I need a bit more time before I will come and say what we plan to do with it. We will take a couple of months, review department in detail and in refine or relook into this project going forward where Protalix will be focused. And we take it from there and of course, we will be open and share it with everybody.

Thank you.

The next question in the line of Ron [ph] with H.C.

Hi, this is Edward on for Ron. I appreciate you taking the questions. You went into a little more detail about the BALANCE and the BRIGHT studies. And I appreciate, commend you for being so close to finishing enrollment. And I was just wondering if you could provide a little more granularity on when the final top-line data might be available for BALANCE and BRIGHT?

So on the BALANCE study, we hope to finalize enrollment soon, which I don't want to commit to a certain date. As you know, it is designed as follows. It is two years to receive -- to hopefully to meet superiority over fabrazyme and this would be two years from last patient team. This is the end of the dosing. Then there is data cleaning. It takes some time so I assume it would take additional four or five months after. I mean please don't catch me if it's one-month plus or minus. As part of this BALANCE trial, after one year, there is an interim analysis, which is supposed to serve for the European submission, which would be a non-inferiority over other drugs. Again, one-year submission for Europe and non-inferiority one and two years, hopefully, to show superiority over fabrazyme. Two years building business for the U.S. as agreed with the FDA, of course. And this is the protocol and endpoints appropriately.

Okay, thank you. And then we're looking at the BRIGHT trial. I'm just wondering how significant this data might be in terms of the commercial outlook for 102 as you're moving forward.

So for the BRIGHT, the last patient last visit was July 2020. So this exclusive will be 2020. We assume that around four months later, there will be top-line data which takes us to the end of 2020. Please understand that under the accelerated approval path, the BRIGHT study is not included. I hope this answers what you asked me but, please.

Thank you. And moving on to the BRIDGE trial. I'm just wondering if any feedback has been received from the FDA concerning the suitability of some of the data, just along with the prior clinical results from the Phase 1, 2 studies that would support maybe initial approval of 102 or whether it's really the BRIGHT study coming out next year that will be the main driver?

So the BRIDGE study, we have I believe -- I think 16 patients that will be included within this BLA application under the accelerated approval path. It is considered at least a safety data. I don't want to promise over biomarker or preliminary efficacy but right now, will be part of the accelerated approval or the BLA submission as safety data.

Perfect, thank you. I just wanted to make sure that that was going to be a part of everything.

Yes. Please understand, you can understand that the BRIDGE is the 1 milligram and the BRIGHT is 2 milligram but 2 milligram is not part of it.

Okay. And appreciating that you are new to the company, my final question is more on the competitive landscape. So starting with just enzyme replacement therapies is there still a view that Fabry disease cannot be kind of supplanted by drugs like migalastat or miglustat or are enzyme replacement therapies really going can be the standard of care going forward. And then looking at also gene therapies. Just thinking about the preclinical programs that are still ways away from commercialization, is there a concern regarding any of the persistence for some of these lengthy bio constructs? And then when we look at something like AVROBIO's AVR-RD-01, what was the -- or how key was the vector dropping some of the peripheral blood that was seen in these early-stage clinical data?

So you wanted to refer first to the -- to migalastat and the celestat or you prefer that I will discuss the gene therapy by AVROBIO.

Whatever order you prefer.

It doesn't matter. So migalastat, as far as we understand cannot address all Fabry patient. I understand it is a matter of amenable mutation and we understand it's around 30%. Celastat is still in development and safety and efficacy need to be further developed. So, we will see the outcomes, of course. As for AVROBIO that is very interesting, of course. It's not a matter of a concern or not. If it works is good for the patient so it's okay. Still needs to be shown for a longer duration and many more patients so time will tell. We saw what they published recently and let's see, it holds a going forward. Anything else? Earlier on the program is difficult for me to refer because they are very early. So nobody we know how to tell the future of course.

Right, exactly. Okay, well, that was all from me. I appreciate you answering all the questions.

Always, thank you. Anyone else, please.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day. You may all disconnect.