Protalix BioTherapeutics, Inc. (PLX) Q4 2019 Earnings Report, Transcript and Summary

Greetings and welcome to the Protalix Biopharmaceuticals reports Fourth Quarter and Full-Year 2019 Financial and Business Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Monique Kosse, Investor Relations at LifeSci Advisors. Thank you. You may begin.

Thank you, operator, and welcome everyone. Thank you for joining us today for a discussion of Protalix's fourth quarter and full-year 2019 financial results. Leading the call today will be Dror Bashan, President and Chief Executive Officer of Protalix. He will joined by Eyal Rubin, Chief Financial Officer of Protalix. Before we begin, I would like to remind everyone that various statements made during this call will include forward-looking statements for the purposes of a Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those regarding the company's future plans, prospects and strategy, financial goals and guidance, product attributes and pipeline, drivers of growth, expectations regarding reimbursement, and other statements that are not historical facts. Management's assumptions, expectations, and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause the actual results and/or performance to differ materially from any future results performance or achievements discussed in or implied by such forward-looking statements. And the company can give no assurance, they will prove to be correct and will not provide any further guidance or updates on the company's performance during the quarter unless they do so in a public forum. Please refer to the company's March 12, 2020, press release and the Risk Factors included in the company's filings with the SEC for a discussion of the important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. Prior to this call, the company issued a press release announcing its financial results for the fourth quarter and full-year 2019 results. A copy of the release can be found on the Investor Relations page of the company's website. With that, I will now turn the call over to Dror Bashan, President and CEO of Protalix. Dror?

Thank you. So good morning and thank you for joining us today to review the company's fourth quarter and year-end 2019 operations and recent highlights. During this call, I will provide an update on the clinical and corporate progress. And then I will ask our CFO, Eyal Rubin, to review the company's financials before opening the lines for questions. So 2019 has been a pivotal year for Protalix, as we successfully expanded on the company's strong foundation, grew our team, and entered into new phase of development as a world-class recombinant therapeutic company. We're excited to continue our forward momentum through to 2020, towards commercialization of our Fabry program, and we believe Protalix is positioned for both near and longer term success. We're extremely enthusiastic about the lead program PRX-102, with three fully enrolled Phase III clinical trials ongoing. We believe, we have a robust clinical program in the industry and for the treatment of Fabry and very significantly we anticipate to file a BLA submission to the USFDA for the coming quarter. Furthermore, we anticipate final results of our BRIDGE and BRIGHT trials in the first and second half of 2020 respectively, which will further support our portfolio and evidence around PRX-102. Protalix is putting pressures and firing in all cylinders right now and the energy among the entire staff reached new highs for 2019. 2020 is shaping up to be a banner year for the company. We look forward to advancing our clinical pipeline, expanding our sales in Brazil for the Elelyso treatment for the Gaucher disease, and leveraging commercial opportunity to expand our global footprint in the treatment of Fabry disease. I would like to review some of our major accomplishment over the last year, beginning of course with this morning announced financing. Today's announcement of 47 points -- $43.7 million tied from some of the leading investors in Israel and U.S. underlines Protalix's commitments to bringing important treatment to the Fabry patient community. Our ability to secure this transaction under some of the most challenging market condition in over a decade is a strong indication for the deep interest in our technology and platform and serves as validation that our years of work with the Fabry community remains significant continued importance to these patients. The additional capital will help us to progress our multiple ongoing clinical trials towards completion as well as to further develop our early-stage pipeline and serves to further reinforce our strong foundation as we look to another truly transformational year for Protalix. As we announced earlier this quarter with our commercialization partner, Chiesi, we received an agreement letter from the FDA for Initial Pediatric Study Plan for PRX-102 for the treatment of Fabry disease which outlines an approach for PRX-102 to address the needs of Pediatric Fabry patients. We plan to submit the BLA for PRX-102 via the FDA accelerated approval pathway next month, based on data from the completed Phase I/II clinical trials of PRX-102, and ongoing Phase III BRIDGE clinical trial. Earlier this year, we announced positive 12-months interim on-treatment data in the BRIDGE study. This demonstrates an important improvement in kidney function in patients who have switched from Replagal into PRX-102. This doesn't help to support the expected BLA filing on the Accelerated Approval. We have completed enrollment in the BALANCE study, our head-to-head Phase III trial of PRX-102 for the treatment for Fabry disease. This evaluates the safety and efficacy of PRX-102 compared to Fabrazyme on the renal function in Fabry patients. Today it's more than 66 patients are being treated in our extension studies after opting to continue treatment without further PRX-102. We have also completed enrolment in our Phase III BRIGHT trial of PRX-102. This is an open-label switch over study to assist Fabry patients previously treated with either Fabrazyme or Replagal and preliminary data showed PRX-102 administered over every four weeks results continues active enzymes throughout the entire infusion interval. This could be a significant benefit to patients as infused in every two weeks in the current standards and discounted standard of care. Today, substantially all patients that were enrolled in this study remain on the four weeks dosing regimen, and we are continuing treatment under the four weeks dosing regimen in long-term extension study. Finally, in 2019, we were able to grow our team and Board significantly; my own appointment to President and CEO and Director in May was followed by the appointment of Mr. Eyal Rubin as Senior Vice President and CFO in July 2019. And shortly thereafter, our Board of Directors unanimously elected Zeev Bronfeld as Chairman of the Board. And only, recently in December 2019, Protalix added the accomplished Pol Boudes, and Gwen Melincoff to our Board. I'm very proud of our entire team's commitment to the potential of Protalix. Despite years of current enzyme replacement treatment, there still remains an unmet medical need in the Fabry patients who continue to show progression in loss of kidney function. An accelerated approval of PRX-102 would bring hope to these patients much quicker and that is the goal we all work towards every day. I will now turn the call to Eyal to review the financials.

So thank you, Dror, and thank you everyone for joining today's call. I would like to begin the financial updates by congratulating the team on the completion of the recent financing. As announced in our press release this morning, Protalix successfully secured funding agreements to raise a $43.7 million through a PIPE financing by number of the household names leading Israel and U.S. based investors including Psagot Investment House, More Investment House, Highbridge Capital, UBS O'Connor, Rosalind Capital, and Alrov Properties and Lodging, among others. Rosario Capital and Houlihan Lokey served as financial advisors on this PIPE transaction. Net proceeds from the financing will be used to advance our clinical programs and the commercialization of PRX-102 for the treatment of Fabry disease as well as to further develop our early-stage pipeline therapeutics and for general corporate purposes. Protalix will issue and sell the purchase an aggregate of 17.6 unregistered shares of our common stock at a price of $2.485 per share. We generated gross profit equal to approximately $43.7 million in this private placement. Each share issued was accomplished with the warrants to purchase one share over common stock or the one shares at an exercise price equal to $2.36. The final thing is further described in the Form 8-K which was filed earlier today and in the Securities Purchase Agreement attached to the Form 8-K. Before getting into the 2019 numbers, I will also mention that in December of 2019, we announced that the Protalix held a special meeting of stockholders to propose the following two critical financial amendments which stockholders ultimately approved a reverse stock split 1-for-10 and a reduction in the total number of shares of the company's common stock that Protalix is authorized to issue from 350 million to 120 million shares. We thank our stockholders for this important vote and for the continued support of Protalix despite the challenging times in the markets. For the year ending December 31, 2019, Protalix record revenue from selling of goods of $15.9 million, an increase of $6.9 million or 77% compared to revenue of $9 million for the same period in 2018. The increase is primarily due to the higher sales of Elelyso in Brazil as well as the increase in sales of drug substance to Pfizer. R&D expenses net were $44.6 million, an increase of $11.3 million or 34%, compared to $33.3 million for the same period of 2018. The increase results primarily from an increase of $9.1 million in the clinical trial related cost as well as a decrease of $2.1 million in grants received from the Israeli Innovation Authority. SG&A expenses were $9.9 million, a decrease of $1 million or 9% compared to $10.9 million for the same-period in 2018. The decrease is also primarily from costs related to the company's U.S. Exclusive License and Supply Agreement that the company entered into in 2018, with Chiesi, our partner which were not incurred in 2019. Net loss for the year was $18.3 million or $1.23 per share, basic and diluted compared to a net loss of $26.5 million or $1.8 per share basic and diluted for the same period in 2018. At December 31, the company had $17.8 million in cash and cash equivalents. I will now turn the call back to Dror.

Thanks, Eyal. So we continue to progress as a worldwide -- as a world-class company and 2019 was transformational from Protalix. And I have to take this moment and thank the many Fabry patients and investigators and other stakeholders in our three pivotal trials around the world, our tremendous scientific and technical stuff for their dedication and efforts and our shareholders for the patience and support. Thank you again. With that, I will now turn the call back to the operator and we will open the call for questions from the audience.

Thank you. Ladies and gentlemen, we will now be conducting the question-and-answer session. [Operator Instructions]. Our first question comes from the line of Ram Selvaraju with H.C. Wainwright. Please proceed with your question.

Hi, this is Boobalan dialing in for Ram Selvaraju and thanks for taking my question. So I wanted to start off a little bit to get to know more about Chiesi experience and is Chiesi facing any business operation disruptions due to the coronavirus in Italy?

So first, thank you for the question. I think I will take the opportunity and wish everybody not only who is listening to us, but everyone you know the best health possible of course and for them for their families this is very important. The coronavirus is worldwide and there is a pretty significant heap in Italy. As for Protalix, we don't see any reason because it's -- it is in Italy, Protalix, manufacture the product, Protalix runs the clinical trial. So actually, I think many of the employees of Chiesi which of course exist and working in a very successful company. In Italy, I think many of them work from home. So there is no harm and there are ongoing discussions. So it's true that they're not coming to, let's say to Tel Aviv to meet with us. But we are conducting on a daily basis discussions over video conferences or TCs et cetera. So we don't see any let's say effect on the ongoing activities of Protalix ahead of submissions or clinical trials. Moreover, we are looking, of course to make sure and we have stocks, of course in the different sites globally whether three clinical trials are ongoing to have enough material for the patients of course to make sure and we do anything with any effort of course to make sure it will continue as planned.

Okay. So moving on, has the FDA indicated to you that it will only accept the BLA for review once the BRIDGE top-line data becomes available in mid-2020?

We expect to, if I heard you well, we expect to have the outcomes of the top-lines of the BRIDGE 20 patients after 12 months by April of 2020 which is a month from today.

Okay. And it reflects to the potential launch of PRX-102 in the United States. I'm curious like, what is the strategy to take the market share from competitors such as Fabrazyme and do you have any details in pricing?

So, as you probably know the sales and marketing rise was Chiesi. They are working in the last couple of quarters to establish and already made an effort and made an investment of course to establish a certain marketing platform on the ground both in the U.S. and the EU. They also bought a couple of assets in the rare disease area. And I think it is under their hand. And if I don't want to discuss, if I may say pricing because I don't have the data right now. This is in a nutshell. We believe that the outcomes of the BRIDGE, the BRIGHT, the mechanism of action are such that if indeed we get approval by the end of this year as planned and we get on the market next year, we would be able to start to take market share from either new diagnosed patients or from the current commercial products. To tell you exactly how much market share and how exactly it will be done I'm not right now for the information if I'm missing. But I can assure you that the team is on the ground both in the U.S. and in the EU is experienced. It comes from let's say the usual suspects, if I may say, and many, many hundreds of years of experience combined of course in each of the continent to establish a very good sales and marketing team.

Understood. And what are the current expectations for Elelyso revenue from Brazil?

Can you repeat the question? I could not hear. I don't hear you well. I'm sorry.

What are the current expectations for Elelyso revenue from Brazil?

So in 2019, we reported $9.1 million of sales, we expect a growth of about 10% to 15% year-over-year for the next couple of years. I don't know what would happen in five years of course, it would be, I think, less responsible to say. This is by patients we see, as I mentioned, I think in the previous calls high alignment between the number of device and the orders and the number of the patients, we already have something that goes something like around 25% of the treated patients in Brazil or treated Gaucher patients in Brazil. We expect it to grow again about 10%, 15% year-over-year in the next couple of years.

Understood. And any update on the business development activities with respect to OPRX-106 from PRX-110?

At present, I don't have news on that. We are, as I mentioned, we have engaged and we actually finalize the project, these days we have engaged with a scientific advisory firm a couple of months ago, they've reviewed our capabilities, technology, pipeline, structure, et cetera. We are reviewing it with our management and board. We know that if I make a refine the strategy or way going forward for the next say a few years and we will come out opening to the market soon about it. As part of it will be of course, this is what we do with 110, or 106 or each of the molecules that we have in our pipeline.

Okay. And one final question if I may has the company made any progress in potentially monetizing the protein manufacturing technology platform?

I mean all I can say that we're working on potential collaborations right now based on our platform this actually expressing protein top-line sales.

Thank you. Our next question comes from the line of Peter Welford with Jefferies. Please proceed with your question.

Hi, thanks for taking my questions. I've got three please. And firstly, just with regard to sorry I will come back to this but the COVID-19 situation. I appreciate that obviously your manufacturing any trial could be affected by this but just on the point of view of the clinical trials, I guess could you give us some sort of visibility in terms of the patient follow-up, because obviously all your patients are enrolled now, which is a good thing in the sense that you're not trying to get new patients. But equally, I guess now therefore, you've got all those patients in the study, it's important that you're still able to follow those patients up and you don't have the flexibility at this point now to change sites or reallocate clinicians. So I’m wondering if you could give us some update as far as procedures you put in place or plans to be able to ensure follow-up can be completed, so that trials can be completed successfully. And secondly, then just on the financials, obviously, very good in doing the capital raise. Can you give us some sort of outlook maybe for cash burn this year and apologies if you said this at the start of the call, or some sort of guide as to how we should be thinking about the run rate of OpEx during the course of this year? And then just finally then on with regards to the Chiesi, could you just outline for us about when the first milestone or remind us rather when the first milestone will come from Chiesi and what triggered that milestone? Thank you.

So, thank you. I will address the first one. The first question [indiscernible] we are working closely with Chiesi which is actually our vendor to run the clinical trial. In order to see that we are prepared adequately of course to the extent possible to maintain the clinical trial and continue them. It could be either by home visits, supporting with patients to come to the hospitals once in two weeks for their infusion. We hold all kinds of preparation discussions. We make sure that we have enough of course material either our drug or Fabrazyme on sites. So as far as we know, as of today, it looks the things are going well. I assume this is, if I may say a general point for all clinical trials or probably about hundred, if not thousands of clinical trials globally. We do take if I make say extreme measurements to ensure to the best that we can that these clinical trials inclusive of the extensions will be continued as claimed. This is one. So I will take the second question if you don't mind Eyal will answer you. So maybe Eyal you will take the third one.

Of course. So thank you Peter for joining this call. With regard to the burn rates as in previous year, we anticipate that at least the first half unless something unexpected will happen and in this crazy market you can never anticipate or project, but we will keep the $7.5 million net burn rate for the first half of the year obviously, as we go deeper and deeper into the trials and extension since are fully funded by Chiesi. So our net burn rate is going to decrease. So we should expect a decrease in the second half of this year. With the final thing and the expected cash flow projections, we believe that the secured financing will keep us in the year for the next few years based on our internal plans and budget.

But Peter I would like to add that I think by securing this say close to $44 million with the cash we have in hand as we reported to the extent that I can foresee of course, we are -- we have enough cash or secured enough cash to continue and walk, if I may say in piece, if I may say, until at least the minimum without doing anything else at the end and the final result of the BALANCE study, which is actually supposed to be by Q1, I believe 2022 and I assume that you do not expect me just to sit on my hands. So I hope there will be more to do, I hope we will be able to cut and collaborate with sales policies on our technology and do other things for this to be followed, of course.

So just to be clear I guess this is my third question, the sufficient funds for two years that presumably excludes a milestone from Chiesi which I think we should get on U.S. approval assuming that happens around the end of this year or early next year?

Yes. So with regard to your third question about the milestones, so the FDA approval obviously triggers the milestone. The interim analysis also triggers one obviously we cannot disclose the figures. But as you rightfully so said, this is going to be a triggering event for getting those milestones from Chiesi.

Understood. Thank you.

Thank you.

But Peter just to emphasize maybe I did not understand fully your question even with just by the money that we have raised and we have in cash, without these additional milestone not that we're not expecting them, don't get me wrong of course we are secured until the end of our Fabry program and I think it's achievement by its own.

Yes, understood. That's absolutely fair. I just wanted to make clear that was -- that was what you are referring; yes the cash is sufficient beyond the first quarter 2022 balance excluding any milestones, so the milestones then should extend that run might beyond that?

Yes sir. Any further questions?

It appears we have no additional questions at this time. So I would like to pass the floor back over to management for any additional concluding comments.

Okay. So, again thank you very much everybody and I wish everybody the best health and meeting you again next quarter.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. Again we thank you for your participation and you may disconnect your lines at this time.