Protalix BioTherapeutics, Inc. (PLX) Q3 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to the Protalix BioTherapeutics Third Quarter 2022 Financial and Business Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce to your host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. Sir, you may begin your conference.

Thank you, operator, and welcome to the Protalix BioTherapeutics Third Quarter 2022 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the update was issued this morning and is available on the Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release and this teleconference include forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and on the Protalix filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Thank you, Chuck, and welcome, everyone, to our third quarter 2022 financial results and business update call. I will begin with a review of our progress and accomplishments over the quarter, along with our plans for the coming months. Following my remarks, Eyal will provide a more detailed review of our financial results, and we'll then open the line for questions. I'll begin with a significant milestone recently achieved, we are pleased to report that last week we, together with our development and commercialization partner, Chiesi Global Rare Disease, resubmitted the biologic license application or BLA to the U.S. FDA for PRX-102 for the proposed treatment of adults with Fabry disease. The data package contained in the BLA resubmission include, in addition to the Phase I, II studies, the final 2 years analysis of our Phase III BALANCE clinical trial and the final Phase III open-label BRIGHT study report. In addition, we have provided data from our long-term open-label extension studies. Achieving these milestone is a testament to the dedication of Protalix and Chiesi teams to delivering this potential new treatment to patients with Fabry disease, and we are grateful for their hard work and commitment to our program. We and Chiesi anticipate that the FDA will complete its review of the resubmission BLA within 6 months of [receipt]. With respect to the PRX MMA submitted to the European Medicine Agency, the EMA, earlier this year, the EMA is currently reviewing our application, our dialogue with the EMA is ongoing. As we approach year-end, Protalix is entering into an exciting time as we are moving closer to a potential approval of PRX-102 for the treatment of adult patients with Fabry disease. We believe that PRX-102 has significant potential for patients and families affected by Fabry disease, and we remain committed to continue collaboration with the FDA and EMEA to work towards our goal of successfully bringing this much needed treatment to the patients in need. Turning to our earlier-stage pipeline, we are continuing to develop additional programs expressed through our proprietary protein expression system prosthetics. PRX-115 is an over PEGylated uricase in development for treatment of severe gout. We are on track to initiate a first-in-human Phase I clinical study of PRX-115 in the first quarter of 2023. And the support for this first-in-human study, we are finalizing our toxicology package. In addition, we continue to make progress on PRX-119, a PEGylated recombinant human DNS1 protein designated, designed to elongate DNS half-life in circulation for treatment of NET-related diseases. We have conducted preclinical studies to demonstrate feasibility of PRX-119, and we look forward to providing updates on these 2 and other programs as we progress. Finally, our balance sheet provides us with sufficient cash runway to the fourth quarter of 2023, enough to support the company through the potential approval in addition to continuing to develop our early-stage pipeline programs. I will now turn to Eyal to review our financials. Eyal, go ahead.

Thank you, Dror, and thank you, everyone, for joining today's call. Let me please review our third quarter 2022 financials. The company recorded revenues from selling goods of $8.8 million during the 3 months ended September 30, 2022, an increase of $4.3 million or 96% compared to revenue of $4.5 million for the 3 months ended September 30, 2021, an increase of $3.4 million in sales to Pfizer resulting from timing difference and an increase of $2.4 million in sales to Chiesi was partially offset by a decrease of $1.5 million sales to Brazil resulting from timing differences. Revenue from license and R&D services for the 3 months ended September 30, 2022, were $5.4 million, a decrease of $2.1 million or 28% compared to the revenue of $7.5 million for the 3 months ended September 30, 2021. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi agreement. Cost of goods sold was $7.1 million for the 3 months ended September 30, 2022, an increase of $3.4 million or 91% from cost of goods sold of $3.7 million for the 3 months ended September 30, 2021. The increase in cost of goods sold was primarily the result of the increase in sales of goods. For the 3 months ended September 30, 2022, our total research and development expenses were approximately $7.4 million, comprised of approximately $4.9 million in subcontractor-related expenses, approximately $1.7 million of salary and related expenses, approximately $0.2 million on material related expenses and approximately $0.6 million of other expenses. For the 3 months ended September 30, 2021, our total research and development expenses were approximately $7.3 million comprised of approximately $4.8 million in subcontractor related expenses, approximately $1.6 million of salary and related expenses, approximately $0.1 million of material related expenses and approximately $0.8 million of other expenses. Total decrease in research and development expenses was $0.1 million or 1% for the 3 months ended September 30, 2022, compared to the 3 months ended September 30, 2021. Selling, general and administrative expenses were $2.8 million for the 3 months ended September 30, 2022, a decrease of $0.2 million or 7% compared to $3 million for the 3 months ended September 30, 2021. The decrease was primarily due to the decrease in salary-related and selling costs. Financial expenses net were $0.4 million for the 3 months ended September 30, 2022, compared to financial expenses net of $2.3 million for the 3 months ended September 30, 2021. The decrease result was primarily from lower interest and debt amortization costs due to a decrease in our outstanding notes from an aggregate principal amount of $57.92 million of 2021 notes to an aggregate principal amount of $28.75 million of 2024 notes and an increase in exchange rate of new Israeli shekel for U.S. dollars over the period. Cash, cash equivalents and short-term bank deposits were approximately $20.8 million at September 30, 2022. As Dror mentioned, we believe that our current financial position provides us with a sufficient cash runway through the first quarter -- the fourth quarter of 2023. I will now turn the call back to you, Dror.

Thank you. Sir, should we now open the floor for questions.

Yes, please.

[Operator Instructions] We have a first question from the line of Boobalan Pachaiyappan with H.C. Wainwright.

Can you hear me okay?

Yes.

Great. Congrats on the BLA submission. This is great news for Protalix shareholders. A couple of questions from us. So firstly, some investors are curious to know at what point you'll be able to share the full details of the agreement within Protalix and Chiesi with respect to PRX-102?

Eyal, would like to refer to that?

Yes. Given the agreement between the parties, we will not make the agreement public and the agreement is reducted for obviously legal reasons, and it will stay this way. As soon as they will hit the relevant milestones, whether it's going to be commercial, regulatory or the royalty, obviously, it's going to be disclosed as part of the financial reports or the relevant they required, if required PRs.

Okay, clear. All right. Understood. With respect to PRX-115, so I was wondering if you could talk about maybe on a preclinical level, what kind of efficacy are you seeing? And also, are you seeing any ADAs or undesired human response?

So I will say the following that I think that with the data that we have at present, we feel comfortable to continue, of course. And since uricase does not exist in the human body, we -- it's better that we will speak once we will have final results of the Phase I study with human beings, of course. This will be by far more substantial to discuss upon and not just to say things which are from preclinical studies. So the data that we have support and gives us the comfort to continue, of course. But to -- I don't want to put hopes before we get results from human beings that will hopefully participate and finalize the study as we plan. This will be far better.

Okay. Understood. And then maybe within PRX-115 -- speaking about PRX-115 competitive landscape. As you probably know Horizon has a drug, KRYSTEXXA, and there's also a company that we cover called Selecta Biosciences and they are currently in Phase III and the readout is expected in first quarter 2023. So I'm just curious how your PRX-115 gout program is differentiated from KRYSTEXXA and SEL-212?

So I think that once we see results, it will be by far more easier to explain where we see the differentiation. Clearly, the intent is not to develop a drug, which will be identical or any 2, the intent is to differentiate either through the frequency of the infusion and/or through immunogenicity. And before we -- I will say much more, and it's not -- because it's a big secret because it has to be based on data. And we prefer to base it on even early-stage clinical data from Phase I/II than on preclinical and science only.

[Operator Instructions] We have next question from the line of John Vandermosten with Zacks.

I wanted to start off with a question on Brazil. They recently had an election, which changed the government there. And I'm wondering if you might expect any differences due to that change, maybe a little bit more liberal demand for pharmaceutical products?

I don't foresee -- I don't think there will be any major changes at present. And this drug exists in Brazil for a couple of good years already. I don't foresee -- we don't -- we sell in competitive prices, of course, with compared to Sanofi and others. And I think, right now, we are fine. But we will see.

Okay. Very good. And then also on Pfizer's sales, do you know if they had any sales in Europe or not? I think we had discussed last -- on the previous call about the end of exclusivity for VPRIV. And I think that was August 30. Were they able to penetrate that -- the European market at all with the drug?

First, it's a question to Pfizer, but I'm not aware that they have launched in Europe as of yet.

Okay. Okay. And let's see -- and then I guess we've got -- I was going to ask about 115 and just the competitive environment there, and I think we already addressed that. I think it's about $1 billion market. Is there any kind of portion of the market that you're pursuing in particular? I mean, there's -- since there are already products there, it looks like it's being dominated by about 3. How do you see yourself fitting in into the current set of products that are available?

So I think, first, Chiesi is responsible for the marketing, of course. But we believe that in light of the safety, immunogenicity, the efficacy data, the 2 potential regimens, we have, if I may say, a good, even a very good alternative for the patients for all these aspects. And by the end of the day, it is a drug for the patient, the patients I mean. And I think -- I hope that Chiesi will do a good job and they are clearly taking care of it and preparing themselves well, and we will do fair on the market.

And then on Chiesi and the --

Combination. Good combination of the safety, the immunogenicity, the efficacy data, the robustness of the program. And of course, the potential 2 regimens is a very good alternative, potentially, of course.

Great. Yes. I guess we'll keep an eye out for that Phase I data. And just on that Phase I data from 115, I guess we would expect that to come out somewhere around midyear next year. Does that sound about right?

I believe it's something like -- it's about 12 months from the initiation of the study. I assume end of next year, beginning of Q1 the year after. I mean, speak about the final results.

Okay. Maybe we have like some kind of top line prior to that, just to get a sense of --

We would see along the way.

Okay. And then just the last 1 for me on Chiesi's rare disease subsidiary here, and I guess -- I think it's in Boston, right? Have they started marketing any products yet? And I'm just wondering kind of where they are in terms of ramping that up. I know that there are some other products, some of the rare disease products that are still in development, but I wasn't quite sure where they are in terms of commercialization activities. How are they looking on that side of things?

So Chiesi, no, they have established rare disease division already a couple of years ago. They bought a couple of rare disease assets, so they have, I think, a couple of drugs on the market. Actually, they have their own site, of course. It's not a secret. And right now, for the last year, I believe there are -- since we were supposed to get approval in the U.S., but also in Europe today, they are ready to go. So we have full teams preparing themselves and actually ready for launch, hopefully.

Okay. All right. Well, congratulations on the BLA submission and look forward to hearing good news back from the FDA and EMA in the near term.

Thank you. Looking forward to that.

[Operator Instructions] As there are no further questions from the participants, I would now like to turn the call back over to Dror Bashan President and CEO for closing remarks. Over to you, sir.

Thank you. So thanks, again, everybody, for joining our call, and looking forward to speak with you next time. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.