PolyPid Ltd. (PYPD) Q3 2020 Earnings Report, Transcript and Summary

Good afternoon and thank you for standing by. Welcome to today's PolyPid Third Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] You must also advised this meeting is being recorded today Wednesday 11, November, 2020. And I'd now like to hand the meeting over to your speakers today. Please go ahead.

Thank you for participating in PolyPid third quarter 2020 earnings conference call. Joining me on the call today will be Amir Weisberg, Chief Executive Officer of PolyPid; and Dikla Czaczkes Akselbrad, Executive Vice President and Chief Financial Officer. Earlier today, PolyPid released financial results for the three and six months ended September 30, 2020. A copy of the press release is available on the Investors section on the Company's website, www.polypid.com. I'd like to remind you that on this call, management will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projections. These statements involve materials, risks, and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not take undue reliance on these statements. I encourage you to review the Company's filings with the Securities and Exchange Commission, including without limitation, the Company's form F1 and 6-K, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. PolyPid disclaims any intention or obligation, except required by law to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. This conference call contains time sensitive information and speaks only as a live broadcast today, November 11, 2020. With that completion of those prepared remarks, it's my pleasure to turn the call over to Amir Weisberg, CEO.

Thank you, Bob. On behalf of our team at PolyPid, I would like to welcome everyone to our third quarter 2020 earnings call. I will begin today with some brief introductory comments. And then Dikla will provide detail updates on our business and will review our financial results, after which we will open the call for questions. I am extremely pleased with the recent progress we have achieved in advancing our development program and in continuing our evolution toward becoming a commercial company. As you know, we are currently in Phase 3 with our lead asset D-PLEX 100 for the prevention of surgical site infection, or SSI. Dikla will provide further details on this program shortly. I'm excited to report today that our ongoing SHIELD I trial proceeding as planned, and we are having great success in adding new clinical centers for our trial. This is the first of our two plan Phase III clinical trials in soft tissue surgery. We are also preparing to conduct our second Phase III trial in abdominal surgery, SHIELD II which we expect initiates before the end of this year. Importantly, this two phase III trial will serve as a basis for PolyPid first new drug application of NDA submission and we believe will contribute to support the broad level for the prevention of SSI. Beyond our lead indication, we also have ongoing clinical development program for D-PLEX 100 for the prevention of SSI in bone tissue, such as the sternum in open heart surgery. In addition, our promising ONCO PLEX local inter-terminal therapy per clinical program continues to generate promising early results. Dikla will also provide updates on these two programs shortly. As you can see, PolyPid has a robust ongoing development program for our innovative PLEX technology. Our aggressive R&D initiatives are supported by a strong balance sheet, which we expect to be sufficient to complete the SHIELD I study and to initiate and conduct SHIELD II as well as prepare for the submission of an NDA to the FDA. I will now turn the call over to Dikla to provide you with some further details on our business. Dikla, please take it from here.

Thank you, Amir. And thank you all again for joining us on the call. I would like to begin with a brief discussion on the status of our pipeline. Following the enrollment of our first patient in the SHIELD I trial in July, we have continued to open clinical trials centers at an impressive pace. In fact, in just a few months since the enrollment of the first patient in the study, over 50% of the planned 60 centers have already received IRB approval, and the vast majority of these sites are now open to enrollment. As a reminder, our plan is to enroll 600 to 900 patient within 60 centers in the US, EU and Israel. Following the enrollment of 500 patients, the study design provide for a blinded sample size re estimation based on the overall infection rate observed in the study. We continue to anticipate the top line result from SHIELD I will be available in the second half of 2021. We also expect that the initiation of our second abdominal surgery study, SHIELD II, which will have a broader eligibility criteria including minimally invasive surgical procedure will occur before year end. This second trial will enroll approximately 900 to 1,400 patients across the same number of centers. We have contracted with leading CRO to support this study, and they've already engaged with a number of centers globally to participate in the trial. We are very excited about the important progress we have achieved in advancing our pivotal development program for D-PLEX 100 in abdominal surgeries and we look forward to providing investors and analysts with an update once the first 100 patient have been enrolled in SHIELD I study. While the operating environment for conducting clinical trials continues to evolve due to the ongoing global COVID-19 pandemic, it is important to note that we can reasonably expect that over 70% of the colorectal resection surgery patients to be enrolled into these two clinical trials will have cancer diagnosis. In our previous Phase II study in 200 patients, 74% of enrolled patient had colorectal cancer. Therefore, these will be deemed high priority surgical procedures in hospital. From a commercial perspective, in order to maximize our commercial success in the US, we have began to establish our own footprint in US to initiate commercial preparation activities, while also exploring potential partnering opportunities with leading pharmaceutical companies. In the US, we are beginning work around branding, packaging, and distributing, conducting market research on the current landscape and significant unmet need for the prevention of SSI. And it started to establish our team in the US to support the anticipated commercial launch of the product. In Europe, we are currently evaluating commercial strategic partners to maximize the future commercial value of D-PLEX 100 in this market. As we have said in the past, a significant commercial opportunity exists for the prevention of SSI. Based on industry data out of 30 million hospital inpatient surgical procedures conducted in the US in 2016, there are around 14 million procedures or about 45% of all inpatient procedures defined as our target market. These are major surgical procedure with the high risk of SSI, such as those in soft tissue for open abdominal procedure, as well as those in orthopedic or cardiac procedure, where SSI often leads to disabling and sometimes even life threatening complications. For the prevention of SSI in bone tissue, we intend to evaluate next clinical steps for an open heart surgery Phase III trial in the first half of 2021, which will allow us time to ensure SHIELD II is progressing as planned. As a reminder, in our randomized phase I V2 trial of 81 patients having open heart surgery, there were no infection in the 58 patient treated with D-PLEX 100 compared to 4.3% infection rate in the standard of care arm. We focused on bone tissue due to the high risk of morbidity and mortality in cases of deep surgical site infection in these procedures. We initiated our Phase B bone model trial in open heart surgery earlier this year, and intend to submit the data is a supplement to the abdominal soft tissue surgery NDA submission. This trial will enroll 1,300 to 1,600 patient in 45 centers across the US, EU and Israel. Both abdominal and bone tissue surgery pose significant threat of SSIs for hospital. Patients developing infections following surgery very often incur prolonged length of stays, readmissions, and when did infection occur, increased rate of re-operation. In cases with more superficial infection additional cost for debridement wound cleaning, negative pressure wound therapy and other medical treatments are often incurred. Moreover, since infection rates and readmissions are used by CMS as one of the quality measures in setting a hospital reimbursement level, high infection rates can negatively impact the overall payment rates by CMS to the hospital. For example, in 2019 Medicare penalized the New York Presbyterian/Weill Cornell Medical Center with more than $9 million in penalties tied to the hospital acquired infection reduction HSE program and readmission reduction, HRRT program that include the SSI metric. These types of penalties can have a significant impact on a hospital's total budget. As Amir said, we're also very excited about the potential of our pipeline candidate ONCO PLEX, which is an intertumoral chemotherapy currently in preclinical stage. By the end of this year, we expect the availability of preclinical data for this compelling opportunity. In addition, we plan at the time to be in a position to provide anticipated timeline for a planned pre investigational NDA meeting with the FDA and for the initiation of the first human study. Moving on to the balance sheet; as of September 30, 2020, the company had cash, cash equivalents and short term deposit of $71.8 million as compared to $26.6 million as of December 31, 2019. Cash used in operations for the first nine months of 2020 total $16.8 million. To reiterate what Amir said, we believe our strong cash position will allow us to complete our first Phase 3 trials SHIELD I in abdominal soft tissue infection to initiate and conduct the second abdominal surgery study SHIELD II and to prepare for the submission of an NDA. Now, let's turn to our income statement. R&D expenses for the three months ended September 30, 2020 were $4.2 million, compared to $3.8 million in the same three months period of last year. As spending increased due to the initiation of the Phase 3 SHIELD I clinical trial and preparation for the phase 3 SHIELD II clinical trial. G&A expenses for the three months ended September 30, 2020 were $2.2 million, compared to $1.2 million for the same period of last year. Cost increased as we became a publicly traded company with higher D&O insurance costs, and we also had an increase in non cash share based compensation. For the three months ended September 30, 2020, the company had a net loss attributable to ordinary shares of $6.5 million, compared to net loss of $2.1 million in the three months period ended September 30, 2019. We will now open the call to your question. Operator?

[Operator Instructions] Your first question is from the line of Gary Nachman of BMO Capital Markets.

Hi, guys. Good morning. So the first abdominal phase 3, you've had good progress activating sites, but how long to get to the full 60 target that you've highlighted? And then will you consider fewer sites, if it becomes more challenging to activate them? And have you been enrolling your target of around 1.5 patients per month per site? How's that been going?

So, good morning, Gary. And thank you for that. If you recall in our previous call, we've discussed the fact that we expect that by between quarters we will be opening 50% of the centers. And this has worked very well for us. And we're very pleased that we just, in four month time we have over 30 centers globally in the US, EU and Israel that have already received IRB approval and our assumption is this will become easier as we go because you can imagine this they're not starting the other but all the other are in the process. So they should be coming as we go along. We indicated that we assume that the rate of recruitment which will be between 1.5 patients per month center, we are not considering at this stage opening less centers. And the reason is that we want to be ready if there is any change in the environment due to COVID-19. Any specific hospital closing their surgery department for a period of time giving space for COVID patient. So we are still going to open the 60. And up until today, we haven't seen any reason to change it or any problem with it due to the Covid. With regards to the recruitment, base of recruitment of patient as we said with the next time we are going to update -- will be when we reach the first 100 and our assumption is that it will be early next year to that 2021 early 2021.

Okay, so the sample size we estimation. Did you want to answer something, Amir?

No, jus to say that until now it looks good. And we believe that this 65 center can support us if something will happen with the COVID-19. But until now everything is perfect.

Okay, and so the sample size estimation that should still be in the middle of next year, around July timeframe. You said data in the second half. But sounds like you're on track for the re-estimation mid year.

You are right.

Okay. And then for the second abdominal phase 3, if it's more minimally invasive procedures, how much might that be delayed by the whole COVID situation? How can you potentially get around that and could you have data on that study later next year, or would more likely be into 2022?

So this trial is going to start in the coming two weeks just before within the less than a half less than that. And so you can imagine that a lot of work for initiation is already done. And we are feeling comfortable about this trial. The fact that there are more minimally invasive still over 70% of the patient will be cancer patient. So still although in some cases, there is a possibility to do the surgery, laparoscopy manner, still those are cancer patients. So those are super high priority surgery. And we do see at the moment, and we don't perceive for the coming few months, that these have deemed high priority surgery will be delayed. So again, we did give a gap between the two trials. So we started the first SHIELD on the second -- at the beginning of the third quarter just to right. And we are now starting the second one and we are holding off on this turnout trial to make sure all each trial is up and running and all the centers are in place. But for now, we don't see any reason that those will be delayed because those are -- these are still similar population in terms of the reason for surgery. With regard to your question regarding readout, so not to -- it doesn't have anything to do with COVID-19. The fact that this is a more balanced trial in terms of minimally invasive versus open and a larger trial in size between 100 to 1,400 and post -- it want -- the read out will not be next year. It will be 2022 and it has nothing to do -- this was our plan to start with service quality didn't change here anything.

Okay. And then lastly, I think, Amir, in your opening remarks, you said that with these two initial phase 3 studies, you could submit and that should be enough for a broad label but that would just be in soft tissue, right to have a broader label in bone, you would need to then submit the sternum study as a supplemental filing. Just want to confirm it.

Correct.

Your next request is from the line of Balaji Prasad of Barclays.

Hi, good morning, and thanks for taking the questions. Just a couple more from me. Firstly on, can you update us on the developments on the commercial build outside? And how do you see that impacting either OpEx or cash runway, if it's materially different forces you earlier communication. And maybe that's also a good segue to discuss the current cash balance and the runway provides for you with your various activities. Thanks.

Thanks Balaji. Good morning and good to speak with you. So with regard to US separation, so we are increasing it slightly, it's not going to be-- it's going to be instead of the one person that was there, where we are looking to have three person there. So it's not going to impact our cash flow. But we are having the ability to do some more infrastructure work with regards to commercialization. We've mentioned in today's press release, some points regarding health economics, branding, packaging, things that needs a bit more runway in order to reach to the point of commercial NDA with all the right data. So we don't envision this changing in any way our runway. And with regards to cash position, again, as we said, since the earlier this year, we expect our cash to be sufficient into 2022.

Great, and on your ONCO PLEX program. So you're planning to meet the FDA at the end of the year is that right understanding? And so if so, with the pre investigational NDA meeting from their till, so what's the gap or duration before you start trials on oncology side.

So you understand it almost correctly, we like to get by the end of this year since this program was an early stage program as we were going public, there wasn't much valuable information to investor. And by the end of this year, we will be in a position to share much more data in the form of preclinical data, some characteristic of the ONCO PLEX product; everyone is trying to -- NDA and to first demand. So it's not yet -- before the end of this year, the meeting, but rather a timeline for that. And we do expect that we should be in a position that next year we will have an IND meeting with the FDA, pre IND sorry, of course so.

Your next question is from the line of Elliot Wilbur from Raymond James.

Hi, good morning, good afternoon, Ami and Dikla. Wanted to ask a follow up question to your earlier commentary, Dikla, around the update in SHIELD I with respect to the 100 patient enrollment milestone. I just wanted to confirm that that in fact is just going to be an update in terms of when you hit that enrollment point. And we're not actually going to see any associated data with that update.

You are correct. We wanted -- because the operating environment and around COVID and some companies experiencing delays. We are not in this position but we wanted to make sure investors have an ongoing insight to the progress in terms the operating progress and this is why today we've updated that over 50% of the centers have received IRB approval in just four months from first month. And we are the next point that we will be updating once we hit, as you said, one -- the first 100, so investor can see that we are in line with our expectation.

Okay, so the follow up to that, just in terms of thinking about the overall efficiency of the program, do you have a sense yet of what the expected overlap would be in terms of participating centers between SHIELD II two and SHIELD I?

That's a good point. We do expect that there will be some overlap, but it's hard for us to say at this point. But we do see that, we already see centers that we were at some point thinking about them for SHIELD I but then decided more appropriate in terms of the patient population to be for SHIELD II and already converted them. So this is very helpful for us. And hopefully, this will shorten timeline for SHIELD II but it's still early before we actually start and can update after a pointer to where the situation is -- but obviously, once that SHIELD I will finalize recruiting, we will be able to convert all of those centers.

Okay, then with respect to SHIELD II, obviously, I presume the primary endpoints will be identical with that of SHIELD I. But are there any noteworthy differences in terms of secondary endpoints between SHIELD II and SHIELD I?

No, their primary and secondary endpoints are quite similar. And they are quite similar to what we had in phase 2 that we've published exactly a year ago.

Okay. And then final question just shifting more to the commercial front. Just to get maybe your high level thoughts on the timeline for and sort of range of possibilities around European partnership? I guess my assumption would be that you, at least at this point, you would strongly prefer a pan European partnership. But I wouldn't also expect to be finalized probably until we saw some initial data, at least from SHIELD I or maybe at the earliest, at the sample size re-estimation. So just wondering if that's consistent with your thinking or if you think maybe that actually we could see something before that initial clinical data point. Thanks.

Thanks Elliot. Of course, we cannot relate specifically to timeline especially when it comes to commercialization because those are vary from company to company, from negotiation to negotiation, from products to products, but what we can say that we are continuing with our strategy that we reiterate for quite some time regarding having our own footprint in the US and still initiate commercial preparation activity while also exploring potential partnering opportunities with leading pharmaceutical companies and with the European authority and geography as well as the rest of the world. We are evaluating commercial strategic partners. We think the D-PLEX has a very good market value opportunity, industrial [Indiscernible], and this is the feedback that we are getting, but it's very hard to give timeline on that. It could only create the expectation that we do not want to be either a meeting or on meeting, what we can say that we are very happy with the process today.

Thank you. There are currently no further questions, please continue.

Thank you for joining our third quarter of 2020 earnings conference call. I would like to emphasize how excited we are about the progress we have achieved today, as well as the company's long term prospect. We are grateful to our team members and all of our external partners for their commitment to our mission, and then collaboration to ensure we continue to progress toward achieving our goal of building D-PLEX 100 to help healthcare provider and a patient as soon as possible.

Thank you. With that we conclude the presentation. Thank you for participating.