PolyPid Ltd. (NASDAQ:PYPD) Q3 2024 Earnings Call Transcript

PolyPid Ltd. (NASDAQ:PYPD) Q3 2024 Earnings Call Transcript November 13, 2024

Operator: Greetings, and welcome to the PolyPid Third Quarter 2024 Conference Call. [Operator Instructions] As a reminder, this call is recorded. And I would now like to introduce your host for today’s conference, Brian Ritchie from LifeSci Advisors. Mr. Ritchie, you may begin.

Brian Ritchie: Thank you all or participating in PolyPid’s third quarter 2024 earnings conference call. Joining me on the call today will be Dikla Czaczkes Akselbrad, Chief Executive Officer of PolyPid; Jonny Missulawin, PolyPid’s Chief Financial Officer; and Ori Warshavsky, Chief Operating Officer U.S. of PolyPid. Earlier today, PolyPid released its financial results for the three and nine months ended September 30, 2024. A copy of the press release is available in 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. For example, management is making forward-looking statements when it discusses the potential benefits of D-PLEX100, the expected timing for patient recruitment, top line results from the SHIELD II trial and of the unblinded interim analysis, the expected SHIELD II infection rate, the company’s expected cash runway and the potential to secure additional funds if all the warrants issued in both of the company’s most recent private placement financings are exercised.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks described from time to time in our SEC filings. The company’s results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place 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 annual report on Form 20-F, 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 as 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 of the live broadcast today, November 13, 2024. With the completion of those prepared remarks, it’s my pleasure to turn the call over to Dikla Czaczkes Akselbrad, CEO of PolyPid. Dikla?

Dikla Czaczkes Akselbrad: Thank you, Brian. On behalf of our team at PolyPid, I would like to welcome everyone to our third quarter 2024 earnings conference call. We are very pleased with the recent critical advancements in our business, most notably as it relates to the significant acceleration in enrollment in our ongoing SHIELD II pivotal trial for D-PLEX100 for the prevention of abdominal colorectal surgical site infections. Moreover, we are operating from a position of financial strength as we are funded beyond the upcoming interim analysis and into 2026 if all the warrants issued in both of our most recent private placement financing are exercised. We will further discuss our cash runway shortly, but I’d like to begin with the status of SHIELD II.

We recently announced that the study enrolled the last patient required to conduct the planned unblinded interim analysis. We will have the outcome of the analysis during the current quarter now that the 30-days follow-up assessment for the last patient has been completed. As a reminder, the unblinded interim analysis may allow for early trial conclusion due to positive efficacy, continuation to planned patient recruitment which is up to 630 subjects, sample size reassessment or futility. I’m pleased to report today that the study has now enrolled approximately 550 subjects, and approximately 60 centers are currently opened in multiple countries around the world including in Eastern Europe, in the U.S., Germany, Ireland, Portugal and Israel.

All of the planned centers are now open, and the vast majority are currently recruiting patients. This achievement, along with the increase in volume of surgical procedures following the conclusion of the slower summer months, has led to substantial ramp-up in recruitment recently. In fact, more than 80 subjects were enrolled every month since the end of the summer. This important progress should allow us to complete patient enrollment for the full trial in December with top line results anticipated in the coming quarter. As we have said on prior calls, we view SHIELD II as a derisked Phase 3 trial. One of the primary reasons for this is that the trial is being conducted in a focused patient population in which we have already generated highly positive, statistically significant data in SHIELD I, our first Phase 3 study with D-PLEX100.

This view was further supported by the recent publication of the full data set of SHIELD I in the highly regarded peer-reviewed journal, the International Journal of Surgery. I will now turn the call over to Ori for a review of the highlights from this important publication. Ori?

Ori Warshavsky: Thank you, Dikla. On October 17, the Phase 3 SHIELD I trial results including efficacy and safety were published in the International Journal of Surgery, which is ranked second by impact factor out of 212 surgery-focused medical journals worldwide. Of note, SHIELD I is one of the largest Phase 3 trials for the prevention of surgical site infections in colorectal resection conducted in over a decade. SHIELD I included close to 1,000 patients in total and was a prospective multinational, randomized, double-blind Phase 3 trial designed to assess the efficacy and safety of D-PLEX100 administered alongside the standard of care compared to a standard of care alone arm in the prevention of post abdominal surgery incisional infections.

The paper highlights key takeaways from SHIELD I that informed the execution of SHIELD II, including the compelling data generated in the prespecified analysis of the subgroup of patients with surgical incisions greater than 20 centimeters. In these patients, significant improvements were observed in the primary endpoint, which was a combination of incisional SSI, incisional reinterventions or all-cause mortality in the D-PLEX100 treated patients with a p-value of less than 0.01. In addition, in the key secondary efficacy outcome, incisional SSI, a statistically significant reduction was observed with a p-value of less than 0.05. Exploratory analysis of additional secondary efficacy outcomes, including superficial SSI, deep SSI, all-cause mortality, time to adjudicated SSI, incisional reintervention or any surgical intervention also show differences in favor of D-PLEX100 in the greater than 20-centimeter incisional length subgroup.

Overall, the prespecified and post-hoc analysis of the SHIELD I study suggests that D-PLEX100 may benefit patients with increased SSI risk, including those with lengthy incisions. I would also add that unlike SHIELD I, the currently enrolling SHIELD II is not being conducted under the tight COVID-related safety restrictions that were in place during the pandemic and significantly impacted the overall infection rate in the study. Due to this unexpected change in baseline inflection rate, the SHIELD I primary outcome became extraordinarily difficult to meet. In the post COVID-19 setting, although the published data is limited, we see infection rates rise above what they were during the pandemic in different territories and different surgery types, including in colorectal surgery.

And with that, it is my pleasure to now turn the call over to Jonny to review the financials. Jonny?

Jonny Missulawin: Thank you, Ori. As of September 30, 2024, the company had cash and cash equivalents and short-term deposits of $9.5 million. We expect that our current cash balance will be sufficient to fund operations into the first quarter of 2025. However, I’d like to take a moment to review the terms of the two pipe financing transactions closed in January and August of 2024 which provides the opportunity for our cash runway to be significantly expanded. Under the terms of the January 2024 pipe, we have the potential to secure an additional $18.5 million if the unblinded interim analysis of SHIELD II trial results and the stopping of the study due to positive efficacy and all warrants are exercised. In addition, under the terms of the August 2024 pipe, we have the potential to secure an additional $6.1 million if the unblinded interim analysis results in either the stopping of the trial due to positive efficacy or continuation to planned patient recruitment and all warrants are exercised.

If all the warrants issued in the August pipe are exercised, the company would be funded beyond top line results. If all warrants issued in both January and August pipe are exercised, the company would be funded into 2026. For both transactions, investors have 10 trading days to exercise their warrants following the interim outcome as I just mentioned. Now let’s turn to our income statement. Research and development expenses for the three months ended September 30, 2024 were $6 million compared to $3.8 million in the same 3-month period of 2023. The increase in R&D expenses was driven by the ramp-up in patient enrollment in the SHIELD II Phase 3 trial. Marketing and business development expenses for the three months ended September 30, 2024 were $246,000 compared to $261,000 in the same 3-month period of 2023.

General and administrative expenses for the three months ended September 30, 2024 were $1.2 million, similar to the same 3-month period of 2023. For the three months ended September 30, 2024, the company had a net loss of $7.8 million as compared to $5.6 million in the third quarter of 2023. With that, we will now open the call to your questions. Operator?

Q&A Session

Operator: [Operator Instructions] We will take our first question. Your first question comes from the line of Roy Buchanan from JMP. Please go ahead. Your line is open.

Roy Buchanan: Thanks for taking the question. Just a couple of quick ones. SHIELD II, can you just give us a sense of the blinded infection rate is in line with your expectations and just maybe a sense of what that is? And then can you just remind us what the bar is that you need to achieve to stop for efficacy on the interim?

Dikla Czaczkes Akselbrad: Roy, thank you. I can give you two — well, first of all, it is in line with our expectation. But we are blinded so we don’t really know how the infection rate is divided between the two arms. But we don’t see anything that alarms us in the sense that it’s not in line with our expectation. But maybe I could give you a sense from a report that was published by the CDC just last week, which is covering the hospital-acquired infection report for 2023, looking on infection rate change from 2022. And this is interesting, because on 2022, we still had part of it with COVID and obviously all the measures that were adopted in the COVID years were still in place. And when you look at this report, they indicated that there was a 3% increase in SSI overall.

And then they go to some other specific surgery, for example, in hysterectomy, there was an 8% increase. And this report is the first that we’ve seen in the U.S. that gives indication on infection rates post-COVID time. So this is very interesting to see. It is what we have expected, that infection rates will go slightly up. But obviously, we can’t really say anything about the Phase 3 because we are blinded. But I think this gives — this was published a week ago. And for us, this is encouraging — not encouraging in the eyes of the public health, but encouraging in the eyes of this SHIELD II study.

Roy Buchanan: Okay. That’s helpful. And then maybe just on the heels of that, just what’s the breakdown in patients U.S. versus ex U.S?

Dikla Czaczkes Akselbrad: So most of the patients are ex U.S. You were also asking, I think, what is the criteria that is needed for interim analysis. And that is a p-value of 0.01 or lower. We didn’t gave an indication of what kind of an effect will create 0.01 or less. But if you look at SHIELD II — sorry, at SHIELD I at the high-risk patient population, the long incision which is about the same size of the interim analysis that we are doing now, it was 423 patients. There we had an alpha level of – or a p-value of 0.0032 and the overall effect was 54%. So more or less the same size of study. And you can give — obviously, this is lower than 0.01. But I think it can give you a sense of what kind of effect will imply an early stop for efficacy at the interim.

Roy Buchanan: Perfect. Thank you.

Operator: Thank you. We will take our next question. Your next question comes from the line of Chase Knickerbocker from Craig-Hallum. Please go ahead. Your line is open.

Chase Knickerbocker: Good morning. Thanks for taking the questions. Maybe just to level set on kind of what investors should be expecting on the interim analysis here, the resampling. Should we just be expecting that there’s a press release with kind of the Data Safety Monitoring Board’s recommendation as far as the path forward, whether that’s resampling to 624 or stop for overwhelming efficacy or resampling higher? Is it just kind of that simple statement of fact that we should expect later this month or early December?

Dikla Czaczkes Akselbrad: Chase, thank you for joining us. It’s exactly that. Whatever we will be hearing from the DSMB Committee, from the Data Monitoring Committee, they — as we are — they are unblinded but we are blinded. They will come with a formal recommendation indicating whether we should stop for — due to efficacy, we should continue to the planned study of up to 630 or we can — we should upsize or, God forbid, which we are very — we do not think this is a possibility, but still any clinical trial have also the possibility of a futility. And we will give — issue a press release reporting what we’ve heard from the DSMB Committee this quarter.

Chase Knickerbocker: Got it. And then nice to see the accelerating patient enrollment trends. Any reason not to expect that to continue where, regardless of outcome, you’ve got a fairly robust pace of patient enrollment from here?

Dikla Czaczkes Akselbrad: No, nothing that comes to mind to us. We see recruitment since the end of the summer stabilized on about 80 patients per month. This is very encouraging for us. We put a lot of efforts, all the clinical team here and the regulatory team here to get to the point where all the centers are open. And now that all the centers are open and running, we see about 80 patients per month. And we do not expect to see any change. And since we’ve indicated that we expect to recruit the last patient in December, hopefully, we will not be also impacted with the vacation of the end of the year. So if everything goes well, this will not influence us at this stage.

Chase Knickerbocker: Great. Maybe just last for me. Any incremental conversations with KOLs in the space towards the commercial opportunity for you guys and just again elaborating on the unmet need in colorectal surgery and outside of it as well and broader abdominal? Any interactions there would be helpful to hear some color on. Thanks for taking the questions.

Dikla Czaczkes Akselbrad: So there are, on an ongoing basis, conversation. Some of them are being done as part of the clinical trial. Recently, our director — medical director was visiting in the U.S. centers and hearing about their experience in the area of open colorectal and what’s the unmet need that they see. We do hear also from others about the unmet need, broader from abdominal colorectal. In general, we see areas where surgeons and infection specialists are reporting that a product like ours will allow them to perform a better surgery. We also not too long ago, had some interesting conversation on the health economic aspects of a product like that and the penalties that hospitals are getting. I can tell you that — something that I really recently heard that — from a candidate that we were interviewing.

And he was doing his due diligence with surgeons. He’s an MD. And he said, usually, when I do my due diligence, I hear views that are against and views that are supportive. Here I didn’t hear anyone that says, this is not needed. This is not something that could make a significant change to the way we operate. And this is the level of conversation — we actually see that also in the orthopedic area. There are some recent developments that are getting a very nice response in the market in terms of adoption. So this is quite encouraging for us.

Chase Knickerbocker: Great. Thanks all.

Operator: [Operator Instructions] We will take our next question. The next question comes from the line of Ram Selvaraju from HC Wainwright. Please go ahead. Your line is open.

Unidentified Analyst: Hi there. This is [indiscernible] on for Ram. I had a question regarding the commercial infrastructure that you plan to put in place for D-PLEX100 assuming approval. Do you have any idea of size or even commercial partners?

Dikla Czaczkes Akselbrad: Sure. Yes. Thank you. So as we said in the past, we are looking to have a strategic partner that will commercialize the product in the U.S. with us and we are in discussions around that. And I expect that once we have top line results in the first quarter, those discussions will accelerate substantially. There are not that many assets like D-PLEX100 that have the potential — commercial potential and the medical potential that we bring. So our strategy is to commercialize D-PLEX with a partner. We are also in discussions in other areas and other geographies. And it could well be that some of this will mature before the end of the year.

Unidentified Analyst: Great. That’s really helpful. And speaking of areas outside of the U.S., what other principal regional markets do you think are of greatest value?

Dikla Czaczkes Akselbrad: So it’s interesting that you asked this. I think a product like D-PLEX100 has a market — a global market. Surgeries are — and infection during — due to surgery is a global problem. Obviously the largest market aside from the U.S. and Europe are South America, China, India, Japan. Those are the largest market opportunity. But there is also market like — countries like Vietnam, Canada, Africa, South Africa. Those are areas where infection is a problem, infection post trauma is a problem. And I think a holistic solution, a drug that can be administrated immediately even at the accident site, at the battlefield could make a huge difference for patients.

Unidentified Analyst: That’s great. And regarding regulatory submission to the FDA, do you have a time line for that? How quickly do you think you could complete your submission after the SHIELD II trial completes?

Dikla Czaczkes Akselbrad: We do have a detailed plan for the day that we get top line results going forward. We did not disclose yet the time from that. But I think generally, what we did say is that we expect that we will be — with the breakthrough therapy designation that we have and having submitting the NDA, let’s say, depending again when we get the top line, if we are at the stop for efficacy or if we are at the 630 or if we need to increase slightly, but with the assumption that we have the top line results within the first quarter, our assumption is that we should be getting the NDA with the breakthrough therapy designation during 2026. But we will give more details as we get closer to that data.

Unidentified Analyst: Great. Thanks so much.

Operator: Thank you. There seems to be no further questions at this time. I will hand back for closing remarks.

Dikla Czaczkes Akselbrad: Thank you for joining PolyPid’s third quarter 2024 earnings conference call. We remain highly confident in our long-term prospects, especially the potential of our promising late-stage product candidate, D-PLEX100, and look forward to multiple upcoming potential catalysts. As always, we are grateful to our team members, shareholders and all external partners for their commitment to our mission and support in continuing to advance toward our goal of bringing D-PLEX100 to health care providers and patients as quickly as possible. We look forward to speaking with you again on our next conference call.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.