Protalix BioTherapeutics, Inc. (AMEX:PLX) Q3 2024 Earnings Call Transcript

Protalix BioTherapeutics, Inc. (AMEX:PLX) Q3 2024 Earnings Call Transcript November 14, 2024

Operator: Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Third Quarter 2024 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mike Moyer of LifeSci Advisors for Protalix. Thank you. You may begin.

Mike Moyer: Thank you, operator. And welcome to the Protalix BioTherapeutics third quarter 2024 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 financial results and business and clinical updates was issued this morning and is available now 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 in Protalix’s filings with the US Securities and Exchange Commission. I’ll now turn the call over to Mr. Bashan. Dror?

Dror Bashan: Thank you, Mike. And thank you, everyone, for joining our third quarter 2024 financial results and business update call. I will begin by reviewing our recent accomplishments before handing the call to Eyal who will provide a review of our financial results. We will then open the line for questions, of course. I will start with PRX-115, which is our recombinant PEGylated uricase candidate produced through our ProCellEx platform in development for treatment of uncontrolled gout. As we have announced this morning in our press release, all eight cohorts of the first-in-human Phase 1 clinical trial of PRX-115 are now complete and data analysis ongoing. As a reminder, this study is a double-blind, placebo controlled single ascending dose study designed to evaluate safety, tolerability, pharmacokinetics and pharmacodynamics following a single dose of PRX-115 in subjects with elevated uric acid levels.

Preliminary results from the eight cohort are consistent with the initial promising results from the seven cohorts. Overall, 64 subjects were randomized across the eight cohorts. 48 of these subjects were treated with a single administration of PRX-115 and 16 subjects were treated with a placebo. All of the subjects completed the study. Exposure to PRX-115 increased in a dose-dependent manner. PRX-115 levels were observed for up to 12 weeks in subjects in cohorts 6, 7, and 8, the cohort with the highest doses. In all tested doses, a single dose of PRX-115 rapidly reduced plasma uric acid levels. The effect and duration of response were found to be dose dependent. Following the single dose, mean plasma uric acid levels 6 milligram per deciliter for up to 12 weeks at the highest dose levels.

PRX-115 was also generally well tolerated, with only 25% of subjects receiving PRX-115 having reported study drug-related adverse events. The majority of these were mild to moderate and transient in nature. We are encouraged by these preliminary results. The findings from the study suggest PRX-115 has the potential to be a promising treatment option for patients with gout. We believe the results demonstrate that PRX-115 may offer an effective uric acid lowering treatment with an added benefit of a potential wide dosing interval, which may enhance patient compliance and treatment flexibility. Further studies are needed to confirm the long-term safety and efficacy of PRX-115 in the gout patient population. Preliminary results from these studies are being presented at the late-breaking poster of the American College of Rheumatology annual meeting, ACR Convergence, which begins today in Washington, D.C. We are continuing our preparations for a Phase 2 trial of PRX-115 in patients with uncontrolled gout.

We plan to continue our dialogue with regulatory authorities in the US and Europe regarding our Phase 2 plans, with the goal of initiating the Phase 2 study in the second half of 2025. And now, for Elfabrio. In past calls, we have discussed the strong commitment of our commercial partner, Chiesi Global Rare Diseases, to the successful commercialization of Elfabrio and the wealth of experience the team brings to such efforts. Chiesi continues to increase its focus on Elfabrio and invest heavily in its medical and commercial program. As part of its program, Chiesi is sponsoring a number of studies, Elfabrio including in a trial in Japan, a pediatric and adult-centered trial, and the maternal and postnatal outcomes study, and other global and international multi-center studies.

We look forward to continuing to collaborate with Chiesi in its goal to bringing Elfabrio to as many patients as possible. Our next pipeline candidate, also being expressed through ProCellEx, is PRX-119. PRX-119 is a PEGylated recombinant human DNase I product candidate in development for potential treatment of diseases associated with neutrophil extracellular traps, or NETs. We are focusing our R&D efforts on early-stage development assets to build our product development pipeline. We have fine-tuned our pathway going forward to focus on leveraging our ProCellEx platform and prioritize renal rare disease indications. In addition, we have begun to evaluate plant-based drug delivery systems that may allow protective delivery of different modalities.

These efforts are in preliminary stages and we look forward to updating you on the progress in these efforts as they progress, of course. With regard to the therapeutic areas, our strategy moving forward is to prioritize rare renal diseases as the core of Protalix development pipeline. This is a logical focus to us, given the existing experience, network, and resources we built through the diligent and dedicated efforts and throughout the public development program. We have identified potential key high unmet need indications on which we plan to focus our initial efforts, such as ADPKD, Alport syndrome, and FSGS and others. Work is currently ongoing to identify assets for the treatment indications. We intend to use the ProCellEx platform and the PEGylation capabilities as well as other modalities, such as small molecules and oligos, to take advantage of highly innovative opportunities.

We are also exploring novel platform technologies. Finally, in September, we repaid in full all of our outstanding principal and interest under the 7.5% senior secured convertible promissory notes. The repayment was financed entirely with the available cash. This is significant for Protalix as we are now a debt-free company. Our financial discipline and strong balance sheet enable us to support our ongoing operations. And with that, it is now my pleasure to turn the call over to Eyal and review our financials. Eyal, please.

Eyal Rubin : Thank you, Dror. Thank you everyone for joining today’s call. Let me review our third quarter 2024 financials. We recorded revenues from selling goods of $17.8 million during the three months ended September 30, 2024, an increase of $7.6 million or 75% compared to revenues of $10.2 million from three months ended September 30, 2023. The increase resulted primarily from an increase of $6.8 million in sales to Chiesi and an increase of $1.1 million in sales to Pfizer, partially offset by a decrease of $0.3 million in sales to Brazil. We recorded revenues from license and R&D services of $0.1 million for the three months ended September 30, 2024, a decrease of $0.1 million or 50% compared to revenues of $0.2 million for the three months ended September 30, 2023.

Revenues from license and R&D services are comprised primarily of revenues we recognize in connection with our license agreement with Chiesi. Cost of goods sold was $8.4 million for the three months ended September 30, 2024, an increase of $3.5 million or 71% from cost of goods sold of $4.9 million for the three months ended September 30, 2023. The increase in cost of goods sold was primarily the result of an increase in sales to Chiesi and Pfizer. For the three months ended September 30, 2024, the company’s total research and development expenses were approximately $3 million, comprised of approximately $0.6 million subcontractor related expenses, approximately $1.6 million salary and related expenses, approximately $0.2 million of material related expenses, and approximately $0.6 million of other expenses.

For the three months ended September 30, 2023, our total research and development expenses were approximately $3.7 million, comprised of approximately $1 million of subcontractor related expenses, approximately $1.9 million of salary and related expenses, approximately $0.2 million of material related expenses, and approximately $0.6 million of other expenses. Total decrease in research and development expenses for three months ended September 30, 2024 was $0.7 million or 19% compared to the three months end of September 30, 2023. The decrease in research and development expenses resulted primarily from the completion of a Fabry clinical program and the regulatory process related to a Fabry biological license application in the United States and the marketing authorization application in the European Union for Elfabrio by the applicable regulatory agencies.

Selling, general and administrative expenses were $2.6 million for the three months ended of September 30, 2024, a decrease of $1.1 million or 30% compared to $3.7 million from three months end of September 30, 2023. The decrease resulted primarily from a decrease of $0.5 million salary related expenses and a decrease of $0.4 million in professional fees. Financial expenses net was $0.1 million for the three months end of September 30, 2024 compared to financial income net of $0.2 million for the three months end of September 30, 2023. The difference resulted primarily from lower interest income on bank deposits, higher exchange rates, partially offset by lower notes interest expenses due to the September 2024 repayment, as Dror mentioned, where we paid in full all of the outstanding principal and interest payable under the 2024 notes.

In the three months ended September 30, 2024, we recorded income taxes of approximately $0.6 million compared to income taxes of $0.1 million for the three months end of September 30, 2023. Income taxes recorded are primarily the result of the tax expenses in respect of Section 134 of the US Tax Cuts and Jobs Act, which was enacted in December 2017. Cash and cash equivalents were approximately $27.4 million at September 30, 2024. Net income for the three months ended September 30, 2024 was approximately $3.2 million or $0.04 per share basic and $0.03 per share diluted compared to a net loss of $1.9 million or $0.03 per share basic and $0.04 per share diluted for the same period in 2023. Since the end of the quarter ended September 30, 2024, the company collected approximately $3.9 million from sales to Chiesi.

And with that, I will now turn the call back to you, Dror.

Dror Bashan : Thank you, Eyal. To conclude, I’m pleased with our progress this quarter, especially for PRX-115 development program. Pending discussions, of course, with regulatory agencies, we plan to begin a Phase 2 program for PRX-115 next year. I’m confident that our strategy, balance sheet and three streams of revenues will enable the next phase of pipeline development for Protalix, and we look forward to updating you on our progress as we continue to drive innovation and create long-term value for both patients and stockholders. Now I would like to ask the operator to open the call for questions, please.

Q&A Session

Operator: [Operator Instructions]. Our first question comes from John Vandermosten with Zacks.

John Vandermosten: I’m going to start off with a question on the Chiesi revenues. Are those all product revenues? Are there any other categories of revenue in there? And I’m talking about the – I guess it’s the $12.4 million that was broken out.

Eyal Rubin: The revenues from Chiesi, is it’s all product revenues. As you remember, and we’ve indicated in the past, the [indiscernible] we are selling to Chiesi – actually, we’re selling to their inventory at this point. However, the sales and the revenue that we record are all revenues that are recorded in connection with the actual goods sold to Chiesi.

John Vandermosten: I guess the reason I’m asking is just to calculate the gross margin and make sure that that’s the right number to use for calculating that and I shouldn’t subtract anything.

Eyal Rubin: You shouldn’t subtract. To calculate the gross margin on this product, it’s not just adding up all the revenues and dividing the margins on Elfabrio, are obviously way higher than the all other [indiscernible]. So, trying to allude and – again, calculate numbers by simply dividing the COGS, taking it out from the sales and getting the margin, I don’t think that that’s going to give you the right number.

William Febbo: I have to figure something out there then. And also, as you had mentioned on the call, Chiesi put out a study, or at least indicated there was a study on BRITE, looking at the longer duration in between infusions for those patients. Were there any takeaways from that are new that kind of – that may help change the label in terms of the creativity of infusions?

Dror Bashan: John, the extension of the BRITE study is already 3 or 4 years old. So Chiesi put an article or an abstract about the outcomes of I think 3 years of extension. And Chiesi is in discussion with the authorities. If and when there will be any news, we will, of course, update the market.

Operator: The next question comes from Raghuram Selvaraju with H.C. Wainwright.

Daniel Smith: This is Dan on for Ram. Congratulations on the quarter. We wanted to know what are some of the market factors you’re seeing affecting uptake of Elfabrio in the US and how do you view the competitive landscape and treatment of refractory gout? Are you expecting to do comparator controlled pivotal studies and might just be a part of the Phase 2 plan or only Phase 3? And I’d like to ask a follow up if I could.

Dror Bashan: Let’s go one by one. About Chiesi, we think we bring a good or very good alternative options to the Fabry or the adult Fabry patient community. It’s a new ELT after I think close to actually over 20 years in the US. It has its merits. We show that they are as good as Fabrazyme. We think we have a good – or the drug has a good safety and immunogenicity profile. Chiesi is conducting additional study as part of their medical plan, like pediatric study, a registry, pregnant woman study, et cetera. And we think it’s a very good alternative. So I think these are the main points. And Chiesi does well. With regard to 115, can you repeat the question, please?

Daniel Smith: How do you view the competitive landscape in treatment refractory gout? Are you expecting to do comparator controlled pivotal studies? And might this be a part of the Phase 2 plan, or would that only come in at Phase 3?

Dror Bashan: Now, we are actually planning a Phase 2 study. We are in a multi, if I may say, communication and discussion with the agencies both in the US, of course, and in Europe. And this is what I can share right now. We think if – let’s put this way, if indeed the outcomes of the Phase 2 study as we claim will be close or the same or will mimic what we see in Phase 1, I think we have a very interesting potential drug in refractory gout.

Daniel Smith: And for a follow-up, are you engaged in establishing manufacturing contracts with other companies to deploy a proprietary manufacturing platform to produce other firms’ products? And if not, why?

Dror Bashan: At the moment, no. Actually, we have the agreement, as you know, with Pfizer and Chiesi. With the gout study right now, we do it our own, of course. We have the balance sheet to continue this way right now. And we are not trying to build the CMO business. We try to develop new, I would say, therapies for real unmet needs and we will go up the ladder innovation wise. So we think this way is our best way forward and we’ll bring way more value to the shareholders than becoming a CDMO or something like this. I do not underestimate it, but I think our – Protalix is more, I would say, a boutique development company than – way closer to that than to become a CMO. Which is not a bad business, please. It’s not to put any criticism on CMOs, but I think our structure and the way we operate, it’s way closer to be a development company than a CMO. Let’s put it this way.

Operator: The next question comes from Robert Sassoon with Water Tower Research.

Robert Sassoon: Just talking about the PRX-115 and the profile of the 64 participants, the patients. What sort of plasma uric acid levels did they actually start off with and what was the range?

Dror Bashan: I don’t remember by heart. And I know this is published right now with the abstract that we have shared at ACR, but I can get back to you and share with you. I’m sorry.

Robert Sassoon: Just a follow up on that. The patient that actually had the anaphylactic episode, was there anything sort of different about his profile compared to the others?

Dror Bashan: There was one subject, I would say – it’s not a patient. One subject, I think, in cohort number 2, that after three or six minutes into the infusion, developed, if I may say, an anaphylactic reaction. It was taken care immediately and the subject’s health is most important. So he recovered, if I may say. It was the only one out of the 64 subjects. Nothing more than that. There was no consistency across the subjects. It’s one subject out of 64.

Robert Sassoon: What I was trying to get at is if there was anything particular about this particular subject compared to the others that may have been a factor.

Dror Bashan: It may have been that you got a drug before or some ingredient that actually developed antibodies against the enzyme, I would say, [indiscernible]. It was really, literally, I think, three or six minutes from the beginning of the infusion, meaning a very small amount of the enzyme into the body or the plasma, unfortunately. Subject is fine and alive, of course, and was taken care of immediately.

Operator: [Operator Instructions]. We have a follow-up from John Vandermosten with Zacks.

John Vandermosten: For the PRX-115 trial coming up in the second half of next year, what’s the anticipated duration of that? Is that a year-long trial? I know it’s still probably early in terms of design, but can you give us a sense of how long that might take?

Dror Bashan: I think so. Correct me if I’m wrong. It’s a 6 or 12 month duration study. I just don’t have it in front of my eyes. It’s a 12 month, okay. And we plan to initiate it actually the second half of 2025. And hopefully, if indeed the pace of enrollment would be as we expect, I want to be careful, so I believe at the end of – beginning of 2027 will be top line results.

John Vandermosten: On Japan, I know I’ve asked this in the past and I think the trials progressed since then. But any idea when that might be complete? And is there anything else required to get sales in Japan? And then thirdly on that, are the economics for sales in Japan the same as they are in other regions?

John Vandermosten: No, the study is ongoing. So once it will be done, they will – I assume Chiesi will move to submission. I think that – nothing. What do you mean if it’s similar? Japan is Japan. It’s a unique market. It has its own characteristics, if I may say. This is what I can say about it.

Operator: Thank you. At this time, there are no further questions in queue. I would like to turn the call back to Mr. Dror Bashan for closing comments.

Dror Bashan: Thank you.

Operator: Mr. Bashan, any closing comments for the call?

Dror Bashan: Thank you everybody for the time. We look forward to continue updating you. Thank you very much.

Operator: Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.