Protalix BioTherapeutics, Inc. (AMEX:PLX) Q4 2022 Earnings Call Transcript

Protalix BioTherapeutics, Inc. (AMEX:PLX) Q4 2022 Earnings Call Transcript February 27, 2023

Operator: Good morning ladies and gentlemen and welcome to the Protalix full year 2022 earnings call. As a reminder, this conference is being recorded. I will now turn the conference over to your host, Monique Kosse of LifeSci Advisors, investor relations for Protalix. Thank you, you may begin.

Monique Kosse: Thank you Operator, and welcome to the Protalix BioTherapeutics’ fiscal year 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 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 U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Dror Bashan: Thank you Monique and welcome everyone to our fiscal year 2022 financial results and business update call. I will begin by reviewing our progress and accomplishments over the past year along with our plans for the coming months. Following my remarks, Eyal will provide a more detailed review of our financial results, and we will then open the line for questions. 2022 was a strong year for Protalix, and over the last year we made significant progress on multiple fronts. I would like to begin by highlighting our most recent achievement together with our development and commercialization partner, Chiesi Global Rare Diseases. We are very pleased that the European Medical Agency’s Committee for Medicinal Products for human use, or CHMP, adopted a positive opinion and recommended marketing authorization of PRX-102 for the treatment of adults with Fabry disease.

This is a significant step towards the potential approval of PRX-102 in Europe and brings us closer to delivering this treatment option to Fabry patients around the world. The final decision is now referred to the European Commission, which is expected to provide a decision on marketing authorization in early May of this year. Not only are we approaching potential approval in Europe but we also look forward to potential approval in the United States. As previously announced the USFDA accepted our re-submitted biologic license application for review in December. It was re-submitted already November 9. We received the acknowledgement letter on December 9 and our assigned PDUFA target action date of May 9, 2023 is quickly approaching. Including in these regulatory submissions to the EMA and FDA were the comprehensive results from our Phase III clinical program, as well as long term data from our ongoing open label expansion studies.

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Final results from our Phase III BRIGHT and BALANCE trials were completed and announced earlier this year, and both studies met their respective efficacy and safety objectives. This robust set of data represents hundreds of years of patients’ exposure to PRX-102 and we believe provides a compelling case to the regulators to consider this important potential treatment option for adults affected by Fabry disease. We look forward to providing you with updates as we approach potential approval in the EU and the U.S. If approved, PRX-102 will be the second approved drug from our proprietary protein expression system, called ProCellEx, providing even further validation of this unique and innovative platform. As we enter into what will be an exciting year for Protalix, we would like to reiterate our appreciation for Chiesi’s partnership and dedication to this program, and we thank both Protalix and Chiesi’s teams for all their efforts to deliver this potential new treatment to patients with Fabry disease.

Turning to our early stage pipeline, we are continuing to develop promising candidates expressed through our ProCellEx protein expression system. PRX-115 is a novel PEGylated uricase in development for the treatment of severe gout. Final results from the first stage of one month’s multiple dosing toxicity study of PRX-115 in two species to support the Phase I study show no indication of safety concerns. Our current development plan goal is to initiate a Phase I clinical trial in the next couple of weeks. In addition, we continue to make progress on PRX-119, a PEGylated recombinant human DNAse 1 protein designed to elongate DNAse half life in circulation for the treatment of NETS related diseases. We have conducted preclinical studies to demonstrate the feasibility of PRX-119 and we look forward to providing updates on this program as we progress throughout this year.

Finally, our balance sheet provides us with sufficient cash runway through the first quarter of 2024, supporting the company through potential approval in addition to continuing developing our early stage pipeline program, as I mentioned. Before I turn to Eyal for a review of our financials, I would like to say that with regard to the filed earlier this morning, I have to clarify that the was filed with connection to the ATM program and the company has to emphasize this is not an announcement of fundraising. Now I’ll turn to Eyal. Eyal, please?

Eyal Rubin: Thank you Dror, and thank you everyone for joining today the operational review of our full year 2022 financials. The company recorded revenues from selling goods of $25.3 million for the year ended December 31, 2022, an increase of $8.6 million or 51% compared to revenues of $16.7 million for the year ended December 31, 2021. The increase resulted from an increase of $2.2 million in sales to Pfizer, an increase of $3.1 million in sales to Brazil, and an increase of $3.3 million in sales to Chiesi. Revenue from licensed and R&D services for the year ended December 31, 2022 were $22.3 million, an increase of $0.7 million or 3% compared to revenues of $21.6 million for the year ended December 31, 2021. Revenue from license and R&D services represent mainly the revenues we recognize in connection with the Chiesi agreements.

Cost of goods sold for the year ended December 31, 2022 was $19.6 million, an increase of $3.3 million or 20% compared to the cost of goods sold of $16.3 million for the year ended December 31, 2021. The increase in cost of goods sold was primarily the result of an increase in sales of goods. Total research and development expenses for the year ended December 31, 2022 were approximately $29.3 million, comprised of approximately $17.8 million in subcontractor-related expenses, approximately $7.3 million of salary and related expenses, approximately $1.4 million of material related expenses, and approximately $2.8 million of other expenses. For the year ended December 31, 2021, our total research and development expenses were approximately $29.7 million, comprised of approximately $18.4 million in subcontractor-related expenses, approximately $7.4 million of salary and related expenses, approximately $1.2 million of material related expenses, and approximately $2.7 million of other expenses.

The decrease in research and development expenses of $0.4 million or 1% for the year ended December 31, 2022 compared to the year ended December 31, 2021 resulted primarily from $0.6 million decrease in subcontractor-related expenses in connection with our PRX-102 clinical trials partially offset by a $0.2 million increase in materials related expenses. Selling, general and administrative expenses were $11.7 million for the year ended December 31, 2022, a decrease of $1 million or 8% from $12.7 million for the year ended December 31, 2021. The decrease resulted primarily from a decrease in professional fees and salary-related expenses. Financial expenses net was $1.4 million for the year ended December 31, 2022, a decrease of $5.7 million or 80% compared to financial expenses of $7.1 million for the year ended December 31, 2021.

The decrease resulted 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 for 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. For the year ended December 31, 2022, we recorded income taxes of approximately $530,000. We didn’t record income taxes for the year ended December 31, 2021. The income taxes were recorded for 2022 as certain sections regarding the deductibility of research and development expenses of the U.S. Tax Cuts and Jobs Act of 2017 went into effect on January 1, 2022. Cash, cash equivalents, and short term bank deposits were approximately $22.2 million as of December 31, 2022.

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

Dror Bashan: Thank you Eyal. Thank you everyone for joining us on today’s call. We are excited for the year ahead as we await potential approval of PRX-102 for adult patients with Fabry disease, and we continue to work towards our mission of delivering new medicines to patients with high unmet needs. Now I will turn the call back to the Operator to open the line for questions, please.

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Q&A Session

Operator: Our first question comes from Boobalan Pachaiyappan with HC Wainwright. Please proceed.

Boobalan Pachaiyappan: Hi, can you hear me okay?

Dror Bashan : Yes sir.

Boobalan Pachaiyappan: All right, great. Congrats on the progress, and a few questions from our end. We know Chiesi makes launch decisions for PRX-102, but from your perspective, how early could the drug be launched in order for your shareholders to derive maximum value?

Dror Bashan: First, thank you for the question. This is a question for Chiesi. As far as we understand, once we get approved, there will be a couple of months, I assume, to finalize reimbursement schemes or programs with the relevant insurers in the different countries in Europe, and of course in parallel I hope in the U.S., and then it will be ready commercially. But again, this is a question to Chiesi, but I assume this is the plan.

Boobalan Pachaiyappan: Okay. In your view, what’s the general physician awareness for PRX-102 in the European Union?

Dror Bashan: Can you repeat the question? I could not understand it, I’m sorry.

Boobalan Pachaiyappan: I’m trying to understand the general physician awareness of PRX-102 in the European Union.

Dror Bashan: Thank you. I think there is high awareness. This program is, if I may say–the clinical program is eight, nine years old, and the program itself is even earlier. We worked with investigators and physicians throughout the world. We had clinical sites both in Europe and in the U.S., as well as Australia and other places, so as time goes by, and we mentioned a couple of times that we have hundreds of years of patients’ accumulated exposure, clearly a significant portion is also in Europe, so I hope this answers your question.

Boobalan Pachaiyappan: Okay, clear. Can you frame the Fabry disease market opportunity in the European Union and can you discuss any progress or any gating steps to securing reimbursement in the European Union?

Dror Bashan: The program–first, again, this is a question to Chiesi. The indication is about between $2 billion, $2.1 billion . It grows globally, and I hope that and we believe that for Chiesi, we know it will be a very high priority, and I’m sure they will apply the best effort on their commercial program, and then we will have to position this drug well and that’s it. As for specific details with regard to their reimbursement efforts, I suggest you ask Chiesi directly.

Boobalan Pachaiyappan: Okay, clear. Switching gears, thinking about your 115 gout program, on the last call you mentioned the IND will be submitted in the first quarter, so can you clarify if the IND has already been submitted and you are ready to launch Phase I?

Dror Bashan: We are ready to launch Phase I. The Phase I will be conducted outside the U.S. in a center of excellence in New Zealand. I assume that once–that hopefully we will finalize the Phase I successfully, we will prepare meanwhile and we will discuss also with the FDA with regards to Phase II and the next steps.

Boobalan Pachaiyappan: Okay, so with respect to 115 again, how many healthy volunteers or patients – I’m not sure which one you are going to–who you’re going to target, but how many initial data set patients do you need in order to move forward or maybe to get closer to the proof of concept studies?

Dror Bashan: What we are planning now is a first-in-human Phase I study, and we will publish everything once we publish the protocols, so you will see all details.

Boobalan Pachaiyappan: Okay, and maybe one final question, how long do you expect to run the Phase I study, and maybe when ideally you would like to see the data?

Dror Bashan: Which study? I’m sorry, I could not understand.

Boobalan Pachaiyappan: I’m just curious how long do you expect to run your 115 Phase I study?

Dror Bashan: I apologize. We expect to run it until the end of this year, so I hope we will be able to finalize the CSR by the beginning of next year.

Boobalan Pachaiyappan: Okay, thanks so much for taking my questions.

Dror Bashan: Of course.

Operator: Once again ladies and gentlemen, to ask a question, please press star, one on your telephone keypad. Our next question comes from John Vandermosten with Zacks. Please proceed.

John Vandermosten: Thank you, and good afternoon Dror and Eyal. Let me start out with a question on just milestones that we expect after May. May is supposed to be a big month with both EMA and FDA expected, but after that, what should we look for on the horizon in terms of milestones for the company?

Dror Bashan: Eyal, please?

Eyal Rubin: Yes, I think John, you’re referring to clinical milestones, right, not financial ones?

John Vandermosten: Well, just any major events. I mean, you have the other two programs which Dror talked about just a little bit on 115, in terms of that Phase I; but just anything else we should keep an eye out for on the horizon?

Eyal Rubin: Not at this point. As Dror mentioned, we plan to move forward with our first-in-human the next couple of weeks on the PRX-115 and finish it by the end of this year with potentially we’re going to be with early next year, the first main major milestones that we can foresee the current pipeline.

John Vandermosten: Okay, thank you Eyal. In terms of the financial cash flows and everything that’s related to PRX-102, when do we expect–you know, assuming that sales are made in the second quarter or even the third quarter, when might those cash flows be received and when might they be recognized on the financial statements?

Eyal Rubin: with the regulatory approvals should be received within 60 days from the event, and obviously they’re going to be recorded as we get them from Chiesi and we’ll report them to the street, along with the financials.

John Vandermosten: Okay, very good. I saw that you mentioned in the K–and we’ve talked about this before, but you mentioned in the K this time that Vpriv no longer has exclusivity in the EU and Elelyso is marketed globally. What does this mean for future revenues?

Eyal Rubin: Since we don’t commercialize Elelyso and it’s been marketed and commercialized by Pfizer, whether to start the marketing in Europe serving them Pfizer, based on the POs we receive from them. They’ll have to re-think internally as whether to penetrate market by market. We are calling it the EU, but at the end of the day, it’s a market by market struggle, so they’ll have to make up their minds and then we’ll be working accordingly.

John Vandermosten: Okay, great, and I assume that you have regular conversations with them on how things are going with the product sales. You guys obviously have to plan production and everything like that, so I assume that you have conversations with them, right?

Eyal Rubin: Yes, that’s correct. Again, it’s a question for them, they’re holding the commercial rights.

John Vandermosten: Got it. Last one for me is also saw that your agreement with Chiesi for fill finish activities, and just was wondering what the geographic location was of that since you’re going to be producing the drug product in Israel, and then I guess where is it going to be shipped for their disposition?

Eyal Rubin: It’s going to be shipped to Parma, Parma, and from there it will be delivered globally.

John Vandermosten: Great. All right, well thank you Eyal, thank you Dror. Always a pleasure to speak with you.

Dror Bashan: Thank you.

Operator: Thank you. At this time, I would like to turn the call back over to management for closing comments.

Dror Bashan: I have to thank everybody very much for their time today, and we are very happy with the recommendation of the CHMP and we look forward to providing you with further good news down the road. Thank you very much. Have a nice day.

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