PLX Earnings Call Transcriptbeta

Operator: Good morning, ladies and gentlemen, and welcome to the Protalix BioTherapeutics Second Quarter 2021 Financial Results and Business Update Conference Call. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mr. David Holmes of LifeSci Advisors, Investor Relations for Protalix. You may begin your conference.

David Holmes: Thank you, Joe. Welcome to the Protalix second quarter 2021 financial results and business update conference call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Chief Financial Officer. A press release announcing the results and the update was issued this morning and is now 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 in the Protalix 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, David, and welcome, everyone, to the company's second quarter 2021 financial results and financial and business updates. During the call today, I will review the progress of our key clinical programs and provide an update on our strategic roadmap for the remainder of 2021 and beyond. Following my remarks, our Chief Financial Officer, Mr. Eyal Rubin, will review the company's financial results before we open the lines for questions. I would like first to discuss our balance sheet. We ended the quarter with approximately $77 million in cash. As we announced on Friday on August 12, 2021, we entered into a definitive exchange agreements relating to the exchange of $54.65 million principal amount of our outstanding 7.5% senior secure convertible notes due 2021 for $28.75 million of principal amount of newly issued 7.5% senior secured convertible notes due 2024. $25.9 million in cash and accrued and unpaid interest through the closing date. We plan to close these exchanges as soon as practicable subject to satisfaction of certain closing conditions. At closing, we will have reduced our debt by $25.8 million and effectively extended the maturity for substantially all of the remaining debt from 2021 until 2024. This extension of the maturity date of the notes allows us to use our cash resources to continue and realize the PRX-102 potential and advanced our early-stage pipeline. We feel confident about our ability to continue to fund our clinical programs as well as to prepare for potential commercial launch of PRX-102. We recently announced that we have submitted the Type A meeting request to the FDA to discuss the complete response letter dated April 27, 2021, regarding the BLA for PRX-102 for the proposed treatment of adult patients with Fabry disease. The FDA has scheduled the Type A meeting for September 9, 2021. Our objective for the meeting will be to address the issues raised in the CRL and work with the FDA on a plan for resubmission. We are confident in the overall clinical profile of PRX-102 that we have assembled through our extensive development program and believe PRX-102 has the potential to provide important value to the Fabry patient community. We plan to update you regarding the new development as soon as feasible. During the quarter, we continue to build our clinical profile for PRX-102 with the release of the top line interim results of our Phase 3 BALANCE clinical trial for PRX-102 for the proposed treatment for Fabry disease. Based on the interim analysis of the 12 months data generated from the BALANCE study and in combination with previously reported positive data from the Phase 3 BRIGHT and BRIDGE clinical trials of PRX-102, Protalix and Chiesi intend, subject to positive meeting with the EMA repertoire, a representative of the EU regulatory authorities to submit a marketing authorization application to the European Medicine Agency by the first quarter of 2022. And this would position us to potentially have a commercial launch in Europe in the first half of 2023. Two first stage, early-stage pipeline programs are PRX–115, a plan cell-expressed recombinant PEGylated uricase chemically modified enzyme to treat refractory gout; and PRX-119, which is a long-acting DNase for NETs-related diseases. We plan to initiate toxicity study - studies for PRX-115 in the first quarter of 2022. And we are looking forward to updating you on these programs as they progress. Before we turn to Eyal, I would like to recognize what the challenging time has been for all of us and emphasize how much I appreciate our team and the focus and dedication to our mission of bringing important new medicines to the market for patients with high unmet clinical needs. I will now turn to Eyal for review of our financials. Eyal, please go ahead.

Eyal Rubin: Thank you, Dror, and thank you, everyone, for joining our call today. Allow me to review our second quarter 2021 financials. For the quarter ended June 30, 2021, we recorded revenue from selling goods of $3.2 million compared to revenue of $3.6 million for the same period of 2020. Revenues from license and R&D services for the three months ended June 30 were $3.2 million, a decrease of $4.1 million of 56% compared to $7.3 million for the same period of 2020. Revenues from licensed and R&D services are comprised primarily of revenue we recognized in connection with our license and supply agreement with Chiesi. The decrease is primarily due to an updated cost estimation while the trials and field completion in the amount of $4.1 million and from revenues recognized in connection with the progress of our clinical trials that have been completed during 2020. Cost of goods sold for three months ended June 30, 2021 was $4.7 million, an increase of $2.9 million or 161% compared to $1.8 million for the same period in 2020. The increase in cost of goods sold was primarily the result of certain one-time manufacturing costs incurred while preparing for the then anticipated FDA approval of the PRX-102 BLA. Research and development expenses for the three months ended June 30, 2021 was $7.7 million, a decrease of $1.5 million or 16% compared to $2.2 million to $9.2 million for the same period of 2020. The decrease is primarily the result of the completion of two out of the three Phase 3 clinical trials of PRX-102 and reduced cost related to our BALANCE study. We expect research and development expenses to continue to be a primary expense as we enter into a more advanced stage of preclinical and clinical trials for the certain of our product candidates. Selling, general and administrative expenses for the three months ended June 30, 2021 were $3.2 million, an increase of $1 million or 45% compared to $2.2 million for the same period in 2020. The increase resulted primarily from an increase in corporate costs related to insurance and funding. Financial net expenses were $2.1 million for the three months ended June 30, 2021 and $1.9 million for the three months ended June 30, 2020. The increase resulted primarily from an increase in the amortization of debt issuance costs and debt discounts. Cash, cash equivalents and short-term bank deposits, as Dror mentioned, were approximately $77 million as of June 30, 2021. On August 12, 2021, we entered into a definitive agreement relating to exchange of $54.65 million principal amounts of our outstanding 7.5% senior secured convertible notes due 2021 for $28.75 million principal amount of newly issued 7.5% senior secured convertible notes due 2024. In addition, $25.9 million we paid in cash and accrued and unpaid interest through the closing dates. We plan to close the exchange as soon as practicable, subject to satisfaction of certain closing conditions. The new convertible notes may be converted at any time prior to their maturity date at an initial conversion rate based upon approximately $1.7755 per share, which represents a 32.5% premium to the closing price of our common stock on the New York Stock Exchange American at the closing of trading on August 13, 2021. The new notes will be secured by perfected liens at equal priority with the existing notes on all the material assets of the company and its subsidiaries and are guaranteed by the company's subsidiaries. Net loss for the three months ended June 30, 2021 was $11.2 million or $0.25 per share basic and diluted compared to a net loss of $4.1 million or $0.13 per share basic and diluted for the same period of 2020. I will now turn the call back to you, Dror.

Dror Bashan: Thank you, Eyal. We look forward to working closely with the FDA to develop the best forward to bring PRX-102 to commercialization for adult Fabry patient, and we're working towards continuing to advance our early-stage pipeline and positioning the company for their long-term success. We look forward to updating you as the year progresses. Now, let's have your questions, please.

Operator: Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Ram Selvaraju with H.C. Wainwright. Please proceed.

Boobalan Pachaiyappan: Hi, this is Boobalan dialing in for Ram Selvaraju, and thanks for taking my questions. So first one, what are your expectations for the upcoming Type-A meeting with the FDA? And what key items will be discussed during the meeting?

Dror Bashan: Okay. So, as we have just mentioned, the plan is to discuss the item raised at the CRL and to discuss our path forward in order to go for resubmission.

Boobalan Pachaiyappan: Assuming the meeting goes well, what would be the possible next steps and when do you think the FDA may be able to inspect the manufacturing sites?

Dror Bashan: So I wish I knew when they will be able to inspect the manufacturing site. And I suggest we all wait for the meeting. Once we get the meeting minutes, we will be much smarter.

Boobalan Pachaiyappan: Okay. With respect to the PRX-115 and PRX-119 programs, so could you elaborate a little more on the remaining gating factors?

Dror Bashan: On PRX-115, we plan to enter into toxicology studies in early 2022 and then following that into a Phase 1. In PRX-119, it's still in preclinical models. And I assume a year later, we will go into toxicology study and then take it from there.

Boobalan Pachaiyappan: Okay. One final from me. So with respect to the upcoming EMA meeting, so do you anticipate any roadblocks with respect to EMA filing and approval of PRX-102?

Dror Bashan: Nope. We hope there will not be any roadblocks. We expect the meeting to take place early October. And then subject clearly to, let's call it, a green light, we will be able to submit in early 2022 or Q1 2022.

Boobalan Pachaiyappan: Okay, that's it for me. Thanks for taking my questions.

Dror Bashan: Thank you.

Operator: [Operator Instructions] Our next question is from John Vandermosten with Zacks Investments Research. Please proceed.

John Vandermosten: Hi, Dror and Eyal. Good afternoon to you. I wanted to start off with a question on the expenses in the gross margin or the gross cost there. Will those need to be incurred again, if approval is granted? Or are they just one-time expenses that were -- that you won't need to incur when approval comes from the FDA?

Eyal Rubin: Those were a one-timer. Obviously, we cannot elaborate too much here. But in anticipation of the BLA approval, obviously, we have to take certain steps in our manufacturing plant, which were a one-timer as we wrote.

John Vandermosten: Okay. I mean were they administrative costs mostly or were they kind of physical costs where you were putting new things into place?

Eyal Rubin: It's not new things, but they obviously strengthened some of the processes and the administrative costs around the submission.

John Vandermosten: Okay, got it. Got it. And there was a big favorable swing in contracts liability and just want to make sure that was on a cash flow statement. I wanted to make sure that was related to the future milestone payment that you received.

Eyal Rubin: This is one. In August, since the -- there is also manufacturing of goods for Chiesi, which, since the BLA approval got delayed, this is also part of the contractual liabilities there.

John Vandermosten: Okay. Yes, because I think it's swung like $16 million or something in the quarter. And then one of the things, I'm not sure if you saw that EMA approval of Galafold in children 12 and older, does that help illuminate the pathway at all for you perhaps for a pediatric approval for PRX-102? I mean, I know it's a different class of drug, but anything -- any takeaways from that that might help you in the future down the road if you pursue the pediatric indication for 102?

Dror Bashan: This is Dror. I don't know actually -- I don't think it's a headwind. If it's -- I hope it helps, I don't really know.

John Vandermosten: Okay. Yes, I was thinking that when something like that -- that gets approved, it kind of shows what the EMA is concerned about and what they want to see.

Dror Bashan: It's probably favorable. But as long as they will find that PRX-102 does have a potential room as an alternative on the market, I assume it will be discussed and hopefully approved also pediatric.

John Vandermosten: Great. Thank you, guys. Appreciate you taking my questions.

Dror Bashan: Welcome.

Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Dror Bashan for closing remarks.

Dror Bashan: So, all I ask is that everybody will continue to be safe under this COVID phenomena, and thank you very much for the time. We will keep updating you. Thank you.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you very much for your participation. Have a great day.

Dror Bashan: Thank you.