Protalix BioTherapeutics, Inc. (AMEX:PLX) Q2 2023 Earnings Call Transcript

Protalix BioTherapeutics, Inc. (AMEX:PLX) Q2 2023 Earnings Call Transcript August 7, 2023

Operator: Good morning, ladies and gentlemen and welcome to the Protalix BioTherapeutics Conference for Second Quarter 2023 Financial Business Results. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mr. Chuck Padala with LifeSci Advisors, Investor Relations for Protalix. Thank you, you may begin the conference.

Charles Padala: Thank you, operator and welcome to the Protalix BioTherapeutics Second Quarter 2023 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 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’s filing with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?

Dror Bashan: Thank you, Chuck. And welcome everyone to our second quarter 2023 financial results and business update. I will begin by reviewing our recent progress and accomplishments and following my remarks Eyal will provide a more detailed review of our financial results. And then we will open the line for questions. I would like to start with the most impactful milestone we achieved this quarter together with our development and commercialization partner Chiesi Global Rare Diseases. We are very much excited that both the European Commission and the U.S. FDA approved Elfabrio for the treatment of adult patients with Fabry disease. Introducing an alternative treatment options for patients that has the potential to improve quality of life is a significant achievement for the patients and the families affected by the Fabry disease.

And Fabry is now the second approved drug from our priority protein expression system, ProCellEx, which further highlights the success of our unique platform. The approval triggers a $20 million U.S. milestone payment that we have received from Chiesi in Q2. We are very grateful for the Protalix team as well as our partnership with Chiesi. Chiesi’s continued dedication to this journey has been greatly contributed to these achievements. As we discussed during our KOL event in June, Chiesi is poised to realize the full potential of Elfabrio with a global presence and significant expertise within the rare diseases space. They’ve ramped up commercial activities and they’ve already launched in the U.S. In addition, in preparation for launches in various countries carriers started building its inventory as reflected in our financials on which Eyal will elaborate soon.

Fabry disease represents a significant opportunity in a multi billion dollar market that is in need of an alternative treatment option. And we and Chiesi are prepared to deliver. As I just mentioned, Protalix hosted a KOL event in June in New York City. We would like to thank Dr. Ankit Mehta for sharing his perspective on how Elfabrio could address the unmet needs in Fabry disease patients. And we also thank Giacomo Chiesi for joining us and providing an overview of the Chiesi’s in-depth and experience bringing rare disease drugs into the global markets. During our event, we also discussed the future of Protalix and our focus in the rare disease space. We are committed to addressing high unmet needs for patients with limited therapeutic options.

And we are well equipped with the clinical, regulatory and technical expertise to move Protalix forward into the next phase of growth. To that end, I will now provide an update on our very early stage programs. First, PRX-115, which is a novel PEGylated uricase in development for the treatment of severe gout. Enrollment in Phase 1 first-in-human clinical trial of PRX-115 is continuing. And as a reminder, the trial is a double-blind, placebo-controlled, single ascending dose study designed to evaluate the safety, pharmacokinetics, pharmacogenomics, and immunogenicity of PRX-115 in up to 56 patients. The study is being conducted in New Zealand. To date, 16 patients have been dosed in this trial, and we are looking forward to continued enrollment and dosing of patients.

We expect that enrollment will be completed by the end of this year, early next year and to have final results by second quarter of 2024. We also continue to make process on PRX-119, a PEGylated recombinant human DNase I protein designed to elongate DNase’s half-life in circulation for treatment of NETs-related diseases. We have conducted preclinical studies to demonstrate the feasibility of PRX-119. We look forward to providing updates on this program and others as we look to build and strengthen our growing pipeline. Finally, our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near-term capital infusion. I will now turn to Eyal to review our financials. Eyal, please?

Eyal Rubin: Thank you, Dror and thank you, everyone, for joining today’s call. Let me review our second quarter 2023 financials. We recorded revenues from selling goods of $15.1 million during the three months ended June 30, 2023, an increase of $11.7 million or 344% compared to revenues of $3.4 million for the three months ended June 30, 2022. The increase, as Dror mentioned, resulted primarily from an increase of $11.7 million in sales to Chiesi following the approval by the FDA and the EMA of Elfabrio. We recorded revenues from license and R&D services of $20 million for the three months ended June 30, 2023, an increase of $14.6 million or 270% compared to revenues of $5.4 million for the three months ended June 30, 2022.

The increase resulted from the $20 million regulatory milestone coming from Chiesi in connection with the FDA approval of Elfabrio. Revenues from license and R&D services are comprised primarily of revenue recognized in connection with the Chiesi agreements. Cost of goods sold was $6.1 million for the three months ended June 30 2023, an increase of $2 million or 49% from cost of goods sold of $4.1 million for the three months ended June 30, 2022. The increase in cost of goods sold was primarily the result of increase in sales of Elfabrio drug substance to Chiesi and royalties payable to the Israel Innovation Authority in connection with the Chiesi agreement. For the three months ended June 30, 2023, the company’s total research and development expenses were approximately $4.5 million, comprised of approximately $1.7 million in subcontractor-related expenses, approximately $2 million of salary and related expenses, approximately $0.1 million of materials-related expenses, and approximately $0.7 million of other expenses.

For the three months ended June 30, 2022, our total research and development expenses were approximately $7.6 million, comprised of approximately $4.4 million in subcontractor-related expenses, approximately $1.6 million of salary and related expenses, approximately $0.7 million of material-based related expenses, and approximately $0.9 million of other expenses. The total decrease in research and development expenses was $3.1 million or 41% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulator process related to the BLA and the MAA review of Elfabrio by the applicable regulatory agencies.

Selling, general and administrative expenses were $4 million for the three months ended June 30, 2023, an increase of $1.4 million or 54% compared to $2.6 million for the three months ended June 30, 2022. The increase resulted primarily from an increase of approximately $1.2 million in salary-related expenses due to a onetime cash flows. Financial expenses net were $0.8 million for the three months ended June 30, 2023, compared to financial income net of $0.2 million for the three months ended June 30, 2022. The increase resulted primarily from an increase of $0.6 million in cost-related exchange rates as well as an increase in our convertible notes-related expenses of $0.3 million net of a gain recognized due to the conversion of a portion of the 2024 notes of $0.4 million.

In the three months ended June 30, 2023, we recorded income taxes of approximately $0.3 million, which were primarily the result of the provision for the current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act of 2017, which went into effect on January 1, 2022. Section 174 eliminated the option to immediately deduct research and development expenses in the year incurred and requires us to capitalize and amortize these expenditures over 15 years for out of the U.S.-based research and developments. In addition, during the three months ended June 30, 2023, we released the valuation allowance related to deferred tax assets of the U.S. jurisdiction that resulted in a net benefit to tax expenses of $3.1 million. Cash and cash equivalents were approximately $48.2 million at June 30, 2023.

Net income for the three months ended June 30, 2023, was approximately $19.3 million or $0.29 per share basic and $0.21 per share diluted compared to a net loss of $5.3 million or $0.11 per share basic and diluted for the same period in 2022. I will now turn the call back to you, Dror.

Dror Bashan: Thank you, Eyal. So thank you, everyone, for joining our today’s call. On a personal note, I would like to express my gratitude to the entire Protalix team, whose tireless efforts have resulted in this exciting time in the company’s evolution. Although our path towards regulatory approval has certainly had its challenges, given the recent regulatory approvals in the EU and the U.S., we have made significant progress in turning around the company. We are now focused strengthening our pipeline and R&D capabilities. I’m proud of the Protalix achievements so far this year, and I’m confident we will continue to drive the company forward for the benefit of the patients and their families. Now I’ll turn the call back to the operator and open the line for your questions, please.

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Q&A Session

Operator: Thank you. [Operator Instructions]. Our first question is from Boobalan Pachaiyappan with H.C. Wainwright. Please proceed.

Boobalan Pachaiyappan: Hi, thanks so much Dror for talking our questions. So firstly, with respect to Elfabrio. So we understand Chiesi is responsible for launch activities. But maybe from Protalix’s end, what additional update would you like to provide to a shareholder regarding launch preparation and maybe when can we hear the drug will be launched, or about the pricing information and all that, when can we hear?

Dror Bashan: So thank you for that. I think, as you know, Chiesi is responsible for the commercial — for the 100% of the commercial activities. Chiesi is also a private company. So once we will be able to share more information, we’ll share more information. Right now, the product was just approved. It was launched in the U.S. It is being approved country by country in Europe. This is public information, of course. And as Eyal mentioned and I also briefly mentioned, we are building stock, and I hope that this will continue into a good penetration into the market. So once we will have more data, we will share it through our financials in the different quarters, of course. But I can assure you that we are pleased with Chiesi, very pleased with Chiesi. We think they are very good and committed partner. And we are positive they are doing their best in top priority to bring these products to the patients.

Boobalan Pachaiyappan: Okay, fair enough. With respect to your ongoing PRX-115 gout study, so given you’re enrolling patients — hello, can you hear me?

Dror Bashan: Yes.

Boobalan Pachaiyappan: Okay. Alright, sorry, there was a glitch. So with respect to your ongoing PRX-115 gout study, given you’re enrolling patients who have elevated uric acid levels, I’m just curious whether you’re planning to measure UA level at the end of treatment, and also what would be an acceptable reduction in uric acid levels to demonstrate the clinical meaningfulness of 115?

Dror Bashan: So I suggest we have to finish the recruitment and to analyze the data. This is why we have — we plan at least to have up to 56 subjects in this clinical strategy. The protocol that we are using, I think it’s public. It’s — we have all the details of the trials over there. So clearly, it’s about reducing the levels but overall, I suggest we wait and see the final results in order for us to evaluate what we have in hand and how to proceed for the next stage.

Boobalan Pachaiyappan: Okay, great. And then maybe one final question from me. So with respect to NETs programs, so I’m trying to understand your clinical strategy here because there are multiple NET diseases, NET-related diseases, including rheumatoid arthritis, lupus, psoriasis and so on. So I’m trying to understand, is the key here to demonstrate proof of concept in one particular indication and maybe partner with established players for the clinical development or branch out your — the value of this drug, any color on your clinical strategy?

Dror Bashan: So we have mentioned, I believe, in late June on our investor event that we have, if I may say, refined our pathway forward and our strategy going forward. And we will focus into the genetic and non-genetic rare disease space. This is going forward. We believe we have many years of experience, knowledge, many years of scars and also two outstanding successes, bringing products to the market, going through all the developmental and regulatory hurdles, and getting to the finish line. And this is where we believe we can add value. This is despite the fact ProCellEx, our system, is agnostic. So this is the intent. Now right now, we are — we will — we planned this, and we hope we will succeed, of course, to put our hands and to bring in and strengthen our pipeline with additional programs within the rare disease space.