Protalix BioTherapeutics Inc. (NYSE:PLX) Q2 2022 Earnings Conference Call August 15, 2022 8:30 AM ET
Company Participants
Chuck Padala – LifeSci Advisors, Investor Relations
Dror Bashan – President, CEO and Director
Eyal Rubin – Senior VP, CFO, Treasurer and Corporate Secretary
Conference Call Participants
Boobalan Pachaiyappan – H.C. Wainwright
John Vandermosten – Zacks
Operator
Good morning, ladies and gentlemen, and welcome to the Protalix Second Quarter 2022 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded.
I will now turn the conference over to our host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. Thank you. You may begin your conference.
Chuck Padala
Thank you, operator, and welcome to the Protalix BioTherapeutics second quarter 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.
The 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 disclaimers 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 these statements made. Factors that could cause actual results to differ are described in the disclaimer and in the Protalix’ 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 2022 financial results and business update call. I will begin with a review of our progress and accomplishments over the second quarter, along with our plans for the coming months. Following my remarks, Eyal will provide a more detailed review of our financial results. We will then open the line for questions.
Let me begin with a review of our Phase III BALANCE clinical trial for PRX-102 for the treatment of Fabry disease in adults. In April, we announced positive top line results from the trial, showing that PRX-102 successfully met its primary endpoint on kidney function and presented a favorable tolerability and immunogenicity profile. I’m happy to report that the clinical study report, which is called also as the CSR for the BALANCE trial has been completed. The final analysis of the BALANCE study confirms the positive top line results and favorable tolerability profile.
These encouraging results highlight our confidence that PRX-102 has the potential to become an important treatment option for patients with Fabry disease. We are excited to move closer to potential approval of PRX-102 and then the commercial launch. The BLA resubmission will include the positive results from our three completed Phase III clinical trials, the BALANCE, the BRIDGE and the BRIGHT as well as our Phase I/II safety study.
With respect to PRX-102 MAA submitted to the EMA, we are working closely with Chiesi Global Rare Disease, to advance the review process. The MMA was submitted earlier this year in February of 2022.
This is an exciting time for Protalix. As we move closer to a potential approval for PRX-102 for the treatment of Fabry disease. We believe that the totality of our clinical data, which is based on hundreds of years of aggregate patient exposure, demonstrates that PRX-102 can be an important new treatment option for patients with Fabry disease. Chiesi, our global partner, has been working on the commercialization plan to provide a solid foundation to successfully bring PRX-102 to the market upon its anticipated approval.
With regard to our broader pipeline, we continue to invest in new product candidates to support our goal of becoming a significant biotherapeutic company. To that end, we have established a pipeline of early-stage programs in development from discovery stage to Phase I, which will start in early next year.
And all of these programs involves molecules that we expressed for ProCellEx, our proprietary protein expression system, which enables us to express and develop potential products, which will address real unmet needs on the market. In parallel, we continue to work to improve our technological capabilities, both on the ProCellEx system and in the chemical modifications area.
We are moving forward with PRX-115, a novel PEGylated uricase for treating severe gout patients. And the first in-human Phase I study is planned to commence in the first quarter of 2023. As support for this first in-human study, we are finalizing our toxicology package, of course.
With respect to PRX-119, we have conducted several experiments, preclinical studies to demonstrate the feasibility of PRX-119, and we look forward to providing updates on these and additional programs as they progress.
Our 2022 Annual Meeting of Stockholders was held on June 30, 2022. At the meeting, our stockholders approved all of the items on the agenda. In addition, our Board of Directors appointed Shmuel Ben Zvi, or Muli, to be a member of the Board of Directors. As David Granot’s tenure on the Board ended as of the meeting. On behalf of Protalix, I would like to thank David for his dedicated service to our company and wish him the best in his future endeavors.
Muli has extensive financial and economical knowledge as well as considerable management business and auditing experience. Muli is now the Chairman of our Audit Committee and a member of the Compensation Committee. We are very happy to welcome Muli to Protalix.
Finally, our balance sheet provides us with sufficient cash runway to the third quarter of 2023, enough to support our plans for resubmission and potential approval, in addition to the continuing — to continuing to develop our early-stage pipeline programs.
I will now turn to Eyal for a review of our financials. Eyal, please go ahead.
Eyal Rubin
Thank you, Dror, and thank you, everyone, for joining today’s call. Let me review our second quarter 2022 financials.
For the quarter ended June 30, 2022, we recorded revenue selling of goods of $3.4 million, an increase of $0.2 million, or 6% compared to the revenues of $3.2 million for the same period of 2021. Revenues from licenses and R&D services for the quarter ended June 30, 2022, were $5.4 million, an increase of $2.2 million or 69% compared to $3.2 million for the quarter ended June 30, 2021. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi agreements.
Cost of goods sold was $4.1 million for the 3 months ended June 30, 2022, a decrease of $0.6 million or 13% versus $4.7 million for the same period last year. The decrease in cost of goods sold was primarily as a result of a decrease in manufacturing costs due to higher yields and lower wastage.
Research and development expenses for the 3 months ended June 30, 2022, were $7.6 million, a decrease of $0.1 million, or 1% compared to $7.7 million for the same period last year.
Selling, general and administrative expenses were $2.6 million for the 3 months ended June 30, 2022, a decrease of $0.6 million, or 19% versus $3.2 million for the same period last year. The decrease resulted primarily from a decrease in salary-related and selling costs.
Financial income, net, were $0.2 million for the 3 months ended June 30, 2022, compared to financial expenses, net, of $2.1 million for the same period last year. 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 of 2021 notes to an aggregate principal amount of $28.75 million of 2024 notes, and an increase in the exchange rate of new Israeli shekel for U.S. dollars over the period.
As of June 30, 2022, our cash, cash equivalents and short-term bank deposits were approximately $28.6 million compared to $39 million as of December 31, 2021. We believe that our current financial position provides us with sufficient cash runway through the third quarter of 2023.
I will now turn the call back to you, Dror.
Dror Bashan
Thank you, Eyal. So thank you, everyone, for joining us on today’s call. I will now turn it back to the operator to open the line for questions, please.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Ram Selvaraju with H.C. Wainwright.
Boobalan Pachaiyappan
This is Boobalan dialing in for Ram Selvaraju. A few from us. So firstly, now that your clinical analysis is complete, what needs to occur from now until the BLA filing?
Dror Bashan
So actually, this is part of the process. I mean, the CSR is part of the package that is being composed together with the other clinical trials and additional data, of course, and other aspects that will be a part of the resubmission later this year to the FDA.
Boobalan Pachaiyappan
Have you conducted any physician-based market research study and discuss the target product profile and potential appealability of PRX-102 for Fabry disease?
Dror Bashan
So if you think from a marketing point of view, it is clearly the main date of Chiesi. And I’m positive, they are doing a very thorough job, vis-à-vis, or had the potential launch or approval next year. They take it very seriously. For them, it’s, I believe, a very high priority asset. And they do whatever can be done in order to have a successful launch. Clearly, we need to
Boobalan Pachaiyappan
I was wondering if you could share if Chiesi has done any market research focusing on U.S. physicians and then maybe you can share some findings with this?
Dror Bashan
I don’t have anything in right now. Clearly, you can approach Chiesi. And also, we can discuss it on a different point of time, of course.
Boobalan Pachaiyappan
What’s your status in terms of CMC capabilities? Do you or your commercial partner have plans to expand capacity further?
Dror Bashan
I mean currently, what we have — the capacity that we have supposed to be enough, even more than enough, if I may say, to support the market. There’s no issue. I mean it’s supposed to — can be, at least 50% of the market, I mean. Let’s get to 50% of that, and then we can decide if we expand or not.
Boobalan Pachaiyappan
One more of — can you remind us of the potential milestones and breakdown of regulatory commercial for PRX-102?
Eyal Rubin
Yes. So the milestones, the agreement is redacted and there’s a reason to it. So obviously, we cannot share it with the public.
Operator
[Operator Instructions] Our next question comes from the line of John Vandermosten with Zacks.
John Vandermosten
Want to start out with a question on a recent journal article that I was reading through an orphan, and it looked at the current treatments in Europe for Fabry disease. And they found a tremendous shortcoming with what’s offered right now. And particularly, they pointed out pain and temperature intolerance were two of the items that were noted. Does — can unigal address those issues better than existing therapy?
Dror Bashan
I don’t know if we can — to tell you that we have compared to all three drugs on the market. We looked into pain as part of our clinical program, especially on the BALANCE trial. And the data that we have there will be shared with the authorities.
As you know, our endpoint is measured by — for EGFR. Like our main endpoint is not slow pain questionnaire or something like this. But certainly, we look — we address the pain aspect as well.
John Vandermosten
Yes. I mean obviously, there’s something missing there and perhaps unigal can address that. Second question is just on the opportunity for combination therapy in the Fabry space. That’s a trend in some other indications. And I’m wondering if that’s something that might be possible for Fabry?
Dror Bashan
I don’t know. It could be. It has to be, of course, checked on a clinical trial. I think the overall indication, although it’s well known for many, many years, still evolves. And more and more developments are there right now in the pipeline, mainly early stage, but still way more than, let’s say, 5 and 10 years ago. And I’m sure, going forward, there may be some companies that will go for potential combination.
The question is with what? Is there some blood reduction with gene therapy? It could be — but there should be scientific justification to even to initiate such a study. I’m not aware as of yet, let’s put it this way.
John Vandermosten
Something for the future. Next question is looking at Gaucher and Pfizer. I was looking at the revenues that you reported for the second quarter. It seems like — I know these are lumpy, but it seems like Pfizer is kind of trending up. I mean, who knows what could happen in the future. But with that in mind, the [priv], which was a Shire drug, I think, that is ending its exclusivity this month in Europe. And I’m wondering, does that open up an opportunity for Pfizer to expand ISO into Europe?
Dror Bashan
It’s true that the exclusivity period ends up soon. Pfizer is clearly aware about it. And we have discussed it in the past. It’s up to them and their call if and how to enter Europe.
John Vandermosten
I mean it sounds like they know about it. I mean it’s a large opportunity. Obviously, the EU is number two after the United States in terms of the size of the market. So — and it seems like they’re picking
Dror Bashan
It’s true. But you know, John, there are three — at least three enzymes that are on the market for many years, right? Or two enzymes in Europe and three enzymes in the U.S. Also, in other countries, of course. And by the end of the day, they do, give or take, a similar job, okay?
And thanks, God, and the science, the enzymes or the ERTs are doing a good job in a way that patients can live pretty comfortably, if I may say, in a pretty good quality of life for many, many, many years, which is rare, not because it’s rare disease because of the outcome.
Patients that are — or Gaucher patients are treated, right? In order to enter a market, I don’t know, in the U.K. or in Germany or wherever it is, you need to penetrate through some either differentiation or something else. It’s not like a walk in the park today when you have two very, very significant players on the market for many years. It’s not — it’s Shire and Genzyme or Takeda and Sanofi, right? So I assume that Pfizer is looking into it seriously and thoroughly and they will take their decisions.
John Vandermosten
And last one is for you. You mentioned that the gross margin had improved due to some factors. Improvements in efficiency, I guess, you could generalize. Is that something that will continue going forward? Or is that just a onetime kind of benefit that you — which way do you see that going?
Eyal Rubin
It depends. Partially, it’s a consistent thing that we’ll see the benefit going forward. Part of it is the yield. We don’t control the yield. Sometimes you get an outstanding yield you don’t even anticipate, which breaks all records. And usually, the normal curve, some of it obviously will stay there. Some will disappear.
John Vandermosten
So it sounds like — I don’t want to put words in your mouth, but it sounds like it will move up slightly for some factors, but other factors are kind of volatile, and you can’t really determine whether they’re going to continue.
Eyal Rubin
Yes, that’s true.
Operator
[Operator Instructions] Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn this call back over to Mr. Dror Bashan, for closing remarks.
Dror Bashan
So thank you. So I would like to thank everybody again for their time, and we will clearly update accordingly whenever we have something to update the market. Looking forward to talk to you next time. Thank you.
Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.
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