Q4 2020 PolarityTE Inc Earnings Call
You were putting on hold the Kashi T E fiscal year 'twenty 'twenty earnings call at this time on Sunday each day Celgene, sometimes you went very shortly.
Appreciate your patience on please remain underway.
[music].
Yes.
Yeah.
Good day and welcome to just pull Archie T E fiscal year 'twenty 'twenty earnings call today.
Today's conference is being recorded.
At this time I would like to turn the conference over to Richard. Please go ahead Sir.
Yeah.
Thank you operator.
Good morning, and thank you for joining clarity on.
All to discuss fourth quarter on full year 2020 results.
I'm Rich Harley Vice President of Investor Relations.
On the call today are members of the executive team.
David cheaper.
Richard Hague.
T O.
Hey, Jake Patterson.
CFO.
Okay.
Before we begin I would like to remind everyone.
Today's discussion will include statements about the company's future expectations plans and prospects that constitute forward looking statements.
For purposes of the Safe Harbor provisions.
The private Securities litigation reform back from 1995.
We caution that these forward looking statements.
Subject to risks and uncertainties.
It may cause actual results to differ materially from those indicated.
These forward looking statements are based on our current expectations and may differ materially.
Really from actual results due to a variety of factors are more fully detailed under the caption risk factors in our filings with the SEC, including our annual report on form 10-K for the year ended December 31, 2020 Covid.
Can be filed with the SEC today.
Any forward looking statements made on this call speak only as of today's date.
Good day March 30th 2021.
And we disclaim any obligation to update such statements to reflect events or circumstances.
After today's call except required by law.
I'd like to highlight.
The call is being recorded.
We're making it available to investors on the media via webcast and a replay will be available on our website from the Investor Relations section shortly following the conclusion on the call.
Actually it is the property of clarity T E.
Any redistribution retransmission or rebroadcast on the call in any form without <unk> expressed written consent is strictly prohibited.
I'd now like to turn the call over the David Siebert.
Yeah.
Thank you rich and welcome everyone I'm pleased to report that we had another record quarter in terms of revenue, but more importantly, we made significant progress on the preparation for our I N D submission.
Today I will begin by highlighting some of the achievements we've made over the last year and then turn the call over to Richard Hague, who will provide an update on the regulatory development plan for skin P/e, followed by a financial update from Jake Patterson's.
Now I'd like to highlight some notable achievements first last April we announced plans to pursue a BLA for skin T. Six.
<unk> submitted a pre IND meeting request in August and subsequently received feedback from the FDA in October.
With that feedback we are preparing in R&D, which we believe will provide a framework for achieving a successful BLA.
We have maintained a collaborative dialogue with the SBA.
We are on track to submit 90 in the second half from 2021.
Second is capital preservation inefficiency.
In 2020 to be eliminated a number of non essential legacy expenses, we commenced COVID-19 testing, which helped generate additional revenue into three operating expenses.
The company was with respect to head count, which included a reduction to our commercial footprint.
There are a couple of highlights.
Our 2020 operating cash burn was approximately 33% lower compared to 2019, while total revenues were up 79% year over year.
Even more impressive is that the operating cash flow in Q4 of 2020 with 70% lower than the same period in the prior year.
Total operating costs and expenses in 2020 was 47% lower than our two bad debt in 2019.
Driven largely by a 46% reduction in personnel.
And stock based compensation was down 77 percentage 2020 versus 2019.
We believe the organization is now operating at a greater level of efficiency.
And much of this was achieved amid a global pandemic, depending on mix and created substantial challenges and uncertainties from the organization, which we.
Joe Smith.
Sure. We believe the company is now better positioned after having strengthened our balance sheet from recent financings with the free cash on our balance sheet. We expect our business activities will be funded into the third quarter of 2022.
Fourth we completed enrollment in a randomized controlled diabetic foot trial, comparing <unk> plus standard of care to standard of care alone. We look forward to sharing these results presentation and press release.
TWC spring in May of this year.
Instead, we have made incredible progress to protect our intellectual property.
The company's total number of wild and granted utility patents is currently 10 internationally and two in the U S.
Now, let's turn to slide six for a review of our fourth quarter 2020 revenue versus third quarter.
Total revenues were approximately 3.59 billion up 8%.
<unk> revenues were approximately 1.21 billion up 4% income.
Contract services revenue were approximately $2 three 9 million up 9%. This includes revenue from COVID-19 testing, which was approximately 1.86 million in Q4.
Now I'd like to touch on our full year 2020 results versus 2019, which truly demonstrates the transformation of this company has undergone over the past year.
In 2020 total revenues were approximately $10 3 million up 79%.
<unk> revenues were approximately $3 $73 million up 59% and contract service revenues were approximately approximately $6 4 million up 94% again. This includes revenues from COVID-19 testing, which was approximately $4 three 2 million. Since we began testing in late may of last year.
Okay.
While we are extremely proud of our fourth quarter and 2020 results. It is important to note that the F. D. A stated policy on enforcement discretion from $3 61 http engine that is.
Its enforcement discretion is not extended what do you have to you does not make other accommodations for manufacturers on 361 products, who are transitioning to a $3 51 product, we may need to cease marketing skin Chi.
In addition, we recently received information from our largest COVID-19 testing customer on New York based nursing home operator that New York is allowing on site COVID-19 testing for nursing from staff, which we expect will reduce our testing revenues were exploring needs to add new services from this customer such as processing tests for their residents instead.
Their style and working to identify new customers, but we do expect fluctuations in our 2021, COVID-19 testing revenue due to a shifting dynamic landscape.
I'd like to make one thing very clear.
Regardless of whether Skus he remains on the market after the conclusion of the enforcement discretion.
Would not expect to see a major impact to our P&L because we believe we can eliminate coffee correspond to the lost revenue.
As evidenced by the progress we've made over the past year in transitioning. This business. We are prepared to pivot quickly and effectively in response to this potential change, including continuing to manage our costs on.
Accordingly, our focus remains on achieving the key regulatory milestones necessary to obtain a beat obtain a BLA for skin T, which we believe will maximize the long term value of this asset.
Now I would like to turn the call over to Richard who will provide an update on our regulatory development plan for skin GE and other operational updates.
Yeah.
Thank you David and good morning, everyone.
I'm pleased to share the progress we've made towards our goal of submitting an IDE for stem from the second half of this year.
As I described on our last earnings call. We received the initial feedback from FDA in Q4.
You bet on other interactions with the agency has given us additional clarity on <unk>.
Since rather ongoing enabling activities.
Activities remained specifically focused on three areas.
On sea or chemistry manufacturing and controls.
Clinical and critical.
Because you can see them see our team is making excellent progress towards characterizing it as well.
Which over the next few months should allow us to validate and implement it matrix product release assays to meet FDA requirements.
Well, we're making some really strong progress on our transition to current good manufacturing practices or cgmp.
On the preclinical from.
We plan to conduct a certain you.
To conduct certain additional preclinical work, including a GOP toxicology study. However, based on recent feedback we received from the FDA. We do not expect the completion of this work to delay the timing of it I do submission or the initial or the initiation of our pivotal trials.
As discussed on our Q3 call data from our recently completed you are C. G will be on cool that as part of the skin T. I D safety package.
You should note that we currently have 29 patients enrolled in our view on <unk>.
You too.
On to stop enrollment after we reached 30 patients.
The final data package is complete.
We will include it in our IDE submission as well.
We believe that stopping the study is the right decision as it will allow us to reduce costs from better aligned with our strategy to pursue full thickness the abuse as well.
Lead indication.
With regards to the political we plan to move forward with the trial design that we initially proposed to the agency, which is focused on full thickness defuse ranging in size from two centimeter squared to 10 centimeter square.
Penetrated deep structures, such as capsule tandem.
Don.
This corresponds to a wagner grades to him for a university of Texas grades two on three.
In January we had a very valuable clinical advisory Board meeting, which included a number of highly experienced wound care physicians, representing multiple specialties Judy.
Judy excellent feedback we've received we believe the final trial design can be submitted through the R&D will be well received by FDA and by clinicians who will eventually participating on the trial.
And we're taking steps now to ensure that we can begin enrolling patients soon after approval is heightened demand.
At this point I would like to highlight the additional steps, we're taking to maximize the full potential of <unk> over the next several quarters.
Shortly after the idea of opening we expect to submit a second do you have your trial protocol to FDA, which will focus on full thickness day abuse greater than 10 centimeter square.
Goal is to get the study up and running as soon as it is approved and to use the data from two studies to pursue a broad BLA approval for the hard to heal D F use.
Previously described.
Stage, three and four pressure injuries remains an important priority for us it is low.
Our next indication we plan to pursue.
We are currently analyzing internal or external patient data too.
To define the parameters of what our appropriate probably.
Our plan is to submit a supplemental or additional R&D day syndication later this year or early 'twenty 'twenty two.
We plan to take similar steps to follow a lot of acute one indication.
We believe that the work we're doing now in preparation for that day, a few R&D.
Foundation towards celebrating the approval process.
Occasions.
We're very encouraged by what our team has been able accomplish on the five months since our last earnings call and we remain confident in our ability to execute on our strategy to pursue multiple indications from skimping.
We continue to be inspired by the outstanding real World results that physicians and their patients experience index.
Streaming challenging on types.
And steadfast and I believe that skimpy on it can be a game changer in this underserved multibillion dollar market.
Now I'd like to turn the call over to Jay Peterson for a financial update.
Jake.
Thank you Richard and good morning, everyone.
As David mentioned for the fourth quarter of 2020, we reported approximately three to five 9 million in total revenues, which include revenues from <unk>, which we refer to as product search on kit.
And revenues from the sale of contract research services, which we refer to net services in the country.
Revenue from products during the quarter were $1 2 million in revenues from services were Tupac through nine months.
On previous calls we discussed our target with low even based on operational cash burn of less than $2 million grew month on average I'm happy to report that we achieved this target from the fourth quarter cash.
Cash used from operating activities in the fourth quarter of 2020 was approximately five 8 million.
Which included $76 million offering and re price and cost or what will be $2 million. Excluding operating reprice on costs were approximately one $6 million per month on average, which is 70% lower than the three 3 million monthly average in the fourth quarter of 2019 and 20.
On Brazil.
2.25 million monthly average in the third quarter of 2020.
Additionally for the full year ending December 31, 2020 cash used in operations was $37 75 billion.
33% lower than cash use from operations during 2019.
Consistent with our strategy and discussed on previous press releases, we are continuing to work aggressively to reduce our base operations in Pittsburgh and expect we will remain on average below $2 million per month excluding.
Excluding costs associated with clinical trials on daily.
Yeah.
We finished the fourth quarter of 2020 with approximately 25 5 million from cash and cash equivalents on our balance sheet.
Well, our future cash projections may change, including the additional capital raised from a direct investment from exercise of warrants in January of this year, we believe current cash from <unk>.
Cash equivalents will be sufficient to fund their activities through the end of 2021 and into the third quarter 2022.
I'd like to turn the call back over to David for some concluding remarks.
Yeah.
Thanks Jacob.
We've taken extraordinary steps to position this company for the future by implementing transformational changes over the past year.
We continue to make progress on our regulatory plan for skin GE and are eager to reach important regulatory milestones. So that we can begin to generate clinical data on <unk> and eventually obtain a DLA to help more patients and providers will realize the benefit of stinky.
We've reduced monthly cash burn in Q4 by 70% versus the prior year.
We now have 10 granted or allowed patents worldwide. We have seen can be applied in over 1100 clinical cases and reported record service and product revenues in 2020.
We successfully enrolled a large randomized control trial in D abuse with data expected at night, and we have shored up our balance sheet, such that we have adequate cash to fund operations into the third quarter of 2022.
It's truly remarkable progress we've made particularly given the ongoing global pandemic in our recent decision to pursue a be a like I believe the company is in a strong position and I'm incredibly proud of the entire team for getting us here.
Now I'd like to open the calls up for Q&A.
Thank you Sir.
I would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you're using a speaker phone. Please make sure you're on mute function is turned off to allow your signal to reach our equipment.
That's all I spent on the phone language education. Your line is open.
State your name and company day for posing a question.
Again that is star one to ask a question.
We will now take our first question. Please go ahead caller your line is open.
Hi, Good morning, everybody. This is Christian <unk> from Cantor Fitzgerald, Thanks for taking my question the.
The first one I had was Oh CWC next month could you. Please comment on which metrics we might see data from outside of wound closure well it looks similar to the presentation that we saw last year with the first 50 patients and then are you also planning to conduct any further work around cost and time savings.
Sure Richard you want to take the on this question.
Yeah, sure Hi, Kristen I'll say, yes, the data presentation will be similar to what we presented last year.
This debt, let's say WC presentation will be focused on top line data are and there will be some additional data on that will report after CWC as additional analysis is done.
Got it. Thank you and then for the <unk> trial understand that you're hoping to enroll one more patient here, but wondering once you have all that data collected if this is something you would look to share the data from that at a future Medical conference.
Yes, we do plan to do that are the reason we chose 30 is a stopping point. It. So we could have a an even distribution of cash.
15 patients in the control arm at 15 in the treatment arm.
So do you plan to present that and hopefully get that day to publish down the road.
Great. Thank you and then with your cash guidance here into the third quarter of 2022 could you talk about which trials or how you thought about incorporating these trials that you've laid out today in this guidance are specifically in terms of number of patients and it sounds like from your.
Reported earlier that you'll be looking to run these in kind of a tight sequence formation.
Yes, so I'm sorry could you just clarify your question regarding the financial side.
Yeah. So because you provided guidance for us today and for the third quarter of 2022, just wondering how you thought about incorporating your future trials into the guidance you provided today.
Oh, yes, okay. Thank you.
Yeah. So the the the budget that we put in place a incorporates the trials that.
Debt. We've described are the D F Q2.
While the first trials, we said, we hope to be able to as soon as the idea is open to get that enrolled a couple of months later on.
So possibly by the end of.
This year or early into next year.
And the larger D. F. You won't trial the follow on or shortly after that so all that is built into the eye from the budget as well as the pressure injury.
Study as well so that the debt the cash guidance incorporates those studies.
Great. Thanks, and last question here is how important is this data that youre going to share a S. A W. C. Do you think to help with enrollment timelines for this trial and then you know what have you kind of seen across the face with COVID-19 in terms of whether these procedures.
Whether it's skimpy on another product or are still being done has there been kind of an overhang lifted up after you know people are getting their vaccines and hospitalizations going down in certain geographies.
Yeah. So we're certainly excited about presenting the card.
Yeah, a few RCT data believe that'll be valuable for not only for investors to respect and appreciate the debt.
The value of a skimpy on these patient types, but also as you said many of the sites that we've worked with on that study.
Most likely participate in our study so we're excited about the carryover from that.
With regards to on the impact of Covid, certainly we've seen that like everyone has but.
We've seen more and more uptake of the product.
Recently, yeah, and we don't believe by the time that our studies kick off at the impact will be significant at all.
As we've described where we're gonna be treating some very challenging.
Deep loans.
Non elective procedures. These are critical procedures. So we expect the enrollment there too to be to be solid and simple forward as as we expect.
Great. Thank you.
Thank you Kristen.
Yes.
As another reminder to ask a telephone question. Please signal by pressing star one on.
Please state your name and company before posing a question.
We will now take our next question. Please go ahead caller your line is open.
Good morning, and I'm, David on that yet.
This is RK from HC Wainwright.
A couple of quick questions. Okay.
So literally.
Tell me what's on that.
On the day.
And for some period on our enforcement put them from enforceable.
What.
Dialogues right every day.
Yeah.
What did you want to touch on that.
Sure.
So I mean, our dialogue has mainly been focused on the.
I N D. The application process the guidance has been very.
Very consistent from the agency with regards to enforcement discretion.
In terms of their interest and wanted to implement that.
However, as we know last year, they decided to expand the enforcement discretion a couple of months before it was too and so it's hard to speculate right now exactly how they're going to handle this everyone knows that there you know very very busy with COVID-19.
And whether or not there'll be in a position to low to extend that or not remains to be seen and then I think the other question is on exactly how they will handle certain products that are transitioning a two or 351.
And are taking the appropriate steps to partner with the agency.
They'll look at those types of products. So right now it's very much a speculation as to.
How how things are going to unfold.
But as David described earlier on the call were certainly prepared to it's a pivot and handle whatever whatever decisions come our way.
Right I think that the key RK will be met.
And that regardless of what the outcome looks like you know we are prepared right and I think that you know historically when you look at the execution of.
This current management team. We have responded I think very quickly.
And properly two different scenarios that we've been you know had been put in front of us. This.
This is not going to be any different. So we are prepared and we've got a plan in place and.
If need be we'll execute on that but the important part of it is that we have eliminated warehouses, you know looked into and have determined the cost associated with different aspects of this.
We're prepared to make it so that it is not an impact to our P&L and I think that's the important part the important takeaway is that we believe it's not going to have an impact on our P&L. If you need to go on that direction.
Okay. So if I M D as filed in second half moving on that.
They are projecting.
Can you help me understand like how long it would take.
In Jumbo times.
By the time, you know you have on everything that you need to file the BLA.
Sure. So you know a lot of it obviously depends on the.
On the timing of the idea of getting opened but once it's opened and we started enrollment.
Our historical perspective guidance that it would be probably about 20% to 24 months to enroll these studies based on what we've seen previously with our current debt do you have you are see T. So you know what.
The fact that we plan to enroll our first study.
You know a couple of months after the ideas open and then the follow on study a couple of months after that.
So you could expect that are roughly between 24 and 30 months, we should be positioned to have those those those day to complete.
And then of course, you have to factor in the debt locked out of that data analysis that data before we file but I think that's probably a good guidepost is that 24 month to 30 month period once enrollment.
Is initiated.
Perfect. Thank you for that and then the last question David.
Mike.
On COVID-19 testing 11 years.
Yep.
That's on very much out there on New York State.
Hum.
In general how do you use.
He is 11 years.
Yeah.
Especially with the different states, having different mandates on them.
Mask mandates on work back.
How how should we think about that revenue line.
Going forward yeah.
Thanks for thanks for asking that looking at the end of the day you know we were clear about.
A customer that we have in New York Nursing home.
No it was pretty clear with us that they're going to see a shift from the way testing is being done.
That's going to have on near term impact on US there is no question.
On you know that'll that'll have an impact most likely in Q2.
But we are working to explore ways to add new services for this customer.
You know on we're also looking to identify new customers and we're working diligently on that so you know I point to is we do expect fluctuations.
Given the shifting dynamic of this landscape RK I mean, there's no question that that testing was something.
It's something that we identified early on as you know would have hiccups potentially through 2021.
You know the vaccines evolved so were seeing that head on and we're adapting to as best we can but yes, we do expect given that this recent feedback from our our our New York based nursing home operator that that you know near term, we're going to see a little bit of a slowdown from investing.
Okay. Thank you. Thank you both for taking my questions.
Of course, thank you Roger.
Yeah.
As a final reminder to ask a telephone question. Please cyclical pressing star one.
Well pause for just a moment to allow everyone an opportunity to signal for a question.
There are currently no further questions at this time.
This concludes today's call. Thank you for your participation you may now disconnect.
Okay.
Yes.
[music].