Q1 2021 PolarityTE Inc Earnings Call
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Ladies and gentlemen, and good day, and and welcome to the polarity T. He first quarter 2021 earnings call. Today's conference is being recorded at this time I would like to introduce our first speaker Mr. Rich Hurley. Please go ahead Sir.
Thank you operator.
Good afternoon, and thank you for joining <unk> call to discuss first quarter 2021 results.
I am rich Harley Vice President of Investor Relations on.
On the call today are members of the executive team.
Which include David Siebert.
Richard Hague, President and CEO of <unk>.
Patterson interim CFO.
Before we begin I would like to remind everyone that 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 under the private Securities Litigation Reform Act of 1990 fives.
We caution that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated.
These forward looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors, including but not limited to those detailed under the caption risk factors that are described in our annual report on form 10-K for the.
The year ended December 31, two.
2020, and form 10-Q for the quarter ended March 31, 2021 filed with the SEC.
Any forward looking statements made on this call speak only as of today's date Thursday may 13th 2021, and we disclaim any obligation to update such statements to reflect the fence or circumstances that occur after today's call except as required by law.
I'd like to highlight two participants that the call is being recorded we're making it available to investors and the media via webcast and a replay will be available on our website and the Investor Relations section. Shortly following the conclusion of the call.
Additionally, it is the property of <unk> and any redistribution retransmission or rebroadcast of the call and any forms without <unk> expressed written consent is strictly prohibited.
I would now like to turn the call over to David <unk> David.
Thank you rich and welcome everyone today I'll begin by highlighting our Q1 revenue and emphasize some of the important steps we have taken to transform <unk> into a clinical stage development company with a proven technology.
I will then turn the call over to Richard Hague, who will provide an update on our regulatory development plan for <unk> and recap the topline results from our <unk> trial followed.
Followed by our Chief Financial Officer, Jake Patterson to give you an update on our financials.
Please turn to slide four for a review of our Q1, 2020, one revenue compared to Q4 2020.
Total revenues were approximately $4 seven 1 million up 31%.
And <unk> revenues were approximately $173 million up 44%.
And contract Research service revenues were approximately two nine and $8 million up 25%. This includes revenues from COVID-19 testing, which were approximately $1 $69 million and Q1.
I am very proud to say that polarity is well on its way to making a successful transition to a clinical stage development company with a proven and patented technology.
As a direct result of the steps our management team has taken over the past year to reposition the company and.
In addition to the hard work and dedication of each and every one of our employees.
I'd like to address a few important points that we believe distinguishes <unk> from other biotech companies that are at a similar stage and the development process.
With over 200 skin applications and zero adverse reactions, we have accumulated and abundance of data from real world experience, which demonstrates that skin T. He successfully close as difficult to treat wounds.
Additionally earlier this week, we reported topline data from a 100 patient diabetic foot ulcer randomized controlled trial, which met both the primary and secondary endpoint of wound closure.
And percentage area reduction net 12 weeks.
We believe all this should give investors great confidence that skins. He is a derisked asset as we pursue a BLA.
Second with a very limited commercial effort consisting of just eight sales reps, we were able and still able to prove that <unk> is a commercially viable assets.
And Q1, we generated $1 $73 million of skin T sales, which on an annualized basis is roughly $865000 per rep.
This represents a substantial commercial opportunity, which we believe could significantly be significantly enhanced with a BLA approval.
Third.
We continue to see a growing body of evidence that supports skin and CE through scientific publications, including the most recent publication of interim results from the day of few trial published and the international wound Journal.
Currently there are now over 10 peer reviewed publications involving skin T.
Force.
The intellectual property portfolio percentage skin tea continues to grow with the issuance of our second U S. Patent earlier, this year and and notice of allowance in the Philippines.
Polarity T now possesses 11 allowed or granted patents.
And the U S and nine internationally.
And finally, we continue to make real progress and our pursuit of a BLA for skin GE and remain on track to submit an IND and.
And the second half of 2021.
Now I'd like to address the Fda's decision not to extend the enforcement discretion period for 361 products.
To be consistent with the Fda's enforcement discretion period, ending on May 31, 2021, we will be winding down commercial sales and skin T.
Importantly.
With the elimination of the associated costs of our commercial effort.
We would not expect to see a major impact to our P&L after severance and restructuring costs.
Now I'd like to turn on the call over to Richard who will provide details from our recently completed clinical trial in diabetic foot ulcers and give an update on our BLA development plan for skin T.
Richard.
Thanks, David and good afternoon, everyone.
First of all I'd like to start by thanking our clinical team and all the physicians and patients that participated and our recently completed multicenter randomized controlled trial evaluating the treatment of diabetic foot ulcers with <unk> plus standard of care versus standard of care alone.
As reported earlier this week, we were extremely pleased with the preliminary topline results that clearly demonstrated that skin te's superiority over standard of care and both the primary endpoint of wound closure at 12 weeks and the secondary endpoint of percent error reduction at 12 weeks as.
As a reminder, 100 patients were evaluated across 13 sites with 50 patients and the treatment arm and 50 patients and the control arm.
For the primary endpoint, 70% of patients were receiving skin day, plus standard of care had wound closure at 12 weeks versus 34% of patients receiving standard of care alone equating to equating to a P value.
0.0032.
For the secondary endpoint the percentage area reduction at 12 weeks was significantly greater from the skin day, plus standard of care treatment group and 84, 4% versus the standard of care alone at 53, 5%. This equated to a P value of 0.000 to four.
It is important to note that 45 or 50 patients and the treatment arm received a single application of <unk>, which is significant given that the most commonly used skin substitute products require multiple applications to achieve results.
We look forward to sharing the full study results in the coming weeks and as with our interim analysis results, which were currently published and the international wound Journal and we expect to complete results from the full data set to be published at some point and the future.
Transitioning to regulatory I am pleased to share that our team is continuing to make good progress as we are now on the final phase of our IND, enabling activities.
We remain on track to submit our RMB and the second half of this year and are working diligently.
Accelerating that timeline as much as possible.
We are very much looking forward to engaging FDA is the part of the upcoming R&D process. As we believe these interactions will inform and crystallize our future development plans for <unk>.
The fda's acceptance of our IND and subsequent enrollment of patients and our first pivotal trial are the critical near term catalysts for the company.
As we complete our transition and become a true clinical stage company, we recognize the need and look forward to being able to articulate future milestones and timelines that will significantly enhance shareholder value.
Following the acceptance of our and we plan to formalize, our milestones and timelines and so that the roadmap to a BLA for <unk> is clear to our stakeholders.
Additionally, I would like to note that as part of our IND submission, we plan to pursue and expanded access program for <unk>, which if approved will allow physicians to continue to treat certain patients with serious and life threatening wounds and allow us to continue together.
Very valuable and safety and outcome data.
Lastly, I believe it's important for us to briefly revisit what makes <unk> truly unique and why we are specifically focused on advancing its development towards the BLA approval.
The core technology of skin <unk> is minimally polarized function and units or psus, which are multi cellular segments creative from a small piece of the patient's healthy skin and are optimized for grafting and we retain the progenitor cells found throughout the skin, including the hair follicles.
<unk> allows the patient to regenerate full thickness three dimensional skin similar to our full thickness skin graft, while reducing the scarring and morbidities associated with split thickness skin grafts and producing results, we believe to be superior to split thickness skin grafts and skin substitutes.
It is also worth emphasizing that our experience and over 1000 patients.
<unk> is easy to use and can be utilized by a variety of health care providers and an operating room wound clinic.
A doctor's office.
Clinically we believe <unk> is highly differentiated from current treatment alternatives and hard to treat wound types and.
And real World experience and data from preliminary studies conducted to date, we have witnessed <unk> cover exposed critical structures.
Volume metrically fill and wounds that include tunneling and ultimately provide complete and durable wound closure with the regenerate tissue, having many of the important characteristics of native skin.
Such as Playability strength sensation ability to sweat and hair growth.
In contrast to a multi staged approach combining numerous treatments and on algorithm dictated by wound progression.
<unk> can be applied directly into deep wounds with exposed structures simple typically requires only a single application and the vast majority of cases and unlike other products and the space may not require a skin graft to achieve final closure.
We believe that our <unk> RCT results strongly supports the observational data we have gained through the extensive clinical use of <unk> as a 361 http and.
It is for these reasons that we firmly believe and our ability to successfully execute on our clinical development plan.
And in turn we are confident that our successful skin and skin <unk> BLA supported by robust clinical evidence will drive widespread adoption.
Enable favorable pill payer coverage and clear marketing claims and provide regulatory exclusivity skimpy is deemed a reference product.
Now I'd like to turn the call over to Jake Patterson for financial update.
Thank you Richard and good afternoon, everyone.
As David mentioned for the first quarter of 2021, we reported approximately $4 seven 1 million and total revenues, which includes revenues from skin T, which we refer to as products and our 10-Q and revenues from the sale of contract research services, which we refer to as services and the 10-Q.
Revenues from products during the quarter were $1 $73 million and revenues from services were $2 $98 million.
Net revenues increased by 405% to $4 seven 1 million for the three months period ended March 31 2021.
Compared to 0.9 3 million for the same periods from 'twenty to 'twenty.
Total operating costs and expenses decreased 41% from $18, one 2 million from the three months period ended March 31 2020.
And to 10, seven and $5 million for the comparable period and 2021.
This decrease was largely driven by the substantial reduction in personnel and its actuated and may 2020 that reduced salary and head count related costs across the company.
Our operating loss decreased from $17 seven 1 million from three months period ended March 31, 2020 to $8 two 1 million for the comparable period in 2021.
Net loss, however increased from 13.04 million for the three months period ended March 31.
2020.
And to 17, four 1 million for the comparable period in 2021.
The increase and net loss is attributable to the fair value and inducement losses related to common stock warrants, which are non operating expenses.
Cash used in operating activities for the three months period ended March 31, 2021 was approximately $6 six 1 million.
And included <unk>, eight 2 million of operating costs and cash used in operating activities for the three months period ended December 31, 2020 was approximately $5 five 8 million and included zero point, and 76 million and offered us the higher quarter over quarter cash burn was attributable to the.
And the annual prepaid expenses and the first quarter of the year such as insurance.
Although we will be losing skin television revenues as David mentioned earlier will be eliminated with the elimination of associated cost.
Our commercial effort, we would not expect to see a major impact to our P&L after severance and restructuring costs.
We will continue to work towards the previously disclosed target of keeping base operational cash burn excluding costs associated with clinical trials, who daily related activities below $2 million.
<unk> per month on average.
And we finished the first quarter of 2021 with approximately $37 2 million of cash and cash equivalents and $34 6 million of working capital. We believe the cash and cash equivalents on our balance sheet will fund our business activities into the third quarter of 2022.
I'd now like to turn the call back over to David Seaberg and for some concluding remarks.
Great. Thank you Jake.
We are really fortunate to have such an incredibly talented and dedicated team at polarity ETE who've been working tirelessly to prepare for our upcoming IND submission.
Additionally, and I can't stress this enough.
I'm very thankful for all the great work done by our commercial team with.
Without their incredible efforts and confidence and the value that skin T. He brings to patients we would never have been able to develop such a robust body of real world evidence.
Their persistence and working with many physicians, who use can T has been and invaluable to this company.
Moving forward with our vision, we believe that our refined clinical focus.
Real world experience and treating difficulty healed wounds.
The body of supportive clinical evidence, including clinical trial data and and expanding intellectual property portfolio.
All validate our strength as a company.
Promise of our product and.
And position hilarity for long term success.
I'd like to thank everybody for coming on the call today and now I'd like to open the call up for Q&A. Thank you.
Thank you ladies and gentlemen at this time the floor is open for your questions. If you'd like to ask a question you may do so by pressing star one on your Touchtone phones now.
And if you are using a speaker phone. Please make sure that your mute function is disabled to allow your signal and to reach on our equipment again. If you are like to ask a question. Please press star one now and.
And our first question comes from a Christian Costco with Cantor Fitzgerald.
I knew you'd be first Kristen.
Hi, everyone and thanks for taking my questions and congrats on the recent data you reported earlier. This week I wanted to ask you a question first about pricing because I know in the past. This is something you evaluate it based off of the current commercial experience from conversations you had so I want.
And to ask if you might look at this differently down the line assuming you get a 351 approval based off of the conversations you've had in the past and then also the data that's now been generated from the trial setting.
Sure and Christina and you say pricing. Your your question really is about the fact that in the past we have shifted gears and pricing because of what we've learned and the market from the perspective of on.
And the very when it wasn't much higher price point on it was restricting to usage of certain hospitals and and and.
Physicians from from adopting the product more aggressively is that correct.
Yeah, exactly and then whether you might look at it differently through having a 351 approval down the line.
Yeah, I mean, that's a very good question, Neil first I'll say and I'll I'll allow Richard to jump in and add to this comment but we are very fortunate to again, you know really learned early on about.
How pricing was impacting the adoption of this product you know when we did shift gears and pricing and I think everybody can look at our revenue trajectory and and noticed that there was a clear on you know moved up.
Up into the right from the standpoint of adoption and especially being used and the larger.
You know wounds.
You know we were we were very fortunate to have that real world experience and sort of your relationships with our providers to really learn that that was impacting our ability to really penetrate so to answer your.
And you know very simply like I do believe that you know pricing.
Pricing is obviously incredibly important to the adoption of this product we will be very focused on that as we move forward.
L a having a BLA.
It allow us to do.
I'll be a little bit more aggressive from a pricing perspective, and certain indications based on you know a lot of different variables, but yes.
Yes, we are going to look into that very closely I think that we are willing to adapt and.
And pricing from to ensure that we have proper adoption and the future but.
And I think that you know.
That's something that we need to really.
Dig into a lot deeper as we move on and Richard you have anything you want to add to that.
Yeah, I would just add debt certainly with the the amount of data that we need to generate to to achieve a BLA.
And that clinical data will also include.
We think a very valuable health economic data.
We think that we could be very well positioned to re look at pricing and <unk>.
You know everything comes down to the cost of total care of patients not just the price of oil.
Your particular product.
So we hope to be able to be in a position to build a very compelling.
The value prop.
Proposition around skin D as it relates to the entitled and the entire cost of care for a patient.
Yeah, specifically and all of these and we talked about at the very difficult to treat wounds were.
Currently the treatment options are incredibly limited and the results are not very very strong. So our product has really proven to be effective through.
Through the.
And the real World experience, we're seeing in these very difficult to treat wounds with exposed bone and tendon et cetera.
And so to your point Kristen as we move forward.
Yes, I would expect weighted approved biologic for us to be able to have more pricing.
Pricing power, if you will and the marketplace.
Given the you know the.
The success that we've seen within those types of wounds.
Yeah.
Thanks for that and then how soon after and I and the filing acceptance do you think you'll be ready to start the trial and I know you don't know the number of subjects required at this time, but based on the enrollment trend do you saw around the RCT. How are you thinking about the ability to enroll day.
A few patients and then on the comments you made about looking at the road map and timelines that we should be thinking off can.
Can you further elaborate I guess, specifically what is going to factor into that decision I think you've guided in the past as the trials will be around 24 weeks, but is the other criteria are essentially just around net number of subjects that will be required and the trials.
Yeah, both great questions. Richard do you want to you want to touch on the on on these two.
Sure. So answering your first one on your last one first Kristen.
Yeah, I think part of what's going on to inform us as.
The type of indication that we're going to ultimately get from from F. D. A.
We've seen skin day work and a multitude of all types and.
And.
And we're hoping to engage them and a discussion that gives us an opportunity to broaden the initial indication for this product now.
And now that remains to be seen as we've talked about previously our goal is to initiate a.
Our first trial, along the lines of a complex D F you indication.
But I think we will ultimately inform us going forward is what additional work will need to be done to get a broader indication.
And I think that is what we hope to gain from our interactions with the agency and where we ultimately will and gain some clarity and be able to share that was with folks going forward.
And I'm sorry, your first question and I shouldn't I should have answered that first and I forgot on already.
No problem I'm no on that asked too many questions and it was.
How soon after and I and E filing acceptance.
Ready to start the trial and then thoughts around enrolment enrolling patients in light of what you saw for this RSVP.
Sure. So thank you for that yeah. So we're doing the work now to.
To be to set the stage for enrollment as quickly as possible.
So we hope that.
There'll be a couple of months GAAP at most between and being open to and our first patients being enrolled.
And we're taking aggressive steps right now to engage sites and and obviously to a to do the work that we need to do all the all the behind the scenes work that needs to be done to have these sites on board. So we're hopeful and and plan to do to accelerate that that turnover of the trial as quickly as possible in terms of enrolment targets were.
Working on that through the number of sites that we ultimately bring on board.
As we know from our our.
Our past the RCT took roughly about.
A little over 12 to 16 months to fully enroll that trial now.
And now of course that was also through the COVID-19 pandemic debt was obviously posing challenges for a lot of folks.
But our goal here is to do everything and our and our posture is that.
And it's possible to accelerate this enrollment.
Process. So we are we are bringing on what we consider to be highly appropriate sites and.
And I'm going to take a very aggressive roll and.
And enhancing enrollment wherever we can so.
More and more clarity to come on that as we get guidance from FDA around patient numbers and.
And and other.
Issues that we have to take into accounts.
Thanks, and then the last question I have for you is based on the data earlier. This week could you discuss the onset of on stocks for skin and <unk> I know this is a big focus for the first 50 patients last year and how that data compare to the standard of care alone arm.
Well I mean, I think we've shown in the past and our interim data that the the early onset of effects as critical and and a big separator and differentiator for skin.
Kinsey and.
Because compared to standard of care.
We have not yet reported the full dataset of course for the from.
And the complete study but.
But I would expect to see similar a similar results.
Armstrong had previously commented on our call that we had.
About the of the impact of those early effects.
And was very pleased by those and we would expect to see similar similar outcomes and the full dataset, but obviously that'll be forthcoming and and.
And the coming weeks.
Great. Thanks, everybody.
Thank you.
Thank you thanks, Dan.
Thank you again, if you'd like to ask a question. Please press star one at any time.
Yeah.
Okay, and if you'd like to ask a question. Please press star one.
Okay.
And it looks like we have a question from Sean King with H C. Wainwright.
Hi, Thank you for taking my question and I just have two.
First on why you're doing the clinical study.
How how would you maintained on a commercial relationship that you had.
And then she cultivated with the Doctor and hospital.
And then and as the second question.
How would you realize the real world data accumulated to designers.
Designed to study better and and hopefully accelerate our study.
Thank you.
Sure I'll answer the first question and I'll and I'll, let Richard address a question number two.
And as far as maintaining the relationships you know I think one thing that you know, we're really fortunate and you know about is that we've got some some really great leadership within the commercial team and we have a gentleman by name Orion Mathis, who has led that group and and Jim Luciano <unk> as well, who have spent and worked tirelessly with our with our entire team here.
Make sure that they are on you know are in front of all the the you know.
User high users if you will of discontinued products, they're really dedicated to to.
Build relationships with them and and do a lot of handholding, especially during the earlier on you know adoption phase. If you will this product you know we do plan as Richard said.
To you know develop go down the pathway of a expanded access and and we are developing a group of people to be focused on that.
And we are gonna have you know.
Brian and a small team working to maintain that the relationships that we have and the marketplace because to your point. They are incredibly valuable and we've been really fortunate to get the support that we've had from these particular providers and and you know surgeons too to really you know identify better ways for this product.
To be used and you.
Our support the adoption of this was there good names. So we do plan to make sure that we intend to reach out and and stay very connected with our user base. If you will.
And Fortunately.
And the leadership on the commercial team has done a great job.
And developing those relationships for.
For the long term, which we have every intent of maintaining Richard do you want to take question number two.
Yeah sure I mean regarding real world evidence it's.
It still remains a bit of a mystery with regards to our F. D. A.
It's going to look at this data not just for us for but for any company they've they've talked about the potential to use this data and and leverage it.
For for for a future regulatory approvals.
And we certainly have a good body of data that debt, we've collected and we certainly plan to have discussions with them around the value of that data. So at this point it would be speculation to try to guess as to what that value will ultimately be but we're very proud of the data that we have been very.
Consistent in terms of safety and the positive outcomes Hussein. So we're certainly hopeful that we can take full advantage of that.
As we are as we discussed this with the agency.
Thank you.
Helpful. Thank.
Thank you.
Thank you.
Thank you ladies and gentlemen, this concludes the polarity T. He first quarter 2021 earnings call. Thank you for your participation you may now disconnect.
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