Q2 2023 Protalix BioTherapeutics Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the <unk> Biotherapeutics conference.
Second quarter, and 2023 in financial and business results.
As a reminder, this conference is being recorded I will now turn the conference over to our host Mr. Chuck The dollar with lifestyle advisors Investor Relations for Calix. Thank you you may begin the conference.
Thank you operator, and welcome to the Photonics Biotherapeutics second quarter 2023 financial results and business update conference call.
With me today are Dror, Bashan, President and CEO of Photonics, and I, All Rubin Senior Vice President and Chief Financial Officer.
A press release announcing the results in the update was issued this morning and is available now on the <unk> 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 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 the metallics filings with the U S Security and Exchange Commission.
I will now turn the call over to Mr. Dror Bashan sure.
Okay.
Thank you Tom.
And welcome everyone to our second quarter 'twenty to 'twenty, three financial results and business update.
I will begin by reviewing our recent progress and accomplishments and following my remarks, you all would 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 all development and commercialization path Nokia as a global road diseases.
We are very much excited that both the European Commission and the U S. FDA approved for Breo for the treatment of adult patients with 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 their families affected by this outbreak disease.
Probably no.
Just sticking to pull glaucoma, all pathology protein expression system, plus Salix, which further highlights the success of our unique profitable there.
The approval of three goes at $20 million milestone payment, we have received from kids in Q2.
We are very grateful for the Protonix team is what is the old partnership mosquitoes. He he has just continued dedication to this journey has been greatly contribute to put these issues.
As we discussed during Gao Kao elephant in June gives he is poised to realize the full potential of our sub real we still global presence in Michigan.
Expertise within the rare disease space.
Ramped up commercial activities and they've already launched in the U S.
In addition in preparation for launches in various countries get you started building inventory is reflected in our financials, which you all will elaborate.
So brain disease represent a significant opportunity in the multi billion dollar market.
Often these treatment option and we had kids eat all prepared to deliver.
As I just mentioned photonics hosted the care really frightened in June in New York City, we would like to thank jumped on it you can make up for sharing his perspective on how far suburb could address the unmet needs in these patients and we also think juggled Mckenzie for joining us and providing an overview of the TSA.
And experience, bringing grid disease drugs into the global markets.
During those events. We also discussed the future of course, Alex and now are focused in the rare disease space. We are committed to addressing unmet needs for patients with limited fill up with your coal plants.
Well equipped with the clinical regulatory and technical expertise to move forward into the next phase of books.
So that the and I will now provide an update on all very early stage programs.
Spirit's 115, which is a novel Pegylated, you'll recall is in development for the treatment of severe adult enrollment in phase one first in human clinical trial of BRL 115 is continuing and as a reminder, it's why.
The trial is a double blind placebo controlled single ascending dose study designed to evaluate the safety pharmacokinetics pharmacodynamics and Immunogenicity of theatrics 115, and up to 56 patients. This study is being conducted in New Zealand today 60 patients have been dosed.
And destroyed and we are looking forward to continuing to enrollment and dosing of patients.
So are we.
Expect that enrollment will be completed by the end of this year early next year into its final results by the second quarter of 2024. We also continued to make progress on Parex 119, typically get recombinant human DNA was one protein design to elongate D&S half life in circulation fluctuate them itself next.
Related diseases, we have conducted preclinical studies to demonstrate the feasibility of barrick's one wasn't like.
We look forward to providing updates on these programs and others as we look to build and strengthen the whole growing pipeline.
Finally.
Our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near term copycat infusion all.
I will now turn to a yard to review our financials.
Young piece.
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 it needs a $15 1 million during the three months ended June 32023, an increase of $11 7 million or <unk> 44 per cent compared to revenues of $3 4 million for the three months ended June 30th 'twenty to 'twenty two.
The increase as Joe mentioned resulted primarily from increased 11 point 10 million until he has he following the approval by FDA and EMA for Fabry.
We recorded revenues from licensing and R&D services of 20 million for the three months ended June 32023, an increase of $14 6 million or <unk> 70 per cent compared to revenues of $5 4 million for the three months ended June 32022.
Increase resulted from the 20 million regulatory milestone payments from kids in connection with the approval of the factory.
Maybe it was from licensing and R&D services are comprised primarily of revenue recognized in connection with the kids.
Cost of goods sold was 16 1 million for the three months ended June 32000.
22 million increased one 2 million or 49% from cost of goods sold of $4 1 million for the three months ended June 32022.
The increase in cost of goods sold was primarily the result of an increasing size of a fabric of drug substance to PZ and royalties payable to the Israel innovation authority in connection with the kidney.
For the three months ended June 32023 of the company's total research and development expenses were approximately $45 million comprised of approximately $1.7 million in subcontractor related expenses approximately $2 million.
Salary and related expenses approximately $21 million of materials, we made an extension on trucks and a new $10 million of other expense.
For the three months ended June 30 of 2022.
Total research and development expenses were approximately 17 6 million comprised of approximately 44 million.
Subcontracting related extension.
Maybe 1.6 million of salaries and related expenses.
Sadly <unk> 7 million of material base related expansion and approximately $2 9 million about extending the total decrease in research and development expenses were $3 1 million or 41%.
Few months ending June 30 of 2020 figures compared to the three months ended June 32022 degrees.
The decrease in Houston, the government expenses, primarily resulted from the completion of our.
For preclinical program and Theres military trough is mainly to the BLA and MAA review are in fact real.
The applicable regulatory agencies.
Selling general and administrative expenses were 4 million for three months ended June 32023, an increase of one 4 million or 54% compared to $2 6 million for the three months ended June 32022.
The increase resulted primarily from an increase of approximately $1 2 million in salaries and related expenses due to a one time cash flows.
Can I have some extensive network point 8 million for the three months ended June 30th 'twenty 'twenty compared to financial income net of <unk> two.
$2 million for the three months ended June 32022.
The increase resulted primarily from increased <unk> 6 million cost related to exchange rates as well as an increase in our convertible note related expenses of $3 million net of the gain recognized due to the conversion of a portion of the 2024 notes of point for me.
In the three months ended June 30th 2023 we recorded income taxes on approximately $43 million, which were primarily the result of the provision for the current accident in respect of section 174 of the U S.
Tax cuts <unk> jobs Act of 2017.
Turning to effect on January 1st 2022.
One for me is 174 eliminated the option to many of the duct research and development expenses in the year incurred and it requires us to capitalize and amortize. These expenditures over 15 years, so out of the U S basically search and developments.
In addition during the two months ended June 30 of 2023, we released the valuation allowance related to deferred tax assets on the English jurisdiction that resulted in a net benefit to tax expenses of $2 1 million.
Cash and cash equivalents were approximately $48 2 million at June 32023.
Net income for the three months ended June 32023 was approximately $19 3 million or pulling $29 per share basic and <unk> 21.
Two shared they needed compared to a net loss of $5 3 million or 11 cents per share basic and diluted for the same period in 2022.
I will now turn the call back to your door.
Thank you Ariel.
Well. Thank you everyone for joining today's call on a personal note I would like to express my gratitude to the entire cathartic system, whose tireless efforts have resulted in this exciting.
It's exciting time in the company's evolution.
Although I'll pass.
Towards regulatory approval. It is certainly had its challenges even with 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 on strengthening our pipeline and I went to a couple of pages I'm proud of the coupon.
Colleagues achievements, so far this year and I'm confident we will continue to drive the company forward for the benefit of patients and their families not always turn the call back to the operator and open the lines for your questions. Please.
If he would like to ask a question. Please press star one on your telephone keypad.
Conformation tone as it indicates your line is in the question Kim You May Press Star two if he would like to remove your question from the queue and.
And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star he is.
Our first question is from Phillip Island, but yet with H C. Wainwright. Please proceed.
Hi, Thanks, so much for taking our questions firstly with respect to Alfa Bill. So we understand the kids is responsible for launch activities, but maybe from Protonix and what additional updates would you like to provide you say Shannon Burke.
Launch preparation and maybe when can we hear the brand will be launched or about.
About the pricing information on all of that then can be here.
So thank you for that I think as you know private he has he is responsible for the commercially.
For the 100 plus percent of the commercial activities.
It gives you also a private company so.
Once we will.
We will be able to share more information with you show more informational right now the protest was just approved which was launched in the U S as being a pool, it's country by country in Europe . This is public information of course.
As you all mentioned Tonight, but you also briefly mentioned well.
Building, Stoke and I hope it to be.
This will continue into a good penetration into the market. So once we have more data we share reached the world find out in the different quarters of course, but I can I can assure you that we all.
Pleased with sketchy very pleased Mackenzie, we think there are very good and committed partner and we are of course, if he was out doing their best and top top priority to bring these products to the patients.
Yeah.
Okay fair enough.
That's like until your ongoing Fiat ex 115 goats study.
The embolic stroke patients.
Hello can you hear me.
Yes.
Okay, Alright, sorry, there was a glitch so with respect to your ongoing payout ex one month high Gold study given you are enrolling patients who have elevated uric acid levels. I'm. Just curious whether you are planning to my chair if you at the end of treatment.
What would be an acceptable.
Asset level.
So the clinical meaningfulness of 115.
So I suggest you know we have to finish the recruitment into analyze the doctor and this is why we have a.
And at least to have up to 56 days subject in this.
Clinical study.
The protocol that the.
We are using I think it's public it's.
We have all the details of the.
The trial is over there. So you know clearly it's about the reducing the euro.
Yeah.
They live in it's about the overall I suggest we wait and see the final results in order for us to evaluate what we have at hand and how to proceed for the next stage.
Okay.
And then maybe one final question from me.
So with respect to with respect to net programs.
So I'm trying to understand you are clinical strategy here because there are multiple led diseases are related diseases.
Including rheumatoid arthritis, lupus Psoriatic gives us a lot.
I'm trying to understand is the key here to demonstrate proof of concept in one particular indication.
Maybe partner you know established players for their.
The clinical development of our brands.
Hum.
The value of the drug any color on your clinical strategy.
So you know we have we have mentioned I believe in late June on our investor events that we have a if I may say refining, though especially for awards and I'll start with you going forward and we will focus into the genetic or known genetic rare disease space.
This is going forward. We believe we have many years of experience knowledge and how many years of scholars and also two outstanding successes, bringing their products to the market going through all the developmental and regulatory hurdles in getting to the finish line and this is where we believe we can and it's really this is despite the fact.
Prosthetics.
System is a disaster.
And so this is the intent now.
Right now.
We all are.
We will we plan at least.
And we hope he will succeed of course to put all hands into bringing our strengths in our pipeline with additional programs in the rare disease space.
We still go out to a commercial platform or a commercial partner right. Now we don't have the means and we are still small.
We have to be to stay modest.
And so we would clearly develop the program products something in a certain stage and then we will consider.
To join forces with a partner.
You know five to 10 years down the road, it's a different ballgame hopefully we will do it and then we can consider maybe to have a face because volatile for you. If I may say confusion, but note that the two or three years, okay and white milk.
Okay, alright, thanks, so much for your time.
Thank you.
Our next question is from John's Andrew My son with sacks. Please proceed.
Thank you and Hello.
Are you guys doing.
Good how are you doing.
I'm doing pretty good.
Let me start with a question on any potential future studies brought by Rio I.
I think it had been mentioned that there might be a pediatric study and potentially some others.
E B greatly responsible for those or would tell us to get involved as well and also do you know if there are any of these trials future trials, especially for pediatrics being considered that.
So again.
Okay.
Under the agreement are scares me.
Our responsibility is to extreme displayed the drug products excuse me.
The recipes.
He has his responsibility include the including the medical plan and of course, the whole commercialization efforts.
They they do Glen.
Pretty deep long term medical plan with additional studies as you mentioned pretty drastic study I think by the FDA requirement. It is rooted in its public was world Eh pregnant women study etcetera. So we're.
I suggest we wait and we will at once it will be initiated it will be fully available for them at that the point of view and also you can approach. She is asking for more information, but overall I believe that was in the next six to 12 months, we will be in the <unk>.
They'll tweet Jessie we'd be executing.
If every deep long term medical plan.
You know since Protonix develop the product there are some key senior employees that are consulted and scarcity. Okay. These consulting with them, but they said they were supposed to be.
Great Yeah. Thank you for that.
Also I want to understand I guess, how revenues will flow through from the product.
There are lots of trees.
The milestone is the product revenues and then there's that royalty revenues.
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And you recognize I think $11 million so far in product revenues should we expect continued trend like that on the product revenue side as we progress through the year and then you know Blake.
Build up inventory and then work it down I mean, what is your sense.
All those revenues will flow for the rest of this year.
Sure.
Yeah.
So John let me elaborate but first well yeah of course, so oh I'll try to elaborate firstly, it's not that we have the product royalties and milestones yeah and the only two type of a revenue stream from from a property on the first one is obviously the royalties.
Both the U S and outside the U S, which you know range is 15% to 35% outside the U S and 40%.
Oh, the least by state royalties for self conducted in the U S. On top of it we have milestone a regulatory and commercial milestone obviously.
And in terms of what we've recorded this quarter and what we anticipate to record in the following quarters. Obviously as you know kids are getting prepared for a launch in the various countries.
Both in the U S, which the product was launched outside the U S and obviously they are building up their inventory and those are the cells that we recorded yeah, yeah. The way that works, we basically sell them.
Drug product.
Based on the lowest royalty tier and at least our president until we pick up and go to the next level means 16%.
The least price and that's the revenue basically that we recorded.
Yeah, I don't want to be even more conservative. This since they are the agreements which is public.
Faith that they were getting the royalties from the niche and obviously you have a reserve for Exxon I mean, it's not a knee and discounts in case that they are they are applied to the price.
In terms of projections for the next year.
There's a small company, we don't really provide projection I think that the trend at least in the next quarter.
He's going to continue as the kids they are building up and around and pick up their inventory I guess that you know in general over the next two three years and yeah until.
Revenues are going to be stable and.
And growing means that the changes in inventory or there'll be a you know at least for us totally transparent.
Most of the revenues they were gonna see is gonna be changes in inventory in kids is inventory build.
Yeah, two or three years from now I guess, if that's going to be a different story and yet but the trend is definitely going to see our increase in revenue towards the end of this year.
And obviously in the beginning or you know.
Second quarter and towards the second half of next year, as well and they're ramping up their operations.
Okay, great great. That's good answer.
And then you know royalty.
Revenues, sometimes it takes a while to flow through.
Perhaps a oh, here's a good sales in the third quarter of 2023.
Royalties won't be recognized until later can you give us a sense of the timing of how that might be and also the cash flows I mean I'm not sure if that the revenue recognition and the cash flows will happen at the same time.
Or just can you help us understand how that flow will go.
For or not really.
Sure. So as I described the revenue as they are almost fully recognized the minute that we sell.
Inventory to be entered the drug product yesterday.
And it's also a yeah, yeah, there's no timing differences between revenue recognition and the cash flow.
According to the news, which is probably because they have 45 days Nik.
So there's no timing to get there.
As I mentioned since the SRA ne and discount.
At this point at least I know I guess that they are as we move forward, we will know better and they were going to play with it or was there.
We recorded a.
But the most of the revenues are recorded in our books in a timely manner and the same goes for the castles.
Okay and then last question for me is on gross margin and you know how might a big gross margin than our fabry out compared to L. A lifestyle well they would be in a similar range or should we expect there.
Okay.
No. That's a yeah, we're talking about a completely different ballgame, obviously I can't share with you the gross margin or the other.
Product.
Lou.
Looking at the industry I guess, you can assume the biological drugs, we're talking about like a you know.
Anywhere between 85% to 90% the gross margin on the pump.
And I think that I I can state that the this is give or take the the case. It was forbidden analyze the different story you don't forget that we sold.
Yeah, it royalties to Pfizer because then they are you would tend to getting at one one off a big check that Pfizer caught yeah. That's the reason that we sell them they are very small.
Any margin on the sales in Brazil is a different story also in Brazil.
Margin, but I'm complaining, but again.
We're not there yet.
Closing those margins at this point.
Okay. Thank you Rachel and thank you Gerrard I appreciate it.
Thank you. Thank you John Thank you.
As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from dire bashes private Investor. Please proceed.
Good morning, just a point of clarification, if I may on the revenue.
From a fab room, the 11 million was that primarily manufacturing revenue or was there a royalty revenue included in that thank you.
Hi, Thank you for the question. So as I explained I mean that will do it again, we are not in manufacturing we have only two streams of revenue onto the flywheel. The first one is royalties me right that we sell to kids eat.
And we're getting royalties and a percent pay off the list price and the second one Odyssey milestones, both commercial and regulatory when we recorded the lease.
Revenues, obviously, there's a finished product they were sold to kidney.
They will turn around Odyssey.
And sell it to the market, but at this point as I mentioned I guess that that's going to be the case in the next you know two years or so yeah. While they are building their inventory. So we're gonna actually record sales of drug product to kenzie, that's gonna be E recording and you know in the future.
The inventory change is going to be a minimal and then the real warranties and constellation and reconciliation is going to start taking place.
Great. Thank you for that clarification I appreciate it.
Thank you.
As a reminder, this star one on your telephone keypad, if he would like to ask a question. We will just pause for a brief moment for any final questions.
There are no more questions at this time I would like to turn the conference back over to management for closing comments.
So this is dror and I would like to thank everybody for their time and again, we are very happy with the results and the involvement of the company.
We have fabry are available both in both continents for the benefit of the patients are there.
Assemblies and looking forward to speaking with you next time, thank you very much.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.
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