Protalix BioTherapeutics' (PLX) CEO Moshe Manor on Q2 2017 Results - Earnings Call Transcript
Aug. 9, 2017 11:00 AM ET|1 comment| About: Protalix BioTherapeutics, Inc (PLX)
Q2: 08-05-17 Earnings Summary
Press Release News
Protalix BioTherapeutics Inc. (NYSEMKT:PLX)
Q2 2017 Earnings Conference Call
August 09, 2017 8:30 AM ET
Executives
Moshe Manor - President and Chief Executive Officer
Yossi Maimon - Chief Financial Officer
Analysts
Peter Welford - Jefferies
Operator
I would now like to introduce your host for today's program Yossi Maimon, Chief Financial Officer. Please go ahead.
Yossi Maimon
Thank you, Jonathan. Thank you everybody. Good morning and welcome to the Protalix BioTherapeutics first half of '17 earnings results and corporate update. With me today is Moshe Manor, our President and CEO. Just like to remind you that we've just issued the press release announcing the results, which is available on our website. Also I'd like to remind you to take a moment to read the disclaimer about forward-looking statement in the press release, the earnings release and conference includes some forward-looking statements.
These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual future experience and results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the US SEC, the Form 10-Q we will file for the second quarter of '17 will also include the detailed discussion of applicable risk factor, as well as our 10-K that we've filed for 2016.
With that I will now turn the call to Mr. Moshe Manor.
Moshe Manor
Thank you, Yossi. Good morning and thank you for joining us. I'm delighted to be here today to discuss the progress we've started achieve over the past few months. We've been able to continue our momentum in the second quarter with involvement progressing for Pegunigalsidase, which is PRX-102 and now Oral PRX-106, deepening partner discussions for Alidornase PRX-110, recording additional sales in Brazil and most recently completing a refinancing and financing to preserve the Company's cash underwriting to 2019, following the conversion of notes that will phase out in cash during the first quarter.
On today's call we'll first review our earnings result for the first six months of 2017and then provide a brief corporate update. I'll now turn the call over to Yossi to review the Company's financials.
Yossi Maimon
Thanks, Moshe. So let's begin. For the six months ended June 30, 2017 we reported a net loss of $20.6 million or $0.16 per share, excluding onetime non-cash charge of $38.1 million in connection with the re-measurement of an embedded derivative, compared to a net loss of $19.5 million or $0.20 per share for the same period in '16.
The conversion feature as you may recall from the last quarter we discussed, for the Company's 7.5% convertible note was accounted for as a derivative until April 12. On that date we basically got the shareholder approval for the nice market 20% rule. The derivative was separated from the debt component of the convertible note and was measured as fair value in each of the different cut off period.
Given the fluctuation in our share and as a result notes fair value, the derivative was increased or decreased against a non-cash charge to the P&L through April 12. Following date, after the shareholders meeting approval the derivative was reversed in its entirety into the shareholders' section and will not be re-measured again and will figure any additional non-cash changes going forward.
We recorded total revenues of $9.2 million for the period, compared to $2.4 during the same period in '16. The increase is attributed mainly to the increase in sales of drug that we have shipped to Brazil and from drug substance that we have sold to Pfizer.
R&D expenses were $15.2 million, compared to $17.3 million for the same period in '16. Selling General and Administrative expense were $5.4 million, compared to $4.2 million incurred in the same period in '16. The increase is mainly attributed to the increase of activities in Brazil.
As of June 30, we had $34.5 million of cash and cash equivalents and in July, we added additional $10 million from the debt financing we recently announced. During the six months ended June 30, we had investors converted approximately $10.8 million of the 7.5% notes, of those about $7.7 million of face value were settled for approximately $11 million in cash, which includes accrued interest and make whole payments.
This was prior to us having the approval for the 20% rule and going forward conversions will be completed in stock. With that conversion we decided to make ourselves whole buy, reloading and issuing additional $10 million of the 7.5% notes, which allows us to keep the same run rate of 2019.
Also just recently a principal amount of $3.6 million of the 4.5 convertible notes due 2022, which have refinanced have been converted to about 4.2 million shares. That happened after the refinancing. At this point I'd like to maybe take a chance and recap where we are in terms of total face value of convertible notes that we have.
So we have $5.9 million of 4.5%, maturing in September '18. We have 61.9, 7.5% maturing in November '21. And we have 5 million [indiscernible] maturing in 2022. Also maybe I'd like to take this chance to walk you through and explain what these notes and the conversion mean in terms of dilution.
All of these notes that we have just mentioned represents approximately potential 85 million shares upon conversion, which we believe the market basically took into account upon issuance as it's the case usually with convertible notes being priced. Going forward, any conversion for us is a positive event as debt is reduced and turned into equity and this has already been priced in as I said.
And with that I will turn the call back to Moshe, who will provide an update on our clinical programs.
Moshe Manor
Thank you, Yossi. Starting with our lead product candidate, PRX-102 for Fabry disease, we are making great progress with all three clinical trial, the enrollment is ongoing in over 25 active clinical sites globally with most in the U.S. Of significant interest we can share with you today that today all patient switching from pegunigalsidase alfa - to pegunigalsidase alfa from Fabrazyme and the Balance study has been made with excellent tolerability and without any infusion reaction observed. This is an important piece of information and a new piece of data for us as we have seen great safety results from naive patient only and seeing this excellent trend in patient switching from a different ERT is reassuring.
Also another important milestone is our clinical trial is that an increasing number of patients in our study have been moved to home care therapy following successful initial infusion periods in the infusion center. This is yet another important indicator as the CIs in the study are becoming increasingly confident in our product candidate, safety profile and the tolerability of the patient to safely switch from a different ERT to our track. This quarter we also received FDA approval for our manufacturing facility to develop not only our current commercial to treat gaucher disease, but also our clinical right candidate PRX-102 to treat Fabry disease.
We are very confident and extremely optimistic regarding the potential of our drug candidate to become the drug of choice for all Fabry patients globally with both the potential and superiority in our once every two weeks infusion with our 1 milligram per kilogram dosing regimen and the maintenance of clinical stability with our once monthly 2 milligram per kilogram regimen.
Turning to PRX-110, [indiscernible] as I mentioned earlier, our Phase II data was recently the subject of an oral presentation at European Cystic Fibrosis Society Conference. The data was not only well received but also gave us great exposure among the physician industry and patient communities and has been instrumental in our interaction with the Cystic Fibrosis Foundation and other potential industry partners.
I'm really excited to report that we have concluded the big step in the engagement with the Cystic Fibrosis Foundation as they reviewed and approve our letter of intent application enabling us to fight for a grand funding to support the development of PRX-110.
We're discussing with multiple potential industry partner has also different and that we are making very good focus on this front. We strongly believe in the potential of PRX-110 to improve the quality of life of patients leading with CF and look forward to the continued development of these assets alongside a strong partner in the space.
Next I want to discuss our commercial product alfataliglicerase for the treatment of gaucher disease and the progress made to date with our activity in the Brazilian market. As everybody knows, Fiocruz submitted a letter of intent to purchase approximately $24 million of drug product and on March 22, we received a formal purchase order of $24.3 million of drug product. Shipment of approximately $3.6 million of the product was completed in June with an additional shipment of $1.3 million completed in July and $2.2 million scheduled to be shipped later this quarter.
According to the purchase order received by the company, additional shipments are scheduled to be made during fourth quarter. We are working closely with Fiocruz and our people on the ground and engaging with patient advocacy group and treating physicians.
We look forward to updating you on our next quarterly call with our continued progress both on the clinical and business development front. As we continue to execute on our goal of bringing improve another version of existing drugs to patient as rapidly as possible.
I will now return the call over to the operator to take any questions you may have.
Question-and-Answer Session
Operator
[Operator Instructions] Our first question comes from the line of Ram Selvaraju from Rodman & Renshaw. Your question please.
Unidentified Analyst
Hey, this is Mitchell on for Ram. Thank you for taking our questions. My first question is when does the company anticipate moving PRX-110 into late stage compared or controlled trials in cystic fibrosis?
Moshe Manor
Can you please repeat your - we can't clearly, barely hear you.
Unidentified Analyst
Yeah. When does the company anticipate moving PRX-110 into a late stage compared or controlled trial in cystic fibrosis patients?
Moshe Manor
Yeah, we actually are now in discussion as we pointed out with - both with preparing with regulatory and with our medical advisory board to design the best, what will be the best study and based on the discussion, it was then and our discussion with partner we'll take decisions on the next phase, Ram.
Unidentified Analyst
Okay. And how does the FDA's decision on permitting the NDA submission for Galafold potentially impact the regulatory timeline for completion of development and possible marketing authorization for PRX-102 to treat Fabry disease?
Moshe Manor
Well, I think this is positive development from our side because as we see the FDA is more open and more flexible in terms of bringing new product based on the need to bring new products to the market. So based on what we understand now, it would provide us the opportunity to actually engage with the FDA after they say once we have the interim analysis or so and to talk about earlier submission after one year - with one year data.
Unidentified Analyst
Okay. And what's likely to be the cost of the pivotal development of PRX-102?
Yossi Maimon
So, the total cost of the trial for the development, we estimated to be in the neighborhood of $40 million fully loaded of the way through approval.
Unidentified Analyst
Okay, great. Thank you, guys.
Yossi Maimon
Sure.
Operator
Thank you. Our next question comes from the line Peter Welford from Jefferies. Your question please.
Peter Welford
Hi. Thanks for taking my questions. Just speaking first of all is 102, wondering if there are any final thought to go to the FDA ahead of time the interim data to understand the potential pool that maybe needed for them to consider as a passage or would you have only consider going to the FDA once the interim data are in hand next year? And then on the finances, just wonder if you could I guess talk a little bit about the - it looks as though the shipments to Pfizer was pretty high this quarter if I think 3.6 million were to Brazil presumably the balance were to Pfizer this quarter. So I'm just facing or should we read anything into that? And can you also then perhaps do why the COGS as well was relatively high this quarter compared to what we've seen in prior periods? Thank you.
Yossi Maimon
Sure. Thanks, Peter for the - it's Yossi, I'll try to take these questions one at a time so. The first one, I think it's a good question. I think that our current thinking is to generate the data first, set of data and once we'll have the one-year data from the Balance study by that time we will have longer term data from the Phase I to additional data from other studies. I think that that will give us a very robust set of data to go into the FDA and see how we can proceed. So that's with in connection with the FDA. So we see it as a very positive change in the FDA recently. And I think it's good for us and for the entire Fabry community. As far the shipments that we're shipping to Pfizer the way to think about it is basically we're selling, we're building up inventory. Pfizer is doing - is one of our supplier for the life organization [ph] for the full and finish process. So the way we do it is we sell it to Pfizer and then we buy back from Pfizer when it's a fully packaged file, so some these increased revenues that you see coming from Pfizer basically is kind of an inventory buildup if you will for the shipments, for future shipments into Brazil, directly related to that the cost is higher because those shipments that we're making through Pfizer are basically done at cost de minimis gross profit on those.
Peter Welford
That's great. Thank you.
