Protalix Biotherapeutics Inc Corporate Call
Dec 02, 2016 AM EST
PLX - Protalix Biotherapeutics Inc
Protalix Biotherapeutics Inc Corporate Call
Dec 02, 2016 / 12:00PM GMT
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Corporate Participants
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* Yossi Maimon
Protalix Biotherapeutics, Inc. - CFO
* Moshe Manor
Protalix Biotherapeutics, Inc. - President, CEO
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Conference Call Participants
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* John Segal
Highbridge Capital - Analyst
* Peter Welford
Jefferies - Analyst
* Ram Selvaraju
Rodman & Renshaw - Analyst
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Presentation
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Operator [1]
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Good day, ladies and gentlemen, and welcome to the Protalix Corporate Update Conference Call.
(Operator Instructions) As a reminder, today's conference is being recorded.
I would now like to turn the call over to Mr. Yossi Maimon, Chief Financial Officer. Sir, you may begin.
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [2]
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Thank you. Good morning, everybody. Thank you for joining us for the conference call. To the extent that statements in this call are not strictly historical. All such statements are forward-looking and are made pursuant to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. The statements set forth in this call which are not historical constitute forward-looking statement, include the statement regarding the expectation, belief, intensions, or strategies for the future.
This forward-looking statements are only predictions and reflect our views as of the day they are made with respect to future events and financial performance and we take other -- and we do not have to take any obligation to update or revise nor do we have a policy of updating or revising any forward-looking statements to reflect events or circumstances after the date on which the statement is made, or to reflect their occurrence of an anticipated events except as may be required under applicable law.
We qualify all of the forward-looking statements in this call by this cautionary statement. For full disclosure and discussion of forward-looking statement and the risk and uncertainties that may impact them, we refer you to the forward-looking statements and risks factors sections of our Annual Report on Form 10-K for the year ended December 31, 2015, and our quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.
At this time, it is my pleasure to turn the call over to Mr. Moshe Manor, Protalix President and Chief Executive Officer.
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [3]
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Good morning and thank you for joining us. On the call today, we plan to review the Company's recently announced liability management and financing transaction, as well as provide and update on our clinical program. I want to note that this transaction is a pivotal one for Protalix. Our narrative has changed. We have substantially addressed our (inaudible) challenges and bolster our liquidity. We are now funded into 2019 and have the ability to realize potential clinical and commercial value creating opportunities.
I will now pass the call back to Yossi to review the terms of the transaction.
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [4]
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Thanks, Moshe. Last night, we announced the terms of a private exchange transaction and the pricing of a related private placement of secured note that brought in an additional $22.5 million in capital. The company entered into definitive exchange agreement with the institutional investors pursuant to which the Company will exchange approximately $54.1 million principal amount of the Company's outstanding 4.5% Senior Convertible Note to 2018 for $40.2 million principal amount of newly issued 7.5% Senior Secured Convertible Note due 2021 an approximately 23.8 million shares of common stock.
Concurrent with this convertible note exchange, we also entered into a Definitive Note Purchase Agreement with institutional investors relating to a private placement of approximately $22.5 million principal amount of the notes. Confirmation of the Private Exchange and the Private Placement are subject to customary closing condition.
Interest from the notes will be paid semi-annually at the rate of 7.5% per annum and the notes will mature on November 20 -- November 15, 2021, unless earlier repurchased, converted exchange or redeemed.
The initial conversion rate will be approximately 1,176 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of $0.85 per share of common stock. This initial conversion price represents a premium of approximately 52% relative to the closing price of the Company's common stock on [nice] market of approximately $0.56 per share last night on December 1, 2016.
Of importance for Protalix, we have the ability to force conversion if our stock trades above $1.28 for at least 20 trading days during the period of 30 consecutive days -- 30 days. The transaction represents the strong vote of confidence from our note holders, who not only converted at a significant portion of their debt to equity and extended the maturity of the note but also agreed to put a new fund into the Company, which we believe should provide us with sufficient capital into 2019; and more importantly, enable us to reach a number of value-creating milestones, including the one-year data of PRX-102 in our ongoing Phase 3 Fabry Trial, as well as data for our AIR DNase and OPRX-106 from the currently ongoing Phase 2 clinical studies.
With that, I would like to pass the call back to Moshe, who will provide an update on our clinical programs.
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [5]
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Thank you. As Yossi just mentioned, we are pleased to have the cash on hand that will enable us to proceed the [cost] on data readout from three clinical trials. Additionally, we will continue our discussions with potential partner for all of our pipeline products, and thus is a potential to bring in non-dilutive capital over the next 24 months.
Furthermore, our marketed product for the shared disease recently received the uptake approval in Brazil by the Ministry of Health. We are currently in advance and direct negotiation with the Brazilian Ministry of Health for the supply of significant amount of vials in 2017.
As you may recall, Protalix out-licensed [global-wide] to the drug Pfizer with the exception of Brazil where Protalix only owns the right. Looking at our pipeline, which we are very excited about, I would - [felt] like to address PRX-102, our plant cell-expressed and chemically-modified version of the recombinant alpha- galactosidase A14. PRX-102 is a covalently bound via a chemical cross-linking using PEG chains, which result in a more active and stable molecule than the current available versions and designed to be superior to the currently approved DLT.
Given the structural differences, PRX-102 has enhanced half life with higher enzyme activity in target organs affected by Fabry disease and demonstrated in clinical trials today very promising safety and early efficacy result.
Earlier this year, we launched the pivotal Phase 3 study of PRX-102 for the treatment of Fabry disease, which we refer as to the BALANCE study. The BALANCE study is a 24 months multicenter, randomized, double-blind active controlled study of PRX-102 in Fabry patients with impaired renal function. 78 patients previously treated with Fabrazyme are being enrolled and then randomized to continue treatment with 1 milligram per kilogram with either PRX-102 or Fabrazyme in 2:1 ratio, respectively. Patients are being treated with IV infusion every two weeks.
The primary efficacy parameter is a comparison of the mean annualized change in eGFR between treatment groups. As a result of the transaction like today, we now have the capital to complete the critical interim analysis which is planned to take place at 12 months of the study.
The interim efficacy and safety analysis will test our non-inferiority to support an anticipated regulatory filings with EMEA Europe, which may also serve as the basis for regulatory filings in more than two-thirds of the global Fabry market that is outside the United States. We anticipate the interim analysis occurring in 2018.
Patients enrolled in the BALANCE study will continue to be treated for a total of 24 months to which point the data will be analyzed to test for superiority to support an FDA filing. To demonstrate superiority during the FDA process, the FDA integrated that the 30% improvement in the rate of decline in eGFR relative to the active comparator arm is acceptable.
We previously reported from our Phase 1/2 trial that eGFR slope for classic Fabry patients was minus 1.8. While according to a published report, an annualized rate of eGFR change of minus 3.8 was observed in study, the effect of Fabrazyme on the classic Fabry patient population with similar baseline of eGFR. In addition to the balanced study, we also claimed to conduct a second study, which we refer to as the [BRIDGE] study, which is an open-label, single arm switch over study to observe the efficacy and safety of PRX-102 in Fabry patients currently treated with Revlimid.
All of the above, these are the hope and belief that our Phase 3 clinical trial has the potential to succeed and to become the gold standard for treatment of Fabry disease.
Moving on to AIR DNase, which is the plant cell derived recombinant DNase enzyme that we have designed through chemical modification to be resistant to inhibition by actin. Given actin is a potent inhibitor of DNAse activity, the company's AIR DNase has the potential to enhance the enzyme activity, efficacy, significant in CF patients when compared to the currently-approved DNase treatment.
We currently have Phase 2 trial underway that is a 20-day switch over study for 15 CF patients previously treated with Pulmozyme to evaluate the efficacy and safety of AIR DNase in CF patients. We will be evaluating a change from baseline of forced expiratory volume, FEV1, and DNA parameters in sputum as our primary efficacy endpoint. We will also be evaluating safety and tolerability, immunogenicity, and pharmacokinetics data.
As part of the development forces for AIR DNase, we partnered with Philips for the exclusive use of their I-neb nebulizer for the development of enhanced product based on dornase alfa for the treatment of CF. The I-neb is a small, lightweight, virtually silent device that is fully portable and has a unique vibrating mesh technology that allows for faster administration than conventional jet or ultrasonic nebulizer. We expect top-line results for our Phase 2 trial shortly. I look forward to sharing them with you.
Our first order to enter clinical is OPRX-106 for which we recently announced the first patient has been enrolled into the Phase 2 trial. OPRX-106 is a plant cell-expressed recombinant human tumor necrosis factor receptor, which we are developing for the treatment of ulcerative colitis.
The Phase 2 trial is a randomized, open-label, two-arm study of OPRX-106 in 20 patients with active mild to moderate ulcerative colitis. Patients are being randomized to receive 2 milligrams or 8 milligrams of OPRX-106 administratively orally once daily for eight weeks. The primary endpoint of the study is safety, including monitoring for adverse events following daily administration of the drug. Key efficacy endpoint includes relevant disease parameters of the drug, including Mayo score and rectal bleeding.
We expect to see data from this study around the second half of next year. I want to remind you I know that the successful OPRX will be the first ever oral enzyme treatment as currently there are no other oral enzyme treatment available.
Before we open up the call for questions, I would like to thank everyone for joining us this morning. I believe Protalix has a number of very valuable assets and it's just a matter of time before the value is fully understood. Following completion of the transactions that we announced today, I'm confident we would be able to deliver on our outline value creating milestone that all have the potential to take Protalix to the next level.
This concludes our prepared remarks. I will now turn the call over to the operator to take any questions you may have.
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Questions and Answers
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Operator [1]
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(Operator Instructions) John Segal with Highbridge Capital.
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John Segal, Highbridge Capital - Analyst [2]
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A few questions here. First, thank you for doing the call. And second, congratulations on the capital raise. I guess breaking the call or my questions now between commercial and clinical. First is how large or how large is the Fabry market today and how would you break it down between the U.S. and abroad?
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [3]
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We estimate the Fabry market to be about $1.2 billion and it's growing double digits in the last couple of years. We have seen a significant growth year by year. We expect this market to continue to grow over the next few years. We estimate that the U.S. is roughly one-third of this market and will probably continue to be a significant portion of the global market.
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John Segal, Highbridge Capital - Analyst [4]
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Okay. And so then I guess the next question is to the extent the trial proved successful, would you seek to partner 102? If so, would you do it for both the U.S. and rest of the world? How are you thinking about commercializing it throughout? And if want to do it on your own, do you foresee substantial operating expense to bring it to market?
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [5]
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John, thank you. This is Moshe. I think that as far as Europe is concerned, we were looking for to partner before that. Europe is a complex market. It's not one market. It's 27 states, so it is a complex exercise and you need to have a good company that has the infrastructure that really can optimize for that.
For the U.S., I think that we, at this point of time, we'll keep it flexible. I think that potentially we can do the U.S. as well, I mean on our own. If you look at the U.S., you need probably less than 20 people all in all both on the ground and in the office to cover the market. It's a very small focused market, but I think will take the decision later on when we make some progress, so we'll take final decision whether we go alone or we go with a partner.
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John Segal, Highbridge Capital - Analyst [6]
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And I guess while we're continuing on the partnership commentary, with 110 and 106, how should we think about either those? Clearly data for one of the two compounds we should see shortly, the other later on, how should we think about whether or not those would be partnership opportunities. I know you mentioned -- you sort of alluded to it in your comments, Moshe, and if so have any conversations begun yet?
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [7]
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Yes, definitely. We are looking for to partner those two product and the strategy that we actually took -- we're taking is to -- actually to provide really clinical data to the partner. We are already discussing with two companies, as in big the companies definitely on the AIR DNase product. We have some ongoing discussions. I guess that those discussions will accelerate based on the data that we will present.
And 106 as you mentioned is really later in 2017. We have already preliminary discussions with some companies and I think the feedback that we are getting is that they would like to see the clinical data and that's why we choose to do that and then -- but we already started the discussion just to be ready to go over our technology, the platform, the advantages. So once we have the data, we can really accelerate the discussion with those companies.
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John Segal, Highbridge Capital - Analyst [8]
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And then last question on the commercial side and then I'll switch to clinical, I saw the pediatric approval in Brazil. We've seen the recent revenue stream. You alluded to the fact that there may be a larger opportunity in Brazil depending on negotiations with the Ministry of Health. How near term -- when would we expect -- when would you expect to know one way or the other where Brazil is going and how kind of how important it could have been to the company's medium-term cash flows to the extent you were successful in winning business?
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [9]
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It's a good question. It is one of the key -- it could potentially be one of the key catalyst for us and it could be a key contributor to our cash flow. Those discussions have been held during the last couple of months and I think we do see a progress even from when we just announced it as ongoing discussions with the -- with the Ministry of Health.
We are continuously optimistic and we still see the potential to announce something hopefully as early as early 2017 about what that potential might be. But as we alluded in our earnings PR as well, this has the potential to be substantially more than what we have recorded in revenues to date.
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [10]
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And John, this pediatric indication is important because that will enable us to cover the entire market because we know this is around 30% of the market. So now we have the full indication, so we are ready to go based on what Yossi mentioned, our discussion [needs to go well].
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John Segal, Highbridge Capital - Analyst [11]
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And that's an interesting point. Moshe, just following up quickly there on the numbers of the clinic -- how large do you estimate the Brazilian market to be whether by patient or by revenue, or what are the third parties estimated to be the potential?
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [12]
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The market is around 700 patients, so treated. There are still number of patients that are not treated yet. We know that the market is really larger or bigger than that, but 700 patients are treated today. So as I mentioned, around 30% of the estimation is pediatric, so now we have the full indication to go for the entire market.
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Operator [13]
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Peter Welford with Jefferies.
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Peter Welford, Jefferies - Analyst [14]
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So I've got a couple. Firstly, just on the financial side, where you say you're funded through 2019. just to be clear that, does that include both funding for the bridge as well as for the balance for 102 and should we assume that you're not assuming there then any additional spend beyond the current Phase 2 trials for the oral anti-TNF and the AIR DNase products.
Then the second financial question as well, similar vein, just to be clear, do you assume when you say through 2019 that you will repay the outstanding roughly $15 million of the 2018 converting cash in that period or is the remaining outstanding balance in the convertible excluded from that calculation and assessment?
And then just on the pipeline. So firstly, on AIR DNase, would you -- and I guess initial discussions, now we know you're having discussions already, are there any additional data or perhaps preclinical work that partners or companies have requested or shown an interest in that would be useful or do you think that after the Phase 2 data, you will have all the clinical data the partners would require to potentially make an assessment of the product?
And then sorry, just a final quick one just on Brazil again. I guess can you perhaps just put us in context as to what we should envisage here. Should we envisage a new long-term arrangement being disclosed or are they broad terms of the agreement likely to stay the same and we should just get more granularity and more confidence that revenues will get towards the originally negotiated terms, but obviously have been -- have been significantly delayed over the last few years. Thank you.
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [15]
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So I'll take the first couple. So yes, I think when we say into 2019 that assumes that we will be fully funding the Fabry trials, all the trials that need to get us to approval.
With respect to the 2018 notes, that's something that we will have to deal with when we get closer and obviously don't want to speak too much about it, but it's something that we will have to deal with when we get closer and obviously that's going to also depend on how Brazil will play in and many other factors. But definitely, Fabry, which is the main key driver for us remain our key lead product. This is all inclusive.
As for the other clinical trials, you're right, we -- and this will be a segue maybe to the next question. Yes, we believe that we will not be entering into additional clinical development beyond these two Phase 2 clinical trials for both the OPRX-106 and for the PRX-110 for CF as it is our belief that these trials will be enough for the potential partners that we're discussing for at least for them to make an assessment on this and how they want to proceed. And obviously, the additional trials that will need to be run are going to be much bigger, which is also the main reason for us considering licensing these out earlier than a Phase 3 for instance.
As for Brazil, I think that it's not really a new arrangement that we are discussing. It's basically the agreement that we had in place back then. It took us a while to get to where we are. I don't envision that we are going to get to the full figures that we have been reported back when we signed the agreement, but we see a process where we will get to -- closer to these numbers down the road.
But as I mentioned before, even the beginning of those -- of that change in Brazil, given that discussions will be a meaningful increase from where we are today and we hope and believe we will get to the level that we have mentioned when we sign the agreement back in -- back in the day. So, it's not a new agreement, it's basically the same agreement that we will have now more clarity and getting closer to the numbers that we have mentioned.
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [16]
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And Peter just to add on Brazil, I think we are now discussing very concrete, the details. So it's not only what we have written before that the framework (inaudible) details in terms of quantities and that stuff, and definitely the need from the government as we already alluded to that in the past to issue the switch from their side, switching from currently marketed product to our product.
So this is being discussed, but it's a big and comprehensive plan, but it's a very concrete discussion about, okay, what can we supply and how in order to start, and what the government needs to do in order to realize that.
On the AIR DNase, we -- in our discussion we showed the data that we have [hand] -- I mean, all that we have done so far. And so [being] the toxicology, different model, so the remaining piece is the clinical data that we - (inaudible), shared with the partners as well. So, this will be the remaining piece in the discussion that we can really go into that once we have the data available.
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Operator [17]
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Ram Selvaraju with Rodman & Renshaw.
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Ram Selvaraju, Rodman & Renshaw - Analyst [18]
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Just one housekeeping item, if I may first. Can you verify that the term of the new senior secured convertible notes due 2021 are effectively the same as the term of the 4.5% senior convertible notes that were due 2018 other than the coupon rate, is that the only difference, the coupon rate and the maturity date?
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [19]
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No, Rand, there's a couple of other element and we will be releasing the indenture upon closing and we will have all the details. But first of all, these are secured notes and there are certain -- number of certain covenants and other items that we need to go through, but I think most of them, the significant ones have been described in the press release.
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Ram Selvaraju, Rodman & Renshaw - Analyst [20]
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Okay. And also, can you verify what's the price of the issuance of the common stock is?
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [21]
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The common stock that we issued in connection with the exchange were at market after close of yesterday, so approximately $0.56.
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Ram Selvaraju, Rodman & Renshaw - Analyst [22]
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Okay. And if I could also ask a couple of questions regarding the pipeline. Are you still on track to release data from the AIR DNase trial before the end of this year? And secondly, I noticed obviously the recent announcement you made on OPRX-106, can you refresh my memory as to the timeline to top-line data in this trial that you just recently announced that you started. Thank you.
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Yossi Maimon, Protalix Biotherapeutics, Inc. - CFO [23]
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Yes, Ram, so the [one NPS], we are just wrapping up the trial and I think we will be able to announce shortly. I don't know exactly at this point whether it's going to be still 2016 or early 2017. This is why we said around year-end, but it's coming in shortly.
The 106 we just started enrollment and I think it is -- heavily depends on enrollment. We believe that we will be able to share top-line results for this trial in the second half of next year.
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Ram Selvaraju, Rodman & Renshaw - Analyst [24]
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Okay, fantastic. And then one other item I figured that I would just ask your opinion. We already previously indicated to the market our views on this, but it would interesting to get your thoughts. The migalastat recent regulatory update which indicated that clearly this drug is going to be in development for a significantly longer period of time than originally anticipated, what are your views regarding the impacts to the potential competitive landscape in Fabry for PRX-102? And any potential advantages that this might provide for you from a competitive positioning standpoint given the timeline to maturity of data, the PRX-102 ongoing BALANCE study? Thanks.
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Moshe Manor, Protalix Biotherapeutics, Inc. - President, CEO [25]
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So, Ram, I think that what we heard from the announcement from Amicus was pretty consistent of what we know. And we believe that the -- we all know this is for certain mutation. And if you look at the data that will be generated there, I mean in our study, we are focusing on actually the most important clinical endpoint that one can really measure, which is the eGFR which is the -- definitely the kidney, which is being affected there. And the other data versus the other data on GI which is it's something that is really an issue for all patients definitely, but they're not the issue in, I think, Fabry. GI is something that patients suffer from, but I don't think that the company -- I mean generally can win on a GI data, I think.
So, the way that we look at the market is that we are going after the most important clinical endpoint that really can give us the advantage there over the current treatment today and definitely to those patients that will be competing with the -- with the -- potentially with migalastat. So, I think we are well-positioned in terms of the study and the endpoint that will provide us the potential to win there.
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Operator [26]
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Thank you. Ladies and gentlemen, this concludes today's question-and-answer session. Thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.
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