PolyPid Ltd. (PYPD) Q1 2023 Earnings Call Transcript

PolyPid Ltd. (NASDAQ:PYPD) Q1 2023 Earnings Conference Call May 10, 2023 8:30 AM ET

Company Participants

Brian Ritchie - LifeSci Advisors

Dikla Czaczkes Akselbrad - Chief Executive Officer

Jonny Missulawin - Chief Financial Officer

Ori Warshavsky - Chief Operating Officer

Conference Call Participants

Brandon Folkes - Cantor Fitzgerald

Roy Buchanan - JMP Securities

Operator

Greetings, and welcome to the PolyPid First Quarter 2023 Conference Call. At this time participants are in a listen-only mode. As a reminder this call is recorded.

And I would now like to introduce your host for today's conference, Brian Ritchie from LifeSci Advisors. Mr. Ritchie you may begin.

Brian Ritchie

Thank you all for participating in PolyPid's first quarter 2023 earnings conference call. Joining me on the call today will be Dikla Czaczkes Akselbrad Chief Executive Officer of PolyPid; Jonny Missulawin, PolyPid's Chief Financial Officer; and Ori Warshavsky, Chief Operating Officer.

Earlier today, PolyPid released financial results for the three months ended March 31 2023. A copy of the press release is available in the Investors section on the company's website www.polypid.com.

I'd like to remind you that on this call management will make forward-looking statements within the meaning of the federal securities laws. For example, management is making forward-looking statements when it discusses the expected resumption of recruitment for the SHIELD II Phase III trial and the timing of top line results therefrom; potential MAA and NDA submissions, the expected timing of the completion of the commercial manufacturing process and packaging validation for D-PLEX100, potential partnering and collaboration opportunities and the company's expectations, regarding its cash balance and additional compelling financing opportunities.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks described from time to time in our SEC filings. Our results may differ materially from those projections. These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should place no undue reliance on these statements. I encourage you to review the company's filings with the Securities and Exchange Commission including without limitation the company's Form 20-F, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

PolyPid disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today May 10, 2023.

With the completion of these prepared remarks, it is my pleasure to turn the call over to Dikla Czaczkes Akselbrad, CEO of PolyPid. Dikla?

Dikla Czaczkes Akselbrad

Thank you, Brian. On behalf of our team at PolyPid, I would like to welcome everyone to our first quarter 2023 earnings call. To begin, we are thrilled with the recent progress we have achieved throughout our business, including the significant strengthening of our balance sheet, which I will review a bit later in my remarks. From a clinical perspective, we have submitted the revised protocol for SHIELD II to the FDA and await their feedback.

Assuming no major comments from the agency, we expect very soon to be in a position to begin recruiting new patients into SHIELD II, which to date has enrolled approximately 40 target patients. As a reminder, we now have a clear regulatory pathway for the potential NDA submission for D-PLEX100 in the US.

Earlier this year, the FDA acknowledged that the SHIELD I result may provide supportive evidence of safety and efficacy of D-PLEX100 in patients with surgical incisions greater than 20 centimeters. The agency also recommended that the company conduct an additional study on this focus patient population to support a potential NDA submission and confirmed the SHIELD II could serve such as planned.

To reiterate what we said on our last call, we intend to recruit a total of approximately 600 patients or an additional 550 subjects beyond the 40 patients already recruited into SHIELD II. Total recruitment time into the study is expected to be approximately 12 months from the time we resumed SHIELD II and more.

Top line results are expected mid next year. We also plan to conduct an unblinded interim analysis once a total of approximately 400 patients complete their 30-day follow-up, as we prepare to resume recruiting for SHIELD II, one of the key learnings from SHIELD I is on the sites involved in the study.

While we are targeting approximately 50 centers for SHIELD II, around the same number SHIELD I, we now have firm knowledge of the best performing site from SHIELD I in terms of recruitment, patient monitoring and good clinical practice. We believe this to be essential in the execution of SHIELD II. We also have enhanced our clinical operation stream, another key step towards supporting the successful study. While we have made modest modifications to the SHIELD II protocol based on the SHIELD I results, the design of the SHIELD II trial is very similar to the SHIELD I study in terms of primary and secondary endpoints.

Patients in the intervention arm will receive D-PLEX100 on top of standard of care and subject in the control arm will receive standard of care alone. The primary endpoint of the trial will be a combination of SSI. reintervention and mortality rate at 30 days post index surgery as defined in the CDC SSI guidelines.

Patient safety will be monitored for an additional 30 days. And the study will take place in the U.S. Europe and Israel. As we have said previously, I would like to emphasize that we view SHIELD II as a de-risked entry trial giving the more focused patient population in which we have already generated highly positive data in SHIELD I.

And the fact that it will not be conducted within the tight COVID related restrictions that were in place during the pandemic and throughout the duration of SHIELD I. In addition, as I noted a moment ago, we are leveraging the key learnings from SHIELD I study.

In Europe, we recently received feedback in a National Scientific Advice meeting from the Swedish Medical Products Agency or Swedish MPA that was in line with the feedback we received from the FDA following the Type D Meeting.

Specifically, similar to the FDA, the Swedish MPA acknowledged that the SHIELD I result may provide supportive evidence in patients with large surgical incision and recommended that the company confirm the results with an additional Phase 3 study to support an MAA submission.

The Swedish MPA also noted that clinical safety data obtained to-date is sufficient for an MAA solution. Importantly, we continue to work closely with our European partner Advance Pharma, with respect to the European development pathway and are fully aligned on the regulatory strategy for this region, including the preparation surrounding our recent meetings with the Swedish MPA.

I should add that we expect to complete the commercial manufacturing process and packaging validation for D-PLEX100 in the next few months. We continue to expect to have the CMC and preclinical data needed to support an NDA submission well in advance of the top line results.

In regard to our financial strength, we completed a series of financial transaction, late in the first quarter to further solidify our financial position. First, we closed on an underwritten public offering that included, the full exercise of the underwriters' option to purchase additional ordinary shares and a concurrent private placement of a, pre-funded warrants with certain existing shareholders for total gross proceeds of approximately $11.4 million.

In addition, we restructured our existing secured loan agreement with Kreos Capital, resulting in over $3 million of deferred repayments which will be paid from August 2024 onwards, in line with the expected timing of our top line results from SHIELD II.

The proceeds from the financing transactions, combined with the loan repayment deferred extend our cash runway into late-Q1 of next year. Looking ahead, we anticipate having a number of additional compelling financing opportunities, to further enhance our balance sheet later in 2023 in order to fund SHIELD II to a successful completion.

With that said, we are grateful for the continued support shown by our largest institutional, shareholders as well as our new investors who participated in the March public offering. Moving on, we also continue to advance our business development initiatives.

As a reminder we are focused on two key areas. First, we are targeting additional strong partners for D-PLEX100 in different geographies like the U.S. and Asia. Second, we are pursuing PLEX platform-related collaboration that, are becoming more focused in nature, in specific therapeutic areas such as oncology. As we said on our last call, our planned objective is to formalize two partnerships in 2023, although, the exact pace of partnership discussions is inherently difficult to predict.

With that, it is my pleasure to turn the call over to Jonny, to review our current financials. Jonny?

Jonny Missulawin

Thank Dikla. As of March 31 2023, the company had cash, cash equivalents and short-term deposits of $19.6 million, including the $6.2 million net received from the underwritten public offering in April 2023.

To reiterate what Dikla previously stated, we expect that our cash balance will be sufficient to expand operations into late first quarter of 2024.

Now let's turn to our income statement. Research and development expenses for the three months ended March 31, 2023 were $3.8 million compared to $8.7 million in the same three-month period of 2022. The decrease in R&D expenses resulted primarily from the completion of SHIELD I Phase 3 clinical trial, and reflecting the cost reduction plan that was executed in Q4 2022.

Marketing and business development expenses for the first quarter of 2023 were $385,000, a decrease from the $775,000 during the prior year three-month period. General and administrative expenses for the first quarter of 2023 were $1.6 million compared to $2.5 million recorded in the same three-month period of 2022. For the first quarter of 2023, the company had a net loss of $6.1 million as compared to $11.9 million in the first quarter of 2022.

With that, I will turn the call back over to Dikla. Dikla?

Dikla Czaczkes Akselbrad

Thank you, Jonny. Before opening the call to your questions, I would like to discuss some recent updates to our Board and senior leadership team. First, we are excited to welcome Yossi BenAmram as an independent Director on our Board. Yossi is a highly accomplished senior leader in the biopharmaceutical industry having spent over 30 years in commercial operations. He previously served as an SVP and President of Merck & Co's Europe, Russia, Africa and Middle East region, a $4 billion business with 10,000 employees in multiple divisions in more than 100 countries. In this role, Yossi led Merck from the fifth position to market leader in pharmaceutical sales in this region. As we approach the potential commercialization of D-PLEX100, we are thrilled to add Yossi and his significant commercial expertise to our Board.

Also as it relates to the Board, Chaim Hurvitz, a member of our Board since 2016 will no longer serve as a Director. On behalf of everyone at PolyPid, I would like to thank Chaim for his significant contribution to our company over the years. We are grateful for his dedication to PolyPid. Finally, I'm pleased to announce that Jonny Missulawin, our SVP Finance has been promoted to Chief Financial Officer.

We will now open the call to your questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We would take our first question. And the question comes from the line of Brandon Folkes from Cantor Fitzgerald. Please go ahead. Your line is open.

Brandon Folkes

Hi, thanks for taking the question, and congratulations on the progress during the quarter. Maybe just starting firstly in the Type D meeting was there any discussion in terms of what a label may or may not include should it be successful in the trial under the new protocol? And I'll stop there.

Dikla Czaczkes Akselbrad

Hi, good morning. Thank you for that Brandon. There were specific discussion on label and what the label should be. It was focused more on the clinical pathway and what's needed for an NDA. But we did have in the past some communication regarding labeling both in Europe and with the FDA that leads us to believe that we will be starting with some indication around abdominal. And from that, we can expand later on as we gather more information and more safety data.

Brandon Folkes

Great. Thanks. And then maybe just switching gears to Europe. Can you talk about if there were any differences that the Swedish MPA as well compared to the FDA? I know you did both pretty similar there. And then just staying on Europe maybe just a three-part question I guess I'll ask all once.

How do we think about the Swedish authority and the feedback with regards to the rest of Europe? Do you think you still have to discuss with any other regulatory agencies in Europe? And then similarly just talk about sort of antibiotic expenses again coming out of Europe. Anything in there for a product such as D-PLEX just given sort of the active ingredient you use in it. Thank you.

Dikla Czaczkes Akselbrad

So with regards to Europe as you -- I'm sure everyone remembers we have a partner there ADVANZ PHARMA and hospital specialty pharma-based pan-European company. So obviously, all of our strategy there is aligned with our partner. And we believe that the Swedish authorities would be representative of what we should expect from the MAA European authorities in general.

We do not think we need additional advice. Obviously and this -- as to any regulatory agency. They can think frequently when results come or when you speak with a different division or a different countries. But we said that the feedback was very clear. So we do not think we will need additional consultation there.

And with regards to differences I really can't point out to major differences because I think that the overall feedback was similar. First they acknowledge the data and said it can be supportive. This is similar to the FDA. They request that we will perform another trial, again same as the FDA. I think they were more clear with regards to the safety data that we already generated. But other than that I really don't see anything to point out on that which for us is a level of confidence and clarity of the data that we have both agency comes with similar feedback as reinforced what needs to be done next.

Brandon Folkes

Thank you very much. Great. Positive. That’s it from me and congrats on [indiscernible]

Dikla Czaczkes Akselbrad

Thank you so much.

Operator

Thank you. We will take our next question. Please standby. Your next question comes from the line of Bala Prasad from Barclays. Please go ahead. Your line is open.

Unidentified Analyst

Hi. Good morning. This is John [ph] on for Balaji. Thanks for taking our question. Just quick one on your business development plan. You mentioned that you will focus on opportunities on the platform itself. So just wondering like have you ever considered alternative uses of your platform in other areas such as animal health? Thank you.

Ori Warshavsky

Hi, John. This is Ori. So the quick answer is, yes. So animal health is one of it. It's one of the venues we are looking into. But even there's much more that can be done with the platform and we're starting to hear this more and more for example there's some level of conversations around delivery of RNA.

The RNA is the hottest topic now in the industry. And so there's some discussions around that some discussions around aesthetics as we can use the platform for a prolonged release of fillers fat melting acids and so on. So these are all kind of venues that we're looking into. So let's keep it at that. It's still all very, very early in conversations but there's definitely more than just antibiotics.

Unidentified Analyst

Got it. Very helpful. Thank you.

Operator

Thank you. We will take our next question. Please standby. Your next question comes from the line of Roy Buchanan from JPMorgan [ph]. Please go ahead. Your line is open.

Roy Buchanan

Not quite JMP Securities maybe, yes. Anyway. Thanks for taking the question. Trying to gauge timing for the unblinded interim. Can we assume linear enrollment from when you start the trial to the 550 patients? And then is there an option to upsize the trial? Can you talk about how big the trial could get if there is? And then can you talk a little bit about the powering and your assumptions for infection rates?

Dikla Czaczkes Akselbrad

Sure. First of all, good morning. Thank you. So, first of all, in any venue that you choose to be we -- I'll start with the first question. With regards to the number of patients and the interim. So the interim is at 400 patients. This is an additional 550 patients. And as we said we expect to be able to finalize the recruitment for the interim during the first quarter so less than a year ago and overall 12 months for recruitment for the additional 550 million that gets us to the 600 million.

We do have an option to upside. I think we -- as we are still awaiting FDA feedback it makes more sense to discuss this once we get the specific. But this very much goes in line with your next question on the underlying assumption because this is obviously all driven from the underlying assumption, because this is obviously all driven from the underlying assumption. And I think the underlying assumptions are very important for investors for analysts trying to determine where PolyPid is? And what are the value driver for us? This is one of the major value driver. The fact that this Phase 3 derisked from the strength of the underlying assumption.

All the underlying assumptions were taken from SHIELD I from the Phase 3 from the group with a larger incision. This is all public information because we've published all this top line. So infection rate which was 9.7% is what we are taking as the underlying assumption for the infection in the standard of care arm mortality again is taken from the standard of care arm and reintervention.

All of this is taken although those were data and those were -- this was a situation that reflected the quite significant restrictions that were used during COVID. So it's fair to assume that today when we do not have those restrictions both personal and hospital base as well as the overall reduction in patients going to the hospital and undergoing colonoscopy there should be a higher infection rate but still this is our assumption. I hope this answers your question.

Roy Buchanan

Yes. No, that's very helpful. Just to make sure I'm clear so that you're expecting the interim in 1Q 2024. Is that what I heard?

Dikla Czaczkes Akselbrad

Yes. Yes.

Roy Buchanan

Okay. Got it. Okay. And then -- so will you be in a position do you think to have the NDA submitted in the second half of next year? And I expect you're going to announce when you start -- restart enrollment of SHIELD II?

Dikla Czaczkes Akselbrad

Yes. We will announce when we start enrollment. And since this is a very fine refinement we still stick to not steel. We stick to all the dates that we said in terms of 12 months and all that, but we could be refining this. I think it's very reasonable that we will start submitting the NDA package in the second half of next year.

Roy Buchanan

Okay. Great. And then just one more on the sites that are being changed. Can you just give us a sense of how many sites are changed are being changed from SHIELD I? Is it half 10% 90%? Thanks.

Dikla Czaczkes Akselbrad

So this is something that is hard for me to say in terms of percentage, because not all the centers are yet open. We are opening the center right now. So, once we have all the centers, I can tell you in percentage-wise what's changed. I can tell you that we are going after all of the countries and most of the centers that we work with want to participate, if we were performing the trial the SHIELD I in around 50 centers.

This is the plan for this trial as well. Overall, we had also in SHIELD I, we had -- we have opened around 60 centers and 50 were actually recruiting and this is the plan now many of the centers that were active in SHIELD I will also be in SHIELD II until we have all of them fully open it's hard to say what level has changed.

Roy Buchanan

Okay. But it sounds like a minority of the sites are going to be not included in SHIELD II. Is that fair to assume? Hard to say.

Dikla Czaczkes Akselbrad

Yes. I mean, no, I think, that it's easier for us to say that most of the centers that were in SHIELD I are going to be in SHIELD II.

Roy Buchanan

Got it. Okay. Thanks.

Dikla Czaczkes Akselbrad

But we -- this is interesting. So we will keep investors updated on that.

Roy Buchanan

Okay. Thanks for taking the questions.

Dikla Czaczkes Akselbrad

Thank you.

Operator

There seems to be no further questions. So I would like to hand back for closing remarks.

Dikla Czaczkes Akselbrad

Thank you for joining PolyPid's first quarter 2023 earnings call conference. We remain highly confident in our long-term prospects especially the potential of our promising late-stage product candidate D-PLEX100.

As always, we are grateful to our team members existing and new shareholders and all of our external partners for their commitment, to our mission, and their support in continuing to advance towards achieving our goal of bringing D-PLEX100 to health care providers and patients as quickly as possible. We look forward to speaking with you again on our next call and throughout the year.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.