midastouch017
1 month ago
Protalix BioTherapeutics, Inc. (PLX) Q4 2023 Earnings Call Transcript
Mar. 14, 2024 1:02 PM ETProtalix BioTherapeutics, Inc. (PLX) Stock
Protalix BioTherapeutics, Inc. (NYSE:PLX) Q4 2023 Earnings Conference Call March 14, 2024 8:30 AM ET
Company Participants
Lauren Merrick - Investor Relations
Dror Bashan - President and Chief Executive Officer
Eyal Rubin - Senior Vice President and Chief Financial Officer
Conference Call Participants
John Vandermosten - Zacks
Operator
Good morning, ladies and gentlemen and welcome to the Protalix BioTherapeutics Fiscal Year 2023 Financial and Business Results Conference Call. As a reminder, this conference call is being recorded. I’ll now turn the conference over to our host, Ms. Lauren Merrick [ph] of LifeSci Advisors, Investor Relations for Protalix. You may now begin.
Lauren Merrick
Thank you, Rob and welcome to the Protalix BioTherapeutics fiscal year 2023 financial results and business update conference call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer.
A press release announcing the results and the update was issued this morning and is available now on the Protalix 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 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 in Protalix’s filings with the U.S. Securities and Exchange Commission.
I will now turn the call over to Mr. Dror Bashan. Dror?
Dror Bashan
Thank you, Lauren and welcome everyone to our fiscal year 2023 financial results and business update call. I will begin by reviewing our accomplishments over the past year and recent progress. Following my remarks, Eyal will provide a more detailed review of our financial results. We will then open the line for questions.
2023 marks a significant year for Protalix as we received regulatory approval for our second drug Elfabrio, for the treatment of adult patients with Fabry disease. In May of 2023, both the FDA and the EMA approved Elfabrio for the treatment of adult patients with Fabry disease. Since then, Elfabrio has been granted additional regulatory approvals in other markets like UK, Sweden and the most recently in Israel as well. Our commercial partner, Chiesi global rare diseases remains focused on the commercial launches, which are underway in the United States, in the European Union, in the UK and additional markets where approvals are granted. We are confident that Chiesi will continue to position Elfabrio for success, and we look forward to continued growth of our Elfabrio franchise. Elfabrio is now the second approved drug expressed via our propriety plant, coal-based protein expression system, Protalix, which further highlights the success of our unique platform with these significant milestones behind us and while we are supporting Chiesi’s operations.
We are continuing to focus on building our – the development of our pipeline of innovative assets for the treatment of genetic and non-genetic rare diseases. Our next clinical development candidate is PRX-115, which is being developed for the potential treatment of severe gout. PRX-115 is a recombinant pegylated uricase product candidate that is also produced using our Protalix platform. In March of 2023, we have initiated a Phase 1 first in human clinical trial of PRX-115 to evaluate its safety, pharmacokinetics, pharmacodynamics and immunogenicity. This is a double-blind placebo-controlled single ascending dose study being conducted in New Zealand in approximately 56 patients with elevated uric acid levels. We are pleased to announce that the trial is now fully enrolled, and we expect to report preliminary results from this study in the second quarter of 2024. Our next pipeline of candidate also being expressed for Protalix is PRS-119. PRX-119 is a pegylated recombinant human DNS1 candidate in developing for the potential treatment of diseases associated with neutrophil extracellular scraps or NES. Additional preclinicals are ongoing, and we will update you accordingly, of course.
In addition to PRX-115 and PRX-119, we have multiple preclinical programs in progress, and we look forward to providing you with the updates on these potential development candidates as they become more mature. On the corporate side, in 2023, we welcome Dr. Eliott Foster as Chairman of our Board of Directors and a member of our nominating committee. Dr. Foster succeeded [indiscernible] who retired and we are grateful to the very dedication and leadership since the founding of Protalix. And we are grateful for Eliot’s contribution thus far as we prepare for an exciting phase of development of the company.
Finally, and before turning the call over to Eyal, I want to note that our strong balance sheet provides us with sufficient cash runway to support our operations and in addition, as Eyal will discuss, sales of Elfabrio to Chiesi increased after regulatory approval of Elfabrio, while Chiesi builds its inventories to support a successful launch. We expect sales to clearly – to gradually continue as they anticipate future approvals and launches in additional countries throughout the world.
With that, it is now my pleasure to turn the call over to Eyal for a review of our financials. And Eyal, please go ahead.
Eyal Rubin
Thank you, Dror. And thank you everyone for joining todays call. Let me review our fiscal year 2023 financials. We recorded revenues from selling goods of $40.4 million for the year ended December 31, 2023, an increase of $15.1 million or 60% compared to revenues of $25.3 million for the year ended December 31, 2022. The increase resulted primarily from an increase of $14.1 million in sales of Elfabrio drug product to Chiesi following the approval by the FDA and the EMA of Elfabrio as Dror described, an increase of $0.1 million in sales to Pfizer and of $0.9 million in sales to Brazil.
We recorded revenues from license and R&D services of $25.1 million for the year ended December 31, 2023, an increase of $2.8 million or 13% compared to revenues of $22.3 million for the year ended December 31, 2022. The increase resulted from the $20 million regulatory milestone payment from Chiesi in connection with the FDA approval of Elfabrio, which was partially offset by a decrease of $17.2 million in revenues recognized in connection with the R&D performance obligation under the Chiesi agreement as the company has completed the Phase 3 clinical program thereunder.
Revenues from license and R&D services represent primarily the revenues the company recognized for services provided under the Chiesi agreement. Cost of goods sold was $23 million for the year ended December 31, 2023, an increase of $3.4 million or 17% compared to cost of goods sold of $19.6 million for the year ended December 31, 2022. The increase in cost of goods sold was primarily the result of increase in sales of goods per for Chiesi Brazil and Pfizer. Sales to Chiesi included certain drug substance costs, which had already been recognized as research and development expenses as it was produced as part of the research and development activities.
Accordingly, the related cost of goods sold does not include the cost of subs. For the year ended December 31, 2023, the company total research and development expenses were approximately $17.1 million, comprised of approximately $6.3 million subcontractor related expenses, approximately $7.8 million of salary-related expenses, approximately $0.6 million of material-related expenses and approximately $2.4 million of other expenses. For the year ended December 31, 2022, the company’s total research and development expenses were approximately $29.3 million, comprised of approximately $17.8 million in sub-contractor related expenses, approximately $7.3 million of salary and related expenses, approximately $1.4 billion of material-related expenses and approximately $2.8 million of other expenses.
The decrease in research and development expenses was $12.2 million or 42% for the year ended December 31, 2023, compared to the year ended December 31, 2022. The decrease in issues and development expenses resulted primarily from $11.5 million decrease in subcontractor-related expenses in connection with the PRX-102 clinical trials and a $0.8 million decrease in materials related expenses.
Selling, general and administrative expenses were $15 million for the year ended December 31, 2023, an increase of $3.3 million or 28% from $11.7 million for the year ended December 31, 2022. The increase resulted primarily from an increase of approximately $2.3 million in one-time cash bonuses, share-based compensation and salary and related expenses as well as an increase of $0.3 million in travel conferences and employee training expenses. Financial expenses net was $1.9 million for the year ended December 31, 2023, an increase of $0.5 million or 36% compared to financial expenses of $1.4 million for the year ended December 31, 2022. The increase was primarily due to a decrease of $0.9 million in income related to exchange rates as well as an increase in interest expenses of $0.7 million which was partially offset by a gain recognized due to the conversion of a portion of the 2024 notes of $0.4 million and $0.6 million increase in interest income.
For the year ended December 31, 2023, we recorded income taxes of approximately $0.3 million, a decrease of $0.2 million or 40% compared to tax expenses of $0.5 million for the year ended December 31, 2022. The income taxes resulted primarily from the provision for current taxes and income mainly derived from U.S. taxable global intangible low tax income duty, mainly in respect of Section 174 of the U.S. Tax Cuts and Jobs Act effective in 2022, Section 174 of the TCJA requires all U.S. companies, for tax purposes, to capitalize and subsequently amortize R&D expenses that fall within the scope of Section 174 over 5 years for research activities conducted in the United States and over 15 years for research activities conducted outside of the United States rather than deducting such costs in the current year.
The net income taxes gives effect to a valuation allowance release equal to approximately $3.1 million. Cash and cash equivalents and short-term bank deposits were approximately $44.6 million at December 31, 2023. Net income for the year ended December 31, 2023, was approximately $8.3 million or $0.12 per share basic and $0.09 per share diluted compared to a net loss of $14.9 million or $0.31 per share basic and diluted for the same period in 2022.
I will now turn the call back to you, Dror.
Dror Bashan
Thank you, Eyal. I would like to conclude by expressing how pride we are on of all that Protalix has accomplished throughout 2023. With two drugs expressed via our proven platform are now approved, we are continuing to build our expertise to develop a type of assets to potentially transform the treatment of rare disease. I am grateful for a world-class team who constantly demonstrate unwavering commitment to our mission. We look forward to updating you on our progress as we continue to drive innovation and create long-term value for the patients and stockholders.
Now, I would like to ask the operator to open the call for questions.
Question-and-Answer Session
Operator
[Operator Instructions] And our first question comes from the line of John Vandermosten with Zacks. Please proceed with your question.
John Vandermosten
Great. Thank you and good afternoon Dror and Eyal. If I start off with a question about some of the PRX-102 studies that are going on, I noticed you had one in Japan and one in the United States for pediatric. Can you give us a timeline on how long those might take and what the next steps would be there to get approvals for Japan and for pediatric indication?
Dror Bashan
So, thank you, John. Actually, this study, this is – and are conducted by Chiesi and this is their responsibility. So, I don’t have the timeline in front of me, of course. And this is for them actually to address that. But you can understand that they put a lot of attention and resources into expanding if I may say the franchise, this is clear.
John Vandermosten
Yes. Great. It sounds like they have a lot of opportunities out there. And also, you may not have gotten a lot of information from Chiesi on this, but when you look at your revenues and kind of expenditures for the year, how should we think of those balancing out in terms of free cash flow on the bottom line? Are they going to be pretty equal based on the view right now? Is that how you are planning going forward?
Eyal Rubin
Hey. Thanks for the question, John. So, I don’t know what equal means. But as Dror mentioned, gradually, we expect the sales obviously to grow. And in terms of the free cash flow, it depends how much money you are going to invest in the early stage and the later stage R&D. As I mentioned in previous calls, the sales to Chiesi are comprised of an inventory buildup as well as obviously, commercial sales to the enrolled commercial patients. We expect that these sales are going to eventually grow and gradually, we will get to the place, as we indicated in our presentation, that we believe that Chiesi with a good job can they take in the market.
John Vandermosten
Got it. And then looking at PRX-115, you had mentioned that there is going to be results from that, it seems like in the next couple of weeks. What – assuming those are positive, what are the next steps for that program? Is that Phase 2, or might there be some other pursuit there?
Dror Bashan
So, if indeed, we continue to go forward, of course, when we move into a Phase 2, yes.
John Vandermosten
Okay. And would that be before the end of this year that you would start that Phase 2?
Dror Bashan
This depends – I think it will be between the end to the first half of next year, yes.
John Vandermosten
The first half of next year, okay. Got it. And then last question on PRX-119. What are the next steps for that? Is that something you might put into the clinic this year?
Dror Bashan
Not yet. We are looking into the right indication to continue with. I think this will take further a bit more to decide.
John Vandermosten
Okay. And then any other milestones on the R&D side that we should think about as we progress through 2024?
Dror Bashan
Once there will be something to update, we will update, of course. We are not exactly sitting on our hands. Well, I think we will pretty much, I would say, even intensively in order to make sure that we can add the additional early-stage assets. It is just – we take our time, and I hope we will cut the right move, but will make sense.
John Vandermosten
Okay. Alright. Thank you, Dror. Thank you, Eyal for your answers.
Dror Bashan
You’re welcome.
Operator
[Operator Instructions] Thank you. At this time, there are no additional questions. Gentlemen, would you want to make some further remarks.
Dror Bashan
So, this is to Dror speaking. I just would like to thank everybody again for the time, and again, to thank our shareholders and our employees for supporting us and moving on with our commitment. And we will – of course, we will update you accordingly on any sort of development, and we will meet in the next earnings update. Thank you.
Operator
This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Eyal Rubin
Thank you.
midastouch017
1 month ago
Protalix BioTherapeutics Reports Fiscal Year 2023 Financial and Business Results
https://finance.yahoo.com/news/protalix-biotherapeutics-reports-fiscal-2023-105000190.html
Company to host conference call and webcast today at 8:30 a.m. EDT
CARMIEL, Israel, March 14, 2024 /PRNewswire/ -- Protalix BioTherapeutics, Inc. (NYSE American: PLX), a biopharmaceutical company focused on the development, production and commercialization of recombinant therapeutic proteins produced by its proprietary ProCellEx® plant cell-based protein expression system, today reported financial results for the fiscal year ended December 31, 2023, and provided a business update.
"2023 was a significant year for Protalix, as we received regulatory approvals of Elfabrio for the treatment of adult patients with Fabry disease and advanced our growing pipeline," said Dror Bashan, Protalix's President and Chief Executive Officer. "As the second drug produced through our proven protein expression platform, Elfabrio's approval is a welcome milestone for Fabry disease patients and their families. Our commercial partner Chiesi Global Rare Diseases is continuing to position Elfabrio for global success, with launches underway in the United States, the European Union, the UK and additional markets where approvals were granted. As we continue to provide Chiesi with operational support for its activities, we have turned our attention to developing our innovative pipeline. For example, PRX-115, our proprietary recombinant PEGylated uricase for the treatment of severe gout, is currently being studied in a first-in-human phase I clinical trial. We anticipate that results from the trial will be published in the second quarter of 2024. As a company powered by a professional team and solid financials, and with the potential for revenue growth, we are poised for an exciting future and look forward to making a positive impact on patients' lives and delivering long-term value to our stockholders."
Fiscal Year 2023 and Recent Business Highlights
Regulatory and Commercial Advancements
The Company, together with its development and commercialization partner, Chiesi Global Rare Diseases (Chiesi), a business unit of the Chiesi Group, gained marketing authorizations in the United States, the European Union, the UK, Switzerland and Israel for Elfabrio® (pegunigalsidase alfa), a PEGylated recombinant human a-Galactosidase-A enzyme, for the treatment of adult patients with confirmed Fabry disease. Elfabrio is administered via intravenous infusion at a dose of 1 mg/kg every two weeks.
On May 5, 2023, the Company announced that the European Commission (EC) granted marketing authorization to Elfabrio in the European Union for the treatment of adult patients with Fabry disease.
On May 10, 2023, the Company announced that the U.S. Food and Drug Administration (FDA) approved Elfabrio in the United States for the treatment of adult patients with Fabry disease.
On August 15, 2023, Chiesi announced that the UK Medicines and Healthcare products Regulatory Agency (MHRA) granted marketing authorization for Elfabrio in Great Britain for long-term enzyme replacement therapy in adult patients with a confirmed diagnosis of Fabry disease.
On September 11, 2023, Swissmedic, the national authorization and supervisory authority for drugs and medical products in Switzerland, announced the approval of Elfabrio in Switzerland for long-term enzyme replacement therapy in adult patients with a confirmed diagnosis of Fabry disease.
In January 2024, the Israeli Ministry of Health granted principle approval of Elfabrio for adult patients with a confirmed diagnosis of Fabry disease.
The FDA approval triggered a $20.0 million milestone payment from Chiesi. In addition, the Company generated $17.5 million from sales of Elfabrio to Chiesi during 2023 post-regulatory approval, as Chiesi is building its inventory and recruiting commercial patients in the United States and Europe.
Clinical Developments
In March 2023, the first patient was dosed in the Company's First in Human (FIH) Phase I clinical trial of PRX–115, a recombinant PEGylated uricase product candidate under development as a potential treatment for severe gout. The FIH trial is a double-blind, placebo-controlled, single ascending dose study designed to evaluate the safety, pharmacokinetics, pharmacodynamics and immunogenicity of PRX–115 in approximately 56 patients with elevated uric acid levels (>6.0 mg/dL) and no previous exposure to PEGylated uricase. The study, which is fully-enrolled, is being conducted at the New Zealand Clinical Research (NZCR) under the New Zealand Medicines and Medical Devices Safety Authority (MedSafe) and the Health and Disability Ethics Committee (HDEC) guidelines. The Company anticipates that preliminary results from the study will be published in the second quarter of 2024.
Corporate Developments
On September 14, 2023, Eliot Richard Forster, Ph.D. began his tenure as Chairman of the Board of Directors, replacing former Chairman Zeev Bronfeld, who retired for personal reasons.
Fiscal Year 2023 Financial Highlights
The Company recorded revenues from selling goods of $40.4 million for the year ended December 31, 2023, an increase of $15.1 million, or 60%, compared to revenues of $25.3 million for the year ended December 31, 2022. The increase resulted primarily from an increase of $14.1 million in sales of Elfabrio drug product to Chiesi, following the approvals by the FDA and the European Medicines Agency (EMA) of Elfabrio, an increase of $0.1 million in sales to Pfizer Inc., or Pfizer, and of $0.9 million in sales to Brazil, resulting from timing differences.
The Company recorded revenues from license and R&D services of $25.1 million for the year ended December 31, 2023, an increase of $2.8 million, or 13%, compared to revenues of $22.3 million for the year ended December 31, 2022. The increase resulted from the $20.0 million regulatory milestone payment from Chiesi in connection with the FDA approval of Elfabrio which was partially offset by a decrease of $17.2 million in revenues recognized in connection with the R&D performance obligation under the Chiesi Agreements as the Company has completed the phase III clinical program thereunder. Revenues from license and R&D services represent primarily the revenues the Company recognized for services provided under the Chiesi Agreements.
Cost of goods sold was $23.0 million for the year ended December 31, 2023, an increase of $3.4 million, or 17%, compared to cost of goods sold of $19.6 million for the year ended December 31, 2022. The increase in cost of goods sold was primarily the result of the increase in sales of goods to Chiesi, Brazil and to Pfizer. Sales to Chiesi included certain drug substance costs which had already been recognized as research and development expenses as it was produced as part of research and development activities. Accordingly, the related cost of goods sold does not include the costs of such drug substance.
For the year ended December 31, 2023, the Company's total research and development expenses were approximately $17.1 million, comprised of approximately $6.3 million in subcontractor-related expenses, approximately $7.8 million of salary and related expenses, approximately $0.6 million of materials-related expenses and approximately $2.4 million of other expenses. For the year ended December 31, 2022, the Company's total research and development expenses were approximately $29.3 million, comprised of approximately $17.8 million in subcontractor-related expenses, approximately $7.3 million of salary and related expenses, approximately $1.4 million of materials-related expenses and approximately $2.8 million of other expenses. Total decrease in research and developments expenses was $12.2 million, or 42%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The decrease in research and development expenses resulted primarily from a $11.5 million decrease in subcontractor-related expenses in connection with the PRX-102 clinical trials, and a $0.8 million decrease in materials-related expenses.
Selling, general and administrative expenses were $15.0 million for the year ended December 31, 2023, an increase of $3.3 million, or 28%, from $11.7 million for the year ended December 31, 2022. The increase resulted primarily from an increase of approximately $2.3 million in one-time cash bonuses, share-based compensation and salary and salary-related expenses, as well as an increase of $0.3 million in travel, conferences and employee training expenses.
Financial expense, net was $1.9 million for the year ended December 31, 2023, an increase of $0.5 million, or 36%, compared to financial expenses of $1.4 million for the year ended December 31, 2022. The increase was primarily due to a decrease of $0.9 million in income related to exchange rates as well as an increase in interest expenses of $0.7 million which was partially offset by a gain recognized due to conversions of a portion of the 2024 Notes of $0.4 million and a $0.6 million increase in interest income.
For the year ended December 31, 2023, the Company recorded income taxes of approximately $0.3 million, a decrease of $0.2 million, or 40%, compared to tax expenses of $0.5 million for the year ended December 31, 2022. The income taxes resulted primarily from the provision for current taxes on income mainly derived from U.S. taxable global intangible low-taxed income (GILTI) mainly in respect of Section 174 of the U.S. Tax Cuts and Jobs Act (the "TCJA"). Effective in 2022, Section 174 of the TCJA requires all U.S. companies, for tax purposes, to capitalize and subsequently amortize R&D expenses that fall within the scope of Section 174 over five years for research activities conducted in the United States and over 15 years for research activities conducted outside of the United States rather than deducting such costs in the current year. The net income taxes gives effect to a valuation allowance release equal to approximately $3.1 million.
Cash, cash equivalents and short-term bank deposits were approximately $44.6 million at December 31, 2023.
Net income for the year ended December 31, 2023 was approximately $8.3 million, or $0.12 per share, basic, and $0.09 per share, diluted, compared to a net loss of $14.9 million, or $0.31 per share, basic and diluted, for the same period in 2022.
Conference Call and Webcast Information
The Company will host a conference call today, March 14, 2024 at 8:30 am EDT, to review the financial results and provide a business update. To participate in the conference call, please dial the following numbers prior to the start of the call:
Conference Call Details:
Date: Thursday, March 14, 2024
Time: 8:30 a.m. Eastern Daylight Time (EDT)
Toll Free: 1-877-423-9813
International: 1-201-689-8573
Israeli Toll Free: 1-809-406-247
Conference ID: 13744193
Call me™: https://tinyurl.com/4pkhcxcj
The Call me™ feature allows you to avoid the wait for an operator; you enter your phone number on the platform and the system calls you right away.
Webcast Details:
The conference will be webcast live from the Company's website and will be available via the following links:
Company Link: https://protalixbiotherapeutics.gcs-web.com/events0
Webcast Link: https://tinyurl.com/mumnf9da
Conference ID: 13744193
Participants are requested to access the websites at least 15 minutes ahead of the conference to register, download and install any necessary audio software.
A replay of the call will be available for two weeks on the Events Calendar of the Investors section of the Company's website, at the above link.
midastouch017
4 months ago
Protalix BioTherapeutics Issues 2024 Letter to Stockholders
https://finance.yahoo.com/news/protalix-biotherapeutics-issues-2024-letter-115000898.html
CARMIEL, Israel, Dec. 26, 2023 /PRNewswire/ -- Protalix BioTherapeutics, Inc. (NYSE American: PLX), a biopharmaceutical company focused on the development, production and commercialization of recombinant therapeutic proteins produced by its proprietary ProCellEx® plant cell based protein expression system, today announced the following letter from its President and Chief Executive Officer, Dror Bashan, to its stockholders.
Dear Protalix Stockholders,
As we approach the close of a transitional year for our company, I want to take a moment to reflect on our recent accomplishments…accomplishments that are shaping our path going forward. Elfabrio®, our second development candidate produced through our proprietary ProCellEx® plant cell-based protein expression system, was approved for the treatment of adult patients with Fabry disease by both the U.S. Food and Drug Administration and the European Medicines Agency. Approval of Elfabrio marks a significant milestone for our company and, more importantly, brings a new therapeutic option to patients with unmet needs. This achievement is a testament to the tireless efforts of our talented and professional team, and we take great pride in sharing this success with you, our dedicated stockholders.
As Elfabrio has moved from the development stage to being a commercial product, we are taking steps we believe will strengthen our internal operations and improve our production capabilities for two commercial products. We are confident that as the commercialization of Elfabrio continues to develop, it will enable us to improve our capital structure.
Our commercial partner, Chiesi Global Rare Diseases, played a pivotal role in our journey, and I extend my gratitude to Giacomo Chiesi and the entire Chiesi team. Their support has been instrumental in our combined success, and we look forward to further strengthening our relationship in the years to come. Since the approval, Chiesi has launched Elfabrio in the United States, the European Union and the United Kingdom, strategically positioning Elfabrio for success in those markets. Protalix is dedicated to being a valuable resource to Chiesi and facilitating Chiesi's commercial efforts.
We are continuing to make progress on our pipeline programs. We have finished the seventh cohort in the phase I clinical trial of PRX-115, our recombinant PEGylated uricase (urate oxidase) under development for the potential treatment of severe gout. At this time, 56 patients have been dosed in this trial and we anticipate completing the trial in the second quarter of 2024. Progress is also being made in the preclinical development of PRX-119, our plant cell-expressed PEGylated recombinant human DNase I product candidate which we are designing to elongate half-life in the circulation for NETs-related diseases. We look forward to updating you as we advance in the development of these and other product candidates, and as we begin to turn our focus to building a sustainable portfolio of treatments for rare diseases.
I also want to take a moment to acknowledge the challenges our community continues to face given the current situation in Israel. Our hearts are with all those who have been affected so profoundly, including our colleagues, partners and the broader community. We deeply appreciate the impact of these events on both a personal and professional level, and we continue to extend our support to everyone navigating these difficult times.
Looking ahead, the future of Protalix is filled with promise and potential. As we continue to innovate and strengthen our operations, I am confident that our company can deliver impactful solutions for the benefit of patients in need. Our commitment to excellence, coupled with the passion of our team, positions us well for continued growth and success.
In closing, I want to express my sincere appreciation for our employees and our Board of Directors for their ongoing dedication to our mission. I also want to thank you, our stockholders, for your continued confidence and trust in our vision. As we navigate the exciting journey ahead, I am optimistic about Protalix's future and the positive impact we can collectively make in the lives of patients and the broader healthcare community.
Thank you for your continued support. I hope you enjoy the holidays and have a happy new year.
Sincerely,
Dror Bashan, President & Chief Executive Officer
About Protalix BioTherapeutics, Inc.
Protalix is a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins expressed through its proprietary plant cell-based expression system, ProCellEx. It is the first company to gain U.S. Food and Drug Administration (FDA) approval of a protein produced through plant cell-based in suspension expression system. This unique expression system represents a new method for developing recombinant proteins in an industrial-scale manner. Protalix has licensed to Pfizer Inc. the worldwide development and commercialization rights to taliglucerase alfa for the treatment of Gaucher disease, Protalix's first product manufactured through ProCellEx, excluding in Brazil, where Protalix retains full rights. Protalix's second product, Elfabrio®, was approved by both the FDA and the European Medicines Agency in May 2023.
Protalix has partnered with Chiesi Farmaceutici S.p.A. for the global development and commercialization of Elfabrio. Protalix's development pipeline consists of proprietary versions of recombinant therapeutic proteins that target established pharmaceutical markets, including the following product candidates: PRX–115, a plant cell-expressed recombinant PEGylated uricase for the treatment of severe gout; PRX–119, a plant cell-expressed long action DNase I for the treatment of NETs-related diseases; and others.
Forward-Looking Statements
To the extent that statements in this press release are not strictly historical, all such statements are forward-looking, and are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. The terms "expect," "anticipate," "believe," "estimate," "project," "may," "plan," "will," "would," "should" and "intend," and other words or phrases of similar import are intended to identify 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. These statements are based on our current beliefs and expectations as to such future outcomes. Drug discovery and development involve a high degree of risk and the final results of a clinical trial may be different than the preliminary findings for the clinical trial. Factors that might cause material differences include, among others: risks related to the commercialization of Elfabrio, our approved product for the treatment of adult patients with Fabry disease; risks relating to Elfabrio's market acceptance, competition, reimbursement and regulatory actions, including as a result of the boxed warning contained in the FDA approval received for the product; risks related to our commercialization partner's ability to obtain and maintain reimbursement for Elfabrio, and the extent to which patient assistance programs and co-pay programs are utilized; the possible disruption of our operations due to the war declared by Israel's security cabinet against the Hamas terrorist organization located in the Gaza Strip, the military campaign against the Hezbollah and other terrorist activities and armed conflict, including as a result of the disruption of the operations of certain regulatory authorities and of certain of our suppliers, collaborative partners, licensees, clinical trial sites, distributors and customers; the likelihood that the FDA, EMA or other applicable health regulatory authorities will approve an alternative dosing regimen for Elfabrio; risks related to the regulatory approval and commercial success of our other product and product candidates, if approved; failure or delay in the commencement or completion of our preclinical studies and clinical trials, which may be caused by several factors, including: slower than expected rates of patient recruitment; unforeseen safety issues; determination of dosing issues; lack of effectiveness during clinical trials; inability to satisfactorily demonstrate non-inferiority to approved therapies; inability or unwillingness of medical investigators and institutional review boards to follow our clinical protocols; inability to monitor patients adequately during or after treatment; and/or lack of sufficient funding to finance our clinical trials; delays in the approval or potential rejection of any applications we file with the FDA, EMA or other health regulatory authorities for our other product candidates, and other risks relating to the review process; risks associated with the novel coronavirus disease, or COVID-19, outbreak and variants, which may adversely impact our business, preclinical studies and clinical trials; risks associated with global conditions and developments such as supply chain challenges, the inflationary environment and tight labor market, and instability in the banking industry, which may adversely impact our business, operations and ability to raise additional financing if and as required and on terms acceptable to us; risks related to any transactions we may effect in the public or private equity markets to raise capital to finance future research and development activities, general and administrative expenses and working capital; risks relating to our evaluation and pursuit of strategic partnerships; the risk that the results of our clinical trials will not support the applicable claims of safety or efficacy and that our product candidates will not have the desired effects or will be associated with undesirable side effects or other unexpected characteristics; risks relating to our ability to manage our relationship with our collaborators, distributors or partners, including, but not limited to, Pfizer and Chiesi; risks related to the amount and sufficiency of our cash and cash equivalents; risks relating to our ability to make scheduled payments of the principal of, to pay interest on or to refinance our outstanding notes or any other indebtedness; risks relating to changes to interim, topline or preliminary data from clinical trials that we announce or publish; risks relating to the compliance by Fiocruz with its purchase obligations under our supply and technology transfer agreement, which may have a material adverse effect on us and may also result in the termination of such agreement; risk of significant lawsuits, including stockholder litigation, which is common in the life sciences sector; our dependence on performance by third-party providers of services and supplies, including without limitation, clinical trial services; the inherent risks and uncertainties in developing drug platforms and products of the type we are developing; the impact of development of competing therapies and/or technologies by other companies; risks related to our supply of drug products to Pfizer; potential product liability risks, and risks of securing adequate levels of related insurance coverage; the possibility of infringing a third-party's patents or other intellectual property rights and the uncertainty of obtaining patents covering our products and processes and successfully enforcing our intellectual property rights against third-parties; risks relating to changes in healthcare laws, rules and regulations in the United States or elsewhere; and other factors described in our filings with the U.S. Securities and Exchange Commission. The statements in this press release are valid only as of the date hereof and we disclaim any obligation to update this information, except as may be required by law.
Investor Contact
Chuck Padala, Managing Director
LifeSci Advisors
646-627-8390
chuck@lifesciadvisors.com
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midastouch017
5 months ago
Protalix BioTherapeutics: Fiscal Challenges And Gout Therapy Prospects
Nov. 17, 2023 4:16 PM ET
Protalix BioTherapeutics, Inc. (PLX) 8 Comments
Summary
Protalix shows mixed financials with declining revenue, yet improved operating loss, indicating increasing operational efficiency.
PRX-115, in Phase I trials for refractory gout, is crucial in a competitive market with high efficacy and safety standards.
Despite financial resilience with a moderate cash burn rate, significant share dilution and debt raise long-term sustainability concerns.
Recommendation: Sell.
Protalix faces market positioning challenges and financial instability, warranting close monitoring and caution. Confidence score: 30/100.
At a Glance
Protalix BioTherapeutics (NYSE:PLX), navigating a complex biotech landscape, presents a nuanced picture marked by financial resilience and ambitious clinical endeavors. The company's recent financial performance shows a mix of declining total revenue, yet an improved operating loss and reduced net loss, hinting at operational efficiencies being realized. The significant share dilution, however, raises concerns about long-term financial sustainability. Clinically, the spotlight is on PRX-115, a novel candidate for refractory gout, currently in Phase I trials. Its success is pivotal, given the competitive and growing gout therapeutics market, where efficacy and safety benchmarks are high. While Protalix's modest cash burn rate and current ratio suggest short-term stability, the company's journey in advancing PRX-115 and navigating the complex market dynamics of gout treatment will be critical in shaping its future. The article, therefore, subtly prepares the reader for a cautious yet informed stance on Protalix's prospects, balancing clinical potential against financial and market realities.
Q3 Earnings
To begin my analysis, looking at Protalix BioTherapeutics' most recent earnings report, YoY for the three months ended September 30, 2023, reveals a mixed financial performance. Total revenue declined to $10.3M from $14.2M YoY, primarily due to a significant drop in revenues from license and R&D services, from $5.4M to $0.2M. However, revenues from selling goods increased from $8.8M to $10.2M. Operating loss improved, reducing to $1.9M from $3.1M. Notably, the net loss for the period decreased to $1.9M from $3.6M. Share dilution is evident, as the weighted average number of shares used in computing diluted earnings per share increased significantly from 49.5M to 83.8M. This suggests a substantial increase in outstanding shares, impacting shareholder value.
Financial Health
Turning to Protalix BioTherapeutics' balance sheet, their liquid assets, comprising cash and cash equivalents ($20.4M) and short-term bank deposits ($20.6M), total approximately $41M. The current ratio, calculated as current assets divided by current liabilities, is 1.68 ($72.6M/$43.4M), indicating a comfortable ability to cover short-term obligations. However, when comparing total assets ($87.6M) to total liabilities ($49.3M), there's a notable debt load, particularly considering the convertible notes under current ($20.2M) and long-term liabilities ($28.2M).
Over the last nine months, Protalix's net cash used in operating activities is approximately $4.9M, translating to a monthly cash burn rate of about $0.5M. The cash runway, calculated by dividing liquid assets by monthly cash burn, is approximately 82 months. This estimation, however, is based on past data and may not directly predict future performance. Looking into the future, Protalix estimates their cash runway extending into Q2 2025, per their most recent corporate presentation.
Given their current cash position and modest monthly burn rate, the odds of Protalix requiring additional financing within the next twelve months seem low, barring any significant increase in operating expenses or unforeseen financial obligations.
Market Sentiment
According to Seeking Alpha data, Protalix BioTherapeutics displays a mixed financial landscape. Its market capitalization of $102.86M, juxtaposed with a modest institutional ownership of 12.56%, suggests cautious market confidence. This is underscored by its short interest of 8.76%, indicating a moderate level of market skepticism or hedging against potential downside risks.
The company's growth prospects, evidenced by varied analyst projections, show a fluctuating trajectory with an anticipated rise in sales to $63.95M in 2023, followed by a slight decline in 2024, and a significant increase in 2025. This volatility in revenue forecasts reflects the inherent uncertainties and high stakes associated with biotech stock performance, particularly for companies like Protalix with critical drug candidates in early-stage trials.
Stock momentum, in comparison to SPY, reveals underperformance across multiple timeframes, with a notable decline of 29.50% over three months and 36.20% over six months, albeit with a positive uptick of 33.14% year-over-year.
The net insider activity over the past three and twelve months shows a positive trend, with 64,516 and 1,398,878 shares bought respectively, and no recorded sales. This could be interpreted as a vote of confidence from insiders in the company's future prospects.
Institutional holdings feature key players like BlackRock, State Street Corp, and Geode Capital Management, who have increased their positions, indicating some level of institutional trust in the company's future. The balance between new positions (9 holders, 777,017 shares) and sold-out positions (12 holders, 1,289,817 shares) further highlights a cautious but not entirely pessimistic institutional stance.
PRX-115: Protalix's Strategic Entry in Gout Therapeutics
Protalix BioTherapeutics is shifting its focus to gout therapeutics with its development of PRX-115 for refractory gout. This drug, a recombinant PEGylated uricase produced in plant cells, leverages the ProCellEx platform. Designed for prolonged half-life, it aims to reduce dosing frequency. PRX-115, administered intravenously, is in a Phase I clinical trial. This trial, a double-blind, placebo-controlled study with a single ascending dose approach, seeks to assess the safety, pharmacokinetics, pharmacodynamics, and immunogenicity of PRX-115 in a group of up to 56 patients. It involves up to seven cohorts, with a 3:1 randomization for either PRX-115 or placebo. A key focus of this trial is to monitor uric acid level reductions and evaluate dosing efficacy.
According to Grand View Research, the worldwide market for gout treatments, valued at $2.49 billion in 2022, is projected to expand at a CAGR of 6.25% from 2023 to 2030. The market's expansion is largely attributed to the growing number of gout cases and increased awareness of its treatments. Factors such as renal disorders, hypertension, diabetes, and obesity, which are common comorbidities of gout, further propel this market. Notably, approximately 26% of individuals with gout also have diabetes. The introduction of innovative treatments and a strong pipeline of drugs are additional catalysts for this growth. Nonetheless, the market's advancement is hindered by the delayed diagnosis of gout in less developed regions.
In the current gout treatment landscape, NSAIDs dominate the market. These drugs are widely used for the management of acute gout attacks due to benefits like lower costs and high effectiveness in combination therapy. However, the segment of urate-lowering agents, including xanthine oxidase inhibitors and uricosuric agents, is expected to grow significantly, driven by the introduction of novel drugs with enhanced efficacy and therapeutic value. The acute condition segment, primarily treated with NSAIDs, colchicine, and corticosteroids, held a revenue share over 60% in 2022, expected to maintain dominance during the forecast period??.
While PRX-115 presents a promising development in the treatment of severe gout, it faces significant challenges in terms of efficacy and safety. The drug must demonstrate a robust safety profile and superior efficacy compared to existing treatments to gain a foothold in the competitive gout therapeutics market. The high bar set by existing therapies, particularly in managing acute gout attacks and reducing uric acid levels, necessitates that PRX-115 not only matches but potentially exceeds these standards. Its success in ongoing clinical trials will be crucial in establishing its efficacy and safety, determining its potential role and impact in the evolving landscape of gout treatment.
My Analysis & Recommendation
In conclusion, Protalix BioTherapeutics confronts a complex and challenging landscape. Financially, the company demonstrates resilience with a moderate cash burn rate and a satisfactory current ratio, suggesting short-term financial stability. However, the significant share dilution and a notable debt load, particularly with convertible notes, raise concerns about long-term financial sustainability.
Elfabrio, developed by Protalix and FDA-approved for treating Fabry disease, faces a complex market environment. Its entry is constrained by established Enzyme Replacement Therapies (ERTs) such as Fabrazyme and targeted therapies like Galafold, and in my analysis, Elfabrio does not offer significant benefits over these existing treatments. Insurance and cost factors, as highlighted in the latest UpToDate guidelines, play a crucial role in therapy selection, potentially impeding Elfabrio's market adoption. While Chiesi will handle commercialization and related expenses, the financial returns for Protalix from Elfabrio manufacturing appear limited. Given these factors, Elfabrio's recent approval and its anticipated 2024 market entry seem to have a minimal impact on the market landscape.
The venture into gout treatment with PRX-115, though a strategic diversification, is high-risk and capital-intensive. Success hinges on PRX-115 demonstrating superior efficacy and safety in clinical trials, a formidable task given the established treatments in the gout market. The evolving gout therapeutics market, driven by increasing disease prevalence and rising awareness, offers potential but is fraught with competition and high entry barriers.
Investors should closely monitor Protalix's clinical trial outcomes, financial health, and market penetration strategies. A cautious approach with readiness to pivot based on emerging data and market responses is advisable. Diversifying investments and maintaining a vigilant stance on Protalix's operational and financial metrics can mitigate potential risks.
Given these considerations, my confidence score for Protalix BioTherapeutics is 30/100, leading to a "Sell" recommendation. The company faces significant challenges in market positioning and financial stability, necessitating careful scrutiny in the coming months.
Risks to Thesis
In reassessing Protalix BioTherapeutics, considering both my initial "Sell" recommendation and the specific risks associated with investing in microcap companies like Protalix is crucial.
Firstly, the improved operational efficiency indicated by the reduced operating loss might be a sign of better resource management and potential future profitability. This aspect, reflecting underlying strength, could have been underestimated in my analysis.
However, investing in microcap companies, such as Protalix, carries inherent risks. These include higher volatility, less liquidity, and often limited resources compared to larger firms. Such companies are more susceptible to market fluctuations and might face challenges in accessing capital markets efficiently. This risk might not have been fully addressed in my initial analysis.
Secondly, while share dilution is a concern for shareholder value, it might be necessary for funding R&D. The capital raised could lead to significant advancements, especially in their pipeline products. My initial analysis might have overemphasized the immediate negative impact of dilution, underestimating the potential long-term benefits of their R&D investments.
Thirdly, the positive net insider activity could be a bullish signal, indicating insider confidence in the company’s prospects. This aspect might not have been given due weight in my recommendation.
Lastly, although the competitive landscape for gout therapeutics is challenging, PRX-115 could capture a significant market share if it proves superior. The potential of PRX-115 might have been underrepresented in my assessment.
Moreover, microcap stocks like Protalix are often more responsive to company-specific news, such as clinical trial outcomes. This responsiveness can lead to significant price swings, adding to investment risk.
This article was written by
Stephen Ayers
This article aims to offer informational content and is not meant to be a comprehensive analysis of the company. It should not be interpreted as personalized investment advice with regard to "Buy/Sell/Hold/Short/Long" recommendations. The predictions and opinions expressed herein about clinical, regulatory, and market outcomes are those of the author and are rooted in probabilities rather than certainties. While efforts are made to ensure the accuracy of the information, there might be inadvertent errors. Therefore, readers are encouraged to independently verify the information. Investing in biotech comes with inherent volatility, risk, and speculation. Before making any investment decisions, readers should undertake their own research and evaluate their financial position. The author disclaims any liability for financial losses stemming from the use or reliance on the content of this article.
Comments (43)
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Stephen,
Thanks for your article.
Gout is early stage, cash draining, and the outcome is undefined. I would not put money into PLX based on the early stage Gout program. So we agree on that point.
OTH, contrary to your views, I believe Chiesi has stated they believe Elfabrio can capture 15% of the Fabry market. Could they be wrong?, of course. But they sell drugs for a living, AND, they put multiple $-millions behind this perspective-- they have skin in the game. Even 10% of the market is $200M, of which, nominally half would accrue to PLX. That's worth about $300M in valuation, especially w/o any material marketing expense. That's well over double the current MC. I'm willing to wait for 6 to 12-mos to see how the story unfolds. From these levels, the downside seems minimal, and if Chiesi's sales track anywhere near their estimates, the upside is considerable.
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jeremyjpj
Today, 12:02 AM
Comments (106)
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This guy has not done his DD.
1. Sales have just begun and you mention declining rev from a quarter that had a milestone lol. Laughable. It takes 3-4+ quarters of sales efforts to start judging how Chiesi is executing on getting this drug to patients and sales trajectories.
2. Elfabrio will have a large differentiation than Fabrazyme once approved for its once a month dose protocol since it has better half life profile. Dirty politics I think are what denied patients this much improved QOL option from the get go, but Chiesi is working hard to get the drug approved for once a month dosing. Then realistically this drug takes 35% of the ERT market conservatively imo. It also has a better AE profile even though cut over trials don’t really show it because all these patients were active on Fabryzme prior and able to handle that drug.
End of day let those in the Fabry community try the drug and learn about it and I feel confident Elfabrio will take its rightful place as a next gen. treatment option. Its not just another “me too” drug.
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Ralston Jones profile picture
Ralston Jones
Yesterday, 5:08 PM
Premium
Comments (8)
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This company's future rests on the successful commercialization of Elfabrio via Chiesi in my thinking, so I'm a bit surprised it seems to be such a minimal aspect of your thinking.If you're correct that Protalix sees very limited return via Elfabrio I think the company will be somewhat dead money - unless someone comes with an offer to scoop up the ProCellEx platform for cheap. Potential geopolitical risk is another concern. If however you're incorrect and Elfabrio takes significant share, you'll be wrong to the tune of potentially orders of magnitude.
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Stephen Ayers profile picture
Stephen Ayers
Yesterday, 5:11 PM
Analyst
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@Ralston Jones The article assumes Elfabrio is unlikely to have an impact and the to-the-point paragraph lays out a pretty good case. The article, therefore, focuses on their gout prospects, which the company, itself, highlights as a lead prospect. IMO PLX is very much a gout story now.
Thanks for the read,
Stephen
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john boy
Yesterday, 7:47 PM
Investing Group
Comments (16.48K)
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@Ralston Jones fabry desease was their ticket at 40% of 300,000 a year plus production revenue would lift them to 16.00 a share . I thoughttheir product was a prefferred method of treatment. does this guy know what he is talking about cause if he does your rightthis company may not make it.
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Stephen Ayers profile picture
Stephen Ayers
Yesterday, 7:51 PM
Analyst
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@john boy It's one of three ERTs (there's also Migalastat, an oral, targeted therapy) and there is no reason for patients to switch over to PLX's therapy (efficacy was "non-inferior", dosing frequency is the same)
midastouch017
6 months ago
Protalix BioTherapeutics, Inc. (AMEX:PLX) Q3 2023 Earnings Call Transcript
Published on November 7, 2023 at 9:04 am by INSIDER MONKEY TRANSCRIPTS in
Protalix BioTherapeutics, Inc. (AMEX:PLX) Q3 2023 Earnings Call Transcript November 6, 2023
Protalix BioTherapeutics, Inc. beats earnings expectations. Reported EPS is $-0.04, expectations were $-0.07.
Operator: Good morning, ladies and gentlemen. And welcome to the Protalix Biotherapeutics Third Quarter 2023 Financial and Business Results Conference Call. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mr. Chuck Padala of LifeSci Advisors, Investor Relations for Protalix. You may begin the conference.
Chuck Padala: Thank you, operator and welcome to the Protalix Biotherapeutics Third Quarter 2023 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the update was issued this morning and is now available on the Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release. The earnings release in this teleconference include forward-looking statements. These forward-looking statements are 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 in the Protalix’s filing with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?
Dror Bashan: Thank you, Chuck. And welcome everyone to our third quarter 2023 financial results and business update call. Before we begin, I would like to take a moment to acknowledge the situation here in Israel. We at Protalix are horrified by the devastating events that have been taking place in recent weeks. It is an extremely challenging time and we are heartbroken for the victims, families, friends and loved ones, many of us being personally impacted. Our hearts and prayers go out to all these those affected and we remain dedicated to the safety and wellbeing of our team. We are committed to provide our families, friends and colleagues any and all support they need at this time. At the same time, we want to reassure you that we are continuing to operate as usual.
There have been no disruptions to our facilities and we do not currently anticipate any interruption to the supply of our products Elfabrio and Elelyso. We appreciate all those who have been reached out to Protalix to express their concern and support and we thank you for joining us today. I will now review our recent progress and accomplishments. Following my remarks, Eyal will provide a more detailed review of our financial results and then of course, we will open the line for questions. Let me now turn to our accomplishments this quarter. Since receiving FDA and EMA approval for Elfabrio, our commercial partner, Chiesi has focused on commercial launch in both the United States and the European Union. We are also pleased that Elfabrio has been granted additional regulatory approvals outside the EU, like in Great Britain and Switzerland, and we look forward to continued global growth of Elfabrio.
Having now secured the approval of two drug products, Elfabrio and Elelyso, we are now focusing our attention to develop our pipeline assets with the potential to address high unmet needs for patients with limited therapeutic options. Our most advanced development candidate is PRX-115 for the potential treatment of severe gout. We are currently sponsoring a Phase 1 first in human clinical trial of PRX-115 to evaluate its safety, pharmacokinetics, pharmacodynamics and immunogenicity. It is a double-blind, placebo-controlled single ascending dose trial of up to 56 participants. 42 participants have been dosed today in this first in human trial. We expect to announce topline results from this study in mid-2024. We believe PRX-115 is potentially a good candidate to target this market.
Our next pipeline candidate is PRX-119 for the potential treatment of NETs-related diseases. NETs are web like structures released by activated neutrophils that trap and kill a variety of microorganisms. Excessive formation or ineffective clearance of NETs can result in different pathological effects and has been observed in various autoimmune inflammatory and fibrotic conditions. We look forward to providing with updates on these programs as they progress. There are currently several other preclinical programs and we will update regarding these programs once applicable. On the corporate side, we welcome Dr. Eliot Forster, as Chairman of our Board of Directors, succeeding Mr. Zeev Bronfeld, who retired from his position on our board. As an independent director, Dr. Forster was also appointed to our nominating committee.
Eliot’s reputation in management and leadership in the life science field speaks for itself, and he has a record of success in the United States, the European Union and Asia. We are grateful to Zeev for his dedication and leadership since the founding of Protalix many, many years ago, and we look forward to working with Eliot and leveraging his expertise as we enter this exciting phase of development for this company. Before turning the call to over to Eyal, I want to know that our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near-term capital infusion. With that, it is now my pleasure to turn the call over to Eyal to review our financials. Eyal, please.
Eyal Rubin: Thank you, Dror. And thank you everyone for joining today’s call. Let me review our third quarter 2023 financials. We recorded revenues from selling goods of $10.2 million during the three months ended September 30th, 2023, an increase of $1.4 million or 16% compared to revenues of $8.8 million for the three months ended September 30th, 2022. The increase resulted primarily from an increase of $3 million in sales to Chiesi, following the approval by the FDA and the EMA, as Dror mentioned, of Elfabrio, and of $0.6 million in sales to Brazil, partially offset by $2.2 million decrease in sales to Pfizer. Recorded revenues from license and R&D services of $0.2 million for the three months ended September 30th, 2023, a decrease of $5.2 million, or 96%, compared to revenues of $5.4 million for the three months ended September 30, 2022.
Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi Agreements. As of March 1st, 2023, sponsorship of the extension studies was transferred to Chiesi, and Chiesi is now administering all open label extension studies. Cost of goods sold was $4.9 million for the three months ended September 30th, 2023, a decrease of $2.2 million, or 31%, from cost of goods sold of $7.1 million for the three months ended September 30th, 2022. The decrease in cost of goods sold was primarily the result of the decrease in sales to Pfizer, partially offset by an increase in sales of Elfabrio to Chiesi and of Elelyso to Brazil. For the three months ended September 30th, 2023, our total research and development expenses were approximately $3.7 million comprised of approximately $1 million of subcontractor-related expenses, approximately $1.9 million of salary and related expenses, approximately $0.2 million of materials-related expenses and approximately $0.6 million of other expenses.
For the three months ended September 30th, 2022, our total research and development expenses were approximately $7.4 million comprised of approximately $4.9 million in subcontractor-related expenses, approximately $1.7 million of salary and related expenses, approximately $0.2 million of materials-related expenses and approximately $0.6 million of other expenses. Total decrease in research and developments expenses was $3.7 million, or 50%, compared to the three months ended September 30th, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulatory processes related to the BLA and MAA review of Elfabrio by the applicable regulatory agencies. Selling, general and administrative expenses were $3.7 million for the three months ended September 30, 2023, an increase of $0.9 million, or 32%, compared to $2.8 million for the three months ended September 30th, 2022.
The increase resulted primarily from an increase of approximately $0.6 million in salary and related expenses due to one-time cash bonuses and an increase in share-based compensation. Financial income, net was $0.2 million for the three months ended September 30, 2023, compared to financial expenses, net of $0.4 million for the three months ended September 30, 2022. The change resulted primarily from an increase of $0.3 million in interest income. In the three months ended September 30, 2023, we recorded income taxes of approximately $0.1 million which were primarily the result of the provision for current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017. Cash, cash equivalents and short term bank deposits were approximately $41 million at September 30th, 2023.
Net loss for the three months ended September 30th, 2023 was approximately $1.9 million, or $0.03 per share, basic, and $0.04 per share diluted, compared to a net loss of $3.6 million, or $0.07 per share, basic and diluted, for the same period in 2022. I will now turn the call back to you, Dror.
Dror Bashan: Thank you, Eyal. In concluding this earnings call, I would like to know that we at Protalix are proud of our accomplishments. We have a proven platform technology with two approved therapeutics driving a rich and sustainable pipeline of assets. A worldclass team, a strong balance sheet supporting our strategic plans and a strategic vision to creating a long-term value for our stockholders. We look forward to updating you in the future in our progress. Before we start taking questions, I would like to note that we are praying for our friends and family during this challenging time. One that is filled with pain. I’m grateful for our entire Protalix team, their enduring commitment and resolve at this time as we develop a portfolio for patients with unmet medical needs is noteworthy. Now I would like to ask the operator to open the call for questions, please.
Operator: [Operator Instructions] The first question comes from the line of Boobalan Pachaiyappan with H.C. Wainwright
Boobalan Pachaiyappan: Hi, this Boobalan Sorry for the voice. I’m still recovering from sore throat. So thanks for taking our questions. Firstly, with respect to revenue from selling goods. I see that the revenue dropped from $15 million in second quarter to $10 million in the third quarter. Can you discuss the underlying factors for this drop in revenue and also what are your expectations for revenue in the fourth quarter?
Eyal Rubin: Thank you, Boobalan for the question. So in terms of the decrease, part of the decrease is decrease in sales to Pfizer and part of it is decrease in sales to Chiesi, mentioned in the previous call, the sales to Chiesi are basically their inventory buildup. At this point, the sales to Chiesi are not indicative of the penetration of sales in the market. So obviously, as they build the inventory, there’s going to be fluctuation in the next year and a half or even two years during the term that they’re building the inventory and so it materially also penetrating the market and building their presence in the markets. With respect to your second question, about guidance on the revenue for the fourth quarter, we usually don’t provide guidance for revenue, especially since the POs from Chiesi and from Brazilian Pfizer are dynamic, especially at this point, where Chiesi is the majority of the sales and they are building up their presence in the market.
So I guess that it’s going to take time until we’ll be able to share forecasts and feel comfortable giving those forwarding statements.
Boobalan Pachaiyappan: Okay, fair enough. And then, congrats on winning FDA, sorry, the regulatory approval in UK and Switzerland. So I was wondering if you could provide or maybe at a high level discuss the Fabry disease market opportunity in the UK and Switzerland, and also which countries can we expect to approve Elfabrio in the upcoming quarters?
Dror Bashan: So actually the drug was approved already in most of the, if I may say, western countries in Europe. So the United Kingdom is not part of the EU, but it’s certainly an important market. Also in Switzerland it was approved, and the idea is indeed to move on to other markets outside the EU, including Japan where Chiesi initiated the study in order to register the drug later on and other markets as well. As for the specific size of the Fabry market in the UK, I don’t have it in front of me. And also this is Chiesi, if I may say, a role right now. So once we will have more data or Chiesi will release more data, we will be able to share it with you. But it’s certainly the UK is a very important market in the Europe. Let’s put this way.
Boobalan Pachaiyappan: Okay, thanks for the color. Let’s switch gears and discuss your clinical programs, especially PRX-115, the ongoing Phase 1 study. So I’d like to get some additional color on some of the items that you’re listed in the exclusion criteria. So I was looking at the clinicaltrials.gov website. And so some of the criteria, especially the exclusion criteria, so it says you’re excluding patients with one or more Gaucher in the last one year and those with subcutaneous tophi or those with advanced renal diseases, they’re also excluded. So I’m trying to understand is the strategy to target mild or moderate forms of gout without the renal complication, if I may? So you can clarify more on that.
Dror Bashan: Yes, sure. Thank you for that. So actually it’s a Phase 1 study. It’s a single dose. So it’s the first time we actually infuse it to participants. The participants are actually volunteers with hyperuricemia. They are not and the idea is first to check safety, of course. And then to see if indeed we reduce the hyperuricemia to normal levels or acceptable levels and then take it further. So we measure multiple aspects in order to be able to move on, of course, subject to safety to multiple to like a multiple ascending dose later on in 2024. So it does not indicate right now. The idea is not to indicate for mild patients at all. Actually, it’s for severe gout patients.
Boobalan Pachaiyappan: Okay. Thank you for the color. One last question, if I may. So again, with respect to PRX-115. So I know you’re collecting immunogenicity data and blood uric acid levels as well. So I’m curious, what do you expect to see in these two data, especially Phase 1 study? What are your expectations?
Dror Bashan: So again, we would like to see safety for sure. And then we will analyze from a PKPD point of view additional measurements to see if we have indications for reduction, of course, of the hyperuricemia and other parameters in order, again, to see frequency of dosing and other signals. that will enable us, if I may say, to take further steps or more calculated steps for the next study.
Boobalan Pachaiyappan: Okay, thank you for taking all my questions.
Dror Bashan: Yes, and again, just to make sure, the intent at least is to enroll up to 56 subjects. So I think it’s enough of a number to, or we hope it’s enough of a number to get enough information to move on. I won’t say minimize the risk, but with less risk, of course. Safety for sure, but more than that.
Operator: Next question comes from the line of John Vandermosten with Zacks
John Vandermosten: All right, thank you, Dror and Eyal. Good day to you. Beyond cost how much of your expense structure is oriented towards the Elfabrio business?
Dror Bashan: Okay. Can you repeat the question? I can hardly hear you. I’m sorry.
John Vandermosten: Oh, I’m sorry. Beyond cost, how much of your expense structure is oriented towards the Elfabrio business now?
Eyal Rubin: In terms of cost structure, other than manufacturing, which takes something like three to four months a year, and the production of three to four months a year is sufficient to supply and provide half of the patient population worldwide, we’re not investing at present in Elfabrio.
John Vandermosten: Okay. And how do you see your capital structure changing now that you have two revenue generating products, and then also keeping in mind that there’s the convertible bet on the balance sheet.
Eyal Rubin: That’s a good question. A, we truly we have two revenue generating products out there. Since we are not doing anything in the equity capital markets, so obviously, I guess gradually, slowly, but surely when revenues are going to start to ramp up, the big boys are going to join the party and we’re going to see that we have a stable streamline of revenues and we are accumulating cash. So it’s a different company. It’s not a biotech, a typical biotech company in the development stage. At present, we don’t see this change. As we said, the company at this point is self-sustained. We don’t see any need to raise money in the foreseeable future for the ongoing operations. So I guess that’s going to take time. Over time, I guess that the capital structure is going to change.
John Vandermosten: Okay. And I think that are coming due next year in about a year. And then quarterly cash burn, can you give us some help on how to forecast that going forward? I noticed it was a little bit greater than net income for the quarter and I just wanted to see if you could help us understand how that might flow through for the next several quarters.
Eyal Rubin: Yes, so I think that I responded to this one previously too by Boobalan. And since we are just in a phase of revenue ramp up and Chiesi just starting to penetrate the market and building the presence, slowly but surely, I guess that that’s going to fluctuate. So we don’t feel comfortable at this point sharing the forecasts for the next couple quarters. Yes, I think it’s very, very, very fluctuating. They can decide that they are pulling two batches, one batch, for even technical reason delaying one. So I think at this point it’s going to be irresponsible to share forecasts for the short term. Long term, as I said in the next day, you’re going to have to, that’s going to be mostly an inventory buildup with a runway that will ramp up, I’m talking about sales obviously, we’ll ramp over time.
John Vandermosten: Okay, and then shifting to PRX-115 and assuming that topline comes out as expected or better in the middle of next year, what are the next steps there? Would that be P phase 2 or I guess I’m just wondering what we should expect to see from that development program.
Dror Bashan: So we intend to do a multiple dose following the single dose that we do now and then once we have, which is actually a Phase 2 and then we will continue from there.
John Vandermosten: Okay, and just one last one on 119. What are the next steps for that program?
Dror Bashan: So we, thank you for that. So we will gather information in the near future, if I may say, from the different preclinical studies and other data that we have. And we’ll go for, if I may say, kind of a portfolio go-no-go meeting. And if indeed we decide to go ahead, we will share and continue to toxicology in Phase 1.
Operator: Thank you. This concludes today’s question and answer session. I would now like to turn the floor over to Dror Bashan for closing comments.
Dror Bashan: So thank you everybody for your participation. And I appreciate the time. And we look forward speaking with you on our next call for 2023 results. And I hope with a more peaceful time for us here in Israel. Thank you all.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
midastouch017
6 months ago
Protalix BioTherapeutics Reports Third Quarter 2023 Financial and Business Results
https://finance.yahoo.com/news/protalix-biotherapeutics-reports-third-quarter-115000440.html
Company to host conference call and webcast today at 8:30 a.m. EST
CARMIEL, Israel, Nov. 6, 2023 /PRNewswire/ -- Protalix BioTherapeutics, Inc. (NYSE American: PLX), a biopharmaceutical company focused on the development, production and commercialization of recombinant therapeutic proteins produced by its proprietary ProCellEx® plant cell-based protein expression system, today reported financial results for the third quarter ended September 30, 2023 and provided a business update on recent regulatory, clinical and corporate developments.
"We continued our efforts this quarter towards turning Protalix into a fully-sustainable biopharmaceutical company with a growing pipeline of differentiated proprietary assets. With the approval of Elfabrio® by the U.S. FDA and the European Medicines Agency earlier this year, we are pleased to see our commercial partner Chiesi Global Rare Diseases hit the ground, both in the United States and the European Union. Additionally, Chiesi is continuing to position Elfabrio for future growth with additional approvals worldwide," said Dror Bashan, Protalix's President and Chief Executive Officer. "Our strong balance sheet coupled with our growing revenue stream allows us to focus on the continued development of our growing pipeline of assets, including PRX-115, our recombinant PEGylated uricase in development for the potential treatment of severe gout. We are continuing to enroll patients in our Phase I clinical trial evaluating the safety, pharmacokinetics, pharmacodynamics and immunogenicity of PRX–115, and look forward to continuing to progress this product candidate forward, Mr. Bashan continued. "We are proud of our achievements and look forward to an exciting future as a company with a proven platform and two approved drugs, a rich pipeline of product candidates in lucrative markets, a world-class team of dedicated employees, strong financial support with a solid balance sheet and an increasing stream of revenues."
2023 Third Quarter and Recent Business Highlights
Regulatory Advancements
The Company, together with its development and commercialization partner, Chiesi Global Rare Diseases (Chiesi), a business unit of the Chiesi Group, continued to attain marketing authorizations around the world for Elfabrio (pegunigalsidase alfa) for the treatment of adult patients with Fabry disease. Elfabrio, a PEGylated enzyme replacement therapy (ERT), is a recombinant human a-Galactosidase-A enzyme expressed in plant-cell culture that is designed to provide a long half-life.
On August 15, 2023, Chiesi announced that the UK Medicines and Healthcare products Regulatory Agency (MHRA) granted marketing authorization for Elfabrio in Great Britain for long-term enzyme replacement therapy in adult patients with a confirmed diagnosis of Fabry disease.
On September 11, 2023, Swissmedic, the national authorization and supervisory authority for drugs and medical products in Switzerland, announced the approval of Elfabrio in Switzerland for long-term enzyme replacement therapy in adult patients with a confirmed diagnosis of Fabry disease.
Clinical Developments
The Company continued to advance its First in Human (FIH) phase I clinical trial of PRX–115, a recombinant PEGylated uricase product candidate under development as a potential treatment for severe gout. To date, 32 patients have been dosed in the trial. The FIH trial is a double-blind, placebo-controlled, single ascending dose study designed to evaluate the safety, pharmacokinetics, pharmacodynamics and immunogenicity of PRX–115 in up to 56 patients with elevated uric acid levels (>6.0 mg/dL) and no previous exposure to PEGylated uricase. The study is being conducted at New Zealand Clinical Research (NZCR) under the New Zealand Medicines and Medical Devices Safety Authority (MedSafe) and the Health and Disability Ethics Committee (HDEC) guidelines. We expect to announce top-line results from this study in mid-2024.
Corporate Developments
On September 14, 2023, Eliot Richard Forster, Ph.D. joined the Company's Board of Directors as its Chairman, replacing former Chairman Zeev Bronfeld, who retired for personal reasons. In addition to his role as Chairman, Dr. Forster is serving as an independent director on the Company's Nominating Committee.
Third Quarter 2023 Financial Highlights
The Company recorded revenues from selling goods of $10.2 million during the three months ended September 30, 2023, an increase of $1.4 million, or 16%, compared to revenues of $8.8 million for the three months ended September 30, 2022. The increase resulted primarily from an increase of $3.0 million in sales to Chiesi, following the approvals by the FDA and the EMA of Elfabrio, and of $0.6 million in sales to Brazil, partially offset by a $2.2 million decrease in sales to Pfizer.
The Company recorded revenues from license and R&D services of $0.2 million for the three months ended September 30, 2023, a decrease of $5.2 million, or 96%, compared to revenues of $5.4 million for the three months ended September 30, 2022. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi Agreements. As of March 1, 2023, sponsorship of the extension studies was transferred to Chiesi, and Chiesi is now administering all open label extension studies.
Cost of goods sold was $4.9 million for the three months ended September 30, 2023, a decrease of $2.2 million, or 31%, from cost of goods sold of $7.1 million for the three months ended September 30, 2022. The decrease in cost of goods sold was primarily the result of the decrease in sales to Pfizer, partially offset by an increase in sales of Elfabrio to Chiesi and of Elelyso to Brazil.
For the three months ended September 30, 2023, the Company's total research and development expenses were approximately $3.7 million comprised of approximately $1.0 million of subcontractor-related expenses, approximately $1.9 million of salary and related expenses, approximately $0.2 million of materials-related expenses and approximately $0.6 million of other expenses. For the three months ended September 30, 2022, our total research and development expenses were approximately $7.4 million comprised of approximately $4.9 million in subcontractor-related expenses, approximately $1.7 million of salary and related expenses, approximately $0.2 million of materials-related expenses and approximately $0.6 million of other expenses. Total decrease in research and developments expenses was $3.7 million, or 50%, compared to the three months ended September 30, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulatory processes related to the Biologics License Application (BLA) and Marketing Authorization Application (MAA) review of Elfabrio by the applicable regulatory agencies.
Selling, general and administrative expenses were $3.7 million for the three months ended September 30, 2023, an increase of $0.9 million, or 32%, compared to $2.8 million for the three months ended September 30, 2022. The increase resulted primarily from an increase of approximately $0.6 million in salary and related expenses due to one-time cash bonuses and an increase in share-based compensation.
Financial income, net was $0.2 million for the three months ended September 30, 2023, compared to financial expenses, net of $0.4 million for the three months ended September 30, 2022. The change resulted primarily from an increase of $0.3 million in interest income.
In the three months ended September 30, 2023, the Company recorded income taxes of approximately $0.1 million which were primarily the result of the provision for current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017.
Cash, cash equivalents and short term bank deposits were approximately $41.0 million at September 30, 2023.
Net loss for the three months ended September 30, 2023 was approximately $1.9 million, or $0.03 per share, basic, and $0.04 per share, diluted, compared to a net loss of $3.6 million, or $0.07 per share, basic and diluted, for the same period in 2022.
Conference Call and Webcast Information
The Company will host a conference call today, November 6, 2023, at 8:30 a.m. EST, to review the regulatory, clinical and corporate developments, which will also be available by webcast. To participate in the conference call, please dial the following numbers prior to the start of the call:
Conference Call Details:
Date:
Monday, November 6, 2023
Time:
8:30 a.m. Eastern Standard Time (EST)
Toll Free:
1-877-423-9813
Israeli Toll Free:
1-809-406 247
International:
1-201-689-8573
Conference ID:
13741587
Call me™:
https://tinyurl.com/2tsadwma
The Call me™ feature allows you to avoid the wait for an operator; you enter your phone number on the platform and the system calls you right away.
Webcast Details:
The conference will be webcast live from the Company's website and will be available via the following links:
Company Link: https://protalixbiotherapeutics.gcs-web.com/events0
Webcast Link: https://tinyurl.com/362f74wx
Conference ID: 13741587
Participants are requested to access the websites at least 15 minutes ahead of the conference call to register, download and install any necessary audio software.
A replay of the call will be available for two weeks on the Events Calendar of the Investors section of the Company's website, at the above link.
midastouch017
7 months ago
Protalix BioTherapeutics Appoints Eliot Richard Forster, Ph.D. as Chairman of its Board of Directors
https://finance.yahoo.com/news/protalix-biotherapeutics-appoints-eliot-richard-105000998.html
Appointment effective as of September 14, 2023;
Zeev Bronfeld to retire from the Board of Directors
CARMIEL, Israel, Sept. 12, 2023 /PRNewswire / Protalix BioTherapeutics, Inc. (NYSE American: PLX), a biopharmaceutical company focused on the development, production and commercialization of recombinant therapeutic proteins produced by its proprietary ProCellEx® plant cell–based protein expression system, today announced that the Company's Board of Directors has appointed Eliot Richard Forster, Ph.D. to serve on the Board of Directors as its Chairman, effective as of September 14, 2023. In addition to Dr. Forster's appointment as Chairman and an independent director, he was also appointed to serve on the Company's Nominating Committee. Zeev Bronfeld, the current Chairman of the Company's Board of Directors, will retire on the same day.
"We are very pleased that Eliot will be joining our Board of Directors," commented Dror Bashan, Protalix's President and Chief Executive Officer. "Eliot has an established reputation for management and leadership in the life sciences field with successful experience in the United States, European Union and Asia. He will be a valuable contribution to our Board of Directors as we leverage our development successes to strengthen our research and development efforts."
"Zeev has been part of Protalix since its earliest days and played an integral role in our progression from a small laboratory and green room, through the development and approval of treatments for two rare diseases," continued Mr. Bashan. "On behalf of Protalix and the Board of Directors, I would like to thank Zeev for his outstanding leadership, loyalty and dedication and wish him continued great success."
"After almost three decades of leadership at Protalix, I have decided that with the approval of our second drug, the time has come for me to take leave," said Mr. Bronfeld. "I am very proud to have participated in the founding of this great organization and look forward to watching Protalix continue to advance its strategic path."
"I am delighted and honored to join Protalix as Chairman of its Board of Directors, and very much look forward to working with Protalix's talented officers, directors and employees," said Dr. Forster. "I hope that my deep experience in the life sciences industry, which covers a range of disciplines, will be a valuable resource for the company. I am very excited about Protalix's future and pleased to be part of it."
Dr. Forster currently serves as the Non-Executive Chairman of Avacta Group PLC (AIM: AVCT), as a Non-Executive Director of Immatics NV (NASDAQ: IMTX) and as the Non-Executive Chairman of Ochre Bio, Inc., a private biotechnology company.
Dr. Forster served as the Chief Executive Officer of F-Star Therapeutics Ltd., a clinical-stage bispecific antibodies company, until its March 2023 sale to inovoX Ltd. Prior to that, he served as Chief Executive Officer of Immunocure Ltd., Chief Executive Officer of Creabilis SA and President and Chief Executive Officer of Solace Pharmaceuticals Inc., each of which was a privately-held life science company. Earlier in his career, he held positions at Pfizer Global Research & Development and Glaxo/GlaxoWellcome.
Dr. Forster holds a B.Sc. (Hons) and a Ph.D. from the University of Liverpool and an MBA from the Henley Management College. He is an Honorary Visiting Professor at the University of Liverpool and at the University of Pavia, and is a Board member of OSCHR (UK Office for Strategic Coordination of Health Research).
About Protalix BioTherapeutics, Inc.
Protalix is a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins expressed through its proprietary plant cell-based expression system, ProCellEx. It is the first company to gain U.S. Food and Drug Administration (FDA) approval of a protein produced through plant cell-based in suspension expression system. This unique expression system represents a new method for developing recombinant proteins in an industrial-scale manner. Protalix has licensed to Pfizer Inc. the worldwide development and commercialization rights to taliglucerase alfa for the treatment of Gaucher disease, Protalix's first product manufactured through ProCellEx, excluding in Brazil, where Protalix retains full rights. Protalix's second product, Elfabrio®, was approved by both the FDA and the European Medicines Agency in May 2023. Protalix has partnered with Chiesi Farmaceutici S.p.A. for the global development and commercialization of Elfabrio.
Protalix's development pipeline consists of proprietary versions of recombinant therapeutic proteins that target established pharmaceutical markets, including the following product candidates: PRX-115, a plant cell-expressed recombinant PEGylated uricase for the treatment of severe gout; PRX-119, a plant cell-expressed long action DNase I for the treatment of NETs-related diseases; and others.
midastouch017
8 months ago
Protalix BioTherapeutics Stock Is A Hold Pending Successful Commercialization Of Elfabrio
Sep. 06, 2023 8:12 AM ETProtalix BioTherapeutics, Inc. (PLX)FOLD, SNY, SNYNF
Stella Mwende
Summary
Protalix BioTherapeutics reported Q2 2023 revenues of $35.08 million, a 300.72% YoY increase, beating Wall Street estimates.
The US FDA approved PLX's Elfabrio for the treatment of Fabry disease in adults, expanding its commercialization target.
The approval of Elfabrio in Europe and the US is expected to increase Protalix's profitability and revenue generation.
Recombinant therapeutic protein developer, Protalix BioTherapeutics, Inc. (NYSE:PLX) reported Q2 2023 revenues of $35.08 million, representing a 300.72% (YoY) increase. It beat Wall Street estimates by $24.85 million. The company's earnings per share stood at $0.21 beating forecasts by $0.25 even as the stock rose 82.49% (YoY) on improved fundamentals.
Thesis
I expect Elfabrio to be added as a treatment for Fabry disease by various insurance carriers after Protalix BioTherapeutics announced two approvals for the marketing of Elfabrio by the European Commission and the Biologics License Application (BLA) by the US FDA in May 2023. There was also a recent recommendation by the National Institute for Health and Care Excellence (NICE) for Elfabrio as a long-term treatment for Fabry disease in adults in both England and Wales. This recommendation adds the UK's National Health Service (NHS) as a potential customer further expanding Elfabrio's commercialization target into 2024.
Protalix BioTherapeutics whose current attention is on the manufacture of Elfabrio (to be commercialized by its business partner Chiesi Farmaceutici) announced that the US FDA had approved Elfabrio for the treatment of Fabry disease in adults. Speaking during the announcement, Protalix's President and CEO stated:
This approval is a testament to the dedication of the Protalix and Chiesi teams to deliver this much-needed new therapeutic option to patients in need. The totality of clinical data suggests that ELFABRIO has the potential to be a long-lasting therapy. Together with Chiesi, we are grateful to all of the patients and investigators and their staff members who participated in our clinical trial programs and remain committed to bringing ELFABRIO to patients with Fabry disease."
Elfabrio with its active ingredient pegunigalsidase alfa-iwxj operates as an enzyme replacement therapy (ERT) and is intended to be a plant cell-culture-expressed protein. It is also a chemically modified version of the recombinant alpha-galactosidase- A protein. Patients suffering from Fabry disease inherit a deficiency of the alpha-galactosidase- A protein enzyme that breaks down Gb3/ fats causing its abnormal accumulation in the blood/ blood vessel walls. The long-term implications are organ failure, especially in the kidneys, heart, and the overall cerebrovascular system.
Approval Implications
As we know, proper accessibility of rare disease treatments provides significant value to pharmaceutical companies as well as society at large. Therefore, approval of Elfabrio for the treatment of Fabry disease in both Europe and the US through the FDA will mark an increase in the company's profitability and revenue generation.
Firstly, Protalix gets revenue mainly from the sale of goods, licenses, and R&D services. The company increased its sale of goods by 62.3% (YoY) in the six months ended on June 30, 2023, to $20.141 million from $12.41 million realized in the same period in 2022. However, revenues from license and R&D services were the highest earners with an increase of more than 97% (YoY) at $24.522 million.
In my view, the commercialization of Elfabrio in the US will likely attract the attention of health insurance companies such as UnitedHealth Group, Aetna, and even Kaiser. The US FDA approved Fabrazyme by Sanofi in 2003, making it the first approved treatment for adult and pediatric patients with Fabry disease. On its part, Sanofi has been developing its relationship with UnitedHealth Group in fields such as diabetes but is yet to collaborate on handling Fabry's disease. I am not implying that the collaboration will be imminent since there are various aspects to be considered such as the prevalence figures, time of diagnosing the disease, and the effect of the genetic treatment technology to be used. Still, the uptake of this treatment option is a reality since more companies are now being approved in Europe and the US for Fabry disease treatment.
Elfabrio was also recommended by the National Institute for Health and Care Excellence for the treatment of Fabry disease among adults. This recommendation is a stepping stone towards opening the way for Elfabrio's adoption in the United Kingdom through the National Health Service. This adoption is vital considering few companies have their drugs approved for Fabry disease treatment.
Relative treatment pricing
Amicus Therapeutics (FOLD) whose Galafold drug, a treatment for Fabry disease approved in 2018 announced a revenue of $94.3 million in the three months ending on June 30, 2023, and $180.4 million in the six months ending on June 30, 2023. Incidentally, this was the primary revenue source for the company in the quarter. In FY 2022, Galafold's revenue stood at $329 million. The company projected double-digit revenue growth of Galafold in FY 2023 at 12-17% at CER. Amicus has priced its Galafold drug at about $315,000 per year which I think ranges from an average standpoint considering it is administered orally or in tablet form.
For Sanofi (SNY), the net sales attributed to Fabrazyme in Q2 2023 stood at €250 million representing a net increase of 9.7% (YoY) and a surge of 10.7% in H1 2023 at€496 million. Sanofi prices its Fabrazyme drug at about $290,000 and it was the fourth best-selling drug in the quarter. The increased sales were a result of new patient accruals and growth in North America, Europe, and other parts of the world including China. Fabrazyme's lower pricing is slightly attributed to its IV administration which is similar to PRX-102 by Chiesi and Protalix.
In my estimation, Protalix will likely price Elfabrio at an annual average cost of $300,000 to remain in tandem with the industry average.
Cash available
As of Q2 2023, Protalix's cash position stood at $48.2 million representing an increase of 46.06% (QoQ). Protalix generated about $2 million from operations for the 6 months ended on June 30, 2023. The cash flow statement also showed that in the trailing twelve months (TTM by quarter), the company used up $13.2 million in operations. This decline was caused by the decrease in contract liability that also reduced the net income for the six months that ended on June 30, 2023, to stand at $16.2 million. While the $2.0 million net cash generated from operations may be low, it indicated an increase of more than 150% (YoY) from $13.2 million used up in operations in the six months ending on June 30, 2022.
Net cash generated by investing activities for the 6 months ending on June 30, 2023, stood at $4.5 million. These cash proceeds emanated from the sale of short-term deposits. The company has also in the past raised money by selling common stock under its ATM program. In H1 2023, financing generated $24.7 million for Protalix, up 55.35% (YoY) from $15.9 million generated in H1 2022.
Valuation and market dynamics
Protalix's price-to-earnings ratio (TTM) stood at 18.37 against the industry average of 30.48. This represents a difference of 39.71%. I believe that this stock is highly undervalued, especially with the stock trading slightly under $2.
In regards to the prevalence, Fabry disease has been described as the "second-most frequent storage disorder with 1 case per 40,000 males). The global market size of Fabry disease treatment as of 2022 stood at $1.877 billion. By 2030, it is projected to reach $3.3 billion growing at a CAGR of 7.4% in the forecast period.
Risks
While Protalix's total debt stands at $26 million against a cash balance of $48 million, it has a total principal amount of $20.42 million of its 2024 notes outstanding. Payment of this principal in 2024 will force the company to search for additional funding.
Further, the commercialization efforts of Elfabrio will necessitate additional R&D expenses. The expected cash burn into 2024 means that Protalix's cash reserves will only be available until June 2024. Also, as of June 30, 2023, the number of amount of shares of common stock available for Protalix is worth about $6.4 million (under the 2023 ATM sale agreement).
Protalix's development in the line of Elfabrio is tied to the drug's commercialization efforts by Chiesi. Any delay or ineffective performance from Chiesi will affect product rollout and revenue generation.
At the moment, taliglucerase alfa under the brand name Elelyso remains Protalix's main revenue source- from a product development and commercialization perspective. However, since its approval by the FDA, Protalix signed an agreement that transferred all of Elelyso's marketing rights to Pfizer. While Pfizer is responsible for all global expenses of the drug it is still entitled to all revenues from the sale of the drug. Under the Pfizer agreement, Protalix is only entitled to Elelyso's revenues from Brazil where it covers all the drug's expenses.
Bottom Line
I expect Protalix to thrive after the commencement of the commercialization of Elfabrio. The prevalence of Fabry disease and the growing market size of the disease treatment options means significant value will be placed on Elfabrio as a potential alternative. Additionally, Protalix has greater leverage with Elfabrio since it is handling the manufacturing part of the drug substance which is essential in its agreement with Chiesi. I believe this stock is a hold pending the successful commercialization of the drug post FDA approval.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
This article was written by
Stella Mwende profile picture
Stella Mwende
1.7K Followers
I have more than five years experience in the financial industry. I focus mostly in the commodities, foreign exchange and cryptocurrencies. I also write on general issues like equity research, economics and geopolitics.Fellow contributor Crispus Nyaga is my colleague.
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Analyst’s Disclosure: I/we have a beneficial long position in the shares of PLX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.
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dovik017 profile picture
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Nice article. Little confused. You say hold but sound positive based on cheap valuation and growth of gabby drug.
Is it the debt and raising capital that you feel is a hold?
Thanks
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About PLX
Symbol Last Price % Chg
PLX
Pre
1.90
1.90
-4.04%
0.00%
1D
5D
1M
6M
1Y
5Y
10Y
Market Cap
$136.00M
PE (FWD)
19.00
Yield (TTM)
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Protalix Biotherapeutics, Inc. (PLX) Q2 2023 Earnings Call Transcript
Aug. 07, 2023 10:10 AM ETProtalix BioTherapeutics, Inc. (PLX)
Protalix BioTherapeutics, Inc. (NYSE:PLX) Q2 2023 Earnings Conference Call August 7, 2023 8:30 AM ET
Company Participants
Charles Padala - IR
Dror Bashan - President and CEO
Eyal Rubin - SVP and CFO
Conference Call Participants
Boobalan Pachaiyappan - H.C. Wainwright
John Vandermosten - Zacks
Unidentified Analyst - Private Investor
Operator
Good morning, ladies and gentlemen and welcome to the Protalix BioTherapeutics Conference for Second Quarter 2023 Financial Business Results. As a reminder, this conference is being recorded. I will now turn the conference over to our host, Mr. Chuck Padala with LifeSci Advisors, Investor Relations for Protalix. Thank you, you may begin the conference.
Charles Padala
Thank you, operator and welcome to the Protalix BioTherapeutics Second Quarter 2023 Financial Results and Business Update Conference Call. With me today are Dror Bashan, President and CEO of Protalix; and Eyal Rubin, Senior Vice President and Chief Financial Officer. A press release announcing the results and the update was issued this morning and is now available on the Protalix 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 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 in the Protalix's filing with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?
Dror Bashan
Thank you, Chuck. And welcome everyone to our second quarter 2023 financial results and business update. I will begin by reviewing our recent progress and accomplishments and following my remarks Eyal will 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 our development and commercialization partner Chiesi Global Rare Diseases. We are very much excited that both the European Commission and the U.S. FDA approved Elfabrio for the treatment of adult patients with Fabry 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 the families affected by the Fabry disease. And Fabry is now the second approved drug from our priority protein expression system, ProCellEx, which further highlights the success of our unique platform. The approval triggers a $20 million U.S. milestone payment that we have received from Chiesi in Q2. We are very grateful for the Protalix team as well as our partnership with Chiesi. Chiesi’s continued dedication to this journey has been greatly contributed to these achievements.
As we discussed during our KOL event in June, Chiesi is poised to realize the full potential of Elfabrio with a global presence and significant expertise within the rare diseases space. They've ramped up commercial activities and they've already launched in the U.S. In addition, in preparation for launches in various countries carriers started building its inventory as reflected in our financials on which Eyal will elaborate soon. Fabry disease represents a significant opportunity in a multi billion dollar market that is in need of an alternative treatment option. And we and Chiesi are prepared to deliver.
As I just mentioned, Protalix hosted a KOL event in June in New York City. We would like to thank Dr. Ankit Mehta for sharing his perspective on how Elfabrio could address the unmet needs in Fabry disease patients. And we also thank Giacomo Chiesi for joining us and providing an overview of the Chiesi's in-depth and experience bringing rare disease drugs into the global markets. During our event, we also discussed the future of Protalix and our focus in the rare disease space. We are committed to addressing high unmet needs for patients with limited therapeutic options. And we are well equipped with the clinical, regulatory and technical expertise to move Protalix forward into the next phase of growth.
To that end, I will now provide an update on our very early stage programs. First, PRX-115, which is a novel PEGylated uricase in development for the treatment of severe gout. Enrollment in Phase 1 first-in-human clinical trial of PRX-115 is continuing. And as a reminder, the trial is a double-blind, placebo-controlled, single ascending dose study designed to evaluate the safety, pharmacokinetics, pharmacogenomics, and immunogenicity of PRX-115 in up to 56 patients. The study is being conducted in New Zealand. To date, 16 patients have been dosed in this trial, and we are looking forward to continued enrollment and dosing of patients. We expect that enrollment will be completed by the end of this year, early next year and to have final results by second quarter of 2024.
We also continue to make process on PRX-119, a PEGylated recombinant human DNase I protein designed to elongate DNase's half-life in circulation for treatment of NETs-related diseases. We have conducted preclinical studies to demonstrate the feasibility of PRX-119. We look forward to providing updates on this program and others as we look to build and strengthen our growing pipeline. Finally, our strong balance sheet provides us with sufficient cash runway to maintain current operations without the need for near-term capital infusion. I will now turn to Eyal to review our financials. Eyal, please?
Eyal Rubin
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 goods of $15.1 million during the three months ended June 30, 2023, an increase of $11.7 million or 344% compared to revenues of $3.4 million for the three months ended June 30, 2022. The increase, as Dror mentioned, resulted primarily from an increase of $11.7 million in sales to Chiesi following the approval by the FDA and the EMA of Elfabrio. We recorded revenues from license and R&D services of $20 million for the three months ended June 30, 2023, an increase of $14.6 million or 270% compared to revenues of $5.4 million for the three months ended June 30, 2022. The increase resulted from the $20 million regulatory milestone coming from Chiesi in connection with the FDA approval of Elfabrio. Revenues from license and R&D services are comprised primarily of revenue recognized in connection with the Chiesi agreements.
Cost of goods sold was $6.1 million for the three months ended June 30 2023, an increase of $2 million or 49% from cost of goods sold of $4.1 million for the three months ended June 30, 2022. The increase in cost of goods sold was primarily the result of increase in sales of Elfabrio drug substance to Chiesi and royalties payable to the Israel Innovation Authority in connection with the Chiesi agreement. For the three months ended June 30, 2023, the company's total research and development expenses were approximately $4.5 million, comprised of approximately $1.7 million in subcontractor-related expenses, approximately $2 million of salary and related expenses, approximately $0.1 million of materials-related expenses, and approximately $0.7 million of other expenses.
For the three months ended June 30, 2022, our total research and development expenses were approximately $7.6 million, comprised of approximately $4.4 million in subcontractor-related expenses, approximately $1.6 million of salary and related expenses, approximately $0.7 million of material-based related expenses, and approximately $0.9 million of other expenses. The total decrease in research and development expenses was $3.1 million or 41% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The decrease in research and development expenses primarily resulted from the completion of our Fabry clinical program and the regulator process related to the BLA and the MAA review of Elfabrio by the applicable regulatory agencies.
Selling, general and administrative expenses were $4 million for the three months ended June 30, 2023, an increase of $1.4 million or 54% compared to $2.6 million for the three months ended June 30, 2022. The increase resulted primarily from an increase of approximately $1.2 million in salary-related expenses due to a onetime cash flows. Financial expenses net were $0.8 million for the three months ended June 30, 2023, compared to financial income net of $0.2 million for the three months ended June 30, 2022. The increase resulted primarily from an increase of $0.6 million in cost-related exchange rates as well as an increase in our convertible notes-related expenses of $0.3 million net of a gain recognized due to the conversion of a portion of the 2024 notes of $0.4 million.
In the three months ended June 30, 2023, we recorded income taxes of approximately $0.3 million, which were primarily the result of the provision for the current taxes in respect of Section 174 of the U.S. Tax Cuts and Jobs Act of 2017, which went into effect on January 1, 2022. Section 174 eliminated the option to immediately deduct research and development expenses in the year incurred and requires us to capitalize and amortize these expenditures over 15 years for out of the U.S.-based research and developments. In addition, during the three months ended June 30, 2023, we released the valuation allowance related to deferred tax assets of the U.S. jurisdiction that resulted in a net benefit to tax expenses of $3.1 million.
Cash and cash equivalents were approximately $48.2 million at June 30, 2023. Net income for the three months ended June 30, 2023, was approximately $19.3 million or $0.29 per share basic and $0.21 per share diluted compared to a net loss of $5.3 million or $0.11 per share basic and diluted for the same period in 2022. I will now turn the call back to you, Dror.
Dror Bashan
Thank you, Eyal. So thank you, everyone, for joining our today's call. On a personal note, I would like to express my gratitude to the entire Protalix team, whose tireless efforts have resulted in this exciting time in the company's evolution. Although our path towards regulatory approval has certainly had its challenges, given 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 strengthening our pipeline and R&D capabilities. I'm proud of the Protalix achievements so far this year, and I'm confident we will continue to drive the company forward for the benefit of the patients and their families. Now I'll turn the call back to the operator and open the line for your questions, please.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. Our first question is from Boobalan Pachaiyappan with H.C. Wainwright. Please proceed.
Boobalan Pachaiyappan
Hi, thanks so much Dror for talking our questions. So firstly, with respect to Elfabrio. So we understand Chiesi is responsible for launch activities. But maybe from Protalix's end, what additional update would you like to provide to a shareholder regarding launch preparation and maybe when can we hear the drug will be launched, or about the pricing information and all that, when can we hear?
Dror Bashan
So thank you for that. I think, as you know, Chiesi is responsible for the commercial -- for the 100% of the commercial activities. Chiesi is also a private company. So once we will be able to share more information, we'll share more information. Right now, the product was just approved. It was launched in the U.S. It is being approved country by country in Europe. This is public information, of course. And as Eyal mentioned and I also briefly mentioned, we are building stock, and I hope that this will continue into a good penetration into the market. So once we will have more data, we will share it through our financials in the different quarters, of course. But I can assure you that we are pleased with Chiesi, very pleased with Chiesi. We think they are very good and committed partner. And we are positive they are doing their best in top priority to bring these products to the patients.
Boobalan Pachaiyappan
Okay, fair enough. With respect to your ongoing PRX-115 gout study, so given you're enrolling patients -- hello, can you hear me?
Dror Bashan
Yes.
Boobalan Pachaiyappan
Okay. Alright, sorry, there was a glitch. So with respect to your ongoing PRX-115 gout study, given you're enrolling patients who have elevated uric acid levels, I'm just curious whether you're planning to measure UA level at the end of treatment, and also what would be an acceptable reduction in uric acid levels to demonstrate the clinical meaningfulness of 115?
Dror Bashan
So I suggest we have to finish the recruitment and to analyze the data. This is why we have -- we plan at least to have up to 56 subjects in this clinical strategy. The protocol that we are using, I think it's public. It's -- we have all the details of the trials over there. So clearly, it's about reducing the levels but overall, I suggest we wait and see the final results in order for us to evaluate what we have in hand and how to proceed for the next stage.
Boobalan Pachaiyappan
Okay, great. And then maybe one final question from me. So with respect to NETs programs, so I'm trying to understand your clinical strategy here because there are multiple NET diseases, NET-related diseases, including rheumatoid arthritis, lupus, psoriasis and so on. So I'm trying to understand, is the key here to demonstrate proof of concept in one particular indication and maybe partner with established players for the clinical development or branch out your -- the value of this drug, any color on your clinical strategy?
Dror Bashan
So we have mentioned, I believe, in late June on our investor event that we have, if I may say, refined our pathway forward and our strategy going forward. And we will focus into the genetic and non-genetic rare disease space. This is going forward. We believe we have many years of experience, knowledge, many years of scars and also two outstanding successes, bringing products to the market, going through all the developmental and regulatory hurdles, and getting to the finish line. And this is where we believe we can add value. This is despite the fact ProCellEx, our system, is agnostic. So this is the intent.
Now right now, we are -- we will -- we planned this, and we hope we will succeed, of course, to put our hands and to bring in and strengthen our pipeline with additional programs within the rare disease space. With regard to a commercial platform or a commercial partner, right now, we don't have the means, and we are still small and we have to be to stay modest. So we will clearly develop the products until a certain stage, and then we will consider to join forces with a partner. 5 to 10 years down the road, it's a different ball game. Hopefully, we will do well, and then we can consider maybe to have a phase -- this is part of, if I may say, a vision, but not the two, three years plan right now.
Boobalan Pachaiyappan
Okay, alright, thanks so much for your time.
Dror Bashan
Thank you.
Operator
Our next question is from John Vandermosten with Zacks. Please proceed.
John Vandermosten
Thank you and hello Dror, Eyal, how are you guys doing?
Dror Bashan
Good, how are you John.
John Vandermosten
I am doing pretty good. So let me start with a question on any potential future studies for Elfabrio. I think it had been mentioned that there might be a pediatric study and potentially some others. Would Chiesi be completely responsible for those or would Protalix get involved as well? And also, do you know if there are any of these trials -- future trials, especially for pediatrics being considered?
Dror Bashan
So again, under the agreement with Chiesi, our responsibility is to actually to supply the drug product to Chiesi. The rest is Chiesi's responsibility, including the medical plan and of course, the whole commercialization efforts. As part of it, they do plan a pretty deep long-term medical plan with additional studies. As you mentioned, pediatric study, I think by the FDA requirement, it is written and it's public as well, pregnant women study, etcetera. So I suggest we wait and we will -- once it will be initiated, it will be fully available, I mean, from a data point of view. And also you can approach Chiesi and ask them for more information but overall I believe that within the next 6 to 12 months, we will be in the -- not we, Chiesi will be executing a very deep long-term medical plan. Since Protalix developed the product, there are some key senior employees that are consulted with Chiesi or Chiesi is consulting with them, but this is their responsibility.
John Vandermosten
Great, yeah, thank you for that. Also, I want to understand, I guess, how revenues will flow through from the product and there's two components there, [indiscernible]. I mean, the milestone, there's the product revenues and then there's the royalty revenues. And you recognized, I think, $11 million so far in product revenues. Should we expect a continued trend like that on the product revenue side as we progress through the year? And then will they build up inventory and then work it down, I mean, what is your sense of how those revenues will flow for the rest of this year and into 2024?
Eyal Rubin
So John, Eyal. Let me try to elaborate. So first, in Elfabrio we have the product, royalties and milestones. We have only two type of revenue stream from Elfabrio. The first one is obviously the royalties in both the U.S. and outside the U.S., which ranges 15% to 35% outside the U.S. and 15% to 40% of the lease royalties for sales conducted in the U.S. On top of it, we have milestones, regulatory and commercial milestones, obviously. In terms of what we've recorded this quarter and what we anticipate to record in the following quarters, obviously, as Chiesi are getting prepared for launch in the various countries, both in the U.S., which the product was launched and out of the U.S., obviously, they are building up their inventory, and those are the sales that we recorded. The way that it works, we basically sell them the drug product based on the lowest royalty tier at least at present until we pick up and go to the next level, meaning 15% of the lease price, and that's the revenue basically that we recorded. I want to be even more conservative than this since the agreement which is public state that we're getting the royalties from the net sales. Obviously, we have a reserve for sRNA and discount in case that they are applied to the price.
In terms of projections for the next year, as a small company, we don't really provide projections, but I think that the trend at least in the next quarter is going to continue as Chiesi are building up and ramping up their inventory. Again in general in the next two to three years until revenues are going to be stable and growing means that the changes in inventory are going to be at least for us totally transparent. I guess that most of the revenues we're going to see is going to be changes in inventory and Chiesi's inventory build. Two to three years from now, I guess that, that will be a different story but the trend is definitely that you're going to see an increase in revenue towards the end of this year. And obviously, in the beginning or the second quarter and towards the second half of next year as well, they are ramping up their operations.
John Vandermosten
Okay. Great, great. That's a good answer. And then royalty revenue sometimes take a while to flow through. Perhaps Chiesi would have sales in the third quarter of 2023, but the 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 the revenue recognition and the cash flows will happen at the same time for this, can you help us understand how that flow will go for Elfabrio?
Eyal Rubin
Sure. So as I described, the revenue is almost fully recognized the minute that we sell the inventory to Chiesi, the drug product to Chiesi. And it's also -- there's no timing difference between the revenue recognition and the cash flow. According to the agreement, which is public, they have 45 days net to pay us, so there is no timing gap there. As I mentioned, since the sRNA and discount if applicable, at this point, at least unknown, I guess that they -- as we move forward, we'll know better. And we're going to play with the reserves that we recorded, but most of the revenues are recorded in our books in a timely manner and the same goes for the cash flows.
John Vandermosten
Okay. And then last question for me is on gross margin. And how might the gross margin in Elfabrio compared to LOIs, so will they be in a similar range or should we expect a difference?
Eyal Rubin
That's -- we're talking about a little different ball game. Obviously, I can share with you the gross margin of the product, but looking at the industry, I guess we can assume that you have biological drugs, you're talking about like anywhere between 85% to 90% gross margin on the product. And I think I can state that this is give or take the case with Elfabrio, -- different story but don't forget that we sold the royalties to Pfizer back then in return to getting a one-off big check that the Pfizer cut. That's the reason that we sell them at a very small, if any, margin on the sales. In Brazil, a different story also. In Brazil, we do have margins. We don't complain. But again, we're not disclosing those margins at this point.
John Vandermosten
Okay, thank you Eyal.
Dror Bashan
Thank you John, appreciate it.
Operator
[Operator Instructions]. Our next question is from Dar Bashes, Private Investor.
Unidentified Analyst
Good morning. Just a point of clarification, if I may, on the revenue from Elfabrio, the $11 million, was that primarily manufacturing revenue or was there royalty revenue included in that? thank you.
Eyal Rubin
Thank you for the question. So as I explained, I mean, I'll do it again. It's not manufacturing. We have only two streams of revenue on Elfabrio. The first one is royalties means drive the resources to Chiesi, and we're getting royalties at a percent of the list price. And the second one, obviously is milestones, both commercial and regulatory. When we recorded the revenue, obviously, there's a finished products that were sold to Chiesi. They will turn around, obviously, 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 two years or so while they are building their inventory. So we're going to actually record sales of drug product to Chiesi. That's going to be the revenue we're going to be recording. And in the future, once the inventory change is going to be minimal, then the real royalties calculation and reconciliation is going to start taking place.
Unidentified Analyst
Great, thank you for that clarification. Appreciate it.
Dror Bashan
Thank you.
Operator
[Operator Instructions]. There are no more questions at this time. I would like to turn the conference back over to management for closing comments.
Dror Bashan
So this is Dror and I'd like to thank everybody for their time. And again, we are very happy with the results and the evolvement of the company. Happy that we have Elfabrio available both -- in both continents for the benefit of the patients and their families, and looking forward to speaking with you next time. Thank you very much.
Operator
Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.
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