By John Vandermosten, CFA

NYSE:PLX

READ THE FULL PLX RESEARCH REPORT

Second Quarter 2024 Financial and Operational Review

Protalix Biotherapeutics, Inc. (NYSE:PLX) announced second quarter 2024 financial and operational results in an August 14th, 2024 press release and in the filing of Form 10-Q. The reports were followed by a conference call which discussed recent achievements, clinical updates and financial performance. Since the beginning of the year, with respect to Elfabrio (PRX-102) partner Chiesi has continued its commercialization activities, obtained additional approvals and launched new studies for a pediatric indication and for approval in Japan. In its research and development portfolio, Protalix provided an interim update on its PRX-115 Phase I trial in gout and launched an eighth cohort with an eye on a Phase II study.

Revenues for 2Q:24 were $13.5 million, which were dominated by product sales of Elelyso. This produced a net loss of ($2.3) million or ($0.03) per share.

Financial results for the quarter ending June 30th, 2024, compared to prior year comparable period:

➢ Revenues were $13.5 million, down 62% from $35.1 million due to the recognition of the Chiesi milestone in the prior year period and initial inventory product build for Elfabrio. Elelyso sales to Pfizer were $6.9 million and sales to Brazil were $4.7 million compared to $3.4 and $0 respectively. Total Elelyso sales were up 3.4x prior year levels. Sales of Elelyso vary widely due to timing of inventory transfers. Chiesi product sales were $1.7 million;

➢ Cost of revenue was up 54% to $9.5 million reflecting the surge in Elelyso sales. Gross margin was 29%. This number contains many moving parts and gross margin excludes previously recognized costs that will be recognized in future batches of product. We expect Elfabrio gross margins to be substantially higher than Elelyso; however, sales volumes surged for the latter, diluting Elfabrio’s margin contribution. Additionally, a significant portion of drug substance was recognized as research and development expense, also impacting margins;

➢ Research and development expenses fell 34% to $3.0 million from $4.5 million. Completion of the Fabry clinical program and related regulatory efforts in 2023 led to the decline. Lower subcontractor expenses, reduced salary and related expenses were partially offset by slightly higher materials related expenses;

➢ Selling, general and administrative expenses were down 13% to $3.5 million compared to $4.0 million on a reduction in salary and related expenses;

➢ Net financial income was $155,000 compared to a net financial expense of ($774,000) due to reduced financial expenses;

➢ Income tax benefit of $69,000 compares to income tax expense of ($308,000);

➢ Net loss was ($2.2) million vs $19.3 million, or ($0.03) per share versus $0.21 per share;

The cash and equivalents balance on June 30, 2024 totaled $45.0 million versus $44.6 million at the end of 2023. The increase was attributable to an increase in short term bank deposits. Cash burn was ($0.2) million for 1H:24. There was no cash from financing. We do not anticipate the need to raise capital in at least the next 12 months and perhaps for a substantially longer period depending on Elfabrio’s growth trajectory. After the end of the reporting period, Protalix received $6.9 million from partners for Elelyso sales. Protalix holds over $20 million in convertible notes on its balance sheet which are due in September 2024. The company plans to repay them in full from its cash balance.

Key Opinion Leader (KOL) Event

Protalix held a Key Opinion Leader (KOL) event on June 26th, 2024 featuring luminaries in the Fabry disease and gout fields as well as Protalix’ CEO, Dror Bashan. The in-person, New York City event was headlined by Aleš Linhart and Naomi Schlesinger. Aleš Linhart, DSc, FESC of Charles University in Prague discussed the treatment landscape for Fabry disease and his perspectives on Elfabrio. Naomi Schlesinger, MD of the University of Utah discussed the current treatment landscape for uncontrolled gout and top-line results from the Phase I clinical trial of PRX 115.

Dr. Linhart is encouraged that there is now another alternative for Fabry disease and for his 250 patients in the Czech Republic with the disorder. Administration of Fabrazyme is every two weeks, and by the end of this period, they are not feeling well, due to the product’s half-life. Elfabrio’s PEGylated formulation allows for longer activity and may address this. Neutralizing antibodies also emerge in patients given Fabrazyme. With a new alternative on the market that stimulates a less severe antibody response, patients can enjoy greater effectiveness of the drug.

Dr. Schlesinger provided some background on gout, noting that more than 5% of Americans suffer from the condition. Gout is a type of inflammatory arthritis caused by a buildup of uric acid crystals in the joints. This buildup leads to sudden, severe attacks of pain, swelling, redness, and tenderness in one or more joints. Existing drugs on the market have shortcomings including the inducement of anti-drug antibodies which may lead to failure to achieve sustained reductions in uric acid.

Dror Bashan wrapped up the event with a discussion of anticipated milestones including the clinical study report for PRX-115 by 4Q:24. Now that Protalix is receiving revenues from two different products, the company is focused on rare renal diseases. These revenues allow the company to be self-sufficient with respect to funding its development activities. The event wound down with an opportunity for participants to ask questions.

PRX-115

In March 2023, Protalix announced that it had dosed its first patient in the Phase I clinical trial for PRX-115 in the treatment of severe gout. Protalix has completed enrolling seven of eight cohorts and has reported results from these groups. We expect to see topline results from all eight cohorts in the third quarter of 2024. Planning for a Phase II trial is underway with trial design details expected over the next several quarters and a launch in mid-2025.

The ongoing Phase I trial is designed as a double-blind, placebo-controlled, single ascending dose study intended to evaluate the safety and pharmacokinetics, pharmacodynamics and immunogenicity of PRX-115. Subjects considered for enrollment will present elevated uric acid levels (>6.0 mg/dL) and no previous exposure to PEGylated uricase. The single ascending dose study enrolled seven cohorts with patients randomized 3:1 to receive a single intravenous dose of PRX-115 or placebo. Other secondary endpoints will examine the reduction in uric acid and dosing efficacy. The study is being conducted at New Zealand Clinical Research under the New Zealand Medicines and Medical Devices Safety Authority. Further details on the clinical trial can be found on clinicaltrials.gov and the related entry under NCT05745727.

Protalix felt that the results observed in the first seven cohorts have been sufficiently positive to expand the study by adding an 8th cohort of eight new subjects. Cohort 8 will analyze a higher dose and its potential to result in increased exposure time. Conclusions from the PK and PD study are that exposure to PRX-115:

➢ Increased drug systemically in a dose dependent manner;

➢ Reduced plasma uric acid concentrations to below 6.0 mg/dL over time;

➢ Was dose dependent on uric acid concentrations in the plasma;

➢ Was well tolerated.

26% or 11 of 42 subjects treated with PRX-115 reported a drug-related adverse event (AE), with the majority of the events being mild to moderate. One subject in cohort 2 experienced anaphylactic reaction after infusion with PRX-115, which was fully resolved. There were no other serious AEs in the trial and no AEs reported in the highest doses in cohorts 6 and 7. Protalix hopes to have a competitive product that will be superior to other leading products in the market in terms of side effects and frequency of administration.

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