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 Marek of LifeSci Advisors, Investor Relations for Protalix. You may now begin.
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 released 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 Protalix's filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?
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 marked a significant year for Protalix as we received regulatory approvals for our second drug, Elfabrio, for the treatment of adult patients with Fabry disease. In May of 2023, both the FDA and the EMEA 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, Switzerland, and 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, the UK, and additional markets where approvals are granted. We are confident the Chiesi will continue to position Elfabrio for success, and we look forward to continued growth of Elfabrio's franchise. Elfabrio is now the second approved drug expressed via our proprietary plant-cell-based protein expression system, ProCellEx, 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 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 uric acid product candidate that is also produced using our ProCellEx 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 candidate, also being expressed through ProCellEx, is PRX-119. PRX-119 is a PEGylated recombinant human DNase I candidate in development for the potential treatment of diseases associated with neutrophil extracellular traps, or NETs. Additional pre-clinicals are ongoing, and we will update you accordingly, of course.
In addition to PRX-115 and PRX-119, we have multiple pre-clinical 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 welcomed Dr. Eliot Forster as chairman of our board of directors and a member of our nominating committee. Dr. Forster succeeded Zeev Bronfeld, who retired, and we are grateful to Zeev for his dedication and leadership since the founding of Protalix. We are grateful for Eliot's contributions thus far as we prepared 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 approvals of Elfabrio while Chiesi builds its inventory to support a successful launch. We expect sales to Chiesi 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 review of our financials, and Eyal, please go ahead.
Thank you, Dror, and thank you, everyone, for joining today's call. Let me review our fiscal year 2023 financials. We recorded revenues from selling goods of $40,400,000 for the year ended December 31st, 2023, an increase of $15,100,000 or 60% compared to revenues of $25,300,000 for the year ended December 31st, 2022. The increase resulted primarily from an increase of $14,100,000 in sales of Elfabrio drug product to Chiesi following the approvals by the FDA and the EMA of Elfabrio, as Dror described, an increase of $100,000 in sales to Pfizer and of $900,000 in sales to Brazil. We recorded revenues from licensing R&D services of $25,100,000 for the year ended December 31st, 2023, an increase of $2,800,000 or 13% compared to the revenues of $22,300,000 for the year ended December 31st, 2022.
The increase resulted from the $20 ,000,000 regulatory milestone payment from Chiesi in connection with the FDA approval of Elfabrio, which was partially offset by a decrease of $17,200,000 in revenues recognized in connection with the R&D performance obligation under the Chiesi agreements as the company has completed the Phase 3 clinical program thereunder. Revenues from licensing R&D services represent primarily the revenues the company recognized for services provided under the Chiesi agreements. Cost of goods sold was $23 ,000,000 for the year ended December 31st, 2023, an increase of $3,400,000 or 17% compared to cost of goods sold of $19,600,000 for the year ended December 31st, 2022. The increase in cost of goods sold was primarily the result of an increase in sales of goods to 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 such drug substances. For the year ended December 31st, 2023, the company's total research and development expenses were approximately $17,100,000 , comprised of approximately $6,3000,000 subcontractor-related expenses, approximately $7,800,000 of salary-related expenses, approximately $600,000 of material-related expenses, and approximately $2,400,000 of other expenses. For the year ended December 31st, 2022, the company's total research and development expenses were approximately $29,300,000 , comprised of approximately $17,800,000 in subcontractor-related expenses, approximately $7,3000,000 of salary-related expenses, approximately $1,400,000 of material-related expenses, and approximately $2,800,000 of other expenses.
The decrease in research and development expenses was $12,200,000 or 42% for the year ended December 31st, 2023, compared to the year ended December 31st, 2022. The decrease in research and development expenses resulted primarily from an $11,500,000 decrease in subcontractor-related expenses in connection with the PRX-102 clinical trials and a $800,00 decrease in materials-related expenses. Selling general administrative expenses were $15 ,000,000 for the year ended December 31st, 2023, an increase of $3,300,000 or 28% from $11,700,000 for the year ended December 31st, 2022. The increase resulted primarily from an increase of approximately $2,300,000 in one-time cash bonuses, share-based compensation, and salary-related expenses, as well as an increase of $300,000 in travel conferences and employee training expenses.
Financial expenses, net, was $1,900,000 for the year ended December 31st, 2023, an increase of $500,000 or 36% compared to financial expenses of $1.,400,000 for the year ended December 31st, 2022. The increase was primarily due to a decrease of $900,000 in income related to exchange rates, as well as an increase in interest expenses of $700,000 , which was partially offset by a gain recognized due to the conversion of a portion of the 2024 notes of $400,000 and a $600,000 increase in interest income. For the year ended December 31st, 2023, we recorded income taxes of approximately $300,000 , a decrease of $200,000 or 40% compared to tax expenses of $500,000 for the year ended December 31st, 2022. The income taxes resulted primarily from the provision for current taxes and 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. 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 give effect to evaluation allowance release equal to approximately $3,100,000 . Cash and cash equivalents in short-term bank deposits were approximately $44,600,000 at December 31st, 2023.
Net income for the year ended December 31st, 2023, was approximately $8,300,000 or $0.12 per share basic and $0.09 per share diluted compared to a net loss of $14,900,000 or $0.31 per share basic and diluted for the same period in 2022. I will now turn the call back to you, Dror.
Thank you, Eyal. I would like to conclude by expressing how proud we are 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 pipeline of assets to potentially transform the treatment of rare disease. I'm grateful for our 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 stakeholders. Now, I would like to ask the operator to open the call for questions.
Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question at this time, please press star one from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions, and once again, that is star one. Thank you. Thank you. Our first question comes from the line of John Vandermosten with Zacks. Please proceed with your questions.
Great. Thank you, and good afternoon, Dror and Eyal. Thought I'd 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?
So thank you, John. Actually, these studies, they 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 Elfabrio, I may say, the franchise. This is clear.
Yeah. 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're planning going forward?
Thanks for the question, John. So I don't know what equal means, but as Dror mentioned, gradually, we expect sales, obviously, to grow. And in terms of the free cash flow, it depends how much money we're 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'll get to the place, as we indicated in our presentation, that we believe that Chiesi, with a good job, can take in the market.
Got it. Then looking at PRX-115, you had mentioned that there's going to be results from that, it seems like, in the next couple of weeks. Assuming those are positive, what are the next steps for that program? Is that phase 2, or might there be some other pursuit there?
If indeed we continue to go forward, of course, we'll move into a Phase 2 . Yes.
Okay. Would that be before the end of this year that you would start that phase 2?
This depends. I think it will be between the end to the first half of next year. Yes.
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?
Not yet. We are looking into the right indication to continue with. I think this will take further a bit more to decide.
Okay. And then any other milestones on the R&D side that we should think about as we progress through 2024?
Once there will be something to update, we will update, of course. We are not exactly sitting on our hands. I think we work pretty much, I would say, even intensively in order to make sure that we can add additional early-stage assets. It is just we take our time, and I hope we will cut the right moves that will make sense.
Okay. All right. Thank you, Dror. Thank you, Eyal. Appreciate your answers.
You're welcome.
Once again, if you'd like to ask a question at this time, you may press star one. We'll pause a moment to pull for questions. Thank you. At this time, there are no additional questions. Gentlemen, would you like to make some further remarks?
This is 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. Of course, we'll update you accordingly on any further developments, and we will meet in the next earnings update. Thank you.
This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful day.
Thank you.