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 call 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 your conference.
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 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 filing with the U.S. Securities and Exchange Commission. I will now turn the call over to Mr. Dror Bashan. Dror?
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 those affected, and we remain dedicated to the safety and well-being of our team. We are committed to providing 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 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 drugs, 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 I, 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 to date in this first- in- human trial.
We expect to announce top-line 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 structured, 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 you 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. Ze'ev 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 Ze'ev 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 over to Eyal, I want to note 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.
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 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 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. We 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 agreement. As of March 1, 2023, sponsorship of the extension studies was transferred to Chiesi, and Chiesi is now administering all open-l abel 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 a 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, our total research and development expenses were approximately $3.7 million, comprised of approximately $1 million for subcontractor-related expenses, approximately $1.9 million of salary and related expenses, approximately $0.2 million of material-related expenses, and approximately $0.6 million of other expenses. For the three months ended September 30, 2022, the 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 material-related expenses, and approximately $0.6 million of other expenses. Total decrease in research and development expenses were $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 process related to the BLA and the 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 a one-time cash bonus and an increase in share-based compensation. Financial income, net, were $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 and cash equivalents in short-term bank deposits were approximately $41 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 $0.7 per share, basic and diluted, for the same period in 2022. I will now turn the call back to you, Dror.
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 tech platform technology with two approved therapeutics, driving a rich and sustainable pipeline of assets, a world-class 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, updating you in the future on our progress.
Before we start taking questions, I would, I would like to note that we are praying for our friends and family, families 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.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your questions 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 poll for questions. The first question comes from the line of Boobalan Pachaiyappan with H.C. Wainwright . Please go ahead.
Hi, this is Boobalan . Sorry for the voice. I'm still recovering from a sore throat. 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?
Thank you, Boobalan , for the question. So in terms of the decrease, the, part of the decrease is decrease in sales to Pfizer, and part of it is decrease in sales to Chiesi. As I 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 or sales in the market. So obviously, as they build their inventory, there's gonna be fluctuation in the next year and a half or even two, yeah, during the term that they're building the inventory and slowly but surely also penetrating the market and building their presence in the markets.
Yeah, with respect to your second question about guidance on yeah, revenue for the fourth quarter, we usually don't provide guidance for revenue, especially since, you know, the POs from Chiesi and from Brazil and 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 gonna take time till we'll be able to share forecasts and feel comfortable, you know, giving those forward-looking statements.
Okay, fair enough. And then, congrats on winning, FDA. Sorry, the regulatory approval in U.K. and Switzerland. So I was wondering if you could provide, or maybe at a high level, discuss the Fabry disease market opportunity in the U.K. and Switzerland, and also, which countries can we expect to approve Elfabrio in the upcoming quarters?
So actually, you know, the drug was approved already in most of the, if I may say, Western countries in Europe. So, you know, 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 well as for the specific size of the Fabry market in the U.K., I don't have it in front of me, and also this is, you know, Chiesi's, if I may say, 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.
Okay.
But certainly, the U.K. is a very important market in Europe. Let's put it this way.
Okay, thanks for the color. Let's switch gears and discuss your clinical programs, especially PRX-115, the ongoing phase I study. So I'd like to get some additional color on some of the items that you 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 gout flare 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 renal complication? If I may, so you can clarify more on that.
Yes, sure. Thank you for that. So, actually, you know, it's a phase I study. It's a single dose, so it's the first time we actually infuse it to, to participants. The participants are actually, volunteers with hyperuricemia. They are not, s o and the idea is first to, 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 from there. So we measure multiple aspects in order to be able to move on, of course, subject to safety, to a multiple, to, like, a, 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.
Okay, thank you for the color. One last question, if I may. So again, with respect to PRX-115, so I know you are collecting immunogenicity data and blood uric acid levels, as well. So I'm curious, like, what do you expect to see, you know, in these two data, especially it's a phase I study? What are your expectations?
So again, we would like to see safety for sure, and then we will analyze from a PK/PD point of view, you know, 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, you know, further steps or more calculated steps for the next study.
Okay, thank you for taking all my questions.
Yes, and again, just to make sure we—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, you know. I won't say minimize the risk, but you know, with less risk, of course. Safety, for sure, but more than that.
Thank you. Next question comes from the line of John Vandermosten with Zacks. Please go ahead.
All right, thank you, and Dror, Eyal, good day, good day to you. Beyond costs, how much of your expense structure is oriented towards the Fabry business now?
Okay, can you repeat the question? I can hardly hear you. I'm sorry.
Oh, I'm sorry. Beyond costs, how much of your expense structure is oriented towards the Fabry business now?
There, 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, you know, supply and provide half of the patient population worldwide. We're not investing at present in Fabry.
Okay, very good. And how do you see your capital structure changing now that you have two revenue-generating products, and then also, you know, keeping in mind that there's the convertible debt on the balance sheet?
That's a good question. It's true that we have two, you know, 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 they're going to see that we have a stable streamline of revenues, and we're accumulating cash.
So it's a different company. It's not a, you know, a biotech, or a typical, yeah, the 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. I guess that's going to take time. Over time, I guess, the capital structure is going to change.
Okay. And I think they're, I think they're coming due next year, in about a year from now. 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.
Yeah, so I think that I responded to this one previously to by Boobalan. Since we are just in a phase of revenue ramp-up and Kyozia 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 forecast for the next couple of quarters. Since it's very, very, very fluctuative, they can decide that they're pulling two batches, one batch, for even technical reason, you know, delaying one.
So I think at this point, it's going to be responsible to share yeah focus for the short term. Long term, as I said, in the next, you're going to have to, that's going to be mostly an inventory build-up. With a run rate that will ramp up. I'm talking about sales, obviously. We ramp over time, you know.
Okay. Then shifting to PRX-115, and assuming that the top line comes out as expected or better, in the middle of next year, what are the next steps there? Would it be a phase II, or I guess I'm just wondering what we should expect to see from that development program.
So we intend to do a multiple dose following the single dose that we do now. And then, you know, once we have, which is actually a phase II, and then we will continue from there.
Okay. And just one last one on one one nine. What are the next steps for that program right now?
Thank you for that. So we will gather information in the next, 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, you know, to toxicology and phase I.
Okay. I appreciate it, Dror, Eyal. Thank you.
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.
So thank you. So thank you, everybody, for your participation, and I appreciate the time, and we look forward to 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.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.