Welcome, everyone, to this session of our November 2024 MicroCap Conference. I'm Alex Hantman, and I serve as an equity research analyst here at Sidoti & Company. Today, I'm pleased to be in conversation with COO Ori Warshavsky of PolyPid, ticker PYPD. During the presentation, please feel welcome to submit questions using the Zoom Q&A interface at the bottom of your screen. After the presentation, we'll open to your questions. And with that, Ori, I'll turn it over to you.
Thank you, Alex. Good morning, everyone. Yeah, so I'm Ori Warshavsky, the Chief Operating Officer of PolyPid. About four years at PolyPid, and kind of before that, just over 10 years at Teva Pharmaceuticals, and I went through a wide range of roles, from strategy to commercial, and today, I lead most of all of the U.S.-related activities, investor relations mainly, business development, and launch activities. What I will show in the next 20 minutes is a real quick overview of our company and our phase III product. I think the key message to take from this presentation is that we have a product in phase III with data coming in next quarter, so really imminent, and the trial is fully funded, so really, in terms of inflection points, you can't get any better and any kind of quicker than this.
As I jump in, so PolyPid is an Israel-based company with a drug development drug delivery platform called PLEX. PLEX stands for Polymer-Lipid Encapsulation matriX. And PLEX, what PLEX does, PLEX can take many types of drugs, of APIs, and turn them into a local, high-concentration, prolonged release. And when we say prolonged release, we talk about days and weeks and even months of constant release, which is a big differentiator from what else exists. Other companies in the local space, if they talk about local release, they talk about 72 hours or 96 hours compared to our days, weeks, and months. So really a different, completely different platform. As I mentioned, we have a phase III product, D-PLEX 100. We have an earlier program in oncology called OncoPLEX. The platform and the products are well protected by a large number of patents. 65 employees, fully integrated.
All our capabilities, from R&D to clinical to regulatory to manufacturing, is based in Israel. And like Alex said, under the ticker PYPD. The way the PLEX works is like this. Imagine on a nanometric level, thousands of thousands of layers of polymer that serves as a backbone, and then lipids that surround the drug and protect the drug from enzymes, from body fluids, and from any other harsh conditions in the body. The structure is like an onion with thousands of thousands of layers. And every time the outer layer comes in touch with body fluid, it peels off or disintegrates, and the API is released. And next, the next layer comes in touch with body fluids, peels off and releases again and again and again and again.
And we can control the number of layers in these granules, which is how we are able to customize the duration of the release. So SHIELD I is our first phase III trial. I'll go over the results in a minute. SHIELD II is the ongoing phase III trial. And as I mentioned, a younger program in oncology. D-PLEX 100 is our phase III product. And what D-PLEX is, is taking the PLEX platform and encapsulating a known approved safe antibiotic, doxycycline, a broad-spectrum antibiotic for the indication of prevention of surgical site infections or SSI. SSIs are under this umbrella of hospital-acquired infections, which means a patient came in for a surgery without an infection, and then something happened during the surgery, and now the patient is infected.
The event happened within the hospital, and now the hospital is responsible for clearing out the infection and responsible for all the cost and treatment that is related to clearing the infection. Our product is going through the 505(b)(2) pathways. It's customized for 30 days of release, and we chose 30 days of release because the CDC defines any infection that comes from the surgery over the next 30 days after surgery as a surgical site infection, so we customize the product to really fit well with the definitions of the CDC. We have Breakthrough Therapy for the product. We have Fast Track Designation for submission for approval and QIDP designation, which gives us an additional five years of market exclusivity. You can see on the right the total addressable market in the U.S. You should look at it into two buckets.
One are surgeries that have high infection rates, like abdominal surgeries, gynecology, urology surgeries. That's about half the addressable market. And the other half are surgeries that may be not as high infection rate, but if there is an infection, the consequences are really terrible. So as an example, if there is an infection in a sternum bone in an open heart surgery, there's a 40% chance of mortality. In the orthopedic surgery, if there's an infection during a hip replacement procedure, this can mean multiple surgeries to clean the infection, two, three weeks in the hospital, and tens of thousands of dollars of cost, which is paid by the hospital. So really, there's a clinical need, and there's also an economic need for reduction of the infection. This is how this looks like in surgery. I'll keep it brief because I know it's too early in the morning.
But this is D-PLEX . Okay? So D-PLEX is this white powder. Just as the doctor is ready to complete the surgery, pours the powder into a mixing bowl, adds saline, and turns it into a paste that looks like a toothpaste, and then applies directly on the incision. I'm going to jump here because I know some people are sensitive to that. So this is what it looks like at the end of surgery. The doctor finished the incision, finished the surgery, ready to close, applies directly on the incision, D-PLEX . And from that point on, there's 30 days of release of antibiotic. It's a one-time thing. The surgeon puts it in for one time. The drug is anchored to the incision, and there's no additional coming in, not for to take out anything. There's no additional application. A full one-time use, high concentration locally.
In terms of the clinical data, so SHIELD I was the largest trial in the space in over a decade. It was a global trial, centers in the U.S., Europe, and in Israel, close to 1,000 patients looking into the standard of care, which is for the most part IV antibiotics, comparing it to D-PLEX in addition to standard of care. So we're not really looking to replace any of the standard of care with this trial, but looking to add another layer of protection to the body and to the surgeons. The primary endpoint looks at reduction in SSI, reduction in reintervention, and reduction in mortality over the 30 days where the antibiotics is released, plus another 30 days of safety.
What we saw in SHIELD I was, if I look on the entire cohort, the 1,000 patients, we saw a nice reduction in infection rates, but we did not reach the P-value that was sufficient for NDA approval, and the reason for that was that this trial was done start to finish during COVID. We started the trial in July 2020, and we ended in May 2022, and as all of you know, during COVID, there were no visitors allowed into the hospital. There were no elective surgeries. Everyone was well protected, and there were just not enough infections in the hospital. In a way, we designed the trial in 2019 based on 2019 knowledge of the world, and then 2020 came and really changed the working assumptions in the hospital for everyone.
That said, when we look at a pre-specified group, and this was a request by the FDA to look at large incision as its own standalone group, with the thought that large incisions are more complex surgeries and therefore in a higher risk for infection. And FDA wanted to ensure that the product works well at the complex surgeries as well as the "easier" surgeries. And what you see is when there were enough events, the product really worked as designed, 54% reduction in infection, very low P-value, and with a large patient population. So this subgroup was almost 50% of the trial, 423 patients, very meaningful data.
And even if we dive deeper into the large incision subgroup, if you look in the right column on the effect, meaningful nice reduction in primary endpoint, in the key secondary endpoints, even a 40% reduction in mortality, a 55% reduction in reintervention. So clearly, across all our parameters, the product worked as designed. Unfortunately, COVID was something that we couldn't really predict when designing the trial. We even took one jump further and looked at all risk factors and see how SSI deals with all risk factors. Because a surgeon, when a patient comes in for a surgery, one look and the doctor will know this is going to be a larger incision, or this patient is a smoker or a diabetic or large BMI, and by definition, in high risk of infection.
We looked at all these, this is post-hoc analyses, at all these different risk factors, which were almost the entire trial, almost the entire trial at one or more risk factors. And as you can see here, really nice reduction, really low P-value. The product really works on the tough cases. This is a good message, both to surgeons and to the hospital administrators, that when they think of, "Where should I try this product? How do I pilot it? How do I test that this works?" We now show them there's a clear patient population that you as a hospital, you as a surgeon know that are in risk, that they are problematic for you. We have a tool here that can significantly reduce that risk. We took all that information to the FDA after the end of SHIELD I and basically said, "Ask for guidance.
The product clearly works. COVID happened. It's a known antibiotic. What should we do next?", and the FDA said three things. One, they acknowledged that there were no safety issues with the product. Two, they recommended that we repeat that large incision as its own study. And three, they reiterated that because we have Breakthrough Therapy, one study, one successful study will be sufficient for NDA submission, and this is what we're doing now. Similar design as the previous trial, similar endpoint, almost similar endpoints, total of 600 patients with an interim view at 400. so just so you understand where we are, yesterday we had our Q3 earnings call. Yesterday, we announced that we have approximately 550 patients already on the trial. so we're really close to fully enrolling the trial. We expect to enroll the 600 patients before the end of the year.
Top line for the 600 patients are expected in Q1, so next quarter. And the interim review is already ongoing. All the patients for the interim review were recruited. They all went through surgery, and now the data is being compiled. So before the end of the year, we will already have the results of the interim analysis. And what the interim analysis will give us is one of four things. One, stop the trial because the product doesn't work. We see very, very low chances that that happens because, again, it's doxycycline. It's an approved product. Two, they can tell us the product worked as planned. Go ahead to 600 patients. Three, they can say the product works, but you should increase the patient population size. Or four, they can tell us the product works better than design, and you can stop early, stop for efficacy.
This is, again, at 400 patients. If I go back to here, again, this group, the same group of patients, large incision was 423 patients. If we see results similar to that, any P-value that is below 0.01 will be sufficient for an early stop. This is where we are. As I mentioned in the beginning, the inflection points are coming really soon within this quarter and next quarter. We see this. The company sees this as a de-risk trial because we are going to a patient population that we know the product worked in in the previous trial. We are taking a conservative view of statistics, meaning we're taking the actual COVID days infection rates as our baseline, and anything that goes beyond that is just increasing the chances for the product to work.
We've done a lot of lessons learned internally to ensure the product works well. I'm jumping now from the clinical to a little bit on the commercial. I spoke about the total addressable market in the U.S. You see on the right here the addressable market in Europe. The trial is designed to both meet the requirements of U.S. as well as Europe. You see here the initial abdominal surgeries are a big part of this. This will be the initial target of surgeries that we're going after at launch. So this is the volume. In terms of cost, we are looking to somewhere between $400-$600 per vial, two to three vials per surgery, so somewhere between $800-$1,800 per procedure. So clearly, a very large market that's available here. From a go-to-market perspective, we are looking to find commercial partners.
We already have a partner for all of Europe, Advanz Pharma. The partners that we're looking for, and Advanz is exactly that, is a partner that knows how to sell in the hospital. What we are learning is that for a small startup that is not a U.S.-based startup going alone into the market, definitely into the U.S. market, is a very challenging task, a very expensive task. And we decided strategically to find commercial partners to help us sell the product. The Advanz deal had evaluated over $150 million in upfront and milestone payments, both development milestones and sale milestones, royalties, transfer price that is favorable because we are the manufacturers, and a commitment to net sales. So very attractive in terms of the economics and in terms of the deal structure. And this is what we're looking to do in other territories, starting with the U.S.
And then expanding to other territories: Canada, Latin America, China, and so on. I expect that once we have the data, we will see an increase in the interest from partners. I've been in conversations with many potential partners over the last year. There's a few of them sitting on the sidelines waiting to see the data. So this is another inflection point that you can see in the story in the coming year is getting partners to the different territories. I want to go one more around the access and reimbursement and so on, and why we think this product really has a good chance to get adoption in the hospital. I think the clinical side is clear. If you show patients and you show surgeons a 50% reduction in infection, the clinical story is clear. But there's a very strong health economics piece here.
The way these surgeries are paid for, they're paid based on DRG, meaning the hospital gets a lump sum of money per surgery. As an example, if a patient comes for a colorectal resection, the payer pays the hospital, let's say, $10,000 per surgery. Now, if the surgery went well and the patient leaves on time, the hospital makes money. If now there is an infection and the patient needs to stay another week or 10 days in the hospital and it costs another $25,000, the hospital is on the hook for all this additional cost. So it's a direct impact on the hospital margin if there's an infection. There's also penalties by CMS for the hospitals with the worst infection rates. This is public information. All hospitals need to publish their infection rates, and the worst offenders get penalized by Medicare.
There's a clear financial reason to minimize infections. On the other side of that, and this is here on the right side of the slide, D-PLEX is eligible for NTAP program. NTAP stands for New Technology Add-on Payment. And this product will give a reimbursement for up to 75% of the cost of the drug by CMS. So what they say is the D-PLEX can, on one hand, reduce the cost to the hospital from an infection. On the other hand, the hospital would get reimbursed for almost the entire, the whole cost of the drug. So a good story for my health economics, which we intend to leverage and use as part of our kind of commercial messages. Finally, we have our manufacturing suite, fully GMP qualified with sufficient capacity to meet all the demand for both Europe and U.S. for the next few years.
It's been through a European inspection. It will go to inspection as part of the FDA NDA submission. As a closing, just on the financials, so we announced yesterday we have $9.5 million in cash, which will take us into a Q1. We had two PIPE deals over the year, both in January and in August. These PIPE deals have warrants included to them, and you can see the strike price for these warrants. These warrants are short-term warrants. They are exercisable within 10 days of the interim analysis. And if they are fully exercisable, we'll have sufficient cash all the way into the middle of 2026. You can see on the right here the top shareholders and the analysts that cover us. And with that, Alex, I'll hand it over to you for Q&A.
Great. Well, thank you, Ori, for sharing all this great info. Maybe just to pick up on yesterday's earnings release. It sounds like the highlight was around enrollment that went well ahead of schedule. So I think you talked about some of the implications for the next readout, but maybe we could just talk a little bit about, did that move up at all, or does that move up the potential approval timeline and kind of where that leaves us for the next couple of milestones?
So maybe I'll just repeat what was said. So we announced yesterday approximately 550 patients out of the total 600, approximately 600 patients. So we're really close to the final, to the end of the trial. This was the guidance that we gave, I think, from the beginning of the year. So this was the plan. The summer months were a little bit slower on recruitment, but once the summer ended, we really picked up, and we see on average about 80 patients per month, which was also what we planned for. So yeah, so this is in line, top line Q1 next year, and then submission and approval first half of 2026.
Okay. Thank you. And can we talk a little bit about what type of data you're going to actually have when the interim period is over, and what are you going to release when we get that first look?
Yeah, yeah, yeah. That's a very good point. Us as a company, we are still blinded to the overall data of the trial because the trial is ongoing. The interim is at 400 patients, but the trial is going until 600. So we are blinded. The only ones who see the data is the Data Monitoring Committee, the DMC. They will see the overall data, and they will only give us an indication of either stop because the product doesn't work, stop because the product works better than planned, or continue to 600 or need to sample the re-estimation. We, of course, will announce it. We will PR the outcome of the committee, but we wouldn't know beyond that what was the split between the two arms or anything or infection rates and so on.
What we see is infection rates on aggregate, and on aggregate, I can say that the trial, the patient population looks very much similar to what we saw from this group in SHIELD I in terms of risk factors, in terms of percent of cancer patients, age, the different territories very much in line. But we wouldn't know much more than that. We can probably do some sort of reverse engineer if they say, "This, what does this mean to us?" But they will not give us more than that.
Good context. Thank you for sharing. Let's talk a little bit more about your commercialization strategy. So I think you talked about Advanz Pharma, but maybe you could share a little bit more about how that partnership came about and how you're exploring other opportunities for development or commercialization.
So Advanz Pharma, first of all, Advanz Pharma is a European and Nordic Capital-backed company that is really focused on infectious disease products and hospital products, which is really the type of profile of what we're looking for, a partner that knows its way around the hospital corridors. The deal was signed before we even announced the SHIELD I results. They've been with us since then, so since more or less August 2022 until today. They are fully in line. They're fully aligned with our path forward around SHIELD II. We consult them around the activities that are related to the European market. I would say in general, you ask how this came about. In general, companies that sell into the hospital, there is not much innovation in general in the hospital.
So companies that already have a sales team already sell into the hospital, and they want to bring more innovation to keep being engaging and interesting to surgeons or doctors in the hospital, they need to look for new innovation. There's not much there. Most companies go for other oncology centers or retail products. So there's a handful of companies that are focused on hospitals are really looking for something new. This is why we see quite a lot of interest from companies for this product.
Great. Thank you for explaining. Maybe we could turn a little bit to plans to market the drug outside the U.S. Could you talk about what markets you're looking at and what sort of approvals those would come with?
Yeah. No. Good. We are looking in, I guess, two main buckets. There's the buckets of clearly U.S., Europe, the buckets that I would say that can demand higher pricing. So Europe, U.S., Canada, Japan, New Zealand, this bucket. And then there's a bucket of markets that are more driven by volume. China and India will be in this bucket, maybe Brazil as well. This is kind of our general approach.
Some of these markets will need the local clinical trials like Japan, like China, and we will rely on the local partner to drive these activities. Our kind of second tier or less priority will be a partner that can bring us a few markets together. So for example, if there's a partner that can bring most of Latin America, that's an interesting partner for us. If there's a partner that can bring Southeast Asia, Vietnam, Thailand as one with one partner, so we don't need to deal with 20 different partners, I think that's interesting from us, again, from our capacity as a smaller company.
That makes sense. Thank you. And so we're almost at time. Maybe we could end with kind of a question to sum up the value proposition for investors who might be looking across infection control, surgical complication investments. Ori, how do you think about kind of summing up the investment opportunity for folks?
So I will say two things on this. First, as I mentioned in the beginning, we are really at the end of what we see as a de-risk trial, again, going back to a patient population that we already know that the product worked in, going to some of the same doctors and centers with data coming in within the next quarter or next quarter. We are fully funded for this trial with a strong investor backup. So that's one piece of it. It's really coming soon. On the other hand, or in addition to that, if someone wants to see a comparator of a product that is for addressing infections during surgery, there's a company called BoneSupport that can be a good comparator. They are in bone infections, not necessarily all infections.
There are a Nordic company traded in, I think, in the Swedish stock market. But their market valuation, they launched two years ago. They already sell close to $100 million in the U.S., and their market valuation is over $2 billion market cap. So their marketing assumptions, when you go over their kind of the plans and presentation, very much in line with where we are. They are just two years ahead of us. But in terms of market assumptions of approach, sizing, pricing, they're really in line with where we are. And they're doing very well, and we hope that in two years, we'll be where they are today.
Great. Well, with that, we are at time. So I'd like to thank you, Ori, for sharing the PolyPid story with us, and also thank everybody listening for spending time with us today.
Thank you, Alex, and thank you, everyone. I appreciate the time to present.
Take care.