Earnings call transcript: PolyPid Q3 2024 focuses on trial progress

PolyPid (NASDAQ:PYPD)'s earnings call for the third quarter of 2024 highlighted the company's ongoing efforts in clinical trials and strategic financial positioning. Despite a net loss, the company is optimistic about its future, driven by its focus on the DPLEX-100 product for surgical site infections. The stock price saw a slight increase, reflecting cautious investor optimism.

Key Takeaways

• PolyPid reported a net loss of $7.8 million for Q3 2024, an increase from the previous year.
• The company is advancing its SHIELD-II trial with promising enrollment rates.
• Stock price increased by 0.33%, closing at $3.04.
• PolyPid aims for a breakthrough therapy designation for DPLEX-100.
• Financial runway extended to Q1 2025, with potential to 2026.

Company Performance

PolyPid's performance in Q3 2024 was marked by a higher net loss compared to Q3 2023, primarily due to increased research and development expenses. The focus on the DPLEX-100 product for preventing surgical site infections has driven up R&D costs, reflecting the company's commitment to innovation. The SHIELD-II trial is progressing well, with full patient enrollment and the potential for early completion.

Financial Highlights

• Net Loss: $7.8 million, up from $5.6 million in Q3 2023.
• R&D Expenses: $6 million, increased from $3.8 million in 2023.
• Marketing Expenses: $246,000, slightly down from $261,000.
• General & Administrative Expenses: $1.2 million, consistent with last year.

Outlook & Guidance

PolyPid's future outlook is supported by the potential for additional funding through warrant exercises, which could extend its cash runway to 2026. The company anticipates submitting a New Drug Application (NDA) in 2026 and is actively seeking a strategic commercialization partner in the U.S. The global market potential for DPLEX-100 remains strong, with interest from multiple regions.

Executive Commentary

CEO Dikla Chotchis Axelrad emphasized the company's strong financial position and the global need for DPLEX-100, stating, "We are operating from a position of financial strength" and "A product like Diplex 100 has a global market."

Q&A

During the Q&A session, analysts focused on the SHIELD-II trial's interim analysis, which is expected this quarter. The potential outcomes include stopping the trial for efficacy, continuing to 630 patients, or determining futility. The interim analysis will be crucial in shaping the trial's future direction.

Risks and Challenges

• Increasing R&D expenses could pressure financial resources.
• Regulatory hurdles may delay the anticipated NDA submission.
• Market competition in surgical site infection prevention products.
• Dependence on successful trial outcomes for future growth.
• Potential challenges in securing a strategic U.S. commercialization partner.

PolyPid's strategic focus on innovation and global market expansion positions it well for future growth, but the company must navigate financial and regulatory challenges to achieve its long-term goals.

Full transcript - PolyPid (PYPD) Q3 2024:

Conference Operator: Greetings, and welcome to the PolyPete Third Quarter 2024 Conference Call. At this time, participants are in a listen only mode. As a reminder, this call is recorded. And I would now like to introduce your host for today's conference, Brian Ritchie from LifeSci Advisors. Mr.

Ritchie, you may begin.

Brian Ritchie, Host/Moderator, LifeSci Advisors: Thank you all for participating in Polypeak's 3rd quarter 2024 earnings conference call. Joining me on the call today will be Dikla Chotchis Axelrad, Chief Executive Officer of Polypede Johnny Misalawan, Polypede's Chief Financial Officer and Ori Roschopsky, Chief Operating Officer, U. S. Of Polypede. Earlier today, Polypede released its financial results for the 3 9 months ended September 30, 2024.

A copy of the press release is available in the Investors section on the company's website, www.polypet.com. I'd like to remind you that on this call, management will make forward looking statements within the meaning of the federal securities laws. For example, management is making forward looking statements when it discusses the potential benefits of DPLEX-one hundred, the expected timing for patient recruitment, top line results from the SHIELD-two trial and of the unblinded interim analysis, the expected SHIELD-two infection rate, the company's expected cash runway and the potential to secure additional funds if all the warrants issued in both of the company's most recent private placement financings are exercised. Forward looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks described from time to time in our SEC filings. The company's results may differ materially from those projections.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not place undue reliance on these statements. I encourage you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's annual report on Form 20 F, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward looking statements. PolyP disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements, whether because of new information, future events or otherwise. This conference call contains time sensitive information and speaks only as of the live broadcast today, November 13, 2024.

With the completion of those prepared remarks, it is my pleasure to turn the call over to Dikla Chachkus Axelrad, CEO of PolyPete. Dikla?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Thank you, Brian. On behalf of our team at PolyPete, I would like to welcome everyone to our Q3 2024 earnings conference call. We are very pleased with the recent critical advancement in our business, most notably as it relates to the significant acceleration in enrollment in our ongoing SHIELD II pivotal trial for DPLEX-one hundred for the prevention of abdominal colorectal surgical statin section. Moreover, we are operating from a position of financial strength as we are funded beyond the upcoming interim analysis and into 2026, if all the warrants issued in both of our most recent private placement financing are exercised. We will further discuss our cash runway shortly, but I'd like to begin with the status of SHIELD II.

We recently announced that the study enrolled the last patient required to conduct the planned unblinded interim analysis. We will have the outcome of the analysis during the current quarter, now that the 30 days follow-up assessment for the last patient has been completed. As a reminder, the unblinded interim analysis may allow for early trial conclusion due to positive efficacy, continuation to planned patient recruitment, which is up to 630 subjects, sample size reassessment or futility. I'm pleased to report today that the study has now enrolled approximately 550 subjects and approximately 60 centers are currently open in multiple countries around the world, including in Eastern Europe, in the U. S, Germany, Ireland, Portugal and Israel.

All of the planned centers are now open and the vast majority are currently recruiting patients. This achievement, along with the increase in volume of surgical procedures following the conclusion of the slower summer months has led to substantial ramp up in recruitment recently. In fact, more than 80 subjects were enrolled every month since the end of the summer. This important progress should allow us to complete patient enrollment for the full trial in December with top line results anticipated in the coming quarter. As we have said on prior calls, we view SHIELD-two as a derisk Phase 3 trial.

One of the primary reasons for this is that the trial is being conducted in a focused patient population in which we have already generated highly positive statistically significant data in SHIELD-one, our first Phase 3 study with DIPLEX-one hundred. This view was further supported by the recent publication of the full data set from SHIELD-1 in the highly regarded peer reviewed journal, the International Journal of Surgery. I will now turn the call over to Ori for a review of the highlights from this important publication.

Ori Roschopsky, Chief Operating Officer, U.S., PolyPete: Ori? Thank you, Nicolas. On October 17, the Phase 3 SHIELD-one trial results, including efficacy and safety, were published in the International Journal of Surgery, which is ranked 2nd by Impact Factor out of 212 surgery focused medical journals worldwide. Of note, SHIELD-one is one of the largest Phase 3 trials for the prevention of surgical site infections in colorectal resection conducted in over a decade. SHIELD-one included close to 1,000 patients in total and was a prospective multinational randomized double blind Phase 3 trial designed to assess the efficacy and safety of DPLEX-one hundred administered alongside the standard of care compared to a standard of care alone arm in the prevention of post abdominal surgery incisional infections.

The paper highlights key takeaways from SHIELD-1 that inform the execution of SHIELD-two, including the compelling data generated in the pre specified analysis of the subgroup of patients with surgical incisions greater than 20 centimeters. In these patients, significant improvements were observed in the primary endpoint, which was a combination of incisional SSI, incisional reinterventions or all cause mortality in the DPLEX-one hundred treating patients with a p value of less than 0.01. In addition, in the key secondary efficacy outcome incisional SSI, a statistically significant reduction was observed with a p value of less than 0.05. Exploratory analysis of additional secondary efficacy outcomes, including superficial SSI, deep SSI, all cause mortality, time to adjudicated SSI, incisional reintervention or any surgical reintervention also show differences in favor of Diplex100 in the greater than 20 centimeter incisional length subgroup. Overall, the pre specified and post hoc analysis of the SHIELD-one study suggests that DIPLEX-one hundred may benefit patients with increased SSI risk, including those with length incisions.

I would also add that unlike SHIELD-1, the currently enrolling SHIELD-two is not being conducted under the tight COVID related safety restrictions that were in place during the pandemic and significantly impacted the overall infection rate in the study. Due to this unexpected change in baseline infection rate, the SHIELD-one primary outcome became extraordinarily difficult to meet. In the post COVID-nineteen setting, although the published data is limited, we see infection rates rise above what they were during the pandemic in different territories and different surgery types, including in colorectal surgery. And with that, it is my pleasure to now turn the call over to Johnny to review the financials. Johnny?

Johnny Misalawan, Chief Financial Officer, PolyPete: Thank you, Ori. As of September 30, 2024, the company had cash and cash equivalents and short term deposits of $9,500,000 We expect that our current cash balance will be sufficient to fund operations into the Q1 of 2025. However, I'd like to take a moment to review the terms of the 2 Pipe Financing transactions closed in January August of 2024, which provides opportunity for our cash runway to be significantly expanded. Under the terms of the January 2024 pipe, we have the potential to secure an additional $18,500,000 if the unblinded interim analysis of SHIELD II trial results in the stocking of the study due to positive efficacy and all warrants are exercised. In addition, under the terms of the August 2024 pipe, we have the potential to secure an additional $6,100,000 if the unblinded interim analysis results in either the stopping of the trial due to positive efficacy or continuation to planned patient recruitment and all warrants are exercised.

If all the warrants issued in the August pipe are exercised, the company would be funded beyond top line results. If all warrants issued in both January August pipe are exercised, the company would be funded into 2026. For both transactions, investors have 10 trading days to exercise their warrants following the interim outcome as I just mentioned. Now let's turn to our income statement. Research and development expenses for the 3 months ended September 30, 2024 were $6,000,000 compared to $3,800,000 in the same 3 month period of 2023.

The increase in R and D expenses was driven by the ramp up in patient enrollment in the SHIELD-two Phase 3 trial. Marketing and business development expenses for the 3 months ended September 30, 2024 were $246,000 compared to $261,000 in the same 3 months period of 2023. General and administrative expenses for the 3 months ended September 30, 2024 were $1,200,000 similar to the same 3 month period of 2023. For the 3 months ended September 30, 2024, the company had a net loss of $7,800,000 as compared to $5,600,000 in the Q3 of 2023. With that, we will now open the call to your questions.

Operator?

Conference Operator: Thank Your first question comes from the line of Roy Buchanan from JMP. Please go ahead. Your line is open.

Roy Buchanan, Analyst, JMP: Thanks for taking the questions. Just a couple of quick ones that, Sealed 2, can you just give us a sense of the blinded infection rate is in line with your expectations and just maybe a sense of what that is? Then can you just remind us what the bar is that you need to achieve to stop for efficacy on the interim? Thanks.

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Good morning, Roy. Thank you. I can give you 2 first of all, it is in line with our expectation, but we are blinded. So we don't really know how the infection rate is divided between the 2 arm, but we don't see anything that alarms us in the sense that it's not in line with our expectation. But maybe I could give you a sense from a report that was published by the CDC just last week, which is covering the hospitals acquiring infection report for 2023, looking on infection rate change from 2022.

And this is interesting because on 2022, we still had part of it with COVID and obviously all the measures that were adopted in the COVID years were still in place. And when you look at this report, they indicated that there was 3% increase in SSI overall. And then they go to some other specific surgery, for example, in a histomectomy, there was an 8% increase. And this report is the first that we've seen in the U. S.

That gives indication on infection rates post COVID-nineteen. So this is very interesting to see. It is what we have expected that infection rates will go slightly up. But obviously, we can't really say anything about the Phase 3 because we are blinded. But I think this gives this was published a week ago and for us, this is encouraging not encouraging in the eyes of the public health, but encouraging in the eyes of this CHI-two study.

Roy Buchanan, Analyst, JMP: Okay. That's helpful. Thanks. And then maybe just on the heels of that, just what's the breakdown in patients U. S.

Versus ex U. S?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: So most of the patients are ex U. S. You were also asking, I think, what is the criteria that is needed for interim analysis and that is a p value of 0.01 or lower. We didn't gave an indication of what kind of an effect will create a 0.01 or less. But if you look at SHIELD 2 sorry, at SHIELD 1 at the high risk patient population, the long incision, which is about the same size of the interim analysis that we are doing now, it was 423 patients.

There we had an alpha level of 0 or p value of 0.0032 and the overall effect was 54%. So more or less the same size of study and you can give obviously this is lower than 0.01, but I think it can give you a sense of what kind of effect will imply on early stop for efficacy at the interim.

Roy Buchanan, Analyst, JMP: Perfect. Thank you.

Conference Operator: Thank you. We will take our next question. Your next question comes from the line of Chase Knickerbocker from Craig Hallum. Please go ahead. Your line is open.

Chase Knickerbocker, Analyst, Craig Hallum: Good morning. Thanks for taking the questions. Maybe just to level set on kind of what investors should be expecting on the interim analysis here at resampling. Should we just be expecting that there's a press release with kind of the data safety monitoring board's recommendation as far as the path forward, whether that's resampling to 624 or stop or overwhelming efficacy or resampling higher? Is it just kind of that simple statement of fact that we should expect later this month or early December?

Thanks.

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Good morning, Chase. Thank you for joining us. It's exactly that, whatever we will be hearing from the DSMB committee, from the data monitoring committee, they as we are they are unblinded, but we are blinded. They will come with a formal recommendation indicated indicating whether we should stop for efficacy, we should continue to the planned study of up to 630 or we can we should upsize or God forbid, which we are very we do not think this is a possibility, but still any clinical trial have also the possibility of a futility. And we will give issue a press release reporting what we've heard from the DSMB committee this quarter.

Chase Knickerbocker, Analyst, Craig Hallum: Got it. And nice to see kind of the accelerating patient enrollment trends. Any reason not to expect that to continue where kind of regardless of outcome, you've got a fairly robust pace of patient enrollment kind of from here?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: No, nothing that comes to mind to us. We see recruitment since the end of the summer stabilize on about 80 patients per month. This is very encouraging for us. We put a lot of efforts, all the clinical team here and the regulatory team here to get to the point where all the centers are open. And now that all the centers are open and running, we see about 80 patients per month and we do not expect to see any change.

And since we've indicated that we expect to recruit the large patient in December, hopefully, we will not be also impacted with the vacation of the end of the year. So if everything goes well, this will not influence us at this stage.

Chase Knickerbocker, Analyst, Craig Hallum: Great. Maybe just last for me. Any incremental conversations kind of with KOLs in the space towards kind of the commercial opportunity for you guys and just kind of again kind of elaborating on the unmet need in colorectal surgery and kind of outside of it as well and kind of broader abdominal, any interactions there would be helpful to hear some color on. Thanks for taking the questions.

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: So there are on an ongoing basis conversation, some of them are being done as part of the clinical trial. Recently, our directors and medical directors was visiting in the U. S. Centers and hearing about their experience in the area of open colorectal and what's the unmet need that they see. We do hear also from others about the unmet need, broader than from abdominal colorectal in general.

We see areas where surgeon and infection specialists are reporting that a product like ours will allow them to perform a better surgery. We also, not too long ago, had some interesting conversation on the health economics aspects of a product like that and the penalties that hospital are getting. I can tell you that something that I really recently heard that from a candidate that we were interviewing and he was doing his due diligence with surgeons, he's an MD. And he said, usually when I do my due diligence, I hear views that are against and views that are supportive. Here, I didn't hear anyone that says this is not needed.

This is not something that could make a significant change to the way we operate. And this is the level of conversation. We actually see that also in the orthopedic area. There are some recent development that are getting a very nice response in the market in terms of adoption. So this is quite encouraging for us.

Chase Knickerbocker, Analyst, Craig Hallum: Great. Thanks all.

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Thank you.

Conference Operator: We will take our next question. The next question comes from the line of Ram Selvaraju from H. C. Wainwright. Please go ahead.

Your line is open.

Eduardo, Analyst, H.C. Wainwright: Hi, there. This is Eduardo on for Ram. Had a question regarding the commercial infrastructure that you plan to put in place for ZPlex 100 assuming approval. Do you have any idea of size or even commercial partners?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Sure. Yes. Thank you. Good morning. So as we said in the past, we are looking to have a strategic partner that will commercialize the product in the U.

S. With us. And we are in discussions around that. And I expect that once we have top line results in the Q1, those discussions will accelerate substantially. There are not that many assets like the PLEX-one hundred that have the potential commercial potential and the medical potential that we bring.

So our strategy is to commercialize DPLEX with a partner. We are also in discussions in other area and other geography. And it could well be that some of these will mature before the end of the year.

Eduardo, Analyst, H.C. Wainwright: Great. That's really helpful. And speaking of areas outside of the U. S, what other principal regional markets do you think are of greatest value?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: So it's interesting that you asked this. I think a product like Diplex 100 has a market, a global market. Surgeries are an infection due to surgery is a global problem. Obviously, the largest market aside from the U. S.

And Europe are South America, China, India, Japan. Those are the largest market opportunity, but there is also market like countries like Vietnam, Canada, Africa, South Africa, those are area where infection is a problem, infection post trauma is a problem. And I think an holistic solution, a drug that can be administrated immediately even at the accident site, at the battlefield could make a huge difference for patient.

Eduardo, Analyst, H.C. Wainwright: That's great. And regarding regulatory submission to the FDA, do you have a timeline for that? How quickly do you think you could complete your submission after this execution trial complete?

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: We do have a detailed plan for the day that we get top line results. Going forward, we did not disclose yet the time from that. But in generally, what we did say is that we expect that we will be with the breakthrough therapy designation that we have and have been submitting the NDA, let's say, depending again when we get the top line, if we are at the stop for efficacy or if we are at the 630 or if we need to increase slightly, but with the assumption that we have the top line result within the Q1, our assumption is that we should be getting the NDA with the breakthrough therapy designation during 2026. But we will give more details as we get closer to that data.

Eduardo, Analyst, H.C. Wainwright: Great. Thanks so much.

Conference Operator: Thank you. There seems to be no further questions at this time. I will hand back for closing remarks.

Dikla Chotchis Axelrad, Chief Executive Officer, PolyPete: Thank you for joining PolyPeds' 3rd quarter 2024 earnings conference call. We remain highly confident in our long term prospects, especially the potential of our promising late stage product candidate, CPLEX-one hundred and look forward to put multiple upcoming potential catalysts. As always, we are grateful to our team members, shareholders and all external partners for their commitment to our mission and support in continuing to advance toward our goal of bringing DPLEX-one hundred to healthcare providers and patients as quickly as possible. We look forward to speaking with you again on our next conference call.

Conference Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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