Greetings and welcome to the PolyPid Second Quarter 2020 Conference Call. At the time, all participants are in a listen-only mode. As a reminder, this call is being recorded today. I'd now like to introduce your host for today's conference Mr. Bob Yedid from LifeSci Advisors. Mr. Yedid, you may begin..

Thank you all for participating in PolyPid second quarter 2020 earnings conference call. Joining me on the call today will be Amir Weisberg, Chief Executive Officer; Dikla Czaczkes, Executive Vice President and Chief Financial Officer; and Taunia Markvicka, Chief Operating Officer.

Earlier today, PolyPid released financial results for the three and six months ended June 30, 2020. A copy of the press release is available in the Investors section on the Company's website, www.polypid.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.

Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projections.

These statements involve materials, risks, and uncertainties that could cause actual results or events to materially differ. Accordingly, you should not take 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 form F1 and FK, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

PolyPid disclaims any intention or obligation, substance required by law to update or revise any financial projections or forward-looking statements because of new information, future events, or otherwise. This conference call contains time sensitive information and speaks only as a live broadcast today, August 19, 2020.

With those prepared remarks, it’s my pleasure to turn the call over to Amir Weisberg, CEO, Amir?.

Thank you, Bob. On behalf of our team at PolyPid, I would like to welcome everyone to our first earnings call. Now that we are a public company, we look forward to conducting these calls with investor and analyst each quarter.

I will begin today with some brief introductory, comments and then Dikla will provide a detailed update of our business and will review our financial results. We are excited to successfully complete our IPO on NASDAQ at the end of June. We raised $62.8 million in the net proceeds from the IPO and added several well respected new investors.

This is a very exciting milestone for our company that further strengthens our balance sheet as we enroll forward becoming a commercial company. Moving on for those of you new to our story, I would like to take a moment to provide some brief background on our company and technology and review our growth strategy.

I joined PolyPid in October 2010, as one of the initial investors to manage the Company together with my partner Dr. Noam Emanuel, who founded PolyPid in 2008, and he is inventor of our model technology platform that we call PLEX.

Our technology focused on optimizing the local delivery of medicine to significantly improve clinical outcomes including in the surgical settings.

Our lead product is focused on optimal local delivery of the broad-spectrum antibiotic in the prevention of surgical site infection, SSI, are -- and will continue to be a global health issue and impose a heavy burden on healthcare system even with use of systemic antibiotic, which are the current standard of care for the prevention of SSI.

Indeed, systemic antibiotics while begin [hair fall] are still limited. The reason is that once a patient has a surgical incision, it interrupts the local blood supply and prevents the best penetration and activity of antibiotics into the surgical wound.

Therefore, solution can be augment in limited system antibiotical activity in the wound by using the local approach.

This is where our D-PLEX100 has a potential to be the optimal solution by delivering constant linear release of the broad-spectrum antibiotic directly into the surgical wound over four weeks to protect the surgical site and prevent infections with minimal exposure to non-relevant systemic target.

D-PLEX100 has generated very promising Phase 2 data indicating significantly higher efficacy than systemic antibiotics. We are now in Phase 3 with D-PLEX100 for the prevention of SSI. Dikla will review our technology platform and clinical programs in more detail shortly.

On the strategic prospective, we are focused both on the continued clinical development of D-PLEX100 and also our preparations for becoming a fully-integrated pharmaceutical company. We have put in place many building blocks over the past 10 years to position us well to take advantage of the improvement opportunities ahead of us.

We have deep patent portfolio to protect our innovative technology and the GMP approved state-of-the-art manufacturing facility that we bid. More ever, we have received key regulatory validation around the potential of our technology in the form of QIDP and Fast Track Designation from the FDA.

Our confidence is further driven by the high quality team we have appointed as well as a talented Board of Directors. Following the IPO, we are now well capitalized to successfully advance our business to the next phase of growth. I will now turn the call over to the Dikla to provide you with some further details on our business.

Dikla, please take it from here..

Thank you, Amir, and welcome again to our new investor as well as other who invested in PolyPid in our private financings for joining us on the call. As this is our first earnings calls, I would like to take a few minutes to describe the uniqueness of our PLEX technology.

First, our product from a matriX based on combination of polymers and lipids plus our main PolyPid. This combination fully protects the drug to release in a constant linear manner over a prolonged time, which for us means weeks to months, not that hours to few days you may see with other technologies.

Their release rate dictates the exposure to the drug and the duration, both of which are predetermined to optimize the efficacy and safety. Once the body fluids betrayed the outer metrics layer, they disintegrate and broken down to release the medication.

This process continuously repeats each time and new outer layer comes in contact with the body fluids. Second, D-PLEX100 was optimized to release doxycycline, a broad-spectrum antibiotic active against both gram-negative and gram-positive bacteria with decades of known efficacy and safety.

D-PLEX platform allows for a constant linear release of the drug and does maintain a high local concentration of doxycycline within the surgical incision for up to four weeks, which is sufficient to eradicate bacteria, including resistant one over the sensitive wound healing period.

Finally, it is important to understand that with D-PLEX100 we are able to achieve these high local concentrations with relatively small doses of doxycycline overall, which is not achievable with systemic delivery without risking causing organ damage or toxicity to the patient.

The placement of D-PLEX100 directly into the surgical site not only avoids the dilution of the antibiotic in the systemic circulation when administrated systemically, but also overcomes limited penetration of the antibiotic into the incision due to interruption of blood flow.

The study released at the incision site over several weeks result in the secrecy and safety, which our trial have shown to date and that we anticipate will be demonstrated in our Phase 3 trials. With that, let's turn to the status of our pipeline.

We intend to conduct three Phase 3 trials with D-PLEX100 including two in soft tissue and one in bond tissue surgeries. We believe this Phase 3 suite of trials support our strategy for a broad label for the prevention of SSI.

We recently enrolled our first patient in the SHIELD I trial, which is the first of our two Phase 3 clinical trials for the prevention of SSI in abdominal surgeries or soft tissue. Our plan is to enroll 600 to 900 patients among 60 centers in the U.S., EU and Israel.

Following the enrollment of the first 500 patients, the study design provides for blinded sample size re-estimation. We anticipate the top line results from SHIELD I will be available in the second half of 2021.

In late 2020, we expect to initiate a second Phase 3 trial in abdominal surgery SHIELD II, which will include more minimally invasive corrective procedures. This second trial will enroll approximately 900 to 1,400 patients across the same numbers centers.

Our Phase 3 trials are based on the positive results we observed in our Phase 2 trial, which studies 201 patients in a two arm trial with a 30-day endpoint of the reduction of infection rates and mortality, and safety endpoint at 60 days. I would like to point out that about 75% of those patients in the trial had colorectal resection for cancer.

Colorectal surgery is one of the surgeries with the highest rate of SSI because the contamination risk is, both from the exposure to bacteria from external factors as well as from bacteria in the GI track.

The results were compelling as the use of D-PLEX100 showed a 59% reduction of the primary endpoint of SSIs and mortality at 30 days versus the standard of care of systemic antibiotics alone, which was statistically significant with a P value of less than 0.01.

There were five deaths that occurred in the standard of care treated patient and zero in the D-PLEX100 treated patients throughout the 60 days. Overall, D-PLEX100 was well tolerated and no drug-related serious adverse events were observed. And importantly, no negative impact on wound healing was seen. Dr.

Anthony Senagore, a colorectal surgeon and a medical advisor to PolyPid, presented key results from this Phase 2 trial at the American Society of Colon and Rectal Surgeons conference held virtually on May 16 and 17, 2020.

The other significant indication for D-PLEX100 is the prevention of SSIs in bone tissue, such as the sternum in open heart surgery. In our randomized Phase 1b/2 trial of 81 patients going through open heart surgery, there were no infections in the 58 patients treated with the D-PLEX100 compared to 4.3% infection rate in the standards of care arm.

We initiated our Phase 3 bone model trial in open heart surgery last February and intend to submit the data as a supplement to the abdominal soft tissue surgery NDA submission. This trial will enroll 1,300 to 1,600 patients in 45 centers across the U.S., EU and Israel. Moreover, a significant commercial opportunity exists for the prevention of SSI.

Based upon industry sources, out of the 30.2 million hospital in-patient surgical procedures conducted in the U.S. in 2016. There are around 14 million procedures or about 45% of all in-patient procedures defined as our target market.

These are major surgical procedure with a high risk of SSI such as dose in soft tissue for open abdominal procedures to dose in orthopedic or cardiac procedure with unacceptable rates of morbidity and mortality.

Based on our clinical studies to-date, we believe the data demonstrates an improvement in efficacy and safety over the standard of care and will strongly support a value proposition within the existing TRG payment for the selected surgical procedures.

This includes improved outcomes such as a reduction in surgical infection, leading to shorter length of stay, fewer re-intervention or readmission, lower morbidity or and mortality, resulting in overall improvement in hospital quality measures.

In addition, the QIDP designation gives us additional opportunities to qualify for an add-on payment in the in-patient setting. This substantial market opportunity combined with the unmet medical need, I discussed earlier, is representative of why we are so excited about PolyPid's future prospects.

As Amir mentioned, we have an extensive intellectual property portfolio, with 90 issued patents globally, two allowed patent applications and 33 pending patent applications protecting our technology and products.

Under the FDA QIDP program, which is designed to speed the development of novel drugs against important pathogens, PolyPid will be able to take advantage of certain incentives.

Including FDA priority review and along with our regulatory approval pathway provides for a total of eight years of market exclusivity, which is another layer of protection that complements our patent following market approval.

In addition, Fast Track Designation allows for early and frequent communication with the FDA throughout the entire drug development and review process, and provide for a rolling review for D-PLEX100 NDA.

Moving onto the balance sheet, as of June 30 2020, the Company had cash, cash equivalents and short-term deposits of $81.7 million compared to $27 million December 31, 2019. As Amir mentioned, we were thrilled to complete our IPO in June, through which we raised approximately 62.8 million in net profits.

Cash use from operations for the first six months of 2020 was $7.5 million. We believe our strong cash position will allow us to complete our first Phase 3 trial SHIELD I in abdominal soft tissue infection and to initiate and conduct a second abdominal surgery study SHIELD II to prepare for the submission of an NDA for the FDA.

Now let's turn to our income statement. For the three months ended June 30, 2020, the Company had a net loss of $17 million compared to a net profit of $0.3 million in the three months period ended June 30, 2019.

R&D expenses for the three months ended June 30, 2020, were $4.3 million compared to $3.5 million in the same three months, period of 2019, as spending increased due to the proliferation of the Phase 3 clinical trial of D-PLEX100 for the prevention of SSI in abdominal surgery.

General and administrative expenses for the second quarter of 2020 were $2.9 million compared to $1.2 million in the second quarter of 2019, as cost increased due to the Company's IPO and an increase in non-cash based compensation.

GAAP net loss attributable to ordinary shares for the three months ended June 30, 2020, was $19.1 million compared to GAAP net profit of $0.3 million for the same three month period of 2019. On a non-GAAP basis, our net loss distributable to ordinary share for the three months ended June 30, 2020, was $4.8 million.

The non-GAAP net loss includes a reevaluation of our convertible preferred share warrants liability following the increase in fair value due to the IPO price. We will now open the call to your question. Taunia Markvicka, Chief Operating Officer, in the U.S. will join Amir and I to answer your question.

Operator?.

Thank you very much. [Operator Instructions] Our first question we have on the line comes from the line of Gary Nachman from BMO Capital Markets. Please go ahead..

Hi guys. Congrats on your first earnings call.

So, how is enrollment going so far for the first Phase 3 abdominal study? How much are you being impacted by COVID? And then, how many sites do you have activated and where are those sites? And how long before you can get all 60 sites up and running?.

Hi, Gary, thank you. I appreciate your participation. So, as you all know, we open the trial about a month and a half ago, and up until now, which is running as planned. The plan is overall to open 60 centers in different countries globally, U.S, Europe and Israel, which relating to the second half of your question about COVID.

This should also be helpful in terms of COVID, if in some country, there is a second way. At some point, we have enough centers and diversity in terms of countries, as well as number of centers to overcome this, and things that are going as planned. We're first opening the centers in Israel, in Europe, and later on, we'll be joined by the U.S.

The first few weeks are more divided or more used to open the centers, but also patients are gathering, and up until now since we spent a lot of time before to prepare for this trial. So, we are quite confident, let say, we are on track based on our plan.

We have a very detailed stand, looking at the number of patients that need to be recruited and we are on track there..

And then, are you on track to restart the cardiac Phase 3 study by the end of the year? And to talk about the rolling NDA to D-PLEX100, first, you're going to start with abdominal then you'll have the cardiac after supplemental? And how much Fast Track speed set up potentially?.

So, the Fast Track that we announced this quarter that we received on abdominal, first allow us to submit the NDA on a rolling basis, which is a very good, potential shortening of time. And the idea is that you tend to submit the NDA based on the two abdominals, and the tenor will be then submitted post approval or as a supplement to the NDA.

On the base IPO that we were planning, as we indicated, in our prospectus, we weren't thinking about pursuing the journal because we said, we need additional cash in order to proceed. And since we did raise more than we expected, more than to 50, we initially submitted for we are evaluating now the right timing to reinitiate the sternal.

It's not really to open it because the trial is ongoing, but more to reinitiate the recruitment and the opening of additional centers. We will give an update towards the end of the year where we stand on that..

And then the last question, should we expect an update on the oncology program before the end of the year, you had mentioned that during the IPO? And what's a reasonable timeframe for when you might start clinical studies and what those might look like?.

So, yes, we do. We do expect to be able before the end of the years to give more color and detail on the oncology program. As we said in the past, we're very encouraging preclinical data and we expect to be able before the end of the year to give additional information on this program, including timeline focus event..

Okay. And it's possible that that could happen sometime in 2021? I know it's early, and I don't want to hold you to it, but just to let people know..

Yes, if we were in a position to give the timeline, we will publish it now. It more depends on the type of models that we decide to go with in terms of the type of toxicity that the FDA will require from us. On that basis, what kind of IND we will need or IND package we will need in order to further to start first event.

So if it's possible that it will be within 2021, yes, the answer is that it's possible. Since we're in the process of preparing all of this material and understanding the requirements, it’s hard to say today what is exactly the timeline, but it's definitely possible..

[Operator Instructions] The next question we have today come from Balaji Prasad for Barclays. Please go ahead..

Amir and Dikla congratulations on your first earnings call. Glad to be a part of it. Maybe just a couple of questions from me.

Firstly, I know that you present recently at ASCRS, I want to see what kind of reactions you have from there, any feedbacks which influences your next step of clinical or commercial actions from those meetings in the presentation? And secondly, could you also speak a bit about how the second phase of your Phase 3 trials would look like in late 2020? Thanks..

Thank you for joining our call today. Taunia, would you like to take the first part of the conference and I will relate to the study..

Sure. Thanks Balaji. So the feedback, obviously, you know that presentation at the American Society of Colorectal Surgeons Annual Meeting was a virtual meeting and virtual presentation.

I think that the feedback that our speaker had received was, generally exciting, folks have been encouraged and looking for an opportunity to directly address the surgical site, and surgical site infections remains an area of keen interest among the colorectal surgeon.

So, I would say, the feedback we've got from behind the scenes was a positive reaction in the virtual format that we presented..

And regarding your second question about the Phase 3 abdominal, so as we indicated, this Phase 3 is between 600 to 900 patients, and we are running it with a primary endpoint of reduction of infection and mortality, which is similar to what we had in our Phase 2, the 201 patients, again, randomized, double-blinded multi centers.

We are looking to show statistically significant reduction in the primary endpoint where we are following those patients for 30 days for the primary endpoint and additional 60 days for safety purposes.

We all also of course looking at other parameters that later on to see supportive of our commercial strategy in terms of potential health economics, and in more or less, and we allow for mainly in this trial mainly open abdominal surgery, relatively a small portion of minimally invasive.

The second Phase 3 have a more substantial portion of minimally invasive operation, and because of that, it's a larger trial in terms of the size..

[Operator Instructions] The next question we have comes from the line of to Elliot Wilbur from Raymond James. Please go ahead..

Congratulations on getting across the IPO finish line. First question, I wanted to ask is with respect to secondary endpoints in the Phase 3.

Obviously, we've all been very, very focused on the primary endpoint that seems rather well defined, but just let to get your thoughts impressions on some of the secondary endpoints things that maybe we haven't thought about as much in terms of wound healing, scarring, and issues as such that you think may be important in terms of differentiating asset that have gotten a little bit less attention perhaps than the infection rate itself?.

So, thank you, Elliot, it's a good point. We didn't establish the secondary endpoint, but you are touching exactly what we are looking at in terms of both wound healing things that are relating to safety but are more relating to scarring and wound healing. This is something that we are evaluating.

We are looking at the use of -- the level of use of use of antibiotic IV, which in our Phase 2 trial we've seen in all of our Phase 2 trials. We've seen quite substantial reduction in the use of antibiotic IV. This is another parameter that is important to show.

And in some cases, at least in our Phase 2 trial, we saw the benefits that patients that didn't have infections per se or clinically defined as, having an infection, still benefited from either less readmission, shorter length of stay, less use your antibiotic IV, all of these parameters are looked at and these are parameters that we're gathering..

Okay. And then just one additional question here, as I think about SHIELD I being rolled out, how standard is the actual standard of care in the Phase 3 trials? I know that the protocol says, something along the lines that was institution specific, I assume that there's a fairly narrow range of treatments that are sort of defined as standard of care.

But just curious, if you could weigh in with any commentary in terms of sort of the ranges of other antibiotic regimens that are allowed to be used in the standard of care or whether or not, it allows for oral versus intravenous? Just wondering, how much variability there may be in the SSI parameters in the clinical trial protocol?.

Sure, so the standard, there are things that are very uniform, and things that are more viable between different centers and countries. So, everyone is using what we call systemic antibiotic, whether it's IV or PO and we allow for that. We allow for that both on the standards of care and in the treated arm.

This is a standard of care which is very much uniform between different countries, geographies as well as different centers. And this is something that is part of the protocol. You do see some things that are not so much uniformed, usually line of bowel prep. There are places where it's very customary and places that it's less customary.

And here, we give some more variability. We do allow for bowel prep. What we are avoiding is, bowel prep with antibiotics, because then we think this could be diversity to the patient population. So patients can get, all patients get systemic antibiotic whether IV or intravenous or PO, depending on the type of surgeon using this specific center.

And we do allow for bowel prep, but without a pre-use of antibiotic IV for prolonged period of time prior to the surgery. So, there is just one shot prior to this surgery, usually about half an hour to an hour prior to the incision..

Okay. Thanks. And actually I have one more question.

I don't think this was asked earlier, but obviously a little bit early to comment in terms of what the Fast Track Designation may ultimately do for the timeline and the path to ultimate NDA submission, but just wanted to get sort of your thoughts in terms of what the additional optionality may be in terms of more frequent interactions with the agency or interactions at specific points in time along the development pathway that maybe you didn't previously consider, during the course of the road show? And I guess, I won't really what I'm getting at is that, does this maybe make it possible to sit down and discuss the NDA with the agency around the time point of that initial sample size validation, opening up potentially earlier filing than previously expected?.

Thank you, Elliot. So, there are a couple of points here that I think are worth mentioning. Generally, and not specifically for PolyPid, the Fast Track allow for more frequent interaction with the FDA as well as the NDA rolling on the basis of the rolling submission.

And this is something that we will take advantage of and we've already, I think, have taken advantage in terms of more frequent communication and the ability to ask questions as we go along. We do have the possibility to go to the FDA after the first Phase 3 after SHIELD I, if the data is robust enough and ask for an NDA based on one trial.

This is a possibility and it goes from the tests we are and also the QIDP. And we don't have any guarantee that even if the data is robust, that they will allow us to submit an NDA, but this exactly the type of communications we will be able to have with the agency due to the QIPP and the Fast Track once we have additional data.

So, that it is possible..

Thank you very much. [Operator Instructions] There are no further questions in the queue at this stage. Please continue..

Thank you for joining our first quarterly conference call as a public company. I would like to reiterate how excited we are about the Company's Fast Track and declaration completion of our IPO.

We are grateful to our team members and all of our external partners for their commitment to our mission and their cooperation, particularly during this uncertain time of the COVID-19 pandemic. Thank you..

Thank you very much. That does conclude the conference for today. Thanks for attending. You may all disconnect. Speakers please standby..