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Edited Transcript of PFNX earnings conference call or presentation 7-May-20 8:30pm GMT

Q1 2020 Pfenex Inc Earnings Call

San Diego May 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Pfenex Inc earnings conference call or presentation Thursday, May 7, 2020 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Evert B. Schimmelpennink

Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director

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Conference Call Participants

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* Douglas Royal Buchanan

JMP Securities LLC, Research Division - Associate

* Gregory B. Gilbert

SunTrust Robinson Humphrey, Inc., Research Division - Analyst

* Jennifer M. Kim

Cantor Fitzgerald & Co., Research Division - Analyst

* Tsan-Yu Hsieh

William Blair & Company L.L.C., Research Division - Senior Research Analyst

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Presentation

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Operator [1]

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Greeting, ladies and gentlemen, welcome to the Pfenex First Quarter 2020 Results and Business Update Call. (Operator Instructions) As a reminder this conference is being recorded.

We'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements with respect to our and our collaboration partners' development and commercialization plans for PF708, PF743 and PF745, CRM197 and our other product candidates; the expected regulatory pathways for our product candidates; and expectations to submit additional human factors data to FDA and expectations with respect to a comparative use human factor study that addresses the FDA's views; the expected timing and phases of our and our collaboration partners' future clinical trials; the expected timing of our regulatory submissions and any potential future regulatory approval and commercial launch; potential partnering opportunities for our product candidates; the potential to receive future payments under our agreements with Jazz, Alvogen, Merck, SIIPL, Arcellx and our other collaboration partners; potential milestones for our product candidates; potential growth opportunities and strategies, including market sizes, pursuance of biological targets and potential to solve supply challenges; our opportunity to drive shareholder value; expectations with respect to regulatory developments and the therapeutic equivalence; expectations with respect to the impact of the COVID-19 pandemic; and our future expectations with respect to sufficiency of our cash and cash equivalents. Actual results could differ materially from these contemplated by our forward-looking statements, and reported results could be (sic) [should not be] considered as an indication of future performance.

Please look at our filings with the SEC for a discussion of the factors that could cause our results to differ materially. Additional information will also be set forth on our quarterly report on Form 10-Q for the quarter ended March 31, 2020, to be filed with the SEC. The forward-looking statements on this call are based on information available to us, and we disclaim any obligation to update these forward-looking statements, except as required by law.

Earlier today, Pfenex released financial results for the first quarter ended March 31, 2020. Pfenex's earnings release and corporate presentation are currently available in the Investor Relations section of our website.

It is now my pleasure to introduce your host, Pfenex President and Chief Executive Officer, Mr. Eef Schimmelpennink. You may begin, sir.

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [2]

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Thank you, Kelly, and good afternoon, everybody. Welcome to Pfenex's First Quarter 2020 Financial Results and Business Update Conference Call.

Before moving into a review of our first quarter results, I want to take a minute to address the ongoing COVID-19 dynamic, which has impacted nearly everyone in the U.S. and across much of the globe in one way or another. The Pfenex leadership team and I have proactively taken appropriate steps, including social distancing, to protect the health and well-being of our team and help flatten the curve.

Since the stay-at-home order was put in place, we have maintained critical program work in the lab and staggered our shifts to minimize exposure. We additionally identified program initiatives that were able to be completed by our employees as they work from home. We have not seen any significant impact to program progression on our major programs as a result of these changes to date and feel that our modified approach has maintained focus and execution on these programs. The team has been quick to adapt to this new normal, and we will continue to monitor for any such impacts on our business and on our programs.

I want to thank the Pfenex team for their continued great work and all of our investors for their continued support. I especially also want to thank the health care workers, first responders and those staffing essential businesses on the frontline around the globe for their tireless and selfless efforts in dealing with this crisis.

With that, I will now focus on the status of our 3 core programs as well as our portfolio of early-stage development programs. I will then provide a summary of our first quarter 2020 financial results before opening the call up for questions.

I would like to start by highlighting that we've ended this year with our 3 core programs: PF708, our collaboration with Jazz Pharmaceuticals to develop PF743 and PF745; and our CRM197-based collaborations, all at a stage in which we believe they will not require material investments prior to achieving an inflection point, including moving towards the potential for milestone payments and royalty revenue. This has enabled us to proactively expand our strategy with 2 additional pillars to drive long-term value growth.

The first pillar is focused on identifying opportunities to selectively expand our pipeline with a combination of wholly owned products and new royalty-bearing collaborations, the benefit from our proprietary Pfenex Expression Technology platform. These activities include, amongst others, advancing our wholly owned peptide products, PF810, and the Arcellx cell therapy collaboration with PF753 and PF754. And we continue to evaluate opportunities for additional partnerships as we look to drive long-term shareholder value.

The second pillar is focused on a tailored strategy to develop novel biopharmaceutical products that leverage our extensive experience in the space. After selecting both biological targets of interest and modality last year, we have made significant progress and currently have the first novel program in the lead selection phase.

With that setting the stage for where we are with our pipeline, let me move into updates on specific programs. To start, there were several updates during the quarter for PF708, our first FDA-approved product and a proposed therapeutic equivalent candidate to Forteo. As a reminder, therapeutic equivalence or A rating is primarily based on the FDA evaluating 3 distinct requirements that center around showing pharmaceutical equivalence, bioequivalence and human factor equivalence. If achieved, the rating would permit PF708 to be automatically substituted for Forteo in many states in the U.S.

On April 14, we announced that the FDA informed Alvogen, our commercialization partner for PF708, via a general advice letter that additional comparative use human factor data, specifically from Forteo experienced users, would be required before PF708 therapeutic equivalence could be determined. While disappointing, we are pleased that the FDA's therapeutic equivalence evaluation is continuing and that the FDA's feedback provides guidance for what is needed to achieve an A therapeutic equivalence designation.

With the aim to confirm our understanding of the items outlined in the general advice letter, Alvogen has begun discussing next steps with the FDA. And together, we plan on submitting additional supportive information as well as clarifying questions in the near future. We believe these collaborative interactions with the FDA will guide the appropriate next steps and provide a path to a submission of additional data in support of the PF708 comparative use human factors assessment. In parallel, we have begun key activities required to generate the additional data suggested to help ensure that, once we have completed our discussions with the FDA, we are ready to execute our plan.

With the experience gained from our 5 previous human factor studies, combined with the FDA's direction, we believe we can provide a comprehensive data package that allows for the final PF708 therapeutic equivalence determination. We look forward to working with the FDA and our collaboration partner, Alvogen, to complete these additional efforts.

This brings me to the commercialization planning portion of the program. As a reminder, since PF708 received FDA approval in October 2019, Alvogen has assumed responsibility for all of the commercial manufacturing, supply chain management and commercialization activities and costs. Alvogen is well advanced with its commercial strategy planning in the U.S., which includes evaluating a potential launch ahead of a therapeutic equivalence designation. This preparation has included negotiations with the payers in the U.S., including Medicare Part D plans and private payers. In support of these negotiations, during the first quarter, Alvogen announced the wholesale acquisition cost of PF708. We expect to continue to support Alvogen with its commercial strategy planning in the U.S.

We also continue to be impressed with Alvogen's efforts on PF708 in the EU, certain countries in the Middle East and North Africa and the rest of world territories. As we've discussed previously, Alvogen has already established several regional commercialization agreements with our partners across several countries and regions and have swiftly engaged the regulatory agencies in these regions and countries, including the EMA in Europe and the Saudi FDA.

With all of our ongoing activities and future potential opportunities for PF708, we are very excited about the potential for expanding access to patients with this much needed therapy and the positive impact this could have on our business going forward.

Turning to our collaboration with Jazz Pharmaceuticals, through which we are developing 2 products, PF743 or JZP-458 as it's named in the Jazz portfolio, a recombinant Erwinia asparaginase, with a potential launch as early as 2021; and PF745 or JZP-341, a follow-on long-acting recombinant Erwinia asparaginase.

Starting with PF743, which has received fast track designation from the FDA as a potential treatment for pediatric and adult patients with ALL or LBL who are hypersensitive to E. coli-derived asparaginases. Jazz is currently conducting a pivotal Phase II/III clinical study in collaboration with the Children's Oncology Group, and enrollment is ongoing. On its recent quarterly conference call, Jazz confirmed that it is continuing to work towards that goal of BLA submission as early as fourth quarter of this year. They indicated they are highly focused on mitigating potential delays and are continuing to activate sites remotely, enroll patients and utilize remote monitoring where feasible. The Erwinaze market has struggled with product supply challenges in the past. PF743 has the potential to solve for that and, importantly, to reach more patients in need of this critical therapy.

In addition, we're developing the PF745 products and process, which has been technology transferred to Jazz' GMP manufacturer in the first quarter of 2020, and we look forward to Jazz progressing the product development -- the product through development.

As a reminder, under our agreement with Jazz that covers both PF743 and PF745, we are eligible to receive an aggregate total of up to $224.5 million in development and sales milestone fees. Of this, we are still eligible to receive $162.5 million. This includes $34 million in regulatory milestones and $125 million in sales milestones. We may also be eligible to receive mid-single-digit royalties based on worldwide sales of any products resulting from the collaboration.

We are very pleased with the progress achieved to date for these 2 programs and look forward to following Jazz' continued progress. Looking ahead, we do not expect to incur any additional material expenses associated with the development of either PF743 of PF745. Most importantly, we are proud to be part of these programs that have the potential to bring significant benefit to these critically ill patients.

Moving to our carrier protein, CRM197, which is the third potential revenue driver in our advanced pipeline. We have development and commercial partnerships with both Merck and Serum Institute of India, or SII, amongst other partners. Regarding Merck, they are using our CRM197 in 3 vaccines in development, including V114. We are eligible to receive tiered royalty payments based on net sales for all products they develop that use CRM197 produced via the Pfenex Expression Technology based on production strain licensed to them.

Merck's V114 is an investigational 15-valent conjugate vaccine for the prevention of pneumococcal disease and is currently being evaluated in 15 Phase III studies. In Merck's most recent earnings call, they indicated that the Phase III top line data will be available very soon and the BLA filing would occur not long thereafter. V114 is expected to be positioned as a key product in the pneumococcal vaccine market, and we look forward to seeing it progress in its development.

In the first quarter, Serum Institute of India has begun preparations for launch of Pneumosil, a vaccine using Pfenex-produced CRM197. Serum has developed this 10-valent pneumococcal conjugate vaccine, which utilizes CRM197 produced by a production strain licensed from Pfenex and achieved World Health Organization prequalification for Pneumosil.

The second product being developed by SII, which also utilizes CRM197 and is subject to the Pfenex Expression Technology license, is a thermostable pentavalent meningococcal conjugate vaccine that is being evaluated in an ongoing Phase III study. This product is also targeting markets in the developing world. Pfenex is eligible to receive a tiered royalty payment based upon net sales for both products.

Turning to our development evaluation and license agreement with Arcellx, we are providing access to the Pfenex Expression Technology platform to advance Arcellx' proprietary sparX proteins that activate, silence and reprogram antigen-receptor complex T-cell-based therapies.

In the fourth quarter of 2019 and the first quarter of 2020, we completed the development and transfer of sparX 1 and sparX 2, respectively. On both programs, Arcellx has opted into the commercial license. Under this agreement, we're eligible to receive development funding, in addition to development, regulatory and commercial milestones ranging from $2.6 million to $18 million for each product incorporating a sparX protein expressed under a production strain based on the Pfenex Expression Technology as well as royalties on worldwide sales of any such products.

Let me now take a minute to provide an update on our broader strategy, which we'll look at as being made up of 3 pillars. The first pillar of the strategy is focused on executing against our core portfolio, which includes the 3 core pipeline opportunities we just went over, including PF708, a collaboration with Jazz, and our CRM-based collaborations. I believe the near-commercial and late-stage status of our current pipeline is testimony to the success and value that we have been able to create as well as the ability to use these successes to fuel further growth.

The second pillar of our strategy is based on identifying opportunities to selectively expand our pipeline with the combination of wholly owned products and new royalty-bearing collaborations in our products for which our platform is highly enabling. I've shared with you previously that we are in early development with a new wholly owned program, PF810, a recombinant peptide aimed at improving a significant current therapy challenge. We look forward to sharing more details with you as we are progressing the program through its preclinical phase. Our programs within our partnership with Arcellx are examples of opportunities where we believe our platform is uniquely enabling, and we are currently evaluating other potential partnering opportunities that match our strategy, that will license our technology and, in return, we'll receive potential milestone payments and royalty revenue.

Our third development pillar focuses on novel biopharmaceutical products. We have almost 2 decades of experience in expressing natural and engineered proteins. I believe that our historical success rates of over 80% in expressing the desired active protein, our demonstrated success in achieving regulatory approval for our lead product and our platform, team and infrastructure provides a competitive advantage in the development of novel peptides and protein-based therapeutics.

Following an extensive research effort, we have identified a set of high-value, validated biological targets that we intend to pursue. We believe the targets of interest are in disease areas of unmet medical needs with a moderately sized patient population, which would allow Pfenex to potentially develop the products through Phase III clinical studies.

In the fourth quarter of 2019, we engaged a third-party collaborator to deploy their internal libraries of novel modalities to screen against the Pfenex targets of interest in order to isolate binders that could potentially become Pfenex wholly owned novel products. We have chosen these modalities both because of their promise to become novel biopharmaceutical proteins as well as for their fit with the Pfenex platform, which will allow us to take the developments and CMC in-house. Together with our third-party collaborator, we generated a compound library and have performed an initial molecule screen with it. This has led to the creation of a subset of hits that showed activity on our first target of choice. These hit molecules now have been brought back into the Pfenex platform and are currently being expressed for lead selection and optimization, with the aim to ultimately bring us our first novel clinical candidate.

As we continue to progress our pipeline, it is important to mention that a significant element of our success over the last several years stems from being very diligent in how we deploy our capital. We intend to continue to run a company with the same financial discipline. I think it opens up a good segue to move to the financial update as of the first quarter of 2020.

Total revenue decreased by $7.2 million or 91% to $0.7 million in the 3-month period ended March 31, 2020, compared to $7.9 million in the same period in 2019. The decrease in revenue from -- for the quarter was primarily due to significant milestone upfront payments from Alvogen in the first quarter of last year attributable to FDA acceptance of our NDA for PF708 and the granting of licensing -- licenses for additional geographies for PF708.

In addition, revenue amortization related to our Jazz collaboration agreement was completed in the first half of 2019. Work continued to scale back on our Px563L product candidate under our government grants with BARDA, and sales of our CRM197 products tend to fluctuate over the quarters.

Cost of revenue decreased by approximately $1.3 million or 78% to $0.2 million in the 3-month period ended March 31, 2020, compared to $1.6 million in the same period in 2019. The decrease was primarily due to fluctuation of sales of the CRM197 product in the quarter and declining activity related to the BARDA contracts.

Research and development expenses decreased by approximately $2.1 million or 26% to $5.8 million in the 3-month period ended March 31, 2020, compared to $7.9 million in the same period in 2019. The decrease was primarily due to timing of expenses related to our lead product candidate PF708. Significant activity occurred leading up to and shortly after submission of the NDA to the FDA, which occurred in December 2018.

Selling, general and administrative expenses increased by approximately $0.2 million or 4% to $4.7 million in the 3-month period ended March 31, 2020, compared to $4.5 million in the same period in 2019. This increase is primarily due to legal and consulting fees.

Cash and cash equivalents as of March 31, 2020, were $65.6 million, which includes 2 separate transactions in the first quarter of 2020 in which we utilized our ATM to place approximately 1.8 million shares for gross proceeds of $20 million. We believe that our existing cash, cash equivalents and cash inflow from operations will be sufficient to meet the company's anticipated cash needs for at least the next 12 months.

This concludes our prepared remarks. I would now like to ask the operator to open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll hear first today from Greg Gilbert with SunTrust.

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Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [2]

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I wanted to start on 708, if I could. Can you talk about potential time lines to get the info that the FDA needs? I understand it requires a discussion or a meeting first to identify the appropriate path forward, but hoping you could frame for us a fast case versus a longer case there. And then related to that, what is Alvogen's thinking as far as you can tell at this point about launching without an A designation? Does their decision depend on how the FDA responds to you? Or what are the other factors involved there? And then I have a follow-up.

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [3]

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Very good. Thanks, Greg. As we are currently discussing with the FDA what the layout and the next steps need to be, it's a little bit premature to guide on exact timing. It is important to highlight that the agency did not make any statements regarding the findings of the completed study in which we compared PF708 to Forteo in their general advice letter. So what they indicated is that the amount of Forteo experienced users in our study was not adequate to conclude on therapeutic equivalence. And they indicated that they want additional comparative use human factor data from patients and caregivers that have previously used Forteo. But they've made no further statements regarding the subset of the population. And I think it's important to highlight that, when we review the data of the subgroup separately, we believe that the trend that we see suggests that they performed in a very similar manner to the overall population.

So as you -- or as I've stated, we have been in contact with the agency, and especially DMEPA, and have had initial communications with them to discuss the best way to move forward. Our initial step, which is happening in the very near future, is to confirm our understanding of the items outlined in the general advice letter and provide additional clarifying data in the immediate near future, as I said. And then based on that, we will discuss what next steps need to be taken and the plan for resubmitting any additional information or data. So that's to the timing.

Your second question on Alvogen's evaluation on a potential launch, that is indeed something that they are evaluating at the moment. Basically, 2 parts need to be in place, and good progress are being made on both. On the one hand, obviously, we need to get the payers interested and -- on formulary. And as I've mentioned in our previous earnings calls, those discussions have been ongoing for a couple of quarters, and we feel that the feedback from the plans and the pace is very encouraging. And then on the other hand, obviously, we make sure that we have the launch executed. Also, that's moving forward very well and that we are achieving actual pull-through. So those are the elements that Alvogen is looking at to evaluate whether it makes sense to launch prior to a TE rating.

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Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [4]

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Okay. And then on 810, when might we hear more about that? I realize it's preclinical, but are we likely to hear about a significant derisking or not during this calendar year? And is that the type of product you would want to keep for yourselves or partner?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [5]

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That's -- as we're moving the program through its preclinical phase, as you would expect, we're looking forward to see animal data that confirms that we're on the right pathway and that would allow us to move to pre-IND and, ultimately, IND. I think what you often see is that that's a point in time where companies, and it would definitely apply to us as well, start to share a little bit more around the program. On the one hand, as I've mentioned, it's derisked to a stage where we feel confident that we have a solid development. We also don't want to start sharing information too soon in light of the competitiveness of the market. So that's how that progress will -- or how that program is progressing. And at this stage, I'm not ready to provide any guidance on when those milestones might be hit.

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Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division - Analyst [6]

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Okay. And then lastly, it's good to hear from Jazz and from Merck that those programs -- or the lead programs with you are moving full speed ahead. Any color that you can provide about the follow-on products for both of those programs? Any movement there that you can disclose or that you're aware of?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [7]

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Yes. We -- like you, we are pleased to hear in the earnings calls of both Jazz and Merck that both developments are moving forward finally. As for follow-on programs, let's tackle Jazz' PF745 that we developed with Jazz first. I indicated in the prepared remarks that we've now, in the first quarter, completed the tech transfer of that half-life extending program to Jazz, so that's in their hands now to move into the clinic. So they are continuing with the development of that program, and we're looking forward to continue to see that progress.

As for Merck, the focus, obviously, is on 114 as the first program to potentially be commercialized. They have indicated that they are expanding and working on the pneumococcal franchise with 116 and 117. And again, as those programs progress, we look forward to see the updates that Merck provides.

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Operator [8]

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We'll hear next from Brandon Folkes, Cantor Fitzgerald.

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Jennifer M. Kim, Cantor Fitzgerald & Co., Research Division - Analyst [9]

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This is Jennifer Kim on for Brandon. I have 2. Just given the backdrop of COVID-19, if the path to therapeutic equivalent rating on PF708 moves faster than you currently anticipate, can you talk a bit about your ability to supply a significant portion to the market? Do you and Alvogen have supply on hand? And then my second question is, you touched on this a little before, but can you provide some more color on those ongoing commercial discussions with your payers? Given the delay in the therapeutic equivalent rating, do you expect payers to delay discussions until you have better visibility on that? Or are they progressing on the assumption that you'll get that rating?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [10]

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Great questions. Thank you. Let me tackle the study and the potential impacts of COVID-19 first. You're right that one of the aspects that we're obviously focused on is how to best mitigate any potential impact of COVID-19 to the potential enrollments. And we're working with our team, Alvogen and our CRO to best define ways to minimize or even neutralize the COVID-19 factor. It's important to understand that if you look at the human factors study, the nature of the testing actually allows for precautions to be put in place that will allow for individuals to participate in the study while maintaining social distancing. This study is usually, and all our previous studies were done that way, conducted with a single subject and a single proctor in the room. So it's quite feasible to practice appropriate social distancing. So we're scheduling. That would really allow to have the study move forward nicely. What we also see is that there are actually quite a few examples of human factors in other clinical studies being done with patient populations that are less mobile. MS patient population groups would come to mind. So you could see -- and there's, again, ample examples out there where these studies were actually performed remotely in the private setting of patients and, in our case, caregivers. So we're evaluating all those options, again, with the aim to make sure that if and when we need to do a study, we can do that in a speedy way.

I think you also had a question in there on whether, given COVID-19 and assuming that Alvogen launched the products, we would be able to actually supply the market, and the short answer to that is yes, both with the supply chain as well as the wholesalers that we're working with. We are definitely in a position to supply the full market. Our full supply chain is U.S.-based. All those CMOs continue to operate. They are open. Same goes for the wholesale. So at the moment, as we see things, we do not impact any significance -- or we do not see any significant impact of COVID-19.

And I believe your third question was around payer discussions and whether those are impacted by the TE rating. Clearly, the TE rating would allow for an automatic substitution of the products. Payers from the beginning have been interested in our proposition because it does provide for a significant cost savings to the health care system. That is not changing. What we're working through potentially at the moment is how would you create that uptick. So those discussions, as I said, are continuing and we feel are continuing in a very supportive way.

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Operator [11]

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From JMP Securities, we'll move to Jason Butler.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [12]

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It's Roy for Jason. Just a couple of quick ones here. So for the SII program, the mini-trial program, what's the standard time line? Or is there one for a procurement decision from the WHO or Gavi? And then for PF708, what's the status of the Asia region, the collaboration with NT Pharma?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [13]

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Right. Good questions, Roy. Thank you. So the first one on SII and the timing of feedback from Gavi or WHO, my understanding is that, that usually goes relatively quickly. Important also there to understand that this is not one tender that is written on an annual base. There's many different tenders that are ongoing, and we know that the first proposals have gone in from SII. So we expect to hear back through SII shortly or in the next couple of months on what the feedback on those proposals are. So we'll keep everybody updated there. And again, it's going to be one in -- one of a series of tenders that SII applies for.

And then your second question, remind me again, was around the NT Pharma? Sorry, just took a second here to get that -- to bring that back. So think of that transfer, and that has been completed now, merely as an administrative transfer that allows NT Pharma to set up a JV, which is going to take care of several osteoporosis products. So we feel that that's going to be very beneficial to us. The combined company -- or the JV is significantly larger and, I would say, more powerful than NT was on its own. With 708 in that, we'd expect that, that, again, is going to provide even more opportunity for success for that part.

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Douglas Royal Buchanan, JMP Securities LLC, Research Division - Associate [14]

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Okay. Great. And then actually a follow-up on the SII. So what do the payment streams look like to SII? And what can you guys expect to see in terms of the royalties on that? Will it be a fairly steady stream? Or is it a bolus? How does that work?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [15]

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No, I think once you see several tenders hopefully being awarded, that should be a relatively steady stream. I would assume that these are timed contracts. And as you -- again, hopefully, we'll see more contracts that will start to even out the revenue stream. I do also expect that this is something that will ramp up over time. Obviously, what we will see in the next -- in the first quarters would not represent what we hope to see as the years go -- or as the quarters go by.

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Operator [16]

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(Operator Instructions) We'll hear next from Andy Hsieh with William Blair.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [17]

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So just a couple of questions on the human factor study. So patients, I don't know if you have publicly disclosed kind of the breakdown between the subgroup of Forteo experienced patients and naive patients and that -- the latest 102 kind of head-to-head studies.

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [18]

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No. We've not broken that down yet. So think of this as a sub-20 subjects of the total. And again, important there is we never set out to include those. So it's more or less like a default -- I don't want to use the word accident, but we -- that we have done in a study population.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [19]

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I see. Okay. And in terms of the trial cost, how should we think about that? Timing-wise, is this after the NDA? So would Alvogen be responsible for this? Or is this kind of considered as like pre-NDA? So help us understand this in terms of, like, R&D modeling.

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [20]

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Yes. And I think the important piece to start with is that these studies are not very costly. So our previous study with 102 subjects was sub-$1 million, and we shared that cost with Alvogen. So that's why, in my prepared remarks, I referred to actually all 3 of our core portfolio of programs, but with that also 708 that we do not anticipate any material cost to get our P&L to bring the products to the next inflection points.

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Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division - Senior Research Analyst [21]

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Right, right. That makes sense. Okay. And just one, I guess, strategic or philosophical question. Obviously, some questions were asked before about potentially launching without TE rating. I think we just kind of heard from TYMLOS, they're guiding down their revenue guidance for this year. So would that be a deterrent to do that and probably wiser just to wait for the TE rating, just given the fact that you can't really have effective sales force and reps out there visiting doctors, convincing them to write 708 scripts?

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [22]

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Yes. Good question. And let me start off again by saying that this is currently being evaluated, which means that there's not been made a decision to bring the product to the market, so just want to be clear on that. I think the current climate, if anything, would actually benefit from that. Alvogen and us, we've never been -- our intention has never been to put a sales force against this product, and that is not likely to change. So if anything, I guess, we're in more even playing field given where the current COVID situation is bringing us. So there's different ways to get a product on that potential. And obviously, the cost and benefit of our products are significant compared to Forteo, and that will continue to be our aim if and when we detail the product.

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Operator [23]

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And at this time, I would like to turn things back to you all for any closing remarks.

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Evert B. Schimmelpennink, Pfenex Inc. - CEO, President, Secretary, CFO, Acting Principal Financial & Accounting Officer and Director [24]

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Thank you, Kelly. I want to close off by, again, thanking the Pfenex team for their continued great work as well as all our investors for their continued support. So thank you all for joining today's call. Have a great evening.

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Operator [25]

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Again, that will conclude today's conference. Thank you all for joining us.