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Edited Transcript of PLX earnings conference call or presentation 7-Nov-19 1:30pm GMT

Q3 2019 Protalix Biotherapeutics Inc Earnings Call

KARMIEL Nov 14, 2019 (Thomson StreetEvents) -- Edited Transcript of Protalix Biotherapeutics Inc earnings conference call or presentation Thursday, November 7, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dror Bashan

Protalix BioTherapeutics, Inc. - President, CEO & Director

* Eyal Rubin

Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary

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Conference Call Participants

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* Lucy-Emma Mary Sarah Codrington-Bartlett

Jefferies LLC, Research Division - Equity Analyst

* Monique Kosse

LifeSci Advisors, LLC - MD

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Presentation

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Operator [1]

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Good day, and welcome to the Protalix Biotherapeutics Third Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Monique Kosse of LifeSci Advisors. Please go ahead.

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Monique Kosse, LifeSci Advisors, LLC - MD [2]

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Thank you. Hello, everyone, and welcome to Protalix Biotherapeutics Third Quarter Earnings Results and Corporate Update Conference Call. With me today are Dror Bashan, Protalix's President and CEO; and Eyal Rubin, Senior Vice President and Chief Financial Officer.

A press release announcing the results is available on Protalix website. Please take a moment to read the disclaimer about forward-looking statements in the press release, their earnings release and this teleconference, including forward-looking statements. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made here today. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the U.S. Securities and Exchange Commission. The Form 10-K we filed for the year 2018 and the Forms 10-Q filed for the periods ended June 30, 2019 and September 30, 2019, include a detailed discussion of applicable risk factors. I will now turn the call over to Mr. Bashan.

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [3]

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Thank you, Monique, and good morning, everyone. Thank you for joining us today to review the company's third quarter operations and recent highlights. During this call, I will provide an update on our clinical and corporate progress, and then I will ask our CFO, Eyal Robin, to review the company's financial before opening the lines for questions. But before we get started, I want to take this opportunity and introduce Eyal, and this is his first conference call with us. Eyal joined Protalix late September as our CFO. He brings more than 20 years of experience in finance and capital markets, an extensive background in financial planning and operations and a deep knowledge of the biotechnology and pharmaceutical industries. It has been a pleasure working with him since he joined and we are very pleased to have him on board. I would like also to acknowledge our new Chairman, Zeev Bronfeld. Zeev was one of the earliest investors in Protalix and was anonymously elected Chairman by the Board in August of 2019. He has served as a Director of Protalix since 1996 and as a Director of the Company -- Protalix Ltd, which is the Israeli company, I'm sorry, since 1996, and as a Director of the company since December of 2006. Zeev is an experienced businessman and have been involved in the management of biotechnology and life science companies for many years. He has participated in the management of numerous private and public Israeli companies and in a number of technology and biotechnology incubators in Israel. On behalf of myself and the entire management team at Protalix, I want to express to you our commitment to Protalix potential. The data from the ongoing clinical studies with our Fabry product candidate, which we announced in the previous quarter, continued to be outstanding. I believe we are very close to achieving the potential of having a commercial drug candidate that surpasses the current standard of care for the patients in the Fabry community. A very encouraging development in this regard was the completion enrollment of our head-to-head, double-blind BALANCE Phase III study. Our BALANCE study is designed to evaluate the safety and efficacy of PRX-102 compared to Agalsidase Beta, or Fabrazyme, on the renal function of a Fabry patient with progressing kidney disease, previously treated with Fabrazyme. PRX-102 also called Pegunigalsidase Alfa is our product candidate development for the treatment of Fabry disease. The BALANCE study is the third of our 3 phase study for PRX-102, which we are -- all now -- which are all now fully enrolled and ongoing. This represents the robust and this thorough clinical program for Fabry. We are confident in the outcome of these studies based on data from completed PRX-102 study with adult untreated patients. Another major development for our drug is our planned BLA submission, anticipated by April 2020. We together with our collaboration partner, Chiesi Farmaceutici, are planning the submission under an accelerated approval pathway. This submission will be based on the data from our completed Phase I/II clinical studies of PRX-102 and from our ongoing Phase III BRIDGE clinical studies as well as safety data from all ongoing studies. The unmet medical need for Fabry remains despite years of current enzyme replacement treatments. Fabry patients continue to show progressive loss of kidney function. Accelerated approval of PRX-102 will potentially bring hope to these patients. And that is the goal we are all working towards.

Lastly, we recently announced an incremental results from our BRIDGE open-label to switch-over study. This Phase III study analyzes patients treated with our PRX-102 Fabry product candidates that were previously treated with Replagal.

Interim results from 12-month dosing of on-treatment data from the first 16 out of 22 adult patients enrolled in this BRIDGE study indicate a mean improvement in kidney function in both male and female patients that were switched from Replagal to our product PRX-102. The switch was well tolerated and the majority of the patients who completed the study rolled over to a long-term extension study. Accordingly, those patients continue to be treated with PRX-102. The 12 months results continue to track with our previously announced 6 months result and suggests that strong potential benefit of PRX-102 on renal function for Fabry patients. We, together with Chiesi, plan to include the data from this study in the anticipated FDA BLA filing for PRX-102 under the accelerated approval path. This quarter, we have taken important steps to secure our financial foundations and build shareholders value while we work towards our important goals. Accordingly, the company has convened a Special Meeting of Stockholders to approve an amendment to the certificate of incorporation proposing the following: One is a reverse stock split at a ratio of not less than 1-for-10 and not greater than 1-for-20, with the exact ratio to be set at the discretion of the Board of Directors of Protalix before the day prior to the Special Meeting of the Stockholders and the reduction in the total number of shares of the company's common stock that we have authorized to issue from 350 million to 120 million shares. If the proposal to amend our certificate of incorporation is approved, our Board of Directors will set the timing for the reverse stock split and select a specific ratio from within the proceeding range of ratios.

With that, I would like to turn the call over to Eyal, our CFO, for a review of the financials.

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [4]

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Thank you, Dror. So Protalix recorded revenues from selling goods of $12.1 million during the 9-month period ended September 30, 2019, an increase of $4.9 million or 67% compared to the revenue of $7.2 million for the same period of 2018. This increase is primarily due to higher sales of Elelyso in Brazil. Research and development expenses net were $35 million for the 9 months ended September 30, 2019, an increase of $11.3 million or 47% compared to $23.8 million for the same period of 2018. The increase resulted primarily from an increase of $8.5 million in clinical trial related costs as well as a decrease of $1.8 million in grant received from the Israeli Innovation Authority.

Selling, general and administrative expenses for the 9 months ended September 30, 2019, were $6.9 million, a decrease of $1.9 million or 21% compared to $8.7 million for the same period in 2018. This decrease is primarily due to costs related to the Chiesi-US Agreement we entered into in the third quarter of 2018, which were not incurred in the third quarter of 2019.

The net loss for the 9 months ended September 30, 2019, was $18.6 million or $0.13 per share basic and diluted compared to a net loss of $21 million or $0.14 per share basic and diluted for the 9 months ended September 30, 2018.

At September 30, 2019, the company had $21.4 million in cash and cash equivalents. Now I'd like to turn the call back to Dror.

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [5]

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Thank you, Eyal. I would like to summarize. We are making tremendous progress as a company. This has been a very meaningful quarter for Protalix, and I want to take a moment to thank the many Fabry patients and investigators in our 3 pivotal trials around the world, our tremendous scientific and technical staff for their dedication and our shareholders for their patience and support. With that, I will now turn the call back to the operator, who will open up the line for questions from the audience.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll go first to Ram Selvaraju at H.C. Wainwright.

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Unidentified Analyst, [2]

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This is [Balan] for Raju. I wanted to may be ask a few questions on taliglucerase alfa and then dive into PRX-102. To start off, just with respect to taliglucerase, can you offer some perspective around usage pattern and government ordering in Brazil?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [3]

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Ram, this is Dror. I apologize, but I could hardly hear you. Can you repeat the question or the operator?

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Unidentified Analyst, [4]

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Yes. Sure. I wanted to start by asking a few questions about taliglucerase alfa. So maybe can you offer some perspective around usage pattern and government ordering in Brazil?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [5]

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I apologize. I mean, I cannot hear you but I don't know why. I'm sorry for that.

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Operator [6]

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We'll go next to Lucy Codrington at Jefferies.

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Lucy-Emma Mary Sarah Codrington-Bartlett, Jefferies LLC, Research Division - Equity Analyst [7]

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Just two for me. I just wanted to confirm whether the pre-BLA meeting with the FDA has taken place yet. And then also to confirm that we should expect the final BRIDGE data, which should include biomarker data around the end of the year or in the first quarter next year?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [8]

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So pre-BLA meeting with the FDA took place through October. Clearly, until we receive the minutes from this meeting, we can't share anything. Once we will receive the minutes, we will put it publicly, of course. As for your second question. Last patient out for the BRIDGE is planned for December of this year. I assume that -- I hope that towards the end of Q1, we will be able to share final and -- final analyzed results officially of course.

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Operator [9]

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We'll move next to Walter Gorey, a private investor.

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Unidentified Participant, [10]

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I have about five questions relative to the proposed reverse split. Number one is, does your market maker vote the shares that he has in inventory?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [11]

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Thank you for the question. At this point, the shares weren't voted yet. But -- and again, I guess that since it's confidential, and once it is voted, the company will know about it. But thus far, I can say that we didn't see it voted.

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Unidentified Participant, [12]

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Okay. But they have the right to vote them, is it correct?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [13]

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Yes. I'll have to look into it. If you want I'll get back to you, I need to see what are his rights. If it's (inaudible) that the votes or how this thing works.

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Unidentified Participant, [14]

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Right. Unfortunately, with what's happened to the value of our company and he has an obligation to take those shares in inventory. He might have a big block of shares to vote. Would you agree with that?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [15]

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Again, as I said, I'll have to check and see what's the inventory that he has.

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Unidentified Participant, [16]

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Yes. Right. I mean...

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [17]

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I can definitely get back to you, Walter.

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Unidentified Participant, [18]

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Okay. I appreciate that. Putting this proposal out to shareholders, does that suggest that you don't have a partner potential for OPX-106?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [19]

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No. It doesn't suggest anything. As you all know, we made public, the company received a deficiency letter from the NYC American. An essential step to regain compliance is to do the reverse stock split in order to allow institutional investors and retail investors to bargain the marker in the market, investors that are basically prohibited based on their charter to touch a penny stock or a share with our price. It doesn't suggest anything on our ability to complete or execute a partnership deal collaboration, nondilutive funding or any other means or vehicles that they -- can be used to support the company overall financial structure and liquidity.

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Unidentified Participant, [20]

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Well, this proposal is massively dilutive to present shareholders. I mean, is this acceptable to the Board and Management?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [21]

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A, the proposal is not dilutive to the shareholders since they -- we're not suggesting anything. We are asking, a, to do a reverse split, which is a technical move. And obviously, we are decreasing the number of authorized shares to make sense to the market from 350 to 120. To your question, if it's acceptable to the Board and the Management. Yes, this is correct. It is acceptable. That's the reason that the -- obviously, we put this proxy and plan in place.

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Unidentified Participant, [22]

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Well, if I vote yes tomorrow then 2 days before the meeting, the Board is going to execute, I once say, for example, 1-to - [15.] At that point, I will do, with present shareholders will be substantially diluted.

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [23]

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No. So just to explain the technical move that we're doing here. A reverse stock split by itself doesn't dilute anybody. A reverse stock means that while the share price -- the current share price is $0.22, $0.23, if we're doing a reverse stock split of 1-to-10, it means that the share price a minute after is going to be $2.2. You will hold 1 share for every 10 shares that you held previously, but nothing was added and there's no dilution to the existing shareholders.

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Unidentified Participant, [24]

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And what happens when you declare the 1-to-10?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [25]

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It's a technical thing that -- actually, every shareholder that has x amount of shares, the day after the reverse split, he has the x amount divided by 10, but also the float is divided by 10 as well. So your proportional ratio of holdings in the company didn't change. Again, just to...

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Unidentified Participant, [26]

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Well., there's 148 million shares outstanding now.

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [27]

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True. If you do reverse 1-to-10, 14.8. And the price is going to jump from $0.22 to $2.2. This will allow the retail investors -- the more big -- bigger retail investors, institutional investors to buy long in the market if they are interested because right now, they are blocked from buying in the market based on their charter. They can't even get close to our -- to the company, to our shares, given the share price.

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [28]

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So, again, this is Dror. The reverse split by itself is a technical process. Each shareholder will own the same percentage as they had before. The number is changing but it is just a technical arithmetic procedure. If the company has a...

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Unidentified Participant, [29]

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Well, presently, you have -- on the present structure, you have 79 million shares available for future financing.

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [30]

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True.

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Unidentified Participant, [31]

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Under 1-to-10 split, that number will go to $93 million. Is that correct?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [32]

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No. You will not go to 1 -- just to explain again how this mechanism works. When we do a reverse split, what gets basically split is or reverse split is the float. Means to say that if we have 148 million shares in our float, the day after, we're going to have at the 1-to-10 ratio, it's going to be 14.8%. The proportional holdings of the equity does not change. We announced concurrently with this offer to reduce the authorized shares so, in a way, instead of having $200 million and more, the day after reverse split, we will have $120 million altogether authorized shares, out of which $10 million or 14% actually -- 15%, 14.8% are going to be our float. And obviously, we have also secured shares on a fully diluted basis for the conversion of the notes. So again, to explain this technical move should not change your holdings in the company or anything else.

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Unidentified Participant, [33]

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Well. But the -- if you did a 1-to-10 on the present capitalization, that would be 35 million shares, correct?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [34]

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No. The authorized shares (inaudible) particularly, you reverse split is. But Walter, I suggest that we send you an email, let's set up a time, and we'll take those questions off-line, just to explain the mechanism. I appreciate and I'll be happy to address all of your questions on one-on-one. If you'd like, you can send me an email and I'll definitely set up a time and we'll take this discussion.

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Unidentified Participant, [35]

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Okay. If you would give me your e-mail address, please?

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Eyal Rubin, Protalix BioTherapeutics, Inc. - SVP, CFO & Corporate Secretary [36]

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Yes, sure. The email eyal.rubin@protalix.com.

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Operator [37]

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We'll go back to Ram Selvaraju at H.C. Wainwright.

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Unidentified Analyst, [38]

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This is [Bubalan] in for Ram Selvaraju. I wanted to ask a few questions about taliglucerase first and then maybe dive into PRX-102. To start off, with respect to taliglucerase, can you please offer some perspectives on the usage patterns and government ordering in Brazil?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [39]

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So what we see, as of 2019, we see a high alignment or correlation between the orders and on the number of vials that we produce. Actually, we see this year that we get to something around 23% market share. We see growth of average of about 15% year-over-year in the next few years. And I don't want to give expectations beyond the next 2, 3 years, it will be not responsible. But we see a steady growth with taliglucerase in Brazil. And right now, we are very happy with it.

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Unidentified Analyst, [40]

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Okay. Great. I appreciate that. And then as an add-on to the previous question. Maybe you can walk us through which ex-U. S. territories outside Brazil might in future provide growth opportunities for taliglucerase?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [41]

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Currently, we have an agreement with Pfizer, where they have the global rights -- sales and marketing rights globally, except Brazil. This is the situation as of today. If there will be, of course, any change, update the market.

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Unidentified Analyst, [42]

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Okay. Appreciate that. And I'm going to switch gears a little bit and maybe wanted to ask few questions regarding PRX-102, which is pretty exciting. So do you happen to know when the BALANCE data with PRX-102 slated to be released?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [43]

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So this -- the BALANCE data, we'll explain. We finished enrollment by the end of September 2019, which is about 5, 6 weeks ago. By the FDA, we have 2 years dosing to show superiority, meaning, end of September or early October in 2021, we will finish the 2 years dosing, okay. Then there is a data log, analysis, it takes a couple of months in order to have final official results. As for the EU authorities, the request is 1 year of -- into the BALANCE study, which means that by the beginning of October next year 2020, we will conduct an interim analysis. And if it is positive, we will start to begin our preparation for submitting a BLA in the European Authority.

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Unidentified Analyst, [44]

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Okay. Great. Can you please enumerate a few gating items remaining for the completion of the FDA submission for PRX-102 and then specifically which items are in Protalix's responsibility and what elements is in Chiesi's desk?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [45]

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I think we work closely together and transparently together. So I assume every item is done hand-in-hand. Clearly, Protalix had develop the product and (inaudible) product. So we have certain inputs in our company and Chiesi has their own input, of course. As time goes by, they are establishing their own rare disease business in the U.S. and then later on in Europe. So we work very closely together. It's on a daily basis.

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Unidentified Analyst, [46]

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Okay. Great. And this is the last question. Has Chiesi provided any feedback regarding its commercial preparations for the potential future U.S. launch of PRX-102. Do you have any idea how many sales people likely to be deployed? And what kind of marketing campaign would it looks like?

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [47]

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I don't know to share with you the details right now. We know the preparation started. We are in, again, in direct contract with Chiesi. It's a private company, Chiesi. Right now, we are pleased with their preparation.

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Operator [48]

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And there are no further questions at this time. I'll turn the conference back over to management for any closing remarks.

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Dror Bashan, Protalix BioTherapeutics, Inc. - President, CEO & Director [49]

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Okay. So again, I would like to thank everybody for taking the time and listening and asking the questions. Happy to answer any further questions off-line, of course. And good day to everybody.

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Operator [50]

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And that does conclude today's conference. Again, thank you for your participation.