PolarityTE, Inc. (NASDAQ:PTE) Q4 2021 Earnings Conference Call March 30, 2022 8:30 AM ET
Company Participants
Cameron Hoyler – General Counsel
Richard Hague – Chief Executive Officer and President
Jake Patterson – Chief Financial Officer
Conference Call Participants
Kristen Kluska – Cantor Fitzgerald
Cobb Sadler – Catamount Advisors
Operator
00:04 Good day. And welcome to the PolarityTE Fiscal Year 2021 Earnings Conference Call. Today’s conference is being recorded.
00:12 At this time, I would turn the conference over to Cameron Hoyler. Please go ahead, sir.
Cameron Hoyler
00:18 Thank you, Operator. Good morning and thank you for joining PolarityTE’s call to discuss fiscal year 2021 results. I’m Cameron Hoyler, General Counsel. On the call today are members of the Executive Team, which includes Richard Hague, Chief Executive Officer and President; and Jake Patterson, Chief Financial Officer.
00:36 Before we begin, I would like to remind everyone that today’s discussion will include statements about the company’s future expectations, plans and prospects that constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
00:53 We caution that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated. These forward-looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors, including but not limited to those detailed under the caption Risk Factors, which are described in our annual report on Form 10-K for the year ended December 31, 2021, and subsequent reports filed with the SEC.
01:21 Any forward-looking statements made on this call speak only as of today’s date, Wednesday, March 30th, 2022, and we disclaim any obligation to update such statements to reflect events or circumstances that occur after today’s call, except as required by law.
01:37 I’d like to highlight to participants that the call is being recorded. A replay of the recorded call will be available on our website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of PolarityTE and any redistribution, retransmission or rebroadcast of the call in any form without PolarityTE’s expressed written consent is strictly prohibited.
02:00 I would now like to turn the call over to Richard Hague, CEO.
Richard Hague
02:06 Thank you, Cameron, and good morning and welcome everyone. I’ll kick off today’s call with an update on our progress related to our IND for SkinTE, as well as share other highlights in the quarter and turn the call over to Jake Patterson, who will provide a financial update.
02:23 Clearly, our most critical accomplishment was receiving approval from FDA for our IND to evaluate SkinTE for the treatment of chronic cutaneous ulcers in mid-January. Since that approval, we have been working diligently to prepare for the launch of our first pivotal study under IND, a multi-center randomized control trial evaluating SkinTE in the treatment of Wagner 2 diabetic foot ulcers entitled Closure Obtained with Vascularized Epithelial Regeneration for DFUs with SkinTE or COVER DFUs.
02:57 I am very pleased to report that last week, we green lighted several clinical trial sites to begin identifying patients for enrollment. And as a result our first patient was consistent on Monday. We are targeting up to 20 trials like for the study and we’re on track to have approximately 16 sites fully operational by the end of May. As a reminder, this is a 100 patient study with 24-week follow-up and a planned interim data readout targeted for Q3 of next year.
03:28 But those of you that have followed our story closely, we are well aware that we have a great deal of positive outcomes was SkinTE treating many types of hard to treat chronic cutaneous ulcers, while registered as a 361 HCT product. This includes outcome data from our prior DFU and VLU RCT studies that commenced during the 361 marketing period. Both studies showed statistical significance versus standard-of-care at 12-weeks for a complete knee closure and percent area reduction. With the vast majority of patients, leading only one application at SkinTE.
04:06 As we’ve discussed previously, it is this data that gives us a great deal of confidence and our ability to successfully execute on our upcoming pivotal trials. Jake will provide more detail at a moment, but I want highlight that we very recently raised $5 million in gross proceeds from a registered direct offering. That offering was intended to both to provide off some additional balance sheet strength and is also expected to help us achieve the reverse stock split as on our proxy for the special meeting of stockholders that we have been held in May.
04:41 Additionally, we continue to see solid execution in terms of fiscal discipline. The $22.6 million or $1.9 million per month of cash used in operations during the 12-months ended December 31st 2021, compared to $37.8 million or an average of $3.2 million per months during the prior year.
05:03 I’d now like to turn the call over to our CFO, Jake Patterson. Jake?
Jake Patterson
05:09 Thank you, Richard, and good morning, everyone. I want to emphasize that we have now completed our transition into a clinical stage development company. We will continue to be physically disciplined by managing our costs effectively and looking for ways to extend our balance sheet.
05:26 Operating costs and expenses decreased $12.9 million or 25% for the year ended December 31st 2021, compared to the year ended December 31st 2020. The reduction in operating costs and expenses is attributable to reductions in general administrative expenses, sales and marketing expenses, and restructuring and other charges that were partially offset by increases in research and development expenses.
05:54 As Richard noted, cash used in operations for the 12-months ended December 31st 2021 was $22.6 million or an average of $1.9 million per month, compared to $37.8 million of cash used in operations for the 12-months ended December 31st 2020 or an average of $3.2 million per month. Our goal continues to be maintaining a base operational cash burn, which excludes costs associated with clinical trials and BLA related activities below $2 million per month on average. We finished 2020 with approximately $19.4 of cash and cash equivalents and $17.7 million of working capital. We believe the cash and cash equivalents on our balance sheet will fund our business activities into the fourth quarter of 2022.
6:44 I’d now like to turn the call back over to Richard for concluding remarks.
Richard Hague
06:50 Thank you, Jake. Before I close, I’d like to briefly revisit the impact that chronic cutaneous ulcers have on patients and our entire healthcare system and the opportunity that these hard-to-heal wounds presents the PolarityTE. Chronic cutaneous also [indiscernible] that have failed to progress through the orderly and timely tissue repair process necessary to restore the normal function of anatomy and anatomy of skin. Diabetic foot ulcers, Pressure Injury and Venous Leg Ulcers make up the majority of chronic cutaneous ulcers and effect and estimated 8 million patients annually or approximately 2% of US population.
07:29 The prevalence is expected to increase as the population ages and the incidence of diabetes, cardiovascular disease, and obesity continue to rise. Accordingly, these ulcers represent an enormous unmet multi-billion dollar market opportunity and we expect that market to continue to grow over time.
07:49 The direct impact of patients and to the healthcare system is enormous, chronic cutaneous ulcers often persist for years, and some remain unyield for decades, due to their chronicity these ulcers increase the patient’s vulnerability to infection and have significant morbidity and mortality risk, which has increased in larger wounds or wounds that extent to greater depth. For these patients, there is a very real possibility of partial or full limb amputation with associated disability. 85% of non-traumatic limb amputations are associated with chronic cutaneous ulcers, but an estimated limb amputation occurring every thirty seconds.
08:32 And finally, recent studies have shown a 2 times to 6 times greater risk of mortality with chronic cutaneous ulcer patients, compared to match cohorts. As for these reasons that everyone our team is related to begin treating patients again under our IND. I’m incredibly proud of our team for the significant progress we’ve made in the 10-months, since we seized our 361 marketing efforts.
08:58 Lastly, during the latter half of 2021, we engaged in discussions with certain third-parties regarding M&A and strategic initiatives, due to the volatile market conditions, the deal was not completed. However, we were highly encouraged by the fact that this opportunity was and part initiated by positive feedback regarding SkinTE from physicians that was communicated directly to potential strategic partners.
09:24 I am confident that our recent accomplishments combined with the tangible milestones we expect to achieve in the coming quarters, we’ll effectively position the company to consider future potential strategic opportunities and order to pursue with the commercialization of SkinTE upon BLA approval.
09:44 Thank you. I’d now like to open the call for Q&A.
Question-and-Answer Session
Operator
09:48 Thank you, sir. [Operator Instructions] We’ll now take our first question from Kristen Kluska from Cantor Fitzgerald. Please go ahead.
Kristen Kluska
10:13 Hi, good morning. Thanks for taking my questions and for the additional color on the call this morning. I wanted to first ask if the previous guidance that you laid out in terms of Wagner 2 DFU trial, the 24 to 30 month enrollment, if you still think that was a fair way to look at things in light of some of your comments around enrollment right now, but also around the sites that you plan to work with as well?
Richard Hague
10:42 Yes. Hi, Kristen, good morning and thanks for your question. Yes, I spoke — I feel very confident about the timing based on our past experience, we think that those timeframes are achievable and we’re excited to start enrolling this month and looking forward to our first SkinTE being — patient treated later this month Ideally.
Kristen Kluska
11:06 Okay, thanks. And is there any update around running a second trial if this is something that you think you could potentially do in parallel? Or if the agency wants to see the data from the Wagner to DFU study before starting that trial?
Richard Hague
11:24 Sure. Great question. So we have had some informal communication with FDA and we’re actually going to be requesting a formal discussion with them to make sure that we’re aligned on that second study. Our plan is to most definitely start that study before year end. But we want to make sure that we communicate with FDA to get alignment about the study size and design and criteria, et cetera. As of now, we would expect the most likely run a study in VLU patients, but that’s still to be determined. And as I said, the timing hopes to be before year and then we’ll get that kicked off.
Kristen Kluska
12:08 Okay. Thank you for taking the questions.
Richard Hague
12:11 Thank you.
Operator
12:34 [Operator Instructions] And the next question comes from Cobb Sadler from Catamount Advisors.
Cobb Sadler
13:04 Hey, Richard. How’s it going? Hey, Richard thanks for taking the question. Just had a question on your strategic initiatives, so can you talk a little bit about maybe how that came about? What happened there? And then maybe what you might look to do going forward as it relates to partnerships or maybe an acquisition, maybe you’re acquired? What are your thoughts here? Because I’ll do a follow-up if you have an answer for that.
Richard Hague
13:45 Sure. Well, I’m very limited to how much I can discuss related to the non-disclosure that we have with other parties. But as I mentioned on the call, the outreach was initiated actually based on the feedback from previous SkinTE users, who have given feedback to various companies around our technology are very positive feedback. So that was the genesis of the initial outreach. And ultimately as I said, after a fair amount of time extended on the process, it ultimately didn’t come to fruition, because of the market conditions that everyone’s been experiencing over the last quarter or so. Our plan as always has been to continue to keep our eyes and ears open and to look for different options available to us in order to ensure that the company can successfully achieve its strategy of obtaining a BLA for SkinTE and that will continue to be our strategy going forward.
Cobb Sadler
14:59 Okay, Okay. That sounds good. Because I look at the market opportunity, your trial was [indiscernible] I think — but there’s got to be interest from definitely from a capital rising perspective, but also from a strategic perspective. And so, I guess, would you open up a formal process? Or are you just going to execute daily versus your FDA initiatives or like — so what would be the plan? Are you going — because it sounds like maybe this came to you. If I have that right, I mean, and have that right? But would you do — would you open a more formal process at some point, because at something point to definitely get through, I mean, your results are great, but you’re probably need more capital to get the FDA approval. So, you’ve got to do something at some point, maybe toward the end of the year? And so what would be — what will be the plan there? Just execute see what happens? Or would you open up some sort of process?
Richard Hague
16:03 Sure. Well certainly, going to continue to focus on executing on our current clinical trial and working with FDA to get the second trial cleared and up and running as well. I mean, that’s absolutely priority number one. And certainly in parallel to that, as I said before, we’re going to continue to keep our options open and to work with various parties to identify various methods to ensure that we can continue to execute from a financial perspective and that could take on various forms.
16:42 As we’ve mentioned in the past — on past calls, we are certainly open to discussing potential strategic opportunities, such as partnerships and such and with also obviously, continue to want to tell our story to the investment community to build momentum behind what we think is a very exciting story and very exciting progress that we’ve made and we expect to make. So at a high level, we’re going to continue to keep all options open and we will be very thoughtful and aggressive as we need to be in order to ensure that we can be properly positioned to execute on our clinical development strategy.
Cobb Sadler
17:30 Okay. Well, congrats on the progress. I mean, you’re definitely doing as well as you can based on which you could control and that’s really I can do it at this point. But yes, I mean, you’re executing as well as you possibly can on what you — which you can control. So that’s good. Okay Appreciate it. Thanks a lot.
Richard Hague
17:47 Thank you, Cobb. Appreciate it.
Operator
17:51 Thank you. With this, I’d like to hand the call back over to Cameron for any closing remarks.
Cameron Hoyler
18:01 We’d just like to thank you everyone for joining today’s call, and thank you for your support. We appreciate it.
Operator
18:09 Thank you. This concludes today’s conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.
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