CollPlant Biotechnologies Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 29, 2023

Key Takeaways

  • Despite the war in Israel, Coal Plant’s operations—including R&D and collagen production—are minimally affected thanks to a dedicated crisis team and robust employee safety measures.
  • The collagen-based dermal filler with AbbVie triggered a $10 million milestone this quarter (totaling $24 million so far), earned a U.S. patent for its photo-curable technology, and holds up to $26 million more in potential milestones plus future royalties.
  • Coal Plant will launch a large animal study of 100 cc regenerative breast implants in December—building on early data showing tissue regeneration and no adverse events—and plans a pivotal GLP study to support FDA discussions in 2025.
  • In the gut-on-a-chip program, bioprinted scaffolds have successfully supported epithelial cell growth; the next key milestone is validating a healthy gut model before inducing ulcerative colitis for drug screening and personalized medicine partnerships.
  • As of September 30, Coal Plant held $29 million in cash (excluding future milestones), providing at least a two-year runway, reported Q3 GAAP revenue of $43 K (nine-month revenue $10.7 million), and reduced operating losses year-over-year on both GAAP and non-GAAP bases.
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Earnings Conference Call
CollPlant Biotechnologies Q3 2023
00:00 / 00:00

There are 6 speakers on the call.

Operator

Greetings and welcome to Coal Plant Biotechnologies Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dori Kurowski with LifeSci.

Speaker 1

Thank you. You may begin.

Speaker 2

Good morning. I would like to welcome everyone to Coal Plant Biotechnology's financial results conference call for the Q3 ended September 30, 2023 and corporate business update. With us on the call today from Coal Plant are Yajil Tal, Chief Executive Officer, who will provide an overview of the company's programs and forthcoming update and Irvin Rotem, Deputy CEO and Chief Financial Officer, who will provide a summary of Coal Plant's financial results for the Q3 ending September 30, 2023. Before we get started, I would like to remind everyone that the statements made on this conference call may include forward looking statements. Actual events or results could differ materially from those expressed or implied by any forward looking statements as a result of various risks, uncertainties and other factors, including those set forth in the Risk Factors section of Coal Plant's filings with the Securities and Exchange Commission.

Speaker 2

These filings can be found at www.sec.gov or on Coal Plant's website at www.coalplant.com. In addition, any forward looking statements made on this call represent Coal Plant's views only as of today, November 29, 2023, and should not be relied upon as representing the company's views as of any subsequent date. Oil Plant Management specifically disclaims any obligation to update or revise any of these forward looking statements. Finally, Coal Plant Management will refer to certain financial measures not reported in accordance with GAAP on this call. You can find reconciliations of these non GAAP financial measures to the GAAP financial measures in the earnings press release that Coal Plant published earlier today and which is available on Coal Plant's website at ir.coalplant.com.

Speaker 2

With that, let me turn the call over to Yajil Tal, Chief Executive Officer of Coal Plant Biotechnologies. Please go ahead, sir.

Speaker 1

Good morning, everyone, and thank you for joining us today on Coal Plant's investor conference call to discuss our Q3 2023 financial results and corporate developments. As you know, Israel has been in a state of war since October 7. First and foremost, I want to communicate to you about how we have been managing cole plan during this time that has very unfortunately been a significant part of our daily life. When the war started, CorePlant's management team implemented 2 key objectives. The first one was maintain company operations, including R and D and general operations in support of the company's objectives and the second objective was to maintain employee safety and security.

Speaker 1

At the beginning of the war, we established a crisis team comprised of management members that are closely monitoring all aspects of our company operations. This team is charged with key responsibilities, including maintaining ongoing communication with business partners, critical suppliers, major shareholders, analysts, bankers and others as well as strengthening ties with CorePlants employees. In addition, approximately 10% of CorePlant's employees were drafted to the Army at the beginning of the war, and of course we keep in touch with them. As of today, we can report that CorePlant's production plan and main development programs have been minimally affected as a result of the war. Specifically, we can say that collagen production continues according to plan and that we continue to maintain an ongoing dialogue with our partners.

Speaker 1

The moral of our employees these days is reasonable according to the circumstances and their desire to come to the site and contribute to coal plant is commendable and at a good level. As Arano will expand upon later, we also took the initiative to make the necessary adjustments to the company's budget to accommodate the current challenging market conditions as well as the situation that Israel is in today. The company is now focusing on advancing its key programs that I will discuss shortly. We all pray that the war which was imposed upon us will end soon and life will get back to normal so that we can continue to contribute to our part to make life better and longer. CorePlant is developing collagen technology and regenerative medicine products to improve and prolong lives.

Speaker 1

We have historically remained steadfast in the use of our cash and very conservative about utilizing the capital markets. We will continue to direct very careful focus on our core programs and our supportive partners in order to continue in this matter. Our goal is to create products that enable the regeneration of tissues and organs using our novel proprietary recombinant human collagen technology. Our collagen, which is produced in genetically engineered tobacco plants, is differentiated from the other types of collagen by its regenerative properties and also because it is xenotissue frame. Now on to our development programs.

Speaker 1

On this slide is the dermal filler product candidate that we are partnered with Avion. This product candidate, which is in clinical phase now, has the potential to create a paradigm shift in the fillers market since in addition to tissue filling, it would provide regenerative properties for new skin growth. This program is our top focus and is planned after continuous to advance this filler program towards commercialization. Last quarter, we announced the achievement of a very important company milestone related to this product candidate, which triggered a $10,000,000 payment to Coal Plant in the Q3. Coal Plant has the potential to receive additional milestone payments as well as future royalties in accordance to its long term collaboration with AbbVie for this dermal filler.

Speaker 1

This month, we announced that a U. S. Patent was granted related to our photo curable dermal filler product candidate being developed by CorePlant for the aesthetics market. The patent is related to our method of use and application and we believe that this patent will strengthen our position in the aesthetic market for many years to come. Now I will discuss our other in house development programs that are our core focus.

Speaker 1

The next leading program is our regenerative breast implants. Based on 3 years of development, we are now establishing the infrastructure for the next large animal study, which we plan to begin in December. The upcoming study will be conducted with clinically relevant commercial size implants and will serve as the basis for the pivotal large animal study. This study follows the completion of our 1st large animal study, the result of which were announced in January of this year. The first preclinical study demonstrated progressive stages of tissue regeneration after 3 months as highlighted by the formation of maturing connective tissue and neurovascular networks within the implants with importantly no adverse events reported.

Speaker 1

We have previously stated according to the FDA, patients with breast implants have an increased risk of developing breast implant associated anaplastic large cell lymphoma. This is a very serious risk. In the U. S. Alone, 100 of 1000 of people per year experience adverse events that range from autoimmune symptoms to these more serious side effects.

Speaker 1

Core plant breast implant are comprised of its proprietary plant derived RH Collagen and other biomaterials and therefore are not expected to pose such a risk. Further, our breast implants are expected to regenerate breast tissue without eliciting immune response and thus may provide a revolutionary alternative for aesthetic and reconstructive procedures. The additional safety and efficacy data that we will generate from the large animal studies that I mentioned will be used to optimize the development of the regenerative breast implant and to support future regulatory submissions and clinical studies. Here is an example of a breast implant printed with our collaborators at Stratasys using ColPlant's RH collagen based bindings. We look forward to reporting initial results from this study by the second half of next year.

Speaker 1

Last but not least is our Gat on the Chip program. This is an area where we have an opportunity to disrupt the market in terms of drug discovery and personalized medicine. We are developing a 3 d bio printed gut tissue model that is intended to evaluate the therapeutic response in patients suffering from ulcerative colitis. This model is designed to mimic the tissue of the human intestine to assay drug response, metabolism and other factors in humans. A device like this would allow medical professionals to identify drug targets and personalized therapeutic responses that could lead to improved patient outcomes by providing a predictive personalized platform in medicine.

Speaker 1

Issue on a cheap devices are typically comprised of plastic chambers or channels that aim to recapitulate the distinct compartments and structures of the targeted tissue or organ. The multi chip arrays that we are developing will be charged with our microfluidic chips that contain the bioprinted scaffolds and is intended to support high throughput therapy screening. Our system being developed is designed to enhance the physiological environment of the human intestine tissue and enable us to provide a predictive personalized platform. CorePlant mimics the gut structure by 3 d printing the gut tissue geometry in high resolution using its unique RH Coragen based Bioinformulation. Recently, the CorePlant team managed to successfully grow epithelial cells on the 3 d biopracted scaffolds.

Speaker 1

In many ulcerative colitis patients, failure to respond to a specific therapy can be determined only after 3 months of treatment. This is a significant amount of time to remain in therapy with an unknown outcome, which of course is not ideal for the patients. In addition to delaying what could be the initiation of an effective treatment, this option also bears the risk of exposing the patient to unjustified adverse events. With the large and growing inflammatory bowel diseases market and the many new biological treatments being launched to address the needs of these patients, it is important to note that a need also exists for reliable screening tool to provide a personalized prediction of treatment response. In various areas of personalized medicine, we expect that this approach could be a groundbreaking improvement over the existing use of animal models for drug developments.

Speaker 1

This could be a sustainable means for drug development and patient diagnosis without the use of animals. And we remind you, this program is also very much in line with our ESG initiatives. Recently, we have made strides in bolstering our ESG environmental, social and governance initiatives. After approving our company's sustainability roadmap for the upcoming year, we have initiated a range of projects aimed at reducing CorePlants' carbon footprint and aligning with our vision and mission related to sustainability. Being able to communicate our planned initiatives was mandate for us after we conducted a formal analysis of our current operations and identified what we are doing correctly or where we can further improve.

Speaker 1

In our commitment to advancing sustainability and ESG principles at CorePlant, we produced a ranked list of material topics forming the foundation of our ESG strategy. These priorities were reviewed and approved by our senior leadership and Board of Directors. 1 of our key initiatives in the forthcoming publication in 2024 of our inaugural ESG report for 2023, which will outline for the first time precise ESG objectives. In September, Copeland proudly announced its participation in the United Nations Global Compact, the world's largest initiative for sustainable and responsible corporate governance. This alliance unites over 23,000 companies and 4,000 non business signatories across 166 countries and more than 62 local networks.

Speaker 1

By joining this voluntary leadership platform, CorePlant reaffirms its unwavering dedication to sustainable practices and further blusters its mission to provide sustainable alternatives to existing regenerative and aesthetics, medicine products and technologies. This concludes my initial remarks about our core programs that we remain very excited about in terms of their prospects. Now I will turn the call over to our Deputy CEO and Chief Financial Officer, Eran Rotem to provide a recap of the financial results. Eran?

Speaker 3

Thank you, Yefir. Good morning, everyone. I will now review our financial results for the 3 9 months period ending September 30, 2023. GAAP revenues for the Q3 ended September 30, 2023 were $43,000 and included mainly income from sales of our Bio Inc. And RH Collagen, a decrease of 66 $1,000 compared to $109,000 in the Q3 ended September 30, 2022.

Speaker 3

GAAP revenues for the 9 months period ended September 30, 2023 were $10,700,000 and included mainly revenues from AbbVie, Coal Plants Business Partner. Revenues increased by $10,500,000 compared to $241,000 in the same period last year. The increase is mainly related to the achievements of a milestone with respect to the ARPU agreement, which triggered a $10,000,000 payment. And in addition an increase in income from sales of CorPlane's Allergan products. As we said previously, according to the agreement with Fabavi, Corplent is also eligible to receive up to an additional $26,000,000 in milestone payments for the dermal filler product as well as royalty payments and fees for the manufacture and supply of RH Collagen once the product will be in the commercial phase.

Speaker 3

GAAP cost of revenues for Q3 2023 was $278,000 compared to $264,000 in Q3 2022. Cost of revenues includes mainly the cost of the company's average collagen based products and royalties the Israeli Innovation Authority or IIA for the company's sales. GAAP cost of revenues for the 9 months ended September 30, 2023 was $1,200,000 compared to $338,000 in the 9 months ended September 30, 2022. The increase in the amount of approximately $880,000 is mainly comprised of $312,000 in royalties expenses to the IAA, mainly related to the milestone payment received from AbbVie and $430,000 relating to the sales of Bio Inc, Virginics Fluorogel and RH Collagen. GAAP operating expenses for Q3 2023 were $4,400,000 compared to $4,300,000 in Q3 20 including G and A expenses and R and D expenses that are related to supporting the company's development effort in different programs, including the regenerative breast implants and gut on a cheap programs.

Speaker 3

The increase of approximately $100,000 is mainly related to the general and administrative expenses, which are share based compensation. On a non GAAP basis, operating expenses for Q3 2023 were $3,900,000 compared to $3,700,000 in Q3 2022. Non GAAP measures exclude certain non cash expenses. GAAP operating expenses for the 9 months ended September 30, 2023 were $11,900,000 compared to $12,300,000 in the 9 months ended September 30, 2022. The decrease of approximately $438,000

Speaker 1

includes a $247,000

Speaker 3

reduction of product development activities and approximately $191,000 in general and administrative expenses, mainly for share based compensation expenses. For the non GAAP basis, the operating expenses for the 9 months ended September 30, 2023, were $10,600,000 compared to $11,000,000 in the 9 months ended September 30, 2022. GAAP financial income, net for the Q3 of 2023 totaled $225,000 compared to $89,000 in the Q3 of 2022. The increase in financial income net in Q3 2023 is attributed to an increase in interest rate and interest received from the company's short term cash deposits. GAAP net loss for Q3 2023 was $4,400,000 or $0.38 basic loss per share compared to a net loss of $4,400,000 or $0.40 basic loss per share for Q3 2022.

Speaker 3

Non GAAP net loss for Q3 2023 was $4,000,000 or $0.35 loss per share compared to a net loss of $3,700,000 or $0.34 basic loss per share for Q3 2022. GAAP net loss for the 9 months ended September 30, 2023 was $2,300,000 or $0.20 basic loss per share compared to a net loss of $12,500,000 or $1.14 basic loss per share for the 9 months ended September 30, 2022. Non GAAP net loss for the 9 months ended September 30, 2023 was $1,200,000 or 0 point 1 $1 Basic loss per share compared to $11,200,000 loss or $1.02 basic loss per share for the 9 months ended September 30, 2022. During the Q3, our cash balances increased upon receiving the payment from AbbVie for achieving the milestone. In this period of continued weakness in the global capital markets, the world situation in Israel and the uncertainties in general, we carefully maintain Corpen's work plan while keeping goals for the progress of the main programs.

Speaker 3

Cash, cash equivalents and restricted cash as of September 30, 2023 were $29,000,000 We believe these cash balances represent as of today, November 2023, the company cash runway of at least 2 years of operation based on our currently contemplated operations and plans. Cash provided by operating activities during the 3rd quarter of 2023 was $6,800,000 compared to cash used for operating activities of $3,200,000 during the Q3 of 2022. Cash provided in Q3 2023 is including the $10,000,000 milestone payment for Magna. Cash used in operating activities during the 9 months ended September 30, 2023 was $418,000 compared to $10,400,000 during the 9 months ended September 30, 2022. Cash provided by financing activities during the Q3 of 2023 was $216,000 compared to no cash from financing activities during the Q3 of 2022.

Speaker 3

Cash provided from financing by financing activities during the 9 months ended September 30, 2023 was CAD 1,100,000 compared to CAD 1,500,000 during the 9 months ended September 30, 2022. Cash provided by financing activities is mainly attributed to proceeds from the exercise size of options and warrants into shares. This now concludes the financial summary. Operator, I believe that we can now open the call for questions.

Operator

Thank you. At this time, we'll be conducting a question and answer Our first question comes from Swayampaklar Makhanath with H. C. Wainwright. Please proceed with your question.

Speaker 4

Thank you. This is RK from H. C. Wainwright. Good afternoon, Yihil and Eran.

Speaker 4

Hope you and your families are safe and doing well. I know it's tough times out there. Just thinking about the different development programs that you folks are focusing on. And to start off with the dermal and soft tissue filler. So, Yiran, thanks for telling us that there is $26,000,000 still out there in terms of milestone payments.

Speaker 4

Just for us to understand, what's the next milestone that you need to achieve to receive the next payment from AbbVie?

Speaker 3

Thanks, RK for your kind words. And to your question, yes, it's correct. We have regarding only regarding the dermal filler product, which is one product out of the agreement with AbbVie, we are left now with additional $26,000,000 that will come against the milestones. Just to remind the audience, we already received $24,000,000 $14,000,000 as an upfront and another $10,000,000 in the Q3 of this year. So we may disclose the details of the agreement only in accordance with our partners' agreement, only when with AbbVie's agreement.

Speaker 3

And accordingly, in the past, we did disclose that the milestone payments will be triggered upon the achievement of the following topics. 1 is a milestone for development, clinical trial, regulatory and commercial sales. So those are the milestones that we disclosed that at the beginning of the agreement, we disclosed that those are the milestones that are in front of us. And at this stage, we are unable to share information about the timeline for the next milestone.

Speaker 4

Fair enough. And then regarding the breast implant, so what's the development strategy, especially after the next large annual study that you're planning to initiate

Speaker 1

soon? Thank you, RK for the question. This is Yecheel speaking. The large animal studies, this is I'll give you the long answer. The large animal studies that we conducted so far were intended to practice the surgical protocol and optimize the design of the implant.

Speaker 1

And we reported the results of these studies as demonstrated tissue regeneration, muscularization and no adverse events. The upcoming large animal study is intended to evaluate commercial size implants and we plan to launch it in December of 2023. In this study, we have 2 endpoints. The longer one is 12 months. The first one is 3 months.

Speaker 1

And this study will help us to converge into the final implant design in terms of geometry and the biomaterials that the implant is made of. This 100cc study will be followed by a GLP pivotal study is that its data will serve us for the ID submission to FDA. In any case, discussions with the FDA, for example, like Type C meeting, we are these discussions are planned for 2025. And regarding the time to commercialization, it is premature to address this question. The timing can be determined only after we get the IV approval, which by itself will be a major achievement to the company of the company.

Speaker 1

At this point of time, I would say that it is going to take few years before this product hits the market. And at this point of time, it is too early to be more precise on that. And I would like to emphasize that breast implant is a multidisciplinary program. And this program involves developing of technological building blocks that were not existing until now, until we develop them. And consequently, we are developing a product in a very detailed manner to ensure that the product will eventually perform over time and, of course, maintaining the patient safety.

Speaker 1

So I hope that this is addressing your question.

Speaker 4

Yes. Thank you very much, Yohil. And then the last question from me is on cut on a chip. So I believe you terminated your agreement with Tel Aviv University and Sheba Medical Center recently. Just trying to understand the rationale behind that and also how keen are you in trying to get either a development partner or a commercial partner for this for the gut on a chip product?

Speaker 1

Yes. Thank you, RK, for the question. So first of all, after 1 year of collaboration, we have decided the coal plant can take upon itself the Cat on a Chip product development and do it with our in house resources based on the know how that has been accumulated. The product development team has been restructured and the development plan was adjusted and optimized to accommodate a new program organization. Now, of course, by the time that we will validate, we go by stages in the development process.

Speaker 1

So the next stage will be to develop a model to mimic a healthy gut issue. And then later on, we will induce the ulcerative colitis disease onto this model and add other components such as PBMC and also microbiome to have a full model. So we believe that when we will have a healthy tissue model, we will be in a position to start seeking for a collaborator. The collaborator can be for drug discovery purposes, but also for personalized medicine applications. So I hope that this is addressing your question.

Speaker 4

Yes, it does. Thank you very much and good luck with everything.

Speaker 3

Thank you, Alok.

Operator

Our next question comes from Ben Haynor with Alliance Global Partners. Please proceed with your question.

Speaker 5

Good day, gentlemen. Can you hear me okay?

Speaker 3

Of course, thanks.

Speaker 5

Excellent. So just a quick one on the runway, the 2 year runway. Can you remind us, does that include expected payments from AbbVie milestone payments?

Speaker 3

So we are talking about the dermal filler, right?

Speaker 5

Or the option products. I mean, are there AbbVie the potential for AbbVie milestones or options to be are they included in that 2 year runway, I guess, is the shorter way of action?

Speaker 3

No, no. No, no, no. The 2 years runway, which is a very important piece of information, the 2 year runway is only counting on the $29,000,000 that we already have in our banks. We are not including yes, we are not including the potential additional milestone achievement or exercise of an option product or renew agreements.

Speaker 5

Okay. That's helpful. I just wanted to make sure I was clear there. And then on the gun on the chip or gun on the chip, the next development activities, what sort of goes into that? How soon do you think you could sign up a collaborator or partner on that?

Speaker 5

Just any color on what investors should expect to hear next?

Speaker 1

I believe that by the times that we can show a model of a healthy gut issue, which is going to be the next major milestone and shows that this model is validated. And the plan that we have to take it to the next level of inducing the ulcerative colitis model, I think that at the time that we have a healthy tissue model and the plan is that we can present to a potential partner, this will be the time to seek for the partner.

Speaker 5

Okay. So then it's dependent on getting the healthy tissue model where you want it and then whatever negotiation time that might be required with partners.

Speaker 1

Right, right, exactly. And we are progressing in the healthy tissue model. We managed to grow a peculiar layer on the model, which is the basic of the model and also to form blood vessels. So I think we are progressing very nicely according to the plan. And by the time we will have a validated healthy tissue model, then it will be the time to put to a partner.

Speaker 1

And by the way, this technology that we are developing can later on be expanded to different tissue models because that tissue model is quite complex. So all the building blocks that we are establishing for this model can later on be used to develop with other partners, different models like skin, like lung, whatever.

Speaker 5

Okay. That makes sense. Everything seems pretty straightforward. That's all I had and thoughts go out to you and everyone in Israel. Thanks for taking the questions guys.

Speaker 1

Thank you.

Operator

We've reached the end of the question and answer session. I'd now like to turn the call back over to Eran Rotem for closing comments.

Speaker 1

Okay. So thank you, Eran. Our vision is to be the leaders in regenerative medicine, helping people live longer and better through our innovative collagen technology. Consequently, our goal is to create better alternatives and options for the future such as novel regenerative products for medical aesthetics applications and unlimited supply of spare parts for the human body, including life saving organs medical treatment that is tailored for the individual characteristics for each patient and drugs developed without the need for animal testing. In closing, I want to reiterate our upcoming goals for the remainder of 2023 and through the first half of 2024.

Speaker 1

We plan to continue to advance development of paradigm shifting regenerative dermal and soft tissue filler program with AbbVie initiate the study in large animals with commercial sized breast implants to generate additional safety and efficacy data in support of commercialization of this program, advance our gut on a chip development program to the level of functional model that mimics gut tissue, including permeability feature and continue to form collaborations with industry leaders related to the use of our RH Collagen. Thank you everyone for your time this morning and for joining us today's conference call. We leave you with this closing slide, featuring our very important and valued coal plant key members. Operator?

Speaker 3

Operator, you can now close the call.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at

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