PolarityTE, Inc. (NASDAQ:PTE) Q1 2022 Earnings Conference Call May 16, 2022 8:30 AM ET
Cameron Hoyler - General Counsel
Richard Hague - Chief Executive Officer and President
Jake Patterson - Chief Financial Officer
Conference Call Participants
Kristen Kluska - Cantor Fitzgerald
Carl Byrnes - Northland Capital Markets
Good day, and welcome to the PolarityTE First Quarter 2022 Business Update Conference Call. Today's conference is being recorded.
And now at this time, I would like to turn the conference over to Cameron Hoyler. Please go ahead.
Thank you, Operator. Good morning and thank you for joining PolarityTE's call to discuss first quarter 2022 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.
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. 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 that are described in our annual report on Form 10-K for the year ended December 31, 2021, and subsequent reports filed with the SEC.
Any forward-looking statements made on this call speak only as of today's date, Monday, May 16, 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.
I'd like to highlight to participants that the call is being recorded. A replay of the recorded call will be available on our Web site 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.
I would now like to turn the call over to Richard Hague, CEO.
Thanks, Cameron, and good morning, and welcome everyone. As we announced via a press release on Friday, I'm very pleased to report that the FDA has granted SkinTE a Regenerative Medicine Advanced Therapy designation. This RMAT designation is an incredible accomplishment for our company, and comes on the heels of the first patient being enrolled in our Phase 3 pivotal study of SkinTE in Wagner 2 diabetic foot ulcers less than a month ago. I'll elaborate on the importance of the RMAT and the status of our ongoing pivotal trial after we discuss the quarter's financials. But needless to say, we are thrilled with the progress that we have made over the last several months.
I would now like to turn the call over to Jake Patterson, our CFO.
Thank you, Richard, and good morning, everyone. Operating costs and expenses decreased $1.6 million or 15% for the three-month period ended March 31, 2022, compared to the three-month period ended March 31, 2021. For the three-month period ended March 31, 2022, cash used in operating activities was $6.0 million or an average of $2.0 million per month, compared to $6.6 million of cash used in operating activities or an average of $2.2 million per month for the three-month period ended March 31, 2021. As of March 31, 2022, we have $18.7 million in cash and cash equivalents, and working capital of approximately $17.2 million.
We believe cash and cash equivalents on our balance sheet together with the net proceeds of the IBEX Property sale will fund our business activities into the fourth quarter of 2022. 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.
I'd now like to turn the call back over to Richard for additional operational remarks.
Thanks, Jake. So, I'd like to discuss three key items in more detail. First, the RMAT designation, what it is, how we got it, and what we believe it means for PolarityTE and SkinTE moving forward; second, our Phase 3 pivotal study in DFUs, and third, the continued advancement of our intellectual property estate. As some of you may know, the RMAT designation framework was established under the 21st Century Cures Act. It is a dedicated program designed to expedite the development and review processes for promising regenerative medicine products. These can include gene therapies, tissue-engineered therapies, and human cell and tissue therapies.
Importantly, however, products that are regulated solely under Section 361 of the Public Health Service Act are not eligible for an RMAT designation. To be eligible for RMAT, a sponsor must submit an application and demonstrate to the FDA that their product satisfies three criteria. First, that the product is a regenerative medicine therapy, in the case of SkinTE, a human cell and tissue therapy. Second, that the product is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition. And third, that the preliminary clinical evidence indicates that the therapy has the potential to address unmet medical needs for such disease or condition.
It is clear that the FDA agrees that the chronic cutaneous ulcers and DFU specifically are a serious or life-threatening condition. To underscore this, we think it's important to highlight some key statistics related to DFUs. The DFU is the most common chronic wound of the food, with an annual incidence of 1.1 million to 3.0 million in the U.S. alone. The prevalence of diabetes, with roughly 37 million people in the U.S. or 11.3% of the population, a lifetime risk of someone with diabetes developing foot ulcers is high as 34%, leading to 20% of all diabetes-related admission.
When current management strategies fail to heal DFU or when they are left untreated, the ulcers typically progress, leading to increased risk of mortality, impairment of day-to-day functioning, and morbidity that often includes amputation. The presence of comorbidities, length of the time a DFU has been present, wound size, depth, and presence of exposed structures are all correlated to decreased likelihood of healing, and increased risk of critical complications such as infection and amputation. Unfortunately, more than a half of DFU become infected, and 17% to 20% of these result in some level of amputation.
Researchers have found that between 2010 and 2015, even after controlling for the prevalence increase in diabetes, the age-adjusted rates for diabetes-related non-traumatic lower extremity amputations increased by 50%. Both minor and major amputations increased during this time, which is a concerning finding as amputation is accepted as an important index for successful care.
Limb loss has a more substantial negative impact on the quality of life than any other complication of diabetes. In addition to their impact on the quality of life, both DRU and lower extremity amputation appeared to be more than just a marker of poor health. They are independent risk factors associated with premature death. Five-year mortality rate for patients with DFU, a minor amputation and a major amputation are astonishing 30%, 46%, and 57% respectively. By comparison, the five-year pooled mortality rate for all cause cancer is 31%.
Regarding FDA's third RMAT criteria related to preliminary clinical evidence, we have long known that the clinical data we generated while SkinTE marketed as a 361 HCT/P had value not only to the patients whose lives were improved, but also to our understanding of how the product worked in different wound types. While our SkinTE development program remains focused on chronic cutaneous ulcers such as the Wagner Grade 2 DFUs in our first pivotal study under IND, The RMAT submission also allowed us to show FDA all the clinical data that has been published to-date. In the RMAT submission, we included data from completed and ongoing clinical studies, evaluating safety and efficacy of SkinTE in multiple patient populations including three completed pilot studies in DFU, VLU, and burns, and two randomized controlled trials in DFU and VLU. In addition to the formal clinical studies, compelling clinical evidence was provided from 8-K series across a wide array of wound types, which included trauma, pressure, and burn wounds.
I would like to emphasize that all of these data are in the public domain, and are cited in our Investor presentation. We would strongly encourage those interested in learning more about SkinTE to read the peer review publications that report these impressive data. Overall, we are very excited about what the RMAT designation may mean for our SkinTE development program. Similar to breakthrough therapy designation, RMAT provides the benefits of intensive FDA guidance on efficient drug development including the ability for early interactions with the FDA to discuss potential ways to support accelerated approval and satisfy post approval requirements, potential priority review of the biologic licensing application, and other opportunities to expedite development and review.
In its correspondence granting our RMAT, the FDA offered us the opportunity to request a multi-disciplinary comprehensive discussion between PolarityTE and the FDA regarding the SkinTE development program including planned clinical trials and plans for expediting the manufacturing and development strategy. We would be making this request shortly and are eager to work closely with the agency to identify potential means to accelerate and broaden our development program.
I would now like to provide an update on our first pivotal study being conducted under the open IND, our COVER DFUs trial. Two patients have now been enrolled and additional patients are being screened at three currently active sites. Importantly, last week we hosted a meeting with physicians and coordinators from 15 sites that will now be qualified to begin identifying patients for our study. I personally had the opportunity to interact with many of the attendees in this meeting. And the enthusiasm for having access to SkinTE to treat patients under this study was incredibly high. As a result, over the coming weeks we expect enrollment to steadily increase.
Finally, I would like to provide a brief update on our intellectual property. We have received additional patent issuances and allowances. And the total number of allowed and granted utility patents worldwide is now 18 with four in the U.S. and 14 internationally. We continue to pursue additional patent applications in the U.S. and abroad, related to our regenerative technologies, including SkinTE.
In terms of recent developments, the USPTO notified us that an additional U.S. patent application will issue on May 24, and the claims to be issued are for compositions that relate to the company's MPFU technology in combination with a cryoprotectant. We also received notification of issuance allowance or patent grants from patent offices in Israel, New Zealand, Vietnam, and Costa Rica. To close the call, I would like to reiterate my thanks to our team for accomplishing the tremendous amount in the first several months of 2022. We look forward to continued engagement with FDA, and will share additional information regarding our progress in due course. Finally, I'd like to emphasize that with these recent accomplishments, we believe that PolarityTE is well-positioned for continued execution of our development plan for SkinTE, and to explore opportunities for strategic partnerships or transactions. Thank you.
I would now like to open the call for Q&A.
[Operator Instructions] We will hear first from Kristen Kluska, Cantor Fitzgerald.
Hi, this is Kristen Kluska, Cantor. Thanks for taking the questions, and congrats on the recent RMAT designation. Wanted to first ask if you could talk a little bit more specifically about some of the topics you plan on discussing with the agency as a result of this meeting. I think in the press release you said, in manufacturing, and expedited ways of getting the drug approved. So, can you comment a little bit more specifically on that?
Yes, hi, Kristen, and thanks for the question. First off, the first topic that we'll be discussing with them is our second trial design. So, we had mentioned previously, we've been working with the FDA to get clarity around that. We actually had requested a Type C meeting. And as a result of the RMAT being granted to us, FDA asked us to actually cancel that meeting and reschedule it under the RMAT. So, we're going to request this Type B meeting shortly. And in that discussion we will absolutely be talking about the trial design for our second study in order to accelerate the approval or the generation of data, I should say, for this current indication of chronic cutaneous ulcers.
Additionally, to your point about manufacturing, obviously, we want to make sure that we have every i dotted and t crossed when it comes to our manufacturing capabilities and our ability to achieve results that are in line with the FDA's expectations. So, as part of those discussions, of course, we'll be talking to the FDA about the status of our ongoing transition to GMP, and our ability to ensure that we are in line and on target with FDA's expectations. And, obviously, if there are ways for us to expedite this process through these discussions with FDA we'll certainly pursue that.
Okay, appreciate that. And just from a communications standpoint, what should we expect, are you going to plan on press-releasing when you have a meeting scheduled or the -- is the next update going to be the minutes? Essentially, just trying to figure out how you guys plan on communicating when or if the meeting takes place?
Yes, it really depends on timing. If it aligns with an upcoming earnings call, then certainly we'll use that as a vehicle. If not, we'll certainly PR any material information that is gathered through the interactions with the FDA. If it's a standard interaction that is simply a dialogue to determine certain processes that we're going to follow we wouldn't necessarily share that. But certainly, as we get clarity around certain specific actions that we plan to take, we will most definitely share that publicly.
Okay, thank you. And then final question for me is just on durability and follow-up, so, obviously, you have a very unique backstory in terms of SkinTE utilization, so just curious, I understand this new path towards an approval. But have you looked at collecting further follow-up data or have you talked closely with these physicians who've utilized the product, both the ones that were in the trial and then both the ones that were kind of these one-off utilizations? Like are you tracking the durability and some of the follow-up around SkinTE cases?
Yes, that's actually a very good question, and the timely question. We are actually working to continue to gather data, both data that has not yet been published or presented anywhere, and other data in terms of, as you described, continue follow-up in durability. So, we are working currently on a publication plan, and hope to be able to generate some meaningful data from the past use of SkinTE in a variety of different wound types. One specific area that we are targeting is an update on pressure injuries. We had a couple of different sites using the product quite a bit in that particular wound type. And we hope to be able to be in a position to get some data published specific to that.
So, it's a great question, and it's something that we consider to be a very unique opportunity for us given our past commercial experience. I will say that in talking to the physicians that attended our recent investigators' meeting, I'd say roughly half of the physicians there had used SkinTE previously. And as I said, the excitement for getting access to the product once again, under the study, was really, really high. And they all had very, very positive things to say about their past experience with the product and the patients that they had treated. So, we certainly plan the find vehicles for ensuring that that any data that we can capture will be utilized effectively.
Got it. Thanks again.
Thank you, Kristen.
And we'll now move to our next question. We will hear from Carl Byrnes from Northland Capital Markets.
Thanks for the question. This is Carl Byrnes from Northland Capital Markets. I'm wondering if you could speak to your expectations with respect to the timeline of the stage 3 DFU trial, specifically when you might conclude patient enrollment and if there would be interim data, and approximately what timeline that would occur, as well as top line -- complete top line readout for this study? Thanks so much.
Yes, good morning, Carl, and thanks for the question. So, we've talked previously about timing. And it's early days, but our internal targets are tied to monthly enrollments of roughly anywhere from four to six patients per month, approximately. We are planning to do an interim data readout. So, if we're fortunate to stay on track with our target, we would expect to have patients -- half of our patients fully enrolled by roughly around the end of this year or early into Q1 of next year, which would, given the six-month follow-up of last patient in, would get us some time in late Q2 or early Q3 of next year for the interim data. Obviously, we're going to do everything we can to accelerate that.
And then, as I said, these 15 sites that were part of investigators' meeting, we're very enthusiastic about enrolling patients. So, we'll continue to report back as we see enrollment increase, and give us a better clarity on the timeline and the targets. But we believe that some time, as I said, Q2, Q3 of next year we would in a position to have the interim data. And I think at this point I'll wait to see how enrollment shapes up in the coming months to make a longer-term statement around the full data readout.
Great, thank you, very helpful.
And ladies and gentlemen, this will conclude your question-and-answer session. I'll turn the call back over to your host for any additional or closing remarks.
Thank you all very much for joining the call today. And have a nice day.
With that, ladies and gentlemen, this does conclude your conference for today. Thank you for your participation. And you may now disconnect.