Polypid Ltd. (PYPD) Ori Warshavsky COO.

Welcome everyone, this is Jeff Kohn with the Wall Street resource. Joining me is Ori Warshowski. He's a CEO of PolyPid. Good morning, Ori. I'm just the CEO, just a mature lady. Oh, I don't get in trouble with my boss. No, my bad. I appreciate that. Ori Warshowski, CEO, a bad habit on my part. Anyhow, Ori, can you just tell us a little bit about PolyPid for those that are familiar? Yes, of course. We are a biopharm company based in Israel with a delivery, drug delivery platform called Kinetrix. This platform, very high level, can take many types of drugs and turn them into a local high concentration prolong release. Specifically, we can customize the release to fit whatever the market needs. For example, our main product, which we'll talk a lot about in a few minutes, is customized for 30 days of release with other products that are designed for three weeks, some for even more than that. It's a very unique and differentiated model. We are back for integrated meaning with all the capabilities in-house from the research and development to manufacturing, to clinical and regulatory teams. Our least product, Deplex 100, finished our clinical trial with very successful results. I'm sure we'll mention this later. We just signed a major commercial deal with a US player to commercialize the product. We actually yesterday morning received a letter from the FDA accepting our file and basically taking the final steps towards approval. We are publicly traded under the NASDAQ, under the TKRI BYTV. Very good. You actually answered a few of my questions there, but maybe we'll go a little bit more in depth. If I heard you correctly, it's not just one drug. It's a platform. Is that correct? Yes. Your lead candidate is what and what does it do? A lead candidate, Deplex 100 takes a platform, incorporates into its non-antibiotics, doxic cycling, designed for 30 days of release for prevention of surgical cycling sessions. other side infections or pesticides or infections that happen after a major surgery under the Sombrilla of hospital acquired infections. Basically, a patient comes into the hospital for whether it's a colonneous section, a joint replacement knee, knee heat, a choleractol, sorry, a C-section of surgeries, any major surgery, the surgery goes well and then anywhere within the first 30 days post-surgery and infections can develop. And this infection means another week in the hospital, another potential surgery, additional costs to the hospitals, to the payers. So there's quite a lot of downstream impact. We showed in a large clinical trial close to 800 patient clinical trials, a 60 percent reduction in infection compared to the standard of care. So we ran a trial, a global trial comparing the standard of care today, which is identity biotics, to our product deplex in addition to standard of care. And so amazing result, 60 percent reduction, very highly-statically significant. So from a point of view of the FDA, this was robust enough for a FDA submission, which we did earlier this year. Very good. So also, if I understood you correctly, it's not the drug you developed. It's more the delivery method. Is that correct? This is a drug that's out there already and well used. So, dosycycling is a non-antibiotic. We took him and basically gave it almost completely different life in the unexplained. So, the problem with surgical side infection is a patient takes antibiotics before the surgery to try to prevent infection. Now, once a surgeon does an incision to start the surgery, by definition, the surgeon cuts the blood flow to the site and any antibiotics basically stop working because the exam gets to the area where it needs to work. What we did is we turned this voxycycling through our delivery system into a powder. The surgeon applies the powder directly on the incision. So now there's local eye concentration of antibiotics for the 30 days, even though the blood flow is lacking and there's you know that the wound is still healing. There's very eye concentration locally. This localization also means that there's no systemic impact on the body. None of the kidney toxicity that you see with antibiotics. None of the blood microbiome issues that you see with antibiotics. And significantly less drug resistance because of the this high concentration locally. So, there's also five tumor systems. Okay. And then the regulatory pathway for this, even though it's an existing drug, it is what? The pathway is what is called the 505B2 pathway, which is a pathway for basically a situation like us taking a known active ingredient and using it in a different way. We submitted the new drug application in end of May. We actually just yesterday morning received what is called the acceptance letter. So the FDA accepted our file. They gave us priority review. FVAC is this product. It has a breakthrough therapy. There's high onmet need for this product. So designated as a priority review. And with this priority review, the FDA already gave us the expected approval date or cadufe date, which is expected to be on November 20th, this year. I'm sorry. I cut out a bit. I didn't hear the date. The cadufe date. The cadufe date is November 28th here. It is an expedited review six months instead of the traditional tenments because we are a priority review breakthrough therapy drug. So excuse my naive a take here. But on that date, if everything goes well, you could have an approved drug or is there more further bureaucracy with FDA? No, no. This is the final step. The final step approval is November 28th. Very good. And then in terms of the confidence that it'll go well, it's because I'm assuming because it's an existing drug or what else gives you confidence. Do you have any journal write-ups or what gives you the confidence that this is going to be a go? This will be approved. So first, we have a very robust data, which is done on the first step. The first step is the very robust data, clinical data. We also have been conversations with the FDA over the last almost a year back and forth agreeing with the FDA. What type of information is needed for submission? One type of statistical analysis is the needed for submission and we submitted all of that as part of the package. In the letter that came today, the FDA wrote in big books letters, no filing review issues were identified. So that also gives us another. Doesn't mean that nothing can come down the line. But it is at this point, after the file has been with FDA for 60 days, nothing showed up. We do have, and I'm sure we'll speak about this in a minute, we signed the agreement with a partner for this product and they did their own due diligence and they review the file and they went through all the processes and batch records and SOPs as part of the due diligence for the deal and also agreed that this is an approval file. Okay, and then what type of study did you do for this? The study was a almost 800 patients global trial in US, Europe and Israel looking at a full with a double blind, randomized, all the good clinical practices, looking at comparing the standard of care to deep looks in addition to standard of care. And this was all up until now, this was the second phase three between the two phase three and the phase two, we have almost 2000 patients that were part of our clinical program for this product. Okay, so I'm trying to get my arms around the size of this market. It sounds pretty large and then also what what docs are currently doing that did I hear you right that the current state is just take some some medicine prior to the operation or or what are you competing against? Yeah so today the across the board in major surgeries doctors do give I can't be biotics 30 to 60 minutes before the surgery specifically in a call erectile there's also what is called a bowel crest so just like it head of a colonoscopy basically doing to antibiotic and other other liquids to kind of clean you from the inside of the in preparation for surgery and for the most part those are those are the main the main activities the doctors do they're all sorts of other stuff let's call it managing temperature and managing glucose level and training with scissors and that with clipers really a one range of of activities but I guarantee biotics is true across the board and I think what we what we said right now with this large trial with this robust data is really a high hurdle for anything new product to come into the space so they will have to just like we compared ourselves to the standard of care anything new that comes up will have to compare themselves to us to really show a meaningful value So I'm trying to see why they wouldn't use this is it a lot more expensive than the other drugs I continue that in my conversations with surgeons and I really I spoke to surgeons and I spoke to pharmacists into infectious disease specialist in the hospital and I've never I never got a no I wouldn't use this and maybe I got to I would use it but I need to see more data or I would use it depending on the price but all surgeons understand the the issue of infection all surgeons know their own level of infection infection rates the hospital itself is required to report infection rates to CMS to Medicare and Medicaid so this is public information and hospitals actually get penalized on the level of infections so it's really the way we're adding another level of protection for infection which really doesn't change much in how doctors close the incisions today but they give them an additional piece of mind from a cost perspective on cost perspective we are looking at somewhere between 400 to 600 dollars per mile and the open procedure takes being between two to three to three miles so somewhere somewhere between a thousand dollars per surgery is the passion very good it's maybe one more piece and it's important to understand the farmer the farmer economics here on being because we talked about their price the reimbursement piece here which is always a question when farmer is a little different with the store that we are because because infections or surgical site infections are under the umbrella of hospital acquired infections the insurance basically tells us the hospital this is not my problem this is hospital acquired which is your your problem to deal with meaning there's the hospital sets set set reimbursement price for a column reception for example the average in the US right now is about $40,000 for surgery with a comorbidity now the now is the surgery went well and the patient way went home on time the hospital makes money if there is an infection now the patient stays another 10 days in the hospital all this additional cost is completely borne by the hospital so there's a direct impact on the hospital margins for this cost and we know from literature each event like this can cost somewhere between 20 to 30 thousand dollars to the event so there's a direct impact on costs there's also as I said penalties from CNS on infection rates there's also a reputation of costs here because if you go to an and elective surgery you know I know if I go to elective surgery I will do the research and see a performance in KPIs and qualities and this is reported in the US news best hospitals and in all these other measures so there's a direct impact from a cost perspective and this is kind of when we build a thumb economic model we show the hospital this is what your expected costs these events 10 to 15% infection rates per year and this is what we can see this is what this product can say very good and I think you mentioned you have a recent partner and I'm sure they've done due diligence before partnering but can you tell us a little bit about that partner? Yes absolutely this is this is an announcement from from last week we took the decision a couple of years ago that to partner or out license this product and not to build our own internal sales capabilities just because of the cost of building something from scratch like that and learning curve we signed an agreement last week with azurety farmer azurety is a private company backed by qhp capital they are in the hospital space they have a portfolio of over 50 products in 10 to 20 areas the products for the surgery room the antibiotics that they already sell they have really all the necessary commercial infrastructure to promote a product in the hospital and what they would they say agreement that we signed if basically has three parts to it first azurety receives the rights to commercialize defects 100 in the US and Canada so they will be responsible for all the commercial activities sales marketing market access contracting everything that has to do with us will be on their their responsibility the second part of it is manufacturing and supply which be our responsibility politics responsibility and the third piece is a future development of how to expand the label the usage of the of defects 100 and this a development the agreement is designed such that azurety will fund it and we will we will exit the political exit the financial behavior is very attractive we received 30 million dollars as an upfront payment there are additional $290 million in development and sales milestones and these are all achievable milestones in the in the next few years there's no bio box there there's no kind of inflated numbers it's really targets that are achievable in addition to these milestone payments we are eligible for a royalties that start in the meetings and ramp up all the way to the mid 20 and since we are the manufacturer there's a pre-set transfer price per vine there's a margin on the transfer price so it's not just cost plus there is a much margin that we make on each vine and any efficiencies economies of scale or development or manufacturing efficiencies we get to keep the additional margin so overall overall if it looks on some of what the analyst assume or it's a the weak it based on this agreement between 40 to 50 percent of the overall economics of of of sell of the product very nice and so you mentioned in Canada? Do they have an exclusive "just for us" in Canada? Yes, we we we we we we say the rights for all the other markets, and we we say the rights for everything that is outside the space of a surgical site infection. So for example, if we want to develop and we have some some additional things in the pipe instead of a prevention. prevention of infection, but treatment of infection, this is something that's deal with us. So do you have a partnering partnering strategy for XUS Canada at this time? We have we have the fuel markets that we that we market as a kind of a first first goal, European markets, Mexico, Brazil, and some of the larger markets in Asia, China. China potentially Korea is one of them. A lot of it will depend on on on pricing in these markets and the reference pricing to back to Europe or US. We don't want a smaller market like Korea to impact our ability to sell. in a new role because of reference pricing. So those are the kind of considerations when we came off with the list of the next targets. - Okay, and I think I heard you say that you're gonna be manufacturing the drug, correct? And where is that gonna be manufactured and will that facility be ready to go when the drug is ready to go? - Yeah, so our main manufacturing site is in Israel. The site has been audited by the Israeli and European authorities a number of times with no major issues. The manufacturing team is preparing for an FDA inspection which is expected to come in towards the end of September. And this is really the next big hurdle ahead of approval and we are putting really all efforts and resources needed to make sure that we pass this inspection. We had a number of mock inspections and there's at least one more plan. We have the former global, chief global quality of Kava Pharmaceutical is now an advisor and he's basically working with the team every day to prepare for this inspection. And as you can imagine, as do we see when they, when before they signed the partnership deal, they had a team at our site, they did their own audit, their own due diligence, they went through all the records. So I think we feel confident in this inspection. - Okay, and I think you said use the word main manufacturing. Do you have a secondary site or in the works? - This is our site, there is a provision in our agreement with the Zority, but if we need another site, they will find the tech transfer for another site outside of the zone. - Okay. - And right now, this is our site. - Gotcha. And was this delivery method developed in house or was it acquired and if acquired, the only license increased? - It was developed completely in house by our founder, Dr. Noh Mimanwell. And the technology, the, yeah, we have over 170 patents around the technology, the delivery, the product itself, and more and more are being developed. We, and we own all of it. - Okay. At this point, as we monitor the company, what are some of the events and timelines? You've mentioned one or two already, but what are some of the events or timelines we should look for? - Yeah, I can put it all on the timeline. So, I'll start from a week ago because it'll make it even better. So last week we signed the commercial agreement with Azure EP yesterday we received that second set of from the FDA and received the date of the pedupa. What's coming next is a fact inspection in the fall. And then also a European submission, submitting to the EMEA summer runs September, October as well, approval coming in end of November and then launch early 2027 as a warranty will launch the product. - Very good. - No, it is, yeah, sorry. - No, I was just gonna say, is there anything that you wish I would ask that I fail to ask you? - I just, I really wanna make sure it's clear that a kind of former financial perspective, given the cash in the bank to the $30 million that came out of this upfront. And the additional milestone that we expect we really don't see the need to raise money in time soon. We are well funded. Yeah, and also, you know, as you look at the market cap, the market cap of the company is around $80 million today, which for me it's kind of a family company that is really in the final step for approval with the partner in the market. So, at least for my perspective, an undervalued and a little hidden gem kind of in this space. - What's the biggest disconnect you think why the market's missing this? - This is the question that they, I've been asked a lot the last week or so, and I don't really have a good answer. We really expected that kind of the acknowledgement from the FDA to bring more excitement. We have, like I said, with very dearest products, with a partner that's willing to put a lot of money to this product to succeed in the market. It's a large on-met name. The only thing I would say is people have a hard time to maybe understand the hospital business. It's not a straightforward kind of auto model this. It's of course, it takes longer to get products into the market. Usually it's kind of 69 months and things start seeing, how long and things start seeing, uptake in revenue. So maybe that's a little bit part of that a jewelry farmer from the Sulaikov is not an household name. It's not a known brand in the farmer's state, but again, it's a very good partner with a very willingness to kind of hold up his needs and make a success out of this product. - Very good. And it's a very late stage story, which is nice. - Yeah. We took most of the risk already, you know, away. - Well, Ori, thank you so much for sharing the polypid story. - Thank you, I appreciate you having me.