Sol-Gel Technologies Ltd. (SLGL) Earnings Call Transcript & Summary

Our first presentation is from Sol-Gel. Please begin.

Hello. Good morning. And welcome to the first and, hopefully, not annual Solebury Trout virtual global health care conference series. Thank you so much for joining us this morning. We have a fantastic group of companies presenting throughout the series. If you wish to schedule a one-on-one meeting with one of our presenters, please reach out to your Solebury Trout contact or go to www.troutaccess.com to make the request. As a reminder: Feel free to submit your questions throughout the presentation. While there won't be an answer session, we will follow up with answers individually. These are indeed challenging times, and this event would not be possible without the vision of Tommy Hoffman and Brian Korb; or the incredible hard work and late nights put in by the behind-the-scenes team of Jen Porcelli, Casey Stekloff and Lee Stern. They have done a phenomenal job on a very short notice. With that, let's get started. My name is Chiara Russo, and I'm a vice president here at Solebury Trout. And it is my absolute pleasure to introduce the first presenter, Dr. Alon Seri-Levy, Co-founder and CEO of Sol-Gel Technologies. Dr. Seri-Levy, please go ahead.

Thank you very much. Good morning and good afternoon, everybody. And thank you to Solebury Trout for the opportunity to still talk to you about Sol-Gel even when face-to-face meetings are not feasible. I apologize in advance, as I have an allergy and that I may have to mute myself for a few seconds in order not to sneeze into your ears. It's not COVID-19, just a seasonal allergy. Before I start, please pay attention to this cautionary note on forward-looking statements. For those of you who do know us, let me start with a brief update regarding the time lines for our late-stage investigational drugs Epsolay and Twyneo. We completed the clinical programs required for the submission of our NDAs for Epsolay and Twyneo. We also met with the FDA for pre-NDA meetings. Exhibit batches for Epsolay were produced at full commercial scale, and the next production step is the manufacture of the commercial and validation batches. Exhibit batches for Twyneo were produced on a 200-kilogram scale. Our CMOs for Epsolay and Twyneo are open despite COVID-19, and we therefore do not anticipate delays in the submission of the NDAs or the production of the commercial and validation batches for both Epsolay and Twyneo. This is, of course, a dynamic situation which we will be monitoring closely. As for our current modus operandi, our company is following all restrictions published by the Israeli Ministry of Health, and therefore no more than 30% of the employees work at our facilities at any one time. BCP and DRP were in place ahead of the COVID-19 crisis. And our IT infrastructure allows recovery in case of a disaster; secured remote access to servers, financial activities and quality systems; and access to remote conferencing services. Our company is taking all measures to ensure the well-being of our employees, including frequent on-site cleaning and sanitary measures. On-site and remote IT support is available. All business travel abroad was canceled and replaced towards telecoms and video conferences. Purchase orders were placed to increase our current inventory. And lastly, SGT 2010 (sic) [ SGT-210 ] stage 1 proof-of-concept clinical study for erlotinib in punctate palmoplantar keratoderma type 1 is ongoing, subject to Israeli Ministry of Health Guidelines for COVID-19. For those of you who don't know us, [ here is a brief ] introduction to our dermatology company. Sol-Gel has 2 pipelines of topical drugs, a branded pipeline and a generic pipeline. Our branded pipeline is based primarily on our proprietary microencapsulation in silica platform technology. Last July, we announced positive Phase III pivotal trial results for our branded drug product candidate Epsolay in papulopustular rosacea, with NDA submission expected in the first half of this year. If approved, Epsolay has the potential to be the first FDA-approved single-agent benzoyl peroxide prescription drug product and to work faster and better than existing drugs. Last December, we announced positive Phase III pivotal trial results for our branded drug product candidate Twyneo in acne vulgaris, with NDA submission expected in the second half of this year. If approved, Twyneo has the potential to be more effective than existing drugs. Last January, we announced that we initiated a Phase I proof-of-concept study for erlotinib gel in a rare skin condition called punctate palmoplantar keratoderma type 1, with results expected early next year. We recently also announced that, based on extensive patent analysis and [ 15 ] provisional patent applications that we submitted, we intend to investigate tapinarof and roflumilast for various skin conditions. I would like to emphasize that our resources are primarily dedicated to advancing Epsolay and Twyneo through FDA approvals to the market, but we never stop thinking of the days after Epsolay and Twyneo are launched even in these tough times of COVID-19. Our generic pipeline benefits from our expertise in topical formulations. As a result, we have 7 50-50 gross profit-sharing collaborations with Perrigo. These collaborations generated more than $22 million in net revenues last year. The next 2 slides are about our microencapsulation in silica platform technology. Benzoyl peroxide is an active ingredient used in both Epsolay and Twyneo. And this is a cryo SEM picture and its corresponding EDS map of BPO crystals entrapped in our silica microcapsules. As you can see in these pictures, the microcapsule silica shell entirely wrap around the benzoyl peroxide crystals, and therefore they can serve as barrier between the irritant benzoyl peroxide crystals and the skin. Our silica microcapsule [ samples in lipids ] penetrate in and gradually dissolve the entrapped benzoyl peroxide. The dissolved benzoyl peroxide then reaches out through the polysilicon shell to the skin. Tretinoin is an active ingredient used together with benzoyl peroxide in Twyneo. And these are 2 SEM pictures of tretinoin encapsulated in our silica shell. On the left, you can see a slightly damaged silica shell, and if you take a closer look, you can see a tretinoin crystal entrapped inside. In the picture on the right, you can see that each silica shell may contain [ multi tretinoin ] crystals. While our silica shells are too small to be [ filled ], the complete encapsulation allows us to stabilize tretinoin in the presence of benzoyl peroxide. The silica shell itself is a barrier between the irritant tretinoin and the skin, and the release of the tretinoin is [ fueled ] by modifying the physical properties of the silica shell. Based on our current FDA requirements, we expect that the FDA will require generic substitutions to demonstrate a release profile of tretinoin similar to [ ours ], a hard task to achieve [ unless same ] delivery system is used. Our encapsulation platform and branded drug product candidates are extensively patent protected. A pharmaceutical indication we are focused on is papulopustular rosacea. Papulopustular rosacea is a chronic inflammatory skin condition that most often affects the face. And as you can see in this photo, it resembles acne vulgaris, except that comedones are absent and only inflammatory lesions exist. Regretfully, all current treatments have insufficient efficacy, resulting in poor patient adherence. Benzoyl peroxide is an effective antibacterial drug that is not associated with bacterial resistance. It is widely used in the treatment of acne patients but not for rosacea patients because rosacea patients cannot tolerate benzoyl peroxide. Their skin is too sensitive for such a strong oxidizing drug. We therefore thought that, if we can manage through encapsulation to reduce the irritancy of benzoyl peroxide, then it would be highly effective in the treatment of papulopustular rosacea patients, so we developed Epsolay, a cream containing encapsulated benzoyl peroxide 5%. Our 2 parallel Phase III clinical studies for Epsolay were multi center, double blinded, randomized, vehicle-controlled on patients with moderate to severe papulopustular rosacea. Patients were randomized 2 to 1 to receive either Epsolay or vehicle applied once daily over a 12-week treatment period. The studies were designed with 2 primary end points at week 12: percentage of patients achieving clear or almost clear in a 5-point investigator global assessment, IGA, scale; and absolute means (sic) [ mean ] change from baseline in inflammatory lesion count. This slide shows that the rosacea severity baseline was similar between the active and the vehicle arms in both studies and that the discontinuation rates were low. The intentions-to-treat population in the active arm was [ 240 ] subjects in study 54-01 and 250 subjects in study 54-02. At the end of the pivotal studies, 43.5% and 50.1% of the patients treated with Epsolay reached clear or almost clear compared to 16.1% and 25.9% of the patients who applied the vehicle. These were highly statistically significant differences. In addition, at the end of the study, patients treated with Epsolay had mean reductions from baseline of 17.4 and 20.3 inflammatory lesions compared to mean reductions from baseline of 9.5 and 13.3 inflammatory lesions in patients who applied the vehicle. Again these are highly statistically significant differences. We are particularly excited about the efficacy results shown on this slide, as the data demonstrates what we believe will be a true differentiating factor for Epsolay, namely how quickly to get patients to the stage of clear or almost clear. This slide shows that Epsolay demonstrated statistically significant higher success in IGA compared with the vehicle at every visit and as early as at week 2 and also that 25% of the patients treated with Epsolay already reached clear or almost clear as early as at week 4. The same applies for the mean reduction from baseline in inflammatory lesion counts. Epsolay demonstrated statistically significant high reduction compared with the vehicle at every visit and as early as at week 2. This is an example of how fast and how well Epsolay works. This patient had moderate rosacea at baseline. Improvement is noticed at every visit, starting week 2. At the end of the study, the patient's face were almost clear of rosacea. Here is another exciting finding. At the end of a 52-week long-term safety study, 73.2% of the subjects treated with Epsolay reached clear or almost clear. Only 4.8% had moderate rosacea, and none had severe rosacea. So not only does Epsolay work fast, but substantial improvements continued beyond the 12 weeks treatment of the pivotal trial. There are clear limitations in comparing data sets across clinical studies. And I emphasize that we did not do head-to-head studies for Epsolay and that this chart is for illustrative purposes only. That being said, when we look side-by-side at the success in IGA of Epsolay; and of Soolantra, which is considered the current market leader, Epsolay distinguishes itself early and clearly. This is important, as patients do not want to wait months for a response, and we therefore believe that the rapid onset of action of Epsolay will be very well received. This time, we wanted to look at the Phase III efficacy results that we got for Epsolay side-by-side with the efficacy results reported for all 4 branded drugs approved by the FDA for the treatment of papulopustular rosacea and an investigational drug that has a PDUFA target action date. Here again we did not conduct head-to-head trials for Epsolay compared to any of these drugs. We were not surprised to find that, after deducting the vehicle effects, Epsolay achieved efficacy results higher than those of any of the other drugs. We encapsulated benzoyl peroxide because we wanted Epsolay to be well tolerated, and indeed, adverse events in the Phase III studies were primarily mild to moderate in severity. There were no treatment-related serious adverse events and only 2 cases of severe application site erythema and 1 case of severe application site pruritus and pain. We monitored dryness, scaling, itching and burning and stinging [ at each visit ]. Baseline tolerability scores are shown in the bottom charts, and week 12 tolerability scores are shown in the upper charts. The major takeaway from this slide is that, although benzoyl peroxide is a strong oxidizer, there were fewer local skin reactions at the end of the study than at baseline. The same applies for the second study, study 54-02. All in all, Epsolay was well tolerated, with low rate of local skin reactions comparable to vehicle. Another pharmaceutical indication we are focused on is acne vulgaris. Acne is a multifactorial disease of the pilosebaceous unit often treated with benzoyl peroxide or tretinoin. While benzoyl peroxide slows proliferation of Propionibacterium acnes, tretinoin regulates hyperkeratinization and abnormal desquamation of the follicular epithelium, namely it open clogged pores. Even though benzoyl peroxide and tretinoin have a complementary mechanism of action, as of today, no such combination has been approved by the FDA because benzoyl peroxide decomposes tretinoin within hours, so patients either use benzoyl peroxide or tretinoin, but they cannot use both drugs concomitantly. So we developed Twyneo, which is a cream containing a fixed-dose combination of encapsulated tretinoin 0.1% and encapsulated benzoyl peroxide 3%, in which the encapsulation has 2 roles: to prevent the decomposition of tretinoin by benzoyl peroxide and to improve patient compliance by reducing the irritancy of both active substances. Following successful Phase II study in which we addressed the combination [ rule X ], namely we showed that both encapsulated benzoyl peroxide and encapsulated tretinoin contribute to the efficacy of Twyneo, we initiated 2 multicenter, parallel, double-blinded, randomized vehicle-controlled Phase III trials on patients with moderate to severe acne vulgaris. Patients were randomized 2 to 1 to receive either Twyneo or vehicle applied once daily over a 12-week treatment period. The studies were designed with 3 primary end points at week 12: percentage of patients achieved clear or almost clear in a 5-point IGA scale, an absolute change from baseline in inflammatory lesion count and an absolute change from baseline in noninflammatory lesion count. This slide shows that the acne severity at baseline was similar between the active and the vehicle arms in both trial. Only 16 subjects treated with Twyneo discontinued the studies due to an adverse event. At the end of the pivotal studies, 38.5% and 25.4% of the patients treated with Twyneo reached clear or almost clear compared to 11.5% and 47 -- and 14.7% of the patients who applied the vehicle. These were statistically significant differences. Statistically significant differences were also achieved for both reductions in inflammatory and noninflammatory lesions. And this is an example of how well Twyneo works. This patient had severe acne at baseline and, according to Dr. Hilary Baldwin, was eligible for Accutane. Significant improvement is noticed after 12 weeks of treatment with Twyneo, and this patient is no longer eligible for Twyneo -- is no longer eligible for Accutane, sorry. This time, we wanted to look at the highest success in IGA achieved by Twyneo side-by-side with the high success in IGA achieved by 4 branded drugs recently approved by the FDA for the treatment of acne vulgaris. I would like to emphasize that we did not conduct head-to-head trials for Twyneo compared to any of these drugs. After deducting the vehicle effects, Twyneo achieved the highest success in IGA than that achieved by any of the other 4 drugs; and also higher success than that achieved by Epiduo Forte, the current market leader. We are progressing towards commercializing Epsolay and Twyneo in 2021 either ourselves or by partnering with a dermatology company that has a strong market presence in the U.S. We are following [ our work plan ] and have all service providers in place to ensure we meet commercialization time lines. Our U.S. Head of Commercialization, John Vieira, is entirely focused on establishing the marketing and sales capabilities in parallel to us strengthening our supply chain to ensure the future continuous supply of both drugs products from our CMOs to our 3PL providers and to U.S. pharmacy. We commissioned 2 market researches regarding Epsolay and Twyneo with payers representing more than 100 million covered lives in the U.S. The vast majority of the respondents found both products compelling enough to drive formulary considerations. Last month, we closed the follow-on of $23 million gross proceeds. In addition, our Board approved an additional investment of $5 million by our controlling shareholder, Mori Arkin, under the same terms as the follow-on. According to the Israeli law, such an investment requires the approval of the shareholders, and hence a shareholders' meeting is scheduled for April 8. The cash we have is expected to be sufficient to fund us well into the second quarter of next year and, with the additional $5 million, until the middle of next year. Since the IPO and as of today, we have achieved all our milestones on time. Important milestones for this year are, of course, the NDA submissions for Epsolay and Twyneo. As I said at the beginning of my talk, as of the moment, we do not anticipate delays in the submissions of the NDAs or the production of the commercial and validation batches for both Epsolay and Twyneo. Thank you for your time and attention. Keep well, and take care of yourselves and your families.