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

Hello, everybody, and thank you for coming to listen to my talk about Sol-Gel. Before I start, please pay attention to this cautionary note on forward-looking statements. 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 September, our NDA for our branded drug candidate, Epsolay for papulopustular rosacea was accepted for filing by the FDA. The PDUFA goal date was set for April 26 of this year, 2021. If approved, Epsolay has the potential to be the first single-active benzoyl peroxide approved by the FDA as a prescription drug product. Last November, our NDA for our branded drug candidate, Twyneo for acne vulgaris was also accepted for filing by the FDA. The PDUFA goal date was set for August 1 of this year. If approved, Twyneo has the potential to be the first FDA-approved acne treatment that contains a fixed-dose combination of benzoyl peroxide and tretinoin. Last March, we updated that our Phase I proof-of-concept study for erlotinib gel was expanded for patients with any type of palmoplantar keratoderma. Results are expected in the third quarter of this year. We are in preclinical testing of tapinarof and roflumilast for various skin conditions. We are also preclinically testing if their combination might be more effective in psoriasis than each active ingredient alone. Our generic pipeline benefits from our expertise in topical drugs. As a result, we have 11 50-50 gross profit sharing collaborations with Perrigo. These collaborations generated $22.8 million in net revenues last year and $6.6 million in net revenues in the first 9 months of 2020. The next 2 slides are about our proprietary microencapsulation in silica platform technology that aims to provide effective and tolerable topical therapies to achieve local action. 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 benzoyl peroxide crystals entrapped in our silica-based microcapsules. As you can see in these pictures, the microcapsule silica shell wraps around the benzoyl peroxide crystals, and therefore, it can serve as a barrier between the benzoyl peroxide crystals and the skin. Yet, as our microencapsulation is being conducted on site, we can modify the properties of the microcapsules to allow slow release of the benzoyl peroxide over time after it is applied onto the skin. Tretinoin is an active ingredient used together with benzoyl peroxide in Twyneo. And these are 2 same pictures of tretinoin encapsulated in our silica shell. On the left, you can see a slightly damaged silica shell. If you take a closer look, you can see a tretinoin crystal entrapped inside. In the picture on the right, you can see that these microcapsules had a core shell structure. While our silica shells are too small to be felt, the complete encapsulation allows us to stabilize tretinoin in the presence of benzoyl peroxide. The silica shell serves as a barrier between the tretinoin and the skin, and the release of the tretinoin is tuned by modifying the properties of the silica-based shells to allow a continuous flow of tretinoin over time after it is applied onto the skin. A pharmaceutical indication we are focused on is papulopustular rosacea. Papulopustular rosacea is a chronic inflammatory skin condition that most often affects the face. As you can see in this photo, it resembles acne vulgaris except that comedones, whiteheads and blackheads are absent and only inflammatory lesions exist. Regretfully, 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 it is assumed that 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 using our encapsulation technology 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 multicenter, double-blinded, randomized and vehicle-controlled on patients with moderate to severe papulopustular rosacea. Patients were randomized 2:1 to receive either Epsolay or vehicle, applied once daily over a 12-week treatment period. 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 studies, patients treated with Epsolay had a mean reduction from baseline of 17.4 and 20.3 inflammatory lesions compared to a mean reduction from baseline of 9.5 and 13.3 inflammatory lesions in patients who applied the vehicle. Again, these were 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 it gets 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, the 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 count. Epsolay demonstrated statistically significant higher 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 IgA of clear or almost clear. Only 4.8% had moderate rosacea and none had severe rosacea. So not only does Epsolay work fast but improvement continued beyond the 12-week treatment of the pivotal trials. 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 acne, tretinoin regulates hyperkeratinization and abnormal desquamation of the follicular epithelium, namely it opens up clogged pores. Even though benzoyl peroxide and tretinoin had a complementary mechanism of action, as of today, no such combination has been approved by the FDA because benzoyl peroxide decomposes tretinoin rapidly, so patients cannot use both drugs concomitantly. So we developed Twyneo, which is a cream containing a fixed-dose combination of encapsulated benzoyl peroxide 3% and encapsulated tretinoin 0.1%, in which the encapsulation has 2 roles: to prevent the decomposition of tretinoin by benzoyl peroxide and to reduce the irritancy of both active substances. Following a successful Phase II study in which we address the combination rollout, 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 2:1 to receive either Twyneo or vehicle applied once daily over a 12-week treatment period. 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 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. 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 according to Dr. Hilary Baldwin, this patient is no longer eligible for Accutane. Our encapsulation system and branded drug product candidates are extensively patent-protected by allowed patents until 2040 for Epsolay and by granted patents until 2038 for Twyneo. We commissioned 2 market researches regarding Epsolay and Twyneo with national, regional and state-level commercial payers representing more than 100 million covered lives. The vast majority of respondents found both products compelling enough to drive formulary consideration. There was no unanimous recognition of Epsolay as an additional option for rosacea, and responses that if Epsolay is priced and rebated similarly to the covered products, coverage seems likely. There was also recognition that we know will be qualified for formulary addition and that the price will determine its position. If you price it like Epiduo, it will be managed like Epiduo. We will continue with spare discussions as we move towards launch, and we will refine our go-to-market pricing and access strategy as needed in order to maximize the market potential of both products. We are progressing towards commercializing Epsolay and Twyneo in the second half of this year, either ourselves or by partnering with a dermatology company that has a strong market presence. We estimate, based on market research that we have done, that no more than 45 to 62 sales representatives are required in order to access 3,300 dermatology practices, representing approximately 6,500 dermatologists and 6,000 nurse practitioners and physician assistants who prescribe about 80% of the prescription by dermatologists in acne and rosacea. As for partnering with a dermatology company that has an established marketing and sales force on the ground in the U.S., this should allow us to quickly capture market share without the need to invest in building our own marketing and sales force. We are exploring a few opportunities and we will announce if these discussions mature. Our generic pipeline benefits from our expertise in topical drugs. As a result, we have 11 50-50 gross profit sharing collaborations with Perrigo. In March 2017, Perrigo filed a Paragraph IV certificate for Soolantra. In February 2019, Perrigo launched acyclovir cream 5% developed in collaboration with Sol-Gel. In January 2020, Perrigo filed a Paragraph IV certification for Bryhali. And in June 2020, Perrigo was first to file a Paragraph IV certification for Duobrii. All in all, we consider our generic pipeline as a source of nondilutive income to fund the development of our innovative branded drug product candidates. At the end of last September, we had $57.3 million in cash and investments. The cash we have is expected to be sufficient to fund us into the third quarter of this year. Last March, we updated that our Phase I proof-of-concept study for erlotinib gel was expanded for patients with any type of palmoplantar keratoderma. If successful, this will pave the way for using erlotinib topical drug products for other rare and common skin conditions. Results are expected in the third quarter of this year. We also announced last year that based on extensive patent analysis and 15 provisional patent applications that we submitted, that we intend to investigate tapinarof and roflumilast for various skin conditions. We are also preclinically testing if their combination might be more effective in psoriasis than each active ingredient alone. Since the IPO and as of today, we have achieved all our milestones on time. NDA for Epsolay was accepted by the FDA and the PDUFA goal date is set for April 26 of this year. NDA for Twyneo was also accepted by the FDA and the PDUFA goal date is set for August 1 of this year. Thank you very much for your attention.