Collplant Biotechnologies Ltd

NASDAQ:CLGN

Earnings Call Transcript 2023-Q1

[Operator]

Welcome to the CollPlant Biotechnologies Investor Conference Call to discuss Financial Results for the First Quarter of 2023 and Corporate Updates.

I'd now like to turn the call over to your host, Dory Kurowski of LifeSci Advisors. Please go ahead.

[Dory Kurowski, LifeSci Advisors]

Good morning. I would like to welcome everyone to CollPlant Biotechnologies' financial results conference call for the first quarter ending March 31, 2023 and corporate business update. With us on the call today from CollPlant are Yehiel Tal, Chief Executive Officer, who will provide an overview of the company's programs and forthcoming updates; and Eran Rotem, Deputy CEO and Chief Financial Officer, who will provide a summary of CollPlant's financial results for the first quarter ending March 31, 2022.

Before we get started, I would like to remind everyone that 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 CollPlant's filings with the Securities and Exchange Commission. These filings can be found at www.sec.gov or on CollPlant's website at www.collplant.com. In addition, any forward-looking statements made on this call represent CollPlant's views only as of today, May 24, 2023, and should not be relied upon as representing the company's views as of any subsequent dates. And CollPlant management specifically disclaims any obligation to update or revise any of these forward-looking statements.

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

[Yehiel Tal, CEO]

Good morning, everyone. We are very pleased to have you join us today on CollPlant's investor conference call to discuss our first quarter 2023 financial results and corporate developments.

CollPlant is developing collagen technology and regenerative medicine products to improve and prolong life. We are committed to becoming the leaders in regenerative medicine and supporting a more sustainable ecosystem that benefits all stakeholders including patients, our shareholders, our employees, as well as providing innovation to the life science industry.

At the heart of our business is our novel proprietary recombinant human collagen technology. Collagen is the building block for all human and mammalian tissues and serves as the primary scaffolding molecule in the body's connective tissues and organs.

It is our goal to become a global leader in regenerative medicine by applying our non-animal drive recombinant human collagen or average collagen to novel medical and aesthetics products. The hallmark of our technology, of course, is both its regenerative properties, as well as it is xeno tissue filler.

We are applying our technology to dermal filler product candidates. There are long term collaboration with our global pharmaceutical partner out there. The dermal filler candidates have the ability to shift the filler market, since they would provide regenerative properties in addition to tissue filler. This program is our top focus and it continues to move forward according to plan.

CollPlant has the potential to save additional milestones and option payments from AbbVie related to this program, as well as royalties on the dermal filler cells once this product candidate obtains a program.

AbbVie continues to advance the filler program and as stated previously, CollPlant expects that the first milestone could be achieved in 2023. Additionally, we continue to advance the development of state-of-the-art photocurable thermal and soft tissue filler. Our goal is to create an innovative filler product with three capabilities, lifting capacity, regeneration of new tissue and contouring capabilities.

As we are making these improvements to the filler product that exist today, we refer to this as a third generation filler. We believe that this filler has the potential to be highly competitive by providing both refine and natural looking aesthetic results, as well as uniquely regenerative long term benefits.

Furthermore, this technology could also be augmented to include facial body contouring applications. CollPlant has granted AbbVie, the right of first negotiation to obtain a worldwide exclusive license to this product candidate.

And now let's turn toward the regenerative breast implant program. At the beginning of this year, we announced positive results from the preclinical study evaluating our regenerative implants in a large animal model. We are very encouraged by these results which demonstrated progressive stages of tissue regeneration after three months as highlighted by the formation of maturing connective tissue and no vascular networks within the implants with no adverse events reported.

This study forms the basis for our subsequent trial in the second large animal model evaluating larger implants that we plan to initiate in the second half of this year. We are currently preparing the infrastructure to support this trial.

No regenerative breast implant currently exists in the market and this implants would be the first of their kind also having unofficial regenerative properties. Importantly, just recently in April, we announced a joint development and commercialization agreement with Stratasys, a world leader in an additive manufacturing and a leader in 3D printing technology after pioneering this technology decades ago.

With Stratasys, we are collaborating on the development of a solution to biofabricate human tissues and organs. This collaboration combines the Stratasys DLP 3D printer that is utilized with a unique programmable photo polarization P3 technology together with core client state-of-the-art, rhCollagen-based BioInk and 3D bio printing capabilities.

The first of our collaborative projects will focus on the development of an industrial scale solution for CollPlant's regenerative breast implants program. And effective solution for scale up of this implant will be important to support clinical trials and commercialization.

Here you can see an example of a breast implant that was printed with Stratasys DLP 3D printer utilizing its P3 technology in combination with CollPlant's rhCollagen based inks. Other agreement, both companies have also agreed to cross promote each other's bio printed products. We do have strategic collaborations for bio printing with multiple parties and as we have said in the past, our strategy is to utilize different printing technologies to serve different indications being solved. For example, a product that would need to have use of multiple materials or for the printing of construct with very small features such as gut-on-a-chip or long-on-a-chip tissue models.

The bio printing aspect of our business has applicability in multiple areas. CollPlant's implants are designed to regenerate breast tissue without eliciting immune response and therefore have the potential to become a revolutionary alternative to both aesthetic and reconstructive procedures including post mastectomy for cancer patients.

According to the U.S. Food and Drug Administration, approximately 350,000 Americans have reported adverse events involving breast implants between 2009 and 2019. Reports range from autoimmune symptoms to breast implant associated anaplastic large cell lymphoma or BIA-ALCL.

The additional safety and efficacy data that we will generate from this study would be used for the optimization of the regenerative implant and are important in support for future regulatory submissions and clinical studies. We look forward to reporting these results from the study next year.

Shifting to our gut-on-a-chip program, this is an area where we have the opportunity to disrupt the options that have traditionally existed in life sciences. Here, we are developing a diagnostic tool for use in personalized medicine and we expect that this approach could be groundbreaking improvement over the existing use of animal models for drug development.

In November, last year, we signed the collaboration agreement with Tel-Aviv University and Sheba Medical Center for our gut-on-a-chip program. I should add that we are fortunate that the university and the medical centers are close to us only 10 miles away. So we get to collaborate with our partners face to face quite frequently enabling strong relationship.

Our agreement with both institutions is to co-develop a bio printed human intestine model for drug discovery and personalized treatment of ulcerative colitis. The 3D bio printed model is designed to emulate the human intestine tissue in order to allow medical professionals to identify drug targets and personalized therapeutic responses that can lead to improved patient outcomes. Should the gut-on-a-chip receive approval, CollPlant has exclusive rights to commercialize the product.

Now let me turn to our commercial portfolio of BioInks. This platform was established in 2021 with the launch of Collink.3D-50. Following this, we launched Collink.3D-90, which offers increased mechanical properties and Collink.3D-50L, our first BioInk available in powder form to provide enhanced operational flexibility.

The entire platform allows our biopharma and academia customers to streamline their process of new product development by utilizing an animal free alternative that delivers improved bio-functionality, safety and reproducibility.

CollPlant remains engaged in partnering discussions with several additional industry leaders interested in interested in CollPlant's technology and expertise in 3D bioprinting to develop therapeutics and medical applications. We have also developed a proprietary aseptic process to mass produce sterile rhCollagen.

The sterile collagens that we are now producing will be utilized in our pipeline product as well as by our partners. Furthermore, it can serve as an ideal substrate for stem cells, induced pluripotent stem cells and all kinds of primary human cells since our collagen will not elicit immune response and will accelerate cell proliferation. Finally, this collagen will also address production processes where collagen as a major constituent should be sterilized.

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?

[Eran Rotem, Deputy CEO and CFO]

Thank you, Yehiel. Good morning, everyone.

I will now review our financial results for the three months period ending March 31, 2023. This quarter, we saw a significant increase in revenues versus last year. For the first quarter ended March 31, 2023, GAAP revenues increased by $367,000 to $433,000 compared to $66,000 in the first quarter of 2022.

Revenues from this quarter included income from sales of CollPlant, BioInk and rhCollagen and the increase of more than 600% resulted mainly from an increase in sales of our other and rhCollagen to CollPlant's business partner.

As we said previously, according to the agreement with AbbVie, CollPlant has the potential to receive additional milestone payments based on product development milestone reached and CollPlant expects that the first of these milestones could be achieved in 2023.

GAAP cost of revenues for Q1, 2023 was $325,000 compared to $31,000 in the third quarter of 2022. Cost of revenue includes mainly the cost of the company's rhCollagen based products and royalties to the Israel Innovation Authority for the company's sales.

GAAP gross profit for Q1, 2023 was $108,000 and increase $73,000 compared to gross profit of $35,000 in Q1, 2022. The company kept approximately the same GAAP operating expenses level as of last year during this quarter.

Operating expenses in the first quarter of 2023 were $3.5 million compared to $3.8 million for the first quarter of 2022. On a non-GAAP basis, the operating expenses for the first quarter of 2023 were $3.1 million a 9% reduction compared to $3.4 million for the first quarter of 2022.

Non-GAAP measures exclude certain non-cash expenses. GAAP financial expenses net for the first quarter of 2023 totaled $196,000 compared to $92,000 in the first quarter of 2022. The increase in financial expenses net is mainly attributed to an increase in exchange rate expenses from cash and cash equivalents and a decrease in income interest received from company's short-term cash deposits compared to the first quarter of 2022.

GAAP net loss for the first quarter of 2023 was $3.7 million, or $0.33 basic loss per share compared to a net loss of $3.9 million, or $0.36 basic loss per share for the first quarter of 2022. Non-GAAP net loss for the first quarter of 2023 was $3.3 million or $0.29 basic loss per share compared to $3.5 million loss or $0.32 basic loss per share for the first quarter of 2022. We have maintained a strong cash position and have carefully contained CollPlant's operating expenses during Q1.

Cash, cash equivalents and short-term deposits as of March 31, 2023, were $26.5 million. Cash used in operation activities during the first quarter of 2023 was $3.4 million compared to $3.2 million during the first quarter of 2022.

Cash provided by financing activities during the first quarter of 2023 was $803,000 compared to $1.4 million provided by financing activities during the first quarter of 2022. The decrease is mainly attributed to more proceeds from the exercise of warrants into shares typical last year during the same period. This now concludes the financial summary.

Operator, I believe that we can now open the call for questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Ben Haynor with Alliance Global Partners. Please proceed with your question.

[Ben Haynor, Alliance Global Partners]

Good day, gentlemen. Thanks for taking the questions. First off from me just wanted to touch on the Stratasys agreement. I'm not entirely sure on how or whether the Stratasys printed implants are going to be the ones used in the second half or second large animal studies second half of this year. Can you provide some clarification on that?

[Yehiel Tal, CEO]

Yes. Thank you, Ben, for the question. So let me elaborate on the Stratasys' collaboration further. So with the Stratasys, we are collaborating in development of a solution to biofabricate human tissues and organs. And this collaboration will be based on the Stratasys' will be 3D bioprinter that is utilizing unique programmable photo-polarization, P3 technology.

And together with the company's buy rate. The first of our collaborative project will focus on the development of an industrial scale solution for CollPlant regenerative breast implant program. An effective solution for scale up of this implant will be very important to support the clinical trials and the commercialization.

We are now already in a - stage where we are able to print the implants of different sizes including clinical size implants with the Stratasys' printer and we are still optimizing the process, but the plan is to leverage of this printer in the large implant studies that we will do in the second half of this year and basically bring the implants in the study with this printer.

[Ben Haynor, Alliance Global Partners]

Okay, great. So the optimization will be complete before that occurs. And then remind me could the second large animal study, could that be used for the registration study to submit to the FDA?

[Yehiel Tal, CEO]

That's a good question. Actually, the sequence is the following. We are going to have two studies this year. Both will be used for - first of all, optimization of the formulation, this is one thing. The second one, the second thing is for the optimization of the structure of the implant and the biodegradation kinetics.

So these two studies that we will conduct this year, which will not be a long term study, studies will serve for these purposes. And with these results, at the beginning of next year, we plan to go ahead and launch a pivotal study, which it will be according to the plan, the ones that we will use in the submission of the package to the regulatory authorities.

[Ben Haynor, Alliance Global Partners]

Okay, great. And then just if you could tell me how meaningful the cross promotion portion of the agreement with Stratasys', I mean, it seems to me that having a turnkey sort of offering from Stratasys' to bring to their customers would be fairly important and just curious on how you see that playing out?

[Yehiel Tal, CEO]

Yes, okay. So the cross promotion is working in different ways. One way is basically is that we were for example, if we enter the collaboration with the third party, which will require us to develop a product, we will definitely prefer to do this development work and later on the commercialization with the Stratasys printer. This would be the first choice for us.

And vice-versa, its processes will go to sell their printers to users in the market, either academia or commercial companies, then they will promote our biological inks. So this is the basic nature of the collaboration. And there might be also another situation where we will jointly codevelop a product for third party collaborator.

[Ben Haynor, Alliance Global Partners]

Okay, great. That's helpful. And then when should we expect to hear more about the third generation photocurable soft tissue filler. My recollection was that you had submitted some data to have the - just curious on that.

[Yehiel Tal, CEO]

Yes. So first of all regarding that we basically - the dermal filler program without this progressing according to the plan. And as I said earlier, we expect the milestone achievement for the first product that we are working together milestone payment this year in 2023. The photocurable filler is another product which is currently under development. We call it a third generation because there is a sequence of product in the market.

The current gold standard is uric acid product. The second generation is a regenerative implant, which is a dermal filler implant, which is combining collagen and HA. And then the third generation is one which is the photocurable. That's why it's called the third generation. And as I said earlier, this is an option product and should have we decide to trigger these options and of course they can do that.

[Ben Haynor, Alliance Global Partners]

Okay. Got it. And then lastly for me, I think -- well, I guess I don't recall you mentioning body contouring applications for the photocurable product. Could you talk a little bit more about those and maybe the obvious applications that you see there?

[Yehiel Tal, CEO]

Sure. So this product can be -- it's basically a technology platform that can be expanded to different areas in contouring, first of all, facial contouring and then later on body contouring. There are different uses for it. The nice thing about the product that you can control the stiffness of the implant by the illumination process. We also developed a unique light source that is basically able to penetrate through the tissue, through the soft tissue and reach the implant and basically cross linking with the final cross linking process.

So we can achieve the controlled stiffness of the implant and this enables us to expand the use to a variety of contouring indications, which are either body or facial contouring.

[Ben Haynor, Alliance Global Partners]

Okay. So, I guess what would - outside the facial, what would be an example application? I mean, is it -- if I don't like to crease in my armpit, do I get that filled or what are the more non-facial applications?

[Yehiel Tal, CEO]

First of all, it's facial shaping. For example, somebody has a recess in the nose, for example, So you can basically fill in these recess and we regenerate additional displays towards the recess. So this is just one example.

The second one on the kicks. So to change the shape and the nice thing is that the physician can with the fingers sculpt the tissue and basically give you the shape which is desired and then photocured so it will lock on the same shape afterwards.

[Ben Haynor, Alliance Global Partners]

Okay, got it. Well, thanks for taking the questions gentlemen. This is definitely helpful.

[Yehiel Tal, CEO]

Thank you.

[Eran Rotem, Deputy CEO and CFO]

Thank you, Ben.

[Operator]

Our next question is from Swayampakula Ramakanth with H.C. Wainwright. Please proceed with your question.

[Swayampakula Ramakanth, H.C. Wainwright]

Thank you. I have a couple of questions. The first one is on the research program, the gut-on-the-chip program. So with your relationship with the universities there, what are you planning to show at least in '23 to see if you can get outside partnerships so that you can make this a commercialize product.

[Yehiel Tal, CEO]

Sure. Thank you for the question, RK. We have developed a roadmap for this product. First of all in terms of the collaboration, we are like the system integrators in the process. We have television universities that are more related to the development of the chip itself with the nano electronics part. And the Sheba hospital is bringing their - they are contributing by bringing the organoids from the patients and basically providing the clinical support. We have gastroenterologist which is an expert in this filler that is part of the team.

So what we are doing is basically we are doing a process where we start, first of all, we are developing of healthy tissue model and then we induce the colitis on this model. And eventually, the idea here is that by the end of '24, we will have a proof-of-concept of this model. The partners might be different partners. It might be for drug discovery, these are the big pharma companies, but our main goal or main target is to take it to personalized medicine, which has been much bigger market opportunity.

And in this case, we believe that in the future there will be service providers that will basically get from us a printed chip which is mimicking the tissue structure and then they will take biopsy from the patient, extract the cells, see the scaffolds that we are - the chip with the cells, the patient cells and basically after some incubation time to do the screening of the drug or optimize the dose of a certain drug or check different drugs and eventually come up with the most ideal solution for the patient. And later on after the colitis, we plan to expand the use to metabolism and also to colon cancer.

So this is the plan. So bring back to your original question, RK. By the end of 2024, we want to have demonstration of a working model of this gut-on-a-chip tissue, tissue model.

[Swayampakula Ramakanth, H.C. Wainwright]

Fantastic. And then on those - on the inks, on the BioInks the different that you're talking about that you want to come in the commercial portfolio. So with the one which is in the market now, the 3D 50L, what are you learning in terms of people using it and how do you see that growing in terms of revenues, not only this product but also the later products that you're looking at, the 3D 50 and the 3D 90.

[Yehiel Tal, CEO]

Yes. So first of all, let me say something about the strategy. We are now in a stage of positioning our technology of the BioInks is a gold standard in the industry. In order to do that, we are creating building blocks for BioInks. So for each indication you need to use proprietary customized biological ink formulation.

And for this reason, we give the researchers today most of the use are in the academia, of course, or in the companies in the development stage of a certain indication, we give them like a menu of building blocks that they can check and basically select the proper components and assemble their own BioInk.

So, we get so far a very good feedback from our customers in the academia. They're using it in variety of 3D technologies. And basically, the users are different. Some of them are on soft tissue applications, some of them hard tissue, some of them are doing drug discovery. And - we see a ramp also in the sales of this product.

[Swayampakula Ramakanth, H.C. Wainwright]

Okay very good. That's all I have for you folks. Thank you.

[Yehiel Tal, CEO]

Thank you. Okay.

[Operator]

I believe that is our last question from our live audience participants. So now I'll turn it back to Mr. Rotem for any questions that came in online.

[Eran Rotem, Deputy CEO and CFO]

Thank you. So I have currently two questions. So I'll address them. And the first one is coming for Mr. Levy and the increase in revenues we see that revenues are up versus last year. Can you elaborate why, who was the customer and what do you expect the trend will be?

Okay. So the revenues in the first quarter including, income from the sales of the company's is rhCollagen and it's a significant ramp up from last year and the majority of the sales are from - one of the strategic business partner of CollPlant. Note that in 2022, CollPlant did not have - did not receive any milestone payment.

And we do expect to receive the first milestone - the first of this milestone in 2023. And I cannot - disclose the name of the customer, but it's a strategic partner that is responsible for the majority of the sales.

The second question is - the second question is coming from [Mr. Braun]. The question is what will trigger the right of first negotiation for the filler application product which AbbVie - has been granted by the company. Is there a time, expiration for this right?

So this question is referring to the - what Yehiel described earlier is the third generation a dermal filler, the one that is - the photocurable one that is doing a contouring. And as said by Mr. Braun, it has the right of first negotiation. There is a mechanism in the agreement that includes the timelines, unfortunately, we cannot disclose more than that about what exactly.

What we are doing along as you can see along the last year, we are updating the market and the public regarding the progress in the development. In the last during the last 12 months, we announced some news from a, preclinical studies. And eventually, we will have to - we will reach the point where we will have news about exercising that kind of the right or not. So at this point, we are in a - progress in the development as mentioned.

That concludes our questions from the audience. And I will now turn the call back to the Yehiel Tal, CollPlant's CEO for any closing remarks. Yehiel?

[Yehiel Tal, CEO]

Thank you, Eran. As I have stated, we at CollPlant is tired to become leaders in regenerative medicine. I think people live longer and better and creating improvements in science through our regenerative technology.

Our goal is to create better alternatives and options for the future such as an unlimited supply of spare parts of the human body, including life-saving organs, medical treatment tailored for the individual characteristics of each patients and drug developed without the need for animal testing.

As mentioned, our vision is to enable a world with unlimited organ supply regenerative tissue products and novel drugs and diagnostics that do not rely on animals. We are confident that our collaboration with the worldwide pharmaceutical leader as well as other numerous collaborations in partnership, agreements, has validated our technology and its multiple areas of applicability.

In closing, I want to reiterate our upcoming goals for 2023. We continue to advance development of paradigm shifting regenerative dermal and soft tissue fillers with AbbVie, expecting first milestone achievement in 2023. Initiate study in large animals with commercial sized implants to regenerate additional safety data and in support of commercialization.

Advanced development of the gut-on-a-chip tissue model for drug discovery and personalized treatment of ulcerative colitis. We continue to expand our commercial portfolio of BioInks - of rhCollagen-based BioInks and the last one is form new collaborations with industry leaders to co-develop therapeutics and medical applications.

And I would like to thank you everyone for joining us on today's conference call.

[Operator]

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.