CollPlant Biotechnologies Ltd. (NASDAQ:CLGN) Q4 2023 Earnings Call Transcript

CollPlant Biotechnologies Ltd. (NASDAQ:CLGN) Q4 2023 Earnings Call Transcript April 4, 2024

CollPlant Biotechnologies Ltd. misses on earnings expectations. Reported EPS is $-0.42 EPS, expectations were $-0.07. CLGN isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greeting and welcome to the CollPlant Biotechnologies Investor Conference Call to discuss Financial Results for the full year and Fourth Quarter of 2023 and Corporate Updates. [Operator Instructions] As a reminder, this conference is being recorded. Now I’ll turn the call over to Dory Kurowski of LifeSci Advisors. Please go ahead.

Dory Kurowski: I would like to welcome everyone to CollPlant Biotechnologies’ financial results conference call to discuss the results for the full year and fourth quarter ended December 31, 2023 and provide a 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 associated updates; and Eran Rotem, Deputy CEO and Chief Financial Officer, who will provide a summary of CollPlant’s financial results for the full year and fourth quarter ending December 31, 2023. Both will be available to answer questions at the end of the call. 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, April 04, 2023 and should not be relied upon as representing the company’s views as of any subsequent dates. CollPlant management specifically disclaims any obligation to update or revise any of these forward-looking statements. Finally, CollPlant management will refer to certain financial measures not reported in accordance with GAAP on this call.

You can find reconciliations of these non-GAAP financial measures to the GAAP financial measures in the earnings press release that CollPlant published earlier today and which is available on CollPlant’s website at ir.collplant.com. Now, let me turn the call over to Yehiel Tal, Chief Executive Officer of CollPlant Biotechnologies. Please go ahead, sir.

Yehiel Tal: Good morning everyone and thank you for joining us today on CollPlant investor conference call to discuss our full year fourth quarter 2023 financial results and corporate developments. As you know, the war that began last October very unfortunately continues. However, CollPlant’s main development programs and production plan thankfully continue to be minimally affected as a result of the war. The morale of our employees these days continues to be admirable according to these circumstances, and I want to take this opportunity to say that I'm extremely thankful for our dynamic and resilient workforce. CollPlant’s mission is to discover, develop and deliver collagen technology and regenerative medicine products to improve and prolong lives.

We continue to carefully focus on our core programs and our supportive partners to advance this mission with the goal of creating products that enable the regeneration of tissues and organs. We are extremely pleased with the momentum we gained last year and have maintained through the beginning of this year to advance our innovative programs in the fields of regenerative anesthetic medicine. Allow me now to recap a summary of what we accomplished. On this slide is the dermal filler product candidate that we are partnering with Avion, specifically its Allergan division for development. Throughout 2023 we made significant progress with AbbVie to advance this candidate towards commercialization. In June of last year, we announced the achievement of an important milestone under this collaboration, which triggered a $10 million payment from AbbVie to CollPlant.

Per CollPlant's agreement with AbbVie, CollPlant has the potential to receive additional milestones and option product payments, as well as receive meaningful royalties on product sales. In their full year and fourth quarter conference call, AbbVie stated that they expect meaningful growth in the aesthetics market and that importantly, a ramping up is now anticipated after multiple quarters of decline in the U.S. filler market. The dermal filler product candidate, which is our top focus, is now in the clinical phase of development and has the potential to create a paradigm shift in the dermal fillers market since in addition to tissue filling, it is expected to impart regenerative properties to the skin tissue. In addition to our partnered program with AbbVie, we have another version of a dermal filler under development.

In the fourth quarter of 2023, we announced that a U.S. patent was granted related to our photocurable dermal filler product candidate being developed by CollPlant for the aesthetics market. This patent is related to the method of use of CollPlant photocuring technology and serves as the basis of its photocurable dermal filler product candidate. We believe that the patent will strengthen our position in the aesthetics market for many years to come. Furthermore, we received a notice of allowance for a patent application which covers the use of this product candidate in Brazil, another important market in medical aesthetics valued at $741 million with a compound annual growth rate of 10.7%. It should be noted that CollPlant has granted its partner, AbbVie the right of first negotiation to obtain a worldwide exclusive license to this product candidate.

Now I will discuss our other in-house development programs that are our core focus. Our next leading program is our regenerative breast implants. These implants, that are comprised of our proprietary non-animal derived rhCollagen and other biomaterials are intended to promote tissue regeneration and a great in synchronization with the development of natural breast tissue. In 2023, the global breast implant market size reached $2.6 billion U.S. and the market is expected to reach $4.1 billion by 2032, exhibiting a compound annual growth rate of 3.7% during 2024 to 2032. We have begun an additional large animal study with clinically relevant commercial size implants. These studies results are intended to be used for the design of a pivotal large animal study.

This study follows the completion of our first large animal study, the results of which were announced in January 2023. This study demonstrated progressive stages of tissue regeneration after three months, as highlighted by the formation of maturing connective tissue and neurovascular networks within the implant, with importantly no adverse events reported. Since then during 2023, CollPlant also conducted additional large animal studies that were intended to further optimize the implant design and composition. In these studies, new tissue formation and neovascularization with no adverse tissue reactions were demonstrated, confirming previous results. We look forward to reporting results from this animal studies in the fourth quarter of this year and the first quarter of 2025.

We cannot stress enough the improvement that a regenerative breast implant could provide given the adverse events associated with currently available silicone implants. Use of the silicone implants carries an increased risk of developing breast implant-associated anaplastic loud cell lymphoma, which is a type of a cancer. Every year in the U.S. alone, hundreds of thousands of people experience adverse events that range from autoimmune symptoms to this most serious side effect. Our breast implants are expected to regenerate breast tissue without eliciting immune response, and thus may provide a revolutionary alternative for aesthetic and reconstructive procedures. The additional safety and efficacy data that we will generate from the recently initiated large animal study is intended to be used to optimize the development of our regenerative breast implants and combined with data from all previous studies, is expected to support future regulatory submissions and clinical studies.

In April of last year, we announced a joint development and collaboration agreement with Stratasys to collaborate on the development of a printing solution to biofabricate human tissues and organs using Stratasys' P3 technology-based bioprinter and CollPlant's rhCollagen-based bioinks. The first project under the agreement is to devise a process for industrial, scale bioprinting of CollPlant’s breast implants. Here is an example of breast implant printed with our collaborators and Stratasys' using CollPlant's rhCollagen-based bioinks. Now I want to draw your attention to a decision that we recently made related to our gut-on-a-chip program. In the spirit of being good stewards [ph] of our own capital, and with our focus on the medical aesthetics arena and collaboration with AbbVie, we have decided to put our resources directed to this program on hold.

I want to emphasize that this program is important to CollPlant and that it is still very much a focus of ours. However, we made this decision for now, since we felt it wouldn't be responsible to continue after assessing the projected timeline to progress the tissue model. Anyway, once resources are secured at the appropriate time, we do plan to reinitiate this program. In 2023 we blustered our commitment to ESG, Environmental, Social and Governance initiatives by appointing a dedicated expert to lead our efforts following the endorsement of our company's sustainability roadmap. For the upcoming year, we embarked on a series of bold initiatives and significantly reducing CollPlant’s carbon footprint while harmonizing with our over-arching sustainability objectives.

Through meticulous analysis, and by authorization of key topics, we have finalized the ESG strategy and goals, ensuring their integration into our corporate framework. In September of 2023, we proudly announced our participation in the United Nations Global Compact, the prominent initiative for sustainable and responsible corporate governance by aligning ourselves with this esteemed platform CollPlant reaffirms its unwavering dedication to bioprinting sustainable practices further solidifying our mission to revolutionize regenerative and aesthetics medicine with sustainable alternatives. Furthermore, we are set to unveil our inaugural formalized ESG report for 2023 during the second quarter of this year. This report will showcase our bold commitment to environmental, social and governance process, including ambitious targets in climate action and energy and efficiency, comprehensive workforce, health and safety initiatives and the integration of ESG considerations into our governance structure.

These commitments underscore CollPlant's unwavering dedication to responsible and sustainable business practices promising long-term value creation for our stakeholders. That concludes my initial remarks. 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: Thank you, Yehiel. Good morning everyone. I will now review our financial resources for the three months and the full year period ending December 31st 2023. GAAP revenues for Q4 2023 were $299,000 and included mainly income from sales of our average collagen products, an increase of $241,000 compared to the $58,000 in Q4 2022. GAAP revenues for the year ended December 31st 2023 were $11 million and included mainly revenues from AbbVie, CollPlant's business partner. Revenues increased by $10.7 million compared to $299,000 in the same period last year. The increase is mainly related to the achievement of milestone with respect to the AbbVie agreement which triggered a $10 million payment to CollPlant and, in addition, an increase in income from sales of CollPlant's average collagen products.

As we previously said, according to CollPlant's agreement with AbbVie, CollPlant is also eligible to receive up to an additional $226 million in milestone payments for the dermal filler product as well as royalty payments and fees for the manufacture and supply of the average collagen, once the dermal filler product will be in the commercial phase. GAAP cost of revenues for the fourth quarter of 2023 was $773,000 compared to $62,000 in Q4 2022. Cost of revenues includes mainly the cost of the company's average collagen-based products, oil fees to the Israeli Innovation Authority or the IIA for the company's sales and inventory write-offs. GAAP cost of revenues for the full year ended December 31st 2023 was $2 million compared to $400,000 in the full year ended December 31st 2022.

The increase in the amount of approximately $1.6 million is mainly comprised of $320,000 in royalty expenses to the IIA, mainly related to the milestone payment received from AbbVie, $711,000 relating to the sales of bioinks, VergenixFG, and rhCollagen sales, and approximately $0.5 million related to inventory write-offs. GAAP operating expenses for Q4 2023 were $4.6 million compared to $4.7 million in Q4 2022. Operating expenses include G&A expenses and R&D expenses that are related to supporting the company's development efforts in different programs including the regenerative breast implants and gut-on-a-chip program. The decrease of approximately $100,000 is mainly related to G&A expenses. On a non-GAAP basis, operating expenses for Q4 2023 were $4 million compared to $4.2 million for Q4 2022.

Non-GAAP measures exclude certain non-cash expenses. GAAP operating expenses for the full year period ended December 31st 2023 were $16.5 million compared to $17 million for the year 2022. The decrease of approximately $0.5 million includes $745,000 decrease in G&A mainly comprised of $224,000 decrease in employee salaries expenses and $364,000 decrease in share-based compensation expenses and $140,000 income from insurance indemnification, all of that deducted with an increase of $229,000 in R&D expenses. On a non-GAAP basis, the operating expenses for the year 2023 were $14.5 million compared to $15.2 million in the year ended December 31st 2022. GAAP financial income net for the fourth quarter of 2023 totaled $379,000 compared to $275,000 in the fourth quarter of 2022.

GAAP financial income net for the year ended December 31st 2023 was $493,000 compared to $172,000 in the year 2022. The increase is attributed to an increase in interest rates and interest received from the company's short-term cash deposit. GAAP net loss for Q4 2023 was $4.7 million or $0.41 basic loss per share compared to a net loss of $4.4 million or $0.39 basic loss per share for Q4 2022. Non-GAAP net loss for Q4 2023 was $3.9 million or $0.35 loss per share similar to the loss the company recognized in the fourth quarter of 2022. GAAP net loss for the year ended December 31st 2023 was $7 million or $0.62 basic loss per share compared to a net loss of $16.7 million or $1.53 basic loss per share for the year ended December 31st 2022. Non-GAAP net loss for the year ended December 31st 2023 was $5.2 million or $0.45 basic loss per share compared to $15.2 million loss or $1.37 basic loss per share for the year ended December 31st 2022.

In this period of continued weakness in the global capital market, the war situation in Israel, and uncertainties in general, we continue to carefully maintain CollPlant’s plan while keeping goals for the progress of the main program. Cash and cash equivalents as of December 31st 2023 were $26.7 million. We believe this cash balance represents as of today, April 4th, a company cash runway that will satisfy our operational requirements at least until the end of 2025 based on our currently contemplated operations and plans. Cash used in operating activities during the fourth quarter of 2023 was $2.3 million compared to a cash used in operating activities of $3.3 million during the fourth quarter of 2022. Cash used in operating activities during the year ended December 31st 2023 was $2.8 million compared to $13.7 million during the year ended December 31st 2022.

There was no cash provided by financing activities during the fourth quarter of 2023 compared to $400,000 cash provided by financing activities during the fourth quarter of 2022. Cash provided by financing activities during the year ended December 31st 2023 was $1.1 million compared to $1.9 million during the year ended December 31st 2022. Cash provided by financing activities is mainly attributed to proceeds from the exercise of options and warrants into shares. This now concludes the financial summary. Operator, I believe that we can now open the call for questions.

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