Edited Transcript of PFNX earnings conference call or presentation 11-Mar-20 8:30pm GMT

Looking back over the past 12 months, we’ve announced many positive milestones. It makes us proud to realize that just a couple of years ago, each one, on its own, would have stood as a notable success for the company. During 2019, our lead programs advanced significantly. We earned approximately $31 million in milestones and achieved our first FDA approval with PF708. We believe these achievements speak to the focused execution of the Pfenex team and to the ability of our protein platform to successfully produce a broad range of therapeutic candidates from peptides to large complex proteins. As a result, we believe our platform offers multiple opportunities to generate near and long-term shareholder value as we enter our next phase of growth.

Discussing in greater detail, let me first turn to the status of the programs that have the potential to go commercial in the near future. The main focus for our team over the past year has been around the advancement of our lead program, PF708, a potential therapeutic equivalent candidate to Forteo. In October of 2019, we achieved a historic milestone and celebrated the FDA’s approval of our new drug application for PF708, with Forteo as the reference listed drug. Like Forteo, the FDA-approved PF708 product is indicated for the treatment of osteoporosis in certain patients at high risk for fracture. We have been continuing our efforts to obtain an A rating, therapeutic equivalents designation for PF708 relative to its reference drug Forteo. A determination of therapeutic equivalence may permit the FDA-approved PF708 product to be automatically substituted for Forteo, depending on applicable laws and policies within each of the 50 states in the U.S.

Our collaboration partner, Alvogen, to whom we have transferred the NDA, intends to launch the FDA-approved PF708 product in the U.S. upon an FDA decision on the therapeutic equivalents evaluation of the product. An A rating for this first product will be primarily based on the FDA evaluating 3 distinct requirements. The central are: one, showing pharmaceutical equivalence; two, bioequivalence; and three, human factor comparability. Both pharmaceutical and bioequivalence were part of our NDA, and we believe that its approval suggests that the FDA supports our equivalence to Forteo for these first 2 elements. To further enable the FDA to assess the third element of human factors comparability, we executed 5 human factor studies, including one study in 2019 that compares the PF708 device head-to-head with Forteo. We were very pleased with the results of that study, which we shared with you and submitted to the FDA the week after our NDA approval in October last year. We believe this submission completes the information package required by the FDA to evaluate the therapeutic equivalence of our PF708 products.

As we await the FDA’s decision on A rating, we have with our partner, Alvogen, been diligently working on commercial manufacturing and sales activities as part of the launch for (inaudible) for PF708 in the U.S., and we are all looking forward to receiving the FDA’s decision on a therapeutic equivalence rating.

As a reminder of the U.S. economics of our partnership with Alvogen, if we receive an A rating, we are eligible to receive up to an additional $20 million in support and regulatory milestone payments. We are also eligible to receive the 50% gross profit split on sales if product is rated as therapeutically equivalent to Forteo, and up to 40%, if rated differently.

We’ve been very pleased with our decision to work with Alvogen, and seeing the Alvogen team come together and apply their resources as they prepare for this launch. We’ve also engaged Alvogen to commercialize and manufacture PF708 in the EU, 7 countries in the Middle East and North Africa and the rest of world territories. As we’ve discussed previously, Alvogen has already established several agreements with their partners across several countries and regions and has begun to engage the regulatory agencies in these other countries. For example, a marketing authorization application for PF708 has been filed and accepted with the EMA. And we currently believe that PF708 could be approved in the EU as early as the second half of 2020, subject to granting of our margin authorization by the European Commission under the EU centralized procedure and other factors.

And outside the U.S. and Europe, Alvogen, with our support, continues to advance regulatory and commercial progress. In the fourth quarter, Alvogen submit a marketing authorization application to the Kingdom of Saudi Arabia’s FDA and entered into exclusive commercialization agreements for PF708 with PharmBio Korea in South Korea, and JAMP Pharma in Canada. Under the terms of these agreements, Alvogen will be responsible for the local activities through PharmBio and JAMP Pharma. Alvogen is also in discussions for licensing deals in certain remaining territories, and we will keep you updated on progress there. With all the activities and opportunities for PF708, we are excited about the potential milestones and sales royalties that could have a positive impact on our business.

Turning now to our collaboration with Jazz Pharmaceuticals through which we are developing 2 products: PF743 or JZP-458, as it is named in the Jazz portfolio; a recombinant Erwinia asparaginase, who which Jazz has indicated, it is aiming to file its BLA as early as the end of this year. And PF745 or JZP-341,a follow-up long-acting recombinant Erwinia asparaginase, for which we earned a $15 million development milestone payment in the fourth quarter. Starting with PF743 in December 2019, the first patient was enrolled in a pivotal Phase II/III clinical study. The study is being conducted in collaboration with children’s oncology group. And on its recent quarterly conference call, Jazz confirmed that it anticipates filing the BLA as early as the fourth quarter of this year. Jazz also indicated in the fourth quarter, the FDA granted Fast Track Designation for JZP-458 in the treatment of Acute Lymphoblastic Leukemia. The Erwinaze market has struggled with supply challenges due to ongoing supply and manufacturing issues at the sole manufacturer. PF743 has the potential to solve for them, enabling Jazz to potentially reach more patients in need of this critical drug.

In addition, we continue to advance our development activities for PF745 with Jazz. Similar to PF743, our main responsibility for PF745 is to develop a product and process that can be tech transferred to a GMP facility and taken to the clinic. The $50 million milestone we earned in December with the total development milestones earned for PF745 to $27 million. As a reminder, under our agreement with Jazz that covers both products, we are eligible to receive an aggregate total of up to $224.5 million in development and sales milestone fees. Of this, we are still eligible to receive $162.5 million. This includes up to $3.5 million for development milestones, $34 million in regulatory milestones and $125 million in sales milestones. We may also be eligible to receive tiered mid-single-digit royalties based on worldwide sales of any products resulting from collaboration.

We are very pleased with the progress achieved and look forward to following Jazz’s continued advancement and are proud to be part of these programs that have the potential to bring significant benefit to these critically ill patients.

Moving to our carrier protein, CRM197, which is the fifth potential revenue driver in our current pipeline. We have development and commercial partnerships with both Merck and Serum Institute of India, or SII, among other partners. Regarding Merck, they are using CRM197 produced via a production strain based on the Pfenex Expression Technology in the V114 pneumococcal vaccine and additional programs in development. We are eligible to receive tiered royalty payments based on net sales for all products that they develop that use the CRM197 produced by the Pfenex Expression Technology.

Merck’s V114 is a 15-valent conjugate vaccine for prevention of pneumococcal disease and is in 15 Phase III studies with data readouts from their comprehensive development program expected to become available this year. V114 is expected to be positioned as a key product in the pneumococcal market. In the fourth quarter, we also saw the prequalification of a vaccine from our partner, Serum Institute of India. SII has developed a 10-valent pneumococcal conjugate vaccine, Pneumosil, which utilizes CRM197 from a Pfenex-based production strain and initiated the process of World Health Organization prequalification for Pneumosil in the first quarter of 2019. As previously mentioned, SII received WHO prequalification for their product in Q4 and are preparing to make the product available for procurement by United Nations Agencies and a Gavi vaccine alliance. We’re also completing a Phase III clinical trial that will support a regulatory submission in India. The second part being developed by SII, which also utilizes CRM197 and is subject to the Pfenex Expression Technology license is a thermostable pentavalent meningococcal conjugate vaccine that has entered into a Phase III study. This product is also targeting markets in developing countries. Pfenex is eligible to receive a tiered royalty payment based upon net sales for both products pursuant to regulatory approval.

Turning to our development, evaluation and license agreement with Arcellx. We are providing access to the Pfenex Expression Technology platform to advance Arcellx’s proprietary sparX proteins that activate silence and reprogram antigen receptor complex T-cell based therapies.

On the bid agreement, we are eligible to receive development funding in addition to development, regulatory and commercial milestones, ranging from $2.6 million to $18 million for each product incorporating a sparX protein expressed using a production strain based on the Pfenex Expression Technology, as well as royalties on worldwide sales of any such product. We have completed the development of both sparX 1 or PF753 and sparX 2, PF754. And Arcellx has opted in to the commercial licenses for both production strengths. We look forward to keeping you updated on our Arcellx collaboration and other new developments that we have started.

As I discussed at the opening of the call, I believe in the potential that our proprietary protein production platform has in developing biopharmaceuticals. This feeds directly into our strategy, which centers on 3 pillars: The first one being focused and execute; the second one, expense selectively; and the third, evolve into biopharma.

Looking at the first pillar, for the last 2 years, we’ve been fully focused on executing against our core portfolio. And I believe the status of our current pipeline is testimony to the success and value that we’ve been able to create and the ability to use this to fuel further growth. Growth that amongst others, we believe, will come from a second pillar. As our core programs have been nearing the completion of their development cycles, we’ve been able to use the capacity that became available to selectively expand our pipeline with a combination of wholly-owned products and new royalty-bearing partnerships, around products for which our platform is highly enabling. I’ve shared with you previously that we are in early development with a new wholly-owned program, PF810. The recombinant peptide aiming at solving a significant, current therapy challenge. We are looking forward to sharing more detail with you as we progress the program through its preclinical phase.

Our programs with our partnerships within our partnership with Arcellx are examples of developments, where we believe our platform is uniquely enabling and that are structured to allow us to capture both near and long-term value from it. We are currently evaluating other partnering opportunities that match our strategy, where we license our technology and receive milestone payments and royalty revenue. Our third development pillar focuses on novel biopharmaceutical products. We have almost 2 decades of experience in expressing natural and engineered proteins. And I believe that our historical success rate is over 80%, in expressing the desired active protein have demonstrated success in achieving regulatory approval for our lead product, and our platform team and infrastructure are suitable to enable development of novel peptide and protein-based therapeutics. Understanding that currently approved drugs target only a small subset of proteins linked to a disease, suggests that there may be a large potential drug development opportunity still out there. For many of these targets, the industry is increasingly focused on smaller-sized proteins and engineered cathodes to achieve biological activity on them. Interestingly, it is especially these type of modalities that Pfenex has shown to be capable of developing. I believe this presents an opportunity for Pfenex to potentially become a player in this new wave of biologics and can, over time, evolve Pfenex into an innovative biotechnology company.

Following a extensive research effort, we have identified a set of high value, validated biological targets that we intend to pursue. We believe the targets of interest are in disease areas of unmet medical need with a modestly sized patient population, allowing Pfenex to potentially develop the products through those 3 clinical studies. In the fourth quarter of last year, we engaged a third-party collaborator to deploy their internal libraries of novel binding modalities to screen against the Pfenex targets of interest in order to isolate binders that could potentially become Pfenex’s wholly-owned novel products. We have chosen these modalities, both because of their promise to become novel therapeutic proteins, as well as for that fit with the Pfenex platform, which will allow us to take the development and CMC in-house. We are currently in the process of target screening, an effort to isolate the first set of lead candidates. Those candidates currently grouped under PF91X will be transferred to Pfenex and could become wholly-owned product candidates developed by us.

It is important to mention that a big part of our success over the last several years stems from being very diligent in how we deploy our capital, and I intend to continue to run our company in that way. I think it opens up a good point to pivot to the financials for our fourth quarter and full year 2019. Total revenue increased by $21.1 million or 628% to $24.4 million in the 3-month period ended December 31, 2019 compared to $3.3 million in the same period in 2018. The increase in revenue from the quarter was primarily due to a $15 million development milestone achieved during the quarter related to Jazz collaboration agreement. $5 million earned from Alvogen for FDA approval of our NDA for PF708, of which, $2.5 million was the upfront payment that have been deferred and increased drug sales of CRM197. For the full year 2019, our revenue was $50.3 million, an increase of 239% or $35.5 million compared to 2018 revenue of $14.9 million, primarily driven by achievement of Jazz development milestones, totaling $27 million. Alvogen milestone and sublicensing revenue of $11 million and revenue from Arcellx and CRM197 product sales, partially offset by a decrease in revenue from BARDA and recognized revenue from Jazz that was previously deferred as the upfront payments from Jazz was fully amortized in mid 2019.

Cost of revenue was static at $1.1 million for both the 3 months ending December 31, 2019 and 2018. Decreases resulting from reduced activity from the BARDA program were offset by increases from CRM197 product sales. For the full year 2019, our cost of revenue was $4.9 million, a decrease of 3% or $0.1 million compared to $5 million in 2018, primarily driven by decline in BARDA activity, offset by increases resulting from our work on Arcellx as well as greater CRM197 product sales.

Research and development expenses increased by approximately $0.6 million or 12% to $5.9 million in the 3-month period ended December 31, 2019 compared to $5.3 million in the same period in 2018. This increase was primarily due to new research projects, partially offset by a decrease in cost related to PF708. For the full year 2019, our R&D expenses were $25.5 million, a decrease of 25% or $8.3 million compared to 2018 expenses of $39.9 million. This decrease was mostly due to the reduction of labor and subcontractors cost as the majority of the work performed to support PF708 NDA filing was completed in late 2018.

SG&A expenses increased approximately $1.9 million or 50% to $5.9 million in the 3-month period ending December 31, 2019 compared to $3.9 million in the same period in 2018. The increases were primarily due to higher expenses related to legal, consulting and expand of business development efforts. For the full year, our SG&A expenses increased by $3.2 million or 21% to $19.1 million compared to $15.8 million in 2018.

Cash and cash equivalents as of December 31, 2019, were $55.6 million. In addition, in 2 separate transactions in the first months of 2020, Pfenex utilized its AGM to sell approximately 1.8 million shares of common stock for approximately net proceeds of $19.4 million.

In closing, we are pleased with the flow of positive news throughout 2019 and as we start out 2020. We believe there are many possible opportunities to drive near and long-term growth for our business. This is really an exciting time for Pfenex and our shareholders. Thanks, again, to the Pfenex team for their continued great work and to all of our investors for your continued support.

This concludes our prepared remarks. I would now like to ask the operator to open the call for questions.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) Our first question is from Jason Butler from JMP Securities.

——————————————————————————–

Jason Nicholas Butler, JMP Securities LLC, Research Division – MD and Senior Research Analyst [2]

——————————————————————————–

First one, on 708. To any extent you can, can you update us on where you think your interactions with FDA for achieving the therapeutic rating — equivalence rating.

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [3]

——————————————————————————–

Absolutely. Thanks, Jason. Great question and one that obviously is in all of our minds. So we’ve been — we continue to interact with the FDA in a very collaborative way, and they continue to ensure us that they’re actively reviewing our data. We’ve also been informed that up to the highest level within the FDA. People are aware of this. So given that historically, our benchmarks that we’ve seen are about 3 to 6 to 9-month period of evaluation. We’re about 5 months in and continue to expect that we should be hearing back from the FDA, not too long from now.

——————————————————————————–

Jason Nicholas Butler, JMP Securities LLC, Research Division – MD and Senior Research Analyst [4]

——————————————————————————–

Great. And then just from the CRM197 perspective, can you lay out for us how we should expect to see Merck’s regulatory strategy, it’s commercial strategy? How it’ll focus the launch and specifically with different patient groups or ages?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [5]

——————————————————————————–

Yes. And that, as you would expect me to say is primarily a question. And I think Merck needs to answer, and I don’t think that they’ve given too much insight in how they attempt to how they will launch the product. I think the important thing and what is in the public domain is that they are expecting to give insight in the clinical trials as they start to finish up this year and importantly, expect to file that BLA this year. We know and all of us know, obviously, that there’s 2 significant patient populations, both the pediatrics and the adults. And especially on the pediatric population, which is the largest part of the market, it looks like they have a significant lead over Pfizer. As to how they will position the product and how they roll out, I would really prefer to Merck to give the background on their commercial strategy.

——————————————————————————–

Jason Nicholas Butler, JMP Securities LLC, Research Division – MD and Senior Research Analyst [6]

——————————————————————————–

Yes, that’s great. And then just lastly, I guess, at a high level, can you talk about your capacity to bring new programs into the clinic over the next, let’s say, 2, 3 to 5 years? And what are the bottlenecks? Are they a preclinical stage, clinical or is it also financial?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [7]

——————————————————————————–

So we — from a capacity point of view and a resource perspective, we’ve established a team that is very well capable of handling that. And I think the success that we’ve had with PF708 forms a great foundation for that. If I look at our portfolio and to the degree that we’ve disclosed it, you will see that, that’s various stages of development for our products. So we expect and we’re positioning the company in a way that we can execute well over the next couple of years. If you look at our current cash balance, which I alluded to in the prepared remarks, we closed last year with $56 million cash on hand. And then on top of that, were able to execute the AGM with a little bit over $19 million. So pro forma that led us to start the year with $75 million, which if you look at our current burn rate, I’ve indicated before that I did not expect that to change significantly over the next period of time, puts us in a, I think, in a very solid position to drive growth for the company.

——————————————————————————–

Jason Nicholas Butler, JMP Securities LLC, Research Division – MD and Senior Research Analyst [8]

——————————————————————————–

Congrats on the progress.

——————————————————————————–

Operator [9]

——————————————————————————–

Our next question is from Brandon Folkes from Cantor Fitzgerald.

——————————————————————————–

Brandon Richard Folkes, Cantor Fitzgerald & Co., Research Division – Analyst [10]

——————————————————————————–

Congratulations on all the progress during the year. Can you just give us a bit of additional color about the lead time required to launch post a TE rating of 708? I mean is this sort of something you start shipping that day? Just any color you can provide there in terms of how we should think about that. And then maybe just in light of recent events, could you just talk about the supply chain for 708 and where you source API devices? Any color there.

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [11]

——————————————————————————–

Absolutely. So without wanting to provide too much color on our supply chain or — sorry, on the launch planning, I should say, your first question. We are ready to launch. We have commercial products on hand. So part of a launch is obviously getting the product into the channel and that’s a pretty straightforward and quick exercise. The other part is our commercial discussions as those — those are discussions obviously being led by Alvogen, our commercial partner. And those are very fruitful. A big part of the market sits in 5 D, and we’ve had successful discussions with every single partner there. So we feel that, as I’ve stated upon conclusion of the therapeutic equivalent designation by the FDA, we would be ready, and we are ready to launch the product.

Then to the supply chain. As any company, we have a look at our exposure, and we’re happy to say that with a supply chain that is fully U.S. based and materials plans that are not exposed to China or Asia, we feel confident that we’re not going to be impacted by COVID-19 as things stand now.

——————————————————————————–

Operator [12]

——————————————————————————–

Our next question is from Andy Hsieh from William Blair.

——————————————————————————–

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division – Senior Research Analyst [13]

——————————————————————————–

Congratulations on recognizing a profit, not a lot of biotech companies can cheer that accomplishment. So just a couple of questions. So in terms of the OpEx line in 2020, I think you kind of mentioned about it being consistent in the next couple of months or quarters. Just maybe additional details about how we model the 2020? I know you’re not giving guidance, and it could change over time, but just given new projects the — kind of the Arcellx collaboration, your internal wholly owned — how do you think about that in the next 3 or 4 quarters?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [14]

——————————————————————————–

Yes, and thanks for the question, Andy. As you already indicated, I will not give guidance. But if you think about the company and what we’re focused on and how 2019 shaped up, 2019 was already a year which we’ve shifted our resources away from what was one of our biggest expense drivers, obviously, 708. And the clinical work that we were doing there, we’ve shifted that in 2019 to our new programs. There’s still work ongoing with 708, but to a lesser extent. So as the new programs mature, we’re spending our capital there, our OpEx is focused there. So what I have stated before is that I do not expect our expense profile for the portfolio as it sets now to materially change over the next couple of quarters. So I think that’s what I would focus on in your modeling.

——————————————————————————–

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division – Senior Research Analyst [15]

——————————————————————————–

Got it. And related to that, maybe you could provide some progress on the CFO search, and what qualifications are you looking for as you kind of go from phase 1 to phase 2, which is growing the company to evolving into a biopharma company.

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [16]

——————————————————————————–

Yes, thanks for that. I’m pleased to say that we have a very strong finance team in-house, which really had an opportunity to shine over the last months and quarters as we were looking for and are looking for a CFO. I have some very specific qualifications that we’re looking for and most importantly, somebody that can really be part of the growth of the company going forward. So far while we have interviewed a lot of candidates, we’ve not quite found the right one. And I’d much rather make sure that we take our time in finding that right candidate and bringing somebody in that maybe does not fit completely at this stage. So we continue to search, but the good thing is that things are going quite well as I stand at the moment.

——————————————————————————–

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division – Senior Research Analyst [17]

——————————————————————————–

Okay, okay. And a clarifying question. I think you mentioned about the screening initiative that you started at the end of the year. So let me just try to understand this. So you basically have a therapeutic target in mind and a third-party is providing what maybe a plasmid library that you’re screening. So essentially, this is like a bacterial display platform. Is that a correct way to think about that?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [18]

——————————————————————————–

No, I would qualify it a little bit differently. So we’ve spent a significant part of last year identifying what we feel are the right targets for Pfenex to go after, and that has been a very extensive piece of work that has been done within the company. The output of that is a short list of biological targets that are validated. We want to go after targets that we know that if we hit them well, there is a biological effect, and we’ve then started to identify modalities. So I think of engineered proteins or scaffolds that we feel are the right modalities to target the targets that we’ve identified rather than setting up those libraries internally, which is obviously a good body of work. We’ve decided to tap into resources and identify companies that have libraries for those — with those modalities. So what you do is then make sure that you generate the right amount of the right libraries. So it’s not a existing library. You generate a library and then start, I guess, screening against those targets. So that’s the phase that we’re currently in, and we’re excited to expect the first hits to come to Pfenex in the not-too-distant future. So that’s where those hits will actually come into Pfenex, and then we will fully work them up to leads and ultimately, wholly owned fully CMC developed programs and then, obviously, later on, bring them to the clinic. I hope that helps a little.

——————————————————————————–

Tsan-Yu Hsieh, William Blair & Company L.L.C., Research Division – Senior Research Analyst [19]

——————————————————————————–

I see. Yes, yes, that’s super helpful. And lastly, I think when we talk about the CRM197, usually, the application is in bacterial infections, pneumococcal and meningococcal infections. Just wondering from a scientific perspective, has that been tested in a virology setting before?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [20]

——————————————————————————–

So I think many people have used CRM197 in many different settings and a read-through or maybe what you’re asking is CRM197 useful in what the — what we’re currently going through and trying to come back as a society. We have reached out through — to the Bio coronavirus collaboration initiative to inform Bio and their U.S. government partners of the availability of our GMP CRM197 carrier protein. So people know that if they’re working on vaccines that they can potentially tap into our CRM197. We’ve also indicated and put to attention again our production platform for the production of relevant antigens and through all our work with BARDA over the years. They are very well aware of our capacities in this regard. And then internationally, we’ve reached out to the correlation of epidemic partners, innovations or CPI and Norway to also make them aware of the availability of our GMP CRM197. So that’s really an attempt to, if possible, play our part or if needed in finding a solution for what’s obviously a challenging threat at the moment.

——————————————————————————–

Operator [21]

——————————————————————————–

(Operator Instructions) Our next question is from Gregg Gilbert from SunTrust.

——————————————————————————–

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [22]

——————————————————————————–

I have a couple. First on 708. What can you say about the ability for you and your partner to supply a meaningful part of the market once you get your launch underway? How would you quantify it?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [23]

——————————————————————————–

We’ve set this up, and we feel confident that, if needed and if the opportunities there, we would be able to supply the full market.

——————————————————————————–

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [24]

——————————————————————————–

Okay. And on 708, do you think the March 23 date holds any significance in FDA making a decision? Or do you think that’s irrelevant in their determination timing?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [25]

——————————————————————————–

So it’s difficult to say. We have no indication from the FDA on any dates, and there is not being a PDUFA regulated timing or doesn’t have a figure regulated time to it. We really just continue to dialogue and wait with the FDA. The good thing is that we’ve not had and/or not many questions from the FDA on our data. It does really feel that it’s a process that the FDA needs to go through, looking at as we all know on the one hand, equivalents and the pharmaceutical equivalents, which both are elements of our NDA and have been reviewed extensively. And then our efactor data, which was the only new piece of data that was submitted to the FDA some 5 months or so ago now. I think that’s one side of the evaluation that they’re doing the data, and again, we feel that the data is very supportive therapeutically of being a therapeutically equivalent product. Then the other side is the policy side of it, and this is also where over the years and also over the last couple of quarters, we’ve clearly seen the FDA make strides into finding or defining the right pathway to provide a alternative for increased access to complex drugs. So we feel that, that also points in the right direction. And it seems that those 2 need to come together and that hopefully is going to happen shortly.

——————————————————————————–

Gregory B. Gilbert, SunTrust Robinson Humphrey, Inc., Research Division – Analyst [26]

——————————————————————————–

Okay. Your comment before about operating expenses not changing materially, I believe that holds for a few quarters. Can you just speak philosophically about extending that out over the coming years? Is it your intention to not materially change OpEx? Or does it really depend on the amount of royalty and income you generate? And you have plenty of ideas to spend more, if more was coming in?

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [27]

——————————————————————————–

There is always ideas to not necessarily with the purpose of spending more, but there is always ideas to drive more value in our pipeline. I think, logically, and that’s how biotech development works. As programs and products mature, they move into the clinic and with that, obviously, increases. I feel that if I look at our long-term plans, we have a good opportunity to drive much of that growth. If we are in a lucky circumstance where we can do more, we will obviously not hesitate to do that.

——————————————————————————–

Operator [28]

——————————————————————————–

As there are no more questions in our queue, this concludes the question-and-answer session. I would now like to turn the conference back to Eef for closing remarks.

——————————————————————————–

Evert B. Schimmelpennink, Pfenex Inc. – CEO, President, Secretary, Acting Principal Financial & Accounting Officer and Director [29]

——————————————————————————–

Thank you, Kate. And thanks again to the whole Pfenex team for their continued great work and to all of our investors for your continued support. Thank you all for joining us. Have a great evening.

——————————————————————————–

Operator [30]

——————————————————————————–

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect