Earnings Call: Q2 2020

Aug 6, 2020

Good morning, and welcome to the Selecta Biosciences Second Quarter 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen only mode. This call is being webcast live on the Investors and Media section of Selecta's website at www dotselectabio.com, and it is being recorded. For opening remarks, I would like to introduce you to Brad Doms, Chief Financial Officer of Selecta. Please go ahead. Thank you, operator, and good morning. Welcome to our Q2 2020 financial results and corporate update conference call. The press release reporting our financial results is available on the Investors and Media section of our website, www.selectabio dotcom, and our quarterly report on Form 10 Q for the quarter ended June 30, 2020, will be filed later today with the SEC. Joining me today is Carson Bruhn, our President and Chief Executive Officer and Doctor. Peter G. Traver, our newly appointed Chief Medical Officer. Kei Kishimoto, our Chief Scientific Officer, will be available for the Q and A portion of the call. During today's call, we'll be making certain forward looking statements, including without limitation, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, financial projections and our future expectations, plans, partnerships and prospects. These statements are subject to various risks, including those related to the COVID-nineteen outbreak that are described in our filings made with the Securities and Exchange Commission, including our most recent quarterly report on Form 10 Q, which will be filed later today with the SEC. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of today, August 6, 2020, and Selecta disclaims any obligation to update such statements even if management's views change. I would now like to turn the call over to Carsten Brunn, our President and CEO. Carsten? Thank you, Brad. Good morning. I appreciate you joining us today. The Q2 of 2020 can be best described as a transformational time for Selectum. We've made a number of important strategic business decisions that have reinforced our position as a leader in immune tolerance. The strategic licensing agreement we entered into with Sobeys puts us in a financial position that allows us to maximize our efforts to unlock the full potential of the ImmTOR Immutolerance platform. We also believe that it provides the most value for SEL-two twelve, given Sobeys commercial presence and resources. Our objectives in researching the potential applications of ImmTOR remain the same, to use the technology to optimize the efficacy and safety of biologics, enable redosing of life saving gene therapies and create novel immunotherapies for autoimmune diseases. The strategic licensing agreement with Sobe, which closed on July 28, 2020, is for SEL-two twelve, our Phase III product candidate for the treatment of chronic refractory gout. Under the terms of the agreement, Sobeys assumes responsibility for all development, regulatory and commercial activities and expenses in all markets except China, while Selecta will run the Phase 3 study on behalf of Sobeys. As a reminder, in addition to covering the expenses of the Phase 3 program, Sobeys has 45 days from the effective date to pay $75,000,000 as an upfront license fee and they have paid 20 $5,000,000 as an investment in a private placement of Selecta common stock at $4.62 per share. We're also eligible to receive potential development, regulatory and commercial milestone payments of up to $630,000,000 and double tiered double and tiered double digit royalties on net sales. We look forward to working with Sobeys and remain committed to the development of SAL-two twelve. We anticipate the initiation of the Phase III clinical program with Sobe for SEL-two twelve in the Q3 of this year. This program will consist of 2 double blinded placebo controlled trials of SEL-two twelve. Each trial is expected to enroll 105 patients and have 35 patients receiving 0.1 milligrams per kilogram of ImmTOR and 0.2 milligrams per kilogram of pegatricase. 35 patients receiving 0.15 milligrams per kilogram of ImmTOR and 0.2 milligrams per kilogram of regapricase and 35 patients receiving placebo. Each trial will have a 6 month primary endpoint and one of the trials will have a 6 month extension. Top line data from the Phase 2 COMPARE trial are expected in the Q3 of this year. As you know, this is a head to head study of a once monthly dose of SEL-two twelve, which is a combination of ImmTOR and begatricase compared to biweekly doses of belodecase with a primary endpoint of the maintenance of serum uric acid levels of less than 6 milligrams per deciliter at 3 6 months. The COMPARE trial has enrolled 170 patients. We're also very pleased to have entered into research license and option agreement with Sarepta for the use of ImmTOR in neuromuscular diseases in JUUL. Under the terms of this agreement, Sarepta has the option to license the rights to develop and commercialize the ImmTOR platform for use in select neuromuscular diseases, in particular, Duchenne muscular dystrophy and certain limb girdle muscular dystrophies. Sarepta will evaluate its investigational gene therapies in combination with ImmTOR to prevent or minimize the formation of neutralizing antibodies. Our gene therapy and autoimmune disease programs remain a priority for us, and we are pleased to confirm the timing for these research and development initiatives. Our lead gene therapy program in Methanolonylgly Academia or MMA, which is being conducted in collaboration with AskBio, is expected to enter the clinic in the first half of 2021 with preliminary data expected in the second half of twenty twenty one. We also intend to advance our proprietary program in onusine transcarbamylase or OTC deficiency and will provide an update on that program later in the year. In addition, we intend to submit an investigational drug application for 1 of our autoimmune disease programs in 2021. The first indication will be IgA nephropathy, a kidney disease that occurs when an antibody called immunoglobulin accumulates in the kidneys. We intend to build upon our learnings from the SEL-two twelve program of combining an immunogenic enzyme with ImmTOR to derisk this program and advance it safely and effectively through clinical trials. The second indication will be in primary biliary cholangitis or PBC. Both diseases have well defined target antigens, significant unmet medical need and are well suited to the application of our ImmTOR platform. We're also pleased to have strengthened our team recently, welcoming Doctor. Peter G. Drever to the position of Chief Medical Officer. Peter had been serving in an interim capacity since March 2020 and has now joined us full time as of August 1, 2020. Peter brings a wealth of experience in large pharma, biotech and academia. His prior experience includes Chief Medical Officer and Senior Vice President Clinical Development and Medical Affairs at GSK, CEO of Baylor College of Medicine and Chairman of Medicine and CEO of the University of Pennsylvania Health System. He was most recently CEO of Galectin Therapeutics, a biotech company that he guided to Phase 3 in NASH. Peter will oversee medical affairs, program management and all aspects of clinical development and strategy, as well as provide scientific and clinical guidance for potential business development initiatives. Before I turn the call over to our Chief Financial Officer, Peter will say a few words. Peter? Thank you very much, Carsten. I am very proud to be part of an organization that is pioneering innovations and that may advance the treatment of a number of challenging diseases with unmet medical needs. Selecta has the capabilities and scientific acumen to become the undisputed leader in targeted and specific immune tolerance. And I'm excited to help advance ImmTOR and explore its role in driving innovation that will ultimately help patients. In the immediate term, my goal is to ensure the Phase 3 studies commence enrollment quickly and safely. And we believe we are well positioned to conduct a successful pivotal program with Sobeys. In the near term, I look forward to helping the team kick off our first gene therapy clinical program in MMA in the first half of next year and advancing our proprietary program in OTC deficiency. Furthermore, I'm excited to help Selecta kick off our autoimmune disease efforts as there is substantial unmet need and applicability of the ImmTOR platform to benefit patients in both IgA nephropathy and primary biliary cholangitis. I'll also be helping the team on our business development efforts, evaluating opportunities from a strategic clinical perspective. Overall, my goal is to translate our deep science into products and partnerships that generate value and help patients. I believe we have the right team here at Selective to achieve this goal. Now I'll turn the call over to our Chief Financial Officer, Brad. Brad? Thank you, Peter. Our detailed financials are laid out in our earnings press release, which we filed this morning and will be further outlined in our 10 Q. So I'll just highlight a few key items here. We had $61,400,000 in cash, cash equivalents and restricted cash as of June 30, 2020, which compares to cash, cash equivalents and restricted cash of $91,600,000 as of December 31, 2019. Our cash balance at June 30, 2020 does not include the $100,000,000 in initial payments under the license agreement with Sobeys. We believe that our available cash, cash equivalents and restricted cash together with the $25,000,000 payment received in July 20 from Sobe under the Sobe private placement and the contractually obligated payment from Sobe of $75,000,000 under the Sobe license, which is due 45 days after the effective date of July 28, 2020, will enable us to fund our operating expenses and capital expenditures into the Q1 of 2023. Net cash used in operating activities was $23,500,000 for the 6 months ended June 30, 2020 as compared to $27,400,000 for the same period in 2019. Research and development expenses for the Q2 of 2020 were $10,700,000 which compares with $12,100,000 for the same period in 2019. The decrease in cost was primarily the result of less expense for our Phase 2 COMPARE trial for SEL-two twelve, offset by increases for our gene therapy program in collaboration with AskBio and salaries and benefits. General and administrative expenses for the Q2 of 2020 were $5,600,000 which compares with $4,100,000 for the same period in 2019. The increase in cost was the result of expenses incurred for salaries, legal and professional fees, partially offset by decreased travel expense. For the Q2 2020, Selecta reported a net loss of $24,100,000 or $0.25 a share compared to a net loss of 16,400,000 or $0.37 a share for the same period in 2019. I will now hand the call back over to Carson. Carson? Thank you, Brad. As mentioned earlier, the Q2 was transformational for Selecta, and I'm pleased to have been able to capitalize on business development opportunities in a way that will fuel our research and development efforts to grow the applications of ImmTOR. Our commitment to use the technology to optimize the efficacy and safety of biologics, enable redosing of life saving gene therapies and create novel immunotherapies for autoimmune diseases is unwavering, and we're very excited about the possibilities that our ImmTOR platform provides. We provide specific details on our gene therapy and autoimmune disease programs at an R and D day we plan to host sometime in October. With that, we're happy to take questions. Thank you. We will now begin the question and answer session. And our first question will come from Elena Merle with Cantor Fitzgerald. Please go ahead. Hey, guys. Thanks so much for taking the question and congrats on all the progress. Just on the gene therapy front, curious in terms of kind of like just steps before entering the clinic. Just first on MMA, I guess what are the gating factors both I guess maybe internally and with Path Bio as well as from the FDA perspective before you can dose first patients. We've seen mTORSAFE and gout. I guess just kind of curious kind of what the preclinical work to support sort of safety in humans if needed and just more color on sort of all those steps that you need to take there before you can first dose patients? And then I guess with the Sarepta collaboration and neuromuscular, I'm kind of curious both from sort of I guess with Percepta's perspective but also with the FDA. I guess like what exactly do you have to do before you can enter patients? I mean, you've seen mTOR in patients already. So kind of just curious, I guess, how quickly you can move this platform into the clinic across a number of gene therapies? Thanks. Yes. Thanks for the question, Elyse, as always. So, yes, on the M and A front, we're currently conducting or finalizing our tox studies, working on we already had a pre IND meeting with the FDA and currently working, compiling and preparing for the IND filing. So we are on track start the trial in the first half of next year. In regards to the Sarepta collaboration, so just to remind you, this is a research agreement. So they're really trying to replicate the data that we have generated so far preclinical in basically liver based diseases and apply those learnings in neuromaster disorders. So that's really the focus and they have 24 months to do so. So it's really the first step is to replicate those results in animal models. Got it. Thanks. And our next question will come from John Newman with Canaccord. Please go ahead. Hi, guys. Good morning. Thank you for taking my question. So, Carson, I just wondered if you could talk a little bit about what you'll be looking to do when you advance your proprietary program in OTC deficiency. I'm just curious as to how you'll go about determining the dosing schedule given with ImmTOR, you should be able to dose more than once. And also just curious as to kind of how you define success here. We really haven't seen any other programs that have been able to definitively demonstrate the ability to redose. So I wonder if part of the OTC program will maybe focus on that first? Thanks. Yes, John, thanks for the question. So we'll provide more details on timing at our R and D Day in October. But obviously, in terms of dose finding, we'll have learnings from the MMA program, which will go into the clinic first in the first half of next year. And you raised a good question, how do we define success? And I think you've clearly demonstrated in the preclinical data that we were able to prevent the formation of neutralized antibodies. And that's really what we're looking for as initial proof of concept. Are we able to mitigate that risk? And then obviously, ultimately, the second step is, are we also able to retreat? And we have demonstrated both in animal models, both in rodents and also in primates. And that's really but I think the first kind of in terms of proof of concept really is, are we able to prevent the formation of neutralizing antibodies. Great. Just one quick follow-up question, if I may. You talked about your autoimmune program and you mentioned one of the indications being the kidney indication, IgA nephropathy. Just curious if you have specific antigens in mind that you're looking to go after there. I'm just wondering what type of approach you might take. It's an interesting indication, especially with your platform. Thank you. Yes, that's a great question, John. So really what we're trying to do here and what makes us an attractive indication that it has a clear defined antigen And the approach would be really building on the learnings from our gout program where we combine immunogenic enzyme, the uricase with ImmTOR and we're debulking patients of uric acid deposits. The approach with IgA necropping will be very similar. We plan to combine ImmTOR with an IgA protease, which specifically addresses IgA immune complex deposits in the kidney. So it's a very similar approach where here we would plan to basically bulk patients of IgA immune complex in the kidney enable the redosing with ImmTOR. So there's a lot of learnings that we have obviously from the gout indication that we plan to transfer to IgA nephropathy. And obviously there's a significant unmet medical need. There's no approved therapies on the market at the moment. Great. Thank you. Our next question will come from Raju Prasad with William Blair. Please go ahead. Thanks for taking the question. Kind of wondering on the mTOR platform in gene therapy as it relates to serotype. I know you've done some data in AAV8 and 5, I believe. But with next gen kind of capsids coming, I mean, what are your thoughts on the translatability of mTOR across kind of all serotypes? And then I've got a follow-up on. Yes. Thanks, Raj. That's a great question. So as you know, ImmTOR as a technology is pretty much you can basically combine any antigen with ImmTOR. As you rightly said, we have demonstrated we're able to retreat with an AAV8 and AAV5, but we basically believe that it's agnostic to the serotypes. And specifically in regards to the next generation of capsids, which are designed to basically abate pre existing antibodies, we believe definitely that there is an application for ImmTOR as well as those novel caps that are actually quite immunogenic themselves. So we definitely think we're well prepared to address those challenges that we face with AAV mediated gene therapy, but also potentially addressing our next generation capsids as well. Great. Thanks for that color. On the COMPARE trial, how should we think about the data in regards to maybe de risking the autoimmune disease program? Is there any similarities between immunogenicity that's developed with the PDRIQ case versus IgA nephropathy? Yes. I think, I mean, we definitely we believe with the data we have that the approach is definitely derisked, also now going to Phase 3 the placebo controlled study. So we definitely feel that we're derisked and we've basically demonstrated that we're able to combine a the immunogenic enzyme with ImmTOR and really especially the IgA and the property indication is really a one to one translation where we plan to combine an immunogenic enzyme and IgA protease with ImmTOR. So we definitely have learnings we can transfer here in terms of addressing ADAs, which we have demonstrated in the GAL trial already in Phase 1 and 2. Our next question will come from Derek Archila with Stifel. Please go ahead. Hey, great. Thanks, guys. This is Ben on for Derek. Thanks for taking my call. Most of mine have been asked, so I guess just one for Brad. I guess how should we think about the OpEx ramp just considering the Asobi deal and then also the study starting this year next year as well? Thanks. Yes. So it's a good question and thanks for it. So obviously, Sobeys is going to be reimbursing Selecta for the Phase 3. So that should take our expenses down significantly. So if you kind of pro form a our cash balances of June 30 with the Sobeys deal, you can kind of get a flavor for where we think it's going to ramp up. Obviously, as we advance the gene therapy and autoimmune diseases programs, you'd expect to see that go up particularly in the R and D line and starting in late 2021, 2022. But we expect our operating expenses to be significantly lower for the coming years versus where they were given that we're not funding the SEL-two twelve program going forward. The next question will come from Difei Yang with Mizuho. Please go ahead. Thank you. This is Dan Clark on for Difei. Did the Sobei deal change we made changes in the hiring process or the final decision for the hiring of the CMO role? So obviously, as we have talked about Peter, he has an impressive background, both and quite a unique skill set having worked in big pharma, in biotech and academia. And he's obviously ideally suited to oversee the Phase 3 program, which is critical, but also really overseeing the translation of our science into the clinic as a next step in gene therapy with the MMA program. But also, Peter is actually a liver specialist. And as you know, ImmTOR accumulates in the liver, and we're actually pursuing primary biliary cholangitis as an indication. So there's a lot of disease knowledge actually that Peter brings to the table in addition just with his wealth of experience. And obviously now we do have the funding to actually move our platform forward, which definitely was I think a key part in Peter's decision making process as well to join Selecta. Thank you. And then just as a follow-up, for future product and licensing opportunities for Selecta, should we sort of expect to see a similar structure to that that you have with 3S Bio for uricase? So we don't want to comment on BD activities, but I think this is to say now we do have the funds and definitely are looking at in licensing opportunities. And I think the 3S Bio model is definitely a model that can be replicated where we license an enzyme, which is immunogenic and can be retreated without ImmTOR. And I think this can definitely be replicated for other indications as well. Thank you. Our next question will come from bubulan Pashayapin with H. C. Wainwright. Please go ahead. Hi. This is Bhubalind dialing in for Ron Silvaraju. Can you hear me okay? Yes. Thank you. All right. So just to start off, this might have been asked previously, but jumping calls. I would like to hear your thoughts regarding the SOVY partnership with respect to the CEL-two twelve Phase 3 trial. Can you clarify the responsibilities of SOVY? Yes. So we will execute the Phase 3 on behalf of Sobeys and Sobeys will reimburse us for the cost. Obviously, they'll have the final say on the program, but it's run collaboratively, but we're actually going to be in the driver's seat and execute the study on behalf of Sobei and fully get reimbursed by Sobei. Okay. That's actually very helpful. So along the lines, I would like to discuss some possible scenarios for the MIRROR trial, the horizon pharma is currently running. Is it likely to make a difference to the future of CEL-two twelve if the MIRROR trial results are positive and exceed expectations? Or is CEL-two twelve going to be a force to be reckoned with as long as the COMPARED trial data are positive and regardless of what happens to the MIRROR study? Yes. So we have looked at this extensively over the last couple of months, obviously, and don't feel that the results will impact the commercial potential of SA-two twelve. And I'll tell you why. There's really limitations with the use of methotrexate. The first one is patient eligibility, right? You have to exclude patients with chronic kidney disease. And we know actually from the perspective of Phase 3 studies that about 50% of patients had chronic kidney disease. We believe the gout population in general, looking at EPI data, is about 30% of patients actually that have to be excluded. We have to exclude patients that consume more than 3 drinks, alcoholic beverages per week. So that's an issue obviously in this patient population that oftentimes abuses alcohol. And then you have to exclude patients that don't tolerate methotrexate. And we know from other studies that about 20% of patients don't tolerate actually the first 2 weeks. So you have to exclude quite a number of patients. Obviously, there's the question of safety. Massagexion has a black box warning around end organ toxicities, which I think especially in this patient population is critical when it comes to elevated transaminases. And also, when you look at methotrexate, actually, a leading cause of medication error a death due to medication errors. So I think that's another concern in a quite non compliant population. And the third one, maybe the most practical, is really the convenience or lack of convenience as you have to retreat with methotrexate for 6 weeks before you actually initiate the therapy, you have a daily intervention. You have to take daily folic acid, weekly methotrexate and then layer on the therapy after 6 weeks, every 2 weeks versus a once monthly therapy where you don't have restriction around chronic kidney disease and alcohol use. So we feel that we have differentiated product with SEL-two twelve. That's very, very helpful. Thanks so much on that. And then assuming you and Sobe will initiate Phase 3 by end of this year, what would be your next big focus? Is it going to be cell 302 or 3 or both and why? Yes. So as we guided today, we actually will start the Phase 3 this quarter. So I think that's an important milestone for us. And we really, as the next asset going to the clinic, is our focus on gene therapy, and we plan to enter the clinic in MMA in the first half of next year and plan to have at least preliminary data in the second half of next year. That's really the focus. But also we are moving forward our OTC program, which will guide more in October and our autoimmune diseases, specifically IgA nephropathy and primary biliary cholangitis, and we plan to file an IND for one of the indications late next year as well. Okay. That's helpful. And then just a couple more from me. So with respect to your collaboration with Sarepta, what specific safety and efficacy signals would determine whether this program would be a go or no go? And is there a timeline associated with this collaboration? Yes, that's a great question. Obviously, we haven't disclosed the exact details of the experiments that Sarepta will be conducting. But obviously, they have been impressed by the data we have generated so far, which have been generated liver based diseases, where we're able to demonstrate prevention of numerous antibodies when you combine the AAV capsid with Intor and they plan to run a number of animal experiments to demonstrate that you can blunt the immune response to gene therapy. And they have 24 months to do so. It's a 20 4 months research agreement and obviously have the opportunity to opt in at any point. Okay. That's very helpful. And how should we think about modeling R and D costs for the remainder of the year? Yes. I'll let Brad answer that. Yes. So obviously, so we're running the Phase 3 on behalf of Sobeys. So we're as the transaction closed in Q3, we're still working with our accountants to determine whether that will be booked as revenue or a reduction in costs. It's obviously the same net effect, but you would expect overall that our cash burn would go down given that we're not running the Phase 3 or we're not paying for the Phase 3. And as you can see from the COMPARE study winding down as well, our R and D expenses were down significantly quarter over quarter. So I think that trend should continue. And then we'll guide further to you guys and sort of how we'll account for the expense reimbursement from Sobe. Okay. That's very helpful. Thanks a lot. Thanks for your questions. Our next question will come from John Newman with Canaccord. Please go ahead. Hi guys. Thanks for taking the follow-up question. I just wondered if you could briefly go over the economic terms that you have in terms of the AskBio partnership. You've got several programs there that you'll be working on together. Just curious how that would look over the long term, should those programs be successful? Thanks. Yes, that's a great question, John. And we have 2 partnerships actually with AssBio. One is a classical licensing deal where they license ImmTOR for their lead asset in Pompe disease. They licensed ImmTOR in December last year. There's $7,000,000 upfront. And then there will be as we disclosed, there will be regulatory development and commercial milestones plus royalties associated with that. The second collaboration we have is a true strategic collaboration where the M and A program is part of where we share the costs and also the profits. It's a fifty-fifty partnership and where we have up to 10 indications that we plan to develop together and commercialize together. This concludes the question and answer portion of the call. I would now like to turn the conference back over to Selecta's CEO, Carson Bruin, for any closing remarks. Mr. Bruin? Thank you, operator, and thank you to everyone who joined us this morning. We're extremely excited about the second half of twenty twenty and the continued growth of our company and our platform. We look forward to sharing more information about the growth of the ImmTOR platform throughout the year. This concludes today's call. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.