Earnings Call: Q4 2019

Mar 12, 2020

Good morning, and welcome to the Selecto Biosciences 4th Quarter 2019 Financial Results 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 atwww.selectabio.com, and it is being recorded. For opening remarks, I would like to introduce Elena Kogan, General Counsel of Selecta. Please go ahead. Thank you, and good morning, everyone. Welcome to our Q4 full year 2019 financial results and corporate update conference call. A press release reporting our financial results is available in the Press Release section www.selectabio.com and our Form 10 ks for the fiscal year ended 2019 will be filed later today with the SEC. Joining me today is Carsten Brunn, our President and Chief Executive Officer and Brad Doms, our Chief Financial Officer. In addition, Doctor. Alison Schechter, our Chief Medical Officer and Kei Kishimoto, our Chief Scientific Officer will be available for the Q and A portion of the call. As a reminder, 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 and prospects. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our most recent Annual Report on Form 10 ks, which will be filed with the SEC later today. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of today, March 12, 2020, and selected 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, Lona, and good morning. I appreciate you joining us today. 2019 was a pivotal year for Selecta. We made substantial clinical advancements, highlighted by the completion of enrollment in the head to head COMPARE trial of our lead product candidate SEL-two twelve, which is being developed for the treatment of chronic refractory gout. We were able to complete enrollment of the trial in 7 months, which we believe speaks to the significant unmet need in patients with chronic refractory gout. SEL-two twelve combines our INTRO platform and pegatricase, and the COMPARE trial is evaluating a once monthly dose of SEL-two twelve in comparison to biweekly peglodicase. The primary endpoint is the percentage of patients who maintain serum uric acid levels of less than 6 milligrams per deciliter at 3 6 months 80% of the time. We expect to announce top line data from this trial in the Q3 of 2020. As we advance into our Phase III program, which I'll outline shortly, we remain strongly encouraged that SEL-two twelve, if approved, could address some of the current unmet needs in the marketplace with a once monthly dosing profile and the potential to mitigate the formation of neutralizing antibodies without suppressing the immune system. We are pleased to report that in January, we had a productive discussion with the FDA in which we discussed the proposed design of the Phase III clinical program. The discussion has given us clarity on the registrational study, which will consist of 2 placebo controlled trials. Each trial will have a 6 month endpoint, and one of the studies will contain a 6 month placebo controlled extension to evaluate extended safety. As per suggestion to the FDA, we'll be evaluating 2 doses of SEL-two twelve, 0.1 milligrams per kilogram of ImmTOR and 0.15 milligrams per kilogram of ImmTOR versus placebo in each of the two trials. In other words, there will be 2 active treatment arms and one placebo arm. Patients will be randomized 1 to 1 to 1 with approximately 35 patients in each of the 3 arms in each trial. From a manufacturing perspective, we have enough supply to commence the Phase III clinical program. Our gene therapy program continues to be a strategic focus and we made important advancements in 2019, all of which support our entry into the clinic later in 2020. In December 2019, we were excited to report that we broadened our existing strategic partnership with AskBio. We jointly entered into a license agreement under which AskBio the exercise its option to license development and commercialization rights to select us ImmTOR immune tolerance platform for use in AAV gene therapy for the treatment of Pompe disease, which is AskBio's lead indication. Pompe disease is a rare genetic lysosomal storage disease characterized by the abnormal buildup of a sugar molecule called glycogen inside cells. Under the terms of the agreement, Selecta will receive upfront payments totaling $7,000,000 and is eligible to receive milestone payments of $237,000,000 plus royalties on product sales. This builds upon the strategic partnership we announced in August 2019 with Asbio to jointly develop, manufacture and commercialize a portfolio of AAV gene therapies with a lead indication in methylmalonic acidemia and several other indications, which we have not yet disclosed. Our partnership leverages the technology platforms of both companies with Asbio's expertise in clinical and manufacturing AAV gene therapies and Selecta's expertise in immunotologous biology, and there will be a human proof of concept trial to validate the technology and its potential for redosing in patients. The potential to redose gene therapy may be an important therapeutic breakthrough that is currently not possible to redose AAV gene therapy due to the development of neutralizing antibodies against the AAV capsid. Preclinically, ImmTOR has been shown to enable repeat dosing and enhance first dose transgene expression up to 4 folds compared to gene therapy with AV vector alone. We look forward to bringing our gene therapy programs into the clinic later this year. Our proprietary gene therapy program includes research in ornithine transcarbamylase or OTC deficiency, which we intend to advance, and we look forward to providing updates on this program later this year. In 2019, we significantly strengthened our organization's leadership and financial infrastructure, adding several new members to our executive team, appointing a new Chairman to our Board of Directors and completing a $7,000,000 financing. We're proud to have welcomed Carrie Cox as our new Chairman of the Board of Directors. Ms. Cox is a renowned industry leader and successful biopharmaceutical executive. She has served on several boards and held the position of chair for multiple biopharmaceutical companies and health care entities, including Cardinal Health, Celgene, Array Biopharma, Humacyte, Prison Pharmaceuticals, among many others. I'll now turn the call over to our Chief Financial Officer, Brad Darmes. Brad? Thank you, Carson. Our detailed financials are laid out in our earnings press release, which we filed this morning and we further outlined in our 10 ks. So I'll just highlight a few key items here. Before we delve into Selecta's finances, I want to note that the ongoing COVID-nineteen situation will not impact our clinical programs from a supply perspective. Now with regards to our financials, we ended the year with $91,600,000 in cash, cash equivalents and restricted cash. Net cash used in operating activities was $12,900,000 $51,400,000 for the Q4 fiscal year 2019 respectively as compared to $12,700,000 $59,200,000 for the same periods in 2018. As Karsten noted, we completed a private financing December with a high quality syndicate of investors and certain board members, which resulted in net proceeds to the company of $65,600,000 Together with the upfront cash received from the license agreement with AskBio for the lead indication in Pompe disease, we believe our current cash will fund operations into the Q1 of 2021. R and D expenses for the Q4 fiscal year 2019 were $15,200,000 $42,700,000 respectively, which compares with $10,300,000 $47,700,000 for the same periods in 2018. The quarterly increase reflects additional costs incurred specific to our Phase 2 head to head COMPARE clinical trial of SEL-two twelve for which we completed enrollment in December 2019. The decrease year over year reflects reduced costs in 2019 due to the completion of prior programs in 2018 combined with reduced salaries and benefits resulting from the headcount reduction in early 2019. The cost reductions were partially offset by an overall increase in costs incurred in our lead product candidate SEL-two twelve. G and A expenses for the Q4 and fiscal year 2019 were $4,100,000 $16,400,000 respectively, which compares with $5,100,000 $18,200,000 for the same periods in 2018. The decrease is the result of lower salaries and stock compensation expense resulting from reduced headcount at the end of 2018 combined with reduced professional fees. The Q4 and fiscal year 2019, we reported a net loss of $14,900,000 or $0.28 per share $55,400,000 or $1.22 per share compared to a net loss of $14,700,000 or $0.65 per share $65,300,000 or $2.92 per share for the same periods in 2018. I'll now hand the call back over to Carsten for closing remarks. Carsten? Thank you, Brad. As mentioned earlier, 2019 was a year of substantive meaningful growth for us as we evolved in the areas of clinical and regulatory development, organizational structure, finance and strategic partnerships. In 2020, our focus remains on the further development of SEL-two twelve, and we look forward to announcing top line data from the COMPARE study in the Q3 as well as to the initiation of the Phase III clinical program in the second half of the year. In parallel, we'll continue to advance our gene therapy program independently and with our partners entering the clinic in the second half of this year as we continue to pursue new breakthroughs in treating diseases that can benefit from redosing with gene therapy. We look forward to continuing to generate value from our ImmTOR platform. I'd like to conclude by reiterating our gratitude to the many people who have been supportive along the way, including our patients and their families, our investigators helping us with Compare and our great team at Selecta. With that, we're happy to take questions. Fitzgerald. Can you discuss a bit your perspective on the KRYSTEXXA methotrexate combination study? If that study were to show a significantly improved response rate versus say KRYSTEXXA alone, how would that affect your outlook for SEL-two twelve in the gout landscape from a competitive positioning perspective? Thanks for the question. Obviously, we are following this study very closely. I think to date, we haven't seen any controlled data, and we're obviously focusing on executing our COMPARE study and moving into Phase III in the second half of this year. Got it. And then in terms of the doses for the Phase 3, can you discuss a little bit more about the rationale for the multiple doses of ImmTOR versus exploring a single dose? Yes, I think that's a great question as well. I think it's quite common to explore 2 doses. We're always looking for the minimally effective dose. Chronic Factor Gout is a heterogeneous disease. Therefore, we want to test those 2 doses, 0.1 and 0.15 in the Phase 3 program. Got it. Thanks for the color. Thank you. The next question will come from Raju Prasad of William Blair. Thanks for taking the question. Can you remind us of the statistical analysis plan that you've put in place for the head to head trials? Is there an ICT analysis? And how you're dealing with potential dropouts on each arm? And then I have another question on the gene therapy platform. Yes. So, good question, Raj. So, we haven't shared the details of our SAP. Obviously, the trial is powered to show superiority. And in terms of differentiation versus in SUA levels, we will disclose middle of this year in Q3 is the primary endpoint, which is SUA levels below 6 at months 3 6, agent of the time, and some of the secondary safety measures. Great. Maybe just a quick follow-up on that. Can you just kind of provide some general color on the interim stopping rule criteria when that occurred? Did that occur in the 1st month where the CEL-two twelve arm has kind of a higher standard or it happened towards the later where they had the similar stopping rule criteria? Yes. So we haven't disclosed any details. And as you know, we provided an early readout on December 2, but we have not shared a breakdown in terms of dropouts by months. We'll obviously share this during the high level readout in Q3. Okay. And then on the gene therapy platform, it seems like you're going to be advancing in kind of rare liver targeted diseases. Is there plans or optionality to go into other tissue types or is it primarily any liver focused? Just any color on the potential expansion of the platform would be interesting. Thanks. Yes. That's an excellent question. So you're right. I mean, all the data we have currently is in liver directed diseases and will definitely go into a liver directed disease as a first indication. But I think from a scientific perspective, there is no reason why it shouldn't work in other non directed diseases, because the immune response is still facilitated the same way. We don't have any data, but I think from a pure scientific perspective, we definitely see applications beyond just liver directed diseases. Great. Thanks. The next question is from Chad Messer of Needham and Company. Great. Good morning and thanks for taking my questions. First one quickly on the AskBio deal, just trying to understand a little bit of the mechanics there. You announced it, a big one in August and then talked about Pompe in December. Is that the same deal we're just hearing about one of the previously undisclosed programs? And how should we expect to hear about other programs over time? Is there will you announce them when they're decided or when they reach a certain point in development? Yes. Thanks for the question, Chad. Yes, it can indeed be confusing. It's important to understand that the announcement in August is around a strategic partnership where we co develop and co commercialize across a number of indications. So we're basically sharing cost, but then also profits, whereas in December was a pure licensing deal. So they're completely separate transactions We've licensed ImmTOR for the exclusive use in Pompe disease for Aspire's lead program. So they're 2 different collaborations, 2 different deals. Okay, thanks. Appreciate the clarity there. And then obviously, what you guys are trying to accomplish is re dosing, very exciting advancement for gene therapy, if you can pull that off. Do you have any thoughts about when redosing is supposed to happen? How long between initial and subsequent doses? Is that something you've worked out and can discuss? Yes. I don't think we're at this point yet, Chad, to talk about this. But I think what I can say, what we're looking at initially, what we see as a proof of concept, if we are able to prevent the formation of neutralizing antibodies, because that's really the challenge right now. If a patient is dosed to an AAV capsid, they have such high titers of neutralizing antibodies that it's impossible to redose them. So we would in an initial experiment try to show that we can actually prevent the formation of lupus antibodies. The second step would be indeed to be able to redose, but we haven't guided to an exact outline of the clinical trial design for that. Understood. And what do we know about the time course of development of neutralizing antibodies? Is that something that happens in weeks or months or what do we know? Yes, that's a great question. I'll let Kei Kuzimoto, our CSO, answer this one. Hey, Chad. This is Kei. Yes, you do see neutralizing antibodies come up pretty early. They will be seen over the 1st few weeks to a month after dosing. And then the issue with redosing is that those titers will persist for years, if not decades. Okay. All right, great. Thanks guys. Look forward to hearing progress this year. Thanks. Thanks, Chad. The next question will come from John Newman of Canaccord. Hi, guys. Good morning. So Carson, obviously, there's a lot of focus on the head to head study with peglodacase in terms of efficacy. But I just wondered if you could roughly outline what types of analyses you might be able to look at with regard to the safety for 212 as it really seems like in your past studies, you've been able to show pretty low incidence of gout flares, especially the severe flares. So I'm just curious as to generally speaking, what you might be able to look at in the upcoming head to head study? Thanks. John, great question. Yes, I mean, definitely, there's a focus on safety. And as you said, we'll look at the overall AE profile, SEA profile and obviously Gauvest as well. And we obviously hope to see similar results that we have seen in the Phase II dose finding study, where we saw quite a reduction in terms of number of gout flares. So this will all be part of the analysis of this trial. Okay, great. Thank you. The next question will come from Yun Jeong of Janney. Hi, thank you very much for taking the question. So the first one on the primary endpoint of the COMPARE study 80% of the time in month 36, Were you trying to use the primary same primary endpoint, I assume, that was used in the pivotal studies of KRYSTEXXA. But in your planned Phase III study, looks like it's only one time point, month 6. And is that 80% of the time? Or is that a single time point? And during your discussion with the FDA, did the agency show any preference regarding which time point they would like to see? Sorry, which one? Yes, that's an excellent question. Yes, exactly right. We are using in the COMPARE study exactly the same endpoint as KRYSTEXXA per label. But we also have a secondary endpoint where we actually look at 6 months only. The FDA has changed their guidance. So they are, at this point, only interested in a 6 months readout, and it will be also 80% of the time. And the rationale from them is that, obviously, 6 months is the month that counts, and they see bringing patients in for weekly blood draws as a potential issue. So they were very clear in their preferred or in their guidance actually that they're only looking at 6 months for 80% of the time. Okay. Then the second question on the Pompe program. Is AskBio going to take the lead in developing this program in terms of timing and strategic plan? Yes. So as mentioned earlier, so we licensed ImmTOR to AskBio. So they have the rights and they drive the program and they make all the decisions as well. So it's a question you have to address to AskBio. Okay, great. Thank you very much. Thank you. The next question comes from Difei Yang of Mizuho Securities USA. Hi, good morning and thanks for taking my question. Just a couple. The first one related to the SEL-two twelve upcoming Phase III trials. How should we think about stopping room with the head to head study? If we look at head to head study, would that be a reasonable base to think about stocking rules? Yes. Good morning, Difei. Excellent question. Indeed, we plan to use the same stopping rules in the Phase 3 as we've used in compare for SEL-two twelve, which is just to remind everyone, SUA has to be below 1, and then months 2 to 5, SUA levels below 6. So we'll use the same stopping criteria in the Phase 3. Thank you for that clarification. Then on changing subject to gene therapy, would you give us a quick update on what Spark decided to do or they're planning to do with the additional with the opine on additional indications? Yes, that's a good question as well. So just to remind everyone, Spark or I guess Roche now holds the license for ImmTOR in the use of hemophilia A, and they continue to hold that license. They had the option to take 4 additional indications. They have not opted in those and which allowed us to obviously allows us to partner those indications or potentially develop them ourselves. And you can see with AskVirus is one example how we can license those indications to other partners. Thank you. And this concludes the question and answer portion of the call. I will now turn the call back over to Selecta's CEO, Carsten Brunn, for any closing remarks. Carsten? Thank you, operator, and thank you, everyone, who joined us this morning. We achieved critical benchmarks in 2019 as we further advanced the INTRO platform in chronic refractory gout and gene therapy. We're extremely excited about the upcoming milestones in 2020 and the continued growth of our company and its technology. We look forward to sharing further updates about the broad potential of the Intra platform throughout the year. That concludes today's call. Thank you. Thank you. The conference is now concluded. Thank you all for attending today's presentation. You may all disconnect. Have a great day.