Earnings Call: Q2 2019

Aug 8, 2019

Good morning. Thank you for holding. Welcome to the Selecta Biosciences Second Quarter Financial Results Conference Call. At this time, all participants are in listen only mode. This call is being webcast live on the Investors and Media section of Selecta's website at www.selectabio.com, and it is being recorded. For opening remarks, I would now like to turn the call over to Elana Kogan. Please go ahead. Thank you, and good morning, everyone. Earlier today, we issued a press release containing our Q2 2019 financial results and other corporate updates, and we filed our 10 Q. This release and the 10 Q can be accessed by visiting our website atwww.selectabio.com. I am joined today by Carsten Brunn, our CEO and Steven Smolinski, our CCO and Doctor. Kate Kishimoto, our Chief Scientific Officer, who will be available for the Q and A portion of the call. Before we get started, we would like to advise that certain remarks that are made during this call, including without limitation, statements about the company's future expectations, plans and prospects, the potential of our ImmTOR platform the anticipated timing of planned trials related data readouts and ability of results to inform future trials, our collaboration with AskBio, our collaboration with CureCN, the development and market potential for our products, the sufficiency of the company's cash, cash equivalents and short term investments constitute forward looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the Risk Factors section of Selecta's most recent quarterly report on Form 10 Q filed with the SEC, which can be accessed at selectabio.com. In addition, any forward looking statements represent the company's views only as of today, August 8, 2019, and should not be relied upon as representing the company's views as of any subsequent date. While Seleptum may elect to update these forward looking statements at some point in the future, it specifically disclaims any intention to do so even if management's views change. And now, let me introduce Carsten Brunn, who will kick things off today. Thank you, Lona, and good morning, everyone. This quarter, we continue to gain traction and momentum for immune tolerance platform ImmTOR and we are particularly excited about its potential in therapeutic biologics, enzymes and AAV gene therapy. The current challenge for drug development in these areas is the limitations caused by the body's own immune response. Many biologic therapies when administered will trigger the immune system to develop neutralizing antibodies that counteract their therapeutic benefit. Our answer to this challenge is our intra platform, which promotes selective immune tolerance of the therapy, allowing the therapeutic goal to be achieved. For our lead development program SEL-two twelve for the treatment of chronic refractory gout, we have made good progress and patient enrollment is progressing in our 6 months head to head COMPARE trial designed to evaluate SEL-two twelve compared to KRYSTEXXA in adult patients with chronic refractory gout. If successful, this trial will give us an opportunity to demonstrate the superiority of SEL-two twelve. Stephen will talk in more detail about this program in a moment. We are extremely thrilled by our recently announced strategic partnership with Astrapolis Biopharmaceuticals, also known as AskBio, a proven leader in next generation gene therapy development and scaled manufacturing to jointly develop, manufacture and commercialize a broad portfolio of AAV gene therapies. Asbio's gene therapy platform includes a robust pipeline of potentially curative gene therapies, an extensive capsid library, a flexible and scalable manufacturing process and several advanced AAV initiatives under development. The Aspire platform also was used in the development of 2 of the FDA approved gene therapies available today, Sologenzma and LUXTURNA. This partnership will combine our unique ImmTOR platform with AbbVieUS technology for human proof of concept trial to validate our joint portfolio of products and the potential for redosing in patients. Currently, the ability to readminister systemic AAV gene therapy is limited by the development of neutralizing antibodies against the AAV capsid. We believe that our platform has the potential to increase the proportion of patients who achieve and maintain their pridic benefit. For example, the ability to safely redose would benefit patients who are initially underdosed or help restore transgene expression in patients who may lose expression over time. This is particularly important in pediatric patients for whom transfine expression may wane over time as they grow or in patients who experience organ damage such as liver inflammation, which can adversely affect transgene expression. Additionally, last year, we announced a collaboration with the European consortium, CureCN, for the use of our ImmTOR platform in combination with their AV gene therapies, including Nadjard syndrome, a rare genetic disorder characterized by an inability to properly convert and clear bilirubin from the body. We are continuing to advance this collaboration and expect QCM to obtain scientific advice from the German Drug Regulatory Authority in the second half of twenty nineteen. We expect this guidance will inform the clinical trial design. We remain focused on partnerships for our ImmTORM platform to realize our vision for gene therapy. We believe that ImmTOR has the potential to transform gene therapies requiring intravenous administration by more effectively targeting systemic diseases such as inherited metabolic disorders and muscular dystrophies, in which multiple vector administrations are likely needed to achieve full therapeutic efficacy. We believe that strategic partnerships can provide us with a portfolio of differentiated and durable gene therapy solutions to patients and their families. And before I hand it over to Steven to go into more detail on our chronic refractory gout program, I would like to highlight some recent corporate updates. In July 2019, we grew our team as we welcomed Doctor. Alison Schechter as Chief Medical Officer. Alison was most recently the Global Project Head Rare Diseases at Sanofi, and we look forward to benefiting from her extensive experience in drug development as we continue to advance our programs. Additionally, in June, Scott Myers of Raniere Therapeutics joined our Board of Directors. Scott is an accomplished and strategic leader with significant prior CEO experience. As you can see, we've built a lot of momentum in developing both our AAV gene therapy program and building our team to support continued advances in our ImmTOR platform. With that, I'll hand the call over to Stephen to talk more about SEL-two twelve. Thank you, Garsten. Chronic refractory gout represents the most severely affected subpopulation of gout patients who suffer from debilitating pain and disability. These patients experience higher morbidity and mortality than other gout patients. As Carsten mentioned, we continue to believe that SEL-two twelve has the potential to address several unmet needs in chronic refractory gout patients, including sustained serum uric acid reduction, reduced painful flares and more convenient once monthly dosing. As a reminder, SEL-two twelve is a combination of ImmTOR, our novel immune tolerance platform and pegadricase, our proprietary PEGylated uricase. Recently at EULAR, we presented the full data from our completed Phase 2 trial of SEL-two twelve. We continue to be encouraged by what we saw as the data showed that 66% of the valuable patients maintained serum uric acid levels of less than 6 milligrams per deciliter after 5 once monthly treatments of SEL-two twelve at doses of 0.1 or 0.15 milligrams per kilogram of ImmTOR in combination with 0.2 milligrams per kilogram of pigatricase. Additionally, reduced tissue rate burden, low gout flare rates and severity flares were observed. Only 35% of patients treated with 5 doses of SEL-two twelve experienced gout flares during the 1st month of treatment with continued reduction of gout flare rates over months 2 through 5. SEL-two twelve has been generally well tolerated at clinically active doses following repeated administrations in the trial. In March of this year, we announced the initiation of our 6 month head to head COMPARE clinical trial against the current FDA approved uricase therapy KRYSTEXXA, which is designed to compare the efficacy and safety of SEL-two twelve to KRYSTEXXA in adult patients with chronic refractory gout. Patient enrollment in the trial is ongoing and we expect to enroll 150 patients. The primary endpoint is the maintenance of serum uric acid levels below 6 milligrams per deciliter at 6 months and secondary endpoints include flares, quality of life, health assessment questionnaires and TOFI resolution. We anticipate providing interim data analysis in the Q4 of this year as well as full statistical superiority data analysis in the Q2 of 2020. In terms of the market potential, there are roughly 160,000 patients in the U. S. With chronic refractory gout. Chronic refractory gout is a painful and severe form of inflammatory arthritis that can lead to bone erosions and joint deformities resulting in loss of function and disability. Only a small percentage of these patients are currently being treated. As we develop SEL-two twelve, we are looking for consistent SUA control over 6 months and low flare rates. We believe this clinical profile along with its more convenient monthly dosing makes SEL-two twelve a very compelling product for patients and their providers. In fact, we recently conducted third party market research, which showed the SEL-two twelve product profile was very positive received and rheumatologists ranked SUA control, low flare rates, once monthly dosing along with low incidence of infusion reactions as product characteristics that would allow them to increase the duration of treatment and potentially treat more patients. Based on our data and market research, we firmly believe SEL-two twelve has the potential to address many currently identified unmet needs in this patient population and represents over a $1,000,000,000 market opportunity. With that, let me turn the call back over to Carson to discuss our Q2 2019 financial results. Thank you, Stephen. Revenue recognized for the Q2 of 2019 was less than $100,000 under our collaboration agreement with Spark, which compares to no revenue recognized for the Q2 of 2018. R and D expenses for the Q2 of 2019 were $12,100,000 which compares with $14,400,000 for the Q2 of 2018. The decrease was driven by reduced salaries and benefits as a result for headcount reduction at the beginning of fiscal 2019. There were further reductions in cost year over year as a result of the completion of our work on discontinued programs. These cost reductions were offset by timing of costs incurred for both our Phase 2 and Phase 3 clinical programs. G and A expenses for the Q2 of 2019 were $4,100,000 which compares with $4,400,000 for the Q2 of 2018. The reduction in cost was primarily the result of reduced legal fees offset by increased professional fees. For the Q2 of 2019, we reported a net loss of $16,400,000 or $0.37 per share compared to a net loss of $18,800,000 or $0.84 per share for the same period in 2018. As of June 30, 2019, Selecta had $42,000,000 in cash, cash equivalents, restricted cash and short term investments as compared to $48,700,000 as of March 31, 2019. We believe our available cash, cash equivalents and restricted cash will be sufficient to meet its operating requirements into the Q1 of 2020. In summary, our unique platform truly has broad potential. Based on our clinical data, market research and feedback from physicians, we are particularly enthusiastic about our late stage asset for chronic refractory gout and look forward to announcing the interim COMPARE data in the Q4. Additionally, we're eager to unlock the value of our platform with the potential to re dose in AAV gene therapy and further progress our platform to partnerships, particularly with our new strategic partnership with AskBio. That concludes our formal remarks. Now, I'll open the line for your questions. Operator? Thank you. We will now begin the question and answer session. And the first question comes from Chad Messer from Needham and Company. Please go ahead, sir. Great. Thanks for taking my question. Good morning and congratulations on your partnership with Ask Bio, sounds like a high quality group. Details are a little light on what the terms of the partnership are, which I have to assume is for strategic and competitive reasons. But I was hoping you could help me understand a couple of things a little bit better. One would be the impact on your financial situation, in particular in the near term. And the other would be your ability to do other partnerships or basically what have you retained that's not in the partnership? You talked about a broad portfolio that you'll be working on with them. Any help you can give on those 2 would be most appreciated. Chad, thank you. Thank you for the question. So indeed, we're very excited to partner with AskBio because we think they're a partner of choice. They have a proven track record in gene therapy, having spun out 2 companies. Their technology was involved in both approved FDA products. So we're extremely excited. Yes, we kept the details light. We have just announced the partnership. The plan obviously is for us to get into the clinic as quickly as possible. And I think all I can share at this point is going to be in a liver directed disease and we plan to go into the clinic in 2020. And we would partner in a number of indications, which we have not disclosed yet, but we'll share more details over time. In terms of financial impact, we believe that the partnership will have little impact actually in 2019. We'll guide for next year what the cost will be, but I think for now there will be a little impact on our financial runway. And so I think what's important as well, and we talked about this that we obviously as a platform company look at additional partnerships. So this does not lock us up in any way. We partner with Aspire in a number of indications and we disclose those, but this does not limit us from further partnerships in the future. All right, great. Thanks for that added information and congrats again and looking forward to the 212 data next quarter. Thank you, Chad. The next question comes from Derek Archila from Stifel. Please go ahead. Hey, thanks guys. This is actually Ben on the line. Just wondering if you guys have heard an update from Spark about them opting in and that's it for us. Thanks. Thank you. So we obviously are in contact with our partner Spark and they still have the opportunity to opt into 4 additional indications in addition to the hemophilia A indication, which they already have. And we will update you once we hear more news from them. Okay. Thank you. Thanks. The next question comes from Difei Yang from Mizuho first, the question is around 212. Would you tell us if you will start the Phase III for 212 And I think what's important to remember is that the reason we started the COMPARE trial was basically for financial reasons. We had the initial plans to do both the Phase 3 and COMPARE in parallel. But at this point, nothing prevents us from going to Phase 3, except the fact we don't have the funding at this point. So we still have plans to start the Phase 3 as we see it kind of independent of Compare, but it's somewhat driven whether we're able to raise additional funds for that. So the plan is still to start the Phase 3 in Q4 and that is still possible. Okay. Thank you for the clarification. And then with regards to the interim readouts, how many patients, what is the range of the number of patients data that we should be expecting? That is a good question as well, Difei. So we have not guided to this and will not guide to this, but we commit to an interim readout towards the end of this year, which I think will give good guidance actually on what to expect for the final readout as well. Okay. Thank you. So then changing subject to the retreatment piece of the development. Would you on a very high level make comments with regards to financial arrangement, not specifically related to AskBio, but in general, what is the typical upfront you will be looking for and what's the typical royalty, etcetera? Then following up on that with regards to Spark, is there a deadline for Spark to opt in on the additional programs? Another good question, Difei. Obviously, we don't comment on potential upfronts and royalties. So unfortunately, I can't answer that question. In terms of Spark, we actually have not disclosed the exact time, but you can expect towards the end of Q4, they will have to opt in the additional four indications that are still outstanding in addition to hemophilia A, which they opted in already. Yes. Thanks so much for taking my questions. Thank you, Difei. The next question comes from Yun Zhong from Janney. Please go ahead. Hi. Thank you for taking questions. And the first one is on the interim data readout in Q4. Is it possible that there can be some statistical analysis depending on the data, the quality of data? And also will it be in the format like you did for the Phase 2 with some projection on patients who have not completed the full follow-up period? Thanks for the question, Eun. So as we've guided, we will do a numerical readout in Q4 and then we'll plan to do the statistical analysis for the final readout. I think what's important, we don't take a penalty doing a readout as it's an open label trial. Okay. And then the next question, I think you still have 2 internal gene therapy programs and I understand that the focus right now is on the Gout program and also the collaborations is a good way to take advantage of the platform that you have, but do you still have plan if you have sufficient resources to develop your internal gene therapy programs? Jun, you asked an excellent question. And indeed, we have 2 internal gene therapy programs. We have MMA and OTC, and we actually plan to put the MMA program into the partnership with Ask Bio as a liver directed disease. We'll share more details once we have a detailed clinical plan developed with AskBio, but I think that's one of the areas that we bring into the partnership in addition to ImmTOR. I see. Okay, great. Thank you. Thank you. The next question comes from John Newman from Canaccord. Please go ahead. Hi, good morning. This is actually Justin Zelman on for John Newman. I'd like to congratulate you on partnership agreement with SBIO. It's very exciting. I was just curious if the partnership agreement contains plans to have additional development programs in addition to your methylmalonic acidemia program? And I have a quick follow-up. Can you repeat the question please, Justin? Yes. The question was if you have plans to have additional development programs with the partnership agreement with AskBio in addition to your MMA program? The answer is a clear yes. There's a number of indications we're going to pursue together with AskBio. The first will be a liver directed disease, but we'll have additional indications absolutely and we'll guide to those over time. Okay, great. And I noticed the agreement has a profit cost share provision agreement. Will the percent breakdown with SBIO be fifty-fifty split or will that kind of depend on how much costs are put into the program? Yes, exactly. I think one of the reasons we're so excited to partner with AskBio, who as I said, has proven track record of success is that it is a partnership of equal to actually where we share cost, but also profits and really it's a true partnership where we jointly develop, manufacture and commercialize products. I think that's what's extremely excited about this for us that we're equal partners in this in a fifty-fifty partnership. This concludes our question and answer session. I would like to turn the conference back over to Carsten Broom, Chief Financial Officer for any closing remarks. Thanks so much. Thanks for your attention for all the questions. And I was trying to reiterate that our platform has truly broad potential and that we're particularly excited about late stage asset for chronic refractory gout. We look forward to announcing the interim compare data in the Q4. And additionally, we're very eager to unlock the value redose in AV gene therapy and further progress our partnerships, particularly with our new strategic partnership with AskBio. Thanks again for your questions and your attention. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Enjoy the rest of your day.