Thank you for holding. Welcome to the Selecta Biosciences third quarter 2018 conference call. At this time, all participants are in listen only mode. This call is being webcast live on the Investor and Media section of Selecta website at www.selectabio.com, and it is being recorded. For opening remarks, I would now like to turn the call over to John Leaman, Selecta Chief Financial Officer, Head of Corporate Strategy. Please go ahead.
Thank you. Good morning, everyone. Earlier today, we issued a press release containing our third quarter 2018 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 at www.selectabio.com. I'm joined today by CEO Werner Cautreels, our Chief Commercial Officer Stephen Smolinski, and other members of the management will be joining us for the Q&A portions of the call. Before we get started, we'd like to advise that certain remarks that are made during this call about the company's future expectations, plans and prospects constitute forward-looking statements for the 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 also be accessed at selectabio.com. In addition, any forward-looking statements represent the company's views only as of today, November 8th, 2018, and should not be relied upon as representing the company's views as of any subsequent date. While Selecta may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligations to do so, even if management's views change. Now, let me introduce Werner, who will kick things off.
Thank you, John. Good morning, everyone. We believe this year's accomplishments make us well-positioned to achieve several important upcoming milestones. In particular, our lead program, SEL-212, for the treatment of chronic severe gout patients, has generated a robust clinical package in our phase II clinical study that shows, based on clinical data collected to date, it has the potential to fulfill several unmet needs in chronic severe gout patients, including sustained serum uric acid reduction, reduced flares, and convenient once-monthly dosing. We believe that, if approved, SEL-212 could change the treatment paradigm for patients with chronic severe gout who are in real need of new therapeutic options. Let me now take you through the data that gives us confidence going into the start of a head-to-head superiority trial against KRYSTEXXA, the current FDA-approved uricase therapy in the first quarter of next year.
Just as a reminder, SEL-212 is a combination of SVP-Rapamycin, our novel immune tolerance technology, and pegloticase, our proprietary pegylated uricase. In October 2018, we presented data from new cohorts of patients receiving five monthly combination doses of SEL-212 in our ongoing phase II study at ACR in Chicago. Projections based on the trending of data collected to date related to the rate of serum uric acid control for patients who had received five monthly treatment period suggest that approximately 66% of the evaluable patients may maintain serum uric acid control below six milligram per deciliter throughout five months of therapy. That correlates with the mitigation of anti-drug antibodies against the pegloticase enzyme.
Approximately 29% of the patient population treated with SEL-212 in the ongoing phase II trial has experienced gout flares during the first month after treatment, with continued reduction of gout flares out to month five. Overall, 96% of flares in the phase II trial have been mild or moderate in severity, and no flares have been reported as a serious adverse event, nor resulted in discontinuation of the study drug. Preclinical data also presented at ACR addressed the potential impact of SVP-Rapamycin on the inflammasome pathway, which we believe may be related to flares. Indeed, monosodium urate crystals are known to cause inflammation by activating the inflammasome pathway, resulting in interleukin-1 beta production. The preclinical data shown at ACR indicate that SVP-Rapamycin, but not free rapamycin, inhibited interleukin-1 beta production induced by monosodium urate crystals in a mouse model.
The interim data continue to show that SEL-212 has been generally well-tolerated at clinically active doses following repeated, and that is up to five administrations in the trial. Final data are still pending for five of the patients in the new cohorts receiving five monthly doses of SEL-212, and the data will be presented at an upcoming clinical conference. Let me now pass the call over to our Chief Commercial Officer, Stephen Smolinski, who will discuss our clinical development plans and commercialization strategy.
Thank you, Werner. We are now actively engaged in preparations for the start of a six-month head-to-head superiority trial versus KRYSTEXXA, which we plan to initiate in the first quarter of next year. We expect to report interim three-month data and interim six-month data during 2019, and the full data set, which will include head-to-head data for both SEL-212 and KRYSTEXXA in the first quarter of 2020. We have an end of phase II meeting with the FDA scheduled to discuss our planned phase III clinical program. Our strategy remains the same, but we have decided to prioritize the head-to-head superiority study, which we expect to start in the first quarter of 2019, and we also plan to start the phase III later next year. We believe that the head-to-head has the potential to confirm SEL-212's ability to address several unmet needs for severe gout patients.
There are roughly 160,000 patients in the United States with chronic severe gout and only a small percentage are currently being treated by a rheumatologist. As we develop SEL-212, we are aiming for consistent SUA control, low flare rates, and monthly dosing, which has the potential to address currently identified unmet needs in this patient population and represents over a billion-dollar market opportunity. I will now turn the call back over to Werner to discuss other corporate updates.
Thank you, Stephen. For our SVP-Rapamycin technology platform, we believe that based on our SEL-212 program, it has the potential to induce antigen-specific tolerance and that it may be differentiated from systemic immunosuppression. We believe our technology has the potential to allow for the full benefit of biologics, including the possible redosing of AAV gene therapy programs. Using our technology, we have generated many other promising pipeline projects beyond SEL-212 in our core areas of rare diseases and gene therapy. In the third quarter, we announced a new collaboration with CureCN, a European consortium working to cure the ultra-rare disease Crigler-Najjar syndrome. For the use of our SVP-Rapamycin technology, with the goal of potentially redosing gene therapy in clinical trials. Following preclinical toxicology studies, the combination product candidate would be projected to enter the clinic in the second half of 2019.
This opportunity builds upon preclinical work that was published together with Genethon in Nature Communications in October 2018. SVP-Rapamycin is the only technology to have shown the ability to redose AAV therapies in animal models. This technology is unique to Selecta and we believe has the potential to unlock the full therapeutic benefit of gene therapy. In September, we announced the appointment of Carsten Brunn, PhD, as President and Chief Executive Officer starting December 1st. I'll have the opportunity to work with Carsten in transition, who will then provide an update on the company's strategy after he joins the company in December. That also means that this is my last quarterly webcast. Therefore, in closing, I would like to express my gratitude to all of you on the phone for your interest over the years in Selecta.
It was a privilege to work with all of my colleagues. I remain confident in the unique futures of SVP-Rapamycin technology that really has the potential to make a difference for patients. With that, let me turn over the call to John to discuss the quarterly financial results.
Thank you, Werner. For the third quarter of 2018, the company recognized no revenue, which compares to less than $100,000 for the third quarter of 2017. The decline is the result of reduced revenue recognized from the company's grants and collaborations. Research and development expenses for the third quarter of 2018 were $11.9 million, which compares to $9.5 million for the third quarter of 2017. The increase is primarily the result of higher clinical costs related to the company's phase II trial of SEL-212, preparation for the start of the SEL-212 phase III program, and the head-to-head clinical trial, and incremental headcount-related expenses. General and administrative expenses for the third quarter of 2018 were $4.1 million, which compares with $4.4 million for the third quarter of 2017. The reduction in cost is primarily the result of reduced employee salaries and benefits and patent-related costs.
For the third quarter of 2018, Selecta reported a net loss of $16 million or $0.71 per share, compared to a net loss of $14.7 million or $0.66 per share for the same period in 2017. As of September 30th, 2018, Selecta had $50.5 million in cash and cash equivalents, which compares to cash equivalents, and short-term investments of $66.2 million at June 30th, 2018. We expect that our cash balance is sufficient to fund our operations into Q3 2019. The company will require an additional equity offering or other external sources of capital to conduct a planned head-to-head trial against KRYSTEXXA. Finally, we will be presenting at the upcoming Stifel Healthcare Conference in New York on November 13th. We hope to see many of you there. That concludes our formal remarks. We'll open the line for questions. Operator?
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Carter Gould with UBS. Please proceed with your question.
Hi, guys. This is Andrew in for Carter. Thanks for taking my question. I have a couple. Have you had conversations with the FDA on the head-to-head, or is that a plan prior to initiating the first quarter? You mentioned conducting the phase III next year. Generally, what would you want to see in the three or six-month data to get comfortable with initiating following those readouts?
Just wanted to get a sense of what those gating factors are for the phase III. Secondly, with a competitor moving forward with their pivotal immunomodulator study in the coming months, how are you thinking about the market opportunity? With that, what kind of conversations have you had with rheumatologists since your ACR data and their comfort or anticipation for SEL-212? Thank you.
Thanks, Carter. John, you would like to address the first, and then afterwards, Stephen, right?
As we've guided previously, we have an end of phase II meeting that's happening this quarter. I think in that conversation, we'll have a good understanding of what we will do for our phase III program. As we've always stated, we were looking at the head-to-head as part of the phase III development program and part of our commercialization plan. As we've described, we reprioritized that moving forward. I think in answer to your question, in the discussions with the FDA, we'll have a good sense of what the phase III will look like, and we'll plan to put that into the head-to-head trial that we're doing in the first quarter of next year. I think that answers your first question.
I'm going to swing it over to Stephen Smolinski, our Chief Commercial Officer, to address the reaction to the ACR data with rheumatologists and how we're thinking about the marketplace going forward.
Sure. Thanks, John. Having had several conversations with rheumatologists about the MIRROR trial or that combination, I think there have been several conversations that I've seen with rheumatologists and some of the analysts. It is a challenging combination, finding and identifying the right patient to actually go on methotrexate plus KRYSTEXXA. I think there's challenges ahead of that. I think we're pleased that they're trying to do something around KRYSTEXXA. Again, I think our once monthly dosing, our SUA control, and our low flare rates really is where the market and what we hear from opinion leaders is important to them on taking complexity out of the system. I think they're trying to do something around their product.
Again, I think what we're doing with our head-to-head and our product profile really leads to what rheumatologists said is pretty favorable in terms of the results they see that we showed at ACR, as well as moving forward with our head-to-head.
Andrew, I just want to highlight one additional piece, which is I think the fact that there are additional trials going on with immunosuppression, obviously we talk about immunotolerance, talks about the unmet need in this marketplace for patients for six months of basically serum uric acid control. I think as we've chatted a lot, I think there's two different strategies to that, right? One is an immunosuppressive strategy, which is being tried out in the marketplace by competitors, or there's an immune tolerance strategy, which is what we've strived to do with our Tregs and our platform. I think we look forward to helping patients, and looking forward to the data. We do think the head-to-head will allow that apples to apples trial, ourselves versus KRYSTEXXA to be played out.
Thanks. Just as a follow-up on your I know it might be a little too early and your meeting hasn't happened yet, but do you envision needing or doing an active comparator study in your phase III, kind of extending the head-to-head towards that? Are these two separate studies as part of the whole phase III clinical program? Thanks.
They're two separate studies, and I think we've always felt that way. I think we have a pathway to approval with the pivotals, and I think we know what that is, and we have a pretty good understanding. I think this head-to-head is an important one just because I do think there are questions that we can answer with it, and it will allow an apples to apples comparison to allow patients to know what is the best therapy here in the marketplace.
Great. Thanks, guys.
The next question comes from the line of Gil Blum with Needham & Company. Please proceed.
Hi, everyone. This is Gil for Chad. I have a couple of questions. First of all, the newly announced gene therapy repeat dosing trial. Do you believe that the correct dosing of Rapamycin has been worked out from what you've learned so far on SEL-212 in gout?
Good morning. This is Werner. From the data package we do have from SEL-212, also from the preclinical data we have generated in the field of gene therapy. We believe that indeed the data from our phase II trial and from our previous phase I-B trial clearly gives guidance to that, we don't therefore need to be a very extensive dose ranging, which would be impossible in that kind of patients in the first place, which was also the rationale why we wanted to study this in this patient population so that we can extrapolate that to other patient populations.
All right. Thank you. Another question about the head-to-head with KRYSTEXXA. We all know that KRYSTEXXA has a pretty extensive pre-treatment with steroids. What kind of steroids are you guys thinking of using, and how are you going to look at this? Given the differences in pre-medication, can this be designed as a blinded trial?
We feel very comfortable that in the head-to-head, we can certainly keep the patients blinded. I think we feel very good about that. Secondarily, I think when you look at the preparations on it, I think colchicine and steroids are utilized in both pre-treatment regimens. I don't know that there'll be a huge difference between those, at least based upon what the label is for KRYSTEXXA versus our SEL-212 protocol.
All right. Well, thank you very much, and all the best.
Thanks. We appreciate it.
The next question comes from the line of John Newman with Canaccord. Please proceed.
Hey guys, good morning. Thanks for taking my question. I know that you obviously are going to meet with the agency to discuss the phase III and the head-to-head, but can you give us some sort of sense as to how you are thinking about stopping rules in the head-to-head study? The reason I ask is because you obviously had pretty stringent stopping rules in your phase II. The KRYSTEXXA pivotal studies actually didn't have any stopping rules, if I remember correctly. They were put in afterwards as part of our REMS. Just curious as to how you're thinking about that in terms of the head-to-head study. Thanks.
Thanks, John. I think from our perspective, a couple of thoughts. One is in the phase II, we were looking at dose ranging of both our rapamycin and our uricase. I think we wanted to ensure patient safety, which we feel very good about. I think in looking at the data, we feel also very good that we will be able to guide you to a new expanded stopping rule when we head into the head-to-head study and obviously the phase III. I think we feel pretty comfortable with that and the data's there. I think that's the first on the stopping rule.
The other thing that the head-to-head will allow us to do as well is will allow us in a phase III setting with less blood draws to also show that we'll have enhanced patient compliance when it comes to basically our phase III and certainly our head-to-head trial. Beyond the sort of superiority benchmark that we want to do in the head-to-head, we also want to show that we think that our assumptions on patient compliance and expanded stopping rules will also be able to show that in this interim data set at 3 and 6 months.
Okay, great. Thank you.
The next question comes from the line of Derek Archila with Stifel. Please proceed.
Hi, good morning, guys, and thanks for taking my questions. I guess, maybe rightly or wrongly, as we think about this head-to-head versus KRYSTEXXA, kind of the perception, again, whether this is the real apples to apples study, obviously, other people will argue that KRYSTEXXA plus methotrexate or some other immunosuppressant might be the better apples to apples. I guess, what do you think internally you guys need to see from a response rate perspective to really show in this head-to-head versus KRYSTEXXA alone to really be confident to, again, move this forward into phase III? I guess maybe some of the other things that we should be thinking about from an investor standpoint, some of the caveats in comparing this head-to-head versus, and trying to fit it into comparing this versus the KRYSTEXXA methotrexate study, that would be helpful. Thanks.
Sure, Derek. Thanks a lot. I think, primarily as we've described, we will have interim looks at the three and six of the head-to-head, but ultimately this is statistical superiority trial versus KRYSTEXXA, right? I think for us, we feel very confident that at six months, statistical superiority head-to-head is the apples to apples comparison versus the KRYSTEXXA label, and that ultimately would be the result that we're looking for in the trial. I think secondarily, as you described, I think we'll have to leave it to you to debate on what is the right combination. I think we feel very strongly as a group, and we've sort of laid it out that our not immune suppression, but immune tolerance is the proper way.
We're very satisfied with our side effect profile, and like I said, we'll look at the efficacy both in the head-to-head and in the phase III. We remain confident that we have a very competitive product both on the efficacy side and then we obviously from a the patient compliance side of flare rate and monthly dosing, feel very good about that as well. We think that combination of this product, we feel will be treated in the marketplace very well.
Great. That's helpful. Just last question. Did you guys talk about the size of this trial, or is this something again that you need to discuss with the FDA as you're in the phase II, and any sort of thoughts on the overall cost of the head-to-head would be also helpful from a modeling perspective. Thank you.
Thanks, Derek. I think from the perspective of size, we will guide to that when we put the first patient in. I think we are actively working on that, and I don't think that has a lot to do with what the FDA discussion's about. It's going to be about statistical power and then taking a look at it. I think on the perspective of how much it's going to cost, I think we have not guided around that, but I do think that between $30 million and $50 million would get us that head-to-head, would allow us to prepare for phase III and would give us the run rate that we're looking for.
Great. Thanks guys.
The next question comes from the line of Difei Yang with Mizuho. Please proceed.
Hi, good morning, thanks for taking my questions. Just a couple. Is there a small delay in the FDA end of phase II meeting as well as do you need to present there? I think there are five additional patients we're waiting for data on and is that what's in the way, or do you need to wait for that data before having the end of phase II meeting?
Difei, we haven't had any delay in the end of phase II meeting, we don't need the five patients. I think we feel like the package, obviously we had to send that in several weeks ago. We feel that it's very complete to have the end of phase II meeting. As we've guided, we'll have the end of phase II meeting this quarter, we'll go from there.
Okay. With regards to there are some debates about these five patients whether their uric acid level was well controlled at month three point. Is there any reason to think that control may be lost over the next two months? For whatever reason, is there any scientific expectation there?
Difei, I think what we've seen in our trial, and this is both when we take a look at the EULAR data and we take a look at the data that we presented at ACR. When we control the patient through that first month, we generally control them through three months. The reason we felt good about that projection was that 16 out of 16 patients in that ACR data that was presented in Chicago, when they made 12 weeks, made it out to five months. We think that's a pretty impressive trend, and that's why we feel very good about those projections.
Okay, thank you. My final question. If you recall the data presented a couple of weeks back, where there are a few patients, quite a few patients, losing control of the uric acid level, I think at month one or slightly after month one. Were you able to find if there's any specific situations related to those patients? Because it was a surprise. At least to me, it was a surprise. Is there any specific situation, or the data is the data?
I think, Difei, the data is the data. I think as we described, when you looked at the EULAR population, they're probably on the high side of the conversion. I think when you take a look at the five-month data, this is the law of small numbers. This patient population was probably on the low side of that conversion. We believe it's probably somewhere in the middle. We look to show that both in the head-to-head and in the phase III as we go forward.
Okay. Thank you, John.
The next question comes from the line of Yun Zhong with Janney. Please proceed.
Hi. Thanks for taking the questions. I guess, a question about head-to-head study. We haven't seen any data at six months time point, so I don't know what would be your internal projection on what can potentially be seen at six months. Also, I believe the definition of a responder seems to be a little different from KRYSTEXXA study versus your study. I wonder which definition would you like to go by in your head-to-head study?
Thanks for the question. I think on the first one, it goes back to I think what Difei was asking earlier. I think what you see is that if we control a patient at 12 weeks, we generally control them at five months. I think there's no reason to believe that at six months it's going to be any different. I think we feel very confident that our five-month data sort of hangs by itself. Then if we're controlling patients at month one, we control them at month three, and then we typically will control them out. I think that's the projection I think that we, at least internally, are thinking about. I think when it comes to basically the head-to-head study, as we stated earlier, I think we'll guide exactly to what rules we're going to use.
You're absolutely right that a controlled study by definition in KRYSTEXXA's label when it was approved was different than what we were typically using. We'll make sure that we guide that when we actually put up the head-to-head study going forward.
Okay. About the phase III design, I think on your last conference call you disclosed some information. Now that you're going to initiate the study in 2020, sorry, 2019, will there be any potential changes to the design based on what you see from the head-to-head study or based on your discussion with the FDA?
I think absolutely, the answer is yes. I think one of the great things about prioritizing the head-to-head study is we'll continue to learn, I think, some great things that will be helpful to us in the phase III study. Obviously, at the end of phase II meeting, we'll get the FDA's feedback. I think what's clear here, and let me just make a big point, is one of the reasons to do this head-to-head and having the three and the six month sort of data time points is that ultimately, if it's done in the same way as the phase III, we can use that in marketing materials. We want to do that. This has always been part of our commercialization and development strategy. That's the plan with this going forward.
Okay. Thank you.
We have a follow-up question from the line of Difei Yang with Mizuho. Please proceed.
Hi. Thanks for taking my follow-up. From financial perspective, do you have enough funding to finish the head-to-head study?
I think as we've guided, Difei, we will need to find funding, whether an equity raise or some other form of capital to finish that head-to-head study.
Okay. Of the phase III. Not enough funding to finish head-to-head, just so I'm clear.
Correct.
Okay, thank you.
This concludes our question and answer session. I would like to turn the conference back to management for any closing remarks. Thank you.
Thanks, operator, and thanks everybody again for your time. At this point in time, I think we can close the call.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.