Earnings Call: Q2 2018

Aug 8, 2018

Thank you for holding. Welcome to the Selecta Biosciences Second Quarter 2018 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. Selectabio.com, and it is being recorded. For opening remarks, I would now like to turn the call over to John Lehman, Selecta's Chief Financial Officer and Head of Corporate Strategy. Please go ahead. Thank you, Steven, and good morning, everyone. Earlier today, we issued a press release containing our Q2 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 Werner Cottrell, our CEO and other members of the management will be joining us for Q and A portion of this call. Before we get started, we'd like to advise that certain remarks that are being 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 be accessed at selectabio.com. In addition, any forward looking statements represent the company's views only as of today, August 8, 2018, and should not be relied as representing the company's views as of any other subsequent date. While Selecta may elect to update these forward looking statements at some point in the future, it specifically disclaims any obligation to do so, even if management's views change. And now let me introduce Werner, who will kick things off. Thank you, John, and good morning, everyone. 2018 is proving to be an important year at Selecta as the data from the Phase II clinical trial of our lead program SEL-two twelve for the treatment of chronic severe gout patients continue to show improvement in clinical activity, thus providing us the appropriate guidance as we make plans for our Phase II program that we expect to begin in the Q4 of this year. I will start today by summarizing briefly the expanded treatment data we recently presented for SEL-two twelve at the European League Against Rhematism or Euler Annual European Congress in June. And then I will comment on our timeline of anticipated upcoming milestones, including the planned presentation of the 5 month lead dose data at the upcoming American College of Rheumatology or ACR annual meeting to be held October 19 to 24, as well as the start of our pivotal Phase 3 program and planned head to head trial against KRYSTEXXA, which we plan to initiate in parallel with our pivotal Phase 3 program. Just quickly and for brief background, we are currently conducting gout. SEL-two twelve is a combination of SVP rapamycin, our novel immune tolerance technology and pexiticase, our proprietary pegylated uricase and was designed to be the first non immunogenic version of uricase, which would allow for the effective and safe administration of multiple doses with concurrent mitigation of antidrug antibodies against the enzyme. In June 2018, we presented new 3 month expansion data from patients receiving SEL-two twelve at the Euler Congress in Amsterdam. The data was from patients receiving 3 monthly doses of SEL-two twelve with up to 0.15 milligram per kilogram of SVP rapamycin in combination with 0.2 or 0.4 milligram per kilogram of pexitikase, followed by 2 monthly doses of pexiticase alone. Approximately 80% of 20 70 variable patient had serum uric acid control below 6 milligrams per deciliter at week 12. By comparison, in a separately conducted and designed study of the only FDA approved TRICARE therapy, the KRYSTEXXA triple study, 44% of evaluable patients had serum uric acid control below 6 milligrams per deciliter at week 16 as reported also last November at ACR. Additionally, 33% of the patient population represented by our EULAR data and only 27% of all current patients in the SEL-two twelve Phase 2 trial experienced gout flares during the 1st month after treatment with continued reduction of gout flare rates over months 2 to 5. This reduced rate of gout flares appears to be substantially lower than the incidence of gout flares reported in clinical trials involving the current FDA approved uricase and also other uric acid lowering therapies. And now as we push to the finish line for the Phase II trial, we expect to present data from new cohorts of patients who are receiving 5 monthly doses of SVP rapamycin in combination with pixitikase at the upcoming ACR meeting and that will be in October 19 through 24 this year. These patients are receiving regimens with SVP rapamycin doses ranging from 0.1 to 0.15 milligrams per kilogram in combination with 0.2 milligram per kilogram of paciticase. We expect the data from our comprehensive Phase II trial will provide appropriate guidance for the selection of the dose regimen that will be taken into the Phase 2 program. SEL-two twelve's emerging product profile has indicated that SEL-two twelve may provide better and more sustained serum uric acid control, fewer flares and with a convenient once monthly dosing versus the current approved uricase, which is biweekly. We believe SEL-two twelve has the potential to truly change the treatment paradigm for these severe gout patients and we are working to get this product to those patients as rapidly as possible. We are actively engaged in preparations for the start of the Phase 3 program and plan to initiate patient enrollment in the Q4 of this year in a couple of clinical trial sites. Preparations include a plan in the Phase 2 meeting with FDA. Our plan for patients in the 2 pivotal placebo controlled Phase 3 trials will be to dose monthly with the combination therapy for the entire 6 month period. We anticipate enrolling about 150 eval patients in each of the 2 pivotal trials and expect that the primary clinical endpoint will be serum uric acid control below 6 milligrams per deciliter and that measured at months 36. This can be achieved rapidly upon dosing. It's easy to measure and it remains strongly correlated with low or negative anti uricase antibody targets. We expect to report top line data from these 2 Phase 3 trials in 2020. Beyond these 2 placebo controlled pivotal Phase III trials, we are also planning to initiate in parallel a head to head trial versus the current FDA approved uricase and that is KRYSTEXXA. That study will be designed to have the potential to demonstrate superiority. We plan to report data from this head to head trial at the 3 month and the 6 month time point and expect this to happen in 2019. Further market research based on the anticipated product profile derived from our Phase 2 clinical data, both in terms of clinical activity and safety, continues to point to the $1,000,000,000 potential of SEL-two twelve. And with the seemingly broad applicability of our proprietary SFP rapamycin technology platform, which we believe has the ability to unlock the full potential of biologic therapies by mitigating unwanted immunogenicity, we have several promising pipeline programs and many more potential applications in the future. Specifically, our second product candidate SEL403 is a combination of XVP rapamycin with a clinical stage oncology asset called LMB100 that we in licensed from the National Cancer Institute OR MCI, which is part of the National Institute of Health. Patient dosing is ongoing in the Phase I clinical trial for the treatment of patients with malignant pleural or peritoneal mesothelioma who have undergone at least one regimen of chemotherapy. This open label dose escalation Phase I trial is being conducted under a collaborative research and development agreement, that's ACREDA, with the NCI, and it is expected to enroll at least 18 patients. The trial is evaluating the safety and tolerability of this treatment and will provide data on pharmacokinetics, antidrug antibody levels as well as an objective response rate assessment. We will provide further guidance about data disclosure at a future time point. The company is also working with investigators at the NCI to potentially conduct a Phase 1 study of SEL403 in patients with pancreatic cancer and we are further exploring additional studies in autocancer. In the field of gene therapy, we previously presented data from the 2017 annual meetings of the American Society of Gene and Cell Therapy, ASGCT, and the European Society of Gene and Cell Therapy also. That data provided evidence of the potential of SVP rapamycin to unlock the full potential of this novel modality. The company continues to engage in preclinical work focused on its proprietary product candidate for the treatment of methylmalonic acidemia as well as in support of its collaboration with Spark Therapeutics. As you can see, there is strong momentum across our organization and pipeline and we very much look forward to our next data readout at ACR in October for SEL Q12. Finally, I also wanted to let you know that the court process to replace me post my retirement later this year is progressing and we expect to update you on that in the near future. With that, let me turn the call over to John to discuss our Q2 financial results. John? Thank you, Werner. For the Q2 of 2018, the company recognized no revenue, which compares to less than $100,000 for the Q2 of 2017. The decline is a result of reduced revenue recognized from the company's grants and collaborations. Research and development expenses for the Q2 of 2018 were $14,400,000 which compares to $11,000,000 for the Q2 of 2017. The increase is primarily the result of higher clinical costs related to the company's Phase 2 trial of SEL-two twelve, preparation for the start of the SEL-two twelve Phase 3 program and incremental headcount related expenses. General and administrative expenses for the Q2 of 2018 were 4,400,000 dollars which compares with $4,900,000 for the Q2 of 2017. The reduction in cost is primarily the result of reduced patent related costs and contract license fees associated with collaborations. For the Q2 of 2018, Selector reported a net loss of $18,800,000 dollars or $0.84 per share compared to the net loss of $16,000,000 or $0.85 per share for the same period in 2017. Selecta had $66,200,000 in cash, cash equivalents, short term deposits and investments as of June 30, 2018, which compares with a balance of $83,100,000 at March 31, 2018. Select expects that its cash, cash equivalents, short term deposits and investments will be sufficient to fund the company's operating expenses and capital expenditure requirements through the end of Q3 of 2019. The current operating plan accounts for funding in preparation for the planned Phase 3 clinical trial for SEL-two twelve and initial patient enrollment in a couple of the Phase 3 clinical trial sites, but the company will require an additional equity offering or other external sources of capital to expand enrollment in the Phase 3 trial and to conduct the plan head to head trial against KRYSTEXXA. Finally, tomorrow, August 9, we will be at the Canaccord Genuity Annual Growth Conference in Boston and at the Janney Montgomery Scott Healthcare Conference in New York City on September 17. We hope to see many of you there. That concludes our formal remarks. Now we will open the line up for questions. Operator? Thank you. We will now begin the question and answer session. Our first question comes from Chad Messer with Needham and Company. Please go ahead. Great. Good morning and thanks for taking my questions. Could you just start out with the 5 dose combination data that we're waiting for in October? Could you maybe give us some context on where this fits in the planning for the Phase 3? Is it safe to say that 0.1 mgs per kg are the 2 most likely doses under consideration for pivotals? Thanks, Chad. This is Werner. Yes, absolutely. I think what you will see at ACI is indeed five monthly doses of the combination. And the dose range that we'll be showing is from 0.1 to 0.15 and that with a 0.2 of the enzyme. So I think it's a fair assumption that, that will be in the dose regimen that we would take into Phase III. Okay. And then just on the Phase III program, another study you've contemplated, including in the future is also in KRYSTEXXA failures. Didn't hear any mention of that in your plans today. Is that off the table? No, we maintain that idea. We have to do the appropriate preclinical work before we can engage in that, and that is certainly something that's still in our plans. Okay. Great. Look forward to the data in October and hearing about your Phase III plants. All right. Thanks, Ed. Our next question comes from Difei Yang with Mizuho. Please go ahead. Hi, good morning and thanks for taking my questions. So just a couple. The first one is on KRYSTEXXA head to head study. Would you give us a little bit more detail on how many patients will the trial include and what other than uric acid controls, what other measurements you're hoping to help to differentiate your product versus KRYSTEXXA? Okay. Thanks, Difei. John, will you take that? Difei, good morning. So I think as we've described previously and a lot will have to do a little bit with the efficacy difference that we continue to see between ourselves and KRYSTEXXA. I think we've guided and again, we haven't set a number in the KRYSTEXXA trial, but right around 100 patients sounds right, equal parts in both KRYSTEXXA and SEL-two twelve for the head to head. I think we powered it through statisticians. We'll finally do that as we have the final Phase 2 data and decide on what doses we'll look at in the head to head. I think as we take a look at basically what measures we'd look at, obviously, serum uric acid is going to be the primary endpoint. And I think very similarly to what we would see in the Phase between the 2. Okay. Thank you. Yes. And we might also look at TOFI as well, but I think that's again something that we're contemplating. Okay. And so how important is it for the rate of patients who has anaphylaxis reactions to the injection or to the infusion? It's a great question, Difei. I think as we've shown and we've previously sort of mentioned, I think our rate, I think we've only looked at we've had over 380 doses of our product in only 8 sort of anaphylactic reactions. So I think when you look at our rate of anaphylaxis, we feel pretty good about that, especially as you look at the comparison on the label versus our competitor. So I think it's important, but I think we've obviously and I think both now and in the Phase 3, we can show we feel very good about our infusion reaction in anaphylactic rate as we go forward. Okay. Thank you. Our next question comes from Carter Gould with UBS. Please go ahead. Great. Thanks guys for taking the question. Just wanted to in a little bit more to the upcoming readout and maybe if you could just set a little bit of expectations on in terms of the number of patients we'll see, any commentary that you definitely have sort of adequate follow-up? And then, obviously, you posted pretty good data, what we saw at EULAR. How should we think about the upcoming readouts relative to the benchmarks that EULAR data set? And then I have a follow-up. Thanks, Carter. This is Werner. So by the time we will show the data, I think there would be between 30 40 patients that are dosed in these 5 monthly doses at least a certain dose range. And so you can expect that we will present those data there. In terms of going back to Euler, we expect that the data that we will show will be in that order of data that we have shown at UL. Okay, great. And then as far as the end of Phase II meeting with FDA, has that already been scheduled? And are there any other sort of inputs or other work that needs to be done besides sort of getting the upcoming data meeting with FDA before you can move into Phase III? We are very actively preparing for all of the above. That includes, by the way, not only just internal processes, but that also has included extensive consultation with key opinion leaders that will eventually become also our investigators. So everything that you can think of that needs to be put in place to start a Phase III in terms of supplies, materials, all of that is actively ongoing. Okay, great. And just last question for me. Your competitor space has been very vocal on the opportunity in the nephrology segment. Can you maybe talk about how that kind of fits into your $1,000,000,000 commercial potential that you kind of put out there for 212? Okay, thanks. I will Stephen is our Chief Commercial Officer. Yes, thanks for the question. Right now, I think our main focus would go into commercializing this would be focused on the rheumatologists, who currently are treating the majority of these severe gout patients. I think in nephrology, it's an interesting proposition, but probably comes with its own challenges. Again, I think making sure those patients are actually referred to the rheumatologist for appropriate treatment is, in my opinion, the best strategy to move forward with. All right. Thanks. Congrats on all the progress. And our next question comes from Yong Zhong with Janney. Please go ahead. Hi. Thank you for taking the questions. So first one on the CATIA study with KRYSTEXXA. Wanted to know your thinking behind conducting the study in parallel with your Phase III program instead of waiting for the Phase III program to proceed first and to initiate that study? Do you expect the study to have any impact on patient enrollment? I mean, I assume that all studies will probably target same patient populations. Yes. So we continue to continue to plan to continue to conduct these trials simultaneously. Yes, indeed, we have to be careful of how to plan for patient inclusion. But as far as we know, there shouldn't be any interference in terms of the placebo studies versus the active study. So we will be careful to make sure that, that doesn't happen. John, anything more? Yes. And I would just add, I think you asked about the strategy of doing the head to head versus waiting for the Phase III trial. I think it's twofold. One is, I think we have an opportunity based on the efficacy difference that we see between KRYSTEXXA and SEL-two twelve, I think to do a robust study that we're very confident in. I think the fact we're doing a head to head shows our confidence in our drug. I think secondarily, it allows basically as we proceed through the Phase 3 program for data points in 2019 as we're going to be showing both 3 months and 6 months superiority, which we feel again very confident about. And then lastly, and we have Stephen over here, our Chief Commercial Officer, by doing this study in the same way as we'll be doing the Phase 3, even though it's not pivotal, it will allow that for a marketing that Stephen can use with the sales force and others to show patients how good SEL-two twelve, I think, can be for them in their treatment of chronic and severe gout. So that was the rationale for doing all of that. I see. So about the end of Phase 2 meeting with the FDA, I believe you said that the 2 Phase 3 studies will have 150 patient in each. So besides the dose, anything else that you needed to finalize with the FDA regarding the design of the study? No, we have been working with our statisticians and our clinicians to put those designs together. And the whole purpose of the end of Phase II meeting is indeed to present those studies and those designs and obtain their importance. And showing no further questions, this concludes our question and answer session. I'd like to turn the conference back over to management for any closing remarks. Thanks, Stephen, and thanks, everyone, again for your attendance and for your questions. And we look forward to meet you maybe at one of the upcoming healthcare conferences tomorrow at Canaccord in September at the January Montgomery Scott Healthcare Conference. Thanks again. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.