Earnings Call: Q1 2018

May 9, 2018

Thank you for holding. Welcome to the Selecta Biosciences first 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 Leaman, Selecta's Chief Financial Officer and Head of Corporate Strategy. Please go ahead. Thank you. Good morning, everyone. Earlier today, we issued a press release containing our first quarter 2018 financial results and other corporate updates, and we filed our 10-Q. The release in 10-Q can be accessed by visiting our website at www.selectabio.com. I am joined today by Werner Cautreels, our CEO, and other members of the management will be joining us for the Q&A portion of the call. Before we get started, we would 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 be accessed by selectabio.com. In addition, any forward-looking statements represent the company's views only as of today, May 9th, 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 obligation to do so, even if management's views change. Let me introduce Werner, who will kick things off. Thank you, John. Good morning, everyone. I am proud to say that 2018 is off to a strong start. We recently presented three-month phase II data at the Pan American League of Associations for Rheumatology, or PANLAR, and the 2018 Congress for our lead product candidate, SEL-212, for the treatment of chronic severe gout. Those data indicate that our product profile may provide better and more sustained serum uric acid control over time, fewer gout flares, and convenient monthly dosing, compared with recent data reported for the current FDA-approved uricase therapy. We also outlined our plans for two additional data readouts from this ongoing trial. First, the expansion data from these PANLAR cohorts will be presented at the European Congress of Rheumatology, EULAR, on June 15th, 2018. Then data from patients receiving five doses of SEL-212 are expected to be reported at a medical conference in the third quarter. Meanwhile, we remain on track to begin our phase III trial in 2018. Our phase I trial of our next clinical candidate, SEL-403, for the treatment of patients with mesothelioma, is actively enrolling at the National Cancer Institute. While our focus is on the patients that could benefit from this treatment, I do also want to note that data from this trial will present us with a second opportunity to demonstrate translation of our SVP-Rapamycin technology in a clinical setting. Starting with SEL-212. As many of you know, we are conducting a comprehensive dose-ranging phase II trial for our lead clinical candidate for chronic severe gout, which we believe positions us well for a phase III program beginning later this year. SEL-212 is a combination of SVP-Rapamycin, our novel immune tolerance technology, and pegsiticase our proprietary pegylated uricase. SEL-212 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 anti-drug antibodies against the enzyme. Let me take a moment to highlight the data we presented at PANLAR last month in Buenos Aires. We believe these data show the potential of SEL-212 to meet the unmet needs of patients with chronic severe gout. This PANLAR data was obtained from patients that received 3 monthly doses of SEL-212, up to 0.15 mg per kilogram of SVP-Rapamycin, in combination with 0.2 or 0.4 mg per kilogram of pegsiticase. Followed by 2 monthly doses of pegsiticase alone. The data, in summary, showed the following. Approximately 75% of evaluable patients maintained serum uric acid level control below six milligrams per deciliter during the initial 3 months of therapy, with concurrent mitigation of anti-drug antibodies against the pegsiticase enzyme. Furthermore, 91% of patients dosed with pegsiticase alone in month 4, after the initial 3-monthly dose of SEL-212, maintained serum uric acid control, providing evidence of the ability of our SVP-Rapamycin platform to induce immune tolerance in a clinical setting. Importantly, the overall incidence of treatment-related flares of our phase II trial was about 26%, significantly lower than the incidence of treatment-related flares reported by the FDA-approved uricase. As I mentioned earlier, we plan to present an expanded data set of these PANLAR cohorts at the EULAR conference on June 15th. We will host a conference call to discuss the data on that date, June 15th, at 8:30 A.M. Eastern Time. The strong clinical activity of SEL-212 after 3 monthly doses has provided us with the basis to initiate additional patient cohorts receiving five monthly doses of SEL-212 combination product. In mid-February, we began enrolling these new cohorts of patients. These patients are receiving regimens with SVP-Rapamycin doses ranging from 0.1 to 0.15 mg per kilogram, in combination with 0.2 mg per kilogram of pegsiticase. We plan to present data from these patients at an upcoming medical meeting in the third quarter of 2018. Meanwhile, we are actively preparing for an end-of-phase II meeting with the FDA, which will define the design of the phase III program. Patients in the phase III trial are expected to be dosed monthly with the combination therapy for the entire 6-month period. We anticipate that the primary clinical endpoint will be serum uric acid level control below six milligrams per deciliter, which can be seen rapidly upon dosing. It is easy to measure, and it remains strongly correlated with low or negative antibody titers. Beyond two placebo-controlled pivotal phase III trials, with the endpoint discussed above, we are also considering additional trials such as a head-to-head study versus KRYSTEXXA, and potentially a study to test the clinical activity of SEL-212 in patients who have failed KRYSTEXXA therapy, as these patients indeed have no other approved treatment options. With that, let me now turn over to our next product candidate, SEL-403. We in-licensed a clinical-stage oncology asset called LMB-100 from the National Cancer Institute and combined it with our proprietary immune tolerance agent, SVP-Rapamycin. While this recombinant immunotoxin targeting mesothelin holds great promise as an agent for various solid tumors, including mesothelioma, pancreatic cancer, and breast cancer, it has historically proven in clinical phase I trials to be highly immunogenic, causing anti-drug antibodies in all patients, which uniformly negated the drug's clinical activity in the absence of significant immunosuppressive therapy. In March 2018, the first patient was dosed in the phase I clinical trial of SEL-403 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 cooperative research and development agreement with the NCI and is expected to enroll at least 18 patients. The trial will evaluate the safety and tolerability of this treatment and provide data on pharmacokinetics, ADA levels, as well as on objective response rate assessments. With that, let me turn the call over to John Leaman to discuss our first quarter financial results. Thank you, Werner. Selecta reported no revenue for the first quarter of 2018, which is down from approximately $100,000 in the comparable quarter last year. The decline is the result of the reduced revenue recognized from the company's grants and collaborations. Research and development expenses for the first quarter of 2018 were $11.1 million, which is relatively unchanged from the $11 million for the same quarter last year. General and administrative expenses for the first quarter of 2018 were $4.7 million, which compares with $3.9 million for the first quarter of 2017. The increase is primarily the result of greater headcount and related salaries needed to support a maturing clinical-stage public company. For the first quarter of 2018, we reported a net loss attributable to common stockholders of $15.9 million, or $0.71 per share. This compares to a net loss of $15.1 million or $0.82 per share for the same period in 2017. As of March 31st, 2018, we had approximately $83.5 million in cash equivalents, short-term deposits, investments, and restricted cash. This is down from approximately $97 million at December 31st, 2017. We expect that our cash balance is sufficient to fund operations into mid-2019. Note that the guideline excludes any additional payments that we might receive from Spark or other potential collaborations. That concludes our formal remarks. We will open up the line for questions. Operator? We will begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question comes from Carter Gould of UBS. Please go ahead. Thanks for taking the questions. This is Jeff in for Carter. From your point of view, what are the key points of discussion for the end of phase II meeting? Good morning. This is Werner. It will be the conventional questions about the design of the trials, of course, for the pivotal trials. It's pretty clear, I believe, what the endpoints are. Of course, we have to think about the power of the trial, not just only for efficacy, but also for exposure in terms of safety. In terms of the design, placebo-controlled and all of that. The critical items will be the ones that you normally address in an end-of-phase II meeting. Great. How and when will takeaways from that meeting be communicated? We haven't provided guidance when we do that. As soon as we have that information, of course, we will then come back with the guidance to the street. KRYSTEXXA is looking to be a roughly $260 million product right now. I guess just curious on your latest thoughts on the size of the commercial opportunity in gout. John, will you take that? Sure. Well, again, we think KRYSTEXXA, we fully support their efforts to continue to help patients with chronic severe gout. As you may look and know, we feel like they've penetrated a very small amount of the marketplace. We think there is a great potential for a therapy that is more efficacious and can be given for a longer treatment period to greatly expand this marketplace. As you're probably aware, they've also expanded their guidance to peak year sales of something like $750 million. We believe, based upon our market research, that the market is at least that, if not much greater. Great. Thank you. The next question is from Difei Yang of Mizuho Securities. Please go ahead. Hi, good morning, and thanks for taking my question. Just a couple. For the five combo dose, could you talk to us why you picked the 0.2 mg per kilo dose, not the 0.4? Good morning, Difei. From the ongoing phase II data, we had to make a decision on that dose, and it looks like 0.2 would be sufficient to cover a 30-day window. We went therefore with that dose in these cohorts. Okay. Thank you for the color. Maybe a very generic question that, let's say for KRYSTEXXA is the competitor. What if KRYSTEXXA add on to immunosuppressant in their dosing regimen? How would SEL-212 be differentiated in that case? John, do you want to take that question? Sure. Difei, I think we've spoken about it, we often get the question, are we immunosuppressive? We would argue we are not. We're immune tolerant, and we believe that our SVP-Rapamycin platform basically produces T-regulatory cells, which allows for the tolerance for highly immunogenic drugs. I think I would differentiate ourselves that way, that we're immune tolerant, not immunosuppressive. I think the other question that will come up, and obviously we'll have to look at the data as it goes forward, is that they are talking about The drugs themselves, the immunosuppressants, are not without significant side effects. I think to be giving two weeks of an immunosuppressive therapy, then three months of it in correlation with KRYSTEXXA, with the idea that you might be able to lengthen the treatment period, we think will be an interesting proposition as we take a look at side effect profile and efficacy going forward. Thank you. Thank you for the explanation. The next question is from Alex Schwartz of Stifel. Please go ahead. Hi, team. Thanks for taking my question. First off, in your full five-month SVP-Rapamycin plus pegsiticase combo trial data release, how many patients are you testing? A slightly different question, can you give us a sense of how many patients will have completed the full five months of the regimen at that time when you release the data? Do you have good visibility into that right now, or is it too early? John, will you take that? Sure. Alex, I think guiding on how many patients that we'll be displaying in that Q3 sort of medical meeting, I think is difficult because I think it's obviously an open-label trial, but we'll have to find the appropriate meeting, and we certainly want to bring enough data so that it's meaty for you all to take a look at. I think that's number one. I think when we're talking about the number of patients within the various cohorts, I think what we've guided to is that we're looking at cohorts and potentially multiple cohorts between 0.15 and 0.1 milligrams per kilogram of SVP-Rapamycin. Within those cohorts, we have the ability to enroll up to 20 patients. As we think about it, I think they'll be at least as large as the cohorts that you've been seeing previously in phase II, several of the cohorts, specifically potentially around cohorts that we think may be our dose, might have larger numbers of patients just to give statistically a better chance for you to evaluate. I think that's what we've guided, and we'll give more guidance as we get closer to when we're going to actually present the data. Okay, that's great. Thank you for taking my questions, congrats on the progress. Thanks. The next question is from John Newman of Canaccord. Please go ahead. Hi, good morning, guys. Congrats on the continued progress, and thanks for taking my question. I'm curious, in your press release this morning, you talk about some additional data that you'll be presenting in terms of the expansion cohort. I'm just wondering if you can talk a little bit more about what that might look like, the data that you referred to at EULAR. Thanks. Okay. Good morning, John. Sure. At the PANLAR conference only a few weeks ago, which we also, I think, webcasted, a number of patients had not reached month three, four, or five in those cohorts, we expect that we will present those data at the EULAR conference so that you will have a much more complete picture of these different patients in those cohorts. Great. One additional question, if I may. In your prepared comments, you mentioned that you are still considering at this point a head-to-head study with KRYSTEXXA. I'm just curious, conceptually, what that study might look like, if it would need to be a large study, if it could be a small study, if that's something that you could run in conjunction with your phase III program, or if you would wait until after that's completed. Thanks. Sure. No, absolutely. We plan to do that in parallel with the phase III pivotal trials. Those will be most likely placebo-controlled. That will be important. A head-to-head study will not need to be that large because of the clinical endpoints measured and the significance of that. That will be a smaller study. We haven't completed the design of that. Clearly that will be conducted in parallel and maybe even a bit faster than the pivotal program. Okay, great. Thank you. Again, if you have a question, please press star then one. There are no other questions at this time. This concludes our question and answer session. I would like to turn the conference back over to Werner Cautreels for closing remarks. Thanks, Kate. Again, thanks everybody for your interest this morning. Selecta will be attending and presenting at two upcoming conferences. That will be the UBS conference and the Jefferies conference, both in New York. Again, in the next month, as we will give an update at EULAR about the SEL-212, you will have the opportunity to listen in again. Thanks again, and maybe we see each other at one of these conferences soon in New York. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.