Good morning, and thank you for joining the Selecta Biosciences Q1 2023 earnings call. At this time, all participants are in a listen-only mode. Following management's remarks, we will hold a question-and-answer session. At that time, lines will be open for you. If anyone should require operator assistance, please press Star then 0 on your touch-tone phone. I would now like to turn the call over to Blaine Davis, Chief Financial Officer at Selecta. Please go ahead.
Thank you, and good morning, everyone. Welcome to our Q1 2023 financial results and business update conference call. The press release reporting our financial results is available in the Investor and Media section of Selecta's website at www.selectabio.com. In our quarterly report on Form 10-Q for the quarter ended March 31, 2023, which was filed earlier this morning with the Securities and Exchange Commission of the SEC. Joining me on today's call are Carsten Bruhn, President and Chief Executive Officer, Kei Kishimoto, Chief Scientific Officer, and Peter Traber, our Chief Medical Officer. During today's call, we will be making certain forward-looking statements, including, without limitation, statements about the potential safety, efficacy, and regulatory and clinical progress of our product candidates, our financial projections, and our future expectations, plans, partnerships, and prospects.
These statements are subject to various risks that are described in the filings made with the SEC, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today, May 4, 2023. Selecta disclaims any obligation to update such statements except as required by law, even if management's views changed. With that, let me turn it over to Carsten.
Good morning. I appreciate everyone taking the time to join us today. The Q1 of 2023 was marked by a significant milestone with the announcement of positive results from 2 phase III studies of SEL-212 in chronic refractory gout, DISSOLVE I and II, both of which met their primary endpoints. As a reminder, SEL-212 is a combination drug product candidate consisting of 2 components. The 1st component is pegadricase, a potent enzyme that has been observed to reduce serum urate in refractory gout patients who continue to have serious disease symptoms, such as debilitating joint pain and disfiguring tissue deposits of uric called tophi. The 2nd component of the drug candidate is ImmTOR, which is our nanoencapsulated formulation of rapamycin that is designed to condition the immune system to reduce antibody formation to drugs that are administered at the same time.
The proposed mechanism of interaction is the induction of immune tolerance rather than immune suppression, as with other commonly used drugs. DISSOLVE I and II were identically designed, randomized, double-blind, placebo-controlled trials in patients with gout refractory to conventional therapy. Patients were evenly randomized across 3 treatment arms, placebo or one of 2 doses of SEL-212, 0.15 mg/kg or 0.1 mg/kg. Each arm received their respective intervention as a single treatment every 28 days. DISSOLVE I randomized and dosed a total of 112 subjects in the U.S., and DISSOLVE II randomized and dosed a total of 153 subjects globally.
DISSOLVE I met its primary endpoint, with 56% of patients receiving monthly doses of SEL-212 at 0.15 mg/kg, achieving a response which was defined as achievement and maintenance of reduction in serum urate below 6 milligrams per deciliter for at least 80% of the time during month 6. DISSOLVE II also met its primary endpoint, with 47% of patients receiving monthly doses of SEL-212 at 0.15 mg/kg achieving a response. Of note, in patients 50 years of age or older, the response rate of the 0.15 mg/kg dose was 65% in the U.S. study and 48% in the global study. We're also very encouraged by the safety profile of SEL-212 observed in the trials.
In the U.S. study, 75% of subjects who completed 6 months of therapy continued a response through 12 months with no infusion reactions and no new safety signals. The infusion reaction incidence was 3.4% in the high-dose group. In contrast to other urine-lowering therapies, SEL-212 did not increase gout flare rates compared to placebo. We're very excited by these results, which support that SEL-212 could potentially serve as a meaningful new therapeutic option, notably with a convenient once-monthly dosing schedule for patients suffering from chronic refractory gout. Based on this data, our partner, Sobi, is preparing for a regulatory submission and potential commercialization in the U.S.
We've long believed in the potential of our approach and believe this data serve as validation for our ImmTOR technology, which to our knowledge, now represents the only immune tolerance platform with positive phase III data. We expect to share full data from these trials at a scientific conference later this year. With these trials successfully completed and the BLA filing by Sobi on track for the H1 of 2024, we now have the opportunity to decide where to take our ImmTOR platform next. We have always appreciated the multiple potential applications for immune tolerance approach to solve the toughest challenges associated with unwanted immunogenicity, from improving the tolerability profile of existing drugs, as we saw with the SEL-212 program, to expanding and enabling the applications for gene therapy and restoring self-tolerance in autoimmune disease.
In the current market environment, we recognize that we need to be especially thoughtful about our capital allocation and clinical development strategy. Together with our board, we recently conducted a strategic review to focus our resources on key programs where we believe we have the highest potential to succeed. We believe that these steps, which I'll now walk you through, will extend our cash runway into the H2 of 2025. We plan to prioritize the development of ImmTOR-IL for diseases of the liver. ImmTOR-IL, which combines our proprietary Treg-selective IL-2 candidate with ImmTOR, represents the evolution of our precision immune tolerance platform and has potential to further enhance the magnitude and duration of immune tolerance in patients treated for autoimmune diseases.
Specifically, it is designed to restore natural immune system balance through induction and expansion of regulatory T cells in vivo, versus the standard approach of broad immune suppression, which is associated with side effects and leaves patients vulnerable to serious infection and malignancies. We remain on track to initiate IND-enabling studies for ImmTOR-IL in 2023. Our initial focus will be on diseases of the liver. In parallel, we continue to assess additional autoimmune indications for future development. We also intend to continue to support our existing partnerships and prioritize the work under these agreements. These include our collaborations with Sobi for SEL-212 and with Astellas for Xork. For the SEL-212 program, we are continuing to work with Sobi to prepare the BLA filing, which is expected in the H1 of 2024.
As a reminder, under our agreement with Sobi, they are responsible for regulatory and commercial activities in all markets outside of China. Selecta is responsible for ImmTOR manufacturing, and we are entitled to receive up to $630 million in milestone payments, as well as tiered double-digit royalties on net sales. We're also advancing our partnership with Astellas for Xork, our next generation immunoglobulin G or IgG protease. Xork will be developed to use with AT845 Astellas investigational AAV-based therapy for the treatment of late onset Pompe disease in adults. The main IgG protease in development is derived from common human pathogens. As a result, there's high prevalence of pre-existing antibodies against these proteases that can restrict their utility. Xork is differentiated by its low cross-reactivity to pre-existing antibodies in human serum.
Many patients are currently ineligible for clinical trials with investigational AAV gene therapies due to the presence of naturally occurring antibodies against AAV capsids. Due to its selective protease activity against anti-AAV NAb, we believe Xork has the potential to expand access to life-changing gene therapies by addressing pre-existing immunity to AAV. With respect to the remainder of our gene therapy assets, we have paused further development and are exploring alternative ways to advance these programs through potential partnerships. These includes pausing enrollment of our ongoing phase I/II REIMAGINE study of SEL-302, our AAV gene therapy combined with ImmTOR for the treatment of Methylmalonic acidemia or MMA.
We have always intended to partner our gene therapy programs, we believe pausing the REIMAGINE trial will allow any potential partners to help inform the clinical and regulatory path forward for this program, while also preserving Selecta's cash resources in the near term. In connection with this capital prioritization initiative, we've undertaken the difficult decision to reduce our headcount by approximately 25% in order to align our workforce with our priorities and streamline our operations. I'd like to express my sincere gratitude to all of those who were impacted by this initiative. I'm confident that Selecta is well-positioned to execute on the priorities I've outlined today. We continue to focus on leveraging our ImmTOR platform to bring new therapies to patients suffering from autoimmune diseases. That, I'll turn it over to Blaine for a review of the financial results.
The Q1 financial results are detailed in the press release and Form 10-Q issued earlier today. Let me focus my comments here on some key points. Selecta ended the Q1 with cash equivalents, restricted cash and marketable securities of $127.5 million. In light of the strategic initiatives announced today, as well as our expectation that we will receive a milestone payment related to SEL-212 development activities, we believe that our cash position will now be sufficient to meet our operating requirements into the H2 of 2025. I will note that we do expect to incur a cash charge of approximately $1 million in the Q2 related to severance and benefit-related expenses following the targeted reduction in force.
Revenue for the Q1 of 2023 was $5.9 million as compared to $34 million in the Q1 of 2022. Revenue was primarily related to the shipment of clinical supply and the reimbursement of costs incurred for the phase III DISSOLVE program, which was completed in the Q1 of this year. Research and development expenses for the Q1 of 2023 were $18.6 million versus $17.7 million for the Q1 of 2022. The increase was primarily the result of expenses incurred for contract license and milestone payments and personnel expenses, partially offset by a decrease in expenses incurred for the SEL-212 clinical program.
G&A expenses for the Q1 of 2023 were $5.7 million, slightly higher than Q1 of 2022 due to personnel expenses. For the Q1 of 2023, we reported net loss of $21.7 million, or basic net loss per share of $0.14. Let me turn the call back to Carsten.
Over the past few months, we delivered 2 successful phase III studies that could potentially pave the way for our lead asset to reach the market and offer a meaningful new treatment option to patients. This is an achievement that many biotech companies never realize, and I'm very proud of the team at Selecta that helped us reach that important milestone. We both had some difficult decisions about how to advance our mission and position Selecta for continued success. As we now sharpen our focus on ImmTOR-IL while supporting our ongoing partnership with Sobi and Astellas, we believe we have the right strategy in place to create value for all of our stakeholders. I want to thank all our stockholders for your continued support, and we look forward to updating you on our efforts over the course of the year. Now I'd like to open the line to Q&A. Operator?
We will now begin the question and answer session. To ask a question, you may press * then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press * then 2. Once again, that was * then 1 to ask a question, at this time, we will pause momentarily to assemble the roster. Our 1st question will come from Joseph Schwartz of SVB Leerink. Please go ahead.
All right, thanks very much. I was wondering if you can talk about your strategy to develop your IL-2 in liver diseases first. How much of this is driven by the awareness of a specific antigen in PBC versus other factors? Have you identified other antigens that you can address in other liver diseases or even diseases outside the liver? I have a follow-up. Thank you.
Yeah, great question, Joe. As you can tell, we're extremely excited by moving ImmTOR-IL forward. We've identified liver diseases for a couple of reasons. 1, as you pointed out, for PBC, for example, we know the autoantigen impacted, but also we believe that, you know, ImmTOR alone also will have an impact, a positive, you know, impact on liver diseases as well as it accumulates in the liver, and we've shown this in a couple of various animal models. But I'll let Peter walk through a little bit what our thinking is around the liver disease approach. Peter? Peter, I think you're on mute.
Yes, I was. Thank you. It's a very important question, Joe, and We think that collectively, the autoimmune liver diseases, which are PBC, PSC, and autoimmune hepatitis, represent a very good target for our therapy, primarily because they are all known to be T-cell mediated diseases. As you know, PBC has a specific antigen, but there are other antigens that have been identified, for instance, in autoimmune hepatitis, certain classifications there. We are not currently identifying additional antigens, but investigators across various areas are identifying antigens which could then be used.
However, as Carsten said, we actually have Preclinical data that suggests that each step of the therapy, the ImmTOR alone, ImmTOR IL-2, and ImmTOR IL-2, as well as ImmTOR IL-2 plus antigen, all have additive effects in liver disease. We think that the approach is likely to yield results with individual agents as well as collectively better results with multiple agents. That's one of the reasons why we're very interested in liver disease. However, what we find in T-cell mediated liver disease can extend to multiple other autoimmune diseases which are known to be T-cell mediated, such as type 1 diabetes, multiple sclerosis, SLE, et cetera.
We think that targeting liver diseases gives us one of the greatest opportunities to show efficacy of the various components, but will then set the stage for autoimmune diseases more broadly.
Okay. Thank you. That's helpful. Sort of a different question. I was wondering if you could talk about the resources that Sobi is bringing to bear to support a successful rollout of pegadricase now that you have succeeded in phase III. What should we look for in terms of new data or analyses when it is presented or published?
Yeah, that's a great question as well, Joe. Obviously we can't really comment on the resources that Sobi is gonna put behind this. The only thing I can say, they're extremely excited about this, and they've publicly stated this is one of their top priorities. We will definitely share additional DISSOLVE data at an upcoming scientific conference. Just from a timing and next step perspective, you know, Sobi has guided the plan to file a BLA in the H1 of 2024.
Okay. Thanks again.
The next question comes from Kristen Kluska of Cantor Fitzgerald. Please go ahead.
Hi. Good morning, everybody. What, in your opinion, is the size of the market opportunity for PBC and perhaps the liver space in general, where you believe you could show some benefits with ImmTOR-IL? Then for PBC in particular, I know there was just a major conference focusing on this indication and some of the unmet needs, and it seems that the field is moving towards ALP normalization and then also a pretty high unmet need for addressing pruritus. Just wondering with this mechanism, how you think broadly there could be potential impact on the different manifestations that occur with this disease?
Yeah. I'll let Peter talk about the manifestation of the disease and our approach. I just gonna comment on the market size. We think it's actually a sweet spot for Selecta. These are sizable indications, but a size where we can execute ourselves both from a clinical perspective, these are not gonna be huge trials, and also from a commercial perspective as well. We think it's a sweet spot for us from a size perspective, but I'll let Peter address the specific question.
Thank you, Carsten. It is a very good question, Kristen. The fact is that collectively, the 3 indications of autoimmune liver disease probably affect about 280,000 patients in the United States. If you take those that are resistant or fail current therapies, there's over 100,000 people. It's a sizable group of patients and a market opportunity. You've brought up another very good point, and that is the targets that people have utilized for therapy in the past. You mentioned PBC, the fact is that for approval of drugs, you only have to reduce alkaline phosphatase to 1.67 times the upper limit of normal. There's a lot of data now that suggests that normalization of alkaline phosphatase is much more effective.
Therefore, the therapeutic successes that have been identified thus far are using a standard which is probably not adequate for full therapy. Normalization of alkaline phosphatase is really quite critical to reduce mortality, morbidity, and the potential for a liver transplant. That expands the market opportunity for a new therapy that addresses the underlying immunologic aspect. The same goes for the other diseases such as autoimmune hepatitis, where now normalization of transaminases is the goal, but failure of other therapies has been with a higher transaminase level than normalization. For PSC, there are no therapies, that's wide open. But your point is very well taken. The field is evolving in terms of endpoints, and that evolution favors.
A immunologic therapy that could potentially normalize alkaline phosphatase and transaminases in these diseases.
Thank you for that. For the MMA trial, can you confirm that the pause was really just a matter of prioritizing the pipeline and, you know, there's no specific issues relative to this program? I guess what essentially, you used the word pause versus discontinue outright. What do you think can bring this forward? Is it really just looking for a partnership at this point? Thank you again.
Yeah. There was nothing wrong with the program or the indication. It's really a resource prioritization. You know, we felt it was not ethical for us to actually dose the 1st patient. We actually paused the study and are looking for a partner to move this forward. It's... If you like, it's kind of a turnkey kind of situation here, where it's a single center trial at the NIH, and they are ready to go. It's truly a pause and not stop.
The next question comes from John Newman of Canaccord. Please go ahead.
Hey, guys. Thanks for taking the question. Just had 2 questions. The first one is, can you talk about the expenses that you're responsible for with regard to SEL-212 going forward with Sobi? The second question is, what should we think about in terms of a timeline for the IL-2 program to actually the clinic? Thanks.
I should let Blaine answer the first question around the expenses on SEL-212.
Yeah. Thanks, John. Relative to the expenses for SEL-212, the agreement that we have with Sobi basically provides reimbursement for all activities associated with the preparation of the BLA, kind of the completion of the clinical trial activities as well as moving towards the manufacturing component on ImmTOR. All of those expenses as we think about them over the coming months will be reimbursed by Sobi. That's hopefully provides you the clarification you need there.
Yes, thanks.
Just on the timelines for ImmTOR-IL, you know, since we've just announcing this strategic shift, we're not yet quite ready yet to give you an exact timeline we're gonna be in the clinic. We are on track to initiate IND-enabling studies for ImmTOR-IL. Obviously we pool our resources behind this and make this the top priority for us moving forward.
Okay, great. Thanks.
The next question comes from Gil Blum of Needham & Company. Please go ahead.
Good morning, everyone, and thanks for taking our question. It's never great to have to reduce headcount, but my question is, when should we start seeing effects on your OpEx?
Yeah. Gil, so on the OpEx line, you know, I think what you'll start to see is as we go throughout the year, specifically around R&D, you will start to see kind of a decrease in that operating expense. Just as a reminder, as we think about the reimbursement that we get on the SEL-212 activity specifically, those come in as revenue and then also kind of net out on the R&D expense line. As we've gone through the prioritization, as we laid out in the call and in the press release, you should expect to see a decrease in the subsequent quarters, specifically in the R&D side. Then around G&A, you would also start to see a slightly more modest decrease there.
You know, overall, this prioritization obviously results in extending our cash runway out till the H2 of 2025. We're also doing this in a relatively in a position of strength really. Given our cash position of $127 million, you know, we believe that we will see a decrease that still allows us to remain focused on the prioritized activities that we think can generate value over the longer term.
All right. Thank you for that. Just a point of clarification. I didn't see much in your comments about IgA nephropathy, if you can provide clarity there.
Yeah, that's a, that's a good question as well. Here, for IgA, we're basically evaluating next steps and trying to figure out the best path forward for the asset. We believe there's significant potential for the IgA protease, especially now that, you know, with the phase III successfully completed on 212, which is kind of a similar approach, kind of redosing a highly immunogenic enzyme and, you know, lowering serum uric acid deposits in the IgA protease. We're trying to debug patients of immune deposits in the kidneys. There's a lot of similarities. We remain very excited, but something we're looking at right now and see what the best path forward is for the asset.
All right. Thank you for taking our questions.
The next question comes from Uy Ear of Mizuho. Please go ahead.
Hey, guys. Thanks for taking my question. firstly, I guess could you sort of just expand on the IgA nephropathy decision, you know, evaluation? Before you were kind of excited about it because, you know, because of 212 and the similarity. just wondering like, are you like what has changed exactly? I guess secondly, you know, the cash runway out into the H1 of 2025 includes upcoming milestone payments for SEL-212. Wondering like, what would the cash runway be without the milestone? Thanks.
Yeah. It's just, you know, elaborating a bit on the IgAN decision. We remain very excited, but we had to make resource decisions on where we allocate, you know, our investment. You know, the IgA protease in a sense is a single indication asset, whereas ImmTOR-IL really opens multiple sizable indications. Liver diseases are where we're gonna start, but there's also broader application as well. We think that's the better choice in terms of we had to prioritize resources. We still, as I said earlier, we remain excited about IgAN, and we think it's a valuable indication and we'll explore the best path forward for the program.
Around the cash, 1 way and, maybe I'll let Blaine talk a little bit about the thinking here, on, you know, how we, how we're approaching this.
On the cash runway piece, you know, we feel very confident in our ability to achieve the milestone payment that we mentioned in the cash runway guidance. We can't be specific about what activity that's associated with. You know, just as a reminder, we have the opportunity to receive an additional $65 million in kind of development and regulatory milestones associated with the Sobi deal, as well as up to $550 million in commercial milestones. As we think about the cash runway guidance we provided, you know, the prioritization that we walk through combined with that milestone associated with the development is what gets us to the H2 of 2025. We haven't incorporated additional milestones, right?
We think it's a very achievable milestone that we anticipate. We do anticipate receiving that, you know, well in advance of when that cash runway guidance is associated in the H2 . You know, we're not gonna kinda go into detail about what it would be without that milestone, given the confidence that we have in our ability to achieve that.
Okay. Thank you.
The next question comes from Dipesh Patel of H.C. Wainwright. Please go ahead.
Thank you, guys. In light of the fact that Sarepta would not be exercising its exclusive option under the Sarepta agreement and your pausing of the phase I/II MMA gene therapy study, how should investors think about the future of gene therapy redosing using ImmTOR? Secondly, do you feel ImmTOR is less suited for gene therapies?
Yeah. That's a good question. We definitely think that ImmTOR is well suited in gene therapy, as we've demonstrated with our NT capsids study, actually, where we clearly demonstrated that even a single dose of ImmTOR meaningfully reduces NAb titers and redosing is a key challenge. There's additional benefits as well, instead of kind of this once and done approach, kind of a low and slow where you give multiple, you know, lower doses as well. That's very attractive. We've always guided that gene therapy is a partner play, and we'll continue to do that. I think we've demonstrated this year actually with an additional partnership with Astellas, in, you know, in an additional indication with our Xork program.
Great. Okay. Second, did the current market conditions and/or DISSOLVE readouts in any material way impact your business relationship with Sobi? Are you still on track to receive $65 million in development and regulatory milestones and up to $550 million in commercial milestones?
Yeah. The market conditions don't impact our relationship with Sobi. I think we've just delivered a very positive and successful phase III program. Sobi's excited about this. They're, you know, moving forward, pressing forward with the filing of the BLA. There's no impact with the market conditions on that partnership or any of the milestone payments that you mentioned.
Okay. As we think about strategic reprioritization, can you clarify your clinical development strategy for ImmTOR-IL? For example, is your goal to complete IND-enabling studies of ImmTOR-IL and partner with an established player for clinical development and commercialization as an example?
Yeah. As I mentioned earlier, we're quite confident that we can move this forward ourselves in autoimmune diseases of the liver. At this point, we don't plan on partnering ImmTOR-IL.
Okay. As we kind of shift over to the DISSOLVE study readouts and speaking of the secondary endpoints, have you had a chance to analyze patient-reported outcomes and gout flares between active treatment and placebo groups? If so, can you share any noticeable trends, particularly between ImmTOR doses, in the context of pain, inflammation, and joint damage?
Yeah. The analysis of secondary endpoints is ongoing, and we have not disclosed those yet.
Okay. Final question. dive deep into the DISSOLVE study readouts, were there any common baseline characteristics at play among non-responders who participated in both DISSOLVE I and DISSOLVE II studies?
I think that's an excellent question, but also too early. We'll provide additional data at a scientific conference later this year.
Great. Well, thank you very much for the update, gents.
Thank you.
As there are no more questions in the queue, I'd like to turn the microphone back to Carsten Brunn.
Thank you, operator, and thank you everyone for joining our call today. We look forward to keeping you up to date on Selecta Biosciences. Thank you.
That concludes today's call. You may now disconnect. Thank you.