Axcella Health Inc (AXLA) 2022 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Axcella's second-quarter 2022 conference call. Please be advised that today's call is being recorded and that all participants will be in a listen-only mode until the question-and-answer session. After today's presentation there will be an opportunity to ask questions. (Operator Instructions)

And now for opening remarks, I would now like to hand the call over to Bob Crane, Chief Financial Officer at Axcella. Please go ahead, sir.

Thank you very much, operator; and good morning, everyone.

We would like to advise that certain remarks we will make on today's call, such as those relating to our cash runway and our ongoing clinical trials of AXA1125 include forward-looking statements that are subject to various risks and uncertainties. These risks and uncertainties are detailed in our SEC filings, including our most recent Form 10Q, which we plan to file later today. These filings can be assessed on our website, axcellatx.com or on the SEC's website.

All forward-looking statements represent our views as of today, August 12, 2022, and should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update these forward-looking statements.

With that, let me turn the call over to our President and CEO, Bill Hinshaw, to begin the discussion. Bill?

Thank you, Bob; and good morning, everyone. It's a pleasure to be speaking with you again. Today, I plan to briefly review the progress we've made during the past quarter. Following my opening remarks, Bob will then update you on the financials before we open the call to your questions.

On August 2, we reported powerful results from our Phase 2a trial of AXA1125 in the treatment of Long COVID. As you may know, Long COVID also known as post-acute sequelae of SARS-COVID-2 infection, or PASC, is a condition in which patients experience a broad range of symptoms for weeks, months, or years after their infection with COVID. Most of the people that contract viruses recover naturally and return to their regular lives quickly. What is distinct about COVID is the proportion of number of patients who have persistent symptoms like fatigue post infection.

In general, while there's some variation in the numbers, estimates suggest that 20% to 30% of patients who contract COVID go on to experience at least some Long COVID symptoms. If you simply apply these numbers to all the confirmed cases to date, this equates to a Long COVID population as high as 23 million people in the US alone. We are now a few months into the timeframe when a portion of the large number of people who contracted Omicron will be considered to have Long COVID 12 weeks post infection. And at present, there are no therapeutics for Long COVID.

People with Long COVID suffer from numerous symptoms, but by far, the most common is fatigue. In fact, most Long COVID patients suffer from chronic fatigue. The condition is so severe and debilitating that people with Long COVID often find themselves unable to work, perform tasks of daily living, or effectively care for their children. The condition can truly wreck people's lives. And this is happening at an enormous and growing scale with an estimated 1 million Americans out of work already due to Long COVID.

The subjects who received AXA1125 during our Phase 2a study, experienced improvements in measures of mental and physical fatigue that were both highly statistically significant and clinically relevant compared to those who received placebo. Mean changes in total, physical, and mental scores in the CFQ-11 versus placebo were minus 4.3 for a p-value of 0.0039, minus 2.94 for a p-value of 0.0097, and minus 1.32 for a p-value of 0.0097, respectively.

We also saw clinically meaningful shifts in the severity of physical and mental fatigue that were also noted in a notable majority of subjects who received AXA1125 compared to those who received placebo. There was a statistically significant correlation of improvement in fatigue score and greater distance achieved in the six-minute walk time with a strong p-value of 0.0027, an objective measure of physical ability. Result that was only observed in the patients who received AXA1125.

Now the findings of our Phase 2a study occurred over a short 28-day period. This is the first and only blinded placebo-controlled trial to report positive outcomes in Long COVID to date. In addition, the findings also confirmed the hypothesis that motivated our development of AXA1125: that Long COVID patients suffer from significant mitochondrial dysfunction. And our preclinical and clinical work suggests that AXA1125 may have its effects by essentially recharging the mitochondria and positively modulating other pathways such as inflammation and endothelial function that are just regulated in Long COVID.

Now Long COVID is a persistent and growing part of the ongoing pandemic. Research has shown that Long COVID can be experienced regardless of vaccination status, variant type, or severity of the acute viral infection. No one is immune and cases continue to rise. So going forward, there will be a large and sustained market for Long COVID treatments.

The knowledge that Long COVID is serious and growing as a problem has led to interest in addressing the needs of the patients at the federal level. In April, the Biden administration issued a memorandum to federal agencies, instructing them to take steps to combat Long COVID. On August 3, the administration released two reports on Long COVID. The first: the National Research Action Plan on Long COVID outlines a US government-wide national research agenda focused on advancing prevention, diagnosis, and treatment for individuals and families experiencing Long COVID; and the second: the services report on Long COVID set out federal services available to the American public to address longer-term effects of COVID-19.

Now over the past months, we've engaged with leadership in Congress regarding the needs for treatment for Long COVID. And we are in the process of preparing our data package for the end of Phase 2 meeting with the FDA later in the year to discuss our plans to move as rapidly as possible towards registration. Trial design will be confirmed following these regulatory discussions. And the trial size is expected to be consistent with a disease not a vaccine, meaning a much smaller sample size will be necessary.

We believe that the success of our Long COVID trial also puts in us a position to explore opportunities to address a range of other diseases and as we expect to make announcements regarding these indications early next year. Axcella is proud to be playing a leading role in the efforts to address the needs of patients with fatigue, the most common symptom of Long COVID patients. Our research and positive trial results, along with our EMM platform, have put us in a leading position in the sector with an attractive and differentiated profile to make progress towards understanding the underlying biology of and treating the complex condition that is Long COVID.

In the coming months, we will continue to pursue a focused strategy to achieve our goals of tackling a range of complex diseases by capitalizing on the therapeutic potential of our endogenous metabolic modulator platform. We expect to report interim data from our NASH trial, another large and underserved patient population, where our multi-targeted mechanism of action and attractive profile, offers a differentiated approach. This data will be reported towards the end of this quarter. We're also intent on broadening our pipeline by leveraging key insights we have gained from the trial and the emerging sciences.

So let me invite Bob to provide a review of the financials for this quarter. Bob?

Thank you, Bill, and good morning, everyone.

We ended the quarter of June 30, 2022, with approximately $44.4 million in cash and marketable securities, which compares to $78.9 million as of June 30, 2021. Axcella expects that its current cash balances will be sufficient to meet its operating needs into the first quarter of 2023, provided that it continues to meet certain cash covenants in its loan agreement with SLR investments. If not, cash and cash equivalents will be sufficient to fund its operations into the fourth quarter of 2022.

Turning to the income statement, our research and development expenses were $17.4 million and $31 million for the three and six months ended June 30, 2022. This compares to $10.3 million and $20.5 million for the comparable periods of 2021, with the year-over-year increase primarily related to the increase in our Long COVID impact and EMMPOWER clinical trial.

General and administrative expenses were $3.8 million and $5.8 million for the three and six months ended June 30, 2022. This compares with $4.9 million and $9.2 million for the same periods of 2021. These increases were primarily the result of greater non-cash-based compensation and benefits-related costs.

Axcella's net loss for the quarter and six months ended June 30, 2022 was $21.9 million or $0.42 per share, and $40.9 million or $0.87 per share, respectively. Our net loss for the second quarter and six months ended June 30, 2021 was $15.9 million or $0.42 per share, and $31.1 million or $0.83 per share.

That concludes our formal remarks. Now, operator, would you please open the line for questions?

We will now begin the question-and-answer session. (Operator Instructions) Thomas Smith, SVB Securities.

Hey, guys. Good morning. Thanks for taking the questions. Just one on Long COVID.

You highlighted a couple of the recent US government policy actions. Can you just talk a little bit more about how you're engaging with regulators here, and talk about, I guess, your stance? Is there any funding that's being made available to help fund some of the research and development efforts?

Sure. Thanks, Tom. Good morning, and thanks for the question. Yeah, I'll break it into two parts. So I'll handle the first part about the broader government, and then I'll ask Margaret to speak to the regulatory status and discussions.

So, yes. The US government, the medical community, the patient community, everyone we speak to understands how large this is becoming and what an issue it is because it's persistent, it's growing, and the level of impact that this can have not only on a patient's life but on the system. And so we've seen major actions by the administration on the National Research Action packed along with the services report, along with the memo.

And we've seen a number of other activities in the government. And I've been speaking to some of the leaders in that on this issue. So we do see, obviously, the NIH's RECOVER Act where there is significant funding for research and intended for treatment, but there have not been many options for them to support. We have initial conversations with the NIH and others and look forward now to taking our data and discussing with them if there's an appropriate collaboration that can come from that.

Now with that said, I will outline that this is an ongoing part of the pandemic. And the comparative efforts and funding for Long COVID to date, versus the acute situation, which were very understandable, is not yet in proportion. And we believe that while there are important steps moving here, there needs to be more.

So Margaret, if you can speak to the regulatory engagement to date.

Yeah. All right. So yeah, we have had discussions with MHRA when we opened the protocol, as you recall.

The initial study was a single site done in the United Kingdom. So we went to the MHRA. They, again, are well aware of the impact of the ongoing pandemic and the consequences of Long COVID, and we're very supportive and helpful in those initial discussions. So as Bill mentioned in his remarks, we are actively preparing to reengage the MHRA and to have discussions with the FDA about rapid -- how we can rapidly move forward into a registration program. Again, given the public health need, given the profile of our agents, and given our preliminary results here.

Okay, got it. Thanks. And then just on the finances. Can you just remind us of the covenants on the loan agreement with SLR and what would trigger repayment there? And then just remind us on what activities and data sets are baked into the cash runway?

Yeah, that's --

Bob?

Okay. Thank you, Bill. This is Bob Crane.

So we have a loan agreement with SLR. We have outstanding principal of approximately $26 million with them, and as part of the loan agreement, we have a requirement to maintain cash balances of at least $20 million. And so they have the right to sweep that amount of cash in the event that we fall below. They don't have the obligation, but they have that right.

And with respect to that, we completed to the second quarter with $44 million. We have sufficient proceeds in the absence of their sweep to go into 2023. And as we go forward, we continue to prosecute the NASH trial. And as we disclosed our results of the Long COVID trial on August 2, we're wrapping that up and making plans to go forward. So there will be some cash benefit or burn benefit from completing that trial.

Okay. Got it. Great. Thanks, guys. Appreciate you taking the questions.

Certainly. Thank you, Tom.

Ed Arce, HC Wainwright.

Great. Thank you for taking my questions. A couple for me. Firstly, on Long COVID. You mentioned the end of Phase 2 meeting later this year and that you are seeking a registrational trial and looking to confirm the design of that.

So I'm wondering, firstly, if you can share perhaps some of the details that you're seeking to gain alignment on, for example, the primary endpoint, the number of patients, and the treatment duration, if you can. And also, do you have in mind any specific scientific conference for which to report the full results? And then I have a follow-up.

Great, Ed. Thank you for the question.

Margaret, once you speak to this -- obviously, Ed, we're in a state where we'll be approaching the agency, as you alluded to. We're preparing our submission with this data. And indeed, a number of the questions that you alluded to are what we'll be focused on. And until we have that conversation, we will be preparing but not then definitive. But we have a really good foundation and base for what we are planning to do. Margaret?

Yeah. Thanks, and thanks for the question. So yes, without getting into specifics, as you can imagine, we will be covering those major points. Those are always -- in general, of course, as you go into registration, those are always things that you want to have alignment with the agency.

We have have demonstrated a significant impact in fatigue in the study we just completed. So of course, we will be discussing our plans to assess that fatigue as well as other measurements. And so that will also form part of the discussion. So for example, we will be discussing how we measure and assess improvements in physical function along with the improvements in fatigue and whether or not the measures that we use to, say, assess overall quality of life are appropriate for the population.

So those are standard end-of-Phase 2 discussions along with sample size. Again, it's our belief, given -- the fact that we've already generated a fair amount of safety information given our ongoing Phase 2b program, that this study will be in the hundreds. It's not going to be a vaccine trial or heart failure trial and thousands of patients. And I'll also note that we demonstrated the significant improvements over a relatively short period of time.

Again, these were individuals who have been symptomatic for many months and over 28 days. Some of them normalized, which was really just astounding. So we anticipate that the trial will be in the order of several months. But of course, we'll have all of those discussions, robust discussions, with the health authority.

And then, Margaret, on the scientific conference question that I had. We were obviously going to coordinate with Oxford and who conducted the trial with us and -- Margaret, any thoughts here?

Yeah. We obviously are looking to get to a scientific audience as quickly as possible. I don't want to necessarily announce which one we're targeting. Again, we have to respect the embargo rules of all of the major scientific conferences, which ask that you not say anything until the abstract is accepted and typically there's an embargo date.

So I think it's a little premature for us to announce that. But we're clearly trying to get the message out, not only at a scientific conference, but also in publication as soon as possible, given the clinical significance of these findings.

Okay. Great. That's helpful. And then my other question is around the interim data on your NASH trial, your ongoing NASH trial, expected probably next month.

Just wondering, given the prior data with AXA1125 in which you showed about a 38% of patients reaching a meaningful thresholds both for metabolism in MRI-PDFF and an inflammation with ALT. Wondering, given this is going to be a longer period, what kind of responses would you be expecting at this interim? And also, since we don't really have any FibroScan data yet, what level of degree of response would you expect there? Thanks so much.

Bill Hinshaw

Thank you, Ed. Yeah. We're excited to have these other important data milestones coming up. Margaret, you want to speak to how we set this up?

Yeah. All right. So what we were looking at here is we'll have -- we're looking to release six month data as well as -- given the enrollment dynamics, we'll have a larger number of people at the three months. It's important to remember that one of the features of this trial compared to the prior one is that we actually also have a higher dose under study. So we would be be able to determine where there is a dose response in a head-to-head comparison.

I expect that we will see incremental results, particularly with respect to some of the markers that typically take longer to respond. So for example, I expect that we will see continued improvements in HbA1c in the diabetic patients as glucose control improves over time. I expect that we will continue to see and be able to demonstrate using FibroScan improvements in fibrosis, recognizing that, again, that's typically something that is slower and lags behind the immediate improvements in metabolism and inflammation that we've see.

So I think that's the kind of data -- you're right that we haven't shown FibroScan data before. In our prior study, we used cT1 one as that correlated with the histologic findings. And so here we're switching to something that is a more commonly used clinical measure. Right? Most of the clinicians have FibroScan and follow their patients. So they'll be able to put those findings and context to something that they are doing in their clinical practice.

Sounds good. And thanks so much.

Thank you, Ed. What we are looking forward to this. And I think Margaret pointed out something there that is important in terms of the base circumstance. You're familiar with, of course, our multi-targeted mechanism and how we work across the different pathways in an integrated way.

And we're encouraged to see the historical results we saw in the type 2 diabetic population as well. We're up into the 60% range of hitting those milestones. So we're really looking forward to this data and then continuing to grow in that important disease too, because it's another complex underserved area where patients have big need. So thanks for your question, Ed.

Keay Nakae, Chardan.

Thank you. With respect to the registrational study for long COVID, in terms of an objective functional outcome measure, what else might be acceptable instead of six-minute walk?

Margaret?

Yeah. Thanks for the question. So there are actually a range of possibilities. I'll point out that the FDA has drawly promoted the use of the PROMIS tools, which are actually another patient-reported outcome, but it's [sectioned] and well validated across a range of different populations. There are also digital health measures that are now coming into common use in clinical trials.

And I think one of the things that we're looking at, the six-minute walk doesn't really capture the actual problem seen in Long COVID very well. We understand that it's easy to do, so it has some advantages. But the problem is that you can do a six-minute walk, but then you don't recover very well. So your total physical activity in these patients really takes a hit.

So what we're looking to do is really get it to better capture of that overall level of activity. So what happens over the period of the weeks. So that's one of the things we're evaluating. And again, it's a little premature to announce. It's actually if we, say, go to a [trigger fee], which instrument we're using.

We're currently evaluating those. And of course, we'll have those discussions. But that's the overall intent, to get at something that captures the overall level of activity well.

Okay. Yeah, we'll look forward to seeing what you come up with. Thanks.

Okay, Keay. And I think I know Margaret shared this in the broader call previously, but up in a five-year period there were -- up to 20% of the drugs approved in total had a primary endpoint, including the PRO. And then supplementing that is what we're looking to do. So we have good precedent, good confidence, and I look forward to the next steps there.

This concludes our question-and-answer session. I would like to I turn the conference back over to Bill Hinshaw for any closing remarks.

Well, thank you, Andrew. And thanks to all of you who tuned in today. We are absolutely energized by the opportunity to help address the substantial needs that people with Long COVID and NASH are facing today. And we're looking forward to our upcoming data readout and other key milestones that we expect will help to drive value for our shareholders.

So we look forward to speaking with you again in the near future. And this concludes our call, operator. Everyone, be well.

Thank you. The conference again has concluded. Thank you for attending today's presentation. You may now disconnect.