Celyad Oncology SA (CYAD) 2021 Q4 法說會逐字稿

Welcome to the Celyad Oncology second half 2021 earnings conference call. (Operator Instructions) Please note this event is being recorded. I'd now like to turn the conference over to Dan Ferry, Managing Director with LifeSci Advisors. Please go ahead, sir.

Thank you all for joining us today. Before we begin, I would like to remind everyone that today's event may contain forward-looking statements within the meaning of applicable securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks and uncertainties, which may cause actual results, financial condition, performance or achievements of the Company to differ materially from those expressed or implied by such forward-looking statements. A list and description of these risks, uncertainties and other risks can be found in the company's US Securities and Exchange Commission filings and reports, including in its annual report on Form 20-F, filed with the SEC on March 24, 2022, and subsequent filings and reports by the company.

These forward-looking statements speak only as of the date of this call, and the company's actual results may differ materially from those expressed or implied by these forward-looking statements. The company expressly disclaims any obligation to update any such forward-looking statements made on this call to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless required by law or regulations. Let me now turn the call over to Filippo Petti, Chief Executive Officer of Celyad Oncology. Filippo, the floor is yours.

Thank you, Dan, and thank you, everyone, for joining us today as we report the financial results for 2021 and provide an operational update. Joining me from the management team is our Chief Scientific Officer, Dr. David Gilham; our Chief Medical Officer, Dr. Charles Morris; and our Chief Business Officer, Dr. Steven Robino.

We will start today's call with an operational and clinical update, an overview of the financials and then discuss key milestones we expect to achieve over the next several months. After our prepared remarks, we ask the operator to open the line for your questions.

Throughout the past year, we've continued to execute on a number of our strategies, including making steady progress with our novel shRNA-enabled programs. Our lead shRNA program CYAD-211 is currently in the Phase 1 IMMUNICY-1 trial where we are evaluating its tolerability and clinical activity following cyclophosphamide and fludarabine chemotherapy in patients with relapsed refractory multiple myeloma. The latest data from this study, which was presented at the ASH Annual Meeting in December 2021 showed a good tolerability profile and evidence of a clinical activity. We're pleased with the progress made with this program today, and we anticipate additional data to follow later this year.

We've also introduced the first preclinical candidate for our armored CAR franchise, which we aptly named shARC, for its shRNA Armored CAR-Ts. Regarding CYAD-203, this is our first preclinical shRNA-based allogeneic armored CAR-T candidate engineered to co-express IL-18 with the NKG2D CAR receptor. We are currently working on conducting IND-enabling studies. And assuming those studies are successful, we anticipate submitting an IND application by the end of this year.

While our shRNA programs have continued to move forward, we unfortunately encountered a setback with our TIM-based CYAD-101 candidate. Earlier this month, we paused our Phase 1 CYAD-101-002 trial after two fatalities occurred in patients that presented with similar pulmonary findings.

The FDA subsequently placed the study on clinical hold and with the safety of our patients as our first priority we are focusing our efforts on investigations into the causes of these events. We hope to provide an update on the CYAD-101 program when additional information becomes available.

The current setback with CYAD-101 should not overshadow the many achievements we accomplished over the past year, including bolstering our balance sheet in December 2021 with the announcement of a $32.5 million private placement by an affiliate of Fortress Investment Group. This investment ushers in a new era for Celyad Oncology, as the infusion of growth capital will be used to fund the clinical development of our allogeneic CAR-T candidates to advance our pipeline of preclinical CAR-T candidates and fortify our robust intellectual property estate.

Throughout the past 12 months, we've announced encouraging clinical data from our programs at major scientific conferences, which Charlie will discuss next. With that, I'll now turn the call over to Dr. Charlie Morris, our Chief Medical Officer, to provide you more details on our clinical programs. Charlie.

Thank you, Filippo. It's great to have this opportunity to speak with everyone on today's call about the progress we've made in our pipeline over the past year. As Filippo mentioned, we're very excited about the data we've generated in 2021 as well as the potential from our ongoing studies which supports our decision to focus our future R&D programs on our allogeneic assets.

Turning first to CYAD-211, our shRNA-based allogeneic CAR-T candidate engineered to co-express a BCMA targeting chimeric antigen receptor and a single shRNA, which interferes the expression of CD3 zeta component of the T-cell receptor complex.

CYAD-211 is currently being evaluated in the IMMUNICY-1 trial, a first in-human, open-label, dose escalation study of the safety and antitumor activity of a single infusion of CYAD-211 following CyFlu preconditioning chemotherapy in patients with relapsed or refractory multiple myeloma.

In December 2021, at the ASH annual meeting, we presented the latest clinical data from the trial, which showed a good tolerability profile and evidence of clinical activity. These data show no dose-limiting toxicities, no graft versus host disease or CAR-T-related encephalopathy syndrome. There was one Grade 1 CRS or Cytokine Release Syndrome event. Three out of 12 patients evaluated for activity achieved a partial response, one in each dose level, while eight patients had a best response of stable disease. All patients had detectable CYAD-211 cells in the peripheral blood, although engraftment was short lasting.

We are currently enrolling patients in cohorts evaluating CYAD-211 following enhanced lymphodepleting regimens with the aim of improving cell persistence and potentially optimizing the clinical activity of CYAD-211. In addition, the new C1 protocol allows for redosing of CYAD-211 in certain patients. We expect additional data to be presented during the second half of 2022.

Moving to CYAD-101, our sole candidate using our T-cell inhibitory molecule or TIM platform, in December 2021 we announced dosing the first patient in Phase 1b CYAD-101-002 trial, also known as KEYNOTE-B79. The CYAD-101-002 trial was part of the collaboration with MSD through one of its subsidiaries. The trial is evaluating CYAD-101 administered after FOLFOX chemotherapy, followed by MSD's anti-PD-1 therapy KEYTRUDA in patients with refractory metastatic colorectal cancer with microsatellite stable or mismatch repair proficient disease.

In late February, we voluntarily placed the study on pause after two fatalities occurred that presented with similar pulmonary findings in two patients with extensive pulmonary metastatic disease from their colorectal cancer. The FDA subsequently placed the study on clinical hold. We are currently investigating these findings and evaluating any related events in additional patients treated on the study. We expect additional feedback from the FDA by the end of March, which will help guide us to the appropriate areas of priority to meet their requirements. We'll be sure to provide additional updates on the trial as we learn more from our ongoing investigations.

Lastly, we announced updated data from our next generation autologous NKG2D CAR-T candidate, CYAD-02 at ASH in December 2021. Results from the CYCLE-1 trial evaluating CYAD-02 for the treatment of relapsed or refractory AML or myelodysplastic syndromes indicated that a single shRNA can target two independent genes to enhance CAR-T cell phenotype. We believe clinical data from CYCLE-1 support the potential versatility of our shRNA platform while further validating its uniqueness among currently available gene expression control technologies for the development of next-generation CAR-T therapies.

As previously reported, 12 patients received treatment with CYAD-02 in the CYCLE-1 trial, including six patients at the dose level 3, which evaluated a dose of 1 billion cells per infusion. The majority of patients experienced some reduction in blast count with two MDS patients achieving a marrow complete response at dose level 3.

Of the eight patients with the best response to stable disease, four had antileukemic activity, which is defined as a decrease of at least 50% of the bone marrow blast. As this represents greater activity than we saw with our first generation product, CYAD-01, we believe these data provide evidence that using a single shRNA to target two independent genes that appears to enhance the phenotype of the CAR-T cells.

While we have prioritized our allogeneic programs, there remains a high unmet need for patients with relapsed or refractory AML at MDS and we plan to potentially seek collaborative partnerships that could assist in driving the clinical development of this autologous candidate.

With that, let me now turn over the call to Dr. David Gilham, our Chief Scientific Officer, for an update on our R&D efforts. David?

Thank you, Charlie. And thank you, everyone, again for joining us today. As Filippo and Charlie just discussed, 2021 was an important year for the company as we continued to execute against our strategy. We believe now more than ever that short hairpin RNA technology or shRNA offers significant possibilities to enhance CAR-T therapies beyond their current scope, and can be used as a platform technology to develop allogeneic CAR-Ts.

We believe our second-generation multiplex shRNA platform, which is a key aspect of the future of our allogeneic approach offers a unique ability to control the level of single or multiple genes to optimize allogeneic CAR-T cell therapy products, a significant differentiator for our company within the allogeneic field.

For example, as compared to gene editing, the level of gene knockdown can be controlled through the choice of the specific shRNA. This is particularly important when knockouts of a protein may cause viability issues such as with essential kinases or through the knockout of a potential protein like HLA Class 1, which could sensitize the CAR-T to natural killer cell elimination. This multiplexing platform potentially allows us to generate an optimal therapeutic T-cell phenotype with a strong control on one of the major raw material costs, since all of these elements are maintained within a single vector. In fact, we are currently working on multiplexing up to six different shRNA in a single vector construct.

Looking ahead, we plan to leverage our multiplex shRNA platform with our own all-in-one vector-based approach that underpins our future allogeneic CAR-T candidates, including several programs which are in the discovery phase of development. In addition to our second-generation multiplexing capabilities for shRNA, we have introduced our armored CAR-T franchise that also uses shRNA. Our current work is centered on the pro-inflammatory cytokine interleukin 18 or IL-18. IL-18's dual mechanism of action directly potentiates the anti-cancer activity of CAR-T cells while also altering the balance of pro and inflammatory cells within the tumor microenvironment.

The logic of adding a cytokine to CAR-T is twofold. The first reason is a predictive autocrine effect where the cytokine can have a beneficial effect upon the key CAR-T cell functions. Secondly, is a paracrine effect, where this particular cytokine can impact upon the tumor microenvironment and in particular, drive the strong immune suppressive environment present within the majority of tumors to one that's more pro-inflammatory.

This is a tremendous opportunity. And based on the preclinical work done to date, we are actively evaluating a series of differentiated armored CAR-T candidates for both solid tumors and hematological malignancies that utilize the co-expression of IL-18, a multiple discovery stage, next-generation, shRNA-based allogeneic CAR-T candidates. As mentioned before, we are now referring to our shRNA armored CAR-T franchise as shARC to clearly identify these armored shRNA CAR-T cell candidates. We are excited, very excited about our latest advancements and look forward to providing more details on our shRNA capabilities and new candidates in the future.

With that, I'll now turn the call over to Filippo for financials and closing statements.

Thank you, David. Turning to our financials, I'd like to just remind you all that our full financial details are available on the Celyad Oncology website in both French and English. Our research and development expenses were EUR20.8 million in 2021 as compared to EUR21.5 million in 2022 (sic - see Press Release "2020"), a year-over-year decrease of EUR0.7 million. The decrease in the company's R&D expenses is primarily driven by the company's decision to discontinue the development of CYAD-01 in the fourth quarter of 2020, as well as the decrease of the expenses associated with share-based payments, non-cash expenses related to the warrant plan offered to our employees and directors.

Our general and administrative expenses were EUR9.9 million in 2021 as compared to EUR9.3 million in 2020, an increase of EUR0.6 million. This increase is primarily related to higher insurance costs and consulting fees, partially compensated by the decrease of the expenses associated with the share-based payments related to the warrants plan offered to our employees and directors.

We posted net other income of EUR3.4 million for 2021 compared to a net other income of EUR4.6 million for 2020. Similar to the first half of 2020, our net other income for 2021 is associated with grants received, including those from the Walloon region.

In 2021, other income was partially compensated by other expenses, including the remeasurement income on the recoverable cash advances of EUR0.3 million for the year 2021, and the amendment fees associated with the Dartmouth license agreement signed in December 2021 for EUR1.1 million.

Net loss for the year ended December 31, 2021 was EUR26.5 million or EUR1.70 per share, compared to a net loss of EUR17.2 million or EUR1.23 per share for the same period in 2020. The increase in the net loss between periods was primarily due to the decreased change in fair value of contingent consideration combined with a decrease on other income and expenses.

Net cash used in the operations for the year ended December 31, 2021, which excludes noncash effects, amounted to EUR26.6 million, which is in line with the net cash used in operations of EUR27.7 million for the year ended December 31, 2020.

As of December 31, 2021, our treasury position was approximately EUR30 million or approximately $34 million. Based on our current scope of activities, we estimate that our cash, our cash equivalents, combined with the remaining access to our equity purchase agreement, should be sufficient to fund operation expenses and capital expenditure requirements until mid-2023.

In closing, Celyad Oncology is more focused than ever on our mission. And although we are facing a current challenge with the CYAD-101 program, the situation does not take away from the important work our team is doing. As such, we will look forward to announcing exciting upcoming clinical and regulatory milestones in the remainder of 2022, including additional data from the Phase 1 IMMUNICY-1 trial of CYAD-211 with ongoing cohorts evaluating the enhanced lymphodepletion expected during the second half of 2022. As well as the CYAD-203 program, we plan to provide an update on the ongoing IND-enabling studies as we anticipate the submission of an IND application for the program by the end of the year.

In stepping back and evaluating the pipeline as a whole, it's important to remember that our true potential for our company reaches beyond, far beyond the current programs. Each program is providing us valuable insight on how to apply our platform technologies and generate enhanced candidates in the future. I'm deeply grateful to all of our team members who tirelessly deliver each and every day with the dedication in pursuit of our mission to develop innovative cell therapies against cancer.

And with that, I'll now turn the call over to the operator in order to take your questions. Operator?

Thank you. (Operator Instructions) Raju Prasad, William Blair.

Thanks for taking the question and thanks for the update. Can you maybe give us a sense of what solid tumors you're thinking about taking 203 in? I mean, obviously, you have a wealth of data in colorectal cancer, but there's obviously some things to maybe sort out with combo therapies there. So just kind of curious to know -- NKG2D is pretty ubiquitous across many cancers, but just kind of want to hear your strategy there. Thanks.

Yes, Raj. Thanks for the question. Good to reconnect. Maybe I'll turn that over to Charlie to provide some initial thoughts and maybe David and I can chime in as well. But Charlie?

Yeah, hi Raj. I mean, we see the potential for NKG2D as you know, in both solid and hematological tumors. I think it's clear that part of the decision-making process has to involve a deep understanding of -- to what extent CYAD-101 and the targeting are involved in what we've seen in the CYAD-101 study. If that seems -- it's a key risk factor there, if indeed extensive pulmonary disease, for example, then you would pivot more towards tumors which do not have a propensity towards an abundance of pulmonary metastases. But it's a little early yet. So at this point, I think we will continue to evaluate that. There's clearly a significant opportunity with NKG2D in all types of malignancies, but it may well be that we have to take stock of where we are with 101 before any final decisions on 203's first trials. I don't know, David, if you have any scientific things to add to that.

Thanks, Charlie. And hi, Raj, good to speak to you. I'd say I think the big advantage, as Charlie said, of NKG2D is its broad potential targeting. When we started with the autologous program a good number of years ago now, the initial trial was targeted in multiple indications. And for me, I think this seems like an obvious route to start as well with 203. It is quite hard to tease out that there will be a specific indication that may be susceptible to IL-18, for instance.

And so for me, it seems obvious that we shouldn't put all our eggs in one basket, so to speak, and pursue just one indication, but potentially as we did with our auto program, look to assess a number of indications and just determine whether any -- a specific one may show enhanced sensitivity through a mechanism we may not entirely understand. But apart from that, it's hard to be really more specific.

Ed White, H.C. Wainwright.

Morning. Thanks for taking my questions.

Good morning, Ed.

Good morning, Filippo. On 211, just a question on timing. I want to get an idea of how long you look at different lymphodepleting regimens and dosing, and when do you think you can move forward with a one dose, one lymphodepleting regimen so we can see some real progress towards a registration trial?

And then the second question I have is just on 101 with the clinical hold. What kind of impact does that have on R&D expenses? How should we be thinking about first half versus second half? Will expenses be a material impact in the first half as it's closed down and pick up in the second half? Or how should we be thinking about that? Thank you.

Thanks for the questions. I'll turn you over maybe to Charlie for answers around the kind of the 211 program and how we're thinking about the latest cohorts there. Charlie?

Yes, Hi, Ed. We are already recruiting in the enhanced lymphodepleting cohorts. Obviously, one of the major timing limitations is the regulatory requirements to manage safety through staggering the time between each patient's inclusion in the study. But I would be hopeful that we will have a dose and lymphodepletion regime -- regimen clarity around the end of this year. We are anticipating several more cohorts, but assuming that we begin to see a better engraftment, better persistence associated with clinical responses without GvHD, I would be hopeful that we would be going into next year with an expansion cohort and hopefully able to be seriously considering what the next steps in a development program are. For 101 expenses, I'm definitely going to turn that back to Filippo.

Ed, I don't know if you have any follow-ups to Charlie's thoughts on the 211. If not, I can jump into the second question.

Sure. No, Charlie handled it. Thank you, Charlie.

Perfect. Look, I think from the 101 side of things, as we think about the program and we kind of outline the budget for the year, obviously, the fair number of enrollment and thinking about how that program was gaining nice momentum throughout the course of Q1 now with the kind of the pause, as you can imagine, us having to go through the investigation and then perhaps restart things later this year.

I would say it's probably just kind of a shifting of how we think about the budget for that program more than anything else. I think it's a little too early to say in terms of where we would need to have additional expenses, but perhaps around maybe patient enrollment and things like that. What the investigation may or may not entail in terms of costs, I think we're still assessing some of the things that we may want to put in place to better understand what has transpired. But I think from an overall perspective, the budget around 101 is probably more of a shift in terms of timing than anything else.

Okay, great. Thanks, Filippo.

Thank you, Ed.

(Operator Instructions) Nick Abbott, Wells Fargo.

Good morning. Thanks for taking the questions. First one, just going back to 211, I think there's been a confluence now on to consolidation, repeat dosing. So I know you said, Charlie, that the protocol allows for repeat dosing. What are the criteria for that? And have you been able to repeat dose? And what's the disadvantage not to just assume that repeat dosing is going to improve outcomes?

Hi, Nick. Thanks for the question. The protocol allows for redosing for patients in stable disease, after at least eight weeks on the study -- stable, sorry, stable disease or better after at least eight weeks on the study. So patients who just don't seem to have had any response to an initial dose aren't allowed to go and have an alternative treatment. We have not re-dosed patients yet, but it's certainly there. And we plan to continue to actually look at that as a potential for what we could do systematically rather than optionally.

So I agree completely with your last point. To my perspective, and David may also have an opinion here, there is no disadvantage, in my opinion, to redosing in patients who can tolerate the chemotherapy, who have tolerated the cells. And we -- to do that in a more systematic way requires FDA approval, Belgian authority approval. It requires protocol amendments, et cetera. But that is a part of the planning for subsequent cohorts as I think [you know]. David, anything to add?

Not too much. Good morning, Nick. I'd certainly agree with the premise and the advantage of the allogeneic approach is to think about it off the shelf and how frequently we can give dosing. I will, of course, look more to the future that I think further candidates, knocking down multiple genes and enhancing immune evasion, I think is going to be important for the allogeneic field as a whole, not just for our products so that we can look at multiple dosing, but also combining that with a reduced lymphodepletive regimens to certainly reduce the impact on patients.

But that's certainly looking for the future, as Charlie says, understanding where we are and then thinking about how we can look at multiple dosing in a pragmatic and planned way rather than the ad hoc route that we have potentially in our current protocol, I think, will be certainly the way forward.

Thanks. And then on 203, David, I think I may have misheard what [Fil] said in his prepared remarks. But it sounds like there are multiple candidates. So what exactly are you looking for in the ideal 203 candidates? What are the variables that you're tinkering with as you think about what does the ideal candidate have to show us?

Yes. I mean this is a multiplex question, actually or at least multiplex answers, Nick. I mean, first and foremost, the idea for any development is that we move on and the candidate itself, to my mind, has to show greater potential than what we've had before. I think that's taken as read. The challenge actually from a scientific perspective is that we're actually now reaching the limitation of actually going beyond the limitations of the preclinical models that we have.

So there's no really very good models to understand IL-18 in the human situation, for instance, and to be able to model and understand that in the preclinical context. So it is very much about trying to assess the individual components and assuming that those components, when we put them together, will deliver a candidate that generates greater clinical efficacy.

So for me, first and foremost is -- for 203 is the question of IL-18 and what can that bring to an NKG2D base construct. There is also a limitation with 203, of course, we've been developing this for some time, and it's based on some of our early shRNA technology.

Now, if you were to ask me at this moment, I would certainly be using our next-generation optimized shRNA technology to express multiple hairpins in that particular candidate. So I think it's an important steppingstone in terms of where we're looking to go, where this is a candidate that is really hopefully going to be pushing IL-18 in the context of NKG2D and trying to show that we can use this as a way of leveraging really into our next-generation shRNA candidates. Yeah. I think that that's really -- I mean, it is about improving its overall activity. But the real challenge is actually from a scientific perspective, having good models that can really define this before we get into the clinic now, to be honest, Nick.

Okay. Thanks, David. Then just last one. So on 101, I think, Fil, you said that, expect to hear back from FDA by the end of March. What is FDA responding to? Have you submitted a package? Have you provided recommendations? And I guess ultimately, what are the ramifications for 203? FDA seemed concerned about [counting] NKG2D in colorectal cancers, or in the setting of pulmonary metastases. And now you're coming with a more potent CAR-T. It seems like there's a potential for, you know, a flag to go up and the FDA has to -- wants you to start at a dose that is so low, it just becomes challenging or impossible to actually do that --complete that dose to move on.

Yes, all good questions.

In terms of (multiple speakers) -- sorry.

Please go ahead, Charlie.

Yes, in terms of FDA, the standard approach in the position that we're in is that they issue a so-called list of deficiencies. That, I'm sure, will not show -- well, I don't expect will show any particular surprises. We are trying to assess the role, if any, of 101 in the events that have been observed. So it's going to be about safety, it's going to be about the relationship to the target, the relationship to the administration that one would project and expect. And those are all the things that we are already working on to try to understand better.

The effects on 203 really depends on the outcome of the investigation. If we believe that's a -- this is an unfortunate incident in patients who were already at risk and who had a rapid progression because we can find no reason that we believe that 101 is involved, then 203 has -- is probably not impacted if there is a relationship to -- or if we believe and remember we have previous studies with 101, we have previous studies with CYAD-01 and -02.

So we have lots of experience in multiple patients with solid tumors who have been treated with NKG2D targeting CAR-T cells. So that hopefully gives us the basis for really understanding, have patients with similar risk factors been in earlier studies and does this appear to be the impact.

In terms of what that means, 203 everything from here forward, I think, is speculation. But clearly we are going to need to be take a somewhat conservative approach anyway because we have not administered IL-18 expressing candidates before. Our belief is that that's safe to do because of the levels of IL-18 binding protein, but we have to confirm that. So I think it's a -- the 101 experience and the knowledge of the expression of the cytokine requires caution anyway. But I think we will find an approach which takes into account all of our findings as we move forward.

Great. Thank you.

(Operator Instructions) There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Filippo Petti for any closing remarks.

Thank you, operator. And also I'd like to thank everyone for joining us today, and certainly your interest in Celyad Oncology. As an organization, we remain steadfast in our mission to bring novel and innovative CAR-T therapies to cancer patients with unmet medical needs. We look forward to speaking with you all again soon. All the best.

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