Eloxx Pharmaceuticals Inc (ELOX) 2017 Q4 法說會逐字稿

Good day, everyone, and welcome to the Eloxx Pharmaceuticals full-year 2017 earnings webcast and conference call. Today's call is being recorded. At this time, I would like to turn the call over to Barbara Ryan. Please begin.

Thank you, Candace. Welcome and thank you to those of you joining us on the line and the webcast this morning for a review of Eloxx Pharmaceuticals' full-year 2017 financial results and business update. I am Barbara Ryan, Eloxx Pharmaceuticals' Investor Relations Officer. And with me this morning to discuss the results and update you on our progress are Robert Ward, Chairman and Chief Executive Officer; Dr. Pedro Huertas, our Chief Medical Officer; and Greg Weaver, our Chief Financial Officer.

Before we begin, I'd like to remind you that any statements made during this call that are not historical are considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors section in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission.

Any forward-looking statements represent our views as of today, March 20th only.

A replay of this call will be available on the Company's website www.eloxxpharma.com following the call. You can find the dial-in information for the replay in today's press release as well as on the Company's website. It is now my great pleasure to turn the call over to Robert Ward, Chairman and Chief Executive Officer of Eloxx Pharmaceuticals.

Thank you, Barbara, and welcome to everyone joining us on Eloxx's first earnings webcast and conference call as a public company. We are very pleased to have this opportunity to share with you an update on Eloxx Pharmaceuticals and our very promising development programs in the orphan diseases of cystic fibrosis and cystinosis. 2018 is a very important year for Eloxx because of a number of fundamental catalytic changes that will occur at the Company.

Today we will share what we consider to be very promising data for ELX-02, our lead readthrough investigational compound, and our progress in both cystic fibrosis and cystinosis. We will also provide an update on our Phase 1 program and our plans to seek regulatory clearance to initiate Phase 2 trials in both of these indications in the fourth quarter of this year. We expect to share additional information on our cystic fibrosis programs at the upcoming European and North American cystic fibrosis meetings later this year.

As you may be aware, Eloxx Pharmaceuticals is currently developing novel small molecule medicines designed to treat genetic diseases by restoring the production of proteins from genes with nonsense mutations. Single nucleotide changes in the reading frame of a gene can create a premature stop codon that can prevent production of the protein, such that individuals either have dramatically reduced levels of protein expression or no protein at all.

As a result of this reduction in protein levels, individuals have altered physiology leading to a variety of rare and ultra-rare genetic disease states. For example, in cystic fibrosis and cystinosis, nonsense mutations are often considered to be associated with the most severe forms of the disease, and patients today have limited treatment options.

When we talk about readthrough, the small molecules that we have designed have activity at each of the three premature stop codons, which means a single small molecule has potential applications in disease state where patients may have different nonsense mutations. Therefore, readthrough may be established across a basket of collected nonsense mutations in a single disease state.

In addition to our lead indications of cystic fibrosis and cystinosis, Eloxx has conducted enabling experiments in other orphan diseases, including MPS I syndrome, Rett's and Duchenne muscular dystrophy. We believe that readthrough technology has the potential to address a wide range of different orphan diseases where nonsense mutations contribute to morbidity and mortality.

Our novel compound library is built upon the aminoglycoside scaffold where medicinal chemistry has been applied to modify the interaction with the ribosome. Here on the slide you can see a crystallized structure of the cytoplasmic ribosome depicting the aminoglycoside interaction with the helix 44 decoding site, which allows near cognate transfer RNAs to enable the ribosome to read through a premature stop codon that may have halted protein production.

By modifying this scaffold, we've improved the selectivity of our novel molecules for the cytoplasmic ribosome and optimized them for readthrough activity. To date, our IND enabling studies with ELX-02 have focused on testing the toxicity and tolerability in a series of required studies where to date, we have seen no observations of ototoxicity. And the data suggest improved tolerability of the kidney with a three to fourfold improvement in the safety margin over the original parent compound. These early-stage findings will need to be confirmed, of course, through the remainder of our development program.

Our Phase 1 single ascending dose study enrolled 60 healthy volunteers and is now complete. Our Phase 1b study or the multiple ascending dose study has a targeted enrollment of 45 individuals, and we have already completed the first cohort in this study. To date there have been no observations of serious adverse events, no renal or ototoxic serious adverse events.

In general, ELX-02 has been relatively well-tolerated. We are very pleased with the emerging profile. Now with the completion of Phase 1a and the first cohort of the Phase 1b studies, we are on track for submission of our clinical trial application in Belgium and our investigational new drug application here in the US, which will enable us to seek regulatory clearance to initiate Phase 2 trials later this year in both cystic fibrosis and cystinosis.

We currently have global rights on a library of novel molecules with long composition of matter patent lives. This year, we expect to nominate a second novel molecule for development in a new orphan disease state.

Joining me on the call today to share with you our most recent data and our progress in the clinic is Dr. Pedro Huertas, our Chief Medical Officer. I will turn the call over to you, Pedro.

Thank you, Bob, and welcome, everybody. I would like to update you on the status of our two leading programs, cystic fibrosis and cystinosis. As you may be aware, cystic fibrosis is one of the most common of the rare diseases and, in fact, is the most prevalent genetic disease in the Western world and the most common fatal inherited disease in Caucasians.

Cystic fibrosis is a systemic disease caused by mutations in the transmembrane conductance regulator, CFTR. The CFTR is a chloride channel and mutations in the channel cause dysfunction of epithelial fluid transport in the lung, pancreas and other organs, resulting in the classical clinical manifestations of cystic fibrosis.

Complications include thickened mucus in the lungs, which leads to frequent respiratory infections and pancreatic insufficiency, giving rise to malnutrition and diabetes. These manifestations of the disease lead to chronic disability and reduced life expectancy. The current standard of care focuses on correctors and potentiators. These are small molecules that stabilize the CFTR so that it traffics appropriately to the cell surface, and once there has an increased probability of opening and closing.

These therapies target mutations in classes other than Class I mutations, for in Class I mutations no protein is produced. We have generated data suggesting that ELX-02 holds the potential to be active in both homozygous and compound heterozygous Class I nonsense mutations to increase translational readthrough of mutant CFTR, improve chloride currents in human bronchial epithelial cells and organoids, and demonstrate synergy with correctors and potentiators in compound heterozygous patients.

In the next slide, mutations in the CFTR have been grouped into several categories based on its intrinsic functional defect. Class I mutations do not lead to the production of functional proteins. Premature stop codons or nonsense mutations are Class I mutants, and the Cystic Fibrosis Foundation in the US estimates that approximately 22% of patients have Class I mutations on one or both CFTR alleles. And of these, approximately 13% carry a nonsense mutation on one or both alleles.

As a consequence, we are focusing on the subset of patients with diagnosed nonsense mutations, and to this end in the next slide we have been collaborating with the Hubrecht Organoid Technology also known as HUB in Belgium. The HUB is a spinoff Company of the Hubrecht Institute, KNAW and the University Medical Center Utrecht.

The HUB has discovered methods to produce organoids which are stem cells derived in this case from intestinal epithelia that, upon exposure to appropriate growth factors and media differentiate into epithelial mini organs. These organoids form a polarized epithelium in the form of a hollow sphere that maintains the genetic phenotypic and functional properties of the cells of origin.

Because they maintain the properties of the patient's disease, organoids represent an in vitro platform for drug discovery and a tool for precision medicine. When exposed to a suitable compound such as ELX-02, organoids swell as a consequence of flux of sodium and chloride across the CFTR, which in turn carries water into the inner cavity of the organoid.

Swelling is the assay, and the degree of swelling measures the response of the organoid to a particular drug. This swelling is thought to represent and predict the effect of a drug such as ELX-02 on functional parameters of the disease such as FEV1 or exocrine pancreatic secretion in patients with cystic fibrosis.

You will observe on the left side panel of this slide that organoids from a patient carrying a nonsense mutation are flattened. On the right side panel of this slide, you can appreciate that when treated with the appropriate drugs, the organoids swell and increase in volume. In the next slide, we see the response of organoids to both ivacaftor and ELX-02. These organoids originate from a patient who is a compound heterozygote for the delta 5O8 mutation, which is responsive to ivacaftor, and the G542X mutation.

The G542X mutation is the most prevalent nonsense mutation in the CFTR, and is responsive to ELX-02. In the top panel you can appreciate that when these organoids are treated with ivacaftor working the delta 5O8 mutation, they swell and increase their volume by approximately 35%, and then the response saturates by about 45 minutes.

These cells make an effective delta 508 CFTR, and the ivacaftor increases the probability that the channel operates properly. Since the amount of delta 508 is finite, once the CFTR is fully activated the response saturates and plateaus.

In the leftmost lower panels, you see that when the same organoids are treated with ELX-02, the organoids swell in a dose-dependent manner, increase their volume by 45%, and the response is not saturable. This makes sense since ELX-02 induces the synthesis of new CFTR, and the synthesis continues during the experiment.

In the lower center panel, you see that when treated with ELX-02 and ivacaftor, the organoids swell in a dose-dependent manner and increase their volume by 60% in a non-saturable fashion. This suggests that ivacaftor enhances the effects of ELX-02. But most importantly on the next slide, we show you what happens when organoids homozygous for nonsense mutations are exposed to ELX-02.

Neither ivacaftor nor lumacaftor have an effect on these organoids since in the absence of ELX-02, the cells do not make any CFTR. As I mentioned earlier, G542X is the most prevalent nonsense mutation, and it's estimated at approximately 5% of the CF population. W1282X is another prevalent nonsense mutation at about 4%.

In the top panel of the slide, you can observe that organoids homozygous for the G542X mutation swell in a dose-dependent manner in response to ELX-02. In this example, these organoids increase their volume by 65% and the response is not saturable.

In the lower panel of the slide, you can observe that organoids homozygous now for the 1282X mutation also swell in a dose-dependent manner in response to ELX-02. In this example, the organoids increase their volume by 65% and the response is not saturable.

These early results suggest that ELX-02 has the potential to rescue these mutations in a dose-dependent manner and produce functional CFTR with a measurable pharmacodynamic effect.

We are very encouraged and excited by these results. We held a meeting with the federal agency for medicines and health products in Brussels, Belgium in January of 2018. And based on the feedback we received from the agency, we are on track to submit a CTA in Belgium mid-2018. Pending regulatory clearance, we are targeting to have the first patient first visit in the fourth quarter of 2018.

Furthermore in the next slide, I would like to tell you a little bit more about our second leading program in cystinosis. System gnosis is an orphan ultra-rare lysosomal storage disease caused by mutations in the cystinosin gene, a cysteine efflux channel. When nonsense mutations prevent the production of a functional efflux channel, cystine accumulates in the lysosome to such an extent that it crystallizes. It is the cystine accumulation that causes the manifestations of disease, which in turn lead to functional impairment in the kidneys and through many body organs. In general, patients with cystinosis receive renal transplants by 20 years of age.

The current standard of care, which is cysteamine bitartrate, stimulates an alternative transport pathway and does not address the underlying molecular pathology of the disease. Cystinosis caused by nonsense mutations accounts for approximately 15% of the total patient population, but this number may underestimate the prevalence of these patients which may be as high as one-third of the total population.

In February of the current year, our collaborator Dr. Paul Goodyer from McGill University presented our cystinosis data at the World Symposium in Lysosomal Storage Diseases in San Diego. There he showed that in vitro, ELX-02 reduces nonsense mediated mRNA decay by increasing the concentration of cystinosin mNRA levels in a dose-dependent manner, and also increased the translational readthrough and reduced cystine levels to near normal levels, also in a dose-dependent manner.

In a mouse model carrying a mutation equivalent to the human W138X mutation, which is the most prevalent nonsense mutation in cystinosis, ELX-02 lowers cystine accumulation in vivo and in vitro. We are also very excited about this data. So far we have had a pre-IND discussion with the Gastroenterology and Inborn Errors of Metabolism Division at the FDA, and received encouraging written comments at the end of December 2017.

I would now like to turn the call over to Greg Weaver, our Chief Financial Officer, who will discuss our 2017 financial results and provide you with an update on our balance sheet. Greg?

Thank you, Pedro. As of December 31, 2017, the Company had cash and cash equivalents of $24 million, which we expect will fund the Company's operations at least through the end of the first quarter of 2019, based upon our current operating plans. The Company received net proceeds of $16.8 million in Q4 of 2017, related to completing its Series C financing. The Company has no debt.

The Company's statement of operations for the year ended December 31, 2017, reflects a net loss of $21.2 million versus a net loss of $9.8 million in the prior year. R&D expenses were $16.4 million for the year compared to $9 million in the prior year 2016 an increase of approximately $7.4 million due to growth in clinical development activities and a one-time licensing fee.

G&A expenses were $4 million for the year ended December 31, 2017, compared to $800,000 in the prior year, an increase of approximately $3.1 million. The increase in G&A expense was primarily related to an increase in our headcount, which is currently 18 FTEs and related salaries, stock-based compensation, other personnel costs, and costs related to opening our Boston area US headquarters.

For the three months ended December 31, 2017, the Company had a fourth-quarter net loss of $10.6 million, which included approximately $4.3 million in non-cash expenses. Therefore, our use of cash and operations in the fourth quarter was approximately $6.3 million.

Fourth quarter R&D expense totaled $8.4 million, which included $3.4 million in non-cash license fee expense, and fourth quarter G&A expense totaled $2.2 million. In 2018, we anticipate increasing our headcount as we expand our overall development activities and increase spending as we initiate new clinical trials.

Turning to the financial summary slide, the key point to make here is that we believe our balance sheet enables us to deliver on the objectives we have shared with you here today and fund our operations through the end of the first quarter of 2019.

I'd now like to turn the call back over to Bob.

Thank you, Greg. In summary, we're delighted with the emerging profile of ELX-02 and encouraged by the substantial activity observed in both homozygous and the complex heterozygous cystic fibrosis organoids. We believe these data are potentially predictive of clinical potential and have raised our expectations of probability of success.

We believe that Eloxx has a very bright future ahead of us as we look to submitting our CTA in Belgium for cystic fibrosis in the middle of this year, and our IND in the US for cystinosis in midyear as well. Pending regulatory clearance, we expect to advance to Phase 2 trials in each of these indications by the end of this year.

We thank you for joining us on our first earnings call as a public company, and we look forward to continuing to update you on our progress. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.