Evelo Biosciences Inc (EVLO) 2018 Q4 法說會逐字稿

Good morning, and welcome to the Evelo Fourth Quarter and Full Year 2018 Financial Results Conference Call. (Operator Instructions) Please be advised that the call is being recorded at the company's request.

At this time, I'd like to turn the call over to Stefan Riley of Evelo. Please proceed.

Thank you, operator. Good morning, and welcome to Evelo's Fourth Quarter and Year-end 2018 Financial and Operating Results Conference Call. This morning, we issued a press release that outlines the topics that we plan to discuss today. This release is available at www.evelobio.com under the Investors tab.

Today, on our call, Simba Gill, Evelo's CEO, together with key members of our leadership team, will review the company's strategy, recent clinical highlights and our financial results.

Before we begin, I would like to remind everyone that statements made during this call that do not relate to matters of historical fact, including statements about our objectives and anticipated clinical milestones for 2019, the impact of any of our monoclonal microbials and the timing and results of any clinical studies, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are intended to be subject to the safe harbor protection provided by the reform act.

Actual results could differ materially from those indicated by forward-looking statements due to the impact of many factors. Participants are directed to the risk factors set forth in Evelo's quarterly report on Form 10-Q for the quarter ended September 30, 2018, and the company's other filings with the Securities and Exchange Commission.

Any forward-looking statements made today speak only to Evelo's operations as of today. Evelo disclaims any duty to provide updates to its forward-looking statements even if subsequent events cause the company's views to change.

It is now my pleasure to pass the call over to Simba.

Thanks, Stefan. Good morning, everybody, and happy Valentine's Day. Today, I will review our vision and strategy. Duncan McHale, our Chief Medical Officer, will review our clinical execution to date and plans for the many clinical studies we are taking forward this year. Mark Bodmer, our Chief Scientific Officer, will review an important discovery that we have made, which underpins the mechanism of action of our monoclonal microbials. Finally, Jonathan Poole, our Chief Financial Officer, will review our financials before we turn the call over for question and answer.

Our vision is to develop monoclonal microbials as a broadly applicable new class of medicines. Immune cells in the small intestine play a central role in governing our systemic immunology, and our platform harnesses this to open up the potential for efficacious, orally delivered and convenient, safe and cost-effective medicines, breaking multiple dogmas across science, medicine and business. Our products have the potential to impact major chronic diseases and cancers at all stages of disease across global patient populations.

We are advancing a broad clinical development pipeline, investigating multiple monoclonal microbials across different disease pathologies with multiple formulations. We are also continuing to invest in our platform and pipeline with the aim of capturing the full breadth of our opportunity. We have advanced our understanding of monoclonal microbials and the gut-body network through our internal research activities as well as through collaborations with leaders in academia, including Harvard University, the Mayo Clinic and the University of Chicago.

I would like to emphasize our clinical progress and execution against plan in 2018. Our Series C financing and IPO placed the company on a strong financial footing, enabling us to invest in our platform and the advancement of several product candidates. We gained approval of multiple regulatory applications and initiated clinical trials in the U.S. and Europe, ending 2018 with 3 products in 4 clinical trials, addressing 9 different patient groups in oncology and inflammatory diseases. We have done this in less than (inaudible) since Evelo was launched.

These achievements are a testament to the talent we have attracted in research, manufacturing, clinical development, regulatory affairs, legal, intellectual property, finance and corporate development. I want to acknowledge and thank our remarkable team at Evelo for making this happen.

I'd like to now introduce Dr. McHale, our Chief Medical Officer, to review the status, progress and anticipated readouts of our key clinical programs, beginning with our inflammatory disease clinical trials.

Thanks, Simba. This has been an exceptionally busy period clinically as have we advanced 3 clinical candidates across multiple indications in parallel.

First, I'd like to talk about EDP1066, the first of our anti-inflammatory monoclonal microbial candidates, which we are currently studying in a Phase Ib clinical trial in atopic dermatitis and psoriasis. It's a placebo-controlled trial and tests a range of doses of EDP1066 in 36 healthy volunteers and up to 84 patients. The primary endpoint of the trial is the safety and tolerability of EDP1066, and we've included exploratory endpoints which will give us insights into the potential clinical benefits of EDP1066 and its immunological effects. Specifically, we are investigating how EDP1066 modulates clinically validated biomarkers of inflammation across Th1, Th2 and Th17 biology.

We have completed dosing of the 3 healthy volunteer cohorts in this trial, and following review of the data by the trial's Safety Review Committee, we have proceeded as planned to the cohorts of patients with atopic dermatitis and psoriasis.

We have recently decided to add an additional cohort of 24 atopic dermatitis patients at the lower 1x dose. The addition of this cohort means that we will have a full range of 1x and 5x the estimated human equivalent dose for both atopic dermatitis and psoriasis patients based on our metric scalings from the mouse models. We expect to announce initial clinical data from this trial in the second quarter of the year.

As you heard from Simba, our strategy includes studying multiple formulations ahead of late-stage trials and commercialization. Therefore, we are initiating an immunopharmacology study in healthy volunteers with EDP1066. We expect to dose the first subject in this study in the first half of this year and to complete it in the second half.

Now consistent with our strategy to build a portfolio of multiple monoclonal microbials for the treatment of inflammatory diseases, we have advanced EDP1815 into a placebo-controlled Phase Ib trial in atopic dermatitis and psoriasis. The study has a similar design to the EDP1066 study, and we expect initial clinical data from this trial in the second half of the year.

We aim to advance our inflammatory disease portfolio into further clinical trials in atopic dermatitis, psoriasis and additional indications in the second half of 2019. Now potential additional indications include asthma, psoriatic arthritis, rheumatoid arthritis and inflammatory bowel disease.

I'd like to discuss the progress we have made with EDP1503, our first antitumor monoclonal microbial. Now one of the challenges in the immuno-oncology field is working out the mechanistic rationale for combination therapy. Our preclinical research demonstrated EDP1503 has pleiotropic effects, modulating multiple antitumor immunological pathways. In the tumor microenvironment, we see upregulated expression of MHC Class I and the chemoattractants CXCL9 and 10 and increased natural killer, NK, cells and proinflammatory macrophage cell activity. These mechanisms all have relevance in treating patients who are either nonresponsive or poorly responsive to current cancer immunotherapy.

So EDP1503 is in 2 open-label Phase II clinical trials in a diversity of tumor types, covering a broad range of immunoresponsiveness.

First study is a clinical collaboration with Merck, investigating the effects of EDP1503 and KEYTRUDA combination therapy in microsatellite stable colorectal carcinoma, triple-negative breast cancer and a basket of PD-1 relapsed tumor types. We commenced dosing in this study in quarter 4, 2018.

Now the second ongoing study is an investigator-sponsored study by the University of Chicago, also in collaboration with Merck. This study is looking at the effects of EDP1503 and KEYTRUDA combination therapy in metastatic melanoma in both patients who are checkpoint inhibitor naive and those who have relapsed on checkpoint inhibitor therapy. In both trials, patients will be dosed daily with EDP1503 monotherapy for 2 weeks at the start of the trial, and then they will receive daily EDP1503 in combination with checkpoint inhibitor therapy for the remainder of the study. Biopsies will be taken at baseline and at the end of the monotherapy period to look for effects of EDP1503 in monotherapy on the tumor immune environment.

We expect clinical data from the first trial in the first half of 2020 and anticipate clinical data from the investigator-sponsored trial in the second half of 2020.

So I'd now like to hand over to Mark, our Chief Scientific Officer, to update you on the platform developments.

Thank you, Duncan. We continue to discover marvelous new things about what immune cells in the small intestine can do and how monoclonal microbials have their effects. I'd like to tell you about some of them.

The lining of the small intestine is the body's main window on our environment. It contains the bulk of our immune cells, and these cells sense the outside world and govern systemic immune activity according to what they sense. They are central regulators of the immune system. This fills a fundamental gap in our understanding of how immunity and inflammation are coordinated, and it's the core scientific realization that has allowed us to create a new drug platform.

I'll describe some important insights into monoclonal microbials and how they work. In a surprising discovery, we found that many of our monoclonal microbials do not need to be viable for efficacy. They need to be intact, but growth and cell division are not required. This indicates that monoclonal microbial efficacy comes from the recognition of microbial structural motifs by immune cells in the small intestine. It's also a formal demonstration that the effects are not dependent on engraftment or colonization. This extends the range of our discovery platform, opening up a new class of nonreplicating monoclonal microbials quite distinct from anything else in the field. We've defined an additional manufacturing step to produce these intact, nonreplicating forms of monoclonal microbials and have recently put our first nonreplicating product candidate, EDP1867, into development for inflammatory diseases.

Coupled with this work on nonreplicating microbes, we've been doing detailed studies tracking the path of immune signals generated by the action of our products in the small intestine. As a reminder, monoclonal microbials do not distribute outside the gut, but their effects do. We've mapped their action from immune cells in the small intestine to associated lymph nodes to the sites of therapeutic effective inflamed tissues or tumors throughout the body. A clear picture is emerging of the modulation of cellular and cytokine pathways, consistent with our understanding of validated disease targets. The striking observation from this work is the coordinated effects on multiple pathways, reflecting a natural complex process of restoring immune health. And we see the same picture with both live and nonreplicating products.

As my final comment, we believe that this gut-body phenomena will turn out to be broadly general for many aspects of physiological control. This is the basis of our continuing discovery work not only on the extensive range of opportunities to address clinical needs in inflammation and oncology but also in an expanding range of therapeutic areas.

I'll now turn the call over to Jonathan.

Thanks, Mark. In today's press release, we reported cash, cash equivalents and investments of $147.9 million at the end of Q4 2018. This compares to $164.3 million at the end of Q3 and $38.2 million at the end of 2017. We expect that these funds will be sufficient for our operating and capital expenditure needs into the second half of 2020. And as Simba mentioned, our current operating plans include the completion of our ongoing clinical trials for EDP1066, EDP1815 and EDP1503 and the potential initiation of clinical trials in 2 additional indications in our inflammatory disease therapeutic area.

R&D expenses for the fourth quarter increased $5.2 million to $11.3 million from the same period in 2017, reflecting our expanding portfolio of clinical trials and continued investment in our platform and preclinical pipelines.

Cost drivers for the full year were similar with total 2018 R&D expenses of $39.9 million compared to $20 million for the same period in 2017.

G&A expenses for the fourth quarter of 2018 were $4.7 million compared to $2 million for the same period in 2017. And for the full year, G&A expenses were $18.2 million compared to $7.6 million in 2017. These increases for the quarter and the year were due primarily to increased personnel costs, professional and consulting fees and facility expenses supporting Evelo's growing organization and public company infrastructure required following our IPO in May 2018.

And finally, net loss was $15.4 million for the fourth quarter compared to a net loss of $9.9 million for the same period in 2017. And for the full year 2018, the net loss was $60.9 million compared to $34.1 million in 2017.

With that, let me hand the call back to Simba to wrap up.

Thanks, Jonathan. We have built a strong foundation for Evelo and believe that we are now well placed to validate the potential of monoclonal microbials as a broadly applicable new modality of medicine with the potential to treat all stages of disease for large patient populations around the world. As a final comment, building great companies is always about leadership, people and culture, and we remain focused on attracting and inspiring special people in a special culture that allows for continuous innovation, invention and creation.

With that, thank you very much for your attention, and we are very happy to take any questions you may have. Operator?

(Operator Instructions) And our first question comes from the line of Chris Shibutani of Cowen.

This is CJ Zopf on for Chris Shibutani this morning. Congratulations on all the progress since the last quarter. I'm curious to learn a little bit more about the thoughts behind the immunopharmacology clinical study that we started in healthy volunteers for 1066. What is it you're hoping to learn there that will better enable additional trials in the inflammatory indications in particular for the second half?

CJ, this is Simba. Thanks for your kind comments. I'm going to let Duncan answer that question.

Thanks for the comment. So yes, the immunopharmacology experimental study, it allows us to test a variety of sort of dosing levels and formulations. And the study should provide a rapid readout, and the results would help accelerate future developments for 1066 and other monoclonal microbials, so to say, formulations may be around new patient populations that we would need to include in the future developments, such as pediatrics, and may include ways to optimize delivery.

And would there be new types of biomarker datas, things like that, that would provide new information for the new indication?

At this point, we're not committing to communicate the data that we would get from this study. They're really for internal decision-making in terms of the program.

Sure, okay. You guys have also been very confident about the data you have been seeing so far, it seems. Can you give us a little more color on what we should expect, what types of data for the upcoming readouts for 1066 and 1815 in terms of types of data we'll see, specific biomarkers, number of patients? Will it be all healthy volunteers? Will patient data be included, et cetera?

So firstly, let me emphasize that we're very much enrolling on plan, and we've completed with EDP1066 through the highest-dose cohort in healthy volunteers. So based on the data review by the trial's Safety Review Committee, we've proceeded as planned into cohorts of patients with both atopic dermatitis and psoriasis on the EDP1066 trial. We expect to report initial clinical data on both EDP1066 and EDP1815 in line with our guidance, which is second quarter of this year for EDP1066 and the second half of this year for EDP1815.

The primary endpoints of the study are -- of the studies are safety and tolerability of each of EDP1815 and 1066 in healthy volunteers as well as in patients with mild or moderate psoriasis or atopic dermatitis. We will be looking at exploratory biomarker endpoints, which will include the effects of the potential therapies on multiple validated clinical measures of disease. And we're not giving specific guidance on what those measures are, but we'll be looking at an integrated set of biomarkers, pharmacodynamic markers and beyond.

And our next question comes from the line of Matthew Harrison of Morgan Stanley.

This is Vikram on for Matthew. So our question is around being able to compare the data we're going to get this coming year, especially in atopic dermatitis. So there's been a lot of data from antibodies, from small molecules over the last couple of years, and there's been a lot of interest about -- in how we're going to be able to compare the data we're going to get in AD from 1066 and 1815 this year to those previous datasets. So how would you think about framing that comparison? And are there any trial design details that you could share that will help people make that comparison?

Yes. Let me make a high-level point, and then I'll answer your question directly, Vikram. So very importantly, one of the strategic drivers behind what we're doing is to advance monoclonal microbials for the treatment of all stages of inflammatory disease. Studies are very much focused on the moderate disease populations, and that's distinct to the bulk of antibody work there in which most antibodies are primarily used, as you know, to treating severe disease populations. So the moderate patient populations represent a very significant unmet medical need. Those patients typically don't take antibodies for a variety of reasons, owing to the limitations of antibodies. So I just wanted to clarify that.

Specifically, the other point is that the main aims of the study, as I commented on briefly just now, are safety and tolerability in healthy volunteers and patients and then, essentially, a signal-finding study. So that's the key thing we're looking for is a signal which would potentially validate the central thesis of the company, i.e., the systemic immune system can be modulated by engaging immune cells in the small intestine with already-delivered monoclonal microbials. So that's really what we're looking at as opposed to looking at comparative data in historical clinical studies.

(Operator Instructions) Our next question comes from the line of Matthew Luchini of BMO Capital.

So first, just to be clear, following up on one of the prior questions. The data that comes out in the second quarter will include both healthy volunteers and patients with active disease?

And then, secondly, wanted to just hear a little bit more about the addition of the 1x dose cohort that was added for atopic dermatitis, a little bit more about why and what you saw. And should we expect you to follow the same path in the 1815 study?

And then the final question would just be for 1867. Given that you are thinking about also moving that into inflammatory disease, could you talk about how you think that product might be positioned relative to your existing inflammatory products?

Thanks, Matt. So yes is the answer to your first question in terms of will we provide readouts in the second quarter in both patients as well as healthy volunteers. So that's a very clear yes.

Let me take the 1867 question next, and then I'll hand over to Duncan who can talk about the expansion with the additional cohort in EDP1066. So as Mark said, the discovery of Evelo, in which we have now shown that some monoclonal microbials retain activity even when they are nonreplicating, is profound. What that opens up is an extension of our existing strategy, which is to take forward multiple anti-inflammatory products for the treatment of multiple different diseases. And the data that we'll generate in the clinic will drive which products we take forward in which different indications. So at this stage, what we can tell you is EDP1867 drives profound anti-inflammatory effects. It's working in a different way to the other microbes. And we'll go into the clinic and see what the clinical biomarker data represents, and that will drive how we advance it as we go forward.

So just to illustrate that in a little bit more detail, the breadth of inflammatory diseases, as you know, Matt, covers everything from psoriasis to psoriatic arthritis, atopic dermatitis, food allergy, asthma, RA, ankylosing spondylitis, other arthritic disease, ulcerative colitis, Crohn's colitis and beyond. So there's a huge breadth of different inflammatory indications we could go after, each of which are driven by differential cytokine pathways, et cetera, so IL-4, IL-5, IL-13, et cetera. So that's always been our strategy to take forward multiple different inflammatories, given the breadth of biology and the breadth of disease. And now with 1867, we have another potentially very exciting product. So that's how we look at 1867.

Duncan, do you want to talk about the expansion to the additional cohort for 1066? And we're already doing what we have now initiated with 1066 with 1815 actually, Matt, just to be clear. So yes, we're already looking in both atopic dermatitis and psoriasis on the current plan at a 1x and 5x dose on 1815, but Duncan can give you more color on 1066.

Yes. So just to be clear, the addition of the cohort has nothing to do with anything that has been seen in the trial. What we have done is, as Simba said, this is originally a signal-searching study. It is a signal-searching study, and we were looking at the higher dose to get that signal. But we had a lower dose in psoriasis because that enabled the safety to get to the higher dose in both atopic dermatitis and psoriasis. By adding in the lower dose in atopic dermatitis, that balances that up and actually gives us a more sensitive study to detect a signal in both atopic dermatitis and psoriasis. So it improves the overall sensitivity to detect a signal. And as Simba said, actually, we've incorporated that upfront into the 1815 design because we think it's a better design, it's a more sensitive design. So it's purely just optimizing our ability to see a signal there.

And this does conclude our Q&A session. I'd like to turn the call back over to Simba Gill for the closing remarks.

So I'd just like to thank everybody for their time and attention. Thank you very much.

Thank you for joining us today. You may now disconnect.