F-Star Therapeutics Inc (FSTX) 2021 Q2 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the F-star Therapeutics Incorporated Second Quarter 2021 Earnings Call and Corporate Update. (Operator Instructions) As a reminder, this conference will be recorded and available for replay. I would now like to introduce you to Lindsey Trickett, VP of Investor Relations for F-star. Please go ahead.

Hi, and good morning, everyone. Thank you for joining us. With me today is Eliot Forster, CEO; and Darlene Deptula-Hicks, our CFO. We announced financial results premarket today for the quarter ending June 30, 2021. You can access the press release on the Investor Relations page of our website at fstar.com. Before we get started, let's quickly run through our forward-looking statements.

Please note that as a part of our discussion today, management will be making forward-looking statements. These statements are not guarantees of future performance, and therefore, you should not place undue reliance on them. Investors are also cautioned that statements are not strictly historical, constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties and that could cause the actual results to differ materially from those anticipated. These risks include risks and uncertainties detailed in F-star's filings with the SEC. The company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this conference call.

With that, I'll hand it over to Eliot. Go ahead, Eliot.

Thanks, Lindsey. Welcome, everyone, to our second quarter 2021 earnings call. It's great to speak with you today and provide a corporate update on what's been another positive past few months. A further update to the financing that we completed in the second quarter is that we raised over $80 million in gross proceeds between the underwritten public offering and the aftermarket facility. This now includes a group of top-tier institutional investors. We now have 7 equity research analysts covering F-star and the strengthened financial position ensures delivery of future clinical milestones, which I'll highlight today.

On the clinical side, we're pleased to share with you today an updated strategy for the development of FS118, our PD-L1 LAG-3 bispecific antibody, with the addition of checkpoint naive patients to the clinical activities. It's an extremely exciting opportunity for patients as well as for

F-star, and I'll say more on that shortly. FS222 and FS120 continued to progress through first-in-human clinical trials. You may have seen last week that we announced a collaboration with Merck, known as MSD, outside of the U.S., for combining FS120 with KEYTRUDA. We're excited to have completed this partnership agreement and plan to initiate the FS120 KEYTRUDA combo trial next year.

In keeping with our preference or making program updated conferences, we'll be showing news on FS120 at this year's ESMO meeting. During the quarter, we've reported significant progress with our STING programs, both with the agonist and the inhibitor. We licensed our preclinical STING inhibitor to AstraZeneca for future development and commercialization and gave a clinical update on the STING agonist, SB 11285 just in this past month.

During the quarter, we also granted a composition of matter patent protecting SB 11285 in the U.S.A. This pattern continues through 2037 without additional patent extension. I'll now remind you of the pipeline, provide a bit more detail on each of our programs and then review our upcoming milestones. On Slide 4, you can see that we have 4 clinical stage programs underway and that we continue to work with our long-standing partners, Denali and Merck KGaA of Darmstadt, and now our new partner, AstraZeneca. We've been delighted with these partnerships to date, and I look forward to further positive and fruitful collaborations.

Here on Slide 5. You'll see that FS118 is currently being studied in an ongoing Phase II proof-of-concept trial in patients with PD-1 resistant head and neck cancers. We anticipate reporting on this study in the first half of 2022. In addition, we're expanding into checkpoint inhibitor naive patient population, and I'll provide further details on this in the coming few slides.

FS222 is designed to improve outcomes for patients with PD-L1 low tumors, an area with a significantly high unmet medical need. You'll remember that FS222 is uniquely engineered such that the relative affinities to each binding target do not cause them to self compete. This avoids the hook effector or bell shape curve that we've seen in other drugs targeting CD137 and PD-L1. FS120, as I mentioned earlier, is currently in the ascending dose phase of the first-in-human trial as monotherapy. We're seeking to determine a biomarker-driven pharmacologically active dose as the point at which to trigger going into combination with KEYTRUDA.

Again, we'll provide a more detailed update at the upcoming ESMO conference. In the ongoing Phase I study, SB 11285, as a monotherapy and in combination with Tecentriq, were safe and well tolerated, and we're pleased to observe early signs of clinical benefit in the form of disease stabilization. This has encouraged us to continue to additional dose expansion cohorts for this promising drug. This second-generation STING agonist can be delivered systemically and with rapid cellular uptake. We anticipate providing additional information on the progress of this trial in the first half of next year. Meanwhile, we'll continue to explore wider strategic opportunities for the program.

Moving to Slide 6. I I'm pleased to give you some detail on the expansion of the clinical development of FS118 activities. You might remember that we saw positive data from the Phase I trial in a wide cohort of heavily pretreated acquired resistance patients, in particular, in patients with specific expression of PD-L1 and LAG-3. Based on these data, we initiated the ongoing Phase II proof-of-concept study in patients with acquired resistance head and neck cancer. This group of patients have few therapeutic options available to them and therefore, represent the subgroup of the whole patient population.

However, we believe that success here can lead to a fast route to market for FS118. And we plan to provide a clinical update in the first half of 2022 on the progress of this proof-of-concept study. The recent ASCO conference marked a milestone for immuno-oncology with the validation of LAG-3 target through a pivotal Phase III trial in melanoma. The whole oncology community was delighted to see a third real option emerge for patients and the huge opportunity this represents. The external validation of LAG-3, coupled with our own preclinical and clinical data, means that we'll be starting an additional trial with FS118.

This will be in both non-small cell lung cancer and diffuse large B-cell lymphoma in patients who are naive to checkpoint inhibitor therapy. Like all of our programs, the clinical trial will be a biomarker enriched, and we anticipate starting later this year. We've been a firm believer in the potential of LAG-3 as a significant checkpoint inhibitor pathway in immuno-oncology. And as we anticipated, we are happy to see the field continue to progress in this important area. Despite the significant advances of the past 2 decades, it remains that large numbers of patients do not gain long-lasting benefits from PD-1 or PD-L1 therapy.

We're fully committed to provide patients with the treatment options that not only avoid the resistance to first-generation checkpoint inhibitors, but also potentially transform their experience of the treatment of advanced cancers. That's in terms of both disease control and greater quality of life. We continue to be led by the data. We'll always be looking for ways to bring additional benefits to patients with our next generation of immuno-oncology treatments. And before I hand over to Darlene, Slide 7 is a reminder of what the next 24 months hold for F-star.

We expect multiple data readouts which we'll share at medical or scientific conferences, highlighting clinical progress across our 4 programs. Later this year, you'll see data on FS120 and on FS222. Next year, we plan to share data on FS118 in that required resistant patient population, show you the continued progress of SB 11285 in its clinical trial and give further updates on FS120 as we move towards a combination with KEYTRUDA. I believe we have a very bright future based on our tetravalent bispecific platform technology. We look forward to sharing these upcoming milestones with you as well as progress in bringing additional programs from our discovery efforts into the clinic in the near future.

I'm grateful for the support of our new and existing investors who are with us on this journey to transform the lives of patients with cancer. Also, for the employees at F-star who worked tirelessly to progress life-changing medicines and create value for our shareholders. And with that, I'll hand over to Darlene to give you an update on our financials, Darlene.

Thanks, Eliot, and good morning, everyone. As Eliot highlighted, it's been a quarter of real financial and clinical progress for the company. We're extremely pleased with our recent equity financing and the top-tier investors who have joined us. I'll now go through the financial results for the second quarter of 2021, which provides a solid platform for executing on the company's strategy including the expanded clinical development plan for FS118, that Eliot just outlined, and we'll be happy to take questions at the end.

Cash and cash equivalents, as of June 30, 2021, were $81.6 million, resulting from our successful $82.6 million public offering of common stock and proceeds from our ETM equity offering program in Q2, which netted a combined $77.3 million after fees and expenses. We also entered into a $10 million debt facility in Q2 and drew down the full amount on that facility. In our Q1 earnings call, we guided to a cash runway well into the second half of 2023. We believe our current operating plan, including the expanded clinical development plan for FS118, will cost us about 1/4 of cash runway. We believe our cash continues to be sufficient to fund our current projected operating plan, including the delivery of multiple clinical milestones laid out by Eliot earlier across all 4 of our programs.

Turning now to revenue. Revenue for the quarter ended June 30, 2021, was 0 as compared to $500,000 for the same period in 2020. This $500,000 decrease is due primarily to a reduction in research and development services revenue with partners, Merck and Denali. Currently, we do not have any ongoing research and development service arrangements with either partner as all programs have come to an end of the research phase and have now transitioned to the milestone phase as expected, and this is consistent with our collaboration strategy.

As a reminder, our revenue typically includes amounts that relate to upfront payments, milestone payments, option exercise payments and/or amounts historically due to us for research and development services. Total research and development expenses were $8.4 million for the second quarter of 2021 as compared to $2.1 million for the prior year second quarter. This $6.3 million increase is primarily due to $2 million increase in manufacturing costs, including a manufacturing batch in the second quarter of 2021, a $1.4 million decrease in the U.K. research and development tax incentive credit quarter over comparative quarter. an increase in clinical CRO and clinical assay cost of $1.2 million, resulting from having 4 clinical programs this quarter as compared to one clinical program this time in 2020. And an increase in R&D compensation-related costs of about $700,000 and then another $1 million of just general project-related costs. R&D expenses include $0.5 million and $0.3 million of noncash stock-based compensation expense for Q2 '21 and 2020, respectively.

Total general and administrative expenses were $6.5 million for the quarter ended June 30, 2021, compared to $3.2 million in the comparable second quarter of 2020. This $3.3 million increase is primarily due to an increase of $1.5 million in legal and professional fees, $1 million in share-based compensation expense $0.5 million in insurance and other costs associated with being a public company and $0.3 million in other G&A costs. G&A expense also included $1.3 million and $0.3 million of noncash stock-based compensation expense for Q2 '21 and 2020, respectively. Net loss for the second quarter of 2021 was $15.6 million or $0.92 per basic and diluted share compared with a net loss of $6.5 million or $3.53 per basic and diluted share for the second quarter of 2020. In closing, over the past quarter, we've seen interest continue to grow in F-star in our bispecific platform and our clinical stage programs as well as positive conversation with the investment community.

Additionally, we're now covered by 7 equity research analysts and are encouraged by their engagement. We believe our solid financial position supports delivery of multiple clinical milestones across all 4 of our programs and we, of course, will continue to ensure the effective financial management of the company. With that, thank you all, and we'll now open the call up for questions.

(Operator Instructions) Your first question is from the line of Daina Graybosch with SVB Leerink.

Thank you guys for the question. Maybe 2 for me that are related: One, I wonder if you could speak to the biologic rationale for selecting non-small cell lung cancer and diffuse large B-cell lymphoma for the new FS118 trial? And then the second question is, what is your current belief on which LAG-3 ligands are dominant in cancer and whether this varies across tumor types? And do you have any data on which ligand and LAG-3 types you're now pursuing proof of studies is the most relevant.

Daina, nice to speak with you. Thanks for the questions. Of course, with both non-small cell lung cancer and B-cell lymphoma. We have an underlying hypothesis that you and I have discussed on a number of occasions, which relates to the current expression of LAG-3 and PD-L1. Clearly, some of the details around that we'll only be revealing later. But I think it's fair to say that we've observed data, our own and some externally in both of those settings that give us cause to believe that we can provide superior benefits to patients in those disease settings because of that co-expression. So it's LAG-3 PD-L1 co-expression and more details later on that.

With respect to the ligands, it's a kind of interesting case that more and more ligands appear to be coming along. As you may recall that for us, our dominant mechanism is actually LAG-3 cleavage from the surface of those exhausted immune cells. So to some extent, the ligand interaction is irrelevant. And because we cause that shedding of the LAG-3 receptor in its first instance. And of course, as you know, we believe -- although no one else has published it, so we can't be sure it's not totally unique, but at least it's rare, if not unique mechanism that we provide through the 2+2 mechanism with our bispecifics

Next question is from the line of Matt Phipps with William Blair.

And glad to see the expansion with 118 after the Bristol data. I guess maybe first in lung cancer, pretty not necessarily current space, but definitely some real entrenched regimens. Do you think that the -- maybe the co-expression biomarker patient population differs from maybe just a pure PD-L1 high population? Or is there some kind of need to think you can carve out there? And then up at ESMO, I really don't want to emphasize too much, but I obviously saw that FS120 trial and progress poster, is there any other data to come? Or is it kind of some updates in that trial and progress poster?

Sure. Matt. I'm so pleased to be talking to all the analysts this morning. So the -- with respect to lung cancer, for now, I'll just stay with the LAG-3 PD-L1 co-expression. As you might imagine, we're not going to try and knock KEYTRUDA, Opdivo kind of off their spots in the whole population. We've certainly seen information in co-expressing patient groups within lung cancer, non-small cell lung cancer that we believe will give us an advantage. And over the rest of this year, we'll start to roll out some of that thinking and through trial design, you'll begin to see how that thing is emerging. With respect to FS120 at ESMO, it is a trial in progress update. I think as we've discussed in the past, this is a first-in-class dual agonist. I know that there have been some questions as to how we'll progress against dose escalation and so on. And of course, I think as you made clear in the MSD KEYTRUDA agreement, what we're really looking for is early signs of biological activity to give us the confidence to go to that combination, and we'll talk about some of the underlying rationale and biology at ESMO within the confines of the ESMO materials that roll out, of course.

Your next question is from the line of Hartaj Singh with Oppenheimer.

Eliot, just a couple of questions. One is, Eliot, on this new strategy with FS118. The clinical trial readout, would you expect to be doing sort of a Phase I/II sort of trial where you have initial cohorts stratified and then looking for a signal and then expanding them? Or will it be more a regular sort of a trial where you're just going to recruit patients in non-small cell lung, DLBCL, and just go forward with that? Just any thoughts there to give us any contours around that? And then secondly, how does this change your strategy with the acquired resistance patients with FS118? Assuming you have good data in the first half of next year, the first quarter of next year, would you continue on with that strategy?

Hartaj, nice to speak with you, too. So with respect to the expansion into the checkpoint naive patient population, I can't reveal too much about the design of the protocol at this stage. Clearly, that will come a little bit later in the course of this year. But it's -- again, I repeat, look, we've got a biomarker strategy around this. We know that there are specific cohorts within both of those patients that's with the B-cell lymphoma and non-small cell lung cancer that we believe will give us the best response. I think you'd expect us to be sensible and go through an adaptive design type of approach to make sure that we weren't throwing all of our eggs into the basket at once. But we also have very early decision points in order to accelerate when we need them. And we are certainly going after areas of those settings where we believe there is an advantage with our 2 plus 2 format.

With respect to the acquired resistance, we're really excited about the prospects in the acquired resistance population. As you know, probably better than I do. These are patients with all different disease types who have had a checkpoint therapy, had a response and then become refractory. And where they tend to go, at least in the West, is then to palliation and chemotherapy. And you're looking for a quality versus duration of life balance. So we think there is a genuine medical need in that setting. And hopefully, as our data play out in the first half of next year, we'll be in a position to expand rapidly into what we hope.

Now clearly, this is always subject to discussions with regulators, what we would hope would be a rapid progress towards registration. And that would run in parallel to the checkpoint naive. We -- I guess just a word on checkpoint naive, we've looked to the data that emerged out of the recent ASCO conference. We've continued to monitor our internal nonclinical and clinical data. And we feel the opportunity we've alighted upon in those 2 settings is really important, but it doesn't diminish our enthusiasm and/or ambition for the acquired resistance population as well.

And then just a follow-up. Are there any additional insights you have from translational data or third-party data that are giving you insights into 222 or 120 for other tumor types that you could look to get into over the next 12 months?

Sure. Well, thanks again, Hartaj. So look, we're -- both of those programs will give a trial in progress update at ESMO with FS120. And I think we'll just need to wait for that before we can say any more about it. With 222, we watch with increasing interest, what's going on with the other clinical stage molecules. We're very excited about the progress of FS222 in our hands. We continue to believe that the real opportunity for our molecule because of 222 is in the low PD-L1 setting. I think I even mentioned, in some of my opening remarks here, that we think we have a unique opportunity with 222 given the tuning of the PD-L1, CD137 ratios we've achieved. And we continue to watch other molecules with targeting the same to cancer targets to see what's coming up. But as we sit here today, what we've seen internally and what we've seen externally doesn't diminish the enthusiasm we have for that low PD-L1 setting and doing well for those patients who again don't have that many options.

Your next question is from the line of Yale Jen with Laidlaw & Company.

Regarding the 118 and the PD-1 -- in PD-1 naive patients, checkpoint in naive patients, we noticed that in the non-small cell lung cancer, some of the readouts, particularly the progression-free survival and ORR, which -- overall response rate, which is not superior greater than the chemotherapy during the trials. So do you feel these are some aspects you think that with the combination we'll have a better shot to improve them? Then I have another follow-up question.

Sure. So look, I think in terms of our base hypothesis, if we set aside the kind of LAG-3 PD-L1 co simultaneous inhibition, we believe that mechanistically, LAG-3 is very, very important. And obviously, that's now been established with the BMS data in melanoma, but it's important in that exhaustion pathway emerging in the checkpoint treated patients. And so: One, I guess, a macro hypothesis would be that we would hope that certainly the PFS would be extended because we would have uncleaved LAG-3 from the surface of those exhausted T cells would prevent that exhaustion pathway even initiating. And to create a kind of a checkpoint inhibitor better as it were, I think, is probably the underlying thinking. I hope that addresses your question, Yale, if that was the direction of it.

Yes, absolutely. That's very helpful. Maybe the follow-up is, in term -- again, in terms of discomfort -- checkpoint naive patient, do you want to measure in the PD-L1 level as 1, 2 choose patients or secondary patients, or any other color at this point you can provide?

I'm going to have to disappoint you with that one, I'm afraid. We will speak about the details. Nice try though. We'll speak about the details of the trial design at a later stage.

Your next question is from the line of Patrick Trucchio with H.C. Wainwright.

Just a couple of follow-ups on SB 11285. First, can you discuss the dosing, including dose escalation ongoing and how the data generated to date is to inform the further development? And secondly, I'm wondering if as part of the update in 2022, if you would have an update on potential efficacy and then if so, which patients and at which doses? And what would you be looking for to give you confidence to move forward to Phase II? And then thirdly, would you look to develop SB 11285 on your own beyond Phase I? Or would you look for a collaboration partner?

Patrick, nice to speak with you. So we announced, I think, a couple of -- a few weeks ago that 11285 had reached the so-called CVR 1 protocol level. And that is 5 monotherapy doses in the escalation and 3 combination with Tecentriq doses. We've certainly seen enough from a safety tolerability. And I think, as I said, some kind of early signs of clinical benefit by the way of stabilization of disease to give us confidence to press on beyond that. And that's what we've done, and we announced and we'll continue with that. We should have a clinical update in the first half of next year with that. And maybe if we add additional doses beyond that, we'll keep going. The things -- to give us confidence is that there are kind of 2 halves to it.

There's the kind of obvious bit, which is, is the drug safe and well tolerated and is it beginning to give benefit either as a mono or in combination with the PD-L1. But the other is, is it fulfilling therefore, the characteristics of the kind of second-generation STING agonist. And we've already seen some clear signs of that the PK levels we achieved and have talked about certainly correspond with that we'd expect to enable the targeted cellular uptake, immune cells targeted earlier uptake. And we're also seeing a couple of other markets that we haven't announced that give us confidence -- that drug is generating the pharmacology, we're interesting in 11285 if it's generating the pharmacologies that you're interested in. And so it's those elements. So the classic clinical profile safety and some signs of efficacy as well as those second-generation STING characteristics as it were. And as you know, we can already give it intravenously, and it's well tolerated. So sort of check that box.

With respect to what we do with it, I think, as I said, we're now in a phase where we'll certainly be exploring all strategic possibilities, and that would include carrying it forward beyond Phase 1 ourselves, but all the way through to seeking collaborations or partnership with it. And we're open-minded as we sit here today with respect to that. It's a really cool molecule. We were excited to get it into the portfolio. but it's not 2 plus 2, the tetravalent bispecific, not from our platform. And so although it fits as a second-generation molecule, we'd be happy to collaborate under the right circumstances. We want to make sure that this -- these sort of molecules get taken forward to benefit patients, that's for sure.

Yes. And then just with the FS120 and FS222 data readouts expected later this year, I'm wondering if you can frame for us your expectations on those readouts for the next steps for the programs.

Sure. So FS120, I think, as I mentioned, we'll give an update at next month's ESMO. It will be a trial in progress update really to address some of those slightly hanging tolerability questions in the first instance, but also to give some guidance as to the sort of biology you'll be looking for to trigger that KEYTRUDA combination and 1 or 2 other minor sort of development steps with that program. And beyond that into the first half of next year or beyond, we'll be looking to get that combination started, although, of course, we'll continue with monotherapy study as well. Because nonclinically, we did see some actually quite nice monotherapy effect, not in the same league as the combination, but nonetheless effect and so we should explore those fully as well. For 222, again, it's in a Phase I ascending dose monotherapy study, we'll provide at the end of fourth quarter as much clinical and biological data as I can. And I think in response to an earlier question, I said, we continue to be confident in targeting into expansion of those low PD-L1 expressing tumors. And we'll certainly be able to talk about that. We'll give an update on any safety and tolerability data and PK and, of course, any clinical data that we have at that stage. We'll be reasonably well advanced to that ascending dose part of the study and into pharmacology. I would anticipate by that stage.

Got it. And then just one on the AstraZeneca collaboration. If you can give us an idea of the cadence of the $300 million milestones. And if you could, what proportion of development versus commercial milestones or any details that you can give us on that?

Yes. So unfortunately, Patrick, the only thing I can give you is what was in the press release and then a generic answer. So let me just repeat that. So near-term upfront near term, USD 12 million and at least $300 million in development and commercialization milestones. I think -- it would be fair to say, without giving too much away, that it's a deal that is structured like most deals you would see between a biotech and a pharma, so all of the development steps in the clinic and beyond, you would see that. But I really can't give you any orders of magnitude, a contour around that, I'm afraid.

Congrats on all the progress.

Thanks, Patrick. Thanks. Nice to talk to you.

Your next question is from the line of Justin Walsh with B. Riley Securities. .

The first one, I was wondering if given the Nature Communications publication, if you guys have had any discussions about potentially testing 11285 in combination with radiation therapy, whether that's external or radiopharmaceutical-based?

Justin, nice to talk with you. Look, it was an intriguing piece of research, and it certainly opened our thinking. But it's -- for us, it would certainly be something if we're going to undertake it to be done in collaboration, either with a clinical academician, which would be interesting or even through a partner. We're as you know, focused on the development of 11285 in combination with Tecentriq, so Roche's PD-L1 antagonist. And for us, that's really got to be our main focus at this stage. We're very intrigued by the emergence of new data all the time with respect to how radiation is affecting the tumor microenvironment and the immune profile there, and we keep an eye on it. And it is interesting to see that 11285 may have some synergies there. But right now, our focus has got to be on that combination with PD-L1.

Got it. And my second question is also on 11285. So it's great that AstraZeneca came in and license the STING inhibitors, did they express any interest in the agonist side of things? Or is it really just that you guys are bringing that forward a little bit further before those types of talks?

Yes. So we really narrowed the conversation just to the inhibitors. The 285 program, as I mentioned earlier, is we're working through a particular program of work. We've optioned ourselves to step to the next level by expanding the dose group because of the data we've seen. But the [ASC] conversation was limited to the inhibitors. As you know, the inhibitors are to be used in inflammatory diseases and so on, and that's really not an area of our expert. It's interesting, but not within our expertise, we do cancer as it were.

(Operator Instructions) At this time, I'm showing that there are no further questions. I would like to turn the call back over to Eliot.

Well, thank you very much, and thanks, everyone, for joining us this morning. I hope you'd agree, we've had a productive quarter, and we've continued to deliver on our corporate and clinical strategies. With the expansion of FS118, we believe there's huge potential. And of course, our other 3 clinical stage programs have progressed well over the period. We have a strong cash runway, and we're on track to deliver many more clinical milestones planned over the next 24 months. And your partnership with AstraZeneca marks another highlight in our collaboration strategy for our noncore assets. And with that, I'd like to thank you all again, in particular, our new and existing investors. Our colleagues who show unwavering dedication to the mission from the labs to the clinic. And of course, all of the patients and health care professionals who contribute daily to the progress of our clinical trials.

F-star will continue to work to bring medicines to the market that will truly transform the lives of patients with cancer, and we look forward to updating you all again in the fall. And with that, thank you very much, and goodbye.

Thank you, ladies and gentlemen, for participating in today's conference call. We ask that you now disconnect your lines. .