F-Star Therapeutics Inc (FSTX) 2020 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the F-star Therapeutics, Inc. Fiscal Year-end 2020 Earnings Call and Corporate Update. (Operator Instructions) As a reminder, this conference will be recorded and available for replay.

I would like to introduce to you today, Lindsey Trickett, Vice President of Investor Relations and Communications for F-star. Please go ahead.

Good morning, everyone, and thank you for joining us. With me today is Eliot Forster, CEO; and Darlene Deptula-Hicks, CFO.

We announced financial results premarket today for the year ending December 31, 2020. You can access the press release on the Investor Relations page of our website at fstar.com.

Before we get started, let's run through the forward-looking statements. Please note that as 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 that are not strictly historical, constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties 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 the call over to Eliot.

Thanks, Lindsey. Let me repeat, welcome to this, our first earnings call. It's a pleasure to provide an update on what's been a transformational year for the company.

We brought together an exciting portfolio of 4 clinical stage assets we've listed on NASDAQ. We successfully adapted the company in response to the ongoing pandemic. We've achieved robust financial performance, and we've continued to deliver for our partners. All of this was possible because everyone at F-star is dedicated to develop the next-generation of immuno-oncology medicines. We're absolutely focused on transforming the lives of patients with cancer from our discovery group to clinical development teams, that's the reason why we are all excited to get out of bed each day. We have a unique opportunity to be instrumental in the immuno-oncology field and a leader in bispecifics, and we relish this responsibility.

Moving to Slide 4. I'd like to run through our fourth quarter 2020 achievements. In a year of global pandemic, we focused on the things that matter. The growth in the number of patients with cancer has not been holded by COVID and neither have we.

On the 23rd of November 2020, we started trading publicly on NASDAQ as FSTX, a huge milestone for our company and something we believe will unlock even greater potential in our unrivaled bispecifics platform. FS118, our lead program, completed its Phase I study in the fourth quarter with encouraging results, and I'll say more about that shortly. I'm very proud of the fact that despite the COVID challenges, we got 2 clinical stage programs off the ground, navigated regulatory review and have patients enrolled. You can see FS120 and FS222 here, with the first patients enrolled in the fourth quarter. And as part of our business combination, we now have the opportunity to develop SB 11285, a next-generation STING agonist.

On Slide 5, let me remind you of the F-star platform technology. We are the only company developing tetravalent bispecific antibodies with 2 plus 2 binding sites that have the ability to simultaneously cross-link immune cells to tumor cells, cluster immune receptors and conditionally activate the immune sign-ups. That is only when both targets are engaged.

As you can see, we adapt the natural binding sites of the antibody, in blue, and also 2 new binding sites in dark green, with only a small number of changes. This is a unique way to make bispecific antibodies, unparalleled in immuno-oncology drug discovery and protected by more than 230 patents.

Finally, the natural IgG1 antibody format of our bispecifics makes them easy to manufacture with monoclonal like titers, great stability and few to no antibody drug antibodies in the clinic.

Moving to Slide 6. I'll run you through our clinical stage programs. The most advanced of the F-star bispecific antibodies is FS118, targeting the key immune cell exhaustion pathways of PD-L1 and LAG-3. We were excited to report that Phase I data from 43 advanced cancer patients has shown FS118 to be well tolerated, with a disease control rate of 59%. Though a unique -- through a unique LAG-3 shedding mechanism, it gives durable disease control in patients with an acquired resistance to current checkpoint inhibitors.

FS118 is currently in a Phase II proof-of-concept study focused on patients with advanced head and neck cancer and acquired checkpoint inhibitor resistance. Clinical data was expected in the first half of 2022. We've been encouraged by the Phase III data we've seen recently from others with LAG-3. It's further validation of this important pathway in checkpoint inhibition to achieve immune activation.

FS222 is a T-cell redirector that delivers PD-L1 driven CD137 activation. This bispecific by design has balanced the affinities for each target and will, therefore, differentiate from other clinical stage PD-L1 and CD137 targeting molecules. Its unique biology enables the treatment of patients whose advanced cancers have low PD-L1 expression. These patients typically benefit little from checkpoint inhibitor therapy. FS222 is in a Phase I study in patients with advanced solid tumors. Early clinical data is expected in late 2021.

FS120 is a first-in-class dual agonist, designed to stimulate the immune response in immunologically cold tumors. By design, FS120 causes triple immune activation. Uniquely, it brings together the combined properties of conditional pharmacology with cross-linking and clustering of the stimulatory targets of OX40 and CD137. While FS120 is likely to have monotherapy benefits, it's designed to complement and enhance the outcomes of checkpoint inhibitors and chemotherapy. FS120 is in a 2-part Phase I study in patients with advanced solid tumors as a monotherapy and in combination with the PD-1 inhibitor.

F-star's fourth clinical asset, SB 11285 is a second-generation STING agonist. It improves the first generation STING agonist being given to patients in an intravenous infusion and rapidly is taken up into immune cells for tumor microenvironment stimulation. SB 11285 can be used as a monotherapy, but clinically, it will be best suited to enhance the benefits for patients of checkpoint inhibitors. To this end, SB 11285 is in a 2-part Phase I study in patients with advanced solid tumors as a monotherapy and in combination with the PD-L1 inhibitor, atezolizumab.

This year, we're also delighted to see the clinical progress made by our partner, Denali, in Hunter syndrome. Here on Slide 7, you can see the multiple value inflection points and clinical data readouts we are anticipating in the near term. Over the course of this year, we'll share data with you on FS120 and SB 11285 trials, and we're optimistic about their potential. We'll be attending and sharing data at multiple medical and scientific conferences, the first being AACR in April. With these scheduled events, there's a lot to look forward to over the next couple of years.

I'm excited by the financial outlook for F-star, and in particular, the higher level of investor interest in the company since going public. We believe we are and will be extremely well placed to deliver for patients and for our shareholders. I would like to thank the F-star team who have done a brilliant job in an unprecedented year. I'd also like to thank our investors for their ongoing support, and I hope you share my excitement for the next 12 months ahead.

And now I'll turn things over to Darlene to give you an update on our financials as a newly listed NASDAQ company. Darlene?

Thank you, Eliot, and good morning, everyone. As Eliot has highlighted, it's been an incredibly busy and exciting fourth quarter for F-star and truly a proud moment for us to be here on our first earnings call with you as a NASDAQ-listed company.

I'll now go through the financial results for the year ended December 31, 2020, which we believe provides a solid platform for the strategy Eliot has just outlined, and we'll be happy to take any questions at the end.

F-star now has 4 exciting programs in the clinic and the different stages of development are reflected in our research and development costs. Let me begin though with reviewing revenue. Our revenue consists of collaboration revenue under our 2017 license and collaboration agreement with Aerie/Merck KGaA and our 2016 license and collaboration agreement with Denali.

Revenue typically includes amounts that relate to upfront payments, milestone payments, option exercise payments and/or amounts due to us for research and development services. Revenue for the year ended December 31, 2020, was $11.3 million as compared with $28.3 million in the prior year for a year-over-year decrease of approximately $17 million.

Of this decrease, Aerie represented $15.9 million and Denali $1.1 million. The $15.9 million Aerie's decrease was due primarily to a reduction in licensing revenue and R&D services revenue resulting from the amended scope of our collaboration agreement in May 2019 as F-star moved to a new wholly owned asset strategy. In addition, there was a $1.1 million decrease year-over-year related to Denali revenue due to the achievement of a $1.5 million development milestone in 2019 offset in 2020 by an increase of $0.4 million in R&D services revenue relating to the start of the second molecule in the collaboration.

Now turning to research -- turning to research and development. Total research and development expenses were $14.1 million for the year ended December 31, 2020, compared to $31.4 million for the 2019 prior year-end, resulting in $17.3 million decrease year-over-year in R&D expense.

Let me take this decrease program by program. First, our FS118 program costs decreased by $8.3 million from $11.5 million in 2019 to $3.2 million in 2020, primarily in the areas of clinical trial CRO costs, clinical sampling costs and R&D expenses due to the small number of patients remaining on study during 2020 and that the Phase Ia study beginning to come to an end. And the Phase II proof-of-concept study commencing late in 2020.

FS118 manufacturing cost also decreased due to a manufacturing batch run in 2019 that supplied the remainder of the 2020 trial. And these decreases were partially offset by increased FTE utilization and a decrease in the amount of U.K. R&D tax incentive year-over-year.

Our FS120 program cost decreased by $4.6 million from $7.7 million in 2019 to $3.1 million in 2020 due to decreased toxicology costs from drug study -- safety studies carried out in 2019, decreased manufacturing costs due to manufacturing batch run in 2019 that also supplied 2020 requirements, and decreased R&D costs due to the timing of development activities. All of this was offset by increased clinical CRO costs resulting from the start-up costs incurred for the Phase I clinical trial of FS120 and increased internal costs due mainly to increased headcount utilization on the program, and also a decrease in the annual U.K. research and development tax incentive year-over-year.

Our FS222 program cost decreased by approximately $1 million from $6.3 million in 2019 to $5.3 million in 2020. This decrease was due to decreased toxicology costs as drug safety studies were also carried out late in 2019, decreased manufacturing costs resulting from a manufacturing batch also run late in 2019 that supplied 2020 needs, and a decrease in other R&D costs due to the timing of development activities. These decreases were offset by an increase in clinical trials CRO costs of $1 million resulting from the start-up costs incurred for the FS222 Phase I clinical trial and an increase of $1.1 million, mainly due to an increase in headcount utilization from the prior year and a decrease in the U.K. research and development tax incentives year-over-year.

Other R&D project costs decreased by $3.3 million from $5.8 million in 2019 to $2.5 million in 2020. This was primarily due to the discontinuance of an early stage program in 2019, a decrease in platform technology expenses and a shift in full-time equivalent FTE utilization year-over-year as they move to other programs.

G&A expenses were $19.5 million for the year ended December 31, 2020, compared to $15.3 million for the full year of 2019. This increase of $4.2 million in G&A expense was primarily due to an increase of $1.4 million in compensation-related costs, $0.7 million in noncash share-based compensation expense, $1.5 million increase in expenses associated with transaction costs for the November 2020 business combination, and increased facilities and IT costs of approximately $0.9 million and miscellaneous and various other G&A costs equaling about $0.5 million, offset by a decrease of $0.8 million relating to reduced travel and conference costs due primarily to COVID-19-related travel restrictions.

The net loss attributable to common shareholders was $25.6 million or $9.69 per share for the year ended December 31, 2020, as compared with a net loss of $23 million or $14.89 per share for the year ended December 31, 2019. The company's consolidated net loss for the year ended December 31, 2020, and includes a loss of $1.7 million attributable to the Spring Bank operations since the transaction date.

Turning to the balance sheet. Total cash and cash equivalents equaled $18.5 million for the year ended December 31, 2020, as compared to $4.9 million for the year ended December 31, 2019. The increase in cash and cash equivalents was driven primarily by proceeds from the PIPE financing and cash resulting from the business combination in November 2020 and proceeds from our collaborations, offset by the company's operational needs during 2020.

I note too that accounts payable and other current liabilities at December 31, 2020 and 2019 were $17 million and $29.9 million, respectively. This reduction of $12.9 million is resulting primarily from the conversion of the convertible term notes at the time of the business combination in November '20.

I can reiterate the encouraging interest we've had on our programs and our platform and look forward to continuing conversations with everyone this year. So I would say, in summary, solid performance from F-star as a newly public company and one which we believe really sets us up for progress against our plans in 2020.

And with that, we will open the call up for questions.

(Operator Instructions) Our first question comes from Wangzhi Li with Ladenburg.

And congratulations on the progress. First question is on the FS118. Obviously, a few days ago, BMS reported positive data for their Phase III trial on LAG-3 antibody. Just wondering what's your thought on that and does that affect your plan anyway? Especially, I think their trial, you enroll a patient without selection LAG-3 positive patient. So does that mean it could work with our selection marker? Of course, your strategy is focused on LAG-3 positive, PD-L1 positive, just -- but given this data, any impact on your strategy or plan?

Wangzhi, thanks very much for the question. So first and foremost, we were delighted to see the LAG-3 Phase III data from BMS in melanoma patients. We are very encouraged that this moves LAG-3 towards being the third checkpoint inhibitor in immuno-oncology.

With respect to our plans for FS118, as you know, we are in a Phase II proof-of-concept study in head and neck cancer patients with acquired resistance and co-positive PD-L1 and LAG-3. And our plans will be to continue to progress through that trial, clearly monitoring what's going on in the external environment at the same time. This eventually will lead us to a basket trial in which we can begin to think about inclusion of other patient types with other profiles. But our main focus continues to be on these acquired resistance PD-L1, LAG-3 co-expressing head and neck patients.

Got it. Great. And then a question on FS120. Could you remind us what's the schedule of the accelerated dose titration, as you expect to report initial data in the third quarter on the accelerated dose titration portion? How many doses and patient per dose and any reminders -- details? Or what should we expect for this -- that data report in the third quarter?

Yes. So Wangzhi, thanks very much for that question. I'd be delighted to give you an update on that. But unfortunately, we haven't disclosed the details of that accelerated dose titration profile at the moment, and we can look forward, however, to give an update later this year as we progress through that in the clinic. Sorry about that.

Okay. Fair enough. Last question for Darlene. So for the license revenue for this year, do we expect similar support with 2020? How do we think about it? Is it more or less or...

Yes. No, thanks for that question. There's 2 ongoing partnerships, and there are certain milestones along the way and some R&D services and things. We have not provided guidance on that yet. And so as you know, these things could vary depending on timing and what milestones may be met. I can say that these collaborations have been going on for multiple years, and they're very, very positive. So -- but we haven't given guidance on that exactly yet.

Our next question comes from Patrick Trucchio with H.C. Wainwright.

Congrats on the progress. I have a follow-up -- a few follow-ups on FS118. So with FS118, we're targeting LAG-3 and PD-L1, whereas we have other bispecific approaches instead targeting LAG-3 and PD1. We also had the positive data from RELATIVITY-047 trial reported by Bristol last week evaluating monoclonal antibody targeting LAG-3 in combination with NIVO as discussed. So I'm wondering if you could further discuss differences between FS118 and these other approaches. And secondly, why the cross-linking between CD4 positive and CD8-positive T cells with upregulated LAG-3 and tumor cells with upregulated PD-L1 could demonstrate differentiated efficacy compared to those approaches? And is the cleavage of LAG-3 is tied in some way to this cross-linking or is that an independent mechanism?

Yes Patrick, nice to speak to you. And thanks very much for your question, and good morning to you, too. So as you know, we uniquely focus on in the clinic LAG-3 and PD-L1. And we particularly like PD-L1 because in the exhausted tumor state, we have an upregulation of PD-L1 on those tumor cells. And as you know, we both cross link between the CD4, CD8 cells -- sorry, between the tumor cells and CD4, CD8 cells to those overexpressing exhausted immune cells that have LAG-3 on their surface. The clustering that are molecules induce and FS118 is a very good example that drives unique biology. And in the case of FS118, that clustering causes an enzymatic shedding of LAG-3 from the surface of those exhausted cells. And as you know, there's now a growing literature to suggest that, that shedding is critical for long-term pharmacology, and we believe durable affect.

And we certainly, in the Phase I study, seen dose-dependent increases in soluble LAG-3, so showing that we're getting that pharmacological benefit but also long duration treatments. Our longest treated patients are over 2 years on study now. So we believe that our mechanism will through that differentiated pharmacology induce durable effect in patients -- benefits in patients.

Got it. And then just a follow-up question on SB 11285. So can you tell us about the patient characteristics of those enrolled in the Phase Ia/b trial? And if the study has been enriched in any way for patients, perhaps it was more likely to respond with STING agonist? And then secondly, what differentiates SB 11285 from the prior attempts with STING agonism? And then finally, what is it that we should expect in the update mid-2021 on the program?

Sure. So like most Phase I studies, Patrick, we have taken just all-comers into the Phase I study for SB 11285. It includes a monotherapy ascending dose and a combination ascending dose with Roche's PD-L1 inhibitor atezolizumab. We expect to provide data in the middle of this year on both of those parts of that study.

I guess the real big differentiation is the chemistry of the second-generation STING agonist has been refined to enable these drugs to be giving systemically. And indeed, SB 11285, because it's second generation does that and it's given intravenously as opposed to the first gen, which generally were given intratumorally. And that really is the main difference between those 2 studies, and we will report out on this ongoing Phase I study midyear.

Our next question comes from I-Eh Jen with Laidlaw & Company.

Congrats on a great quarter. My first question is that on FS222 for the trials in Europe, do you feel any sort of impact at this point in terms of the COVID in Europe? And do you anticipate these events -- this impact to be sort of dissipating over the years -- later in the years?

Yes, thanks very much. And we, in fact, had planned to split the trials between our different programs between the U.S. and Europe in order to manage around some of the COVID risk and we put FS222, as you say, into Spain. We've got really world-leading clinical sites in Spain. And in fact, I'm very pleased to report that the study is going very well. We can't give details now, but it's going very well. And indeed, Spain is, I guess, fortunate and unfortunate enough to have -- to being one of the countries that got an early third wave. And so they're operating fully right now, and we're delighted with the progress there.

Okay. Great. And maybe 2 quick questions, 1 for you and 1 for Darlene. In terms -- I know your hand is full with all the programs as well as collaboration right now, but do you guys still anticipate or be willing to take more collaboration going forward maybe this year or in the future?

Sure. As you know, we moved to a wholly owned asset strategy a couple of years ago, and now got 4 clinical stage assets, which is really exciting. We will continue to look to see if partnerships may emerge, but we will not be going back to the discovery-led partnership type that we've had in the past. Although I would expect to see asset type partnerships, in particular, nonclinical asset type partnerships over the coming couple of years. And we have a fantastic pipeline of targeted Fcabs already sort of on the shelf as it were, and we continue to look to see what we can do with that and further enhance the benefits of our validated platform.

Okay. Great. That's great. And last question for Darlene, just a little bit of housekeeping. In terms of operating expenses for 2021, should we take the fourth quarter '20 figures as a base case for the remaining of the year -- for the full 2021? Or there's a substantial increase? How should we think about that?

Yes. I'm happy to kind of take this offline a little bit too, I-Eh. But I think Q4, we had almost the full quarter of 4 programs in the clinic. We obviously just took on the STING asset. So it's not quite a full quarter of that. So we need to kind of keep that in mind as well, although that program will be completed around midyear or so. So you've got to kind of look a little bit at that as well. So -- but yes, Q4 is more indicative of going forward than history prior to that.

(Operator Instructions) Our next question comes from Matt Phipps with William Blair.

On 118, you mentioned data early next year from the head and neck trial, but there's obviously the futility analysis part of the same stage 2 design. Is that come -- so is it futility now is what you expect to reach? Or the end of stage 2 of that by early 2022? I'm just wondering how you will disclose if you pass that utility analysis in Phase I.

Yes, Matt, thanks for the question. Yes, that -- the futility analysis is what we'll be reporting early in 2022 from the ongoing head and neck study in acquired resistance cancer patients. So that's we expect to read out for FS118.

Got it. Okay. And then on 120, I think this slide specifically mentioned that it's likely to have monotherapy benefits but obviously, quickly moving on to PD-1 combination studies. Just wondering if you've given thoughts of looking -- expanding some of the monotherapy indications or anything for that drug if you do see benefit in this dose escalation?

Yes. Thanks again, Matt. So our main strategy is to push into the PD1 combination what we have shown previously, but come back, too. Also, we've got some very intriguing data in combination with chemotherapy, and we want to explore the full opportunity with checkpoint and chemo.

But we saw some really interesting and encouraging monotherapy signs in the preclinical setting, in particular in the primates that we were studying. And I think that if that translates into benefits, biological benefits, in particular, that we observed during Phase I with FS120, we certainly would not rule out the possibility of going with the monotherapy approach. But just to reiterate, our all of our guidance is that we'll be combining with PD-1 and ultimately, chemo.

There are no further questions. I'd like to turn the call back over to Eliot Forster for any closing remarks.

Great. Well, first and foremost, I'd like to reinforce our thanks here at F-star for everyone who's taken the time to join the call and ask questions this morning. And then further to that, really to thank the whole F-star team from the Board of Directors, all the way through to the rest of the organization, who've done an absolutely brilliant job in an unprecedented year for everyone.

Of course, I'd also like to thank our investors for their ongoing support for the company. And I hope with this update, you too share my excitement for the 12 months ahead. And thank you very much.

Ladies and gentlemen, this does conclude the call. You may now disconnect. Everyone, have a great day.