Gracell Biotechnologies Inc (GRCL) 2023 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. My name is Bhavesh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Gracell Biotechnologies Second Quarter 2023 Earnings Conference Call. (Operator Instructions) I will now hand the call over to Kevin Xie. You may begin your conference.

Good morning. and welcome to Gracell Second Quarter 2023 Corporate Update Conference Call and Webcast. With me today are Gracell's Founder and the Chief Executive Officer, Dr. William Cao; and our Chief Medical Officer, Dr. Wendy Li. We're excited to discuss the advancements of the trial underway with our CAR-T candidates on today's call. We also look forward to sharing with you our recent business developments and upcoming objectives as we progress through 2023. We will conduct a question-and-answer session following our formal remarks.

This morning, we issued a press release announcing unaudited financial results for the second quarter ended June 30, 2023. We encourage everyone to read this press release, and we'd also like to remind you that this call is being recorded for replay.

Please note that for certain information discussed on the call today, including financial data, clinical data and the future plans of our programs, results, management will be making forward-looking statements. Actual results could differ materially from those stated or implied by those forward-looking statements as a result of various important factors. Please refer to the Risk Factors section of our latest 20-F filings with SEC for a full disclosure of these risks and factors.

This conference call contains time-sensitive information that is accurate only as of the date of this live forecast, August 14, 2023. We undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by applicable securities laws.

I will now turn the call over to Gracell's CEO, Dr. William Cao. William?

Thank you, Kevin. And again, welcome, everyone, to our Second Quarter 2023 Corporate Update Conference Call. I will begin today's call with key pipeline updates and details regarding our recent financial transaction. I will then return the call over to our CMO, Dr. Wendy Li, to provide insights and some data presentations from 3 studies presented at American Society of Clinical Oncology, ASCO; and European Hematology Association, EHA in June. Next, our CFO, Dr. Kevin Xie, will discuss our second quarter 2023 financial results. After our prepared remarks, we will open the call to questions.

We had a very successful second quarter with multiple data updates from our clinical programs. Notably, our lead product candidate BCMA/CD19 dual-targeting FasTCAR GC012F, received significant recognition at the ASCO and EHA Annual Meetings, where our investigator presented 2 oral sessions with updated data from our studies in multiple myeloma and B-NHL. In particular, at ASCO GC012F showed 93% overall response rate, ORR, 83% stringent complete response, sCR rate,100% minimal residual disease negativity and median progression-free survival, mPFS of 38 months in an investigator-initiated trial or IIT with 29 relapsed/refractory multiple myeloma, r/r MM patients. As a reminder, the IIT data shared at ASCO at a cut-off date of April 12, 2023.

We believe GC012F represents a next-generation CAR-T therapy candidates. It leverages multiple special features and a proprietary FasTCAR next-day manufacture technology. It is specifically designed to enhance therapeutic efficacy, safety and product availability time. GC012F and its BCMA/CD19 dual-targeting design were built utilizing our team's deep knowledge in biology, immunology and molecular biology. They went through years of development and perfection. We believe we have designed and chosen a compound that drives an optimal balance between safety and efficacy. The dual-targeting approach not only broadens GC012F's applicability in indications where either BCMA or CD19 is a primary proven target. But moreover, makes GC012F a potent weapon against complex diseases where multiple antigens are involved, which is true for many hematological cancers and autoimmune disease.

Based on the clinical data showcased at the medical meetings over the past year, GC012F has demonstrated the benefits of dual targeting in late and early line multiple myeloma as well as in B-NHL and achieved a deep and durable response. Most recently, we are generating data from preclinical studies supporting the strong rationale for utilizing dual-targeting GC012F to treat refractory systematic lupus erythematosus or rSLE. Moreover, GC012F is produced utilizing our FasTCART overnight manufacturing process that facilitates short-term patient wait times and enhance cell fitness, thereby giving clinicians more predictability and flexibility in managing the treatment.

Currently, GC012F is being evaluated in company-sponsored clinical trial in relapsed/refractory multiple myeloma in the U.S. and in 3 IITs in newly diagnosed multiple myeloma, NDMM, B-NHL and SLE. Recently, we have reached a significant milestone as the patient enrollment has commenced in our U.S. Phase Ib/II trial evaluating GC012F for r/r MM. Patient screening is underway at the first activated site. As a reminder, the Phase Ib portion primarily aims to evaluate safety and tolerability as well as determine the recommended Phase II dose. We anticipate enrolling approximately 12 patients in the Phase Ib portion. We estimate that it might take approximately 9 to 10 months to complete patient enrollment. Thereafter, we plan to share our data with the FDA and proceed into the Phase II portion.

We are also continuing to augment the compelling clinical data on GC012F across other indications. As an oral session at EHA Congress, the updated data from the B-NHL China IIT showed 100% ORR at 3 months and 67% CR at 6 months among 9 patients all with the challenging diffuse large B-cell lymphoma or DLBCL subtype. The IIT evaluating 12F immune diagnosed multiple myeloma patients, it's also advancing. We're glad to provide an update from this study, including data from additional patients and the longer follow-up at an upcoming medical meeting later in September.

Moving on to our immunology program. We are excited to report that IIT GC012F in refractory SLE has been successfully launched in China during the second quarter. Multiple patients have been dosed and we expect to share the clinical data in the first half of 2024. Simultaneously, we are amassing compelling preclinical data that strongly support the rationale for CD19/BCMA dual-targeting in the treatment of SLE. First of all, in our clinical studies, our candidate has demonstrated the effective elimination of CD19 positive B cells, which is, of course, crucial to facilitate an immune reset and a combat SLE. Secondly, SLE is a B-cell autoimmune disease resulting from a range of autoantibodies attacking the patient's own system. We believe the treatment shall also address autoantibodies secreting plasma cell or ASC. ASC populations are generally BCMA positive and a significant portion of them are CD19 negative. So the use of CD19 single target in CAR-T therapy alone may not be sufficient to eliminate all the disease causing ASCs in all patients.

Therefore, targeting both BCMA and CD19, which aligns with GC012F dual-targeting design, has the potential to provide a more effective and long-lasting therapeutic approach for refractory SLE. In our preclinical studies, 12F CAR-T has shown a more effective elimination of ASCs compared to CD19 CAR-T alone. Last, but not the least, based on the preclinical data we collected so far, we found no evidence suggesting occurrence of serious adverse events in body. This preclinical data as well as the consistently favorable safety data, we have accumulated in over 50 cancer patients, give us strong level of confidence in the preclinical potential of GC012F in autoimmune disease. We are currently on track to submit investigation on new drug IND filing to the U.S. FDA in 2023 for the planned Phase I trial. This will be an important milestone as we continue to advance our efforts to provide innovative, effective treatment options for patients with automate disease.

During the second quarter, we completed a strategic review across our clinical programs and have decided to focus on our resources on our most innovative validated product candidates such as GC012F, which we believe have the potential to be the best-in-class and address large unmatched medical needs. We can -- you can find our reprioritized pipeline chart in the Gracell corporate presentation deck available on our website. The decisions made during this strategic review reflects our determination to be at forefront of medical innovation, and underscore our dedication to improving the lives of patients through transformative life-changing therapies.

In early August, we have -- we were delighted to complete a private placement transaction, raising $100 million upfront and up to $50 million additional funds if the warrants are fully exercised within 24 months. The financing was led by Vivo Capital and joined by RA Capital, TCGX, Janus Henderson and other well-known Healthcare investors. This additional funding greatly strengthened our financial position, extends our cash runway into second half of 2026 and is intended to support us through critical upcoming milestones planned for the clinical development of GC012F in multiple myeloma and SLE. We thank our existing investors for their unwavering support and extend a warm welcome to our new investors who took time to thoroughly understand our technology and the pipeline. The trust and the confidence you have shown in us are truly appreciated. The Gracell team is committed to our mission to develop innovative and efficacious cell therapy candidates for patients with cancer and autoimmune disease. Thank you for being essential part of our success story.

Now I will hand the call over to our CMO, Dr. Wendy Li, to highlight the 3 data sets that were presented in June at ASCO and EHA. Wendy, please go ahead.

Thank you, William. We're continuing to generate clinical data from the ongoing trials for GC012F, our FasTCAR enabled BCMA and CD19, dual-targeting autologous CAR T cell therapy. This candidate aims to transform cancer and autoimmune disease treatment by driving fast, deep and durable responses with an improved safety profile and fast overnight manufacturing. At both ASCO and EHA in June, long-term follow-up data from the multiple center IIT in r/r MM was presented. Based on the data cutoff date of April 12, 2023, the data showed deep responses with 100% MRD negativity and 82.8% MRD negative stringent CR in 29 r/r MM patients. The medium PFS was 38 months at this data cutoff date, suggesting the durable responses achieved by GC012F among this hard-to-treat predominantly high-risk patient population.

The safety profile was consistently favorable with no neurotoxicity of any grade and no second primary malignancy reported with this longer-term follow-up. We are very encouraged by this clinical data and have commenced patient enrollment in the Phase Ib trial in the U.S. data evaluating GC012F for treatment of B-NHL was also presented at ASCO and EHA, including as an oral session at the later meeting. Based on a data cutoff update of April 12, 2023, the updated data from the ongoing IIT showed an ORR of 100% in all 9 patients treated. Notably, all 9 enrolled patients are diffuse large B-cell lymphoma patients, which is the most challenging subtype of B-NHL. GC012F demonstrated impressive, deep and durable responses and the complete response rate was 77.8% at month 3 and 66.7% at month 6, respectively. 5 of 9 patients experienced Grade 1 CRS and 1 patient had Grade 3 CRS, which resolved within 2 days after standard of care treatment. No neurotoxicity or ICANS of any grade were observed.

This data further supports the clinical potential and wide applicability of GC012F. Additionally, we presented the first data from the company-sponsored Phase I study in China of GC007g at the EHA Congress. GC007g is a donor-derived allogeneic anti-CD19 CAR-T candidate that has been designed to treat relapsed refractory B-cell acute lymphoblastic leukemia patients who may not be eligible for autologous CAR-T therapy due to poor cell (inaudible) infections or other unsuitable conditions. Among the 9 patients enrolled and treated between March 2021 and May 2022. 100% of patients achieved MRD negative CR or CRI at day 28 after infusion of GC007g.

At a median follow-up of 415 days, 7 of 9 patients remained in CR or CRI, where 2 patients had CD19 negative relapse. The 1-year PFS and OS were 76.2% and 85.7%, respectively. Grade 1 to 3 CRS were reported and all resolved after treatment. No neurotoxicity or ICANS were observed. No chronic GvHD occurred.

In closing, I would like to highlight that several clinical studies have initiated over the past few months, including the company-sponsored Phase Ib study of GC012F in r/r MM in the U.S. The IIT of GC012F in refractory SLE in China. And the IIT of SMART CAR-T GC506 targeting Claudin 18.2 in solid tumors. Overall, we are very pleased with the progress of our clinical pipeline and we're eagerly looking forward to building on this momentum.

I will now hand the call over to our CFO, Dr. Kevin Xie. Kevin?

Thank you, Wendy. Turning to our financial results for the second quarter ended June 30, 2023, I'd like to touch on a few financial trends. As of June 30, 2023, the company had RMB 1,188 billion or USD 163.8 million in cash and cash equivalents and short-term investments. We expect the cash this year to be approximately USD 100 million primarily to fund our R&D and clinical programs in the U.S. and China. As announced in early August, we completed a private placement financing with $100 million upfront and up to an additional $50 million in the event that warrants are fully exercised within 24 months after the closing of the upfront purchase. With this, we have extended our cash runway by 1.5 years and now expected our current cash position to be sufficient to cover our operational plans and R&D activities into the second half of 2026 if the warrants are fully exercised. For the 3 months ended June 30, 2023, net loss attributable to ordinary shareholders, RMB 146.9 million or USD 20.3 million compared to RMB 146.3 million for the corresponding prior year period.

Research and development expenses for the second quarter 2023 were RMB 103.8 million or USD 14.3 million compared to RMB 117.1 million in the corresponding prior year period. The decrease was primarily due to the slightly decreased spending on research, development, clinical trials and payroll.

With that, I'd like to turn it back to the operator to open the session for your questions. Operator?

(Operator Instructions) Our first question comes from the line of Kelly Shi from Jefferies.

Congrats on the progress. I have a cost regarding the GC012F for the US Phase I trial. Can you talk about patient selection criteria? And does the trial allow prior BCMA CAR-T and also bispecific treatment targeting both BCMA and the GC012F?

The patient screening is ongoing right now, yes. And there were response to the changing treatment the last week and hopefully, potential more patients can benefit from GC012F. So we now exclude patients, you just mentioned about the BCMA and other treatment. But we have the washout time and between this therapy and GC012F in future. Do you have more questions?

And also, would you be able to estimate, one, are you going to dose the first patient? And in 2023, how many patients to be dosed on this trial?

Yes. We plan to have 12 patients be dosed in 2 doses, and the patients are still in the screening right now and so many types were ongoing and -- but every patient screening is on the track.

Our next question comes from the line of Joe Catanzaro from Piper Sandler.

Maybe first one on the GC012F Phase I in the U.S. here. William, I know you said that the Phase Ib might take 9 to 10 months to complete enrollment of the 12 patients. I guess is it your expectations to fully complete this portion of the trial before disclosing any data? Or is it possible we could see some data once the first dose level clears? Thanks and I have a follow-up.

Yes. Thank you, Joe. To report a full set of data, it takes some time. If the question is whether we're going to report a portion of the data, that's not conventional. I think under circumstance maybe on the CD, it's possible. But I don't think it's a conventional to release a portion of the Phase I data.

Okay. Got it. That's helpful. And I guess my follow-up, it looks like the mesothelin SMART CART was removed from the pipeline with the prioritization. I know it had dose some patients in the China IIT. So wondering if you could speak to maybe what you saw there that maybe led to this decision? And whether there's any learnings there with the SMART CART platform that you could apply to the Claudin program that you continue on with.

Yes. Our bar, as we discussed in the previous meetings, our bar is not just seeing some patients may benefit from SD or partial response. I think currently, the program for solid tumor seems there is a term called 50% OR curse. We think for such a sort of price and a complicated autologous CAR-T therapy, the efficacy should be higher or the benefits to the patient should be highly differentiated from standard of care. And that continues to be our sort of internal criteria for selecting a potential product to move forward. Now back to the 503 mesothelin and the correspondent tumors appear very challenging. We do see the safety. We don't see serious side effects that we need to elaborate. The CIS and neurotoxins horrible. But the efficacy is not striking based on our standards. So -- and in the way of our reprioritization, we focus on the front runners are MM, early line of IM and autoimmune disease, we decided to slow down some of the early programs.

Our next question comes from the line of Justin Zelin from BTIG.

Congrats on the progress. Maybe just first on GC012F Phase I study. If I heard correctly, I think you opened up in 1 U.S. clinical site. And I think previously you said you expect to open up in 5 to 10 U.S. clinical sites. Just wondering if that's still the case here? And just when you might expect the next clinical site to come up online here?

Yes. The first site is activity, right? Yes, and the patients' screenings are ongoing. And yes, other site coming. So right will be very soon. And actually, some part is working on now, everything is on the control and on track now.

Okay. Great. And just wanted to see -- just checking, I think as far as the prioritization goes, I mean everything that's reflected on your pipeline, your new pipeline chart here, we should assume that, that is still in the company's prioritization, correct?

Correct.

(Operator Instructions) Our next question comes from the line of Emily Bodnar from Wainwright.

First, can you maybe talk about how you think about the market opportunity for SLE in the U.S. specifically, I guess what portion of the population you think could benefit from a CAR T therapy? And then I just wanted to clarify, I think on the call said that the newly diagnosed data would be in the fourth quarter, but I think in the press release of the third quarter. So -- just could you clarify that, maybe comment on any next steps for that program.

Emily, I'll answer your first question first, then I'm going to ask maybe to repeat the second question. On the market side, we are targeting refractory SLE. My impression, sorry, I can't give you exact numbers as we have been studying through IITs based on the enrollment criteria and endpoints we are testing and evaluating, so the exact number or the size of market, it's -- I can't give you an exact number, but it's obviously it's a significant unmet need. And the -- it's the field of the (inaudible) are excited about this potential. What was your second question?

Could you just clarify when the newly diagnosed multiple myeloma data is coming and any next steps for that program?

Yes. Wendy, you can take that one?

Sorry, your question again?

Yes, the update -- let me take this. The update of newly diagnosed longer follow-up will be a in September.

Okay. Yes, we're looking for -- yes, yes, we're going to share the clinical data from the IIT in NDMM later September. Yes, right. The next step will be, yes, the IND submission in later to '23 this year.

Our next question comes from the line of Yanan Zhu from Wells Fargo.

This is (inaudible) for Yanan. So my first question is on r/r MM. So for the U.S. Phase Ib/II study, can you discuss the company's internal bar moving the program into Phase II? And my second question is for SLE. So for the U.S. study, what's the company's plan on the dose level? Is it similar to the China IIT?

The first question, yes, we have -- we're going to finish the Phase 1b first, and then we're going to have the meeting with FDA, and we'll be more clear for next step. And the second question, you mean to compare with China, right? Yes, it depends on the (inaudible) and FDA requirements, there are slightly different from the dose level and element frequency dose level in China will be start, the 2-dose around 1.5 and 3.5. And in the U.S. will be 1 and 2 doses. Yes. And the frequencies in China, they can (inaudible) 3 patients together. But in U.S., based on the FDA requirement have to 1 by 1 amongst, that's a little bit different, but the timing will be similar.

The dose for SLE is -- yes, it's going to be similar, but we haven't decided yet. So we -- for this IIT studies in China or SLE, we start from low dose which is very similar to the low dose of r/r MM IIT trials. It looked like it's going to be the same dose for SLE dose.

Our final question for today comes from Yigal Nochomovitz from Citigroup.

On GC007g, you indicated that you're going to start -- you have started a registrational Phase II in China. Can you talk about your thoughts for bringing that product to the United States for clinical development?

Wendy, I'll take this one. The GC007g is a very unique product. And the unmet need compared to other indications are relatively small. So our plan has been limited this product development in China. So we don't have intention to head on another one on our pipeline to U.S.

Okay. And then regarding the SLE trials, can you just talk a little bit more about how the design of the U.S. SLE trial will be structured in terms of the patient enrollment characteristics relative to the IIT in China? Are they relatively similar?

It will be too early to elaborate the designs of SLE trial in the U.S. It's early. The purpose of the IIT is exactly to test out what will be the dose, what would be the endpoints enrollment criteria and all these will be evaluated through the trials, IIT trial, while we are preparing for R&D filing in the U.S. but happy (inaudible) we have gained a lot of insight so the first few patients. But at this moment, it's too early to have a review, but we do see a lot of -- we have obtained valuable information, including the dose, the safety profile, again, preliminary and the response.

Okay. And then the last question I had was you mentioned the 9- to 12-month time frame for enrolling the r/r MM study in the United States. Can you just comment a little more in terms of the assumptions supporting that time frame? Is it a function of the competing therapies in the space and the enrollment criteria? And any additional details you can provide on that time line?

We still keep that -- like you just mentioned about right, about 10 months that we have to finish the Phase Ib, yes. And then we're going to have the EOP1 meeting with FDA, and then we'll be more clear with the next step.

Regarding the competing therapies, so far, we don't see that happening. And given the enthusiasm from those PIs of the centers. Obviously, the unmet need is clear. The features of this potential product, potential compound means a lot to the patients and the doctors. Fast turnaround, safety profile, these are still very attractive. So far, we see everything as planned.

There are no further questions at this time. Kevin Xie, I'll turn the call back over to you.

Thank you again to everyone for joining us on the call. With the strategic reprioritization of our pipeline, we are focused on advancing our highly differentiated and most competitive candidates, including the FasTCAR GC012F. The U.S. IND trial in r/r MM is now underway, and we look forward to submitting the IND filing in SLE later this year. We remain committed to pushing the boundaries of medical innovation and improving patient outcomes through our transformative therapies.

Thank you. This does conclude today's conference call. Thank you for participating. You may now disconnect.