Immunic Inc (IMUX) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vital Therapies Fourth Quarter 2016 Financial Results. (Operator Instructions) As a reminder, this conference is being recorded.

I would like to introduce your host for today's conference Al Kildani. Sir, you may begin.

Thank you, Terence. Good afternoon. My name is Al Kildani, Vice President of Investor Relations and Business Development. Thank you for joining Vital Therapies' management team on our conference call to discuss the company's operations update and results for the fourth quarter ended December 31, 2016.

On today's call are several members of the Vital Therapies senior management team, including Dr. Terry Winters, Co-Chairman and Chief Executive Officer; Dr. Duane Nash, President; Mike Swanson, Executive Vice President and Chief Financial Officer; Rob Ashley, Executive Vice President and Chief Technical Officer; and Dr. [Jan Stange], Chief Medical Officer.

Before we begin, we'd like to remind you that some of the statements we make today will include forward-looking statements, such as statements related to the timing, conduct, and enrolment of our clinical trials; future clinical trial results; the timing of certain development goals, including regulatory filings; possible mechanism of action of ELAD; our projected cash runway; and plans and objectives of management for future operations.

Forward-looking statements are subject to a number of risks and uncertainties that could cause actual events or results to differ materially, including the risk that our clinical trials program is delayed or is ultimately unsuccessful. Please note that these forward-looking statements reflect our management's views only as of today's date and we disclaim any obligation to update any forward-looking statements expect as required by law. Please refer to our SEC filings for a discussion of the risk factors that could cause actual events or results to differ materially.

Vital Therapies promptly makes available on its website reports that the company files with or furnishes to the SEC, corporate governance information, press releases, and other posters and presentations. A replay of this call will also be available on our website later today. We encourage investors to use our Investor Relations website as a way of easily finding information about Vital Therapies.

I would now like to introduce Dr. Terry Winters, Vital Therapies' Co-Chairman and CEO.

Good afternoon, everyone, and welcome to our fourth quarter 2016 update call. I would like to begin with our usual summary of the company for those of you who maybe new to our story. We are developing ELAD, an extracorporeal human allogeneic cellular therapy, which could improve survival in acute forms of liver failure. ELAD is at the Phase 3 clinical trial stage and has Orphan Drug Designation in the U.S. and EU. We are currently enrolling subjects in VTL-308, a randomized controlled trial in severe acute alcoholic hepatitis. Top line data are anticipated around mid-2018. Assuming successful clinical results in the future, we plan to seek regulatory approval and to commercialize ELAD directly in most major markets of the world.

The agenda for today's call will be first to review the status of VTL-308 trial, then to provide an update of our R&D activities, thirdly to review our financial results, and finally we will open up the call for Q&A. So, first, we will discuss the status of our VTL-308 Phase 3 clinical trial. This trial is our priority, and I am delighted to report that we have now enrolled over one-third of the targeted 150 subjects and we remain on target to report top line data around mid-2018.

Fifty-three subjects have been enrolled on multiple sites in the United States and Europe. This compares with 20 subjects at our last quarterly report on November the 3rd. And over the last three months enrollment has accelerated to a rate of about nine subjects per month or slightly above our targeted enrollment rate at 0.2 subjects per open clinical site per month. With 40 sites now open and at least 10 more in process, we believe we should be able to sustain this robust enrollment rate.

As we have noted previously and at the FDA's suggestion, we have incorporated an event driven feature into the trial design consistent with the primary endpoint of overall survival. Under this trial design, enrollment will continue until at least 150 subjects have been enrolled, and a total of at least 55 deaths have occurred in the overall trial. The target of 55 deaths is consistent with the rate seen in the targeted subpopulation in our prior study VTI-208. As we approach enrollment of 150 subjects in the VTL-308 trial, we will assess the overall death rate up to that point and make a determination as to whether additional subjects will need to be enrolled in order to meet the minimum number of 55 deaths called for in our statistical plan.

Now on to R&D. We have entered into a collaboration with Drexel University in Philadelphia and the University of Birmingham in the U.K., two of the key clinical sites that participated in VTI-208 and are also open clinical sites in VTL-308. The Gift of Life Donor Program in Philadelphia is also participating. The collaboration is exploring the potential for ELAD to resuscitate marginal donor livers and thereby increase the supply of livers available for transplantation.

The supply of donor livers is limited not only by the number available, but also by the quality of the organ and the length of time it takes to retrieve the liver and transport it to the transplant center. Up to 70% of the livers that are donated after cardiac death and up to 30% of livers donated after brain death are found to be unsuitable for transplantation. The number of perfusion devices have been developed to help preserve livers and to improve liver quality prior to transplant without none or approved for routine use in the United States. We plan to evaluate whether adding VTL C3A secreted proteins to these systems might further improve liver quality.

An important spin-off of this work is that it provides us with a unique opportunity to study the impact of the VTL C3A cell-secreted proteins on an entire organ rather than just on cells grown in artificial tissue culture dishes. This may help us further elucidate the mechanism of action of ELAD.

Next we continue to analyze the data from our VTI-208 study in order to help us with future clinical development plans. In particular, we have been working on identifying a biomarker that might help predict likely outcome for ELAD treatment in subjects with severe alcoholic hepatitis.

During the recent meeting of the Asian Pacific Association for the Study of the Liver in Shanghai, China, one of our leading investigators Dr. Tarek Hassanein of the Southern California GI and Liver Center in San Diego made an oral presentation titled, "Early Change in Bilirubin Level or ECBL as a Surrogate for Outcome in ELAD Clinical Study of Severe Alcoholic Hepatitis." This presentation can be found on our Investor Relations website under the tab of Clinical Publications and Presentations.

Elevated serum bilirubin level, which causes yellowing of the skin in patients with jaundice, is a well-known marker of compromised liver function. Rapid reduction in serum bilirubin in response to treatment is known to be associated with improvements in liver function and improved survival in patients with alcoholic hepatitis.

During the clinical development of ELAD, we have often observed more rapid and significant reductions in serum bilirubin in ELAD-treated subjects compared with control subjects. As discussed in the presentation, in our study VTI-208, significantly more ELAD treated subjects and controlled subjects had decreases of at least 20% in the serum bilirubin during the first seven days of treatment. And this was predictive of 90-day survival in both the ELAD treated and controlled subjects.

However, only when those subjects with preexisting evidence of kidney failure or coagulopathy, prior to treatment were eliminated from the analysis where the differences in survival between ELAD and control subjects correlated with ECBL. This finding further supports the inclusion and exclusion criteria for our current Phase 3 study VTL-308, and subjects with preexisting secondary organ dysfunction are specifically excluded from participation.

I'll now turn the call over to Mike Swanson, our CFO.

Thanks, Terry. We ended the fourth quarter with cash and cash equivalents of $60 million. Our average monthly cash usage for operations and capital expenditures during 2016 was approximately $3 million. We continue to expect our use of cash will vary based primarily on the timing of enrollment in our VTL-308 trial. It will also increase to support expenditures for longer lead time activities that could support a future biologics license application or BLA submission. As reported, based on our current plans, we believe our existing cash and cash equivalents will be sufficient to fund the company through the first quarter of 2018.

During 2016, we raised net proceeds of $11.7 million from our at-the-market or ATM sales agreement and $700,000 from a private placement with our new director. We currently have $153.3 million remaining under an effective shelf registration statement, of which $62.8 million maybe offered under the ATM sales agreement. No shares have been sold to date under the ATM in 2017.

Summarizing our results for the quarter ended December 31, 2016. The company reported a net loss of $11.7 million or a $0.37 basic and diluted loss per share. This included non-cash expenses for stock-based compensation, depreciation and amortization totaling $1.7 million in the fourth quarter of 2016. This compared to a net loss of $9.9 million or a $0.34 basic and diluted loss per share for the fourth quarter of 2015. This included $1.5 million for the same non-cash expenses. For more details on these financial results, please refer to our press release issued today and our annual report on Form 10-K.

With that, I'll turn it back over to you Terry.

Thank you, Mike. I would now like to open up the call to your questions.

Thank you. Ladies and --

In addition to Mike -- well, let me just say who's on. Could I -- joining me to the Q&A portion of our call are Dr. Duane Nash, President; Rob Ashley, Executive Vice President and Chief Technical Officer; and Dr. Jan Stange, Chief Medical Officer. So, operator, can you please provide instructions and open up the call for questions.

(Operator Instructions) And our first question comes from Katherine Xu from William Blair. Your line is open.

Yes. Hi, guys. This is Joe on for Katherine. So do you mind reminding us the powering assumptions of the trial? So -- and then also of the minimum 55 patient deaths, what number is the trial designed to show on the controlled arm versus the placebo arm? And then also as the pooled mortality data come in, do you only get one look at that as you approach 150 patients enrolled? Or do you, guys, get continuous look at that data? Thanks.

Okay. Let me turn that over to Rob, if I can please.

Sure. So the sample size assumptions are based -- obviously there's a number of things which go into that, but they're fundamentally based around achieving a hazard ratio of around about 0.4. And to get that hazard ratio around about 0.4 with a power of about 95%, we need 150 subjects in total to be enrolled in the study. There's also an assumption there's 10% dropout and other sorts of things, and then like the follow-up and so on and so forth.

So the way that these Kaplan-Meier curves are calculated is based on a ratio of median survival time. But if you translate that into mortality rates, for want of a better way of looking at it, then the blended mortality between the two groups is around about 37%, and we would anticipate that that would be split about 25/45 something like that between the two arms of the study. That's sort of fundamental math that goes into that assumption.

Now going to your question about when we would look at this and so on, because we're not unblinding the data we're just reviewing the sort of blended mortality rate between the two groups, then I don't think we're sort of confined necessarily to when we're looking at it once. However, I think good practice from the perspective of managing data or in the clinical trial like this would be to only -- to look at the data as infrequently as you could. So our plan is to look at it once as we're approaching the full enrollment of the study and then just to make an estimate based on that of what the mortality rate is likely to be 90 days after the last patient is enrolled, which is when we would lock the database in short time after that.

And one point is worth making is that there are obviously a couple reasons why we might not get to the 55 deaths. One is that the controlled death rate might be too low. I think that's unlikely based on the literature and everything that we've done. The other thing is that the ELAD might be performing much better than we anticipated. So there are a number of reasons why the mortality rate might be somewhat less than we anticipate, but all of the literature and our own data will suggest that, that is an accurate estimate as best as we can make it.

So, Joe, you might want to go to slide 12 of our Investor Deck and we have some more information on powering. If you remember the subset that we're targeting at hazard ratio of 0.28 in the 208 trial that were over 99% powered for that or over 95% powered for a 0.4 and about 89% or over 85% for 0.5. Again, you'll see that on slide 12 of our deck.

Great. Thank you so much.

And our next question comes from Tazeen Ahmad from Bank of America. Your line is open.

Hi. Thanks for taking my question. This is Peter Stapor on for Tazeen. I have two questions. First, could the rate of enrollment actually increase with another 10 sites coming on line? And then the follow-up question would be, could you talk about the rate of death accrual associated with disease in either the placebo or treatment groups?

I'm sorry, what was that second question again?

What the rate of death accrual will be expected in the placebo arm and in the treatment arm? Thanks.

Okay. Well, the answer to your first question is easy and that is yes, and we certainly would hope so. We gave you the rate of 0.2 per open site per month, and you can do your own calculations if we get up to 50 sites. But on the other hand, enrollment is always somewhat pickle, and I certainly wouldn't want to predict that it is going to increase. But it's a possible, yes, it is possible.

Now the second question I think I understand it, Rob, but I'll turn it over to you.

Yes. I think that was really what I was just going through is to look at the mortality rates that we anticipate in the study. The average follow-up to these subjects is going to be somewhere around about a year. If you recall, the way that it works is that we'll lock the database after the last subject is or close to when the last subject is completed 90 days of follow-up. But by that point in the proceeding, the first subject will be nearly two years through the study. So the average follow-ups about a year and those mortality rates that I described, the blended mortality rate, is 37% would be what would deliver the 55 deaths, which we have in the plan, if the plan worked out exactly the way that we laid it out. So (multiple speakers) --

Rob, I think most of the deaths occur in the first 180 days, don't they?

Yes, most of the deaths are in the first 180 days or so, and then things start to level out that there's not a continuous proportional death as you would anticipate from something, which is reasonably acute disease where in principle at least we're returning people to a more or less normal liver function,

And just to be clear, when we say most of the deaths in the first 180 days, so that's -- we would expect -- based on this disease process and quite frankly what we've seen before, right now, we are not tracking deaths. I presume the DSMB is looking at that, but we as a company are unaware of the current death right in the trial.

Okay, thank you.

Yes. And just to remind you the FDA has asked us to conduct this trial as best we can on a blinded basis. And to the extent that we can do that, we are in fact making that happen.

Thank you.

And our next question comes from Edward Tenthoff from Piper Jaffray. Your line is open.

Great. Thank you very much and I apologize if my name was called my phone disconnected. Helpful updates on enrollment, I think that's very informative. I wanted to get more of a kind of qualitative view just in terms of when it comes down to the enrollment criteria for the new study in terms of focusing in on liver specific disease, how onerous is that for docs? Is this something that they're routinely doing? Are they very easily able to distinguish via these simple markers, liver sick patients versus kidney or other conditions? And ultimately it ends up coming out in the enrollment rate, which it looks good, but I wanted to get more of a qualitative picture of how that selection is affecting enrollment and docs?

That's a great question, Edward. Let me turn it over to our Chief Medical Officer, Jan Stange, who is actively out on the firing line with our investigators. Jan?

I appreciate it.

Yes, this is a fantastic question because I think this is what makes this trial so interesting to us. The cutoff for secondary organ dysfunction, the ones that we identified in the last trial are critical for whether ELAD can make a difference or could make a difference in survival or not is really based on clear-cuts of lab values, which (inaudible) prognostic scores like in the MELD. So it's very, very objective.

And to us, it did make medical sense because it's well-known that alcoholic hepatitis patients, if they deteriorate and face a dark prognosis, that's basically because they go to secondary kidney failure. So the new cutoff is really clear-cut 1.3 milligram per deciliter of creatinine cutoff.

And the same is true for the INR. Again, we had pretty convincing data from 208 that once you reach a certain insufficiency of your coagulation system, that ELAD cannot or could make a difference in the last trial. We are eliminating those patients, and we have a clear cutoff on the INR; it cannot be higher than 2.5.

We have a tremendous prescreening process where we actually look at those patients that come close to the study but don't qualify. And as it looks, it's the vast majority of patients that are eliminated from that because of those two cutoffs. And the third thing is, of course, age. According to the mechanism of action information that we have on the website, we do believe it's the capability of the liver to regenerate. That capability goes down exponentially with age, and therefore we have this new age cutoff of 50 years old. And then a lot of patients that would have entered 208 and basically contributed to 208 not working as a trial are now eliminated in 308. So it's not a subjective, gut feeling thing of the doctors. It's actually very well reproducible, very objective, and it makes medical sense to me.

If I can also comment, Ted, these are universally used tests, and the results appear quite rapidly. So if a patient showed up in the emergency room at one of our trial sites, probably was in the first hour, they would know that bilirubin, the creatinine, and the INR. And so, that aspect is very clear.

The challenge in the trial, which we've had in getting the patients, is typically patients who are not yet end-stage don't show up at university academic transplant centers. They typically show up at referral centers. And so what we've been doing throughout this trial, and I think the increase in the enrollment rate shows we've actually done a pretty good job, is helping our transplant centers build up their referral channels.

So the local hospitals know when they see a patient in the right range that they call us right away. Particularly as if they let the patient deteriorate too long not only is their prognosis terrible, but they've also excluded themselves for ELAD, which is what we hope would potentially save them. So I hope that provided some useful color.

Absolutely. Both are really, really helpful. So thank you very much.

And our next question comes from Edward Nash from SunTrust. Your line is open.

Hi, thanks for taking the question. This is Mike Guo for Edward. And congrats on the progress of the patient enrollment. I just want to follow up on the patient enrollments. Just now you mentioned that maybe one of the reasons for the accelerated patient enrollment is due to like building up of the referral channels. But do you see any kind of seasonality for the patient enrollments?

Any what term, Mike?

Seasonality.

Seasonality like -- yes.

Seasonality, well, that's an interesting question. Anybody like to take that?

So we do see seasonality, but I'd say it's more random numbers because I, in particular, remember looking at the 208 trial, and very often in the months that we're active in 2014, we're not active in 2015 in 208, so it's just -- I think its random numbers. But, Jan, do you want to?

Yes, I agree with that. And then that's not only seasonality, it's probably also geographic seasonality because as you know we have a significant number of European sites, which are more socialist systems, people have more vacations. I come from Germany. So usually you would expect that in August, for instance, where people have a long vacations that the numbers might go down. That's what we expected. However, as Duane said, sometimes we have a year where it's the total opposite. So I think also it's a random number.

But it takes a while for this disease to really develop after the last big binge, doesn't it? A couple of weeks?

Yes. It's up to six weeks. I mean that's where our criteria say we actually required that the alcohol event cannot be longer ago than six weeks because we want to take up those acute alcoholic hepatitis events.

Now I really -- as we always said this is a population that reflects a third of the 208 population that is really enriched where we think ELAD can make a difference. And the key was the outreach activity to the referring sites to pick up those patients early. I think that's the reason and then of course quite intensive selection of up to 50 sites. Now, we have 40 open that those in combination explain the success on enrollment.

Got it. That's helpful.

Go ahead, Mike.

Yes. My next question is about the mortality rates. We understand that you're still unblinding the mortality rates. But, all in, unblinding the basis if we assume that the patient enrollment sees maybe 50-50 to ELADs and to control. So for the mortality rates you have observed so far, is that sort of as expected?

Oh, wait, Mike, maybe if I can interrupt there. So we are blinded to the mortality so far. We do not know the mortality in the 308 trial even in a blinded sense.

Got it. So the only time you're going to check the mortality data is that when you're close to finish the patient enrollment, you're going to check the mortality rates that's unblinded basis -- on a blinded basis, I'm sorry?

No, at that point, we will check or perhaps we'll have the DSMB check for us in a blinded basis. And we will just get a number that says, okay, there have been 57 deaths so far or there are 40 or there are 60. And there will be no attribution to one arm or the other, and then we will use that to assess whether we have the requisite 55 and how many more patients we need to enroll.

Yes, Mike, we cannot take the risk here of incurring any statistical penalty and that's the reason we do it that way.

Got it. That's helpful. My final question is about the bilirubin level. So for the Phase 3 of 308 trial, the coagulation and the kidney function, and also the age you are trying to recruit like less severe patients, but for bilirubin you are considering enrolling patients at some more severe patient population. Could you remind us the reason for that, please?

Sure. So when we cut the 308 data, we had 71 patients who had the right age, the right bilirubin, the right INR. Of those 71, there were 11 who's bilirubin was under 16. Of those 11, only one died. It was a control. But what it told us is that because we're, through the bilirubin, the age, and the INR, we're selecting for a healthier group in total. We want to make sure patients are actually coming in with some possibility of death, which is obviously unfortunate. But that's -- you need deaths in a survival trial. And so without that bilirubin floor, the event rate was essentially diluted. Does that make sense, Mike?

Okay, got it. Thanks a lot. Yes, that makes sense. Thanks a lot.

And at this time, I'm showing no further questions.

Okay. Well, it reminds for me then to thank everybody. We appreciate it. We will do this again on our first quarter report in early May, I believe. So thank you and have a great day. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.