Immunic Inc (IMUX) 2017 Q1 法說會逐字稿

Welcome to Vital Therapies' First Quarter 2017 Financial Results.

(Operator Instructions)

As a reminder this conference call is being recorded.

I now like to introduce your host for today's presentation, Mr. Al Kildani.

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 first quarter ended March 31, 2017.

On today's call are several members of 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 enrollment of our clinical trials, future clinical trial results, the timing of certain development goals including regulatory filings and FDA approval process, possible mechanism of action of ELAD, our projected cash runway, our ability to scale up our process and to increase our manufacturing capacity to generate higher response to demand, 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, the risks that our BLA takes longer to complete or that we need additional financing sooner than anticipated.

Please note that these forward-looking statements reflect our management views only as of today's date and we disclaim any obligation to update any forward looking statements except as required by law. Please refer to our SEC filings and our most recent 10-Q 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 for furnishings 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' Cochairman and CEO.

Welcome to our first quarter 2017 update call.

Before I start, my apologies for my voice I'm recovering from a nasty cold, but I assure you that it is the same old Terry. So let's begin with our usual summary of the Company for those of you who may be new to the 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 III clinical trial stage and has Orphan Drug Designation in the US and EU.

We are currently enrolling subjects in VTL-308, a randomized controlled trial in severe acute alcoholic hepatitis. Topline 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 is as follows: first we'll review the status of the VTL-308 clinical trial, then discuss the details of our recent financing and how it extends our cash runway. Third, provide an update on our preparations for the submission of an ELAD biologic license application -- or BLA -- to the FDA in the event of successful VTL-308 trial results.

Then we will summarize our plans for commercialization of ELAD, again assuming successful trial results, then update our continued work on ELAD's mechanism of action, review our financial results and finally we will open up the call for questions and answers.

So first, we'll discuss the status of VTL-308 Phase III clinical trial. As many of you know, this trial is our top priority since successful results are essential for us to move to BLA submission and then to commercialization. As of Monday, we had enrolled 67 subjects in the trial in the US and the EU and we now have 46 clinical sites open for enrollment.

Over the last six months, we have been averaging about 8 subjects enrolled per month, and as of the end of April we were at 0.19 subjects per site per month compared with our target of 0.2 which we talked about in our last call. While we are little behind this target as we have said before, enrollment will fluctuate from month-to-moth and we still expect to report top line data around mid-2018.

Next, a discussion of our recent financing. I am very pleased to report that in March we completed the following offering raising $37.8 million dollars after underwriting discounts and commissions. We believe our current cash position could take the Company through the first quarter of 2019 -- well past the expected announcement VTL-308 topline trial results. With the financing addressed we are now focused on completing enrollment of the trial.

So next we would like to give you some information on our preparations for the ELAD BLA, in the event of course of positive results. The ELAD system is regulated as a combination biologic product by FDA. It is comprised of 4 cartridges that contain VTL C3A cells, constituting the biological product, connected to a bedside delivery system, which circulates the patient's plasma through the cartridges and returns the treated plasma back to the patient.

The whole system is regulated by the Center for Biologic Evaluation and Research Division of FDA or CBER, and specifically by its office of tissues and advanced therapies. It is important to note that the bedside delivery system does not need separate approval by the FDA's medical device division although the division does provide advice about approval to CBER.

Europe is similar, although the terminology is different. The licensed application in the EU is known as a market application authorization -- or MAA -- and ELAD is classed as an advanced therapy medicinal product, or ATMP, in the EU.

We plan to submit BLA to the FDA nine months after announcing the topline results of the VTL-308 clinical trial. To do it faster than this would require the addition of significant resources and expenses before the topline results are available. We currently believe that this BLA submission will be granted priority review by the FDA.

Priority review is granted for drug applications that, if approved, would represent significant improvements in the safety or effectiveness of the treatment of serious conditions when compared to current standard of care.

In the event of successful trial results, we believe a BLA submission for ELAD would qualify under this standard. The FDA determines whether an application will have priority review designation within 60 days of the BLA submission. And if priority review designation is granted, the FDA's goal is to take action on an application within 6 months -- or a total of eight months from submission, which is 4 months shorter than the FDA's goal for a standard review.

So now let's turn to an outline of some of our plans for commercialization -- again, assuming positive results from the VTL-308 clinical trial. For commercialization comments, we are grateful to the deep experience that we have on our Board of Directors with pharmaceutical commercialization

For this call, we will discuss our marketing strategy and manufacturing. In future quarterly calls, we'll discuss other aspects of commercialization.

Marketing strategy. We have discussed the large market potential for ELAD before, in our corporate presentation. And we intend to address this significant opportunity by marketing ELAD ourselves in most of the major countries of the world, with the initial focus on the US and the EU.

Since it is crucial that we safeguard the standard of delivery of clinical care, we plan to restrict the hospitals offering ELAD therapy to large academic centers and prominent community hospitals. In practice, these will primarily be liver transplant centers and hospitals with advanced liver therapy programs, which we estimate there are at least 200 in the US -- many of which will be our existing clinical sites.

Our current plan then calls for satisfying growth by adding more bedside units at these established centers rather than adding more hospitals. We expect that other hospitals in surrounding areas will refer patients to the ELAD treatment centers. We intend to continue sending our own specialists to the hospitals to manage the delivery of the ELAD therapy, to ensure the highest clinical standards. But over time, some hospitals may be able to use their own staff.

We plan to place ELAD account executives in the field who are experienced in liver disease, and assign them a relatively small number of hospitals to cover. We anticipate there will be multiple physicians at each hospital who can order the therapy and the account executives must be capable of interacting at the physician level.

Reimbursement is, of course, crucial and we will cover this on a future investor call. However, for context, ELAD is intended to be a life-saving therapy in an orphan indication, which are characteristics usually quite helpful in establishing reimbursement. Education and awareness of alcoholic liver disease are also important components of our commercialization of strategy.

We're now working with our clinical sites, principal investigators and court leaders on ways to reach and provide more information to persons and families affected by this terrible disease. To that end, we have also reached out to and recently engaged with the American Liver Foundation, to aid and encourage them in their educational outreach on alcoholic liver disease -- including alcoholic hepatitis -- to the patient community the medical community and other stakeholders.

Now to manufacturing, we are fortunate to have a manufacturing plant and processes in San Diego that we believe can meet our needs for commercial introduction. Unlike most other biotechnology companies, we do not contract out the manufacturing of our drug substance or our drug product. In our case, these are the C-3A cells and the cells in the ELAD cartridges, respectively.

As currently equipped, we estimate our plant is capable of producing about 600 ELAD cartridge sets per year, although we have only operated it at about 100 sets per year for the clinical trials.

One set is four cartridges used to treat one subject. With a modest additional investment, we believe this capacity can be increased to about 2000 sets per year. And, with significant additional investment we believe the San Diego site could be increased to about 4000 sets per year, which represents capacity that we believe could support up to several hundred million dollars in future sales at currently anticipated pricing. For larger volumes, we would need to build a larger plan at a different location. We intend to build future capacity against demonstrated need.

Of course, we have only operated our commercial bioreactors to produce multiple cartridges at the development stage. And it could take more time than we expect to optimize the commercial process, increase capacity and generate revenue.

Next, let's turn to the continuing work we are doing to elucidate ELAD's potential mechanism of action, conducted with the involvement of our eminent Scientific Advisory Board. A new area of investigation in mechanism of action involves the reduction of oxidative stress. This has been shown by third parties in independent research to be a major contributor to cell activation and cell death in the livers of alcoholic hepatitis subjects.

Prior metabolomics analysis have suggested that there were fewer markers of oxidative stress in the plasma of ELAD-treated subjects. Further work in cell-based models confirms that reserves of glutathione -- a powerful intracellular antioxidant - were increased into hepatocytes and endothelial cells when exposed to ELAD condition medium.

Current investigation is focused on mapping the specific enzyme pathways involved in these cells. It should be noted that most of that mechanism in actual work has been carried out in laboratory based studies, with only limited work involving samples from our clinical subjects. And therefore these findings may not extrapolate to our clinical population.

We are also continuing our research collaboration with Drexel University in Philadelphia and the University of Birmingham in the UK exploring the potential for ELAD to resuscitate marginal donor livers, and thereby increase the supply of livers available for transplantation. We look forward to providing an update after we have collected more data.

Finally, one of the principal investigators in both of our Phase III trials is presenting some additional data on VTI-208 at the International Liver Transplant Society meeting in Prague, later this month. These data examine the prognostic value of the Lille score -- an algorithm incorporating change in bilirubin to predict survival in ELAD-treated subjects.

I'll now turn the call over to Mike Swanson for a discussion of our first quarter financial results.

We ended the first quarter with cash and cash equivalents of $86.6 million. As previously noted, this includes the proceeds of $37.8 million after underwriting discounts and commissions from our March common stock offering, in which we sold a total of 10.1 million shares at $4 per share.

Summarizing the results for the quarter ended March 31, 2017, the Company reported a net loss of $12.6 million or a $0.39 basic and diluted loss per share. This included non-cash expenses for stock based compensation, depreciation and amortization totaling $1.6 million dollars in the first quarter of 2017.

This compared to a net loss of $9.6 million dollars or a $0.31 basic and diluted loss per share for the first quarter of 2016, which included $1.5 million for the same non-cash expenses. For more details on these financial results, please refer to our press release and our quarterly report on Form 10-Q.

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

I would like to open up the call to your questions. In addition to Mike, joining me for this Q&A portion of our call are Duane Nash, our President; Rob Ashley Executive V.P. and Chief Technical Officer and Dr. Jan Stange, our Chief Medical Officer.

Operator, can you please provide instructions and open up the call for questions?

(Operator Instructions)

Katherine Xu from William Blair.

Terry, in your prepared remarks you said that the current capacity could support $100 million of dollars of sales at currently anticipated pricing. Can you elaborate a little bit on that pricing assumptions?

I think, Katherine, what we've said is that the pricing per treatment will be between $150,000 and $225,000 per set of cartridges. And that we intend to sell the cartridges for that price. And basically we will decide what to do with the bedside unit --which is not a major component of cost.

So that's where we're at on pricing. And of course I think you know we've been working with some key people on that whole issue of pricing and reimbursement.

Terry, if I could just make a quick comment. So our pricing comes from a group of expert pricing specialists. And although we ourselves haven't really opined where the price would be, their recommendation was between 150,000 and 275,000 not 225,000.

And then I'm just wondering for the 308 study -- so we're of course expecting a placebo mortality rate at 50% at least. Wondering how confident you are in that number? Of course, that was the observation that you had from 208, but do you have any other supporting evidence to put a higher confidence into or around that number?

Rob, can you comment on that please?

Yes, of course these assumptions have -are critical to our statistical plan. And as you point out, the 180 days survival - the six month survival that we saw in this subgroup from our prior study suggested that the control mortality rate would be around 50% or so, or even a little more.

So there is a couple of pieces of information which I think help us put some confidence around that. The first is that, as we've reported towards the beginning of the study, we continue to see baseline characteristics of the subjects coming into the study which are entirely consistent with the subgroup which we analyzed at VTI-208.

So we have many MELDs of around 25 and average ages of around 39 or 40. So that's very encouraging, if this population performs like the prior population did.

And then we've also been fortunate enough to be able to interrogate the STOPAH study. The STOPAH study was a large -- more than a 1000 patient study -- which was carried out in the UK to look at the efficacy of steroids or Pentoxifylline in alcoholic hepatitis. It ultimately drew the conclusion that whereas there was some evidence there was steroid efficacy at 28 days, there was no evidence for any efficacy for steroids at 90 days.

So these poor subjects remain without any treatment option. A little less than a quarter of the subjects which were enrolled in that study have the same characteristics as VTL-308 subjects, although the mean MELD for those subjects turned out to be quite a lot less than we're getting in our patients. I don't know whether that's reflective of the different healthcare systems and different types of populations and so on. Their mean MELD in our equivalent population is about 21.

So the expected mortality in that group would have been about 30%, and sure enough, it was. In the placebo group it was around about 30%. With our mean MELD of around 25 or so, then our expected mortality would be closer to 50%.

So everything that we see regarding the characteristics of the subject population, comparing with other populations which people are presenting at the meetings, suggests that we're going to be in the right ball park with this mean MELD. And of course, enriching the population with a bilirubin of greater than 16 mgs per deciliter coming in.

So I'm as confident as I can be that the control population will behave the same way to control population behaved in our 208 study.

Jonathan Aschoff from OPU National Capital.

You had about nine patients per month from December to March, and March to May more like seven patients per month, certainly with no fewer clinical sites open. So I was wondering how you reconcile that?

Well as we said before, Jonathan, enrollment jumps around. March-April are key months for medical meetings. But I always joke with people that patients are like London buses -- you wait for an hour at the bus stop, none come along and then all of a sudden four or five coming together. So we are going to get bouncing up and down in terms of the monthly rate.

But let me ask Dr. Stange to comment.

The only thing that I would like to add is that April was better than March. And we have the variation of enrollment per month in the last study, 208. Sometimes five patients per month, sometimes 16 patients per month, sometimes three a day - there's just not parametric statistics. This is very non-parametric and I would not see a trend towards this enrollment. No.

I was also wondering, are you truly getting those early enough stage patients that fit well within the entry parameter thresholds, or are you having to enroll patients that sort of fit the entry criteria but are very often let's say towards the very ends of the acceptable ranges of those different parameters?

Let me jump in before Jan jumps in. As you all know, Jan is from East Germany and I regard him as my East German policeman on the enrollment. And the answer is a very strong, we do not accept patients into the trial that do not fit the enrollment criteria. But, Jan, comment.

But let me make the statement, I never have anything to do with the East German police, okay? But the answer's absolutely yes. That is the reason why for enrollment we have to do a lot of activities to maintain our target.

And the reason for that really is that we are 100% sticking to our entry criteria which are based on our data that we learned from 208. And we don't see that they end up in one spectrum. More it's all over the place, but they are clearly and comfortably within our new specified criteria.

-- Jan, I think we can say we have never enrolled a patient that is outside of the criteria.

No, correct --

-- as I mentioned earlier, there is the mean meld is 25, which is absolutely spot on what we had in the prior study. And the mean bilirubin also is around about 25 mgs per deciliter. So it's not like we're enrolling patients who are 16 or 17 [mix per deciliter]. We're right smack bang out where we hope to be with this patient population --which is really a testament to everybody's efforts.

Okay. And in terms of those who refer to you, roughly how many, what percent - is there 67 enrolled? Is what percent of how many that were overall referred to you by people who thought these patients fit your criteria?

Are you referring to the prescreen? I would say -- and again this is also very noisy. We have some sites that screen 20 patients -- 40 patients a month and find one. And then we are sites that prescreen 10 and find three. So it's very noisy. But in general, I would say we look at 10 to identify one -- that's the all over statistics, as of now.

However, we continue to educate our trial sites and also their referring network outside the trial sites with referring dinners what kind of subjects they should consider for prescreen. So there we learned that some of the refereeing sites in the past who even put patients on the prescreen that had liver cancer or active Hepatitis B as a reason for jaundice to put that on the prescreen and we are educating them that we don't need to know.

What we need to know is alcoholic hepatitis, yes or no and what are the criteria there? So, to answer your question, as of now the statistics are approximately 600 plus prescreen and we are 67. That might change over time since we are in an active education process.

Okay thanks. And then the last quick one I think is, what's going to be the R&D trend at least, if you will, from the 1Q spend over the rest of the year?

The spend? The expense rate?

Yes.

My initial reaction would be that it would be identical. Is that reasonable Mike?

Yes. Really the only thing that moves around the R&D spend significantly is the timing of patient enrollment. As we've just been discussing, there can be fluctuations from month-to-month and quarter-to-quarter. And that's the biggest driver of our costs right now.

(Operator Instructions)

I'm showing no additional audio questions at this time. I'd like to turn the conference back over to management for any closing remarks.

I'd just like to thank everybody for attending the conference call today. And we'll do it again for the second quarter results -- I believe in early August. Is that right? Yes.

Thanks, everybody. Bye.

Ladies and gentlemen, thank you for participating in today's conference.

This concludes the program. You may now disconnect. Everyone have a wonderful day.