Lumos Pharma Inc (LUMO) 2020 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Lumos Pharma Third Quarter Earnings Call. (Operator Instructions) As a reminder, this call is being recorded.

I will now turn the call over to Lisa Miller, Director of Investor Relations. Please go ahead.

Thank you. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports filed with the SEC.

The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Information presented on this call is contained in the earnings release we issued this afternoon and in our Form 8-K, which may be accessed from the Investors page of the company's website.

Joining me on today's call are Rick Hawkins, CEO, President and Chairman; John McKew, Chief Operating Officer and Chief Scientific Officer; Gene Kennedy, Chief Medical Officer; and Carl Langren, Chief Financial Officer. Rick Hawkins will provide a corporate update. John McKew will review the company's lead therapeutic candidate and target indications. Gene Kennedy will discuss our Phase IIb trial initiation and our concurrent pharmacokinetic/pharmacodynamic trial. And Carl Langren will wrap up the call with a review of the Q3 2020 financials and an update of cash guidance.

I will now turn the call over to Rick.

Thank you, Lisa. Good afternoon, and thank you for joining us on today's all. After the market closed, we issued a press release announcing the initiation of our Phase IIb OraGrowtH210 trial. This trial will evaluate our oral therapeutic candidate for children with pediatric growth hormone deficiency or PGHD. The press release also includes corporate updates related to our planned pharmacokinetic/pharmacodynamic OraGrowtH212 trial and our third quarter financial results.

The third quarter was an exciting time for Lumos Pharma, marked by significant achievements and corporate updates as we continue to execute on our mission of developing new therapies for patients with rare diseases. Specifically, as I mentioned, we are excited to announce the initiation of our Phase IIb OraGrowtH210 trial, evaluating oral LUM-201 for PGHD patients, the first focus of our OraGrowtH trials program involving LUM-201 as a potential therapy for multiple indications currently treated with injectable growth hormone.

The OraGrowtH210 trial will evaluate 3 doses of LUM-201 for PGHD patients, with the goal of prospectively confirming our predictive enrichment marker or PEM strategy and identifying the optimal dose of LUM-201 to be used in a registration trial. We eagerly anticipate our Phase IIb data readout, which is expected mid-year 2022.

And in conjunction with our Phase IIb trial on PGHD, Lumos Pharma also plans to conduct a separate single-site trial in PGHD focused on the pharmokinetic and pharmacodynamic aspects of LUM-201 to further explore the pulsatile nature of LUM-201's mechanism of action. The initiation of our second concurrent study evaluating LUM-201 for PGHD patients remains on track to begin during the first quarter of 2021. While Gene Kennedy, our Chief Medical Officer, will speak about both of these trials in greater depth later on in this call, I want to take the time now to express the excitement that we feel at Lumos Pharma around this potential opportunity for our oral therapeutic to disrupt the injectable PGHD market by bringing long-lasting benefits to patients who are subjected to years of treatment with daily injections, for which there currently exists no available oral alternative.

Additionally, the company is pleased to announce that in the third quarter, we received the first tranche, $34 million, of the $60 million proceeds owed Lumos Pharma from the sale of our priority review voucher or PRV. These nondilutive funds will be available to support the expansion of the company's pipeline through the acquisition or licensure of another novel therapeutic candidate for rare diseases.

Specifically, we're looking to target therapies where the medical unmet need is high and the pathophysiology is clear. We anticipate the receipt of the second tranche of the PRV in the first quarter of 2021, which will serve to further strengthen our balance sheet and support our product candidate acquisition strategy beyond LUM-201. We feel fortunate to have both a solid balance sheet as well as an integrated and experienced management team in place, putting us in a strong position to continue to execute on our mission of developing treatments for patients suffering from rare diseases.

With that, I'll turn the call over to John to provide an update on the company's lead therapeutic candidate and target indications. John?

Thank you, Rick. As Rick stated, we are excited to announce that our Phase IIb OraGrowtH210 trial, evaluating oral LUM-201 in PGHD patients, is open for enrollment. We believe that LUM-201 may offer a preferred treatment option for a significant subset of children suffering from growth hormone deficiency in terms of the convenience that it provides to patients as well as potentially increased efficacy due to higher rates of compliance.

As a reminder, growth hormone deficiency can be attributed to low or absent secretion of growth hormone from the pituitary gland. Children with untreated growth hormone deficiency will experience significant growth failure and in many cases, attain an adult height of significantly less than 5 feet, with other potential consequences, including decreased bone mineralization, decreased lean body mass and increased fat mass.

PGHD is a well-recognized condition affecting approximately 1 in 3,500 children in the U.S., Japan and 5 major countries in Europe, with an equally well-established market over $1 billion in size across these same regions. This market consists of the current standard of care of daily injections of recombinant human growth hormone administered to a child for 7 years on average.

Lumos Pharma's therapeutic candidate represents a significant opportunity for these patients as LUM-201 provides a meaningfully different treatment option for PGHD, both in terms of its route of administration and its mechanism of action. The first point of differentiation involves LUM-201's route of administration as an orally administered tablet rather than an injectable therapeutic. While the current standard of care for PGHD consists of around 2,500 injections administered to a child over the average 7-year treatment time frame, LUM-201 is available in the form of a small tablet taken daily. This can potentially provide a therapeutic alternative to these 2,500 injections, which provide challenges for the children and the parents or caretakers.

As a consequence, studies reveal significant compliance issues with the standard injectable treatment regimen, resulting in an impact on growth. With our unique LUM-201 oral agent, the challenges associated with these injections can be alleviated, potentially leading to significant improvements in compliance and therefore efficacy in this patient population.

Second, LUM-201's unique mechanism of action has the potential to safely restore the periodicity and secretion of growth hormone to normal levels. Currently, the standard of care for PGHD therapeutics and others in development act outside of the body's natural feedback mechanisms. LUM-201, however, is unique in that the molecule is not growth hormone, but is instead a growth hormone secretagogue. LUM-201 selectively acts on receptors in the pituitary and the hypothalamus to stimulate the body's ability to release growth hormone at the same intervals and within the same endocrine feedback loops as occurring naturally.

The natural secretion of the growth hormone into the body is pulsatile, with secretions occurring from 23 to 25 times over a given 24-hour period. LUM-201 stimulates the secretion of growth hormone in a way that mirrors this natural pulsatile mechanism while amplifying the peaks of these pulses in order to restore growth hormone and IGF-1 to more normal levels. Preclinical data demonstrate that amplifying the pulsatile release of growth hormone produces greater efficacy than continuous exposure to growth hormone. Utilizing this endogenous release mechanism should enable the naturally occurring IGF-1 feedback loop to be activated, that's needed to ensure proper balance with growth hormone and IGF-1 levels in the body.

Given the endogenous nature of LUM-201 activity, as just described, the individuals who are able to benefit from this molecule must have an active but diminished functioning of the pituitary axis. For this reason, Lumos Pharma is targeting the moderate PGHD population of patients who are able to naturally produce growth hormone but in insufficient amounts to attain normal adult height. Based on our analysis of prior clinical data, predictive enrichment markers or PEMs identify them, the modern PGHD patient group likely to respond to LUM-201 therapy, which represents approximately 50% to 60% of the total PGHD population.

For our Phase IIb OraGrowtH210 trial, we plan to use these same predictive enrichment markers or PEMs to identify potential LUM-201 responders. PEM positive patients reflect a baseline IGF-1 level above 30 nanograms per ml and a peak growth hormone level of greater than or equal to 5 nanograms per ml in response to a single dose of LUM-201 and would be randomized into our trial. We believe that by using these predictive enrichment markers, our upcoming clinical trials will confirm data from earlier trials, showing the potential for LUM-201 to treat a significant subset of the PGHD population with an oral therapeutic. As such, we believe that LUM-201 offers a novel and differentiated treatment option for this subset of PEM positive children suffering from growth hormone deficiency.

I would now like to turn the conversation over to Gene Kennedy, our Chief Medical Officer, to discuss our PGHD trials. Gene?

Thanks, John. I will now take some time to provide more specifics on our Phase IIb OraGrowtH210 trial, evaluating LUM-201 that was just initiated. With regard to trial design, our study evaluates 3 dose levels of LUM-201 in PGHD patients against a comparator arm of standard of care injectable growth hormone therapy. Dosing will be administered over 6 months, with annualized growth height velocity as the primary clinical outcome measure.

As previously stated, the 2 main objectives for this Phase IIb study are to prospectively confirm the utility of our predictive enrichment marker strategy in selecting likely LUM-201 responders and to determine the optimal dose for a Phase III registration trial. We have chosen the dose levels of LUM-201 for our Phase IIb trial for patients with PGHD based on supporting data from a prior PK/PD study of LUM-201 in healthy adults. First, the pharmacokinetic or PK data in this adult study confirmed that higher doses of LUM-201 administered do result in higher plasma concentrations of LUM-201. The pharmacodynamic or PD data from this study demonstrate that as you increase the dose of LUM-201 given, the body secretes more growth hormone until the natural feedback loop is stimulated, causing the release of further growth hormone to plateau.

The 3 doses of LUM-201 we are evaluating in our trial cover the full pharmacodynamic dose response range seen in the adult volunteer study. As the PD data indicate, there is the potential for a significant increase in growth hormone secretion and therefore increased efficacy between the lowest and highest planned dose for our Phase IIb trial.

As to the specifics of trial design, our study is designed to enroll and randomize 80 children to 1 of the 4 treatment arms. The primary end point of the trial is the success of our predictive enrichment marker strategy intended to select subjects likely to respond to therapy with LUM-201. This will be assessed by the percentage of subjects defined as PEM test positive who have a positive growth response as measured by annualized height velocity from baseline to month 6.

The key secondary end points, in addition to safety, are, first, the selection of a pediatric dose of LUM-201 for use in future studies, including Phase III, based on comparison of 6-month annualized height velocity achieved by daily injectable human growth hormone or different doses of LUM-201. Additionally, we will evaluate the repeatability of the LUM-201 strategy and the classification of patients as either PEM positive or PEM negative. We estimate, based on the expected PEM positive rate of 50% to 60% as seen in prior studies with LUM-201, we will need to screen approximately 140 children to identify the 80 children to be randomized. During the screening process, we will have the 2 tests that form our PEM strategy, baseline IGF-1 and LUM-201 stimulation test, done as a paired set twice, approximately a week apart. We will then assess if the clinical determination of PEM positivity or negativity remains the same between the paired assessments. This will provide further clinical evidence as to the utility of our approach.

While this trial is ongoing, Lumos remains on track to initiate a second concurrent trial of LUM-201 for patients with PGHD during Q1 2021. This OraGrowtH212 trial is intended to further explore the effects of the mechanism of action of LUM-201 in amplifying the natural pulsatile secretion of growth hormone by focusing on pharmacodynamic end points at 2 different doses in a limited number of children with PGHD in order to corroborate the amplified pulsatile secretion demonstrated in prior LUM-201 studies in adults. The trial is being conducted at a single specialized pediatric center, with the ability to conduct a more frequent sample collection and monitoring required for these types of clinical trials. Once initiated, the study will run in parallel with our ongoing Phase IIb OraGrowtH210 trial, with the goal of providing supportive data in future regulatory filings and ultimately in our commercial marketing efforts.

Finally, we are excited by the potential that LUM-201 has to serve as a platform therapy for other indications for which recombinant growth hormone is approved. Pending results from our concurrent trials of LUM-201, we plan to expand our clinical development program to evaluate LUM-201 in other indications, such as Turner syndrome and children born small for gestational age. Beyond LUM-201, we continue to actively pursue business development opportunities to license or acquire other rare disease assets in order to expand our pipeline and our ability to provide innovative therapies to those suffering from rare diseases.

I will now turn the call over to Carl Langren, our CFO, to discuss financial results for the third quarter and review our cash forecast. Carl?

Thank you, Gene. We ended the third quarter of 2020 with cash and equivalents of $105.6 million and anticipate cash use of approximately $6.5 million to $7.5 million in Q4 2020. This quarter end cash balance includes the first tranche of $34 million in proceeds from our PRV sale, and we anticipate receipt of the second $26 million tranche in Q1 2021. These nondilutive funds from the PRV sale will contribute to supporting the expansion of the company's rare disease pipeline.

Lumos Pharma reported net income of $1.8 million for the third quarter of 2020 compared to a net loss of $2.7 million for the same period in 2019. As we have discussed, we sold the priority review voucher for $60 million in the third quarter. Given our previously reported $52.2 million net value for the PRV, we recorded other income of $6.3 million in Q3, which is net of $1.5 million in costs incurred related to the sale during the period. The second installment of $26 million is recorded within other receivables on our Q3 2020 consolidated balance sheets. Please refer to the press release we put out this afternoon for more detail on financial results.

Looking ahead, we hope to speak with many of you participating in the Stifel Healthcare Conference and the Jefferies London Healthcare Conference, both of which are scheduled for mid-November as well as the Piper Sandler and Evercore ISI health care conferences in December.

Now I would like to turn the call back over to Rick before we open up for questions. Rick?

Thank you, Carl. We're excited about the initiation of our Phase IIb OraGrowtH210 trial in PGHD and energized for the opportunities that we see for Lumos Pharma now and in the future. We believe that with our oral therapeutic candidate, LUM-201, we have the potential to disrupt the PGHD market served by a treatment regimen of frequent injections. We are also actively looking to expand our rare disease portfolio to address other patients in need. With a solid balance sheet and experienced management team, we're operating from a position of strength to execute on our clinical development plan and look forward to continuing to provide updates as we progress.

With that, we'll open the call to questions. Operator?

(Operator Instructions) Our first question comes from the line of Yasmeen Rahimi with Piper Sandler.

And congrats on the tremendous progress. A couple of questions. Maybe the first one is on the Phase IIb study that got kicked off. Can you maybe help us understand if there are any specific protocol amendments that were put in place for doing the stimulation test? I just wanted to make sure that the IGF level and any protocols are consistent with what is normally done in other sites.

And then the second question is what is the purpose of the PK/PD study that's going to start next year next quarter? Is the purpose just for labeling? I guess I just want to have a better understanding of the study. And what that will -- what are you hoping to gain from that study?

Thank you, Yas. And Gene, will you answer those questions?

Yes, certainly. I appreciate the questions. It's nice to talk to you. So for our Phase IIb study, patients are first diagnosed with the standard stimulation test to diagnose them as to whether or not they have growth hormone deficiency. That's part of becoming eligible for our study. And then once they get through that hurdle, they undergo the baseline IGF-1 and the LUM-201 stimulation test under very prescribed conditions which are laid out in the protocol itself. All right? So it's all in the same document. So that way, we can make sure that they're done in a consistent manner so we can have data that we can stand behind. Does that answer the question? Or would you like some more color?

Well, I guess I just wanted to understand that how is this protocol going to vary in the real world one day? Like is the protocol to qualify into the study different than what would be in practice?

Well, I think the short answer -- or go ahead, Rick, if you want to answer?

No. You just go ahead, Gene.

Okay. I think the short answer is that the normal pathway for diagnosing patients will remain unchanged. To date, there's been no need to segregate pediatric growth hormone-deficient patients and to those who have a more severe nongrowth hormone-secreting physiology and a more moderate some growth hormone-secreting physiology. So we believe to appropriately use this drug and have the option of selecting the correct patients, that, yes, the additional LUM-201 stim test -- the IGF-1 baseline is just done commonly as is, but the additional LUM-201 stim test would be another step to appropriately subset patients into 2 different groups of physiology so that the clinicians can then pick the right tool, injectable versus oral, for the patients who have -- based upon their physiology.

That's helpful. And then thoughts on the PK/PD study?

That as far as on the PK/PD study?

Yes.

Yes. So I know you've been through all of our materials, and I'm sure you came across data that's been published for a while now, that shows when you frequently draw blood from an adult after a dose of LUM-201, all of the 23 to 25 peaks of growth hormone secretion, that John does a great job talking about in our normal presentations, are amplified in those adults. We believe it would be very helpful to the field. You know endocrinologists, you know they are very scientifically driven. So we think it would be very helpful to support our mechanism of action to be able to generate similar data in a pediatric population. So that's the purpose of the study.

And then maybe last question, sorry. What is the age group for the study that are going to be enrolled? What's the cutoff?

Gene?

Kids who are between the ages of sort of 3 and 4 and 10 to 11, boys and girls, but basically, we want kids who are naive to treatment and who haven't started puberty yet.

Our next question comes from the line of Ed White with H.C. Wainwright.

So just on the trial, we're hearing that there could be a second wave to the pandemic. I'm just wondering what precautions you're making now to make sure that you are able to stay on track to get your data in the middle of 2022. And then if you can just tell us the number of sites that you're planning to open and where they're going to be located. Is this going to be U.S. only? Or are you going to have some of the sites outside of the U.S.?

Gene, why don't you answer that?

Yes, certainly. So there's not much good to be said about COVID, but the fact that we hadn't actually opened our trial when it started, I think, gave us a distinct advantage because we were able to give our sites time to adapt to how they see patients and adapt their patient flow to the realities they're facing now. So we've been working with the sites and communicating with them. And health care is, even though there is great concerns about another wave, given the fact that the personal protective equipment and the other adaptations have had months to mature, we're optimistic that kids are going to continue to be treated and trials can go on, hopefully, in much better stead than when this came initially and caught everyone by surprise.

So we're confident we've made modifications, think some things that you would typically do in person, like an investigator's meeting, we're going to do virtually. That's the world we all live in right now. But we think that we can get this trial done, as we said.

Now as far as how many sites, that's -- and where we're doing them, that goes right into our strategy. We're going to have -- what we've said is roughly 40 sites. There's going to be a lot of sites in the U.S., but we have a geographic distribution from coast to coast. We also have a division between private practice clinics and larger academic centers. And as all of us are aware, those types of facilities would have different obligations and different challenges if COVID should get to, let's say, New York City levels again in a different city at some point. So we think that gives us an advantage to, if there are problems, focus our efforts in areas that are doing better than some areas and then if that shifts, shift our efforts back, if that makes sense.

And we also do have an international strategy. We have sites that we're working to open in Poland, sites that we're going to open in Australia and New Zealand. We're also looking at other opportunities. And we think having a diversity of sites outside the U.S. as well as within the U.S. gives us an ability to be flexible and respond to conditions as they happen.

Great. And perhaps the last question that I want to ask is just on your business development, BD, opportunities. Now that you have the first tranche of the cash, I'm sure you were already looking at opportunities, but has any progress been made? And your thoughts about what's out there in the space that you're looking for.

Ed, it's a good question. And the way I can answer that is just to say that we're going to be patient. Our business development efforts are headed by a senior executive, Aaron Schuchart. He's got about 27 years of experience in the space. We have looked at probably 75 opportunities to date, and a number of those opportunities are a handful. We've gotten a very deep dive. I'm convinced that our process is going to yield a positive return for us and especially in light of the kinds of opportunities that we've seen.

I think that the other point is that this is a very experienced management team in the rare disease space. And those opportunities are coming to us and I think based on that experience and context in the industry. So I think we're going to have a positive outcome here.

Our next question comes from the line of Eun Yang with Jefferies.

This is [Yinyi Daling] for Eun. I have a question on the Phase IIb design. Under ClinicalTrials.gov, it's just that the primary end point is the percentage of subjects, subject by PEM, who meet target growth. Could you elaborate on what target growth that you mean there? And also to clarify, Phase IIb only enrolls those kids who meet -- who are PEM positive, right?

Gene, will you take that?

Yes, certainly. No, it's a great question. And we thought it was very important to test these -- this PEM selection strategy in a statistic -- a statistically rigorous way before we launched our registration trial. The data we have shown and how we derived our PEM factors show that in a nonselected population with PEM negative and PEM positive kids, 50% to 60% of the kids had a positive growth response albeit dose -- dose-dependent and then PEM positive kids, right? So when we have a PEM selected population, we would expect the percentage of children to grow to exceed that 50% to 60% bar. So that's how we've set up our statistics there. I really don't want to go into the weeds without being able to actually show anything here verbally.

But the idea is that the percentage of kids who grow in an enriched population obviously should be higher than the percentage of kids that grow in a nonenriched population, or else you're not effectively enriching. Is that helpful?

Yes. So the trial would be in the kids who are PEM positive, right?

Exactly. Only PEM positive kids will be among the 80 kids randomized to 1 of the 4 treatment doses.

I see. And then the target growth that you mentioned there, that you expect the growth to be higher than a nonenriched population.

And well, the percentage, the number of kids because we're enriching from likely responders, right? So that's the thing. The overall -- instead of 50% to 60% of the kids growing, we expect a higher number to grow because we were enriching for kids we think are likely to respond. So that's where -- that's really where the math comes down.

Oh, I see. Okay. Great. And a follow-up question for the PK/PD study. I think you guys previously mentioned that you're going to test 2 different doses. I just want to know how you're going to select those 2 doses to be tested.

Gene, go ahead.

Yes. In the PK/PD study, quite simply, they're going to be 2 of the same doses we're using in the OraGrowtH210 trial. I don't believe we specifically stated which of the 3 doses we've moved forward into the OraGrowtH212 study. It's going to be 2 of the same doses.

Our next question comes from the line of Elemer Piros with ROTH Capital Partners.

So about the doses that you just described that hasn't been disclosed yet, how should we think about these doses in vis-à-vis what was used previously in previous trials? Higher, in the same range? I know you discussed that they cover the entire range. But if you could provide a little bit more specificity, please?

Thank you for the question, Elemer. And John, will you answer that question, please?

Sure. So I think what we told people in the past is in our Phase IIb trial, we are going to look at 3 doses, 0.8 mg per kg, 1.6 and 3.2 mg per kg. And for the PK/PD study that we're doing, we're going to take 2 of those doses and go forward with them.

Okay. And so just to make sure that I understand the purpose of the PK study, and I think it's much clearer now, so you're measuring -- or you're -- there is an observation of 23, 24 -- 23 to 25 pulsatile secretions of growth hormones without treatment. Now the treatment would amplify those peaks or increase the frequency. That's what you are trying to determine or there is some other purpose for the study?

John, go ahead.

As Gene mentioned, what's been seen in adults so far with frequent sampling, after 6 or 12 months of treatment with LUM-201, is that you don't actually change the number of peaks, you just change the amplitude of those peaks, right? And by changing the amplitude of the peak, you increase the amount of growth hormone that's released over 24 hours. And we would like to show something similar to that in this PEM positive pediatric growth hormone-deficient kids, right? So we would like to make sure that we can replicate that, and we understand exactly how we're affecting the pulsatile release with LUM-201.

And just to confirm, that it's a once-daily administration of pills. And how many pills are in the 3.2 mg per kilogram group concerning -- regarding an average-size child?

Yes. Go ahead, John -- not John, but Gene. Go ahead.

Yes. So the actual number of pills, we have a couple of different doses, we have a couple of different-sized tablets because we have a couple of different-sized doses in our Phase IIb study. Our plan is to obviously only take one dose into Phase III. And I think we can give you more clarity at that point when we have our dose. But our expectation is that there will not be a significant pill burden here. That's why we're doing the thorough exploration of dose, so we can actually get efficacy without any kind of significant pill burden for these kids.

Thank you. I'm showing no further questions in the queue at this time. I'll hand the call back to Mr. Hawkins for closing remarks.

We thank you for your interest and look forward to speaking with investors at the November and December investment conferences and other venues in the coming year. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.