Obseva SA (OBSV) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ObsEva Third Quarter 2017 Earnings Results and Business Update Call. (Operator Instructions) Now I would like to welcome and turn the call to Mr. Mario Corso. Please go ahead.

Thank you, operator. Good afternoon, and morning everyone, and welcome to today's call to review ObsEva's Third Quarter 2017 results and business update. On this call, I'm joined by Ernest Loumaye, our Cofounder and Chief Executive Officer; and Tim Adams, our Chief Financial Officer.

During the call today, we will make forward-looking statements, and we remind you of our safe harbor language. We will make forward-looking statements, including but not limited to statements relating to financial results and trends; the process and timing of the anticipated future development of ObsEva's product candidates; our gonadotropin-releasing hormone or GnRH receptor antagonist, OBE2109; our oxytocin receptor antagonist, nolasiban; and our PGF2a receptor antagonist, OBE022; including clinical trial results and potential regulatory pathways towards gaining approval of our product candidates in the U.S., Europe and Asian countries as well as the therapeutic and commercial potential of ObsEva's product candidates.

These forward-looking statements are based on ObsEva's current expectations and inherently involve significant risks and uncertainties. ObsEva's actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of these risks and uncertainties, which include without limitation, risks related to ObsEva's development programs; clinical trial time lines and results; the uncertain clinical development process, including adverse events; the success cost and timing of all development activities and clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses, capital requirements and the need for financing; and other risks detailed in the Risk Factors and elsewhere in ObsEva's U.S. Securities and Exchange Commission filings and reports, including its form 20-F report filed with the SEC on April 21, 2017. ObsEva undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or changes in its expectations.

I will now turn the call over to Ernest Loumaye, our Chief Executive Officer.

Thank you, Mario. On today's call, we will provide the business update, including clinical trial progress for our 3 new chemical entities, third quarter 2017 financial results and our outlook for achieving key future clinical milestones.

We continue to make meaningful progress towards our goal of becoming a leader in the field of women's health and fertility medicine. As you may know, we have multiple promising compounds in clinical development with 2 Phase III programs: OBE2109 for the treatment of uterine fibroids; and nolasiban for assisted reproduction technology, or ART. We also have 1 Phase IIb program moving towards Phase III in OBE2109 for the treatment of endometriosis. And our earlier stage program, OBE022, for pre-term labor is commencing a Phase IIa clinical trial in this quarter.

I would now like to take a few minutes to discuss recent development stages of each of our R&D pipeline compounds. I will start with our lead asset, OBE2109, an oral GnRH antagonist for the treatment of endometriosis and uterine fibroids. In April, we commenced our Phase III clinical trials, PRIMROSE 1 and PRIMROSE 2 for uterine fibroid treatment, and we are pleased to report that we began randomizing patients to treatment in the third quarter following the 2-month training period required to establish baseline bleeding levels.

We are encouraged by initial interest among both physicians and patients. Recall that these studies are two double-blind, placebo-controlled Phase III international clinical trials in women with heavy menstrual bleeding, or HMB, associated with uterine fibroids. Planned enrollment is approximately 1,000 patients in total, with the primary endpoint of reduction in heavy menstrual bleeding as measured by the alkaline hematin method. Our current plans anticipate primary endpoint clinical data to be available in second half of 2019 for both studies.

Our Phase IIb EDELWEISS clinical trial of OBE2109 for the treatment of endometriosis continues to progress. This month, we complete patient recruitment in this trial. And following the achievement of our target randomization of approximately 330 patients in the coming weeks, we continue to expect primary endpoint clinical data in mid-2018. Additionally, we recently achieved another milestone for OBE2109, the validation of our pain scoring system. This is a key element of an endometriosis development plan and is being shared with regulatory authorities for feedback prior to the conduct of Phase III clinical trials.

With such large population in need of new treatment alternative, an estimate 2.5 million women diagnosed and treated for endometriosis and 4 million women diagnosed and treated for uterine fibroids in the U.S. alone., we remain focused on providing a potential best-in-class therapy, with potential optimal dosing and ideal PK/PD characteristic supporting a promising efficacy safety profile. We continue to believe that offering multiple dosage, both with and without add-back therapy, is the ideal way to balance key factors, namely; one, symptomatic relief; two, estrogen-driven side effects, such as hot flashes; and three, bone mineral density safety. And in doing so, appeal to the largest proportion of the patient population. Indeed and importantly, we have recently undertaken effort to better understand physician and patient needs, and initial market research indicates overwhelming physician preference for flexible dosing options, including both partial and full estrogen suppression with and without add-back therapy. We intend to share this analysis at our R&D Investor Meeting that we're planning for the spring 2018.

Now to our second late-stage program, nolasiban, this oral oxytocin-receptor antagonist for assisted reproductive technology during IVF procedure. We announced in September that we complete patient recruitment of over 1,000 patients in 50 fertility centers across Europe in our IMPLANT 2 clinical trial with the aim of randomizing at least 760 women undergoing IVF due to low fertility. Today, we are pleased to announce that patient randomization in this trial is now complete. The trial primary endpoint is ongoing pregnancy at 10 weeks post embryo transfer, and we expect to announce this result in the first quarter of 2018. In the event of positive result, we intend to seek EU and U.S. regulatory guidance on additional clinical trial and registration requirement.

Given that infertility impacts roughly 10% of reproductive age couple and recently more than 1.6 million ART treatment each year worldwide, we are very enthusiastic regarding the commercial potential for nolasiban for the clinical data to be supportive.

Wrapping up with our third pipeline program, our potential first-in-class, oral and selective prostaglandin F2 alpha receptor antagonist, OBE022, designed to delay spontaneous pre-term labor in weeks 24 to 34 of pregnancy. In the first half of 2017, we completed our extensive preclinical and Phase I clinical program for OBE022, which include assisting potential interaction with the drugs used as standoff case in this condition. We are pleased to update our progress today. Our PROLONG Phase IIa proof-of-concept study protocol has been finalized, and we have identified clinical center which will conduct the initial phase of the PROLONG clinical trial. The CTA, the equivalent to the U.S. IND, has been approved and we expect to start patient recruit recruitment before year-end. This trial will evaluate PK, safety, contraction inhibition and target delay of delivery by 2 to 7 days in women who are in acute preterm labor between 24 weeks and 34 weeks of gestation.

PROLONG is being initiated in several countries outside of the U.S., with OBE022 added onto the standard of care, atosiban. This clinical trial is being conducted in 2 parts with part A, an open-label design measuring PK and safety in 8 pregnant women. This will be followed by Part B, a placebo-controlled double-blind design aiming at enrolling up to 120 patients with planned delivery and infant follow-ups. We expect to complete Part A in the second quarter of 2018 and intend to announce initial clinical data for Part B in approximately 60 patients in late 2018. As with endometriosis, fibroids and IVF, the unmet medical need in preterm labor is significant with billions of dollars spent each year on pre-term bills. We look forward to advancing OBE022 in this proof-of-concept study during 2018.

Finally, I would like to quickly mention our recently completed private placement offering in which we agreed to strengthen our relationship with several existing investors, while at the same time attracting new investments from top-tier biotechnology investors. We're grateful for the tremendous interest and support among this group of investors and the transaction has positioned the company to fund our operating expenses and capital expenditure requirements into the second half of 2019 and reach several key milestones.

I will now turn the call over to our CFO, Tim Adams, for a financial overview. Tim?

Good afternoon, or good morning, everyone, and thank you for joining us on the call today. I will provide a brief description of our results for the third quarter of 2017 and an update on our current financial position.

Starting with our third quarter results. Our use of cash from operations in the third quarter of $13.6 million reflected spending in support of our 3 pipeline assets, which included the continued enrollment of our Phase IIb EDELWEISS study in endometriosis, the initial Phase III enrollment of the PRIMROSE 1 and PRIMROSE 2 clinical trials in the treatment of uterine fibroids; and the completion of patient recruitment in our Phase III IMPLANT 2 clinical trial of nolasiban in Europe.

Now turning to the income statement. Our net loss for the third quarter of 2017 was $17 million or $0.59 per diluted share, which compares to a net loss of $7.9 million or $0.37 per diluted share for the third quarter of 2016. This increase in the net loss was primarily driven by our investment in our research and development programs. Our research and development expenses were $13.9 million for the third quarter of 2017 compared to $6 million in the third quarter of 2016. This increase in investment is attributed to the continued progress with our clinical trials.

Our G&A expense for Q3 2017 was $3 million compared to $1.9 million in Q3 of 2016. This increased expense level includes the cost of becoming a public company, additions to our staff and a noncash item of equity-based compensation of $2.3 million. In terms of our liquidity and cash runway, our cash and cash equivalents as of September 30, 2017 were $68.4 million, which reflects the use of cash in the quarter. This quarterly use of cash is in line with our expectation that cash used from operations in the second half of 2017 would be similar to the $28 million from the first half of 2017. As we look to the rest of 2017, with regard to use of cash from operations, we expect the fourth quarter will look similar to the third quarter level of approximately $14 million with some minor potential variance.

Additionally, as Ernest mentioned earlier on the call, last month, we announced a private placement of common shares and warrants that resulted in net proceeds of approximately $56 million. Prior to this transaction, we expected cash on hand to fund our operations into early 2019. Now we believe that our cash runway has been extended into the second half of 2019. This expected time line is important because it allows us to reach the following key clinical milestones: The first IMPLANT 2 results for nolasiban expected in Q1 of 2018; Edelweiss Phase IIb endometriosis results for OBE2109 in mid-2018; commencement of Phase III clinical trials for OBE2109 in endometriosis in late 2018; Phase IIa results from Part B of PROLONG for OBE022 in pre-term labor in late 2018; and 6-month primary endpoint data for PRIMROSE 1 and PRIMROSE 2 clinical trials in uterine fibroids in the second half of 2019.

In summary, we're very pleased that we've been able to deliver on essentially all of our timelines and goals that we articulated at our IPO in January this year. And we look forward to making significant progress that we have outlined over the coming 12 to 24 months.

And with that, we will turn the call over to the operator and open up for questions.

(Operator Instructions) And our first question is from the line of Alethia Young with Crédit Suisse.

This is Derek Yuan on for Alethia. My first question is, what is the current market breakdown between add-back and non-add-back therapy? And maybe do you think there is a strong variance from patient to patient in terms of preferred treatment? And my second question is, what is the difference between the Japanese pain scoring system versus the U.S. system? And how does that effect your trial powering or your confidence on the trial?

Yes, Alethia (sic) [Derek], I think the proportion of patient who will be fully satisfied with no add-back option versus add-back option is yet to be defined by the clinical study outcome, but I would estimate that it's probably 50% and 50% based on what we know already based on our Japanese data and other companies' data. Regarding the pain scoring system, it's a good question. As you know 2109 is being developed by Kissei, a Japanese company, and the data collected in Phase II were based on the scoring system, which was a verbal rating scale, but defined in Japanese as well as the visual analogue scale. As you're aware, the FDA is requesting that we use a verbal rating scale as the tool for the primary endpoint and that has to be validated in U.S. subjects. And that's what we objectively say, we have completed this validation, and we are actually meeting the FDA in the coming days for making sure we meet their expectation prior to starting the Phase III for that pain scoring system.

And our next question is from the line of Paul Matteis with Leerink.

In the EDELWEISS study, I was wondering if you could speak to what defines the ideal safety profile in terms of changing bone material density for a given dose with or without add-back that you'd be willing to take into Phase III? And then the second part of this question is just more broadly across the program. I'm wondering from your conversations with FDA, what you think needs to be conveyed on the safety side in terms of changing bone material density for the FDA to offer a label for one of these GnRH antagonists that won't restrict duration of use?

Yes, Paul, the expectation from the FDA is that at 6 months bone material density reduction, measured by DEXA, should not be below minus 2.2%. So we expect that a drug, which is leading to an average reduction which is below that, would support long-term use.

Okay. And can if I could just clarify, Ernest, I think 2.2% is the standard error of DEXA scan, right? When you're talking about (inaudible) Are you talking about a point estimate not being below 2.2%? Or are you talking about some bound of the confidence interval to change not being below 2.2%?

Yes. I think -- I'm sorry. Yes, you're right. I think it's the limit -- in figural limit of the confidence interval for minus 2.2%. You're right.

Okay. But you think it's the 6-month data that is ultimately the most important. And that if that is met at 6 months you'll be okay without any sort of restrictions.

The 6-month data are certainly important. We are also looking for longer exposure, as you know, in our clinical trials, and we have placebo-controlled trial in PRIMROSE 1 for up to 12 months. What is not in our analysis is that the bone mineral density loss is not constant and linear. Actually, what is known based on local experience, bone mineral density occurred in the first month and then tend to plateau. And that's probably why the 6-month data is really the relevant and the benchmark for long-term treatments.

Okay. All right. That is super helpful. And then just going back to the Phase IIb, you got a handful of dose strengths. So is it the 6-month bone data that's ultimately kind of the gating factor or the filtering factor to what dose that you choose to go into -- to move into Phase III in endometriosis? What other kinds of the -- what other the elements of the adverse event profile or efficacy thresholds are you sort of defining there for dose selection?

Yes, obviously, you are aware that for dose selection, it's multifactorial. It would be first, the one, which is leading to significant reduction of pain, that's the primary endpoint, and that would be balanced indeed with DEXA data at 6 months. Well, we don't expect any other side effects, which are significant or specific, except that hot flashes may be increased in some groups. Now hot flashes is certainly related also to estradiol. And in our PK/PD study, we are very pleased to see that actually if a patient has estradiol above 20 picogram per mL, she does not complain of hot flashes. And as you know, the hypothesis also is that if you maintain an estradiol above 20 picogram per mL, you won't have a significant impact on bone mineral density. So we see some parallel between bone mineral density and hot flashes and we will have to confirm that on the EDELWEISS results.

And Paul, it's Mario. I think the point or one of the points of the EDELWEISS study is to find the dose or doses that maximally treats the pain symptoms without full estrogen suppression. So you're treating symptoms very effectively and also from a bone mineral density perspective, not fully suppressing estrogen should provide an additional safety margin.

Okay. All right. And one more question on safety requirements. AbbVie, who has filed now, spent some time generating additional safety data to show that changes in bone mineral density recover after you stop using Elagolix. Do you see this as a potential regulatory requirement for ObsEva? Or you'll have to generate some of off-drug safety data to show that any sort of toxicity is reversible?

Yes, absolutely. We have currently a follow-up in our PRIMROSE study and in EDELWEISS study in order, indeed, to follow the patient who may have lost more bone mineral density. What the field -- the experts are telling us is that usually bone mineral density loss within the first 6 months are fully reversible, but we'll document that, including follow-up after 1 year of continuous treatment. That's part of the protocol there.

And our next question comes from the line of Kennen MacKay with RBC.

This is Slanix Alex on for Kennen. Just 3 questions on the nolasiban as we look to the Q1 results coming up shortly. Can you just maybe outline your strategy a bit more to enter the market in the EU if the Phase III is positive? Would this single study be enough to get to the market in the EU based on the EMA interactions you've had so far? And I have 2 other follow-up questions.

Yes, Kennen (sic) [Slanix], our intention is indeed to consult national authorities following the Phase III results. We have already tested with them the hypothesis of what would be the package required for registering. We have not yet formally stated that we will file with a single Phase III. But if the p-value is indeed quite low, we will propose to file with Phase -- single Phase III in Europe. That would allow us then to be probably on a 12-month schedule for getting the registration, yes.

Great. And just a follow-up question on potential requirement for the FDA in an environment where we're now seeing a more permissive FDA potentially. Do you see any potential to submit these data to the FDA there? Or what could the regulatory pathway look like otherwise?

No. We expect and we know that the FDA will be expecting 2 Phase III trials. This has been already discussed during our pre-IND meeting at the time of IMPLANT 1. The discussion will be with them whether the European study will stand as a full Phase III for them or supportive data, and whether we need to do at least 1 additional or 2 additional studies in the United States. I think it would depend on the quality of the data, as the IMPLANT 2 study include, as you remember, half of the patients with day 5 embryo transfer, which is a preferred scenario for -- and preferred practice in the U.S. for fresh embryo transfer.

Understood. Okay, great. And just thinking a little bit longer term towards potential commercialization, should -- the Phase III showed the types of p-values that you're looking for, can you maybe talk to commercial readiness to potentially launch in the EU?

Yes. I think that Tim has been preparing the different aspects required for launch. And quite significant aspect is, obviously, the manufacture of the product. Our CSO, Jean-Pierre Gotteland, who is on the line, has indeed developed a plan that we will start implementation for being ready for European launch. The commercial infrastructure that we believe will be quite small for launching a product, with no competition in a kind of B2B model as we are dealing with a limited number of ART centers in each major European country, would have to build after the readout of IMPLANT 2.

Slanix, it's Tim. Just to add to Ernest's comments, on the go-to-market commercial side, because it is a B2B sale you're calling on these fertility centers, there is a limited number on a country-by-country basis. So for the EU, for example, rough numbers, we could hire up a sales force of say 25 to 40 reps that could cover the European Union, the U.S. market will be roughly about a similar size number of sales reps. So it's one that we feel pretty confident that we could take directly to the market and that you could hire that sales force. But as we've always said to The Street, we keep all of our options open, let's have the data come in next year, and then we're in a position to have choices upon positive data.

(Operator Instructions) And our next question is from the line of Ram Selvaraju with H.C. Wainwright.

So firstly with respect to 2109, could you comment on what you anticipate to be the likely filing strategy and the timing between filing for approval in uterine fibroids versus endometriosis? And also if you could give us a sense of to what extent you anticipate presenting commercial considerations in your upcoming R&D event -- analyst event in the spring of next year? And then with respect to nolasiban, if you could just clarify the difference between assessing the drug's impact with regard to ongoing pregnancies versus pregnancies carried to term, and to what extent that has commercial implications? As well as if you could describe what you anticipate seeing in the PROLONG study that would be fully justificative of continued development of the 022 candidate?

Thank you, Ram. In terms of time line for fibroids versus endometriosis, as you are aware, we are already in Phase III for fibroids because(inaudible) of the primary endpoint for 6 months is controlled bleeding, second half of '19 for both studies, a completion of the study in 2020 and then filing. Endometriosis, I would say, it's a little bit too early. Let's see the data of EDELWEISS, agree with the FDA on the design and then we'll come with proposed timelines. We are hopefully experienced to know the number of centers and where to go for delivering these studies, but more to come after the consultation with the FDA on our Phase III. Regarding nolasiban, I think it's a good question. It's clear that we have a typical and clinically significant difference between active and placebo at 10 weeks. We really expect that this is going to be translated into live birth because there are a lots of human pregnancies most occurring during the first trimester and 10 weeks post embryo transfer occurring corresponding activity at 12 weeks of gestation, so 3 months. So we do not expect discrepancy, have a few losses, but I would not expect significant disconnect between the two. For the PROLONG study, I'm sorry, I missed your question, Ram.

Ram, I think for commercial, certainly when we hold an R&D Day next year, we'd like to review scientific data, and we would like to also talk about some of the market research we've done and how we see commercial playing out and the potential there. So those specifics will still be taking shape over the coming months. As you can imagine, we're trying to conclude 2017 and our 2018 planning process. But yes, to answer your question, we would like to share some of our commercial viewpoints at that time as well.

Okay. And then that's just sort -- yes, I'm repeating that now. So just wanted to understand better what do you anticipate seeing in PROLONG that would be justificative of progressing 022 into the next round of clinical studies?

Yes. So above all, it's the safety of the drug that this is the first administration in pregnant women. By the way, we are very pleased by the finish of authority approving our IND or CTA in Europe. Because it's a new chemical entities and we are administrating in pregnant women and it showed us strength of our toxicology and preclinical package. So above all, it's the safety. The second element will be that we have, at least, a clear trend towards a delay in delivery time versus the control properties of atosiban alone as the active will be atosiban plus OBE022. The standoff time point is, how many patients if not delivered at 48 hours, how many patients did not deliver at 7 days. And then, time to delivery. But I think the central point for us would be how many patients did not deliver at 7 days.

And I'm not showing any further questions in the queue. I will like to turn the call back to Ernest Loumaye for his final remarks.

Okay, well. We would like to thank everyone for taking the time to join ObsEva third quarter 2017 update call. We are, obviously, pleased with our progress to date and our focus on providing potential best-in-class therapeutical alternative across a range for women's health disease and infertility condition. We truly appreciate your support and look forward to updating you on our progress again next quarter. As always, do not hesitate to reach out to Tim Adams or Mario Corso for any follow up questions. This concludes our call. Thank you.

And ladies and gentlemen, with that, we thank you for participating in today's conference. This concludes the program, and you may all disconnect. Have a wonderful day.