Phaxiam Therapeutics SA (PHXM) 2022 Q2 法說會逐字稿

Good day and thank you for standing by. Welcome to the ERYTECH business update and financial highlights for the second quarter of year 2022 conference call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Gil Beyen. Please go ahead.

Thank you, and good afternoon. Good morning. Bonjour a tous. Thank you for joining us for our business and financial update call to discuss the business highlights year to date and the financials for the first six months of this year. We announced our business and financial update yesterday evening, and the press release and the webcast presentation can be found on the Investor Relations page of our website.

Joining me on the call today are Dr. Iman El-Hariry, our Chief Medical Officer; and Eric Soyer, our Chief Financial and Chief Operating Officer.

Before starting, on slide 2, I'd like to draw your attention to the disclaimer, reminding you that today's call includes forward-looking statements such as related to the company's operations, timelines, and financials. And as you know, they all involve risk and uncertainties that could cause actual timings and results to differ.

Switching to slide 3, the agenda for the call, and quite standard. I will, as usual, start with a short introduction and present the key business highlights of the year to date, focusing on Q2 and events that occurred after our call, last call in May. After this, Eric will present an update of our key financials and the cash balance. And he will also summarize the strategic priorities and expected milestones for the coming -- for the year to come before we then open the lines for Q&A. All three of us will be available for your questions afterwards.

Now moving to the presentation, a quick company overview of slide 4. It's for anyone new to the company and then for completeness.

Brief overview of ERYTECH. ERYTECH is indeed, the name tells it, focused on the development of erythrocyte-based therapies or red blood cell-based therapeutics. And we've been in this field since -- it's quite a time, we have been working first with a lead product eryaspase, Graspa, with which product we established the proof of concept in leukemia and pancreatic cancer through different clinical trials. And I'll explain more about this.

We recently decided not to pursue further development of eryaspase. And this is following a setback, a Phase 3 trial that did not achieve its primary endpoint and also, new regulatory hurdles that we encountered for our development in ALL. More about this in a minute.

So the focus is now really on our preclinical pipeline which includes work in rare diseases and work also on extracellular vesicles; we call it ERYCEV, erythrocyte-derived extracellular vesicles, exosomes-based. Exciting possibilities there; earlier stage, obviously. And then the other key element of this is strategic partnering that we have announced since quite a while and where we're making good progress.

And then on slide 5 brings me to the key items for the second quarter and year to date -- quite intensive. So first of all, obviously, there was -- in April, the sale of the Princeton facility. Princeton facility is a state-of-the-art cell therapy facility that we built in 2018. And this was in view of the Phase 3 clinical trial with Graspa in pancreatic cancer for the trial and for the early commercial.

On the trial that did not turn out positive, this facility was clearly too big for our needs. We then launched the sales process, and we are pleased to find a good partner with Catalent. We sold the facility to Catalent, one of the leading CDMOs in cell and gene therapy. And so we -- consideration, we received was $44.5 million. Also, our entire team -- site team transferred to Catalent. This was in May. That was the first item.

The second item was more difficult one. This was in August recently, and this is where we have to announce that after a long development path and encouraging data in ALL, hypersensitive ALL, we decided to no longer pursue our plan to in -- our path to a US approval. You may remember that we had been encouraged by positive data that we saw end of 2020 in a Phase 2 trial run by the NOPHO, which is the pediatric oncology group of the Nordic countries in Europe. Based on this trial, we had a long dialogue with the FDA, a dialogue to explore the path to approval in indication based on this IST run in Europe.

The dialogue rounded up very well, with a good pre-BLA meeting already more than a year ago. This was in June 2001. After which, we had multiple exchanges and data requests with the FDA, including the submission of pediatric plan -- this was in July -- initial pediatric plan and iPSP. And there, we received feedback in August, feedback that asked for additional clinical data. So basically, then we had a long evaluation of this feedback, the possibilities, pros and cons.

But after all -- and taking into account this need for additional data and the need -- and the changes in the competitive landscape of new approval in this very small indication, we took the difficult decision to abandon our plans with Graspa in ALL. So clearly, we announced this few weeks ago, and it's the stop of a long development, in a long work with Graspa in ALL.

Then another element, the number three here on this list, is that we recently received the feedback of the results from the start of the TRYbeCA-2 trial [understated]. TRYbeCA-2 trial was a Phase 2 trial to evaluate eryaspase Graspa in metastatic TNBC, triple-negative breast cancer. This was a trial -- a view of building on the pancreatic trial and a view of broadening out to other solid tumors; target enrollment, 64 patients.

But we stopped enrollment when we saw the disappointing results of the pancreatic Phase 3 trial, the TRYbeCA-1 trial. We stopped enrollment end of last year. So we have 27 patients enrolled at the time, 11 and 14, respective -- in their respective groups. It was a randomized trial.

The trial's steering committee met now very recently in September and reviewed the results of these patients. Overall conclusion was that the treatment was well tolerated, but no clinical benefit was demonstrated. Now it's in fact difficult to draw any conclusions, given the immature closure of the trial and the small number of patients. But absent a clear signal, this result reinforced our decision to stop the Graspa development altogether.

So now obviously, this means quite a change for the company with the lead (technical difficulty) being abandoned. So the priorities for the company now is a deep restructuring (technical difficulty) cost reduction and restructuring. We launched it already earlier this year. We have performed staff reductions in the US and are now -- have launched a restructuring plan -- a strong social plan in France. This has been launched and now also recently approved by the labor authorities.

And then Eric will provide more detail in terms of what is the financial impact of this cost saving plan.

Second priority after the sort of -- the change is clearly to focus on our preclinical programs. We have been -- work ongoing as I mentioned in rare diseases and then this specifically, the new kid on the block, but in the meantime quite nicely advanced is a work on our extracellular vesicles, the exosome-like program, vesicles derived from loaded red cells. So it's building on our ERYCAPS technology. We encapsulate drugs in the red cells and then we do the physical issue.

We have presented first results. This was feasibility in vitro earlier this year, and we are now working on in vivo work and also further feasibility. So this technology holds a lot of promise for what we believe (technical difficulty) promise on immune oncology application on the one hand and potentially, also, for the delivery of genes, of RNA, non-viral gene delivery, for example. So work to be done still but, at least, an interesting and quite an exciting platform to work on. More to come from the results soon.

And then the third and the last bullet on this slide is the strategic partnering. So we've launched this process already in November last year after the Phase 3 setback in pancreatic cancer. First step has been the sale of the Princeton facility to Catalent, and we are now with -- obviously, we continue with this -- with this step behind us, we then broadened out, looked at very different strategic options. We have now -- after a broad screening of potential options, we've zoomed in on a few valuable, in fact, any lead options. And we mentioned in the press release, we hope to be able to provide an update soon in the fourth quarter as we said.

And the partnering we're envisioning is really building on the -- what ERYTECH has to offer. We are a listed company. We have -- and Eric will explain -- a solid cash basis. We have a great team left after restructuring. We have a manufacturing facility in Lyon, a cell therapy manufacturing facility. And obviously, we have our eryaspase and ERYCEV platform. So around these elements, we are -- we have searched for partnering options, and we're now pursuing very unique options in -- as we speak.

So with this, I will stop the introduction and hand over to Eric, who will provide an update on our Q2 and first-half financials. We will also at the end summarize the new slope, after which we'll come back, the three of us, for Q&A.

Eric, the floor is yours.

Thank you. Thank you, Gil. Good morning, everyone. Bonjour a tous. We are now reviewing the financial highlights for the first half of this year in slide 7 of the slide deck, and we're starting with P&L information.

As Gil just explained, a number of unusual significant events happened in the first six months of this year, from the sale of the US production facility to the restructuring and resizing of the company's operation in France. And these transactions obviously impacted our financial results as of Q3.

But beyond the one-off impacts of these significant unusual transactions, as we call them, the financial results for the first half of 2022 confirmed a steady and notable decrease in operating expenses and cash [iteration]. And that's in connection with the completion and closure of most of our clinical development activities and the related decrease in protection activities.

With that, net loss for the first half of 2022 was EUR1 million, which is a EUR27 million improvements over the same period of last year and obviously, related mostly to the EUR24.4 million net capital gain on the sale of our production facility in Princeton.

Operating expenses of EUR25.2 million were also showing a EUR6 million decrease, that's minus 19%, year over year with a EUR5.9 million decrease minus 25% in R&D expenses, again, related to the decrease in clinical development activities. Total operating expenses included an asset improvement provision of EUR2.5 million on Lyon production facility related to the end of eryaspase operations and a EUR1.9 million provision for restructuring and resizing the -- also sale [of Princeton] just mentioned, related to the French operations.

Income tax included also a provision as of June 30, 2022, of EUR3.7 million, that's actually $4.1 million, reflecting the best estimate to date of the tax impacts of the capital gain from the sale of the Princeton facility.

So now moving on to slide number 8 for comments on cash. So as of June 30, 2022, ERYTECH had cash and cash equivalents of EUR53.3 million, that's approximately $55.8 million, compared with EUR33.7 million as of December 31 last year. This is a EUR19.6 million increase in cash position during the first half of 2022. And that was the result of the net cash of 37 million, 30%, when EUR6 million received from the sale of the Princeton facility; net cash inflow, EUR20.4 million of net cash utilization in operating and investing activities, obviously, including the sale of the Princeton facility; and EUR2 million of net cash generated in financing activities, including a EUR3 million pre-funding of the expected 2021 R&D tax credit.

In the periods, the variation of the US dollar against the euro led to EUR0.4 million positive currency exchange impact.

I wish to remind that ERYTECH has not drawn any charge on the convertible loan facility, the so-called OCABSA, since last year 2021. And there are no outstanding and unconverted notes. The OCABSA financing line has expired in June 2022.

Already this year, the company initiated, as Gil mentioned that already, a deep restructuring and cost reduction program, which is now further intensified with the halt of the BLA process. And considering these ongoing initiatives to reduce operating expenses, the company believes that its current cash position can send its current programs and planned operating expenses to meet 2024.

Now, and before we move on to Q&A, a very quick summary of our key strategic priorities and upcoming milestones in the next six months, and that's slide number 9 of the presentation. We're mentioning the still ongoing rESPECT study. This is an investigator-sponsored trial, Phase 1 trial, in first-line pancreatic cancer, with results expected by the end of this year. But again, the company has no further plan at this stage to continue developments with eryaspase in this indication.

In closing, main expected milestone for the rest of the year will be the update on the ongoing strategic review and partnering process. The sale of the Princeton facility was already a first step in that process that gave us the means and latitude for a strategic refoundation of the company. As Gil explained already, we are in this process of evaluating variable strategic options. And we expect -- we hope to give further updates on these strategic initiatives in the fourth quarter of this year.

With that, I would like to thank you already very much for your attention. And we will open the call for Q&A. Gil, Iman, and myself will be happy to answer any questions you may have.

Operator Michelle, that's over to you.

(Operator Instructions) At this time, I am not showing any -- well, excuse me -- one moment. Jacob Mekhael, Kempen.

Hi there, and thanks for taking my question. I just had one. Maybe if you could just elaborate on what kind of partnerships you're looking at at the moment and just give a bit more color on that?

Yes, I'll -- hi, Jacob, Gil here. So basically, as what -- we have to face the reality that we don't have a lead program anymore. So we still have the early-stage programs. The real sort of the focus of our partnering is really sort of trying to leverage our listings, our cash, our preclinical programs, and obviously, the team that has done a great development even if the results were not what we hoped.

And so what this brings us to is merger/reverse-merger type of options. And clearly, we can add something to another accompany and what, obviously, we don't have is a lead program, and so basically, a synergistic way of bringing companies in the space together. So also, our facility in Princeton had a lot of value. Our facility in Lyon is smaller but still, also, for a cell or a gene therapy company, clearly, can bring a significant value.

Does that answer your question?

Yes, it does. Thank you very much.

Okay. Thank you.

At this time, I am not showing any other calls in queue. I would now like to turn the conference back to Gil Beyen for closing remarks.

Thank you, Michelle. Just want to thank everyone participating in this call for your attention, for your question, for your continued support of ERYTECH. And wish you a great rest of the day and look forward to speaking again at the next occasion, at our next call, probably. So thanks a lot and have a great day.

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