Phaxiam Therapeutics SA (PHXM) 2022 Q3 法說會逐字稿

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

I would now like to turn the conference over to your speaker today, Gil Beyen, CEO of ERYTECH. Please go ahead.

Thank you. Good afternoon. Good morning. Bonjour à tous. Thank you for joining us for our business and financial update call to discuss the business highlights for the third quarter of 2022 and the financials for the first nine months of this year.

We announced our business and financial update yesterday evening, and the press release and webcast presentation can be found on the Investor Relations page of our website.

Turning to slide 2, before starting, as usual, I have to draw your attention to disclaimer to remind you that today's call includes forward-looking statements. And as you know, they all involve risks and uncertainties that could cause actual timings and results to differ materially.

Slide 3, the agenda. Joining me on the call today are Iman El-Hariry, our Chief Medical Officer, and Eric Soyer, our Chief Financial and Chief Operating Officer. I will start with a short introduction and present the key business highlights of the year to date, focusing on the more recent ones, the ones that occurred after our last call in September, after which Eric will present an update on our key financials and cash balance. He will also summarize the expected milestones before we open up the lines for Q&A, at which all three of us will be present.

So, slide 4. And this is really an update or an overview for anyone new to the company -- I think most of you know, but for completeness -- with ERYTECH. ERYTECH, the name says it's focused on development of red blood cell-based therapeutics. We have been active in this field for quite some time, focused and developed the proof of concept with a product eryaspase, which is asparaginase encapsulated in red blood cells, and for which we have had encouraging preclinical results in ALL -- acute lymphoblastic leukemia -- and pancreatic cancer.

But as this will be a point on the next slide, we have recently decided not to pursue further development with this product. Focus is now on our preclinical programs. We're still working on the encapsulation, the ERYCAPS platform, but now working with vesicles derived from the loaded red blood cells, also preclinical programs in rare diseases. And the other priority, clearly, is pursuing partnering options, and more in a minute.

Quickly then to slide 5, the business highlights, the main news items of the third quarter and year to date. The first one was already largely presented at our last call. It is the fact that indeed in August, we decided to no longer pursue our activities to try and obtain an US approval for Graspa in a subsegment of ALL, in hypersensitive ALL.

And this was based on feedback we just had then received from the FDA, from which it became clear that we needed additional clinical data, which in the competitive environment and the whole context of this specific sub indication, was an impossible task for us.

Another one also presented in September was that we had an -- there was a -- steering committee in the TRYbeCA-2 Phase 2 trial in triple-negative breast cancer, which saw good safety, but no efficacy signal. It was a small number of patients because we stopped this trial prematurely. But still there was not a sort of a [signal baseline] which we said we should continue this activity. And the result of this, combined then with the earlier setback in the pancreatic cancer Phase 3 trial that was at the end of last year, all that together led us to the decision to stop the Graspa or eryaspase development altogether.

The priorities of the company now, obviously, first of all, the deep cost restructuring, cost reduction and restructuring. We launched this already as soon as we had the news, but mainly after the sale of the Princeton facility. We have performed staff reductions in the US and have also implemented now a restructuring plan, (spoken in French) in France, which is now fully implemented. And so now, for still at the end of the implementation but compared to the number of people at the time we announced the pancreatic Phase 3 trial, which is end of last year, we are now at roughly 75% less than at that time, so small -- a steep reduction of the team size.

The second priority for the company and of the remaining 45-ish, 40, 45 people we have kept in a core team in our R&D programs. So, the focusing on the second priority, our preclinical activities, especially on the vesicles, the extracellular vesicles. It's the exosome-like, but now derived from red cells, where we see a lot of promise for immuno-oncology applications, and potentially also for RNA or other non-viral gene delivery. We have, over the past months, shown in vitro feasibility. In vivo work is ongoing, and we expect to be able to provide an update in the beginning or in the first quarter of next year.

We're also working on rare disease programs that -- we already had, in fact, rare disease programs while we were working on Graspa, but they were sort of -- did not get much attention. So we are now reviving -- giving them renewed attention. Also, here, expect to be able to provide updates in the first quarter of next year.

And then the third and main priority of the company is we've announced that already after the Phase 3 trial results is the search for strategic options. We've realized that ERYTECH still has a lot to offer, but doesn't have a lead program anymore. So, the sale of our US production facility, the Princeton facility to Catalent, was the first step. We are now working on different options. We did a broad screening; we've zoomed in on a few valuable options and hope to be able to provide an update before the end of the year or at least in the in the coming months.

What we are trying to do here is [recapitalize] on ERYTECH being a listed company with cash. Eric will provide an update -- with still a GMP facility up with technology IP and the core team -- research core team, also a corporate infrastructure that can support such a company in a combination. So that's it for the slide 5, for the highlights.

I will stop here and hand over to Eric, who will provide an update on the financials for the first nine months, and we'll summarize the news flow afterward. Eric, all yours.

Thank you. Thank you, Gil. Good morning, everyone. Bonjour à tous. We are now reviewing the financial highlights for the nine-month period ended on September 30.

We are on slide 7 of the slide deck, and we're starting as usual with P&L information. As already noted in our previous call for Q2 results, the financial results for the first nine months of 2022 confirmed a significant and accelerated decrease in operating expenses and cash utilization in connection with the completion and closure of multiple clinical development activities and also the deep restructuring of the company.

As a result, the net loss for the first nine months of 2022 was EUR6.2 million, which was a EUR35.4 million improvement over the same period of last year, reflecting the EUR24.4 million net gain on the sale of the Princeton facility and the sharp decrease in operating expenses that show an accelerated decrease of EUR15.5 million. That's minus 33% year over year. It was minus 19% at the end of June. The cost reduction was mostly on R&D with a EUR14.4 million decrease in expenses related to the gradual termination of clinical programs, while G&A expenses also showed a EUR1.4 million decrease over last year.

Total operating expenses of EUR31.2 million included an impairment provision of EUR2.5 million, mainly on the Lyon production facility and related to the end of the eryaspase operations, as well as a EUR1.9 million provision for restructuring related to the staff reduction plan in France. Income tax included in 2022 a provision of EUR3.8 million, still reflecting the maximal potential tax impact of the capital gain from the sale of the Princeton facility until further analysis.

Now moving on to slide 8, for comments on cash. At the end of September this year, ERYTECH had cash and cash equivalents totaling EUR47.3 million or approximately USD46.3 million compared with EUR33.7 million at the start of the year.

The EUR13.6 million net increase in cash position during the first nine months of 2022 was the result of the net cash of EUR37.6 million received from the sale of the Princeton facility; also a EUR27.4 million cash utilization in operating and investing activities, of course excluding the sale of the Princeton facility; and a EUR1.6 million generated in net financing activities. And that was including the EUR3 million pre-funding of the expected 2021 R&D tax credits.

And finally, in the period, the variation of the US dollar against the euro led to a EUR1.7 million positive currency exchange impact. As already mentioned, the company has initiated earlier this year a deep restructuring and cost reduction program. And these cost reductions have been further intensified with the help of the Graspa program and BLA process.

Considering these ongoing cost reductions, the company believes that its current cash position can fund its current programs and planned operating expenses to mid-2024. This is, of course, sort of a theoretical runway, as we will obviously not sit on this cash for 20-plus month, or plan -- as Gil has mentioned that -- to restart the company on a new development pipeline with a strategic partner, in which case the current projections as these will not be relevant anymore.

Now, and before we move on to Q&A, a quick wrap-up of our key news flow and milestones expecting over the next six months.

This is slide 9 of the presentation, which are reflecting, of course, our key current priorities. Starting on one end, with the focus on the ongoing preclinical programs, and more particularly our program with red blood cell derived extracellular vesicles -- we call this novel technology ERY CEV or ERYCEV -- we expect to report on our preclinical results in a few months.

And of course, on the other end, an update on our partnering process: we're still evaluating a number of strategic options to best leverage the company's assets and capabilities in a business combination with a strategic partner. Valuable options are under discussion, and we expect to give further updates on this, hopefully before the end of the year.

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

Operator, Kathryn, over to you.

(Operator Instructions) Boris Peaker, Cowen. Your line is open.

Great. Thanks for taking my questions, and good morning or good afternoon, depending on where you are. I just have one simple question, and that is, are there any clinical data readouts specifically that we should be expecting, particularly maybe from me, your new ERYCEV program over the next six to 12 months? Will we see any visibility into clinically into this program?

Hi, Boris. Good morning. Gil here. On ERYCEV or the preclinical programs, nothing to expect in the next six to 12 months. They are preclinical still, and still some work to IND. The preclinical readout still is the ongoing rESPECT trial. It's a Phase 1 trial in first-line pancreatic cancer, an IST run by Georgetown University, where the trial is still treating patients. And we heard from the PI that he wants to present these data at ASCO. So, it's sort of -- what is it -- June, nine months away.

Got it. Thank you very much for taking my question.

Thank you, Boris.

Thank you, and there are no other questions in the queue. I'd like to turn the call back to Gil Beyen for closing remarks.

No questions, then I want to thank everyone for your participation, your attention and your continued support for ERYTECH. As always, we will keep you posted on progress. And yes, wish you a nice rest of the day, and yes, speak soon, at least at the next call in a couple of months. Have a good day.

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