Palvella Therapeutics Inc (PVLA) 2017 Q4 法說會逐字稿

Greetings, and welcome to Pieris Pharmaceuticals' 2017 Year-End Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Allan Reine, CFO of Pieris. Please go ahead.

Good morning, everyone, and thank you for joining us for our year-end 2017 earnings conference call. On the call today, we have Steve Yoder, our President and CEO; and Louis Matis, our SVP and Chief Development Officer, who will be available for Q&A. We announced financial results this morning. You can access the press release on the Investor Relations page of our website at www.pieris.com.

Before we begin, I'd like to caution that comments made during this call may contain forward-looking statements involving risks and uncertainties regarding the operations and future results of operations of Pieris, including statements relating to the timing and progress of our clinical trials and preclinical programs. And actual results or events may differ materially from those expressed or implied by such forward-looking statements. Factors that might cause such differences are described in our filings with the SEC, including our annual and quarterly income reports. The information we presented is only accurate as of today. And Pieris undertakes no obligation to update any statements to reflect future events or circumstances.

With that, I will hand the call over to Steve.

Thank you, Allan. And thanks to everyone today for joining us for our 2017 year-end earnings call. Before reviewing the highlights of 2017 as well as the key developments so far in 2018, I'd like to briefly summarize our core technology, our R&D strategy and our business model.

With regards to our technology, we're leveraging a novel therapeutic protein drug class called Anticalin proteins, which are derived from human lipocalins. As a reminder, Anticalin proteins are small, stable, monomeric molecules that assemble into a beta-barrel backbone with 4 loops that are involved in target engagement, in which we recombinantly alter to allow for target-specific binding to therapeutic targets of interest. We have broad IP and freedom to operate in this Anticalin space. And we're utilizing this technology to exploit unique properties of a drug class where we believe that there are significant advantages over traditional monoclonal antibody therapeutics, primarily in the areas of immuno-oncology and respiratory diseases.

Our core R&D strategy involves addressing known, clinically validated targets in new ways as exemplified by our lead fully proprietary immuno-oncology drug candidate, PRS-343, which is a bispecific composed of an Anticalin protein targeting 4-1BB and is genetically fused to an antibody targeting HER2, which forms a bivalent, bispecific molecule designed to preferentially activate tumor-specific T-cells in the tumor microenvironment. And the other example is our lead respiratory program, PRS-060, which is an inhalable IL-4 receptor alpha antagonist targeting the same target as dupilumab or DUPIXENT.

Our business model involves advancing a mix of fully proprietary and codeveloped drug candidates in these 2 core areas of therapeutic focus while using the proceeds from the partnered programs to help fund our proprietary pipeline. Importantly, we have maintained co-development and co-commercialization rights for many of our partnered programs, allowing us to forward integrate to a later-stage development and ultimately a commercial stage company, both outside of and within these anchored partnerships.

2017 was a transformative year for the company, both with respect to advancing our proprietary pipeline and through our partnering activities. During the year, we advanced 3 drug candidates into various stages of clinical trials and we signed 3 collaboration agreements. This partnership momentum continued into 2018 with the announcement of a new alliance with Seattle Genetics and which contains key features common to our anchor alliances with Servier and AstraZeneca, material free cash flow, co-development and co-commercialization opt-in rights with the potential to directly commercialize in the U.S.

With respect to our partnering activities, since January of 2017, we have achieved upfront and development milestones totaling over USD 120 million. Looking at these partnerships in more detail, in January of '17, we entered into a co-development and co-commercialization partnership with Servier in immuno-oncology. In May, we signed a global co-development and co-commercialization deal with AstraZeneca in the area of respiratory diseases, built around this lead inhaled Anticalin protein, PRS-060.

And in between these 2 anchor alliances, we signed an option agreement with ASKA Pharmaceutical to commercialize PRS-080, our anemia program, in Japan and other Asian territories. As a reminder, we continue to explore thoughtful ways to monetize PRS-080 after we complete the ongoing Phase IIa study, which we'll come back to later in this presentation.

On February 9 of this year, we announced a multi-program collaboration and co-development agreement with Seattle Genetics in which we will receive a committed $30 million upfront payment and have the potential to earn up to USD 1.2 billion in success-based milestone payments plus royalties. The collaboration leverages the expertise and core technologies of both companies to develop novel, bispecific antibody Anticalin fusion proteins.

Pieris will provide agonistic co-stimulatory engaging Anticalin protein building blocks, which will be combined with Seattle Genetics' tumor-targeted antibodies. This deal fits within our strategy to become a fully integrated biopharmaceutical company as we have an option to codevelop and co-commercialize 1 of these 3 programs prior to the start of its pivotal trial.

So I now want to provide some additional information on our pipeline. And we'll start with immuno-oncology. To put things into perspective, Pieris is the first company to enter the clinic with a bispecific co-stimulatory T-cell agonist. We are a leader in the IO costim space and we have a broad pipeline of IO bispecifics through both our proprietary and our partnered programs with multiple INDs expected over the next couple of years.

Our lead and wholly-owned program, PRS-343, as mentioned earlier, is a bispecific fusion protein made up of two parts: monovalent Anticalin proteins directed against the cell surface protein called 4-1BB or also known as CD137, which is expressed on the surface of tumor-specific T-cells within the tumor microenvironment; and the other part is the monoclonal antibody targeting HER2.

We believe that one advantage of this bispecific approach is that we can activate T-cells within the tumor microenvironment, creating a polyclonal tumor-specific immune response that maintains the MHC class specificity. By utilizing HER2 receptor density to drive 4-1BB activation, we believe we can avoid unwanted T-cell activation in healthy tissues, which could lead to systemic toxicity seen with previously conventionally deployed 4-1BB targeted monoclonal antibodies.

We dosed the first patient of 343 in September of last year in a Phase I multi-ascending dose trial in HER2-positive solid tumor patients, which is dosed once every 3 weeks as a monotherapy. Initial cohorts are composed of the single patient evaluated over a 21-day period for dose-limiting toxicities. These cohorts may be expanded to a modified 3+3 design at what we believe will be efficacious dose levels. We believe we will be enrolling patients at a minimally efficacious dose based on preclinical receptor occupancy data by the end of this month.

We will follow the dose escalation study with an expansion protocol enrolling specific HER2 expressing tumor types that we expect to be amenable to IO therapies, such as gastric and bladder cancers, where the checkpoint inhibitors, such as PD-1, have demonstrated some efficacy and where HER2 therapies have proved to be less effective. As part of our commitment to understand the benefits of PRS-343 in combination with other therapies, during the second half of this year, we plan to initiate a combination study with PRS-343 plus a checkpoint inhibitor involving PD-1 blockade.

We continue to assess other possible regimens and will provide more details in the future for this program as far as combination therapy is concerned. As far as readouts go, we also expect to share initial Phase I data by the end of this year, which we anticipate will include an assessment of safety, tolerability, PK and pharmacodynamic data, including important biomarkers for this mode of treatment.

Importantly, we will be analyzing paired biopsies in the trial with one potentially important biomarker being the evidence of post-biopsy increase in CDA immune effector cell activation and proliferation. As part of our fully proprietary IO bispecific platform, we plan to file at least one additional IND next year and are planning to advance several bispecific candidates through IND-enabling studies over the course of 2018 and 2019.

So moving forward in immuno-oncology. We're going to talk about our Servier collaboration. As a reminder, this is a 5 bispecific program deal for which will retain U.S. commercialization and co-development rights to 3 out of the 5 programs. We are developing PRS-332 as part of this alliance, which is a PD-1 antibody genetically fused to an undisclosed Anticalin checkpoint target. And we have additional programs under this alliance that are also progressing towards the IND stage. And we plan to file our first IND from this alliance during 2019, bringing the total number of INDs filed in immuno-oncology to at least 2 for 2019.

As mentioned earlier, we signed a collaboration with Seattle Genetics on February 9. Seattle Genetics will control the development of the drug candidates during the research in the clinical stages. Given the early stage nature of the programs under this alliance and for strategic IP reasons, we do not plan to provide regular updates at this time. That will conclude the summary in the immuno-oncology space. And we'll now going to turn to the respiratory franchise.

And as a reminder, in May of 2017, we signed a transformative global strategic partnership with AstraZeneca, which included an upfront payment to Pieris of USD 45 million and another $12.5 million milestone payment, which was triggered by successfully entering the clinic with PRS-060, which occurred in December of 2017. This partnership allows us to leverage Astra's established expertise in complex inhalation formulations and devices for respiratory diseases as well as their global commercial capabilities as a leader in this space.

This collaboration covers up to 5 programs, including PRS-060, with co-development and co-commercialization opportunities for both PRS-060 and 2 other programs within this alliance. PRS-060 itself is an Anticalin protein that blocks IL-4 receptor alpha, which thereby inhibits the activity of 2 key cytokines: IL-4 and IL-13. This, as mentioned, is similar to Regeneron and Sanofi's drug dupilumab or DUPIXENT, which is also an IL-4 receptor alpha inhibitor but which is dosed systemically via subcutaneous injection every 2 weeks, unlike PRS-060, which is targeting the disease locally via direct inhalation to the lung.

The Phase II results for dupilumab were released in September of last year and demonstrated a robust effect in moderate-to-severe asthmatic patients with elevated levels of eosinophils, achieving a 67% reduction in the number of exacerbations over control. In addition, another study, which was released in October of last year, demonstrated an 80% reduction in corticosteroid use in a similar patient population.

We believe these data clinically validate the role of blocking IL-4 and IL-13 via IL-4 receptor alpha in the pathogenesis of overactive airway disease and is a great example of our strategy of addressing known targets in new ways, namely deriving benefits of a localized therapy on a target highly validated in the clinic via systemic therapy.

The single ascending dose study that we initiated in December is proceeding on plan. We also plan to initiate a Phase Ib multi-ascending dose study, which we will sponsor and the cost of which will be reimbursed by AstraZeneca. Following the successful completion of the Phase I, Pieris would hand over the program to AstraZeneca, who would be responsible for executing a Phase IIa trial in collaboration with Pieris.

Looking farther ahead, following the first proof-of-concept Phase IIa trial in asthmatic patients, again to be funded and sponsored by Astra, Pieris may exercise an option to codevelop and separately to co-commercialize this program in the United States. Exercising this co-development option would entitle Pieris to a larger royalty, up to the high-teens, or even a gross margin share off future global sales, depending on the level of co-development by Pieris.

Beyond PRS-060, we plan to initiate the discovery effort for additional AstraZeneca alliance programs during 2018. We are also actively pursuing a proprietary respiratory strategy and, with our active key opinion leader advisory board, are determining which disease areas and targets to prioritize.

Moving beyond respiratory disease. I'd finally like to discuss PRS-080, which is a highly potent inhibitor of hepcidin, a key negative regulator of iron metabolism. Hepcidin is up-regulated in states of chronic inflammation, such as chronic kidney disease, which effectively traps iron in the body's iron storage cells, which in turn causes what is called functional iron deficiency or FID anemia.

PRS-080 represents a potential first-in-class therapeutic for this disease. During the first quarter of last year, Pieris initiated patient enrollment of a randomized, placebo-controlled Phase IIa trial for PRS-080 for FID anemia. Patients who meet enrollment criteria are receiving 5 weekly infusions of therapy with one objective of the trial being to assess whether PRS-080 can elevate hemoglobin levels after 4 weeks of exposure to therapy.

We plan to disclose the Phase IIa data by the end of this year for PRS-080. Successful completion of this trial could potentially trigger our partner in Japan, ASKA Pharmaceutical, to exercise its option to develop and commercialize PRS-080 in Japan and certain other Asian marches, subject to the payment of an undisclosed option exercise fee. Our strategy for this molecule in other territories will involve out-licensing, assuming positive Phase IIa data, as we focus our resources on developing our IO and respiratory pipelines.

This concludes my prepared remarks. And I would now like to hand back over to Allan to guide you through our financial results for the fourth quarter and full year 2017.

Thank you, Steve. For the full year ended December 31, 2017, we recognized revenue of $25.3 million as compared to $5.8 million in revenue for the year ended December 31, 2016. This increase in revenue for the 12 months was due to revenue recognized with regard to our collaboration agreements with Servier and AstraZeneca signed in the first half of last year.

Research and development expenses were $22.3 million for the 12 months ended December 31, 2017. Expenses in the corresponding 2016 period were $19.7 million. The increase in full year R&D expenses reflects advancement across our pipeline of programs as well as preparation and advancement of clinical activities.

General and administrative expenses were $17.6 million for the 12 months ended December 31, 2017. Expenses in the corresponding 2016 period were $8.9 million. This increase in 2017 is attributable to transaction fees associated with our partnerships and increases in our G&A functions to support our growing business, including personnel-related costs, legal, audit and other expenses. The net loss for the year ended December 31, 2017, was $17.6 million or $0.40 per share compared to a net loss of $22.8 million or $0.55 per share for the corresponding 2016 period.

Turning to the balance sheet. Total cash, cash equivalents and investments as of the year ended December 31, 2017, totaled $82.6 million as compared to $29.4 million as of the end of 2016. This increase was driven primarily by the upfront payments received from Servier and AstraZeneca and the option payment received from ASKA Pharmaceutical, offset principally by $39.3 million of operating cash expenditure during the year.

As a reminder, the year-end cash number excludes payment of a $12 million -- $12.5 million milestone from AstraZeneca achieved in the fourth quarter of 2017. It also excludes the $47.3 million in net proceeds from the February 2018 equity financing and the $30 million upfront payment due from Seattle Genetics.

With that, I will turn the call back over to Steve.

Thanks, Allan. In summary, we exited 2017 with 3 products in clinical development and followed our partnering momentum from the prior year with the announcement in February of our IO collaboration with Seattle Genetics. We are focused on becoming a commercial organization advancing both our proprietary and co-development product candidates. We expect to release initial data from our clinical programs during the second half of this year.

Thank you for joining us on the call today. We would now like to open the call for your questions.

(Operator Instructions) And our first question comes from the line of Matt Phipps with William Blair.

And definitely a great 2017 and early 2018 for you guys. I just want to -- just a couple of questions on PRS-060 and what to expect later this year. Will that mainly be kind of serum PK levels from the healthy volunteers? Will the Phase Ib have asthma patients where you can look at the eosinophil changes and maybe nitric oxide expelled changes as well?

Matt, thanks for the question. I think it's best that Lou can try to take a stab at that one. So I'll let Lou contribute here.

Yes. So definitely, the bulk of the data that we'll be presenting and releasing by the end of the year will be related to, as you surmised, basically the safety, tolerability and the pharmacology of the drug in the healthy volunteer study. There is a chance that we may see preliminary information from the multi-dose study as well. That trial is indeed expected to commence midyear. And we're in the final stages actually of getting ready to submit the protocol for that drug as well -- for that trial as well. So less certainty in being able to say whether we'll actually see biomarker data by the end of this year, that may go into 2019.

Got you. And is this current Phase I study and the plans for Phase Ib, is it using a nebulizer? Or are you in a dry powder inhaler at this point?

No, this is a nebulized drug. But together with AZ, we are making very excellent progress in generating a dry powder formulation. And the Phase II -- Phase IIa study that Steve mentioned in severe asthmatics will be diverted to dry powder formulation.

Our next question is from the line of Hartaj Singh with Oppenheimer.

This is Emma on for Hartaj. On 343, how many sites have you activated to date? And are you presenting any further data at a medical conference this year? Or would that be a 2019 event?

Thanks, Emma. I think that's another -- you asked two good questions for Lou. So I'll let him go ahead and answer it.

Yes. So well, we now currently have in the dose-ascending phase of the Phase I trial, we have 4 sites online. Those are Sloan Kettering, MD Anderson, START and Sarah Cannon Research Institute. And we're very, very pleased with the number of patients that they're entering into the trial. And we're moving -- as Steve mentioned during his initial remarks, we're moving very nicely now through the dose-ascending cohorts. We're now at the stage of the trial where we will be doing mandated serial biopsies, longitudinal biopsies, looking at the effect of the drug on the new microenvironment of the tumor. And there is a potential later this year to be able to certainly present some of the initial safety, tolerability, PK data of the drug and potentially biomarker data as well. Of course, at any point, we're getting very close to what we believe will be therapeutically effective dose levels. So there's always the opportunity that see single agent activity. But we obviously are not counting on that at this point in time but would certainly love to see it.

(Operator Instructions) Our next question comes from Matt Phipps with William Blair.

Lou, I was wondering if I could get just your opinion, we've had now 2 failed Phase III trials in gastric cancer and 1 failed Phase III trial in bladder cancer with PD-1, PD-L1 antibodies. Obviously, 343 is a much different mechanism but still is looking at immune response, an underlying immune response in these cancer types. How do you kind of interpret those failures? Is it better patient inflection? Or how do you think you can learn from those in the development of 343?

Well, there's also been successes obviously with immunotherapy in both of those genotypes, both in gastric cancer, particularly in patients with a PD-L1 positive tumor microenvironment. And I think the second cancer you mentioned was bladder?

Yes, I mean, TECENTRIQ failed. I know Merck was successful, TECENTRIQ failed. It's just kind of interesting.

TECENTRIQ obviously is approved for late-stage disease. I think the trial you're referring to that they failed was going head-to-head against standard care chemotherapy front line. Obviously, pembrolizumab succeeded in the same front-line indication. And so I say, the jury is still out. There's clearly evidence for effective immunotherapy in both of those cancer types. The other aspect of our drug in addition to the ability to stimulate the immune response through 4-1BB is that we have an anti-HER2 component. And that's for gastric. But in a number of tumors, including bladder, the combination of pertuzumab and trastuzumab was shown to actually demonstrate some very nice efficacy, not just in bladder cancer but also in gallbladder cancer, colorectal cancer and other tumors, looking at those patients who have HER2-plus activity on their tumors. So one of the aspects of our drug that really sets it apart is not just the dual specificity but the dual function, the combination of an anti-HER2 inhibitory effect on tumor growth plus the anti-4-1BB stimulatory component of the drug's activity. And there's actually reason to believe that those 2 mechanisms may be synergistic in terms of driving an antitumor response. So I agree that some of the activity, particularly in gastric cancer, of the PD-1 pathway inhibitors has been not -- certainly not at the level of run or of melanoma. But on the other hand, the fact that our drug, there's this really an abundance of scientific evidence, preclinical evidence, in particular, that co-stimulation through 4-1BB and checkpoint inhibition through the PD-1 pathway can be synergistic. Hence, the reason most of your tumor-specific T-cells in the tumor microenvironment that express 4-1BB are also expressed in PD-1. So modulating both of those immune regulatory proteins on the surface of antitumor T-cells, I think, has the potential for synergistic activity.

Great. And then I guess, I'll just -- one more. You mentioned another IND next year. Is that wholly owned? Or is that from one of the collaborations, one of the many collaborations you guys have?

Yes, thanks, Matt. I can take that. We plan to file in total 2 new immuno-oncology bispecific INDs by the end of next year. That's likely to be one fully proprietary program and one out of Servier collaboration. I mean, the point to keep in mind is we have a lot of -- we're a product engine, so we have a lot of bispecific candidates that we're evaluating. And we are dealing with the strength of a small biotech company, where we definitely want to stay focused and prioritize. And we're going to let the best data win out until we feel we can handle two. And that's our objective, and we're very confident we'll be able to handle two. And I think it's likely to be one Servier and one fully proprietary.

Stephen, the current collaborations, namely Servier and Seattle Genetics, are they solely focused on solid tumors? Is there any work in hematologic malignancies currently?

Yes, I think we haven't broken that out specifically. We believe that our focus to date and the data we generate are in solid tumors. But we do believe that there can be relevance for targeted costim bispecifics even in the liquid tumor space. So I think it's fair to say that there's optionality building to at least one of those alliances to look at that.

Thank you. At this time, we've reached the end of our question-and-answer session. And I will turn the call back to Stephen Yoder for closing remarks.

Yes, thanks again for everyone's attention today and for your continued support of Pieris. We look forward to keeping you updated on our progress throughout the rest of this year, and wish you all a great day. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.