Regulus Therapeutics Inc (RGLS) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Regulus second-quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (operator instructions) As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Ms. Allison Wey, Vice President of Investor Relations and Corporate Communications. You may begin.

Thank you, Vicky. Good afternoon, everyone, and thank you for joining us to discuss Regulus's second-quarter financial results and recent events.

We are joined today by Dr. Paul Grint, Chief Executive Officer; and Jay Hagan, Chief Operating Officer. Paul will provide opening remarks. Jay will review the financial results, and then we will open the line for questions.

Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Regulus's future expectations, plans, prospects, corporate strategy, and performance, which constitute forward-looking statements for the purposes of the Safe Harbor Provision under and Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in our filing with the SEC. In addition, any forward-looking statements represent our views only as of this date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.

I will now turn the call over to Paul.

Thanks, Allison. Welcome, everyone, and thanks for joining us this afternoon.

The second quarter was very busy and productive on multiple fronts. I will spend a few minutes this afternoon highlighting some of our accomplishments from the second quarter, discussing the FDA's request regarding the clinical hold of RG-101, and outlining what we have to look forward to over the next few quarters.

I'd like to spend a minute discussing RG-012 for the treatment of Alport syndrome. In May, we presented preclinical and longitudinal data from ATHENA, a natural history of disease study in patients with Alport syndrome, a debilitating chronic kidney disease, at the European Renal Association meeting.

We are very excited about this program and the opportunity it presents. It's a high unmet medical need, in an orphan population, with no existing therapy. Data from the phase I study that we completed last year, plus the ATHENA data, have informed the phase II proof-of-content study design. We recently submitted the phase II protocol to the FDA, the details of which we will share when we enroll the first patient in the study.

Data from this study could be available in the second half of 2017. And if favorable, our partner, Sanofi Genzyme, has the option to take over the development program. If the option is exercised, we would receive a milestone payment and recoup the vast majority of our development costs incurred to date. Downstream, we are eligible for milestones and royalties, and importantly, retain rights to a co-promote in the US.

Now turning to RG-101 for the treatment of chronic hepatitis C virus infection. In early June, we announced that we met the primary endpoint in the ongoing phase II closed-faced sandwich study of virologic response at 12 weeks following treatment.

RG-101 combination therapy has, to date, shown compelling SVR rates with a shortened four-week course of therapy, delivering up to 100% response rate in combination with Harvoni and nearly 90% for the Olysio and Daklinza arms.

Also in June, we expanded our clinical collaboration with GSK to conduct a dose-ranging phase II study of RG-101 with GSK's long-acting parenteral formulation, or LAP, as a potential single-visit cure for HCV. Data from the current ongoing study of RG-101 in combination with GSK's investigational NS5B polymerize inhibitor we hope to report at ASLD in November.

As you know, last week we received the formal clinical hold letter from the FDA requesting information required to address the clinical hold that we previously announced.

The FDA has requested detailed safety data analyses from preclinical and clinical studies; exploration of potential mechanisms of hepatotoxicity in nonclinical models; review and input from independent hepatotoxicity experts; additional PK data from the US phase I study; and a risk/benefit assessment for the proposed therapeutic regimens containing RG-101.

Much of what is being asked of us is information we have or can obtain over the next couple of months. We anticipate submitting the aforementioned information by early Q4. Once the FDA receives our written response, we will be notified of their decision within 30 days.

Our strategy remains unchanged for RG-101. We are interested in developing a safe and effective treatment for HCV that can be administered in four weeks or less. We believe such a regimen is highly differentiated and represents a significant improvement over current standard of care. This has been further validated by the market research conducted with physicians and payers.

Over the next several quarters, we expect to report more data from these ongoing studies, which will help define the breadth of RG-101's potential and form the basis of the optimal commercialization and partnering strategy.

The back half of 2016 looks just as busy as the first half, during which we plan to initiate the RG-012 phase II study, report data readouts from the ongoing closed-faced sandwich study and the GSK collaboration, address the clinical hold, and announce a new clinical candidate at our first R&D day in early December.

With that, I will turn the call over to Jay to review the financial results.

Thanks, Paul. We ended the second quarter with a strong balance sheet -- cash, cash equivalents, and short-term investments of $108 million. This compared with $106 million at the end of the first quarter and $115 million at year-end 2015.

Given our current operating plan, we anticipate ending 2016 with approximately $75 million to $80 million in cash, and we believe this will take us into 2018, by which time we expect several programs will have made significant advancements.

As you know, in June we secured a $30-million growth capital credit facility with Oxford Finance and received $20 million at closing under an initial term loan at very favorable terms. The loan provides for interest-only payments for the first two years at a rate equal to the sum of 8.5% plus the greater of 0.44% or the 30-day LIBOR rate. An additional $10 million will be available to us subject to the achievement of a certain specified milestone. We are very pleased with these terms and the flexibility it offers us.

We recorded revenue for the second quarter and six months ended June 30 of $0.5 million and $1 million, respectively. This compared with $3.8 million and $8 million for the same periods in 2015.

Revenue for the first half of 2016 and 2015 consisted of amortization of up-front payments from our strategic alliances and collaborations. Second-quarter 2015 revenue included $2.6 million for research services under our strategic alliances and collaborations. Revenue for the first half of 2015 included $3.2 million for research services and $2.9 million in preclinical and other milestones.

R&D expenses were $18 million and $34.8 million for the three and six months ended June 30, 2016, respectively, compared with $19.2 million and $32.6 million for the same periods in 2015.

R&D expenses were consistent for the three months ended June 30, 2016, and 2015, excluding one-time nonrecurring severance charges recorded in June 2015. The increase for the six months ended June 30, 2016, was driven by an increase in our aggregate clinical-trial program costs.

G&A expenses were $3.7 million and $8.8 million for second quarter and first half of 2016, respectively, compared with $5.8 million and $9.5 million for the same periods in 2015. These decreases were primarily driven by nonrecurring severance charges recorded in June of 2015, partially offset by an increase in recurring personnel costs for the three and six months ended June 30, 2016.

Net loss for the second quarter was $21.1 million, or $0.40 per share, and $42.3 million, or $0.80 per share, for the first six months of 2016. This compared with a net loss of $21 million, or $0.41 per share, and $35.5 million, or $0.70 per share, for the same periods in 2015.

In short, our spend remains in line with our operating plan, and the cash runway extends through some key milestone events, many of which Paul outlined in his remarks.

And with that, I'll turn it back to Paul.

I think we're ready to take questions, Vicky, thank you very much.

(operator instructions) Matthew Luchini, BMO Capital.

Hi. Thank you so much for taking the questions, and congrats on the progress. So I just wanted to try to follow up a little bit on some of the information that's going to be going back to FDA -- specifically, if you could talk a little bit about the additional type of PK data that's been requested and what, if anything, you might be able to glean from it. And then secondly, does the detailed safety data [that you'll be submitting] -- does that include anything beyond what's already in the scope of the IND? And then just quickly on RG-012. I know the [design] is going to be coming up when the first patient is dosed, but I was wondering if you could share a little bit about how quickly your expectation is to roll patients off of ATHENA -- I believe you indicated previously that was the plan into that study -- and how we should think about the rate of enrollment into that trial. Thank you.

Matthew, good afternoon. It's Paul. Thank you for the questions. So I'll just take them in order.

So the PK data and exposure data that the FDA has requested is data that comes from the phase I study that we conducted in the US. So just to remind you, we opened the IND with this phase I protocol. It is a study looking at the PK of RG-101 in patients with either severe renal compromise or on dialysis.

And so we -- just in the process of receiving this data now, and so, not surprisingly, the FDA has requested to see that. And so we'll be providing that as part of our responses.

The second part of your question was the safety analysis. Yes, you're correct, we will be doing a safety data [cut] across all the studies with RG-101 that we've conducted. So that will include the original phase I protocol that was conducted in the Netherlands, clearly the phase I study that's in the US currently, together with the other two phase II programs. So that is the sandwich design study and the GSK combo study that's being conducted in Europe. So we'll be doing a safety data analysis across all those studies.

And then the question with regard to enrollment of RG-012. Yes, you're correct, it's our anticipation that some of the patients who enrolled in the ATHENA natural history study will be eligible for the entry criteria for our phase II proof-of-concept study. So clearly we hope to be able to roll those patients over to the phase II study.

Beyond that, it's a little difficult at this point to predict enrollment. Clearly, we're using many of the sites that we used for the ATHENA study, sites both in the US, Canada, a number of European countries, and Australia. So we'll have a number of sites participating in the phase II. And we're optimistic that we'll get this enrolled in a reasonable time period.

Okay, thank you.

Alan Carr, Needham & Company.

Thanks for taking my questions. A couple followups on those, one of them in terms of what the FDA wants. It sounds like, obviously, no clinical studies, but can you give us a sense of how much might be needed in terms of preclinical studies, if any. And then also [maybe] give you a chance to comment on some of the data from the natural history study, and how that might influence protocol design here for the phase II. In other words, can you give us an update on what you're thinking about primary endpoint and that sort of thing for that?

Yes, Alan, good afternoon. It's Paul. Thanks for your questions.

So with regard to the preclinical information. Clearly, as we talked about before, we've conducted a significant formal toxicology program with RG-101. There is a lot of information in the IND that exists, and I think to be helpful to the FDA, we can take a lot of that information and put it into a format that perhaps will be more helpful with regards to answering their questions.

Aside from that, there's a lot of other data, as one thinks about, for example, the miR-122 knockout animal and other pharmacologic models and animal work that's being done. So we're in the process of compiling all that data, together with in vitro studies that we've done from a [transporter] standpoint.

So we have a lot of information. I think it's really -- it's incumbent on us to put it into a sort of logical format to help the FDA with respect to some of the questions they have.

So for the RG-012 proof-of-concept study -- at this point, we're not going to talk about the details of the phase II design. Part of the goal, just to remind you -- there were several goals of the ATHENA natural history study. One of those goals was to see if we could identify patients that progressed, let's say, at a faster rate with respect to decreasing GFR. And we've been able to do that in the ATHENA study. So that clearly is a patient population that we're interested in moving into the phase II proof of concept.

Obviously, measuring, or having GFR as an endpoint is an important one in that study. But also, we -- I think as you recall, in the ATHENA study, we were doing a significant amount of work on a lot of other biomarkers, both blood and urinary. And we'll be including the ones that we believe are relevant that we have identified in the ATHENA study in the phase II proof of concept, as well.

But we look forward to starting the phase II study in the relatively near future. And once we have, we'll share much more of the design with respect to the entry criteria, the nature of the overall design, dosing scheme, and the tests that will be conducted on the patients.

To clarify one point -- you submitted the protocol, and it's usually 30 days for them to respond, and if no response, then it's clearance to go ahead, then?

That's correct.

Thanks.

Liana Moussatos, Wedbush.

Thank you for taking my questions. Does the cash runway into 2018 include the milestone mentioned for Sanofi? And what disease areas are being considered for the fourth clinical candidate?

Hi, Liana. Good question. As far as the cash runway goes, that assumes no opt-in from Sanofi. It's not that we can predict that, but we don't want to have that in our operating plan as a base assumption. So obviously, if we are successful in demonstrating proof of concept and Sanofi opts the program, we have a much more significant runway from those proceeds.

Liana, this is Paul. The answer to your second question, with regard to --

The fourth clinical candidate.

-- the fourth clinical candidate. So I think -- as we've talked before, delivery is critical, so we've very much focused on liver targets and kidney targets, and so that's -- we have candidates in those areas at the moment that are well through our process, and that's where we're focused.

We are looking at other organs and interesting targets. And one point I did make in the script, which we really announced today for the first time, is that -- historically, or really over the last few months, we haven't had the opportunity to talk much about our portfolio.

Not surprisingly, much of the interest has been in the RG-101 program and the RG-012 program and RG-125 as clinical programs. But we're really looking forward to the first corporate R&D day, which we plan to host in early December, where we're going to have the opportunity to talk a lot more about the pipeline, as well, the candidates that we have coming through, the important disease areas that we're working in --but also, I think which -- something that people will find very interesting, just the overall way we go about our target identification and validation process and how we now, in my view, have a very sophisticated way for developing oligonucleotide therapeutics, targeting microRNAs. So I think it'll be a very exciting time at the R&D day.

Thank you.

Jeff Chen, Cowen and Company.

Hi. Thank you for taking my questions. Maybe one for Paul -- in terms of preclinical studies, are there any additional studies that you're planning to conduct to perhaps reveal some mechanisms of action that the FDA has requested? And also, have you talked to hepatotoxicity experts and if you've gotten any feedback and impressions from them? Thanks.

Yes, good questions. So there is a limited set of studies that we're contemplating conducting on top of, as I said, what we've already done, which is a significant program. And basically -- let me just take a step back and just remind you what we've seen in the two serious adverse events reported that we have discussed in some detail on previous calls and also at EASL, medical meeting.

What we're seeing is isolated increases in bilirubin, and this is not seen with concomitant -- significant concomitant increases in other liver enzymes. As we look at the overall pharmacology and toxicology program which we have conducted, we have not seen [increases in] bilirubin in a number of different animal species or studies that we've conducted. And so right now, for us there's no obvious mechanism that would associate these.

We have some ideas, and we'll continue to pursue those. But as I indicated earlier, we'll be putting all the data together in a logical fashion that helps, I think, the FDA address some of the questions that they've asked.

With regard to hepatotoxicity experts, we have not at this point solicited significant feedback. What we need to do for this group is to put together all the safety analysis that we have underway. Clearly, they need an overall picture of the program and what we've seen -- not just from a hepatotoxicity standpoint, but the overall safety of the program.

So we're in the process of doing that. Once the data packages are complete, obviously they will go to the hepatotoxicity experts, and we await their review with interest.

Thank you.

Bill Tanner, Guggenheim Securities.

Thanks for taking the questions. Jay, had one for you. You mentioned -- or Paul may have mentioned, but maybe you could speak to it -- about -- on the Alport program that if Sanofi Genzyme opts in that you'll -- the Company will receive a milestone payment. I think the comment was that it will largely cover the investment. So could you give us a ballpark as to what that number is? If you already mentioned it, I apologize.

The specific numbers are not disclosed in the contract, so I think until we achieve them [we'll not be] disclosing the exact amounts. But there's a milestone payment at the option decision, plus reimbursement for the vast majority -- and that's as close of an approximation we can give you -- on the clinical-development costs incurred to date.

So we know what the number is, and so in terms of giving you a sense of guidance, it's a significant number that would extend our cash runway is what I was alluding to. But that's not in the guidance that we have provided when we said we had cash into 2018 with our existing balance sheet.

Got it. And not to pin you down, but that extension, would that be like 2019, give you an extra year, something like that? Any comment as to that?

Something like that, something like that.

Okay. And then, Paul, I had a question just on the -- some of the needs that the FDA has relative to 101. And I know in the press release, there was a comment about a risk-benefit assessment for the proposed therapeutic regimens. Maybe you could explain a little bit how that would -- what that actually entails, how that's done? And then I guess absent a clear understanding as to the mechanism, how do you actually come up with some kind of a proposal that has some scientific or medical underpinning?

It's a good question. So as we have laid out, the FDA asked us for a number of different things, many of which were logical and we anticipated they would request.

They've asked for a risk/benefit analysis, which personally I think is a great opportunity for us to lay out how we see the positioning of RG-101, as we talked about, with either significantly shortened oral therapeutic courses or potentially, what really excites us, is the one-visit-cure situation.

Just to remind you, we're in phase I in the US. Obviously, our IND has been filed, but we have not at this point had the opportunity to dialog with the FDA and help them understand where we're trying to take this program, and if you like, how it's differentiated from the current approved oral DAA agents that have treatment courses for 8 to 12 weeks generally.

So I personally think that this request for a risk/benefit analysis gives us, I think, a tremendous opportunity to review somewhat what's happening out there in the real world, based on the DAA experience, but also, more importantly, to allow us to put our case as to where we see RG-101 could potentially play a role in the future.

Okay. And then maybe just one last -- or one other one on -- you mentioned the -- so as it relates to the potential mechanisms of hepatotoxicity, you mentioned that in the IND there was some information. I wasn't really sure if you felt like that addressed it, but I'm assuming that if there's any work that needs to be done, these would be somewhat standard, nonclinical hepatotox testing?

Yes, you're correct. The last part of your question there, you're correct.

What I was alluding to -- just to remind you, we have some of this data out publicly -- we've conducted a tox program that's involved multiple doses -- so this was actually four doses given to mice and nonhuman primates over a period of 12 weeks, at very significant multiples above where we are in the clinic. And so this point, we haven't seen changes in bilirubin or clear evidence of hepatotoxicity.

So I think the key question here, really, is this, if you like, on-target or off-target tox. And we've not seen anything to this point that would suggest inhibition of miR-122 is directly related to bilirubin changes. So -- and I think you raised in the second part of your question exactly, there are certain other tests that we're currently working through to see if we can identify some other potential mechanisms.

And then just the last one -- you mentioned that you file and 30 days later the FDA typically would give a response, and I'm somewhat unfamiliar on my part with this. What's the likely -- or in the history, what's the likelihood that this would need to be done iteratively? I'm assuming -- obviously, the Company wants to put forth the best foot and have all the data the FDA would need to resolve it, but is there a probability that -- okay, this looks good, this looks good, and you need to go back and do a little bit more here?

As a company, we're going to -- and we've indicated a time frame. We're going to take the time to provide the most comprehensive response that we can, based on the data set that we currently have, or data that we're going to generate in the near future.

I don't think -- you can't put a percentage, I don't think, or we can't estimate at this point. Clearly, our goal is to get off clinical hold. We can't really speculate at this point. So we will do the best job we can to answer all the questions with the information in hand.

Got it. Okay, thank you.

Bill, there's a mandated 30-day clock they have to reapply to the --.

Right, right. Okay. Perfect. Thank you.

I'm showing no further questions at this time. I would now like to turn the call back over to Dr. Paul Grint for closing remarks.

Thank you again for joining us on the call today. We look forward to providing additional updates throughout the year. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the programming. You may all disconnect. Everyone, have a great day.