Regulus Therapeutics Inc (RGLS) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Regulus Therapeutics Second Quarter 2017 Conference Call. (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. Ma'am, you may begin.

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Regulus' second quarter financial results and corporate highlights. We are joined today by Jay Hagan, President and CEO; Dr. Tim Wright, Chief R&D Officer; and Dan Chevallard, CFO. Jay will provide opening remarks, Tim will share progress on the pipeline programs and Dan will review the financial results before we open the line for questions.

Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Regulus' future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the safe harbor provision under the 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 filings with the SEC. In addition, any forward-looking statements represent our views only as of the date of this call and 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'll now turn the call over to Jay.

Thanks, Allison. Since our first quarter call in early May, we have accomplished many things. Some of which required making some tough, disciplined decisions. As you know, these included rightsizing the organization to fit our strategy and balancing internal activities while leveraging external resources to support our current programs and engaging (inaudible) is a good example of that. Discontinuing certain programs in light of development, regulatory or commercialization considerations and focusing on our most promising ones. We also raised $46 million, which extends our runway through Q1 2019, providing the necessary capital to get us to key program milestones, all of which, I believe, position us for longer-term success. We also added a new Board member in Pascale Witz. Pascale brings tremendous commercial and operational insights from her senior executive roles at both Sanofi and GE and we are honored to add someone of her experience to compliment the existing Regulus Board. With these major actions and decisions behind us, we're laser-focused on execution and meeting our milestones.

Our strategy remains the same despite these changes, namely to leverage our expertise in microRNA biology to advance therapeutics for significant unmet medical needs. Partnering those programs that make sense in light of key considerations, and keeping those that can be developed and commercialized within an efficient commercial footprint. I want to make special mention of the great work the team here at Regulus has accomplished amidst all of these changes. They're doing a terrific job in forging ahead focused on the enrolling the 012 program, advancing the 4326 program into the clinic, and delivering on our most promising pipeline candidates from the lab.

Now I'll turn the call over to Tim, who will provide an update on the 012 and ADPKD programs. Tim?

Thank you, Jay. We continue to make significant progress on our 2 lead kidney programs. Our most advanced clinical program, RG-012 is now in Phase II for the treatment of Alport syndrome. The protocols for the HERA study and the renal biopsy study have been submitted to the FDA. We're in the process of getting the study sites activated and we anticipate recruitment to begin shortly. We expect the completion of HERA enrollment by year-end, the interim analysis with all subjects at 24 weeks of treatment by mid-2018, and the topline results after 48 weeks of treatment by the end of 2018. The renal biopsy study will evaluate RG-012, renal tissue pharmacokinetics, target engagement and downstream effects on disease biomarkers. We expect data from this study towards the end of 2017.

Our second kidney disease program, RGLS4326 for the treatment of autosomal dominant polycystic kidney disease, or ADPKD, is progressing through the IND enabling phase and we are on track for IND filings by the end of 2017. We have planned a comprehensive Phase I program that includes single and multiple ascending dose studies with an additional repeat dose biomarker study in ADPKD patients slated for the second half of 2018. We are very excited to bring these 2 programs forward for the treatment of chronic kidney diseases for which there is great unmet medical need. Dan?

Thanks, Tim. Coming out of the recent restructuring, changes in leadership, pipeline updates and successful financing, I'd like to step you through 3 main points to clarify our second quarter financial results and highlights.

First, I'd like to summarize the recent corporate restructuring. As we previously disclosed, the restructuring was initiated in early May, 2017. The net P&L impact of all related activities was $3.2 million, which included approximately $2 million in nonrecurring cash severance payments. As we look to the second half of 2017, the cash impact of these costs will be offset by personnel savings of an equal amount over the balance of the year, resulting in a net neutral cash impact to our 2017 operating plan. All restructuring-related activities, charges and payments were incurred and have been paid as of June 30, 2017.

Second, to review our operating expenses, our second quarter 2017 R&D expenses were $14.3 million or $14.8 million, if you exclude net adjustments for restructuring charges, including a $1.4 million reversal of noncash stock-based compensation compared to $18 million in the second quarter of 2016. This decrease was primarily driven by reductions in spend and a subsequent discontinuation of the RG-101 program.

G&A expenses were $7.1 million for the second quarter or $3.4 million if you exclude one-time restructuring charges, compared to $3.7 million in the second quarter of 2016. Our net loss per share both basic and diluted was $0.41 per share in the second quarter of 2017 or $0.35 per share excluding these one-time restructuring charges, compared to $0.40 per share in the second quarter of 2016.

And third, I'd like to provide an update on our cash position. As Jay previously mentioned, we are pleased to have closed our recent financing this past week. Pro forma for the financing, we ended the second quarter with approximately $83 million in cash and cash equivalents. At the midpoint of the year, excluding restructuring costs, our 2017 cash flow was in line with our operating plan. As we look ahead and with the cash impact of the wind down of RG-101 and RGLS5040 substantially behind us now, we're protecting an annualized cash burn rate of approximately $48 million. Combined with our recent financing, we now project our cash on hand to extend through Q1 2019.

With that, I'll turn the call back over to Jay.

Thanks, Dan. So just to recap on our upcoming milestones over the next 18 months or so. First, we anticipate having HERA enrolled in renal biopsy data by year-end. Also by year-end, we expect to have filed our IND for RGLS4326 for ADPKD, with initiation of Phase I shortly thereafter. We may also potentially nominate a new clinical candidate. In mid-2018, we project having an interim look at HERA data with final data around year-end 2018. Data from the ADPKD program throughout the Phase I program is expected throughout 2018 as well. In addition, we continue to be very active with potential partners for certain of our programs. On the investor front, we'll be at the Wells Fargo, Wedbush and Cantor Fitzgerald conferences through the remainder of this quarter.

And with that, we'd be happy to take your questions. Operator?

(Operator Instructions) Our first question comes from the line of Matthew Luchini of BMO Capital.

A couple, if I may. So first, the biopsy data is the next big catalyst for you guys. Maybe you could help just remind us in terms of framing of expectations, what we should be thinking about and looking for here? And if you could give a little bit of maybe compare and contrast on how we should be thinking about what we might see here and even as we get into HERA relative to say what Reata has recently presented. And then secondly, if you could just remind us the mechanics of the Sanofi opt-in. Is there a prespecified window post data at which they must get back to whether or not they're going to participate or is it more open-ended than that?

Sure. Why don't I just hit the last question, the mechanics of the Sanofi options and then I'll turn it over to Tim to walk through about the biopsy data and how to think about our data versus the recent Reata data. So the way the deal is structured is that Sanofi has an option on RG-012 for worldwide development and commercialization rights post a Phase II proof of concept study, which is defined as a 1-year randomized study. It's an open option though, whereby they could opt at any point between today and an outside date meaning a certain specified period of time post the completion of the 1-year proof of concept study. So given that it's not disclosed, you can imagine if there's certain short period of time for them to evaluate that final dataset and make a decision on whether to opt in. Upon the opt-in then, they would pay us an option fee which is disclosed, it's $33 million, plus reimbursement of the vast majority of the development costs incurred to-date, which is a number that will continue to grow through the course of this Phase II program and we would project that would be well in excess of 1-year burn for us. And then they would take over ongoing development of the program and commercialization and we're eligible for a development, regulatory and commercial milestones as well as royalties in the midteens on net sales.

Okay. And with that, Tim, will you cover off on the biopsy data, what we can expect as well as the way to think about about our data from the HERA's study versus Reata?

Sure. Well we haven't posted our details on the biopsy study yet. They will be posted in the near future in clinicaltrial.gov once that study's up and running. But what we've disclosed is that study is actually now removed from the previous design of HERA and as a standalone study enables us to get a more rapid read on the pharmacodynamic effect and also tissue exposure levels of RG-012. Recall that the initial study design of HERA last year was pretty much looking for trends in eGFR. We've now powered this for statistical significance on eGFR at 48 weeks and with fairly good confidence that we're going to see a clinically meaningful and statistically significance eGFR change based on a preclinical data and also the natural progression patients with Alport syndrome. So the biopsy data now is important for us to assess both tissue exposure levels, target modulation, that is near 21 in the tissue and it's using an assay that we worked out with Sanofi. And then also looking at both tissue, blood and urine biomarkers as potential early reads for pharmacodynamics effects that, at least preclinically, are associated with efficacy. So it's confidence building in terms of generating patient data that will enable us to assess target modulation, as they say tissue PK, and also the downstream biomarker effects.

Now related to Reata, and I'm not going to comment on that the details on this. But suffice it was unexpected to see what they have shown already based on the data that they previously reported in diabetic nephropathy. And the main long-term outcome remains, whether this will be: A, sustained and B, sustained off of therapy, in particular, because of the mechanism of action being as it is -- hyper-filtration mechanism. So those are all the comments I can make about that at this stage with very limited data that's shared with us so far.

And you may have picked up that we are very pleased that Sanofi decided to keep their pro rata ownership where it's at and participate in the financing that was previously announced.

The next question comes from the line of Liana Moussatos of Wedbush Securities.

What are the steps needed to get to the renal biopsy data and to file the IND for 4326 by year-end? And also, when is your 10-Q coming out?

With the Q, Dan?

Yes, I can answer the 10-Q question. So we'll be filing the Q at the conclusion of this call today.

And as far as the specific steps regarding the renal biopsy study, as Tim mentioned, we submitted the protocol and its activating the sites, and enrolling the patients.

The dates are identified and it's a matter of getting them up and running. There -- it's in progress. And we're hoping for hitting that milestone maybe even ahead of the end of the year for that one. So as far as next steps, the next step will be for posting this on clinicaltrial.gov. From visibility standpoint, you'll be able to see the outline of that protocol at that stage.

Yes, there's IND approvals to get the site up and going, site initiation business, all that basic clinical operations blocking and tackling that goes to getting a study up and going. And then as far as the IND goes, there again, it's doing your non-GOP and GOP toxicology studies.

Yes. So in terms of that program, everything is progressing on Q, that is all the pre-IND work that we need to accomplish and we've already engaged the CRO for the site selection from that Phase I start. So not really sure if I can share any more with you except to say that everything looks very good and all the pre-IND work or the IND enabling work is being completed on time for a Q4 submission.

Our next question comes from the line of Alan Carr of Needham & Company.

Where can you talk a bit more about cash use here and you used the proceeds and to what extent are they directed to the 2 lead programs here in kidney disease, and how much will you still be devoting towards platform and new microRNA candidates?

Yes, I'll let Dan take that. But I mean, at the highest level, clinical programs in general consume the vast majority of discretionary spend. So we have a -- the way to think about, I'll put it into 4 buckets of spend that maybe Dan can walk through at a high level. But we have basically a fixed infrastructure here of employees, plus what it costs to be a public company, sort of, fixed overhead costs, which Dan can give you a sense of. Then we've got our 012 Phase II program. Then we've got the ADPKD program, which would move through a comprehensive Phase I program next year in terms of use of proceeds. And then we have an ongoing active discovery effort here. But the -- I want to make sure I'm emphasizing that as far as discretionary spend goes, just given the larger magnitude of doing clinical trials of the vast majority of that discretionary spend is directed towards those. Daniel, in for any more commentary?

Yes. Alan, I think, how I'd color that further would be probably a 1/4 of our proceeds you can allocate towards fixed costs over the next 7 to 8 quarters. A better part of half of the proceeds are really going to be focused on driving the 012 program through the Phase II and moving the ADPKD program into Phase I, which will take us really through 2018. I'd say maybe the balance, the other 25%, we continue to have a commitment to our research and pipeline development and I think that will really constitute the remaining quarter of the proceeds that we were to save over the next 7 quarters or so.

Yes. And we've articulated in broad strips down, that we have a very active program in NASH with multiple targets been pursued. We have backup hep C program, that pending a updated commercial assessment and business development outreach, where we can articulate what a commercialization plan would look like would be an additional area of research as well as other diseases of the liver that are yet undisclosed and kidney.

And you mentioned that you may bring another -- nominate another program. I assume this is going to be in liver or kidney, or can you narrow it down even more than that?

Yes. I'd prefer not to narrow it down right now. We'll disclose it once we're making the commitment to start spending the more expensive IND enabling dollars on a program. But I will say that there's timelines and project teams working on these various programs here. And as they advance along and as we determine which look the most favorable and how we're going to prioritize our spend, we will be in a position to nominate.

And you're feeling at this point, in microRNA, the best target organs for that are kidney and liver?

Well, we know we can deliver to those organs and we've seen that. Obviously, with the GalNAc technology and other conjugation technologies, we know we can preferentially get to the liver. With our kidney program, both the naked oligo as well as proprietary chemistry we have employed in the 4326 program, we know we can get to the kidney with efficacious concentrations of oligo. Others have demonstrated in the industry an ability to deliver to the CNS, to the eye, topically, to the G.I. And so all of those are potential additional tissues that one could explore. And I also don't want to lose sight of the glioblastoma program, the one oncology program we have ongoing, where -- because that disease is often coupled with surgical resection, there's an opportunity to deliver locally there. And that program continues to be an area that we're exploring that we highlighted last year at our R&D Day.

(Operator Instructions) Our next question comes from the line of Madhu Kumar of Chardan.

This is Kristen on for Madhu. Most of my questions have been addressed, just one on whether there will be any data for either of the 2 programs that ASN meeting this fall?

No, we're not planning to present this year given the time frame of where we expect data to come out and where we are with the programs. We're focusing our efforts back here on-site to get the activities all up and running to get those recruited.

And at this time, I'm showing no further questions. I'd like to turn the conference back over to Mr. Jay Hagan, CEO, for closing remarks.

Yes. Thanks very much for your time and attention today and we look forward to providing updates as the next quarter progresses. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everybody, have a great day.