Cartesian Therapeutics Inc (RNAC) 2016 Q3 法說會逐字稿

Welcome to the Selecta Biosciences Third Quarter 2016 Financial Results Conference Call. (Operator Instructions) This call is being webcast live on the Investor and Media section of Selecta's website at www.selectabio.com and is being recorded.

For opening remarks, I would like to now turn the call over to Mr. Jason Fredette, Senior Director of IR and Corporate Communications at Selecta. Please go ahead, sir.

Thank you, Amanda, and good morning, everyone. Thanks for your interest and for attending our third quarter conference call. I'd like to note that we are taking part at -- in the Stifel 2016 Healthcare Conference and the Piper Jaffray Healthcare Conference later this month. Our presentations from both of these events will be webcast. Details are available in the press release we issued earlier this week.

Earlier this morning, we issued two additional press releases. One containing our Q3 results, and another providing an update on the peanut allergy and celiac disease programs that have been sponsored by Sanofi. Both can be found in the Investors and Media section of our website, selectabio.com.

On today's call, our President, CEO and Chairman, Werner Cautreels, will speak to the recent developments and highlights contained in these announcements. Our CFO, David Siewers, will then review our financial results. And following our formal remarks, we'll be joined for the Q&A session by Kei Kishimoto, our CSO; Peter Keller, our CBO; and Skip Sands, our CMO.

But first, we'd like to advise that certain remarks we make during this call about the company's future expectations, plans and prospects constitute forward-looking statements for the purposes of the safe harbor provisions 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 the Risk Factors section of our most recent quarterly report on Form 10-Q, which is on file with the SEC and can be accessed on our website.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. Therefore, you should not rely on these forward-looking statements as representing our views as of any subsequent date to today, November 10, 2016.

And now let me turn the call over to our CEO, Werner Cautreels, to begin our quarterly review. Werner?

Thanks much, Jason, and good morning, everyone. Over the past months, we have made a series of scientific and clinical advances, demonstrating the breadth of our Synthetic Vaccine Particles, we call them SVP, technology platform. We believe that with our SVPs, we can enable new biologic therapies and also drastically enhance the benefits of a wide range of already marketed biologics. We do that by mitigating undesired immunogenicity, such as preventing antidrug antibodies, or ADAs, that can result from these biologics.

For strategies to focus on three core areas where we see the highest unmet needs, but also the biggest impact. And those are enzyme therapies, gene therapies and biologic cancer treatments.

Our lead product candidate, SEL-212, is a prime example of our ability to improve the profile of biologic drugs. SEL-212 combines our proprietary SVP-Rapamycin together with pegsiticase. Pegsiticase is a highly potent uricase enzyme that degrades uric acid deposits. And these deposits are the cause of many symptoms that are associated with gout. Of course, however, pegsiticase's effect is drastically restricted by the rapid formation of ADAs.

We believe that SVP-Rapamycin can prevent the formation of these ADAs, and therefore enable pegsiticase to do its intended job and that is to significantly lower serum uric acid levels, but also total body uric acid burden in chronic refractory and tophaceous gout patients that are poorly managed with available treatment.

And indeed, in our Phase 1 trials, active and generally well-tolerated doses of SEL-212 were identified and that was in two single ascending dose studies, with more than 75 patients. These trials demonstrated SEL-212's ability to prevent ADAs and thereby enable sustained control of serum uric acid levels for at least 30 days after a single dose.

We will be presenting these data, including data from our ongoing Phase 1b trial on December 7 at the Eleventh Annual Immunization and Vaccine Summit in Boston. And the following morning, so that will be on December 8, we'll also host a conference call, where we will present and discuss these data.

Now these data from Phase 1 prepared us very well for the Phase 2 trial, and we dosed our first patients in October. More than 36 patients will be enrolled in this trial across 15 centers in the United States. SEL-212 patients in this trial will receive three monthly doses of SVP-Rapamycin in combination with pegsiticase, and then followed by two monthly doses of the enzyme pegsiticase alone. The goal of the trial is to demonstrate safety and tolerability but also to show its clinical activity as measured by uric acid levels and inhibition of ADAs. And in addition, as an exploratory endpoint, we will measure uric acid deposits in certain patients using Dual Energy Computed Tomography imaging.

We are obviously very excited and happy to have this trial underway. And we expect, as we announced earlier, to report initial results in the first half of 2017.

We are also pleased by the progress we made in gene therapy. You know that there are many gene therapies in development today for various disorders. Among the greatest challenges that has emerged in the field is maintaining the therapeutic expression levels of the transgene over time, and also enabled repeat administration of gene therapies.

Here, also, we believe that SVP can play an important role. In clinical trials with AAV vectors, both humoral and cellular immune responses have been reported after systemic administration. The cellular immune response may cause liver inflammation and loss of transgene expression, and that is even after the first dose. The humoral or antibody response occurs with the first administration. It affects virtually all patients and prevents, therefore, the ability to readminister the same gene therapy vector, leaving the patient without a treatment option later in life.

Together with our collaborator, Federico Mingozzi, we presented new clinical data at the Annual Congress of the European Society of Gene and Cell Therapy. We demonstrated the potential of SVP-Rapamycin to enhance the therapeutic benefit of gene therapies by mitigating both these unwanted humoral and cellular immune responses. The coadministration of SVP-Rapamycin with AAV8 gene therapy also enabled successful repeat administration, resulting in effective expression of coagulation Factor IX. We believe that these data underscore SVP-Rapamycin's unique potential to prevent immunogenicity that can reduce the durability of gene therapy and enable the ability to administer multiple gene therapy doses.

Consequently, we believe that SVP may enhance not only dosing strategies for existing applications, but also broaden the reach of gene therapy to more diseases. We are currently advancing two proprietary gene therapy programs. Methylmalonic Acidemia, or MMA, and also for Ornithine Transcarbamylase Deficiency, or OTC.

For MMA, we would license the new vector from Mass Eye and Ear recently, that is called Anc80, and that vector has the potential to overcome preexisting ADAs to AAV vectors. MMA and OTC are rare metabolic disorders that cause severe development issues and lack currently effective treatments. Our goal is to avoid cellular immunogenicity and enable repeat administrations of these gene therapies that may be required later in the lives of these young patients.

In addition to gout and gene therapy, we believe that our SVP platform can also have a profound benefit in the field of oncology. We presented in late October new data at the Immunogenicity and Bioassay Summit in Baltimore. We teamed up with our collaborator, Dr. Ira Pastan from NCI, on a program that evaluates the activity of SVP-Rapamycin combined with LMB-100.

Now LMB-100 is a next-generation recombinant immunotoxin that is currently in clinical testing for patients with mesothelioma and pancreatic cancer. So maybe as a background, patients with mesothelioma refractory to chemotherapy were dosed with an earlier version of LMB-100 in a clinical trial, most immediately developed ADAs despite use of potent immunosuppressants. But the few patients who are able to tolerate more than two treatment cycles with immunosuppressant together with this immunotoxin, showed marked anti-tumor activity.

So in this collaboration, Selecta and NCI co-administered LMB-100 with SVP-Rapamycin in mice. And this co-administration prevented the formation of anti-LMB-100 antibodies and allowed for the administration of multiple treatment cycles. And that without the onset of neutralizing antibodies. This also restored the beneficial effect of LMB-100 on controlling tumor growth in the tumor model.

So we've made a lot of progress in our core area of immuno-tolerance. And of course, we look forward to providing you with additional updates on these different programs in the very near future.

In addition to these core areas, our strategy has been, and will remain, to partner, or out license our SVP technology for other indications. This was the case in 2012 when Sanofi approached us to initiate a license and research collaboration agreement that was focused on the creation of a vaccine candidate that encapsulates peanut extract and an immune stimulating adjuvant using our SVP technology. This collaboration was then later expanded to celiac disease, and that was a few years later.

Earlier this week, we received notice from Sanofi that following a strategic review of its R&D portfolio, Sanofi has decided to exit this collaboration with Selecta. As a result, we will be receiving worldwide rights to the intellectual property, to the data and materials that Sanofi sponsored in these peanut allergy and celiac disease programs.

We believe that this gives us -- this research has yielded a very compelling preclinical data. And on the basis of these data, we plan to evaluate strategic opportunities to continue advancing these non-core programs. It's also important to note that the termination of this collaboration is not expected to have a material impact on our cash runway.

So this completes my remarks. And with that, I'll turn it over to our CFO, David Siewers, to give some brief comments on our financials.

Thank you, Werner, and good morning, everyone. Total revenue for the third quarter of 2016 was $1 million, which is down from $1.6 million in Q3 last year as a result of some lower revenue related to the timing of collaboration-related activities.

Our R&D expenses for the third quarter 2016 were $6 million. This is up from $5.5 million in the same quarter last year. The increase is primarily the result of incremental headcount and consulting to support our continued development of SEL-212 as well as increased stock compensation and insurance expenses.

General and administrative expenses were $2.5 million, up from $2.2 million in the third quarter of last year. This increase was largely the result of additional costs related to market research as well as increased consulting and insurance fees associated with being a public company. It is also worth noting that nearly 30% of our G&A expense is currently IP-related.

For the third quarter of 2016, we reported a net loss attributable to common stockholders of $7.7 million or $0.43 per share. This compares to a net loss of $7.6 million or $3.50 per share for the same period in 2015.

As of September 30, 2016, we had $79.9 million in cash, cash equivalents, investments and restricted cash. This compares with $85.3 million as of June 30, 2016. Our cash usage in the third quarter was primarily related to our operating expenditures and was partially offset by cash received from collaborations and grants, as well as the partial exercise of our initial public offering over allotment option.

As Werner alluded to a few moments ago, our guidance, as it remains to our cash way runway, remains unchanged from last quarter. Based on our current operating plans, we continue to expect that our cash, cash equivalents, investments and restricted cash will fund our operating expense and capital expenditure requirements into the first quarter of 2018.

We will now open up the call for your questions. Operator, would you please provide the instructions?

Operator (Operator Instructions) And the first question comes from the line of Tom Shrader from Stifel. Your line is open.

I look forward to seeing the detailed data. A question on the Sanofi partnership. Your cash comments, can we conclude that you wouldn't go into humans without re-partnering? Or that you're a ways away from humans? Or just your thoughts on what you might do on your own?

Tom, this is Werner. So as I mentioned in my comments, these programs have yielded very compelling data. And on the basis of these data, we have to find out and we have to look into our strategic option. We, of course, will continue to focus on our immune tolerance platform. And so we have to think about how to allocate resources and partnering or outlicensing would, indeed, be our preferred option for this.

Okay. And hemophilia is pretty crowded. Do you see this as proof of concept? Or is this something that's a real commercial opportunity? Just your thoughts there. I know you have some advantages, but there are an awful lot of people in this field right now.

I give this over to Peter Keller, our CBO.

So we believe that three in gene therapy, with the SVP platform, we can differentiate, also, in hemophilia. And therefore, by prevention of antidrug antibodies, really make a difference and capture a higher share price.

Okay. So you do think this is a real opportunity for you still?

Yes. Absolutely. And we are open for partnerships and that opportunity as well.

All right. Fantastic. And then, the last question is a little vague. But the LMB-100 program. I understand a lot of these toxins are quite immunogenic. How subtle is this program? Because if you kind of worked your magic, isn't there a chance you'll tolerize to the tumor? Just your thoughts there. How tricky is this program? Or is it -- do you think it's straightforward?

Okay. Maybe, Kei, can you answer that?

Sure. So in the data that was presented in Baltimore recently by Dr. Ira Pastan and his group, one of the issues that they addressed was specifically that was whether SVP-Rapamycin would enhance tumor growth. And they showed, with a couple of different tumor lines, that it did not. And in fact, in some cases, it actually inhibited tumor growth.

And our next question comes from the line of Jeff Hung from UBS. Your line is open.

For the 212 Phase 2, can you remind us what doses are you looking at?

I think we have Skip Sands, our CMO, on the line. Maybe, Skip, can you take that question?

Yes. Werner, thank you. So we have aligned ourselves with the standard dosing that we talked about before which is multi -- a multi-ascending dose trial where we use three doses of 212 followed by two doses of pegsiticase alone. We are using a low dose of the 212 first, followed by our fixed dose of a pegsiticase alone. And then we will use a higher dose of the 212 followed by a higher dose of the pegsiticase alone.

Okay. And then, Horizon is looking to reduce immunogenicity from Krystexxa, for instance by increasing the frequency of dosing from every other week to every week for the first three weeks. And this seems to be a different approach from Selecta, where the frequency of dosing is more spaced out. And obviously, there are other differences in your treatment with your SVP. But what gives you confidence that less frequent dosing is the better approach?

Maybe Peter Keller can address this question?

I think -- yes. So I think there are two different factors. First of all, it's high cost and low convenience to do a weekly dosing, as these infusions can take up to several hours. So we will have, with a monthly dosing, a clear advantage in that regard. And secondly, even though this frequent dosing can overcome immunogenicity for some biologics that are less immunogenic, our belief is that for pegsiticase, as a foreign enzyme to the human immune system, this frequent dosing will not be sufficient to create tolerance.

Okay. And then, I guess, should Horizon ultimately be successful in reducing immunogenicity, what do you think the bar would be for 212 to be more prescribed more often than Krystexxa? Is that bar relative or absolute?

I think, for Selecta, that bar would be -- we would have the higher convenience of monthly dosing. On top of that, we would be more effective and more safe than the treatment from Horizon.

(Operator Instructions) And the next question comes from the line of Katherine Doll from Needham & Company. Your line is open.

This is Katherine Doll on the line for Chad Messer at Needham & Company. I was wondering if you could provide some additional details regarding the revenues that you guys collected this particular quarter. What portion of it is possibly from Sanofi versus your academic nonprofit collaborations?

Thank you, Katherine. David, can you give some more color to this?

Yes. Thanks, Werner. We don't give out the specifics relative to the absolute revenues. The majority of the revenues we have this time is from the grant side with the lesser portion from the collaboration. Just based on research activity, we get paid based on the research activity of resource and then costs will be expended to it. But the specifics, I think, we don't normally release.

And our next question comes from the line of John Newman from Canaccord Genuity. Your line is open.

I just wondered, when you report the initial results from the Phase 2 study for 212 in gout in first half of '17, are you looking in detail, not just at the antibody response, but the types of antibodies? Or are you looking at things like IgG, IgM, IgE, just to see if there's any difference in the levels of antibodies that you are either suppressing or that are still sort of persisting in a low-level?

Thanks, John. Maybe, Kei, can you address that question?

Sure. Sure. So the assay to measure antibodies to pegsiticase will be a bridging type of assay. So it will detect all types of antibody subclasses. So whether they are IgG or IgE or whatever. But I will say that from our preclinical data, we've only seen antibodies that were of the IgG or IgM subclasses.

Okay. And there was some questions earlier on in Krystexxa. I think -- I don't think this has ever been seen for 212. But in the clinical studies for Krystexxa, weren't there a couple of patients that had heart attacks? Now I'm just wondering if you've ever seen any sort of indication of that type of an adverse event, understanding that you're still in a Phase 2 study?

Thanks, John. Maybe, Kei, also on that.

Yes, so again, this is Kei. So our interpretation of the data that we've seen with Krystexxa is that it was probably related to the immunogenicity in that -- these immune complexes can cause complement activation in other immune and inflammatory mediators that can exacerbate a cardiac condition. We obviously have not seen anything like that in our clinical study, but we're also very early at this point.

And at this time, I'm showing no further questions. I would like to turn the call back over to Mr. Werner Cautreels, CEO, for closing remarks.

Thank you, Amanda, and thank all of you for joining us this morning. As we said before, we are presenting at a couple of conferences. So we hope to see many of you at the Stifel and Piper Jaffray Conference this month in New York. And of course, I hope that you will tune in for the conference call that we will host on the morning of December 8, where we will present and discuss, to a larger extent, our Phase 1 results.

So that concludes our call. Thanks again for your interest and looking forward to speak to you again soon. Operator?

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.

Thank you.