Cartesian Therapeutics Inc (RNAC) 2017 Q3 法說會逐字稿

Good morning, and welcome to Selecta Biosciences Conference Call. (Operator Instructions) Please note this event is being recorded.

I would like to turn the conference over to Jason Fredette, Investor Relations. Please go ahead, sir.

Thank you, Francesca, and thanks to all of you for joining us this morning. Within the past hour, we posted some slides to our website that we'll be referring to on the call today. If you haven't done so yet, I encourage you to download them by visiting selectabio.com, clicking on Investors and Media and then Events and Presentations.

In terms of today's agenda, our CEO, Werner Cautreels, will provide introductory remarks and speak to our recent additions to the Selecta team; our Chief Medical Officer, Skip Sands, will review the updated data from our ongoing Phase II trial of SEL-212 that's being presented today at the American College of Rheumatology Annual Meeting in San Diego; and our Chief Financial Officer, John Leaman, will briefly review our Q3 results. We'll then be happy to take your questions.

Before we get started, please refer to Slide 2 on the presentation. 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 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 filed with the SEC, which can be accessed on our website.

In addition, any forward-looking statements represent our views only as of today, November 7, 2017 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.

And now, let me introduce Werner to kickoff the discussion.

Thanks, Jason, and greetings everyone from ACR in San Diego. We are looking forward to sharing an update on Selecta and reviewing the latest data from our ongoing Phase II trial of SEL-212.

Please turn to Slide 3. Let's first reflect on Selecta's mission, which is to unlock a new class of biologic therapies by preventing unwanted immunogenicity. We are advancing our novel approach to prevent anti-drug antibodies in a differentiated range of therapeutic areas. We do this utilizing our proprietary SVP-Rapamycin technology platform, which is designed to teach the immune system by sending precise and antigen-specific instructions to prevent unwanted immune responses and allow the biologic to treat the patient.

We are developing our own proprietary pipeline of product candidates utilizing this platform. And we have been building our IP estate and experience in several therapeutic areas, so we can enter into rewarding business relationships.

For instance, please turn to Slide 4. Last December, we entered into a license agreement with Spark Therapeutics, through which we provide access to SVP-Rapamycin for use with their hemophilia A gene therapy candidate and up to 4 additional preselected targets. The intention would be to utilize SVP to allow for repeat gene therapy doses.

As part of this agreement, Spark has made license payments and stock purchases totaling $30 million, the final $7.5 million of which we just received October 31. In addition, the agreement includes up to $430 million in milestone payments for target. Also, Spark will pay us tiered mid-single to low double-digit royalties on worldwide annual sales of any resulting commercialized gene therapy.

Last month, our collaborators presented preclinical data regarding our own proprietary gene therapy programs for MMA and OTC deficiency, and they presented that at ESGCT in Berlin.

In the case of OTC deficiency, their preclinical studies showed SVP-Rapamycin's ability to block humoral and cellular immune responses to AAV vectors. This would have 2 major benefits: one, the ability to treat patients at an early age while maintaining the potential to redose; and two, the ability to minimize the use of steroids, which may trigger a metabolic crisis.

In the case of MMA, they concluded that the data support to clinical development of a gene therapy for MUT MMA, utilizing the Anc80 AAV vector and SVP-Rapamycin and that combination has potential to be broadly expressed to enable enrollment of patients with pre-existing anti-AAV antibodies, to reduce the need for steroids by mitigating T-cell responses and allow for redosing.

Now let's move on our discussion to SEL-212. I'm very pleased with the ongoing progress we are making in our clinical program. We are gaining important insights that will inform not only the continued development of SEL-212 but will also benefit our SVP platform.

Please turn to Slide 5. We believe that SEL-212 may be a compelling new treatment for patients with chronic severe gout. There are an estimated 160,000 such patients in the U.S. alone, many of which are refractory to oral gout medications. SEL-212 is designed to be a monthly therapy, and it consists of our pegylated uricase enzyme, called pegsiticase, that is administrated in combination with our proprietary SVP-Rapamycin technology to prevent ADAs.

Slide 6 shows the intended paradigm for this treatment. As you can see from the green line, SEL-212 is designed to significantly lower serum uric acid levels for a period of several months, thereby enabling the rapid dissolution of uric acid deposits and tophi in joint tissues and organs.

So where are we in the development of SEL-212 today? Well, we have now been working very closely for the last several months with Selecta CRO on our Phase III design. There are certain complexity when developing a combination like SEL-212, and our ongoing Phase II trial is the first time that this novel combination has been dosed in patients over multiple months. Therefore, we have been very thoughtful and systematic in this trial. It is very important, however, to understand that the primary endpoints used for approval of gout medications by FDA and other agencies is a rather simple and robust biomarker, namely serum uric acid. The clinical objective is to reduce serum uric acid below 6 milligrams per deciliter as shown in the black dotted line here on Slide 6. We believe we can achieve this level of required clinical activity in a high percentage of chronic severe gout patients.

Now let me turn the call over to our CMO, Skip Sands, to discuss our clinical program to date. Skip?

Thank you, Werner.

Please turn to Slide 7. Our Phase Ia trial demonstrated that ADAs were formed in the vast majority of patients dosed with pegsiticase alone. The data also indicated that in the absence of high titer ADAs, a pegsiticase dose of 0.4 milligrams per kilogram could be a viable monthly therapy.

And so as you can see on Slide 8, we carried this dose into our Phase Ib trial to evaluate the combination of pegsiticase with SVP-Rapamycin. The goal here was to show that we could mitigate the formation of ADAs and thus maintain the clinical activity of pegsiticase for a full month after a single dose of SEL-212.

As you can see on Slide 9, a clear dose response was observed. At 0.1 milligrams per kilogram of SVP-Rapamycin seen in the middle chart, clinical activity through day 30 was achieved in 70% of patients and clinical activity was further improved to 100% at the 1.5 milligram dose, meaning all patients maintained serum uric acid levels below 6 milligrams per deciliter.

Let's turn to Slide 10, which provides an overview of our ongoing Phase II trial. Patients in this trial must have symptomatic gout and be hyperuricemic. Highlighted in blue on Slide 11 is the dosing regimen that was designed to inform both the development of SEL-212 and the development of our SVP platform in other potential therapeutic areas.

We've published preclinical data showing the potential to utilize SVP-Rapamycin to induce an antigen-specific immune tolerance to a biologic by dosing the combination for an initial set of doses. We refer to this in shorthand as the teach-and-treat phase, during which we attempt to teach the immune system to become a tolerant to the biologic, while at the same time, treating the patients with therapeutic dose levels of the biologic.

We also have shown preclinically that one can transition to a treat phase, in which the biologic is dosed alone while continuing to avoid ADAs. Because of the known immunogenicity of uricase enzymes, we have included measures to ensure patient safety by implementing stopping rules that were developed for our monthly dosing therapy. These rules call for serum uric acid levels to be closely monitored and treatment to be discontinued if those serum uric acid levels rise meaningfully, which could be an early indicator of immunogenicity.

And finally, on Slide 11. As of October 23, we have included 79 patients from 15 U.S. clinical sites in the ongoing Phase II trial.

Slide 12 is an update of a chart that we showed back in June, in which the average serum uric acid levels are shown in green, and the number of patients remaining in the cohort are overlaid in black. As anticipated, patients in the control cohorts that received pegsiticase alone rapidly lost clinical activity due to immunogenicity. We have seen a dramatic improvement in clinical activity with the increased doses of SVP-Rapamycin, similar to the dose-dependent activity observed in the single-dose Phase Ib trial.

Slide 13 focuses on mid-dose cohorts receiving 0.08 milligrams per kilogram of SVP-Rapamycin. They are holding steady around 70% through multiple doses of SEL-212 in the teach-and-treat phase indicated in orange. While some patients maintained clinical activity all the way to the end of the study, other patients lost activity during the treat phase after dosing with pegsiticase alone.

Slide 14 shows data for the cohorts that received pegsiticase in combination with 0.1 milligrams per kilogram of SVP-Rapamycin. Again, the data is consistent with our Phase Ib trial through week 12 before tailing off in the latter treat phase of the trial with only pegsiticase alone.

The week 12 data from Slides 13 and 14 tell us that both 0.2 and 0.4 milligrams per kilogram of pegsiticase have the potential to be effective dose levels. In order to sustain clinical activity in more patients through week 20, we may need to enhance the teaching by increasing the SVP-Rapamycin dose and/or the number of teachings. We have, therefore, begun dosing cohorts with pegsiticase in the combination with 0.125 and 0.15 milligrams per kilogram of SVP-Rapamycin.

Based upon the strong clinical activity level we saw at the 0.15 milligrams per kilogram in our Phase Ib trial, as shown in Slide 15, we believe that these additional cohorts will inform the dose regimens to be taken forward into Phase III.

Please turn to Slide 16. We have closely and frequently monitored ADA levels during the Phase II trial and continue to see a close correlation between ADAs and serum uric acid levels. This chart includes all data at day 21 after each dose. And as you can see, when ADA titers remain low, serum uric acid levels generally do as well. Conversely, when ADA titers are high, serum uric acid levels also are high.

Slide 17 provides an update on the number of gout flares seen in the Phase II trial. Thus far, approximately 24% of patients receiving SEL-212 reported a gout flare during the first month of the trial. This is followed by a steady decline in flare rates during the remainder of the therapy. While sample size is obviously small, 50% of patients reported a flare during the first month alone in our control cohorts. The low level of flares observed in the ongoing Phase II trial remained promising and would appeared to be in contrast with the increased incidence of flares reported during initial treatment in many clinical trials involving other urate-lowering therapies.

On Slide 18, you will see an overview of the safety data to date. SEL-212 continues to be generally well tolerated at clinically active doses. There've been a total of 11 serious adverse events, or SAEs, 4 of which were determined to be not related or unlikely to be related to study drug. The remaining 7 SAEs were infusion reactions, all of which were reported in our June readout. Notably, no infusion reactions have been observed during the trial after treatment period 2.

A detailed adverse event chart is contained on Slide 19. We have not seen any disconcerting patterns thus far. A number of potential treatment-emergent adverse events that have been reported in the literature for Rapamycin are being monitored. While we have had a few reports of mild stomatitis or oral lesions in the higher-dose cohorts, the majority of these events occurred in a single patient in each cohort. The observations were mild-to-moderate and transient in nature. No patients have discontinued treatment related to these observations, and no relationship has been detected between observations. For instance, we have not seen any association between infections and leukopenia. And of course, this Phase II trial enrolling gout patients does not have a placebo control for comparison.

Finally, we would like to take the opportunity to thank all of the patients and the many investigators, who are participating and making important contributions in this trial.

With that, let me turn things back over to Werner.

Thanks much, Skip.

Please turn to Slide 20. As you can see here, we are narrowing in on the dose regimens that we plan to take into Phase III. We believe the clinical activity we have achieved through week 12 at the 0.1 milligram per kilogram level of SVP-Rapamycin is already compelling, and cohorts receiving pegsiticase in combination with high levels of SVP-Rapamycin are now underway.

We expect to provide an additional update on our Phase II data at a medical meeting in the first quarter. Meanwhile, we are preparing to participate in our End-of-Phase II Meeting with the FDA in the first half of 2018, and we remain on track to begin enrollment of our Phase III in 2018.

Please turn to Slide 21. We are learning a lot as we continue our development of SEL-212. More than 100 patients have received SEL-212 to date, providing us with a large safety database. And we will apply all learnings to our various programs from oncology to gene therapy and potentially chronic indications as well. And we will look forward to discussing this further in detail when we hold our first R&D day in the second quarter of 2018.

Please turn to Slide 22. Given our stage of development with SEL-212, we recently named Stephen Smolinski to the newly created role of Chief Commercial Officer. Stephen's primary focus in the near term will be to provide important inputs on the Phase III program and to start preparing for the approval and launch of SEL-212. He brings to us a tremendous amount of experience from several large pharmaceutical companies in the rheumatology and immunology space.

We also named John Leaman as our new Chief Financial Officer, Treasurer and Head of Corporate Strategy. John joins us with an impressive and well-rounded track record in the life sciences space. He assumed the CFO role from David Siewers, who is staying with us as a consultant. We appreciate the many contributions David has made to the company.

And with that introduction, let me turn things over to John.

Thank you, Werner, and good morning, everyone. It's a real privilege to be joining Selecta. Having worked in the gene therapy field for quite some time, Selecta's potential to truly transform treatment paradigms really intrigued me, was a key factor and attracted me to the company. I'm looking forward to meeting many of you in the audience and hearing your feedback while we're on the road in the months ahead.

Now in terms of Q3 financials, please turn to page -- Slide 23. We generated $27,000 in revenue for third quarter of 2017, which is down from approximately $1 million in the comparable quarter last year. The decline is primarily the result of reduced revenue from our nicotine vaccine candidate grant award from the National Institute on Drug Abuse.

Research and development expenses for the third quarter of 2017 were $9.5 million, which is up from $6 million for the same quarter last year. The increase is mainly the result of greater clinical costs related to our Phase II trial of SEL-212, planning for our Phase III program and incremental headcount-related expenses.

General and administrative expenses were $4.4 million for the third quarter of 2017, up from $2.5 million for the third quarter of 2016. The increase is mainly driven by greater headcount and related salaries needed to support a clinical-stage public company.

For the third quarter of 2017, we reported a net loss attributable to common stockholders of $14.7 million or $0.66 per share. This compares to a net loss of $7.7 million or $0.43 per share for the same period in 2016.

As of September 30, 2017, we had nearly $105 million in cash, cash equivalents, short-term deposits, investments and restricted cash. This is down from approximately $113 million at June 30, 2017, as a result of our operating expenses, partially offset by proceeds from a new credit facility that we entered into in September. This balance provides us with runway into mid-2019.

That concludes our formal remarks. Operator, would you now please open the line for questions?

(Operator Instructions) The first question comes from Carter Gould of UBS.

This is Jeff Hung in for Carter. For the higher SVP-Rapamycin dose cohort that you're still enrolling, how many patients are you targeting? And then on slides, while it looked like you're planning to enroll patients on 0.15 SVP-Rapamycin with the 0.2 pegsiticase, can you talk a little bit about rationale given that you focus more on the 0.4 pegsiticase in the higher-dose cohorts?

Thanks for the question. Skip, can you answer that?

Surely. Let's first talk in the higher-dose cohorts; we are planning on enrolling 10 subjects per cohort. And then the additional cohort is to explore the lower dose of pegsiticase in addition to the higher dose of the SVP-Rapamycin.

Okay. And then a housekeeping question. I guess for the $7.5 million from Spark, how should we think about the recognition in 4Q?

John, can you answer that maybe, the recognition of the payments?

I believe it will be deferred revenue into the fourth quarter.

The next question comes from Thomas Shrader of Stifel.

Couple of questions. I guess, the big one is, in your mind, does it matter if you, in fact, have to cover the enzyme with SVP-Rapamycin always? If there, in fact, is no just treat phase, would that matter? And then I guess, if that's the way this eventually goes, is it important to get data for sort of a second round of treatment as quickly as possible to get a sense that if you teach and treat and the patient does well, can you do the same thing in a year? Just your thoughts on how much the paradigm has changed given the new data?

Okay. Thanks, Tom. I don't believe there has been a change in paradigm. So the way the trial was designed was to inform on SEL-212 as a product, but also this platform as a whole for other indications.

So we are, of course, very pleased with the clinical activity we have seen over the 12 weeks. And there are a number of patients that maintained clinically active over time. We may have to do a little more of teach and treat for this, but you're absolutely right, I think for SEL-212, which is a cyclical treatment, it may not be that important, and we could actually take forward combinations all the way.

In terms of your last question, which is can we retreat patients? Yes, absolutely, this was the whole purpose that if we can prevent immunogenicity the first time that we would be able to do that again. Those kind of questions, of course, we will answer as part of the Phase III program.

Just quickly to look at the new data versus the old data, is it really sort of 2 faces of the data? Because my memory is at the last data release, and I'm looking at some slides where it looks like 5 of 6 patients did very well through the treat phase, but now you're showing it's less than half. So did the trial change very significantly in terms of what you were seeing?

No. We don't believe so. I think we have many more patients now. And I think that is what you really see, the increased patient population. Now you remember maybe last time we talked, as this is an open-label trial, we see this data as they come along. We want to be very systematic, and in seeing this is how we designed the higher-dose cohorts to have that information.

(Operator Instructions) The next question comes from Chad Messer of Needham & Company.

Maybe just expand a little bit more on some of the thoughts that Tom had here. Maybe you can start by telling me where the 3 teach-and-treat doses, where 3 came from, I presume maybe some preclinical data. And then just to be clear, do we need to test some different paradigm other than 3 teach and treat before we go to Phase III?

Thanks for your question. In terms of your last question, the way we will design the Phase III trial, we will indeed include different dose regimens, and we have not made final decisions on that. The data that we will generate in the next few months is sufficient to actually start doing that, and we are actually already doing that design of the trial. So I think we will -- in short to answer your question, this will be part of the program going forward. And we don't really need to test that before. We will have an update to include that in the Phase III program.

Okay. And then I don't know if you can speak a little bit to the rationale for trying 3 teach-and-treat doses?

Yes. Sorry, I forgot about that. So indeed, we've acquired some preclinical data and specifically in the SEL-212 so with pegsiticase, we have done preclinical studies in nonhuman primates, where indeed, we did see this 3 plus 2 as a paradigm that worked.

(Operator Instructions) Final question comes from John Newman of Canaccord.

Continued good progress here on the study, so congrats on that. And I also I think you deserve recognition for a very diligent and deliberate dose-ranging process here, which is not always the case for these types of programs. So that's good. My question is, just curious if there is really anything to know regarding some of the SAEs that you pointed out. I think you had a patient with post-micturition autonomic response, also peripheral edema; doesn't seem like it was huge deal, but I'm just curious as -- in terms of the doses that those SAEs occurred at?

Thanks, John. Skip, can you address those 2 situations?

Surely. So John, the -- let's address the edema patient first. And first off, both SAEs were determined not to be related to drug. And secondly, the person who developed the peripheral edema actually had stopped their diuretic for approximately 2 weeks prior to developing the edema. So they -- and they were on long-term antihypertensive therapy. So not unexpected. The post-micturition event, this person also had a history of fainting kind of spells. So I'm not that surprised that we may have seen something during this, but also again, this was not determined as related to drug.

Okay. Great. And then one other follow-up question and that is we are still eagerly awaiting the design of the Phase III, which I'm sure you'll discuss with us at the appropriate time. But I was just curious, if you do have a dose in that Phase III study, where you're always including the SVP, do you think that you'll need to go as high with the concentration of SVP? I mean, it seems like the results that you saw even at 0.05 and 0.08 in the teach phase looked interesting. So I'm curious if you do end up including an arm where you're already always using SVP, if the concentration might be a bit lower than the levels that you currently have?

Thanks, John. Well, maybe even further clarify, we are testing also two doses of the enzyme, the 0.4, which we had tested in 1b, but now also 0.2. And indeed, the reason we do that is to see if the ratio between the enzyme in this case and the SVP-Rapamycin is indeed important and how we can get to the minimal effective dose, which is a question that everybody will ask.

This is actually, I believe, a very unique -- almost a unique situation where the endpoint is a very robust biomarker. And so going forward into Phase III, we will be very well be able to make -- to measure small even -- relevant but small differences between that. And yes, the Phase III, we are in the middle of that and we will address those different questions as part of the Phase III program in the Phase III pivotal trial.

This concludes our question-and-answer session. I would like to turn the conference over to Werner Cautreels for any closing remarks.

Thank you so much, Francesca, and thanks everyone for joining us this morning. We hope to see you soon somewhere in the hallways here of ACR in San Diego or at the Stifel Healthcare Conference in New York, that is next week and the Jefferies London Health Care Conference also next week. So a lot of opportunities to interact with us. And with that, that concludes our call. Thanks for your attention, and thanks for your participation.

The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.