Cartesian Therapeutics Inc (RNAC) 2018 Q3 法說會逐字稿

Thank you for holding. Welcome to the Selecta Biosciences Third Quarter 2018 Conference Call. (Operator Instructions) This call is being webcast live on the Investors and Media section of Selecta's website at www.selectabio.com, and it is being recorded.

For opening remarks, I would now like to turn the call over to John Leaman, Selecta's Chief Financial Officer and Head of Corporate Strategy. Please go ahead.

Thank you, and good morning, everyone. Earlier today, we issued a press release containing our third quarter 2018 financial results and other corporate updates, and we filed our 10-Q. This release and the 10-Q can be accessed by visiting our website at www.selectabio.com. I'm joined today by CEO Werner Cautreels; our Chief Commercial Officer Stephen Smolinski; and other members of the management will be joining us for the Q&A portion of the call.

Before we get started, we'd like to advise that certain remarks that are made 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 Selecta's most recent quarterly report on Form 10-Q filed with the SEC, which can also be accessed at selectabio.com.

In addition, any forward-looking statements represent the company's views only as of today, November 8, 2018, and should not be relied upon as representing the company's views as of any subsequent date. While Selecta may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if management's views change.

Now let me introduce Werner, who will kick things off.

Thank you, John, and good morning, everyone. We believe this year's accomplishments make us well positioned to achieve several important upcoming milestones. In particular, our lead program, SEL-212, for the treatment of chronic severe gout patients, has generated a robust clinical package in our Phase II clinical study that shows, based on clinical data collected to date, it has the potential to fulfill several unmet needs in chronic severe gout patients, including sustained serum uric acid reduction, reduced flares and convenient once-monthly dosing. We believe that if approved, SEL-212 could change the treatment paradigm for patients with chronic severe gout who are in real need of new therapeutic options.

Let me now take you through the data that gives us confidence going into the start of a head-to-head superiority trial against KRYSTEXXA, the current FDA-approved uricase therapy, in the first quarter of next year.

Just as a reminder, SEL-212 is a combination of SVP-Rapamycin, our novel immune tolerance technology, and pegadricase, our proprietary pegylated uricase. In October 2018, we presented data from new cohorts of patients receiving 5 monthly combination doses of SEL-212 in our ongoing Phase II study at ACR in Chicago.

Projections based on the trending of data collected to date related to the rate of serum uric acid control for patients who had received 5 monthly treatment period suggest that approximately 66% of the evaluable patients may maintain serum uric acid control below 6 milligram per deciliter throughout 5 months of therapy, and that correlates with the mitigation of antidrug antibodies against the pegadricase enzyme.

Approximately 29% of the patient population treated with SEL-212 in the ongoing Phase II trial has experienced gout flares during the first month after treatment, with continued reduction of gout flares out to month 5. Overall, 96% of flares in the Phase II trial have been mild or moderate in severity, and no flares had been reported as a serious adverse event, nor resulted in discontinuation of the study drug.

Preclinical data also presented at ACR addressed the potential impact of SVP-Rapamycin on the inflammasome pathway, which we believe may then be related to flares. Indeed, monosodium urate crystals are known to cause inflammation by activating the inflammasome pathway, resulting in interleukin-1 beta production.

The preclinical data shown at ACR indicated SVP-Rapamycin, but not free rapamycin, inhibited interleukin-1 beta production induced by monosodium urate crystals in a mouse model.

The interim data continued to show that SEL-212 has been generally well tolerated at clinically-active doses following repeated -- and that is up to 5 -- administrations in the trial. Final data are still pending for 5 of the patients in the new cohorts receiving 5 monthly doses of SEL-212, and the data will presented at an upcoming clinical conference.

Let me now pass the call over to our Chief Commercial Officer, Stephen Smolinski, who will discuss our clinical development plans and commercialization strategy.

Thank you, Werner. We are now actively engaged in preparations for the start of the 6-month head-to-head superiority trial versus KRYSTEXXA, which we plan to initiate in the first quarter of next year. We expect to report interim 3-month data and interim 6-month data during 2019 and the full data set, which will include head-to-head data for both SEL-212 and KRYSTEXXA, in the first quarter of 2020.

We have an end-of-Phase II meeting with the FDA scheduled, to discuss our planned Phase III clinical program. Our strategy remains the same, but we have decided to prioritize the head-to-head superiority study, which we expect to start in the first quarter of 2019, and we also plan to start the Phase III later next year.

We believe that the head-to-head has the potential to confirm SEL-212's ability to address several unmet needs for severe gout patients. There are roughly 160,000 patients in the United States with chronic severe gout and only a small percentage are currently being treated by rheumatologists. As we develop SEL-212, we are aiming for consistent sUA control, low flare rates and monthly dosing, which has the potential to address currently identified unmet needs in this patient population and represents over $1 billion market opportunity.

I will now turn the call back over to Werner to discuss other corporate updates.

Thank you, Stephen. For our SVP-Rapamycin technology platform, we believe that, based on our SEL-212 program, it has the potential to induce antigen-specific tolerance and that it may be differentiated from systemic immunosuppression. We believe our technology has the potential to allow for the full benefit of biologics, including the possible redosing of AAV gene therapy programs.

Using our technology, we have generated many other promising pipeline projects beyond SEL-212 in our core areas of rare diseases and gene therapy.

In the third quarter, we announced a new collaboration with CureCN, a European consortium working to cure the ultra-rare disease Crigler-Najjar syndrome, for the use of our SVP-Rapamycin technology with a goal of potentially redosing gene therapy in clinical trials.

Following preclinical toxicology studies, the combination product candidate would be projected to enter the clinic in the second half of 2019. This opportunity builds upon preclinical work that was published, together with Genethon, in Nature Communications in October 2018. SVP-Rapamycin is the only technology to have shown the ability to redose AAV therapies in animal models. This technology is unique to Selecta and, we believe, has the potential to unlock the full therapeutic benefits of gene therapy.

In September, we announced the appointment of Carsten Brunn, Ph. D., as President and Chief Executive Officer, starting December 1. I will have the opportunity to work with Carsten in transition, who will then provide an update on the company's strategy after he joins the company in December. That also means that this is my last quarterly webcast.

Therefore, in closing, I would like to express my gratitude to all of you on the phone for your interest over the years in Selecta. It was a privilege to work with all of my colleagues, and I remain confident in the unique features of SVP-Rapamycin technology that really has the potential to make a difference for patients.

With that, let me turn over the call to John to discuss the quarterly financial results.

Thank you, Werner. For the third quarter of 2018, the company recognized no revenue, which compares to less than $100,000 for the third quarter of 2017. The decline is the result of reduced revenue recognized from the company's grants and collaborations.

Research and development expenses for the third quarter of 2018 were $11.9 million, which compares to $9.5 million for the third quarter of 2017. The increase is primarily the result of higher clinical costs related to the company's Phase II trial of SEL-212, preparation for the start of the SEL-212 Phase III program and the head-to-head clinical trial, and incremental headcount-related expenses.

General and administrative expenses for the third quarter of 2018 were $4.1 million, which compares with $4.4 million for the third quarter of 2017. The reduction in costs is primarily the result of reduced employee salaries and benefits and patent-related costs.

For the third quarter of 2018, Selecta reported a net loss of $16 million, or $0.71 per share, compared to a net loss of $14.7 million, or $0.66 per share, for the same period in 2017.

As of September 30, 2018, Selecta had $50.5 million in cash and cash equivalents, which compares to cash, cash equivalents and short-term investments of $66.2 million at June 30, 2018. We expect that our cash balance is sufficient to fund our operations into Q3 2019. The company will require an additional equity offering or other external sources of capital to conduct the planned head-to-head trial against KRYSTEXXA.

Finally, we will be presenting at the upcoming Stifel Healthcare Conference in New York on November 13. We hope to see many of you there.

That concludes our formal remarks. Now we will open the line for questions. Operator?

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

This is Andrew in for Carter. So I had a couple. Have you had conversations with the FDA on the head-to-head or is that a plan prior to initiating the first quarter? And you mentioned conducting the Phase III next year; generally, what would you want to see in the 3 or 6 months data to get comfortable with initiating following those readouts? Just wanted to get a sense of what those gating factors are for the Phase III. And secondly, with a competitor moving forward with a pivotal immunomodulator study in the coming months, how are you thinking about the market opportunity, and with that, what kind of conversations have you had with rheumatologists since your ACR data and the comfort around patients for 212?

John, you would like to address the first, and then afterwards, Stephen, right?

So as we've guided previously, we have an end-of-Phase II meeting that's happening this quarter. I think, in that conversation, we will have a good understanding of what we will do for our Phase III program. As we've always sort of stated, we were looking at the head-to-head as part of sort of the Phase III development program and part of our commercialization plan, and, as we've described, we reprioritized that moving forward. So I think, in answering your question, in the discussions with the FDA, we'll have a good sense of what the Phase III will look like, and we will plan to put that into the head-to-head trial that we're doing in the first quarter of next year. So I think that answers your first question. I'm going to swing it over to Stephen Smolinski, our Chief Commercial Officer, to the address sort of the reaction to the ACR data with rheumatologists and how we're thinking about the marketplace going forward.

Sure. Thanks, John. Having had several conversations with rheumatologists about the MIRROR study or that combination, and I think there've been several conversations that I have seen with rheumatologists and some of the analysts, it is a challenging combination finding and identifying the right patient to actually go on methotrexate plus KRYSTEXXA, so I think there's challenges ahead on that. I think we're pleased that they're trying to do something around KRYSTEXXA. But again, I think our once-monthly dosing, our sUA control and our low flare rates really is kind of where the market -- and what we hear from the opinion leaders is important to them on taking complexity out of the system. So I think they're trying to do something around their product but, again, I think what we're doing with our head-to-head and our product profile really leads to what rheumatologists said is pretty favorable, in terms of the results they see that we showed at ACR as well as moving forward with our head-to-head.

And Andrew, I just want to highlight one additional piece, which is: I think the fact that there are additional trials going on with immunosuppression, and obviously, we talk about immunotolerance, it talks about the unmet need in this marketplace for patients for 6 months of basically serum uric acid control. And I think as we've chatted a lot, I think there's 2 different strategies to that, right? One is an immunosuppressive strategy, which is being tried out in the marketplace by competitors, or there is an immune tolerance strategy, which is what we've just strived to do with our Tregs and our platform. And so I think we look forward to helping patients and looking forward to the data. And we do think that head-to-head will allow that apples-to-apples trial, ourselves versus KRYSTEXXA, to be played out.

And just as a follow-up on your -- I know this might be a little too early and your meeting hasn't happened yet, but do you envision needing a -- or doing active comparator study in your Phase III, kind of extending the head-to-head toward that, or are these 2 separate studies as part of the whole Phase III clinical program?

They're 2 separate studies, and I think we've always felt that way. I think we have a pathway to approval with the pivotals, and I think we know what that is and we have a pretty good understanding. I think this head-to-head is an important one, just because I do think there are questions that we can answer with it, and it will allow an apples-to-apples comparison to allow patients to know what is the best therapy here in the marketplace.

The next question comes from the line of Gil Blum of Needham & Co.

This is Gil for Chad. So I have a couple of questions. First of all, the newly announced gene therapy repeat dosing trial. Do you believe that the correct dosing of rapamycin has been worked out from what you've learned so far on SEL-212 in gout?

This is Werner. Yes, from the data package we do have from SEL-212, but then also from the preclinical data we have generated in the field of gene therapy, we believe that. indeed, the data from our Phase II trial and from our previous Phase Ib trial clearly gives guidance to that, and that we don't, therefore, need to be very extensive dose ranging, which would be impossible in that kind of patients in the first place, which was also the rationale why we wanted to study this in this patient population, so that we can extrapolate that to other patient populations.

All right. And another question about the head-to-head with KRYSTEXXA. So we all know that KRYSTEXXA has a pretty extensive pretreatment with steroids. What kind of steroids are you guys thinking of using, and how do you -- how are you going to look at this? And, given the differences in premedication, can this be designed as a blinded trial?

We feel very comfortable that, in the head-to-head, we can certainly keep the patients blinded. So I think we feel very good about that. Secondarily, I think, when you look at the preparations on it, I think colchicine and steroids are utilized in both pretreatment regimens, so I don't know that there will be a huge difference between those, at least based upon what the label is for KRYSTEXXA versus our SEL-212 sort of protocol.

The next question comes from the line of John Newman with Canaccord.

I know that you obviously are going to meet with the agency to discuss the Phase III and the head-to-head, but can you give us some sort of sense as to how you're thinking about stopping rules in the head-to-head study? The reason I ask is because you obviously had pretty stringent stopping rules in your Phase II. The KRYSTEXXA pivotal study actually didn't have any stopping rules. If I remember correctly, they were put in afterwards as part of REMS; but just curious as to how you're thinking about that in terms of the head-to-head study.

Thanks, John. I think, from our perspective, a couple of thoughts: one is, in the Phase II, we were looking at dose ranging of both our rapamycin and our uricase, and I think we wanted to ensure patient safety, which we feel very, very good about. I think, in looking at the data, we feel also very good that we will be able to guide you to a new expanded stopping rule when we head into the head-to-head study and obviously the Phase III. I think we feel pretty comfortable with that, and the data is there. So I think that's the first on the stopping rule. I think the other thing that the head-to-head will allow us to do as well is it will allow us, in a Phase III setting, with less blood draws, to also show that I think we'll have an enhanced patient compliance when it comes to, basically, our Phase III, and certainly our head-to-head trial. And so I think beyond the sort of superiority benchmark that we want to do in the head-to-head, we also want to show that we think that our assumptions on patient compliance and expanded stopping rules will also be able to show that in this interim data set at 3 and 6 months.

The next question comes from the line of Derek Archila with Stifel.

So I guess, maybe rightly or wrongly, as we think about this head-to-head versus KRYSTEXXA, kind of the perception again whether this is the real apples-to-apples study. Obviously, other people will argue that KRYSTEXXA plus methotrexate or some other immunosuppressant might be the better apples-to-apples. But I guess, what do you think, from -- internally, you guys need to see from a response rate perspective to really kind of -- in showing this head-to-head versus KRYSTEXXA alone -- to really be confident so that you can move this forward into Phase III? And then, I guess, maybe some of the other things that we should be thinking about from an investor standpoint, some of the caveats in comparing this head-to-head versus -- and trying to, like, fit it into comparing this versus the KRYSTEXXA-methotrexate study, that would be helpful.

Derek, thanks a lot. So I think, primarily, as we've described, we will have interim looks at the 3 and 6 in the head-to-head, but ultimately, this is statistical superiority trial versus KRYSTEXXA, right? So I think, for us, we feel very confident that at 6 months, statistical superiority head-to-head is the apples-to-apples comparison versus the KRYSTEXXA label, and that ultimately would be the result that we're looking for in the trial. I think secondarily, as you described, I think we will have to leave it to you to debate on what is the right combination. I think we feel very strongly as a group, and we've sort of laid it out that our, not immune suppression, but immune tolerance, is the proper way. We're very satisfied with our side effect profile. And like I said, we'll look at the efficacy both in the head-to-head and in the Phase III, but we remain confident that we have a very competitive product both on the efficacy side and then we obviously from the patient compliance side of flare rate and monthly dosing, feel very good about that as well. And we think that combination of this product, we feel will be treated in the marketplace very, very well.

Great, that's helpful, and then, just last question, so did you guys talk about the size of this trial, or is this something, again, that you need to discuss with the FDA as you're in the Phase II? And any sort of thoughts on the overall cost of the head-to-head would be also helpful from a modeling perspective.

Thanks, Derek. I think from the perspective of size, we will guide to that when we put the first patient in. I think we're actively working on that. I don't think that has a lot to do with what the FDA discussion is about; it's going to be statistical power and taking a look at it. And I think, on the perspective of how much it's going to cost, I think we have not guided around that, but I do think that between $30 million and $50 million would get us that head-to-head, would allow us to prepare for Phase III and would give us the run rate that we're looking for.

The next question comes from the line of Difei Yang with Mizuho.

So just a couple. Is there a small delay in the FDA end-of-Phase II meeting, and as well as, are -- do you need to present there? I think there are 5 additional patients we are waiting for data on. Or is that part of -- is that what's in the way, or do you need to wait for that data before having the end-of-Phase II meeting?

Difei, we haven't had any delay in the end-of-Phase II meeting, and we don't need the 5 patients. I think we feel like the package -- and obviously, we had to send that in several weeks ago. We feel that it's very complete to have the end-of-Phase II meeting. So as we've guided, we will have the end-of-Phase II meeting this quarter and we'll go from there.

Okay. And then with regards to -- there are some debates over about these 5 patients, whether their uric acid level was well controlled at monthly point. Is there any reason to think that control may be lost over the next 2 months, and for whatever reason, is there any scientific expectation there?

Difei, I think what we've we seen in our trial -- and this is both when we take a look at the UR data and we take a look at the data that we presented at ACR -- when we the control the patients through the first month, we generally control them through 3 months. And the reason we felt good about that projection was that 16 out of 16 patients -- in that ACR data that was presented in Chicago -- when they made 12 weeks, made it out to 5 months. So we think that's a pretty impressive trend. And that's why we feel very good about this projections.

Okay. And then, my final question, if you recall the data presented a couple of weeks back where there are a few patients, quite a few patients losing control of the uric acid level, I think at month 1 or slightly after month 1. Were you able to find if there's any specific situations related to those patients or -- because it was a surprise, or at least to me it was a surprise? And is there any specific situation or that's -- or the data is the data?

I think, Difei, the data is the data. I think as we described, when you looked at the UR population, they're probably on the high side of the conversion. And I think when you take a look at the 5 months data, this is the law of small numbers. This patient population was probably on the low side of that conversion. We believe it's probably somewhere in the middle. And we look to show that, both in the head-to-head and in the Phase III, as we go forward.

The next question comes from the line of Yun Zhong with Janney.

I guess, a question about head-to-head study. We haven't seen any data at 6 months’ time point, so I don't know what would be your internal projection on what can potentially be seen at 6 months? And also, I believe the definition of a responder seems to be little different from KRYSTEXXA study versus your study. So I wonder which definition would you like to go by in your head-to-head study.

Thanks for the question. I think on the first one, it goes back to, I think, what Difei was asking earlier. I think what you'd see is that if we control a patient at 12 weeks, we generally control them at 5 months. I think there is no reason to believe that at 6 months it's going to be any different. So I think we feel very confident that our 5-month data sort of hangs by itself. And then if we're controlling patients at month 1, we've controlled them at month 3 and then we typically will control them out. So I think that's the projection, I think, that we, at least internally, are thinking about. I think, when it comes to basically the head-to-head study, as we stated earlier, I think we'll guide exactly to what rules we're going to use. You're absolutely right that a controlled study, by definition, in KRYSTEXXA's label when it was approved was different than what we were typically using. And we'll make sure that we guide that when we actually put up the head-to-head study going forward.

Okay. And about the Phase III design, I think on your last conference call, you disclosed some information. And now that you're going to initiate the study in 2020 -- sorry 2019, can -- would there be any potentially changes to the design, based on what you see from the head-to-head study or based on your discussion with the FDA?

I think absolutely, the answer is yes. I think one of the great things about prioritizing the head-to-head study is we'll continue to learn, I think, some great things that will be helpful to us in the Phase III study. Obviously, at the end-of-Phase II meeting, we'll get the FDA's feedback because I think what's clear here, and let me just make a big point, is one of the reasons to do this head-to-head and having the 3 and the 6 months sort of data time point is that ultimately if it's done in the same way as the Phase III, we can use that in marketing materials. And we want to do that. This is part -- always has been part of our commercialization and development strategy, and so that's the plan with this going forward.

We have a follow-up question from the line of Difei Yang with Mizuho.

So do you have -- from financial perspective, do you have enough funding to finish the head-to-head study?

I think as we've guided, Difei, we will need to find funding, whether an equity raise or some other form of capital to finish that head-to-head study.

Okay, of the Phase III. So not enough funding to finish head-to-head, just so I'm clear?

Correct.

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

Thanks, operator, and thanks, everybody, again, for your time. And at this point in time, I think we can close the call.

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