Cartesian Therapeutics Inc (RNAC) 2020 Q2 法說會逐字稿

Good morning, and welcome to the Selecta Biosciences Second Quarter 2020 Financial Results and Corporate Update 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 like to introduce you to Brad Dahms, Chief Financial Officer of Selecta. Please go ahead.

Thank you, operator, and good morning. Welcome to our second quarter 2020 financial results and corporate update conference call. The press release reporting our financial results is available on the Investors and Media section of our website, www.selectabio.com. And our quarterly report on Form 10-Q for the quarter ended June 30, 2020, will be filed later today with the SEC.

Joining me today is Carsten Brunn, our President and Chief Executive Officer; and Dr. Peter G. Traber, our newly appointed Chief Medical Officer. Kei Kishimoto, our Chief Scientific Officer, will be available for the Q&A portion of the call.

During today's call, we'll be making certain forward-looking statements, including, without limitation, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, financial projections and our future expectations, plans, partnerships and prospects. These statements are subject to various risks, including those related to the COVID-19 outbreak that are described in our filings made with the Securities and Exchange Commission, including our most recent quarterly report on Form 10-Q, which will be filed later today with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today, August 6, 2020, and Selecta disclaims any obligation to update such statements even if management's views change.

I would now like to turn the call over to Carsten Brunn, our President and CEO. Carsten?

Thank you, Brad. Good morning. I appreciate you joining us today. The second quarter of 2020 can be best described as a transformational time for Selecta. We've made a number of important strategic business decisions that have reinforced our position as a leader in immune tolerance. The strategic licensing agreement we entered into with Sobi puts us in a financial position that allows us to maximize our efforts to unlock the full potential of the ImmTOR immune tolerance platform. We also believe that it provides the most value for SEL-212 given Sobi's commercial presence and resources. Our objectives in researching the potential applications of ImmTOR remain the same: to use the technology to optimize the efficacy and safety of biologics; enable redosing of life-saving gene therapies; and create novel immunotherapies for autoimmune diseases.

The strategic licensing agreement with Sobi, which closed on July 28, 2020, is for SEL-212, our Phase III product candidate for the treatment of chronic refractory gout. Under the terms of the agreement, Sobi assumes responsibility for all development, regulatory and commercial activities and expenses in all markets, except China, while Selecta will run the Phase III study on behalf of Sobi. As a reminder, in addition to covering the expenses of the Phase III program, Sobi has 45 days from the effective date to pay $75 million as an upfront license fee and they have paid $25 million as an investment in a private placement of Selecta common stock at $4.62 per share. We're also eligible to receive potential development, regulatory and commercial milestone payments of up to $630 million and double -- and tiered double-digit royalties on net sales.

We look forward to working with Sobi and remain committed to the development of SEL-212. We anticipate the initiation of the Phase III clinical program with Sobi for SEL-212 in the third quarter of this year. This program will consist of 2 double-blinded, placebo-controlled trials of SEL-212. Each trial is expected to enroll 105 patients and have 35 patients receiving 0.1 milligrams per kilogram of ImmTOR and 0.2 milligrams per kilogram of pegadricase, 35 patients receiving 0.15 milligrams per kilogram of ImmTOR and 0.2 milligrams per kilogram of pegadricase and 35 patients receiving placebo. Each trial will have a 6-month primary endpoint and one of the trials will have a 6-months extension. Top line data from the Phase II COMPARE trial are expected in the third quarter of this year. As you know, this is a head-to-head study of a once-monthly dose of SEL-212, which is a combination of ImmTOR and pegadricase compared to biweekly doses of pegloticase with the primary endpoint of the maintenance of serum uric acid levels of less than 6 milligrams per deciliter at 3 and 6 months. The COMPARE trial has enrolled 170 patients.

We're also very pleased to have entered into research license and option agreement with Sarepta for the use of ImmTOR in neuromuscular diseases in June. Under the terms of this agreement, Sarepta has the option to license the rights to develop and commercialize the ImmTOR platform for use in select neuromuscular diseases. In particular, Duchenne Muscular Dystrophy and certain LimbGirdle Muscular Dystrophies. Sarepta will evaluate its investigational gene therapies in combination with ImmTOR to prevent or minimize the formation of neutralizing antibodies.

Our gene therapy and autoimmune disease programs remain a priority for us, and we are pleased to confirm the timing for these research and development initiatives. Our lead gene therapy program in methylmalonic acidemia, or MMA, which is being conducted in collaboration with AskBio, is expected to enter the clinic in the first half of 2021 with preliminary data expected in the second half of 2021.

We also intend to advance our proprietary program in ornithine transcarbamylase, or OTC deficiency and will provide an update on that program later in the year. In addition, we intend to submit an investigational new drug application for one of our autoimmune disease programs in 2021. The first indication will be IgA nephropathy, a kidney disease that occurs when an antibody called immunoglobulin accumulates in the kidneys. We intend to build upon our learnings from the SEL-212 program of combining an immunogenic enzyme with ImmTOR to derisk this program and advance in safely and effectively through clinical trials. The second indication will be in primary biliary cholangitis, or PBC. Both diseases have well-defined target antigens, significant unmet medical needs and are well suited to the application of our ImmTOR platform.

We're also pleased to have strengthened our team recently welcoming Dr. Peter G. Traber to the position of Chief Medical Officer. Peter had been serving in an interim capacity since March 2020 and has now joined us full-time as of August 1, 2020. Peter brings a wealth of experience in large pharma, biotech and academia. His prior experience includes Chief Medical Officer and Senior Vice President of Clinical Development and Medical Affairs at GSK, CEO of Baylor College of Medicine and Chairman of Medicine and CEO of the University of Pennsylvania Health System. He was most recently CEO of Galectin Therapeutics, a biotech company that he guided to a Phase III in NASH. Peter will oversee medical affairs, program management and all aspects of clinical development and strategy as well as provide scientific and clinical guidance for potential business development initiatives.

Before I turn the call over to our Chief Financial Officer, Peter will say a few words. Peter?

Thank you very much, Carsten. I am very proud to be part of an organization that is pioneering innovations and that may advance the treatment of a number of challenging diseases with unmet medical needs. Selecta has the capabilities and scientific acumen to become the undisputed leader in targeted and specific immune tolerance, and I'm excited to help advance ImmTOR and explore its role in driving innovation that will ultimately help patients.

In the immediate term, my goal is to ensure the Phase III studies commence enrollment quickly and safely and we believe we are well positioned to conduct a successful pivotal program with Sobi. In the near term, I look forward to helping the team kick off our first gene therapy clinical program in MMA in the first half of next year and advancing our proprietary program in OTC deficiency.

Furthermore, I'm excited to help Selecta kick off our autoimmune disease efforts as there is substantial unmet need and applicability of the ImmTOR platform to benefit patients in both IgA nephropathy and primary biliary cholangitis.

I'll also be helping the team on our business development efforts, evaluating opportunities from a strategic clinical perspective. Overall, my goal is to translate our deep science into products and partnerships that generate value and help patients. I believe we have the right team here at Selecta to achieve this goal.

Now I'll turn the call over to our Chief Financial Officer, Brad Dahms. Brad?

Thank you, Peter. Our detailed financials are laid out in our earnings press release, which we filed this morning, will be further outlined in our 10-Q. So I'll just highlight a few key items here. We had $61.4 million in cash, cash equivalents and restricted cash as of June 30, 2020, which compares to cash, cash equivalents and restricted cash of $91.6 million as of December 31, 2019. Our cash balance at June 30, 2020, does not include the $100 million in initial payments under the license agreement with Sobi. We believe that our available cash, cash equivalents and restricted cash together with the $25 million payment received in July 2020 from Sobi under the Sobi private placement and a contractually obligated payment from Sobi of $75 million under the Sobi license, which is due 45 days after the effective date of July 28, 2020, will enable us to fund our operating expenses and capital expenditures into the first quarter of 2023.

Net cash used in operating activities was $23.5 million for the 6 months ended June 30, 2020, as compared to $27.4 million for the same period in 2019. Research and development expenses for the second quarter of 2020 were $10.7 million, which compares with $12.1 million for the same period in 2019. The decrease in cost was primarily the result of less expense for our Phase II COMPARE trial for SEL-212, offset by increases for our gene therapy program in collaboration with AskBio and salaries and benefits.

General and administrative expenses for the second quarter of 2020 were $5.6 million, which compares with $4.1 million for the same period in 2019. The increase in cost was the result of expenses incurred for salaries, legal and professional fees, partially offset by decreased travel expense.

For the second quarter 2020, Selecta reported a net loss of $24.1 million or $0.25 a share compared to a net loss of $16.4 million or $0.37 a share for the same period in 2019.

I will now hand the call back over to Carsten. Carsten?

Thank you, Brad. As mentioned earlier, the second quarter was transformational for Selecta, and I'm pleased to have been able to capitalize on business development opportunities in a way that will steer our research and development efforts to grow the applications of ImmTOR. Our commitment to use the technology to optimize the efficacy and safety of biologics, enable redosing of life-saving gene therapies and create novel immunotherapies for autoimmune diseases is unwavering. And we're very excited about the possibilities that our ImmTOR platform provides. We provide specific details on our gene therapy and autoimmune disease programs at an R&D Day we plan to host sometime in October.

With that, we're happy to take questions.

(Operator Instructions) And our first question will come from Elena Merle with Canter Fitzgerald.

Congrats on all the progress. Just on the gene therapy front, I'm curious in terms of kind of like just steps before entering the clinic. Just first on MMA, I guess, what are the gating factors, both, I guess, maybe internally and with AskBio as well as from the FDA perspective before you can dose first patient. We've seen ImmTOR is safe in gout, I guess, just kind of curious kind of what the preclinical work to support sort of safety in humans is needed. And just more color on sort of all those steps that you need to take there before you can first dose patients. And then I guess with the Sarepta collaboration in neuromuscular, kind of curious, both from sort of, I guess, with Sarepta's perspective but also with the FDA, I guess, like what exactly do you have to do before you can enter patients? I mean you've seen ImmTOR in patients already. So kind of just curious, I guess, how quickly you can move this platform into the clinic across a number of gene therapies.

Yes. Thanks for the question, as always. See on the MMA front, we're currently conducting or finalizing our tox studies, working on -- we already had a pre-IND meeting with the FDA and currently working, compiling and preparing for the IND filing. So we are on track to start the trial in the first half of next year. In regards to the Sarepta collaboration, so just to remind you, this is a research agreement. So they're really trying to replicate the data that we have generated so far preclinical in basically liver-based diseases and apply those learnings in neuromuscular disorders. So that's really the focus and they have 24 months to do so. So it's really the first step is to replicate those results in animal models.

And our next question will come from John Newman with Canaccord.

So Carsten, I just wondered if you could talk a little bit about what you'll be looking to do when you advance your proprietary program in OTC deficiency. And I'm just curious as to how you'll go about determining the dosing schedule given with ImmTOR. You should be able to dose more than once. And also, just curious as to kind of how you define success here. Really -- we really haven't seen any other programs that have been able to definitively demonstrate the ability to redose. So I wonder if part of the OTC program will maybe focus on that first.

Yes, John, thanks for the question. So we'll provide more details on timing at our R&D Day in October, but obviously, in terms of dose finding, we'll have learnings from the MMA program, which will go into the clinic first -- in the first half of next year. And you raised a good question, how do we define success? And I think we have clearly demonstrated in the preclinical data that we were able to prevent the formation of neutralizing antibodies. And that's really what we're looking for as initial proof of concept, are we able to mitigate that risk? And then obviously, ultimately, the second step is, are we also able to re-treat? And we have demonstrated those in animal models, both in rodents and also in primates. And that's really -- but I think the first kind of in terms of proof of concept really is, are we able to prevent the formation of neutralizing antibodies?

Great. Just one quick follow-up question, if I may. You talked about your autoimmune program, and you mentioned one of the indications being the kidney indication, IgA nephropathy. Just curious if you have specific antigens in mind that you're looking after there. I'm just kind of wondering what type of approach you might take. It's an interesting indication, especially with your platform.

Yes, that's a great question, John. So really what we're trying to do here and what makes us an attractive indication that it has a clearly defined antigen and the approach would be really building on the learnings from our gout program, where we combined immunogenic enzyme, the uricase with ImmTOR and we're debulking patients of uric acid deposits. The approach with IgA nephropathy will be very similar. We plan to combine ImmTOR with an IgA protease, which specifically addresses IgA immune complex deposits in the kidney. So it's a very similar approach, where here we would plan to basically debulk patients of IgA immune complex in the kidney and enable the redosing with ImmTOR. So there's a lot of learnings that we have, obviously, from the gout indication that we plan to transfer to it IgA nephropathy. And obviously, there's a significant unmet medical need. There's no approved therapies on the market at the moment.

Our next question will come from Raju Prasad with William Blair.

So kind of wondering on the ImmTOR platform in gene therapy as it relates to serotype. I know you've done some data in AAV8 and 5, I believe. But with next-gen kind of capsids coming, I mean, what are your thoughts on the translatability of ImmTOR across kind of all serotypes? And then I've got a follow-up on it.

Yes. Thanks, Raj. That's a great question. So as you know, ImmTOR as a technology is pretty much -- you can basically combine any antigen with ImmTOR. As you rightly said, we have demonstrated we're able to re-treat with an AAV8 and AAV5 but we basically believe that it's agnostic to the serotypes. And specifically in regards to the next-generation of capsids, which are designed to basically evade preexisting antibodies, we believe definitely that there is an application for ImmTOR as well as those novel capsids are actually quite immunogenic themselves. So we definitely think we're well prepared to address those challenges that replaces AAV-mediated gene therapy, but also potentially addressing next-generation capsids as well.

Great. On the COMPARE trial, how should we think about the data in regards to maybe derisking the autoimmune disease program? Is there any similarities between immunogenicity that's developed with pegadricase versus IgA nephropathy?

Yes. I think, I mean, we definitely -- we believe with the data we have that the approach is -- definitely derisks also now going to Phase III, the placebo-controlled study. So we definitely feel that we'll derisk, and we've basically demonstrated that we're able to combine a fairly immunogenic enzyme with ImmTOR. And really, especially the IgA nephropathy indication is really a one-to-one translation, where we plan to combine an immunogenic enzyme, an IgA protease, with ImmTOR. So we definitely have learnings we can transfer here in terms of addressing ADAs, which we have demonstrated in the gout trial already in Phase I and II.

Our next question will come from Derek Archila with Stifel.

This is Ben on for Derek. Most of mine have been asked. So I guess just one for Brad. I guess, how should we think about the OpEx ramp just considering the Sobi deal and then also the studies starting this year and next year as well?

Yes. So it's a good question, and thanks for it. So obviously, Sobi is going to be reimbursing Selecta for the Phase III, so that should take our expenses down significantly. So if you kind of pro forma our cash balance as of June 30 with the Sobi deal, you can kind of get a flavor for where we think it's going to ramp up. Obviously, as we advance the gene therapy in autoimmune diseases programs, you'd expect to see that go up, particularly in the R&D line and starting in late 2021, 2022, but we expect our operating expenses to be significantly lower for the coming years versus where they were, given that we're not funding the SEL-212 program going forward.

The next question will come from Difei Yang with Mizuho.

This is Dan Clark on for Defei. Did the Sobi deal change recent changes in the hiring process or the final decision for the hiring of the CMO role?

So obviously, as we've talked about Peter, he has an impressive background both -- and quite a unique skill set having worked in big pharma, in biotech and academia. And he's obviously ideally suited to oversee the Phase III program, which is critical, but also we oversee the translation of our science into the clinic as a next step in gene therapy with the MMA program. But also Peter is actually a liver specialist. And as you know, ImmTOR accumulates in the liver, and we're actually pursuing primary biliary cholangitis as an indication. So there's a lot of disease knowledge actually that Peter brings to the table in addition just with his wealth of experience. And obviously, now we do have the funding to actually move our platform forward, which definitely was, I think, a key part in Peter's decision-making process as well to join Selecta.

And then just as a follow-up. For future product in-licensing opportunities for Selecta, should we sort of expect to see a similar structure to that, that you have with 3SBio for uricase?

So, we don't want to comment on BD activities. But I think just to say now, we do have the funds and definitely are looking at in-licensing opportunities and I think the 3SBio model is definitely a model that can be replicated where we license an enzyme, which is immunogenic and can be retreated without ImmTOR, and I think this can definitely be replicated for other indications as well.

Our next question will come from Boobalan Pachaiyappan with H.C. Wainwright.

This is Boobalan dialing in for Ram Selvaraju. So just to start off, this might have been asked previously, but I was jumping calls. I would like to hear your thoughts regarding the Sobi partnership with respect to the SEL-212 Phase III trial. Can you clarify the responsibilities of Sobi?

Yes. So we will execute the Phase III on behalf of Sobi and Sobi will reimburse us for this. Obviously, they'll have the final say on the program, but it's run collaboratively, but we're actually going to be in the driver's seat and execute the study on behalf of Sobi and fully get reimbursed by Sobi.

Okay. That's actually very helpful. So along the lines, I would like to discuss some possible scenarios for the MIRROR trial that Horizon Pharma is currently running. Is it likely to make a difference to the future of SEL-212 if the MIRROR trial results are positive and exceed expectations or is SEL-212 going to be a force to be reckoned with as long as the COMPARE trial data are positive and regardless of what happens to the MIRROR study?

Yes. So we have looked at this extensively over the last couple of months, obviously, and don't feel that the results will impact the commercial potential of SEL-212. And I'll tell you why. There's really limitations with the use of methotrexate. The first one is patient eligibility, right? You have to exclude patients with chronic kidney disease. And we know actually from the Krystexxa Phase III studies that about that 50% of patients had chronic kidney disease. We believe the gout population in general looking at every data is about 30% of patients actually that have been excluded. We have to exclude patients that consume more than 3 drinks -- alcoholic beverages per week. So that's an issue, obviously, in this patient population that oftentimes abuses alcohol and then you have to exclude patients that don't tolerate methotrexate. And we know from other studies that about 20% of patients don't tolerate actually the first 2 weeks. So you have to exclude quite a number of patients. Obviously, there's a question of safety. Methotrexate has a black box warning around end-organ toxicities, which I think, especially in this patient population, is critical when it comes to elevated transaminases. And also, when you look at methotrexate, it's actually a leading cause of medication error -- death due to medication errors. So I think that's another concern in a quite noncompliant population.

And the third one, maybe the most practical, is really the convenience or lack of convenience as you have to re-treat with methotrexate for 6 weeks before you actually initiate the therapy. You have a daily intervention. You have to take daily folic acid, weekly methotrexate and then layer on the therapy after 6 weeks every 2 weeks versus a once-monthly therapy, where you don't have restriction around chronic kidney disease and alcohol use. So we feel that we have a differentiated product with SEL-212.

That's very, very helpful. And then assuming you and Sobi will initiate Phase III by end of this year, what would be your next big focus? Is it going to be SEL-302 and 313 or both? And why?

Yes. So as we guided today, we actually will start the Phase III this quarter. So I think that's an important milestone for us. And we really -- as the next action going to the clinic is our focus on gene therapy, and we plan to enter the clinic in MMA in the first half of next year and plan to have at least preliminary data in the second half of next year. That's really the focus. But also, we are moving forward our OTC program, which will guide more in October in our autoimmune diseases, specifically IgA nephropathy and primary biliary cholangitis. And we plan to file an IND for one of the indications late next year as well.

Okay. That's helpful. And then just a couple more from me. So with respect to your collaboration with Sarepta, what specific safety and efficacy signals would determine whether this program would be a go or no go? And is there a time line associated with this collaboration?

Yes, that's a great question. Obviously, we haven't disclosed the exact details of the experiments that Sarepta will be conducting. But obviously, they have been impressed by the data we have generated so far, which have been generated in liver-based diseases, where we're able to demonstrate prevention of neutralizing antibodies when you combine the AAV capsid with ImmTOR and they plan to run a number of animal experiments to demonstrate that it can [prompt] the immune response to gene therapy. And they have 24 months to do so. It's a 24-month research agreement. And obviously, have the opportunity to opt in at any point.

Okay. That's very helpful. And how should we think about modeling R&D cost for the remainder of the year?

Yes. I'll let Brad answer that.

Yes. So obviously, so we're running the Phase III on behalf of Sobi. So we're -- as the transaction closed in Q3, we're still working with our accountants to determine whether that will be booked as revenue or a reduction in costs. It's obviously the same net effect. But you would expect overall that our cash burn would go down, given that we're not running the Phase III -- or we're not paying for the Phase III. And as you can see from the COMPARE study winding down as well, our R&D expenses were down significantly quarter-over-quarter. So I think that trend should continue. And then we'll guide further to you guys on sort of how we'll account for the expense reimbursement from Sobi.

Our next question will come from John Newman with Canaccord.

Carsten, I just wonder if you could briefly go over the economic terms that you have in terms of the AskBio partnership. You've got several programs there that you'll be working on together. Just curious how that would look over the long term, should those programs be successful.

Yes, that's a great question, John. We have 2 partnerships actually with AskBio. One is a classical licensing deal where they license ImmTOR for their lead asset in Pompe disease. They licensed ImmTOR in December last year with a $7 million upfront. And then there will be -- as we disclosed, there will be regulatory development and commercial milestones plus royalties associated with that. The second collaboration we have is a true strategic collaboration, where the MMA program is part of where we share the costs and also the profits. So it's a 50-50 partnership. And where we have up to 10 indications that we plan to develop together and commercialize together.

This concludes the question-and-answer portion of the call. I would now like to turn the conference back over to Selecta's CEO, Carsten Brunn, for any closing remarks. Mr. Brunn?

Thank you, operator, and thank you to everyone who joined us this morning. We're extremely excited about the second half 2020 and the continued growth of our company and our platform. We look forward to sharing more information about the growth of the ImmTOR platform throughout the year. This concludes today's call. Thank you.

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