Tempest Therapeutics Inc (TPST) 2017 Q2 法說會逐字稿

Welcome to the OvaScience Reports Second Quarter 2017 Earnings Results Call. My name is Victoria, and I will be your operator for today's call. (Operator Instructions) And later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

And I will now turn the call over to Jennifer Viera. Jennifer, you may begin.

Thank you. Good afternoon and thank you for joining us on today's OvaScience's call to discuss our financial results for the second quarter ended June 30, 2017. With me today are Dr. Michelle Dipp, our Co-Founder and Executive Chair; and Jonathan Gillis, our Vice President of Finance.

Our discussions during this conference call will include forward-looking statements. Please see our press release issued this afternoon and our annual report on Form 10-K and subsequent quarterly reports on Form 10-Q for important risk factors that could cause our actual results to differ materially from those projected or suggested in the forward-looking statements. We undertake no obligation to update or revise the information provided on this call as a result of new information or future results or developments.

We will begin first with Michelle, who will discuss highlights from the quarter, followed by Jonathan, who will discuss our financial results. After our remarks, we will open the call for Q&A.

Now I'll turn the call over to Michelle. Michelle?

Thank you, Jennifer, and good afternoon, everyone. Thank you for joining us on today's call to discuss OvaScience and our updates for the second quarter of 2017. We are entering the second half of the year optimistic about the future of OvaScience and our focus on R&D.

In the second quarter, we took two important steps to enable this focus. First, we appointed Dr. Christopher Kroeger as Chief Executive Officer effective September 1, 2017. Dr. Kroeger brings a wealth of experience driving drug development and innovation in the life sciences, and he has strong clinical and research experience from his time as a physician and scientist. Most recently, he served as CEO of Cardioxyl Pharmaceutical, a company focused on the development of medicines for acute and chronic heart failure, which he sold to Bristol-Myers Squibb for over $2 billion in total consideration. Notably, Bristol-Myers Squibb continues to advance the development of multiple Cardioxyl assets, including two compounds in Phase 2. We are fortunate to have a leader with Dr. Kroeger's experience and his track record of success.

Second, we announced that we will pursue business development opportunities for AUGMENT and discontinue ongoing efforts related to the treatment outside of North America. In conjunction with this decision, additional patients will not be enrolled in the ongoing investigator initiated egg allocation study of AUGMENT with the IVI Group in Spain. We will continue to offer AUGMENT in Canada using the same Canadian clinics and laboratories we use to run our OvaPrime Clinical study. We are confident that AUGMENT is a safe and efficacious treatment and that it offers transformative potential and despite the shift in strategic priorities, we remain committed to minimizing the impact of this change on women in affected areas.

In tandem with this decision, we restructured the company, including reducing our workforce by approximately 50%. This enables us to extend our cash position into the first quarter of 2020, which we expect will allow us to achieve key 2019 milestones for OvaTure and OvaPrime. Most importantly, we believe these changes will best prepare us to execute on our overall R&D focus strategy effectively and efficiency.

Let me now provide an update on OvaTure and OvaPrime. Beginning with OvaTure, our potential next generation in-vitro fertilization or IVF treatment that could help a woman produce healthy, young fertilizable eggs without hormone injections by maturing EggPC cells into eggs in-vitro.

At the Midwest Reproductive Symposium International or MRSi in June and the Society for the Study of Reproduction Annual Meeting or SSR in July, we presented a procedure describing recent morphologic, genetic and functional assessments of bovine and human EggPC derived eggs, which were undertaken to assess the maturation status of the eggs.

As we've discussed before, the ultimate test to determine the maturation of a healthy egg in embryo is successful fertilization. However, as we progress towards fertilization studies, we are focused on the concept of developmental competence, which means that an egg is exhibiting certain characteristics that suggest it may fertilize and develop into a healthy embryo.

In the data presented at MRSi and SSR, bovine and human EggPC-derived eggs were shown to be similar to endogenous eggs with respect to key criteria of developmental competence. These data suggest that bovine and human EggPC cells can be developed in-vitro into eggs that demonstrate the key hallmarks of egg maturation and supports our ongoing efforts to advance OvaTure. The abstract with these results was awarded a 2017 Oral Presentation Award at MRSi.

Next, regarding our work on OvaTure with Intrexon. Beginning this month, Intrexon will continue the bovine EggPC work for us under the OvaTure collaboration rather than under the OvaXon joint venture. Based on project plans provided by Intrexon, we continue to expect to fertilize a bovine EggPC cell-derived egg by the end of 2017, and we plan to continue our ongoing discussions with Intrexon regarding the future of the OvaXon joint venture.

We continue to work with our clinical partners to develop a repeatable and robust process for the maturation of human EggPC cell. We plan to secure authorization to fertilize human EggPC cell-derived eggs and embryos by the end of the first half of 2018, and we expect to submit plans for a clinical study of OvaTure in humans to a regulatory body by the end of the second quarter 2019.

Turning now to OvaPrime, our potential fertility treatment that could enable a woman who makes too few eggs or no eggs to increase for egg reserve. OvaPrime aims to increase a woman's egg reserve by transferring her EggPC cells into her own ovaries where they may mature into fertilizable eggs.

In June, we completed target enrollment of 70 patients in our ongoing prospective controlled, blinded and randomized study of OvaPrime, which is designed to assess the treatment safety in women with either Primary Ovarian Insufficiency, POI, or Poor Ovarian Response, POR. Secondary endpoints include OvaPrime's effect on patient's hormone levels as well as molecular development.

We are on track to complete biopsies in 70 OvaPrime study patients as well as for the initial readout of six months of post-EggPC reintroduction safety data from 20 patients by the end of 2017.

We plan to complete reintroduction in 70 OvaPrime study patients by the end of the first half of 2018. We expect to complete embryo transfers and announce an initial readout of six month of post-EggPC cell reintroduction safety data for all patients by the end of the first quarter of 2019. We anticipate an initial readout of the embryo transfers of all patients as well as all potential births in the OvaPrime clinical trial by the end of 2019.

As outlined above, we have many upcoming catalysts in our OvaTure and OvaPrime programs, and we're pleased that our strategic focus on R&D has provided the financial strength to carry us through these key milestones. Chris and the entire team here at the OvaScience look forward to updating you on our efforts moving forward as we enter into this new and exciting chapter for the company.

With that, I will now turn the call over to Jonathan, who will review our financial results from second quarter. Jonathan?

Thank you, Michelle, and good afternoon, everyone. As you know, we have worked hard over the last six months to realign our organization and to extend our cash runway into the first quarter of 2020. Our progress is reflected in our financial results for the second quarter.

Revenue for the quarter was $84,000. As we did -- as we discontinue ongoing efforts related to the AUGMENT treatment outside of North America, we do not expect significant revenue in the near-term. Cost of revenue for the quarter, excluding restructuring charges, was $0.3 million compared to $1.2 million for the same period in 2016. This decrease was primarily driven by decreased commercial volume as we have prioritized development of OvaTure and OvaPrime.

Research and development expenses for the quarter, excluding restructuring charges, were $5 million compared to $6 million for the same period in 2016. The year-over-year decrease of $1 million or 17% was driven by a $0.5 million decrease in employee-related costs and stock-based compensation expense and a $0.5 million decrease in certain research agreements, both resulting from our restructuring activities.

Selling, general and administrative expenses for the quarter, excluding restructuring charges, were $10.8 million compared to $11.2 million for the same period in 2016. The decrease was driven by decreases of $1.4 billion in employee-related costs due to reduced headcount, a $1.2 million decrease in marketing and commercial-related costs and $0.8 million decrease in travel, facilities and other costs, primarily resulting from our restructuring activities.

However, these decreases were offset by a $2.9 million increase in non-cash stock-based compensation expense, primarily driven by the modification of awards granted to an executive, resulting in accelerated compensation expense. Of the $2.9 million increase, $2.3 million related to the June 2014 and December 2014 option grants. The advisory agreement has subsequently been amended to permit the accelerated vesting of those grants prior to December 31, 2018, only in event of a future termination without cause or resignation for good reason.

Net loss for the quarter was $18.2 million or $0.51 per share compared to a net loss of $18.6 million or $0.62 per share for the same period in 2016. The net loss for the second quarter of 2017 includes restructuring charges of $2 million. As of June 30, 2017, we had cash, cash equivalents and short-term investments of $86.6 million compared to $114.4 million as of December 31, 2016. The cash outlays related to restructuring in the first half of 2017 were $4.1 million. To-date, we have incurred $8.9 million of restructuring expenses and expect total cash expenditures related to restructuring to be between $8 million and $9 million over 2017 and 2018.

Looking ahead, our cash balance will be used to fund our corporate strategy, including the continued preclinical development of OvaTure and our ongoing clinical trial of OvaPrime through key milestones in 2019. We anticipate that we will have sufficient cash without additional financing to support our operating plan into the first quarter of 2020.

Thank you for your attention. I will now turn the call back over to Jennifer.

Thank you, Jonathan. We'll now begin the Q&A session. Operator?

(Operator Instructions) Our first question comes from Alethia Young from Credit Suisse.

Maybe two. One, I guess I wanted just Chris to maybe talk a little about his vision and priorities over the next couple of years. And can you guys go into a little bit more detail about what you found at the Productive Symposiums that you were at that were present in the abstract? Thanks.

Sure, Alethia. Thanks so much. I know that Chris will look forward to speaking with you and I know you -- I think you've had the opportunity to speak with him, which is great. He's really excited to share his thoughts on vision. He's really -- he has a tremendous background, as I think you know, on -- in R&D, and he was very successful at Cardioxyl in terms of taking treatments in a very tough space in both acute and chronic heart failure and getting successful clinical studies there and then subsequently sold the company to BMS. So maybe I'll leave at that and let him update you on the next call. And then -- thanks for asking about the two symposia, on was MRSi and the other one was SSR. So this was in June and July this year, and these are pretty important symposiums, specifically on the research side, so on the science side. And the data that was presented is essentially around a phrase that we've introduced and really worked hard to try to familiarize our analysts and investors within that phrase of developmental competence. So you may recall, in January of this year, we started showing you exactly what we mean by developmental competence. And the reason why it's important is it essentially shows you very specifically in both in morphological, genetic and then functional terms why we believe that these cells which are developing into eggs will, in fact, be eggs which are fertilizable. If you want I can go into detail -- even more detail, but it basically shows that from a morphological perspective, we're seeing larger sizes of cells, so we've seen growth in both the bovine and the human EggPC cells. We are looking for certain hallmarks like the presence of a terminal vesicle, enlargement -- which is the enlarged nucleus of egg before meiotic division. We also look for things like polar bodies. And then finally, the formation of a zona pellucida, which is the thickened outer membrane that develops to protect the maturing egg and prevent fertilization actually from multiple sperm. So that's what we're looking at from a morphological perspective. From a genetic perspective, really we're looking at the chromosomal segregation, which you can actually see. So you're looking for two sets of chromosome, and that was also demonstrated. And then finally, we perform functional tests to determine the status of the bovine and the human eggs. And both bovine and human eggs stain blue for BCB test, which it means that they are mature. We also showed parthenogenetic activation in bovine, again, which is a test for fertilization. So you can see that the EggPC cell-derived eggs, they can be essentially chemically induced to divide into two cells, four cells, et cetera, after chemical activation. So all of this is just in support of what we ultimately believe to be true and hope to show you at the end of this year, which is that we will have a fertilizable cow egg and then hopefully next year, we'll be able to follow that up in the same with the human egg (inaudible) cell.

And then for kind of restructuring, a lot of that kind of SG&A cut, so if maybe you can go in more detail around the restructuring. Thanks.

Sure. Do you want to handle that, Jonathan?

Yes. So the restructuring impacted many physicians, but it helped -- it reduced our workforce by approximately 50%, and it was to realign with the corporate strategy and focusing on the development of both OvaTure and OvaPrime.

So mostly, it was all SG&A?

Yes. I mean, that's the primary portion, correct.

I'm showing no further questions at this time.

Great. Well, thank you, everyone, for joining us today. We look forward to providing additional updates on the future calls. If you have any questions, please don't hesitate to reach out to us directly. Thanks so much and have a good evening.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for participating. You many now disconnect.