Aeglea BioTherapeutics, Inc.
Q4 2018 Earnings Call Transcript

Published: 8 Mar 2019

[Operator:]

Greetings and welcome to the Fourth Quarter 2018 Corporate Update and Earnings Call. And at this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] as a reminder this conference is being recorded. I would now like to turn the conference over to your host Mr. David Calusdian Sharon Merrill Associates. Thank you, Mr. Calusdian. You may begin.

[David Calusdian:]

Well and welcome to Aeglea BioTherapeutics Corporate Update and Earnings Conference Call. After managements prepared remarks they will be available to take your questions. Before we begin please note that today's call may include a number of forward-looking statements including comments on our business strategy, strength and priorities, the timing, plan and success of our clinical trials and related data, the timing and announcements and updates relating to clinical trials and related data, the safety therapeutic benefits and economic valuable of product candidates, the advancement of technologies and proprietary product candidates, regulatory pathways for our development programs, the success of collaborations, the competitive landscape for product candidates, trends with respect to revenues, expenses and cash flows, the company's ability to fund research and development programs and its ability to manage cost, along with the uses of cash and other matters. These forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause the company's actual results to differ significantly from those suggested by these statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to the company's Form 10-K filed with the Securities and Exchange Commission on March 7, 2019 for some of the important risk factors that could cause its actual results to differ materially from expectations including any forward-looking statements made on this call. Except as required by law, the company disclaims any obligation to publicly update or revise any forward-looking statements to account for or reflect events or circumstances that occur after this call. Also, please note that a presentation to accompany this call is available for download on the events and presentations page of the company's IR section of its website at www.aegleabio.com. I'll now turn the call over to Aeglea's Chief Executive Officer, Anthony Quinn. Dr. Quinn, please go ahead.

[Anthony Quinn:]

Thank you David and Good afternoon, everyone. Thank you for joining us. With me today is are Charles York, our Chief Financial Officer and Dr. Jim Wooldridge, our Chief Medical Officer. 2018 was a really successful year for Aeglea with substantial progress on a number of fronts and we've had a great start to 2019. In 2018 we made significant advances with our clinical program for pegzilarginase in Arginase 1 Deficiency and oncology. We leveraged our unique drug hunting capabilities to generate new pipeline programs for cystinuria and homocystinuria. We made significant progress in strengthening the company's balance sheet which will allow us to continue to invest in our lead program and our pipeline. As we look to 2019, the company is well positioned to advance both our programs and leverage our unique human enzyme design capabilities. We are continuing our investment in our lead product candidate pegzilarginase, pipeline programs and accelerating our manufacturing activities. We've continued to build the team and our capabilities. We accelerated our plans to do a financing in 2019 and we closed an offering in February of this year which resulted in total gross proceeds of $69 million, further strengthening our balance sheet and positioning us for success in 2019 and beyond. We continue to build on the rapid progress we've made last year on a clinical experience with pegzilarginase in Arginase 1 Deficiency. The Phase 1/2 data continues to develop with 14 patients who have now completed eight weeks of repeat dosing. We have an oral presentation at SIMD and we'll be providing an update on the Phase 1/2 data at that meeting in Seattle, Washington in early April. As you all know, we have also been progressing studies that are investigating the impact of Arginase depletion with pegzilarginase and patients with advance solid tumors. We've now completed enrollment in the single agent expansion trials. We've also made good progress with our combination trial. Our earlier safety clinical programs for homocystinuria and cystinuria which addressed two more common rare diseases with significant unmet medical need also continue to advance forward with initiation of the IND-enabling studies. We're continuing to leverage our knowledge of biology, human metabolism and enzymology [ph] as we address diseases that have significant unmet medical needs. We're really excited about the opportunities ahead for our programs at Aeglea and are very much looking forward to updating you on a progress as we move through 2019. I would now turn the call over to Jim, who will walk you through our 2018 achievements and also discuss our plans for 2019. Jim.

[Jim Wooldridge:]

Thanks Tony and hello everyone. As Tony mentioned 2018 and the start of 2019 have been a productive and data rich time at Aeglea in rare disease and oncology. First; with our lead investigational therapy pegzilarginase for Arginase 1 Deficiency. We completed dosing on our Phase 1/2 clinical trial. Importantly, the data we generated in this study was critical to inform the design of our pivotal Phase 3 PEACE trial. While this was one of the biggest highlights, we also made important advances with our oncology trials in our pipeline molecules. In 2018, we completed enrollment to the single agent Phase 1 trial in advance solid tumors including the cohort expansions and heavily pre-treated patients with cutaneous melanoma, uveal melanoma and Small Cell Lung Cancer. In the fourth quarter, we presented interim clinical data at ESMO confirming the monotherapy safety profile and demonstrating any tumor activity with pegzilarginase in heavily pre-treated patients with melanoma. In December, we also completed the Phase 1b dose escalation trial of pegzilarginase in combination with KEYTRUDA and initiated enrollment into Phase 2. This Phase 2 study is designed to assess safety and efficacy in patients with extensive disease Small Cell Lung Cancer who relapsed or progressed following platinum based chemotherapy. From our Phase 1 trial, we confirmed the safety profile was consistent with prior pegzilarginase monotherapy observations and a recommended pegzilarginase Phase 2 dose of 0.27 milligrams per kilogram was selected in combination with KEYTRUDA. More importantly, we observed clinical activity in the nine patients treated at this dose level including stable disease in three at nine weeks and one partial response. We expect top line data from this trial in the first half of 2020. We continue to be excited about progress with our pipeline. In October, we presented pre-clinical data on AEB4104. Our new pipeline program for homocystinuria that has the potential to dramatically lower plasma homocystine levels. In a pre-clinical model homocystinuria AEB4104 led to improvement of significant disease related manifestation including improved survival. Also in October, we presented data at the American Society of Nephrology highlighting the discovery and activity of a novel cystine degrading enzyme based on a human [indiscernible]. In a pre-clinical model of cystinuria, our cystine degrading candidate reducing plasma and urine cystine levels, inhibited crystal formation in urine and was accompanied by reduced kidney stone formation. We already started IND-enabling activity for both of these pipeline programs and we look forward to bringing both programs towards the clinic in 2020. Turning now to pegzilarginase in Arginase 1 Deficiency. We announced in December, the design of our global pivotal Phase 3 PEACE study which we aligned the feedback from FDA and EMA. P stands for pegzilarginase effect on Arginase 1 Deficiency Clinical Endpoint and it's a global randomized and double blind trial designed to assess the effect of pegzilarginase versus placebo over 24 weeks. The primary endpoint is plasma arginine reduction and secondary endpoints include mobility and adaptive behavior as assessments of clinically meaningful effects, in addition to safety and pharmacokinetics. At the end of last year, we release guidance that we expect to dose the first patient in the PEACE trial in the second quarter of 2019 and we're on track to meet this milestone. As we've discussed before pegzilarginase is highly effective in reducing plasma arginine levels. Data from the Phase 1/2 study support a weekly dose of 0.1 milligrams per kilogram which should establish rapid control of plasma arginine in the PEACE trial. In the Phase 1/2 trial reductions in plasma arginine levels were accompanied by improvements and important disease-related abnormalities after only eight weeks of repeat dosing. Given the importance of good plasma arginine control it's anticipated that the proportion of clinical responders will increase with longer treatment in that trial. Insights from standardized clinical assessments and feedback we've received from physicians and caregivers indicates that the assessments of mobility and adaptive behavior are ideally suited to capture the clinical benefits of pegzilarginase. In summary, 2018 was a highly productive year and we look forward to a successful 2019 with initiation of the PEACE trial, advancing our combination study with KEYTRUDA in Small Cell Lung Cancer and bringing our two exciting pipeline programs closer to the clinic. Furthermore, we're confident and excited with the PEACE trial design and we expect the data from this trial will be sufficient to support marketing applications for pegzilarginase in Arginase 1 Deficiency. With that, I'll turn the call over to Charles to discuss the financials.

[Charles York:]

Thanks Jim and good afternoon, everyone. As Anthony discussed earlier, we took important steps to strengthen our balance sheet already in 2019 by completing $69 million financing in early February. The net proceeds which came from new and existing investors provide us with pro forma cash of approximately $139 million at December 31, 2018. More importantly, this capital is expected to provide Aeglea with cash runway through our PEACE pivotal trial read out in the first quarter of 2021. Regarding our 2018 financials, we continue to invest in key rare disease and cancer programs in Aeglea which we believe will be the foundation of our long-term success. We recorded a net loss of $14.9 million or $0.62 per share in the fourth quarter of 2018 compared to a net loss of $6.5 million or $0.39 per share on $1.5 million grant revenue in the fourth quarter of 2017. All 2018 and 2017 revenues at Aeglea were the result of our $19.8 million cancer research grant. That grant contract included in May, 2018 with the full $19.8 million of grant revenue recognized over the life of the award and the full cash balance received by year end 2018. Operating expenses increased in 2018 given our strategy to drive forward pegzilarginase in Arginase 1 Deficiency and concurrently develop additional product candidates. Looking at R&D, our fourth quarter 2018 R&D expense was $11.8 million versus $5.8 million in the fourth quarter of 2017. And for G&A, our fourth quarter 2018 G&A expense was $3.5 million versus $2.3 million in the fourth quarter of 2017. The increase in operating expenses were primarily due to advancing the clinical development of our lead program pegzilarginase accelerated manufacturing and strengthening our product development capabilities. During 2018, our expenses supported over enrolling our Phase 1/2 clinical trial and patients with pegzilarginase in Arginase 1 Deficiency. Continuing our open label extension trial in patients with Arginase 1 Deficiency. Completing enrolment in our three solid tumor single agent cohort expansion trials and completing enrollment in the Phase 1b combination trial and patients with Small Cell Lung Cancer. Now looking forward to 2019, we anticipate our burn will be in the range of $12 million to $15 million per quarter with exception of the first quarter of 2019 where we anticipate our burn will be in the range of $15 million to $17 million given our ramp in pipeline development and manufacturing activities for pegzilarginase in Arginase 1 Deficiency. In the pro forma cash of approximately $139 million at December 31, 2018 an extension of our cash runway through our PEACE pivotal trial read out in the first quarter of 2021 were important steps in strengthening our balance sheet. Additionally, to early data we shared in homocystinuria and cystinuria continue to drive investment in both programs. We believe there is significant unmet medical need in both indications and that we will benefit from a favorable market position where we own worldwide rights and mostly importantly, where we believe our assets are differentiated and compelling. I will now turn the call back over to Anthony for some final remarks.

[Anthony Quinn:]

Thanks always, Charles. So including, we believe we're really very well positioned to make meaningful progress towards our goal of providing transformative therapies to patients living with devastated diseases. We're very appreciative of the all the hard work of employees and also importantly the support that we get from patients, caregivers and investigators that involves in our clinical trials. We're really excited by the multiple 2019 milestones ahead and very much looking forward to sharing these updates with you as we actually course through 2019. We'll now open the call to questions. Operator, can you go ahead. Thank you.

[Operator:]

[Operator Instructions] our first question comes from the line of Josh Schimmer of Evercore ISI. Please proceed with your question.

[Josh Schimmer:]

As the INDs for cystinuria and homocystinuria programs approach, maybe you can give us a sense of how you expect each one of those to evolve. What the [indiscernible] endpoints might look like when you might be able to establish initial clinical proof of concept? Thanks.

[Anthony Quinn:]

Josh thanks for the question. So let me start with homocystinuria program. Obviously we presented very exciting data at the end of last year, showing that we have an enzyme lower homocystine levels that lowers homocystine levels in a disease mortal [indiscernible] molecule, improved survival. So in homocystinuria and there's actually a lot information linking homocystine levels and two, good control homocystine levels to control of the disease complications. So that's fairly well established there's no surrogate endpoint and obviously we're going to have to have some discussion with the regulatory authorities. But the evidence is available it's pretty compelling about the importance of controlling homocystine levels. It's a rare disease and we expect basically to go into the patient population which means that we will get that read out of homocystine lowering effects relatively early in the development program. What I really like about these models and the rare disease though, is that the translativeability [ph] of what you see in the animal model to what you're going to see in human is very high, so we actually have a lot of confidence as we move forward with our homocystinuria program. So for cystinuria; cystinuria actually is on the FDA's list of surrogate endpoint so that's actually a great place to start. We've come up - we've got very normal approach, we've got some very compelling data showing by lowering plasma levels of cystine urine levels, we inhibit crystallization, we inhibit stone information and again same time, highly translate the animal model so therefore, we would expect and the observations we've seen in the model high probability of seeing that as we carry over into human and obviously we have given some guidance with our timeline. So for our homocystinuria, we're guiding that we will actually anticipated having our IND filed in the first quarter of 2020 and then for cystinuria, we're guiding the IND in the second half of 2020.

[Josh Schimmer:]

Great. Thanks very much.

[Operator:]

Our next question comes from the line of Matthew Luchini of BMO Capital Markets. Please proceed with your question. Once again Matthew your line is live, please proceed with your question. Double check to see if your line is on mute.

[Unidentified Analyst:]

Hi, this is Steven on for Matthew. Thank you for taking our call. Could you give any color on responses from the SCLC cohort in the Phase 1 trial or maybe some timing on when we might see the data. And then because of the success of patient identification program for ARG1-D, you guys had that the incidents maybe greater than you initially thought, I was wondering if you had any update on the prevalence, you thought, if there was?

[Anthony Quinn:]

Okay, so let's answer the questions in the order that you gave us. So I'm going to hand over to Jim and he'll do the Small Cell Lung Cancer question.

[Jim Wooldridge:]

Yes, thanks for the question. So in the patients for Small Cell Lung Cancer, we did not observe any responses. However we did confirm the safety profile for the rest of the cohort and so we're really pleased that we're able to deliver that study as promised.

[Anthony Quinn:]

And let me come back and talk about the Arginase 1 Deficiency population. So like any rare disease the epidemiology is not particularly well understood and we basically use an assessment that was done, that use end of our data. So it used newborn screening data from some other urea cycle disorders and then they extrapolated the number of Arginase Deficiency patients by considering the ratio of patients that were under follow-up with the urea cycle disorder consortium. We believe that gives us a solid a base case, but it's likely to be on the conservative side and let me just remind you, why we believe it's on the conservative side. Arginase 1 Deficiency is different from other urea cycle disorders. They're actually very prominent neurological manifestation and less frequent hyperammonemic [ph] episodes. What that means is, there's actually fairly high potential that Arginase Deficiency patients mean not get the attention of metabolic physicians, so therefore will be under represented. So that's kind of where the number came from and with that number, we guided to at least 600 patients in the major addressable markets and a good analog is MPS 6 [ph]. But what's really exciting me actually is that, it's hard to find rare disease patients we've already identified more than 170 patients with our efforts substantially confined to largely to the US and Europe. So 170 patients is more than 25% of the population we've guided to. And I know we're good at finding patients and we're continuing to better. But I actually don't believe we're so good that we could have found 25% of the prevalent population. So that's what speaks to give us the confidence that the number we initially guided to is on the conservative side. Does that help?

[Unidentified Analyst:]

Yes, that's great. Thank you so much.

[Operator:]

Our next question comes from the line of Chad Messer of Needham and Company. Please proceed with your question.

[Rajvindra Gill:]

This is Gill on for Chad. Just a quick question, could you remind us the reasoning behind a specific cancer of types in the Basket trial?

[Anthony Quinn:]

Sure, let's do that. So I'm going to ask Jim just to walk you through the logic why we pick these particular genotypes. Jim?

[Jim Wooldridge:]

Yes so thanks for the question, Gill. So as you recall pegzilarginase is highly effective at depleting plasma arginine and some tumors are highly dependent on getting plasma arginine from the extra cellular environment and those cancers are driven by lack of expression of urea cycle enzyme called ASS1, Argininosuccinate 1. And so the selection of our tumors with cutaneous melanoma, uveal melanoma and Small Cell Lung Cancer, is the fact that each of those individual tumor types tends to have very low expression of ASS1 in a significant proportion of patients. As you'll recall from our ESMO publication, not only did we show single agent activity with one partial response in eight stable diseases in the cutaneous and uveal melanoma cohorts but we also saw a signal more of that activity being concentrated in the ASS1 population.

[Rajvindra Gill:]

Thank you very much for the clarification. Could you give any additional color about any discussions going on with PRV for AEB? Thank you.

[Anthony Quinn:]

Could you repeat the question please?

[Rajvindra Gill:]

I was asking about potential for Pediatric Review Voucher, if there's any additional color on it?

[Anthony Quinn:]

That's an important question. Yes, so we basically have Rare Pediatric Disease designation. So the FDA has recognized that we have Rare Pediatric designation. What the implications of that is, is that, once we get approval with this drug then we would be eligible - we are eligible for pediatric voucher, but the pediatric voucher is not given to you until you get approval of your drug.

[Rajvindra Gill:]

All right, thank you guys very much and good luck for the new year.

[Operator:]

[Operator Instructions] our next question comes from the line of Matthew Cross of H.C. Wainwright. Please proceed with your question.

[Matthew Cross:]

Had a couple of quick questions for you. So to start off, you mentioned the completion of the Phase 1b and then moving into Phase 2, so couple of sub questions in this one. First given that the combination has proven pretty tolerable, but response is still pretty limited. How comfortable are you in the FDA with this 0.27 milligram per kilogram per dose and not further escalating to test, still in its both safety and efficacy. And then the second part is, with no observed objective responses but also no surprise safety signals compared to the monotherapy and small cell as Jim just reiterated. Can you kind of recap your thinking on the rationale for moving forward into Phase 2 without stronger signals at this point.

[Anthony Quinn:]

Jim, do you want to take that one?

[Jim Wooldridge:]

Yes, let me start Tony. You can add some extra color, if I missed anything. But I think first of all just looking at our monotherapy Phase 1, obviously we tested three cohorts and as I previously mentioned we did actually report out on monotherapy activity with our uveal melanoma and cutaneous melanoma cohort and as you know Small Cell Lung Cancer is a really rapidly moving disease, it's particularly in the relap setting. And so I think that's really important to keep in mind. When we did our Phase 1b study we didn't actually observed any dose limiting toxicities by protocol defined criteria. However, since our Phase 1 study in the other tumors actually demonstrated significant Arginine depletion over a range of doses. We believe the tolerability would be actually quite a bit better at the 0.27 dose and actually this was both confirmed in the Phase 1 study and now it's what we're pulling through into our Phase 2. So actually we're looking pretty forward to capturing that.

[Anthony Quinn:]

And then just to stepping back, looking strategically, just want to remind people. Especially who maybe new to the story, so when we started off with pegzilarginase we had a modified enhanced enzyme that enhanced Arginase activity. We were looking at in Arginase 1 deficiency and then, there's been interest for sometime about Arginine depletion as an innovative approach for managing cancers. So obviously we're driving forward with pegzilarginase in Arginase 1 Deficiency. We're obviously starting a Phase 3 study, the approval in the rare disease is quick relative to oncology as somebody mentioned earlier. We are eligible for the pediatric voucher and obviously there are other advantage within the orphan designation. And at the same time, we obviously are completing our activities in oncology as Jim said, we have demonstrated single agent activity. We've got compelling pre-clinical data showing that if Arginine depletion actually enhances the effect of various immuno-oncology approaches and we're actually looking at that in small cell cancer at the moment and we'll obviously, when we get that data we will look at that data and think carefully, how best pegzilarginase fits in oncology space. But the good thing is, we're actually driving forward in our rare disease program, so we've got great momentum for our program.

[Matthew Cross:]

Got it. Okay. Appreciate that color from both of you guys, should we expect to see that before combination results within sometime in the near future or in conference?

[Jim Wooldridge:]

Yes, so the combination results we've guided to are having in the first half of next year.

[Matthew Cross:]

Got it. Okay and then pivoting over to Arginase 1 Deficiency. Was curios how much of pricing for Arginase 1 Deficiency as we're looking ahead hopefully completing the PEACE trial in 2020. How much do you think pricing being tied to patient functional outcomes versus Arginase reduction in the PEACE trial given that the FDA has given you the green light geared to set Arginase reduction surrogate [ph] in measuring efficacy here. Just given this, it's been kind of tight rope walk for pricing rare disease drugs at high [indiscernible] levels to be profitable without [indiscernible] any kind of regulatory or political perspective. Trying to get your thinking on that given the allowance the regulators are granting here.

[Anthony Quinn:]

Arginase 1 Deficiency is a devastating disease, the kids are effective with this in early childhood. They kind of look like kids with cerebral palsy in terms of the motor and ability problem they have, but unlike kids with cerebral palsy the neurological complications progress and patients die early. We haven't found many patients over the age of 50 and they end out with very severe irreversible neurological complications and severe intellectual disability. So this is a devastating disease. Second thing is that, it's been known for number of years the importance of plasma Arginine control, if it had been easy to control plasma arginine that it would have been therapy but now - and I think what's very exciting about what we've been able to achieve, is we have - as pegzilarginase is transformative and its ability to control plasma arginine levels. Now the final piece of jigsaw is that, why I'm really excited about. This is a neurological disease, the fact that we've actually within eight weeks of lowering plasma arginine levels. We're actually seeing these very impactful improvements in the patients in terms of the mobility and adaptive behaviour and is very compelling and obviously that's one of the reasons why we're dosing for six months in their pivotal and so that we can actually look more at these clinical benefits that we're already seeing within eight weeks. So the bottom line is and we're confident we're going to see clinical benefits. We've got plasma arginine reductions playing the endpoint. We've actually powered the study to see a 40% difference active and placebo and we're confident that we'll actually have that package. Now just to stay back and remind you, pegvaliase which is approved for phenylketonuria which is obviously a recent drug that's been approved and obviously price, that drug actually only lower phenylalanine levels and in the clinical trial, they actually weren't able to demonstrate any clinical benefit. So it's kind of what - by looking at in the context, but obviously I'm very excited to see the clinical benefits we're seeing already.

[Matthew Cross:]

Agreed. Yes, very much looking forward to seeing how things play out and appreciate that comparison for context. Thanks guys.

[Operator:]

[Operator Instructions] if there are no further questions over the portion of the conference, we will be concluding at this time. this concludes today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful rest of your day.