Eloxx Pharmaceuticals, Inc.
Q1 2018 Earnings Call Transcript

Published: 13 May 2018

[Operator:]

Good afternoon everyone and welcome to Eloxx Pharmaceuticals First Quarter 2018 Earnings Webcast and Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Barbara Ryan, Eloxx Investor Relations Officer. Please begin.

[Barbara Ryan:]

Thank you, Corman. Welcome and thank you for joining us this afternoon for review of Eloxx Pharmaceuticals first quarter 2018 financial results and business update. Joining me this afternoon are Robert Ward, Chairman and Chief Executive Officer of Eloxx, Pedro Huertas, our Chief Medical Officer and Greg Weaver, our Chief Financial Officer. Before we begin, I’d like to remind you that any statements made during this call that are not historical are considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these statements as a result of various important factors including those discussed in the risk factors section in our most recent Annual Report on Form 10-K and 10-Q filed with the Securities and Exchange Commission. Any forward-looking statements represent our views as of today May 10, 2018 only. You can find a replay of this call on the company’s website at www.eloxxpharma.com immediately following the call. You can find the dial-in information for the replay in today’s press release, as well as on the company’s website. It is now my great pleasure to turn the call over to Robert Ward, Chairman and Chief Executive Officer of Eloxx Pharmaceuticals.

[Bob Ward:]

Thank you, Barbara and welcome everyone to Eloxx first quarter 2018 earnings webcast and conference call. We’re very pleased to have the opportunity to update you on the progress we’re making at Eloxx Pharmaceuticals and our very promising development programs for ELX-02 in the orphan diseases of Cystic Fibrosis and Cystinosis. 2018 has already been an exciting year for Eloxx. We ended the first quarter with $18.3 million in cash and on April 25, we announced the successful public offering that resulted in net proceeds of $53.4 million. The following day we began trading on the NASDAQ under our symbol ELOX. This funding provides a strong financial basis for advancing our clinical programs and reaching topline data in cystic fibrosis and cystinosis. Today, we’re pleased to provide an update that our clinical trials application for cystic fibrosis will be submitted in Belgium this month with our investigational new drug application for cystinosis being submitted to the FDA shortly thereafter. We have moved these submissions forward by one month from our original guidance. Also we’re pleased to share our progress in the Phase 1b multiple ascending dose trials where dosing of the third cohort is now underway. We recently disclosed the FDA orphan designation for ELX-02 in cystinosis and in a moment I will introduce our Chief Medical Officer, Dr. Pedro Huertas to provide an update of our clinical progress. Consistent with our guidance to bring forward another clinical candidate and to evaluate additional technologies, I’m also pleased to disclose that Eloxx and Ionis have entered into a technical evaluation agreement to explore potential combination for antisense technology and eukaryotic ribosomal selective glycosides for use of rare or ultrarare genetic disorders. Any additional disclosure will be by mutual consent in future. To support our ongoing clinical and scientific activities, Eloxx Pharmaceuticals is pleased to announce the formation of our scientific advisory board. The inaugural members of the Eloxx Scientific Advisory Board include Professor, Timor Baasov; [indiscernible] Irving and Jeanette Benveniste Chair in Life Sciences and serves as the Professor of Chemistry at the Schulich Faculty of Chemistry at the Technion Institute of Technology. Dr. Baasov is the recipient of the 2016 Israel Chemical Society Prize for Technological Innovation for developing new chemicals as therapeutic agents for the treatment of genetic diseases caused by nonsense mutations. Eloxx’s technology originated from the Technion and results from research led by Professor Baasov. Also joining the SAB are Dr. David Bedwell, Professor and Chairman with James C. and Elizabeth T. Lee Endowed Chair of Biochemistry, Department of Biochemistry & Molecular Genetics at the University of Alabama. Dr. Bedwell currently serves as an Associate Director of the Cystic Fibrosis Research Center and Co-Director of the UAB Structural Biology Program. Dr. Bedwell’s lab studies the mechanistic details of translation termination and Nonsense-Mediated Decay or NMD. He was elected a fellow of the American Academy of Microbiology in 2011. Dr. Rachel Green is the Bloomberg Distinguished Professor of Molecular Biology and Genetics in the Howard Hughes Medical Institute at Johns Hopkins University. Dr. Green is focused on diverse aspects of translation and its regulation in bacteria, yeast, and higher eukaryotic systems using primarily biochemistry and high throughput sequencing approaches. Dr. Green’s recent work on messenger RNA surveillance mechanisms in yeast has synergized with interests in ribosome homeostasis and translational control in various tissue types. She is an elected fellow of the National Academy of Sciences and the National Academy of Medicine. Dr. Sudhir Kumar is the Laurel H. Carnel Professor and the founding Director of the Institute of Genomics and Evolutionary Medicine, Department of Biology, College of Science and Technology, at Temple University. Dr. Kumar was elected as the Fellow of the American Association for the Advancement of Science due to his exemplary contributions in evolutionary bioinformatics, particularly in developing high-impact comparative analysis software for biologists and in illuminating the evolutionary dynamics of mutations and species through comparative genomics. We’re also pleased that Dr. Lynne Maquat who is the J. Lowell Orbison Endowed Chair, Professor of Biochemistry & Biophysics in the School of Medicine and Dentistry, Director of the Center for RNA Biology, Chair of Graduate Women in Science at the University of Rochester is joining the board. Professor Maquat discovered nonsense mediated decay or NMD in 1981 and subsequently while elucidating the mechanism of NMD, the exon-junction complex or EJC and how the EJC marks messenger RNAs for a quality-control pioneer round of protein synthesis. She also discovered Staufen-mediated messenger RNA decay, which mechanistically competes with NMD and, by so doing, new roles for short interspersed elements and long non-coding RNAs. Her current research include microRNA decay and functional links between transcription factors and RNA-binding proteins. She is a member of the American Academy of Arts & Sciences, the National Academy of Sciences and the National Academy of Medicines. We believe these luminaries bring to us important insights in advancing the basic science, as well as potential clinical applications for both readthrough and Nonsense Mediated Decay. We anticipate announcing the appointment of additional members to the SAB this year. We’re extremely gratified to attract these caliber leading experts to advise our board and company as we advance the development of our Library of Molecules across multiple rare diseases linked to nonsense mutations. As the measure of our progress, we’re very pleased to have had two abstracts accepted for oral presentations at the 41st European Cystic Fibrosis Conference taking place this June 6 through 9 in Belgrade, Serbia. These two oral presentations include a late breaking abstract on the result of - in the Cystic Fibrosis Organoids and will be delivered by Dr. Pedro Huertas. I would like to turn the call over to Dr. Huertas for an overview of our clinical and scientific progress.

[Pedro Huertas:]

Thank you, Bob and good afternoon everyone. Today, I would like to update you on the status of our Phase 1 programs and our leading programs in cystic fibrosis and cystinosis. As an introduction, I would like to remind all of us that we have performed a comprehensive series of pre-clinical studies that fulfilled the ICH M3(R2) guidelines and have carried extensive in-vitro and in-vivo studies in model systems of cystic fibrosis and cystinosis. These studies have formed the basis for our clinical studies in humans. As we have shared with you previously, we have completed a Phase 1A single ascending dose study where 60 normal subjects received single doses of ELX-02 or placebo even subcutaneously. The study is complete and closed. Aside from minor injection site reaction, ELX-02 was generally well tolerated and we did not observe any toxicity associated with the renal or the auditory - systems. Today we reported that we have completed the second and are in the midst of dosing the third out of five cohorts in our Phase 1b multiple ascending dose study where normal objects are receiving multiple doses of Eloxx, ELX-02 subcutaneously twice weekly. Today ELX-02 has also been generally well tolerated and we have not seen any toxicity associated with a kidney or and for the ear. Both studies, the Phase 1a and Phase 1b will provide a thorough perspective on the safety, tolerability and pharmacokinetics of ELX-02 and enable our Phase 2 studies. We are pleased that our cystinosis and cystic fibrosis pre clinical results indicate that the emerging profile of ELX-02 supports our development program and enhance the potential to become an important new medicine for these diseases. In cystic fibrosis we will be presenting our latest data using human bronchial epithelial cells and Organoids at the European Cystic Fibrosis Society meeting in early June in Belgrade, Serbia. We anticipate filing a CTA this month with a federal agency for medicines and health products in Belgium for a Phase 2 clinical study in patients with cystic fibrosis carrying nonsense mutations. As Bob mentioned earlier, this submission is one month earlier than our previous guidance. The protocol for the plan Phase 2 study has received the high priority review from the clinical trial network of the European Cystic Fibrosis Society. This Phase 2 study will involve a small cohort of cystic fibrosis patients carrying at least one only all of the most prevalent nonsense CFTR mutation G542X and will be exploring multiple doses in order to identify an optimal one to carry into further development. To identify that dose we will be measuring sweat chloride and nasal potential difference which are traditional biomarkers in cystic fibrosis. We will also be measuring FEV1 Lung Clearance Index and measures of pancreatic, gastrointestinal and overall efficacy of exploratory end points. We plan to take the optimal ELX-02 dose into pivotal trials measuring physiological and clinical efficacy end points. In cystinosis, Dr. Paul Goodyear from McGill University presented our data at the World Symposium in Lysosome Storage Diseases in San Diego in February of 2018. The data in cystinosis shows that ELX-02 decreases the 15 contents in cellular and animal model of cystinosis. And as with cystic fibrosis, we plan to initiate a Phase 2 study involving a small cohort of cystinosis patients carrying at least one of the most prevalent most nonsense cystinosis mutation W138X. The study will assess the dose dependent effect of ELX-02 in cystine levels in white blood cells. This biomarker has been used previously in the development of Cystagon and Procysbi. Cystine levels in a white cells in form on the total cystine burden in the body and decrease in this levels may be considered a surrogate marker likely to predict clinical benefit. As we assess the impact of ELX-02 on cystine levels in this small population we believe that we will be in a better position to inform pre-pivotal studies. We held at pre IND meeting in December of 2017 and we anticipate filing an IND with the FDA shortly. We remain on schedule of our first patients in our Phase 2 clinical studies for ELX-02 and Cystic Fibrosis and Cystinosis by the end of 2018. We will update you on our progress as we move through the year. And now I would like to turn the call back to Bob.

[Bob Ward:]

Thank you, Pedro. Completing our recent offering and up listing to NASDAQ has enabled Eloxx to focus on advancing our pipeline expanding our capabilities. I now like to hand Greg Weaver, our Chief Financial Officer to discuss our first quarter financial results and provide you with an update on our cash position.

[Greg Weaver:]

Thank you very much Bob. As of March 31, 2018, we had cash and cash equivalents of $18.3 million. As Bob mentioned on April 25, we announced the successful oversubscribed underwritten public offering of common stock raising net proceeds of $53.4 million and were uplifted to the NASDAQ global market the next day. We expect that our current cash will be sufficient to fund our operations to 2020 and to top line data for the two Phase 2 trials for our lead and investigation product ELX-02 in Cystic Fibrosis and Cystinosis both of which we plan to initiate in the fourth quarter of this year. For the three months ended March 31, 2018 the company reported a net loss of $8.6 million which includes a onetime merger related charge of $2.1 million for our operating loss of $6.5 million or $0.23 per share. This operating loss includes $700,000 of noncash expenses related to stock based compensation and therefore our use of cash in the first quarter 2018 was $5.75 million or $0.21 of share. The company incurred a net loss for the three months ended March 31, 2017 of $2.7 million and in addition the company reported a net loss tax carryforward of $77 million. Our research and development expenses were $4 million for the three months ended March 31, 2018 as compared to $2.4 million in the same period one year ago, an increase of $1.6 million due to increased clinical development costs in related fees and salaries. Our G&A expenses were $2.5 million for the three months ended March 31 compared to 300,000 for the same period one year ago, an increase of $2.2 million. The increase in G&A expenses were primarily related to an increase in our headcount and related salaries, other personnel and facility related costs and the noncash stock compensation expense that I referred to a moment ago. We expect our R&D costs will increase in 2018 to support our clinical activities for ELX-02 in Cystic Fibrosis and Cystinosis. We also expect our G&A expenses to increase as we build our organization and capabilities and add additional headcount. The current company headcount stands at 20 FTEs. And for your modeling purposes please keep in mind our pro forma shares outstanding now post a public offering as 33.4 million shares. In summary we are what we are well funded to 2020 and to topline data for our two Phase 2 studies in the ELX-02 in Cystic Fibrosis and Cystinosis which we plan to initiate. And now I'll turn the call back over to Bob.

[Bob Ward:]

Thank you, Greg. In summary, we're delighted with the emerging profile of ELX-02 and encouraged by the substantial activity observed in both the homozygous and the heterozygous Cystic Fibrosis Organoids. We believe these data are potentially predictive of clinical potential and have raised our expectations for probability success. This growing enthusiasm of the Cystic Fibrosis community around the data will generate Organoids and we look forward to presenting these to the scientific community at the European Cystic Fibrosis meeting in June. We believe that Eloxx has a very promising future and we look forward to submitting our CTA in Belgium for Cystic Fibrosis this month and our IND in the U.S. for Cystinosis shortly thereafter. Pending regulatory clearance, we expect to initiate Phase 2 trials in each of these indications by the end of the year. We thank you for joining us on our first quarter earnings call and we look forward to continuing to update you on our progress through year. Thank you very much. Corman, you may now open up the call for questions.

[Operator:]

[Operator Instructions] And our first question is from Joel Beatty with Citi.

[Joel Beatty:]

The first one is regarding the Phase 2 trials that are planned in e-filing those CTA and IND for - could you discuss what the getting factors are those Phase 2 trials. It is just a matter of getting those filings approved or are there other things that you're looking to complete in the mean time?

[Bob Ward:]

With our IND and CTA they both have a review period after which if there are no comments by the regulators then the IND and CTA are open respectively. In most IRBs, it's required that you have an open IND or CTA before they begin the IRB review process of the protocol and after that there's just a whole series of very standard study start up signs where we initiate the site training the staff on the protocol and make sure that we have all of the regulatory oversight in place for proper trial execution. So we do think that the guidance we've put forward gives us the ability to feel high degree of confidence of being able to meet our guidance on getting those trials started.

[Joel Beatty:]

And then another question, on the Phase 2 trials could you discuss what the key data plans that you hope to evaluate are that will help - you make your decision on whether to advance into a latest stage trial?

[Bob Ward:]

We’re fortunate that for both Cystic Fibrosis and Cystinosis that are previously approved products that really kind of the established the development path. KALYDECO If you recall when it was originally developed focused in Phase 2 on a single mutation as the core of the development program where in Phase 2 sweat chloride, nasal potential difference are measured and KALYDECO demonstrated that after only two weeks there was improvements on FEV1 which of course became the primary endpoint for Phase 3. So, Dr. Huertas I think you have the opportunity and your visits with the key opinion leaders both at the European Cystic Fibrosis foundation and other Cystic Fibrosis leadership where they talked about what were the levels of FEV1 improvement that represented an approvable product one with substantial clinical interest and that tiered out what the expectations would be around that Pedro, could you share those with us?

[Pedro Huertas:]

Certainly Bob. So in our discussions with the opinion leaders as well as members of the Cystic Fibrosis community, we understand that there is a consensus that changes in FEV1 of around 3% to 5% are considered very clinically meaningful and that type of change it's potentially a registration type of change, a change of 10% or they are about as considered an extraordinary change. So based on our preliminary data that we will be disclosing in Serbia, we believe that we have a very strong belief that will be able to meet those expectations for changes in pulmonary function.

[Joel Beatty:]

So Pedro I think what you're referring is that the HUB has published data showing that the FIS response in Organoids they're still correlated with what was observed FEV1 response in clinical trials and that the Organoids FIS response has been used in Europe as well to reimburse products and mutations where they are not yet approved registrationally. Could you share us a little bit about that hit program and what would be potentially the future for Organoid?

[Pedro Huertas:]

That's right. So Johanna Dekkers in 2016 published in Science Translational Medicine a correlation between the FIF which stands for Forskolin-Induced Swelling in Organoids and its correlation with FEV1 change and that correlation is very high with the co-efficient of 0.84, 0.87. So at the consequence of this correlation, they will say - an anticipation that any change in Organoids maybe likely to predict clinical benefit. And on this basis an initiative exists in Europe at present called HCF2020 whereby various member states, as well as sites will be studying the rare and ultra rate mutations in the CFTR with the expectation that this phase can be carried into clinical trials and we anticipate potentially participating in this program. So in the future and for other mutations we will avail ourselves of the opportunity of participation in this program.

[Bob Ward:]

So Joel in cystic fibrosis, we believe that the Phase 2 endpoints of sweat chloride and nasal potential difference are very important biomarkers. We're showing a positive response as part of the decision to move into pivotal trials. The data from Organoids give us confidence about de-risking the ability to demonstrate FEV1 but of course that would be the primary endpoint in Phase 3. So in Phase 2 we'll be looking for how long to achieve an FEV1 response and what’s the size of the potential. Remember in the G542X homozygous patient population that Pedro mentioned, those are group of patients where today there are no approved drugs to treat the underlying nonsense mutations. And in the heterozygous patient populations where G542X may be sound in combination with other mutations on the other level, there's been a number of studies with different programs but not yet today a truly accepted standard of care. So we think there's a potential to achieve a step up in medical benefit in both the heterozygous and homozygous populations. Now on Cystinosis, it's really Procysbi that was originally developed by Raptor that set the standard around the white blood cell cysteine levels and Pedro - Dr. Goodyer mentioned that in the animal model we showed a 30% reduction in the end of the road. I think Joel was curious when we think of white blood cell cysteine reduction in the Phase 2 trial, what would we be looking for as the signal to move to the pivotal.

[Pedro Huertas:]

So we are fortunate that in cystinosis we do have a biomarker which is likely to predict clinical benefit and that marker is white blood cell cystine levels and this marker informs on the total body burden of cystine which is what accumulate in subjects with cystinosis. So we anticipate that as we treat patients with ELX-02 we’ll be measuring that particular biomarker and we’re very encouraged by the clinical results were by Dr. Goodyear showed it dose dependent reduction in cystine levels in cellular systems from patients with cystinosis as well as a mark decrease with a very small dose in animals, animal models.

[Bob Ward:]

And so the white blood cell cystine levels have reduction of 10% is considered clinically important and then its reduction becomes progressively greater than the role in treating cystinosis would become more pronounced. Is that correct? Is that helpful, Joe that we answered your questions?

[Joel Beatty:]

I appreciate the details and then maybe one last follow-up question, in regards to your cash runway, could you discuss how far that gets you in regards to the datapoints that you just discussed?

[Bob Ward:]

Yes, as we talked about topline data in Phase 2, we’re currently funded to reach a topline data and to 20

[Operator:]

[Operator Instructions] And our next question is from Ted Tenthoff with Piper Jaffray.

[Ted Tenthoff:]

Thank you very much for the detail in the presentation, prepared remarks, as well as for questions. I want to ask a little bit more with respect to the ongoing discovery efforts and really where that’s taking you both in terms of novel compounds but also other diseases that you may be exploring?

[Bob Ward:]

One of the reasons why we brought together the Scientific Advisory Board is they have a blend of experience both on the bio-informatics side, evaluating nonsense mutations or mutational patterns across rare disease, expertise in nonsense mediated decay, and a depth of scientific knowledge on readthrough and what enables ribosome to be able to produce the full length protein in the cases of premature stop codon. We think some areas of fields are still rapidly moving and there is a potential for additional technologies or approaches to really open the door to disease states that perhaps in the past have been thought to be beyond the reach of technology. So we currently courtesy of the pioneering mark of Dr. Timor Baasov have a library of molecules all of which are eukaryotic with selective ribosomal selective glycosides, so these are novel compounds that interact with the ribosome and has shown activity on it. So we currently internal screening program, as well as genetic evaluation, a work that’s currently ongoing that will enable us to target additional disease states that we think would be a minimal, to read through therapeutic approach and also it’s a select compounds out of our library that we move forward in development. This year we intend to nominate one of our compounds to take forward into a new rare or ultrarare disease state.

[Ted Tenthoff:]

And how do you foresee partnering kind of playing a role on the cytogen vision finding disease areas were in departments or even do sort of discovery partnerships or is this really the goal to keep in advance your programs internally?

[Bob Ward:]

Well, I think Ted we believe that the best breakthroughs in medicine have come when combinations of people or talents or experience have come together to do something different. So whether it’s complementary technology or unique insights or access to different markets or access to different patient population, our focus is how to optimize the development of the compounds. So we are for example through the HIT consortium that Pedro mentioned earlier, the consortium will select three companies that would participate in the HIT Consortium and within the consortium, it’s expected that the work will focus on individual agents or therapeutics being applied to patients with defined rare or ultra rare type but it’s the type of collaboration that opens the opportunities for companies to work together and explore combinations and also because the regulators are involved, HIT has the potential to expand the regulatory value on organoid data. I believe one of the discussions ongoing scientific community is for mutations where the patient population is small, if the organoid data is robust, could that be the basis of drug approval as opposed to traditional clinical trial. Now today of course that’s not the standard but we do think that the field is moving rapidly and that’s why we work with the HUB, the HUB is a non-profit associated Utah University. They’ve really developed the technology independent of any pharma company and today most of the companies that work in cystic fibrosis collaborate with the HUB because their organoids are viewed as kind of the goal standard. We think there is a number of promising academic labs as well that are doing cutting edge research to understand new ways to address whether it’s cystinosis or cystic fibrosis and so at the same time we’re looking to make sure that we have an active engagement with academic investigators as well.

[Operator:]

Thank you. And I don’t see any other questions in the queue. I would like to turn the call back to Robert Ward for his final remarks.

[Bob Ward:]

Thank you, Corman. We will look forward to engaging with everyone during the June Cystic Fibrosis Meeting, I know that many interested parties will not be travelling, so we'll look for an opportunity to engage by webcast or through a cable discussion around that meeting. And then we look forward to meeting everyone again quarter from now on our next quarterly earnings call. So thank you very much and that would end our call for today Corman.

[Operator:]

Thank you, ladies and gentlemen for participating in today's conference. This concludes the program and you may all disconnect. Have a wonderful day.