ERYTECH Pharma S.A.
Q2 2020 Earnings Call Transcript

Published: 22 Sep 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the ERYTECH Business Update and Financial Highlights for the Second Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to hand the conference call over to your speaker today, Gil Beyen, Chief Executive Officer. Please go ahead, sir.

[Gil Beyen:]

Thank you. Good afternoon, good morning [Foreign Language]. Hoping you're all well and safe and thanks for joining us for our earnings call for the second quarter of 2020 and the first half year. We announced our business and financial update yesterday evening. You should be able to access the press release and our earnings presentation on the Investors page of our website under webcast and link to slide show or via the link that was provided in the press release. With me on this call in three different locations this time are Dr. Iman El-Hariry, our Chief Medical Officer; and Eric Soyer, our Chief Financial and Chief Operating Officer. Turning to Page 2 and before starting, drawing your attention to the disclaimer on Slide 2 and you will see, if you read it, COVID-19 is still there. We are overall succeeding well in minimizing its impacts on our operations, but the pandemic continues obviously to have an impact on our trials as you will see in the update. Turning to Slide 3, agenda. So, it's the usual quarterly routine, I will start with a short business update, focusing on the key highlights for the second quarter and year-to-date. Eric will then present the financial results for the first half of the year, and summarize the major news flow and expected milestones for the next 12 months. After which, the three of us will be available to respond to your questions. Slide 4, before starting the update for completeness, a quick reminder on our company, you know it, leader in red blood cells, especially focused on cancer and cancer metabolism. Our focus is on targeting cancer cells’ altered amino acid metabolism. With this we are in really late stage Phase 3 in pancreatic cancer, Phase 2 in triple negative breast cancer, and Phase 2 in acute lymphoblastic leukemia. And as you know, we have our own production sites, one in Europe, in Lyon – one for Europe, in Lyon and one for U.S. in Princeton. We are listed on Euronext and on NASDAQ, so everything we do is really on the two continents. The graph on the right side just remained us it's the survival curve of our Phase 2 study in second-line pancreatic cancer, which with a 40% reduction in risk of death rate is to our knowledge still the strongest result ever seen in a large clinical trial in second-line pancreatic cancer. And it's this Phase 2 that mostly enabled us to transition to our pivotal Phase 3, TRYbeCA-1, which will again be the main focus of this update. And the highlights of the updates are on Slide 5. It's not only TRYbeCA-1, I'll start with TRYbeCA-1, but there is also an important update on our NOPHO’s ISDs, a NOPHO’s sponsored trial in second-line ALL and quite some updates on the financials, obviously, second half financials, but also the cash and financing instruments that we put in place on which Eric will give you the feedback. This allows me to start with the business update. On Slide 6, you see and it's a reminder, the design of the Phase 3 study the TRYbeCA-1 study. It is as you know, pivotal randomized Phase 3 trial where we compare the standard of care chemotherapy, which can be gemcitabine with Abraxane or a combination of 5FU, leucovorin and oxaliplatin FOLFIRI. And it’s a trial with about 500 patients. It's with a primary end-points in overall survival. So, you know, the trial was launched end of 2018 is now running in more than 85 clinical sites in Europe, 11 countries in Europe, and in the United States with a target enrollment of approximately 500 patients. Two PI’s, Pascal Hammel, on the left – the picture on the left is the PI for Europe; and Dr. Manuel Hidalgo, the PI for the U.S. And I take the occasion to make a little publicity and invite you to our KOL call. With Dr. Hidalgo, it will take place on September 29 at 10 a.m. Eastern Time 4 p.m. in continental Europe. And Dr. Hidalgo will there discuss the treatment landscape in pancreatic cancer focusing on the challenges and opportunities for new treatments, specifically in second-line pancreatic cancer. And there's been a press release with [already] and linked to this site or to this KOL event. So, TRYbeCA-1, moving to Slide 7, the key highlights for the year-to-date in March in first quarter, but we – for reminders, we had our third independent safety review by our IDMC. This time, it was on third, the first 320 patients in the trial. And again, it was a confirmation of the safety profile of aerial space that IDMC recommended to continue the trial as planned without amendments. Then in April, we got the fast track designation granted by the FDA, we're very pleased because it's obviously a clear confirmation of the unmet medical need in second-line pancreatic cancer and of the interest in the results that we had shown so far in the Phase 2 study. And then more recently, our trial passed the 90% bar, 90% enrollment bar, we have now more than 450 of the approximately 500 patients randomized, and we’ll contract for complete enrollment in the fourth quarter. Over the past months, since the COVID-19 outbreak, our clinical teams and investigators have made tremendous efforts to ensure the continuity of the trail. [Indiscernible] driving obviously the safety of the patients, the staff, and the employees. You know, we experienced some slowdown in our enrollment, especially the March, April somewhat in May, but it picked up again between pre-COVID levels as of June. And we mentioned last time also the events are taking longer than we originally – the events that will trigger the interim analysis are taking a bit longer than we originally expected, but now we can confirm based on a better view on the events that the [two-thirds of the] events that will trigger the interim analysis are expected to accrue before the end of the year. The reporting where we originally said, around year-end, we didn't know whether the interim analysis will come before or after the end of the year. Now, given that the – so what we still see, although effect overall operational, the COVID has no impact or little impact on the [moment], etcetera, where you see the most of the impact is on data cleaning. So, we've been twice – now guided more towards Q1, hopefully early Q1 for the interim analysis. A quick reminder on the interim analysis, it is an – interim analysis for superiority only, no futility analysis. So, two possible outcomes. The IDMC, and it's important to make this clear. So, it's – we are totally blinded due to the study. It is the independent data monitoring committee that will look at the data. So far the two-thirds of the events, and they can then or conclude that the trial already met its plans primary overall survival endpoint, and recommend to stop the trials, complete the trial, or they can implement to continue the trail as planned until the final analysis and this was as before expected in the second half of 2021. So, it's an error in the slide – it’s second half of 2021. So that's about the Phase 3 in second-line pancreatic cancer, and gaining in importance and moving now to Slide 8 is the work we're doing in ALL. In fact, it's not us doing it, it's the NOPHO, the Nordic Society of Pediatric Hematology and Oncology. We're running this investigator sponsored trial. Obviously, we do reproduce the batches and we provide all the support that we can. This is a trial running in 22 clinical sites in the Nordic and Baltic countries of Europe with primary endpoint, pharmacokinetics and safety. This trial we announced in June reached its target enrollment, in fact [it’s launched] target moment originally was 30 patients, it was expanded to 50, and finally we completed, there was some over enrollment and we completed and concluded the enrollment that they completed at 55 patients. The NOPHO has provided some preliminary findings and we're very encouraged by them. So, because they suggest that aerial space achieved its target level and duration of asparaginase activity as primary endpoint associated with acceptable – associated with the acceptable safety profile. So, now it's waiting for the final results. We expect them before year-end and it’s important because we know this is an high unmet medical need. Patients who develop allergy to pegylated asparaginase has very little treatment options left. There is only Erwinase, and Erwinase is experiencing still and since a long time supply shortages. So the need for a second asparaginase in this setting is obvious. The FDA confirmed this in an initial meeting we had with them. So, now based on what we will see in the final results, we will plan to go further with the FDA and discuss the potential path to a BLA in second-line BLA. So, for the NOPHO-trial, on the two other clinical trials, it's like nine, in fact for completeness there is not much to single here. It's more because there's nothing new here the TRYbeCA-2 trial in triple negative breast cancer continues to be enrolling in 17 sites in three countries. The target enrollment is 64 patients. The enrollment we mentioned last time is still slower than we hoped and we are [assessing patients] to accelerate this enrollment if you're still being able to report results in 2021, most likely the end of 2021. And then the Phase 1 ISD in first-line pancreatic cancer. This is a trial where aerial space, the safety of aerial space will be evaluated in combination with FOLFIRINOX, treatment regimen that is gaining increasing grant in first-line treatments in pancreatic cancer. And so, Georgetown University will be sponsoring this trial. They obtained the IND to get started. All the paper work is ready and so now we can confirm that we expect the trial to start rolling, we said in the second half of 2020. So, it will become the fourth quarter of 2020. With this, I conclude the business update. And I now hand over to Eric to provide an update on the financial results, first half 2020 and on the recent financing activities and cash predictions. Eric, all yours.

[Eric Soyer:]

Thank you. Thank you, Gil. Good morning everyone and [Foreign Language]. We’re now reviewing the financial highlights for the first half of this year. We are on Slide 10 of the slide deck. And we are starting with P&L information. The net loss for the first half of this year 2020 was £35 million. That's that was up £5.7 million or 19% year-over-year. And with – this is due to a 5.1 million increase in operating loss and the 0.6 million decrease in financial income. The increase in operating loss 5.1 million was attributable to a 6.1 million increase in pre-clinical and clinical development expenses. A £2.1 million decrease in G&A of which 2.3 million was related to the end of manufacturing capacity expenses, which were mostly incurred last year 2019 and the 1.1 million decrease in income, of which 0.9 million consisted in the upfront payments from the June 2019 last year license agreement with SQZ Biotechnologies, which obviously did not recur this year in 2020. So, those were the key highlights for the P&L information. Now moving on to Slide 11 for comments on cash. And we're starting with a major cash position. As of June 30 this year, ERYTECH had cash and cash equivalents totaling £45.4 million, which is approximately $51 million. And that compared with 73.2 million at the end of December 2019 and 58.6 million at the end of Q1 this year. So that means we had a 27.7 million decrease in cash position during the first six months of 2020, which were consisting of 14.6 million in the first quarter of this year and 13.1 million in the second quarter. And that was the result of the 28 million net cash utilization, which was mostly comprised of 29.2 million naturalization in operating activities, 1.1 million used for investing activities, and 2.2 million generated in financing activities. In the period also, we had the appreciation of the U.S. dollar against the Euro, which led to a 0.4 million favorable currency exchange impact. Those were the highlights on the cash flow for the first six months of this year, and now a word on our most recent financing initiatives. And we’re now on Slide number 12 of this presentation. First, I'd like to recall that we signed an agreement in June this year with Alpha Blue Ocean, ABO; and European High Growth Opportunities Securitization Fund. And that was for the issuance of a zero coupon convertible notes with share warrants attached whereby the Investors committed to subscribe for up to a maximum of £60 million in the event of conversion of all the notes. This is currently subject to regulatory limits of 20% dilution. And therefore, and obviously, depending on market conditions, we may not be able to use it up for the maximum of 16 million, unless we seek further authorization. To date, the company has called two trenches of 3 million each. One in July and the other one in August, and therefore these draw downs are not yet reflected in the company's cash position at the end of June. Second, and today and this is new. ERYTECH has also announced the implementation of an At The Market or ATM program, which will allow us at ERYTECH’s discretion to issue and sell ordinary shares in the form of ADSs, American Depositary Shares on the NASDAQ markets through its sales agent, Cowen and Company. That will be sales to eligible investors as a price equal or near to the prevailing market price on NASDAQ, keeping in mind that the issuance of new shares will also be subject to the same 20% dilution limits as for the ABO convertible notes. Please note that a new shelf registration statement on Form F-3 was filed with the SEC yesterday, which is nearly a rollover of the shelf registration we already filed last year and that will cover this ATM program. Of course, the ATM program can only be used once the shelf registration statement is declared effective by the SEC. And thirdly, the impact on our cash horizon. This new ATM facility together with the ABO convertible notes is complementing or financing solutions and further extending of cash horizon, we believe that these new financing instruments altogether [will know] external cash horizon to the end of the third quarter of 2021, which is beyond the expected upcoming data results in ALL, the Phase 2 NOPHO-trial and in second-line pancreatic cancer with the interim analysis for superiority. This one way projection is of course, again, taking into account the 20% regulatory dilution limit unless we are again further authorized to use these instruments beyond this current limits. That was the summary of our most recent financing initiatives. I am now turning to Slide 13 of this presentation for a quick wrap-up of the upcoming news flows and key milestones. Starting first with the TRYbeCA-1 Phase 3 study, with more than 90% patients of the trial, we expect to be able to complete enrollments in this study in the coming month. Around the same time, and before the end of the year, we expect the full results of the Phase 2 study in second-line ALL, acute lymphoblastic leukemia. We expect this will be reported before the end of the year. Again, this study, which we call NOPHO is an investigator sponsored trial and is conducted in the Nordic and Baltic countries of Europe. You certainly remember that we provided an interim update on this trial last June and the final results should now be expected for the end of the year, but again, keeping in mind that this is an investigator led trial. So, which is to say that, we're not fully in charge of the timeline here. Next is the initiation of the Phase 1 study in first-line metastatic pancreatic cancer. This will also be an investigator sponsored trial in the U.S., with the Georgetown Lombardi Cancer Center, and we expect to start patient enrollment also before the end of this year. And finally, but certainly very importantly, the company milestone is the interim analysis for superiority in the TRYbeCA-1 study, the Phase 3 clinical trial in second-line metastatic pancreatic cancer. As explained earlier by Gil, we now expect this interim readout in the first quarter of 2021 with, again, two possible outcomes either we can conclude early for superiority if the primary survival endpoint is already met with only two-thirds of the events or we continue towards the final analysis, which is expected in the second half of 2021. With that, I would like to thank you already for your attention and we will now open the call for any questions you may have. Again, I would like to remind any of you who would like to ask questions in French that you are, of course, very welcome to do so. [Foreign Language] Operator [indiscernible] this is over to you.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from Fred Gomez with Pharmium Securities. Your line is now open.

[Fred Gomez:]

Yes, thank you for taking my question. I have a few. The first on TRYbeCA-1 in pancreatic cancer, we are now approaching the completion of the recruitment. Can you tell us – can you give us an update about the geographic breakdown between the U.S. versus Europe communications for each zone? And also what you see for the interim analysis? And do you expect to have more patients treated with the combination just I mean [indiscernible] how it’s going to play? And do you know exactly how many events you have now? Because we expect the interim to come shortly, but it seems that you don't have, at this stage, the total number of events requested, so how many events are missing now? The second question is more on the regulatory side. Of course, the U.S. is the primary [efficacy endpoint] but it's likely that [indiscernible] generated in the Phase 3. You mentioned that there is a stratification by chemo regimen, can we expect maybe if you miss the primary to notify maybe a subset of patients that's responded with a better [OS] and also maybe [PSS], so are you going to play with the regulatory discussion in the future? And the last one is for the Phase 2 in leukemia; can we expect something at [ASH] this year? Thank you very much.

[Gil Beyen:]

Thank you, Frederick. I think these are all perfect questions for Iman. Iman, can…

[Iman El-Hariry:]

Okay.

[Gil Beyen:]

Can you take them?

[Iman El-Hariry:]

Yes, sure. Good afternoon, Frederick. Hope you can hear me well. So, on your first question around the geographic breakdown, I [think, if mute the line please]. So, you know, this is [indiscernible] trial. The study started in Europe long before it started in United States. We expect that the majority of the patients would come from Europe and we expect up to maybe between 5% to 10% or a little more will come from the U.S. region. So, this is the geographical breakdown. And just a reminder, we are not stratifying [indiscernible] in the trial, so just as FYI. In terms of the split of the backbone chemotherapy in Abraxane versus Irinotecan based chemo, we – since France is the highest enrolling country in the trial, we have more regime of vaccine as opposed to Irinotecan. But overall, given the other European countries, the percentage is – I don't have the most recent split, but our expectation it would be in the range of maybe [60

[Fred Gomez:]

Yes, thank you very much. Thank you.

[Operator:]

Thank you. Our next question comes from Reni Benjamin with JMP Securities. Your line is now open.

[Justin Walsh:]

Hi, this is Justin Walsh on for Reni. Assuming that TRYbeCA-1 succeeds and aerospace is approved in second-line pancreatic cancer, how quickly do you guys think you'd be able to ramp up to meet the potential demand? And then related to that, is the Leon facility sufficient to supply Europe and the Princeton facility sufficient to supply the U.S.? I'm just sort of thinking in the context of a COVID world where cross Atlantic transport of things might be more complicated?

[Gil Beyen:]

Hi, Justin. Thank you, I'll answer this. So, yes, indeed, it's a lot of work on going and the companies are planning for success. It is true that our – and independent of COVID, so we are now producing in U.S. for U.S. and in Europe for Europe. Princeton is our first facility in U.S. It's been designed to be – to meet the clinical demand, but also early commercial. And the same for the Leon facility, clinical and early commercial. I anticipate that we can cover the first year, year-and-a-half of launch from these facilities that you can imagine as soon as we see positive data appearing that we will have a lot of efforts on going on design and setting up the next facility in the U.S., most likely one on the West Coast just to cover geographic lead because there is a logistics component, non-negligible in this product, so and in Europe, most likely more towards the north of Europe for our second facility. So, the teams are currently preparing the readiness for this sort of site selection or at least location selection. And then, indeed, we've shown it in Princeton that we can pull this off very quickly the – from sort of decision to operational readiness and we won't have to do that soon again, both in Europe and in U.S.

[Justin Walsh:]

Thank you. And if I can just one follow-up, from your just discussions with physicians and KOLs and both the EU and U.S., how aware are they of the, sort of the potential benefits of aerial space and sort of how much of legwork do you guys anticipate having to do versus physicians coming to you since there's so much on that need?

[Gil Beyen:]

I think on – it's a bit both. So, yes, there is still not enough knowledge about the product. We realize this, we are a relatively small company, we're relatively new kid on [block]. Now, the thing is that we are very high on the radar screen, especially in – both in pancreatic cancer and in ALL because the pancreatic cancer – second-line, you know that, nothing works. Nothing works as if we will have – would have positive results there, I think, yes. There's a close community, the GI oncologist, so this would go quickly. We would need, and it’s part of our planning for success, increase the efforts on medical affairs, awareness creation, etcetera. And the plans are there, the money not yet, but that's what we're getting ready, and I would say the same in Europe. So, that's work to be done, but we have the team that is preparing the grounds.

[Justin Walsh:]

Thank you guys for taking the questions.

[Gil Beyen:]

Thank you, Justin.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Boris Peaker with Cowen. Your line is now open.

[Boris Peaker:]

Great. My first question is on the impact of COVID, we saw patients in general in various clinical trials skipping their follow-up appointments and only showing up for treatment appointments. Can you just remind us how frequently do patients need to show up in the TRYbeCA study? How frequently are just the follow-up appointments versus treatment appointments?

[Gil Beyen:]

Iman, can you take this question also?

[Iman El-Hariry:]

Yes. Hello, Boris. So, in the treatment, it’s purely dictated by the treatment itself. And as you know the schedule is every two weeks in the study, it's a four-week cycle. Once patients go into a perhaps either disease progression mode, they are followed up for survival and at that point, it is every eight-week visit, so this is the plan. We need to remember also overall, for survival, it can be a physical visit or it can be a phone call or in a different mode of communications to get that event for the survival. So, far on the impact of COVID, yes, there were actually very minimal delays in terms of the patient follow-up during the – you know the heat over that pandemic back in March and April, but overall, as we are going through the extensive data cleaning in preparation for the interim analysis, we are seeing and we are reviewing the database as we speak. We are not necessarily seeing a lot of these delays in terms of getting the end of treatment at length, at least not different from what you were otherwise seeing in a non-COVID situation. So, this is where we are at this moment. I think again, the good thing for the study, it is a survival and that's what will be able, one way or the other, to capture.

[Boris Peaker:]

Got you. And my second question is on the ALL study being run by the NOPHO Group. I’m just curious what efficacy results do you think we'd need to see to satisfy the FDA for approval based on this data?

[Gil Beyen:]

Iman, I suggest you continue.

[Iman El-Hariry:]

Okay, I’ll take that. So, the primary endpoint is looking at the pharmacological profile of eryaspase in patients who have experienced hypersensitivity actions to prior asparaginase actually really Oncaspar, which is a pegylated asparaginase. So in terms of the pharmacological profile, its asparaginase activities, so achieving a certain level of asparaginase in the circulation, and in not being diminished in terms of the activity in the presence of perhaps neutralizing antibodies or anti-asparaginase antibodies. So, this primary input is the major primary outcome for the trial and from [indiscernible] perspective, the FDA has established this as an acceptable surrogate endpoint for approving asparaginase formulations in ALL. In addition to these primary endpoints, we will have a whole [indiscernible] of other endpoints. We will be clearly looking at which something the FDA would like to see, for example, [indiscernible] level of asparaginase activity. This is something which was certainly looked into in the most recent asparaginase approval, the [asparagus]. And then, of course, the [indiscernible] anti-asparaginase antibodies neutralizing antibodies, all of this will – these are the supportive data that the FDA would expect to see and that's also part of what we have received in terms of their feedback to us early this year.

[Boris Peaker:]

But do you have any specific numbers or the levels that you think would need to see?

[Iman El-Hariry:]

The numbers is – right now, what is accepted is 100 units per [indiscernible] as acceptable levels. And in fact, in all our trials, we exceed this level by a very wide margin for a long period of time.

[Boris Peaker:]

Got you. Thanks for taking my questions.

[Iman El-Hariry:]

Thank you for asking.

[Operator:]

I'm not showing any further questions at this time. I would now like to turn the call back over to Gil Beyen for closing remarks.

[Gil Beyen:]

Great. I just want to thank everyone for your participation and attention and questions, obviously. Thanks also for your continued support. We look forward to keeping you updated on the progress through the remainder of this year, and next year, exciting, news flow coming, at least at the horizon. So thanks again for joining and wish you all a great day. Thank you.

[Operator:]

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