ERYTECH Pharma S.A.
Q2 2019 Earnings Call Transcript

Published: 18 Sep 2019

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the ERYTECH’s Second Quarter 2019 Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Gil Beyen, Chief Executive Officer. Please go-ahead sir.

[Gil Beyen:]

Thank you, Shannon. Good morning and good afternoon to all. Thanks for joining our second quarter first half 2019 earnings call. We announced our Q2 financial results and business update yesterday evening. You have seen the press release most likely. If not, you can access it on our website. Also, this presentation is on our website on the investor section. Here with me in Lyon are Dr. Iman El-Hariry, our Chief Medical Officer; and Eric Soyer, our Chief Financial and our Chief Operating Officer.So, let’s get started. I draw your attention to the disclaimer on Slide 2 and then switch to the agenda on Page 3. So, following our quarterly routine, I will start with providing the business update and focus on the key highlights for the second quarter and the year-to-date. Eric will then take over to present the financial highlights for the first half of the year and he will also summarize the major expected milestones for the remaining 12 months, of the coming 12 months. We will, all three, then be available to respond to your questions.So, and before starting the update I think it is always a good practice to remind to the essentials of our company, they are summarized on Slide 4. You can see and not surprisingly the same profile as at our last update call, we are still the red cells company focused on cancer metabolism with [indiscernible] and that’s the core, late-stage trials in pancreatic cancer Phase 3, triple negative breast cancer Phase 2, and an IST in acute lymphoblastic leukemia in Phase 2.We have industrialized and scalable production with now two owned manufacturing sites, one in Europe that we already had, but have now extended and then one in Princeton for the supply in U.S. that came on stream recently. And next to all the late stage and manufacturing work, we have – we continue to work on leveraging our platform with different preclinical programs that we will briefly touch upon.Going to the next slide. Slide 5, you see the pipeline summarized the overview both clinical and preclinical. Half of it is taken by our lead program eryaspase, which is the asparaginase in red cells and you see at the end of the year. The Phase 3 in pancreatic, the pancreatic ductal adrenal carcinoma PDAC in second line, the study is called TRYbeCA1, and you’ll hear that throughout the call also, I think. Then the Phase 2 in triple-negative breast cancer in first-line, TRYbeCA2.The second-line ALL study Phase 2 is the NOPHO study. It’s an IST and the NOPHO stands for the Nordic Society of Pediatric Hematology and Oncology, so its them who are – it’s an investigator sponsored trial and the NOPHO is the sponsor. And in the pre-clinical program, you’ll see our next product candidate Methionine lyase. You’ll see ERYMMUNE now, and that’s a new SQZ label, and so, we have partnered our immune-oncology and immune modulation activities with SQZ Biotech in Boston, and then we are continuing to do work on – pre-clinical work on metabolic diseases with – mainly on, most of them on the arginase-1 deficiency.Moving to the highlights. Slide 6, you’ll see here the summary. I will not go in full detail because I have a page for each of them assuming on these key highlights for the quarter and the year-to-date.Let’s go to the first one. It’s on Slide 7. It’s obviously our top priority, the Phase 3 in pancreatic cancer. So, we launched this study in September 2018, which is the pivotal Phase 3 study in Europe and U.S., about 500 patients to enroll, comparing standard of care chemotherapy to standard of care chemotherapy with eryaspase added, our product, overall survival end point.So, we – already at the last call I think we had all 11 countries accepting our clinical trial. So, giving our clinical trial authorizations and now we are in these, and many countries are now enrolling really well. So, the enrollment is on track or even slightly ahead of track in Europe. And the news of the quarter is indeed that we now also have the IND accepted by the FDA, so that gives the authorization to proceed in the United States. We expect that the enrollment in United States will happen soon, most likely Q4, but beginning of Q4.Next to second-line metastatic pancreatic cancer, we are also preparing a smaller still a Phase 1 study in IST, it’s not preparing, but the site is preparing to get started on an IST in first-line pancreatic cancer. It’s a Phase 1 in combination with FOLFIRINOX because FOLFIRINOX is gaining a lot of ground in front-line pancreatic cancer. So, as soon as we can start producing in Princeton, we will – also the IND will be filed for this Phase 1 study. So, that’s pancreatic cancer.The next indication for us in solid tumors is triple-negative breast cancer. You remember chosen also because of the unmet medical need, but mainly also for this – in fact it is our metabolically very active tumor types and we expect them also to [vary ] [ph] dependent on asparagine. It’s a proof-of-concept study here. It’s a Phase 2 proof-of-concept that only in Europe, about 65 patients to be treated.Similar design, standard chemotherapy with or without the eryaspase product with an objective response rate primary endpoint. So, we have clinical trial authorizations in – currently the four countries in Europe in which the study runs and we have something missing in the slide, we have close to 20 sites initiated, not close to two, and patient enrollment started, so first patients have been treated.So, it makes now the two TRYbeCA1 and TRYbeCA2 late-stage programs enrolling. This requires obviously additional manufacturing capacity that growing demand in the EU and we don’t occupy that entire building there. We have two floors, part of two floors of the building where we have our – the one manufacturing facility that we already had before, but we have now doubled it, that’s sort of the second and first floor with the second floor depending from where you are. This has been added. So, we doubled the number of cleanrooms and this extended capacity started producing for the clinical trial in July as planned.In Princeton, things are also ready. We have the construction completed. We have four cleanrooms fully equipped, validation completed and we expect that site will be able to start for the clinical trial in Q4 2019 so imminently. And this is the main update on the – let's say on the GRASPA product and its related manufacturing.Shifting to the platform; I'm going to Slide 10 and indeed we announced, I think it was in June, a collaboration – strategic collaboration with SQZ Biotechnologies. SQZ Biotechnologies is a cell therapy company based in Cambridge, Massachusetts. It's a spinoff off of MIT. They have a technology – SQZ technology to load different types of cells with molecules by squeezing the cells through very fine tubes.And what we have done here is we have granted SQZ an exclusive worldwide license on our IP – on parts of our IP related to immune modulation, mainly through tolerance induction and therapeutic vaccination with peptides. And so SQZ will take this on and so we'll use their technology, their loading technology with our IP and [indiscernible] part of our know-how to develop these products, mainly focused on immune tolerance and vaccination.In this deal, ERYTECH is eligible to receive an upfront and potential milestones up to $58 million for the first product and then royalties, sales and potential commercial – royalties on sales, sorry, and potential commercial milestones up to $50 million for each additional approved product or approved indication.So, this deal fits nicely in our strategy that we really are increasingly focusing on cancer metabolism, on late-stage programs, but still not forgetting our platform, leveraging our platform to different applications, different indications. That's mainly done through partnering, which we believe SQZ to be an ideal partner to take our immune modulation IP to the next steps.So, one more slide for the update and [comment a bit] quickly, but it's a – but we also have announced changes to our Board of Directors. This is on Slide 11. Already in – at last call, we announced that we were going to propose Jean-Paul Kress, as the new Director to the annual meeting, to the shareholders and the shareholders has approved his appointment obviously at June 21 just now, so in 2019, and he was then, by the Board of Directors, elected to be the Chairman of the Company – of the Company's Board of Directors.So, really pleased to have Jean-Paul on board. He brings us 25 years of real experience in pharma, but also in biotech and a good mix of pharma-biotech. So, he started his career in companies like Biogen, Sanofi, Abbvie, Gilead, became CEO of Syntimmune, which was then acquired by Alexion and you may have seen he was recently now appointed CEO of Morphosys.He brings also a good mix, Europe-US; French national, been in U.S. for many years. So, the profile we were looking for. So, we're pleased to have Jean-Paul on board. We're set, on the other hand, to see Allene leaving our Board. She notified at the last recent, couple days ago, I think in the Board meeting that she intends to resign at the end of this month. It's really for personal reasons, in fact, for work reasons.You may know TESARO was acquired by GSK. Allene's role has been strongly – she has a very important role within there. And so, the combination with us going – was becoming too difficult. But we thank her for sitting on the Board for three years and been a real good support to the company. And I think with this, I have covered the business update.I leave now to Eric to take you to the financials for the second quarter and the first half.

[Eric Soyer:]

Thank you, Gil. Good morning, you all in the U.S. So, this is – I'm now on Slide number 12. This is a snapshot of our P&L information for the first half of this year. As you can see, the highlight here is a net loss of EUR29.3 million for the first half of this year. This is an increase of EUR10.3 million as compared to the previous period, the six months of 2018.This is coming from an EUR8.4 million increase in operating loss, and that was attributable, mainly to the EUR6 million increase in research and development activities expenses, mostly related to expenses that we had with the company's Phase 3 clinical trial in pancreatic cancer. In the same time, we had a EUR3.1 million increase in G&A expenses, of which more than half EUR1.8 million was related to the launch readiness of the company's additional manufacturing capacity in the U.S. and in France.And finally, we had EUR0.7 million increase in operating income, of which EUR0.9 million, $1 million was related to the milestone payment upon the signature of the license agreement with SQZ Biotechnologies. In the same time, we had EUR1.9 million decrease in financial income, which was mostly related to the translation into euro of our company's cash position held in the U.S. dollars. So, that was the highlights of the P&L figures for the six months – first six months of this year.I'm now shifting to the next slide. Slide number 13 for a snapshot of our cash utilization and cash position. As you can see, the cash position at the end of the first half of this year, June 30 was EUR94.5 million, which is approximately $107 million. That is coming from a cash valuation – cash utilization in the first half of this year of EUR39.9 million. And that cash utilization was the result of a EUR40.5 million net cash utilization in operating, investing and financing activities, EUR23.8 million in operating activities, EUR17.6 million in investing activities, and EUR0.8 million in financing activities.And in the same time, with the appreciation of the U.S. dollar in the period against the euro, we had EUR0.6 million favorable currency exchange impact on the cash position. With that, that's enabled us to confirm the earlier guidance we've given on the cash runway, which is getting us until the end of 2020, possibly into 2021. That's the highlight for the cash position and cash utilization.And before we finish this presentation and open the Q&A session, just reminding the key milestones for the next 12-month period. Of course, Gil mentioned it earlier, the start of our GMP production facility in Princeton expected in Q4 this year very imminently that will enable the start of the U.S. patient enrolment in the Phase III clinical trial for the second line pancreatic cancer trial that's the TRYbeCA1 study, which is also expected in Q4 to start.And we also mentioned, well that's for the 2020 periods the initiation of the Phase 1 investigator sponsored study with eryaspase in pancreatic cancer for the first line treatments and later in 2020, we expect the results of the Phase II second-line trial in acute lymphoblastic leukemia, the NOPHO study, also an IST study. And finally, towards the mid-year period of next year, we would expect the interim analysis into TRYbeCA1 study, again the Phase III in pancreatic cancer that interim analysis is for superiority.With that, I will turn over the call to Shannon, our operator to open the Q&A session. Thank you.

[Operator:]

[Operator Instructions] Our first question comes from Boris Peaker with Cowen. Your line is open.

[Boris Peaker:]

Good morning. My first question is on TRYbeCA1. I'm just curious for the interim analysis, because what would you need to show for the study to stop for efficacy? And also, is there a futility look there that if you don't have enough separation that potentially the study could be stopped?

[Gil Beyen:]

This is a question for Iman.

[Iman El-Hariry:]

Hi. The study – that interim analysis does not have a futility component. So, it's binary – it's basically if the agency will look at the data if there is an enough evidence of advantage in terms of the hazard ratio, then the study will be stopped for efficacy. Otherwise, the agency would recommend to continue the trial until completion. Now, to show an efficacy, we are looking at approximately same hazard ratio, similar hazard ratio to the final analysis.

[Boris Peaker:]

Yes, so what would that hazard ratio have to be for it to stop for efficacy?

[Iman El-Hariry:]

It is what we have provided before, it's around 0.72.

[Boris Peaker:]

Okay, great. And my second question is on TRYbeCA2 study in triple-negative breast cancer. Just curious, what's the timeline for the data? And also, if successful, can this be a pivotal study or have you discussed that with the FDA to potentially be a pivotal study?

[Iman El-Hariry:]

I'll start with the last point. No, we have not discussed this yet with the FDA. As you know, this indication is a new indication for us, so the current goal is to generate a signal of activity that can enable us to move into a Phase III pivotal study. And at that point in time, yes, we'll seek the scientific advice from the FDA and CHMP.

[Boris Peaker:]

Got you. Okay, great. Thank you very much for taking my questions.

[Gil Beyen:]

Thank you, Boris.

[Operator:]

Thank you. Our next question comes from Lucy Codrington with Jefferies. Your line is open.

[Lucy Codrington:]

Hi there. Just a couple of questions for me. It seems like Princeton timelines have slipped again. Is there any particular reason why we're now not expecting it to come online until 4Q? And then just regarding the TRYbeCA1 interim, do we need to have a certain proportion of U.S. patients included in that interim, given that the recruitment has yet to start in the U.S.? Could that be an issue? Thank you.

[Gil Beyen:]

Hi, Lucy, Gil here, I'll start with the – with your question and hand over to Iman. So, yes, we will now see in Q4, we hope it's early Q4. But indeed, it's two things. We got the IND approval, which was great because that opens the path, that immediately also allowed us to start the discussions with the sites on contract negotiations and site initiation. So, that's one track. But the other track is indeed that we still need to get sort of the approval as we have, it was based on the ARC facility.Now that everything has been a bit later, we have decided that we will concentrate all the supply for the U.S. parts of the trial from Princeton. And in order to do so, Princeton is now up and running, but we still need an IND amendment to get the Princeton site also part of the trial. And so that's ongoing and that's why. So, these two tracks will coincide. We hope, we expect so that we can start imminently at the beginning of next quarter. And so, I hope that answers your question and then maybe Iman for the second part.

[Iman El-Hariry:]

Sure. Hello, Lucy. So, for the second part around the interim analysis and the number are expected or projected patients from the U.S. Technically or strictly speaking, actually from a regulatory perspective you don't need U.S. patients in the trial. However, we need to have U.S. patients clearly from an exposure for market access on all other benefits. So, for the interim analysis, the trial will enroll U.S. patients in this quarter.And so, we will have – our current projection is to have around 20% or north of 20% projected number of patients if the study continues to completion. So, by the interim analysis, it may not be the 20%. But again, from a regulatory perspective, strictly speaking, you actually don't need a predefined number of patients from a specific [location] [ph].

[Lucy Codrington:]

Great, that's very helpful. Just – and Gil, thanks for your answers. [I was actually] [ph] asking about the Princeton facility seems to have been delayed, I believe in the last quarter we talked about it coming online in 3Q rather than necessarily the U.S. trial. So, I was just wondering what the delay was to the Princeton facility?

[Gil Beyen:]

The Princeton facility came online in Q2 even, so, it will start GMP batches for validation and everything so that we even – we inaugurated the site on the 20th of June, I think. But indeed, now it is these two parallel tracks one the one hand, the site initiations or at least the contract negotiations and then the IND amendment to also fully have the site part of the trial. That is what's ongoing.

[Lucy Codrington:]

Okay, I see. Thank you very much.

[Gil Beyen:]

Thank you, Lucy.

[Operator:]

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

[Reni Benjamin:]

Hi, good morning, guys. Thanks for taking the questions and congrats on the progress. Gil, if you don't mind, can you just remind me how many sites are open in the TRYbeCA1 study right now? Do you still anticipate a 40/60 split between the U.S. and EU? And you mentioned on the call that enrolment is ahead of expectations. Can you just remind us what your original planned enrolment completion expectations were?

[Gil Beyen:]

I'll start, but also hand over – for the number of sites to Iman to answer in a bit detail. So, we started enrolling in September 2018 with an estimate of 18 to 22 months of – to get to full enrollment. So, we have close to 500 patients to enroll. We expect that that will be around mid-2020. So that I think the first part and Iman gives me [indiscernible] we probably have around 70 sites now in Europe and we are targeting about 30, 40 sites in the U.S.

[Reni Benjamin:]

Right. And then, in regards to the manufacturing facilities, can you just give us an idea on what the current capacity is? What they could potentially be expanded to? And are these the facilities that would support commercialization, and what would be sort of the max production?

[Gil Beyen:]

So, I'll leave this to Eric.

[Eric Soyer:]

Hi Reni, for the Lyon facility first. Initially, it was six cleanrooms with one encapsulation machines in each cleanroom. We've expanded that to 12 cleanrooms now working in two shifts. So, actually, we have quadrupled our capacity in Lyon and each machine on one shift is able to – on two shifts is able to make approximately 500 GRASPA batches per year.And in the U.S., the size of the Princeton facility is approximately of the same scale, a bit bigger than the Lyon facility. And it is operated in one shift now, but could be operated in many shifts as well. So, the size of those facilities, both in Europe and in the U.S. have been designed to cover, of course, the need for clinical trials right now, but they are – they will cover initial commercial needs both in Europe and in the U.S.And then when we have to expand, as you know, not – it's not only a matter of expanding facility, but also expanding our supply capabilities both in U.S. and in Europe, also in terms of the gross sales. So, that's why we believe that both in Europe and in the U.S. that we want to expand that would be also possibly in other countries also to have a better coverage of the [entered] [ph] territory.So, as soon as we have bigger commercial volumes, we are considering, we are actually working on plans to expand to another facility in Europe and possibly another facility in the U.S. once the Princeton facility is fully loaded. And in the U.S., given that we now have a facility on the East Coast, that would make sense to also consider a facility on the West Coast to have a full coverage of the territory.

[Reni Benjamin:]

Got it. Sorry, just I forgot a question on TRYbeCA1. Has the – how often does the IDMC meet? And have they kind of met recently with? And what is their – outside of the interim analysis, I think they consistently are evaluating safety on a blinded basis. Is that correct?

[Iman El-Hariry:]

Yes, and so I'll take this question. The IDMC has planned to meet regularly until the completion of the trial or the first – at least the first superiority analysis. And yes, the goal of these regular meetings are basically safety review for the patients coming into the trial, and is also that we had our first IDMC a few months ago that was basically to assess the safety and the tolerability of the combination of GRASPA with Onivyde or resume abraxane. So, it's almost like the size of a small or smallish Phase I – the analogy of a small Phase I trial.So, that was good. I did see and looked at the data bluntly and had no issues. And now we are expecting our subsequent safety review again during this quarter, so that would be in a sizable number of patients.

[Reni Benjamin:]

Got it. And...

[Iman El-Hariry:]

Next quarter, I'm sorry Yes, I...

[Reni Benjamin:]

Sorry, which quarter?

[Iman El-Hariry:]

Q4, I meant to say it's the Q4.

[Gil Beyen:]

You're ahead of time.

[Iman El-Hariry:]

I am ahead of time.

[Reni Benjamin:]

No problem. And just one final question for me, regarding the SQZ collaboration, just correct me if I'm wrong, it seems like it's more an IP based collaboration and SQZ is really running the program. Am I thinking about that correctly? And when you talk about focused on immune tolerance, can you give us any sort of color in terms of, are they – are they putting proteins into these red blood cells? Are they more DNA based therapeutics into these red blood cells? How should we be valuing the advancement of this program?

[Gil Beyen:]

I'll take this one, Reni. Yes, you're right. It's really an IP. So, it's a freedom to operate type of collaboration, but with a bit more than that. So, they were recently here. So, we're really collaborating on advancing it. But the basis is freedom to operate on our IP so that they can, with their technology, take this forward in this immune tolerance and vaccination type of work.Immune tolerance; we have done some work early days on immune tolerance. It's by loading the red cells with, it can be proteins, typically there is – even we had some work with myosin, we've had some work with Factor VIII even, so – because we know that a big part of the red cells and their life in the liver as the Kupffer cells, if you give boosts of red cells with these molecules inside.We had some nice preclinical results on tolerance induction. For reasons of focus and priority, we already – we have not continued to work there since quite a while, but it still was there. And we were sort of really pleased when SQZ knocked on the doors saying, well, it would be interesting to work on that.I'm not sure which molecules they are working on right now, but it's probably similar to what we've done, so probably proteins and/or enzymes, and they're also – by looking at the technology, we also have done work and published on it, on using the red cell to deliver like peptides to different [indiscernible] to the spleen. And in all the discussions, we also found that we were really focusing all our energy to the cancer metabolism. So, also, they're – have given this freedom to operate so that they can take this forward with their technology, but with our sort of support and collaboration.

[Reni Benjamin:]

Terrific. Thanks for taking the questions, and congrats on the progress.

[Gil Beyen:]

Thank you, Reni.

[Operator:]

[Operator Instructions] Our next question comes from Alex Cogut with Kempen. Your line is open.

[Alex Cogut:]

Hi. Thank you. Just have a question on competitive landscape. Do you see any programs out there in developments in pancreatic cancer that could change the competitive positioning for you or hamper U.S. recruitment for TRYbeCA1? Thanks.

[Gil Beyen:]

Pancreatic cancer is really a field where we see very little happening, and this was really also the reason of – one of the reasons for us to go there, there is high unmet need and very little change over time. Surely not any of the cancer metabolism agents like asparaginase, absolutely not. But also, immunotherapy seem to have a – hard to get a foot into pancreatic cancer. So, especially and one of the reasons we think why the enrollment in the trial is so good is, indeed we see no competing or very little competing activity in – especially in second line pancreatic cancer.

[Alex Cogut:]

And nothing else that you see that could come forward before you actually finish with the readout, assuming, let's say the interim is not successful.

[Gil Beyen:]

Not on our horizon, no. No.

[Alex Cogut:]

Alright, thanks.

[Gil Beyen:]

Thank you.

[Operator:]

Thank you and I'm currently showing no further questions. At this time, I would like to turn the call back over to Gil Beyen for closing remarks.

[Gil Beyen:]

So, thank you, everybody. Thanks for your participation and attention and for your support to ERYTECH. We will, as usual, as always, keep you updated on our progress through the remainder of the year and every quarter and in between. So, thanks for joining and wish you a great day. Thank you.

[Eric Soyer:]

Thank you all. Bye-bye.

[Iman El-Hariry:]

Bye.

[Operator:]

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