Gracell Biotechnologies Inc.
Q2 2021 Earnings Call Transcript

Published: 17 Aug 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Gracell Biotechnologies Second Quarter and Half Year 2021 Conference Call. At this time, all participants are in a listen-only mode. After opening remarks, we will open the call for your questions. Instructions for Q&A will be given at that time. I will now turn the conference call over to Kevin Xie. CFO. Please go ahead.

[Kevin Yili Xie:]

Good morning, and welcome to Gracell's Second Quarter Earnings Conference Call and Webcast. This is our second earnings call as a publicly traded company. With me today are Gracell's Founder and Chief Executive Officer, Dr. William Cao, and our Chief Medical Officer, Dr. Martina Sersch. We're excited to discuss our innovative technologies and the breakthrough clinical pipeline of CAR-T therapies on today's call. We also look forward to sharing with you our recent business developments and upcoming targets for 2021. After our formal remarks, we will conduct a question-and-answer session and the instruction will follow at that time. This morning, Gracell issued a press release announcing unaudited financial results for the quarter ended June 30, 2021. We encourage everyone to read this press release. I would like to remind you that this call is being recorded for replay. Please note that certain information discussed on the call today, including financial data, clinical data and the future plans of our programs, Gracell's management will be making forward-looking statements. Actual results may differ materially from those stated or implied by those forward-looking statements as a result of various factors, and please refer to Risk Factors of our latest 20-F filings with the SEC for full disclosure of this risk and factors. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 17, 2021. Gracell undertakes no obligation to revise or update any forward-looking statements to reflect the events or circumstances after the date of this conference call, except as may be required by security law. I will now turn the call over to Gracell CEO, Dr. William Cao. William?

[William Wei Cao:]

Thank you, Kevin. And again, welcome everyone to our second quarter earnings call. Gracell has made substantial progress during the first half of this year, and it continues to deliver across corporate, clinical and operational initiatives. I will elaborate on some of the key achievements so far and expected milestones for the remainder of the year 2021. Following this, I will turn the call over to our CMO, Dr. Martina Sersch, to discuss our pipeline development, and then to our CFO, Dr. Kevin Xie to discuss financial results. Over the first half of the year, our innovative portfolio of autologous and allogeneic CAR-T cell therapies build upon our rich cell therapy and gene editing expertise and proprietary FasTCAR and TruUCAR technology platforms, continues to meet key milestones and demonstrating encouraging and competitive therapeutic potential across multiple difficult-to-treat hematological malignancies and solid tumors. We presented exciting longer-term follow-up data for GC012F, our BCMA/CD19 dual-targeting CAR-T therapy. GC012F is a novel dual targeting product specific for two different antigens, BCMA and the CD19, which we believe has the potential to be highly efficacious. Dr. Sersch will expand on this shortly. Our plans for IND application submission remains on track in both US and China within the first half year 2022. At AACR Annual Meeting in April, we presented updates on longer-term follow-up for our study in T-ALL for GC027, our lead TruUCAR candidate and off-the-shelf standalone new CAR-T therapy. Data continues to be very promising. And Dr. Sersch will further elaborate. On the leadership team side, we're very happy to announce the timely expansion of our US team. Last spring, we appointed Dr. Jenny Ni as Chief Technology Officer. She is seasoned in CAR-T cell therapy CMC development and having successfully led process development at both Pfizer and Allergan Therapeutics. Dr. Ni's focus will be supporting smooth technology transfer to Lonza for our FasTCAR-enabled product candidate, GC012F. In addition, we're excited about Dr. Grace Jiang joining Gracell as our Head of US Regulatory Affairs reporting to our Chief Medical Officer. Dr. Jiang brings nearly 20 years of experience in biotechnology companies, including at Amgen, in regulatory affairs, with filing experience in multiple myeloma. Dr. Ni and Dr. Jiang's contribution will be instrumental as we continue to advance our product development, and these key appointments also mark an important step to advance our presence in the US. As we enter the second half year 2021, we will continue to build on our solid progress achieved so far. In the coming months of this year, we are planning on advancing exciting early pipeline candidates into clinical studies in China. We will enhance our R&D capabilities in the US with our ongoing manufacturing collaboration with Lonza supporting the US R&D submission for the FasTCAR candidate GC012F in the first half of year 2022. We also plan to expand our manufacturing capacity by developing a second much larger facility in Suzhou, China, in addition to our state-of-the-art, 66,000 square feet GMP manufacturing facility designed for fully closed production capabilities to reduce contamination risks and optimize cost efficiency. These clinical and operational developments will bring Gracell closer to delivering accessible and highly efficacious treatments for patients across a wide range of malignancies. Now, I will hand over the call to our CMO, Dr. Martina Sersch, to discuss the pipeline and our clinical programs. Martina, please.

[Martina Sersch:]

Thank you, William. Gracell is currently developing a rich pipeline of multiple autologous and allogeneic product candidates for the treatment of different types of cancer. Our most advanced program is GC007g. In March, we announced enrollment of the first patient in our pivotal Phase I/II IND study of GC007g in China, an allogeneic donor-derived anti-CD19 CAR-T cell therapy for the treatment of relapsed refractory B-ALL and we are now pleased to announce completion of the first dosing cohort for GC007g. GC007g is a novel treatment option for patients that have relapsed after transplant and may not be eligible for autologous CAR-T therapy. GC007g represents a new approach in allogeneic CAR-T and is manufactured using healthy donor-derived HLA-matched T cells, offering a higher quality T cell advantage over a patient's own T cell. Updated longer-term follow up data for GC012F, our dual targeting CAR-T manufactured on the FasTCAR platform and designed for the treatment of patients with multiple myeloma, was presented at the ASCO 2021 Annual Meeting and the EHA 2021 Congress in June. GC012F is currently being studied in an ongoing Phase I investigator-initiated trial in China for the treatment of relapsed and/or refractory multiple myeloma. At the data cut off January 12, 2021, with a median time to follow up of 13.8 months, 19 relapsed refractory multiple myeloma patients were enrolled and have been treated in three different dose levels from 1x105 to 3x105 cells per kilogram with a single infusion of GC012F after a standard lymphodepletion regimen over three days with flu cy in our single arm open label multicenter IIT study in China. Primary endpoint of the study is safety. Secondary endpoints are efficacy including, but not limited to, overall response rate, MRD negativity rates, duration of response and PK, amongst other. Patients enrolled on study were primarily high risk patients, 95%, as defined by mSMART 3.0 criteria. Among those patients, 16% were double hits and have received a median of five prior lines of therapy. 79% of patients were refractory to last therapy. 95% were triple exposed to PI, IMiD and other treatment modalities. And 95% of patients were refractory to PI, 4 patients had received and were refractory to anti-CD38 therapy. The safety profile of GC012F which we reported during the first presentation of data at ASH 2020 showed TEAEs of mostly cytopenias and those were reversible. Cytokine release syndrome, or CRS, a common safety finding in CAR-T therapy, occurred mostly lower grade 1 or 2, with a median time to onset of 6 days, ranging from 2 to 10 days. Median duration of CRS was four days, ranging from one to eight days. No grade 4 or grade 5 CRS were observed. CRS was treated with standard of care, including tocilizumab steroids and vasopressors and resolved in all patients within one week. We did not observe any ICANS of any grades. With the longer follow-up, no new safety findings were observed. And overall, the safety profile remains favorable. Overall response rate at time of data cut off was 94.7% with all responses being VGPR or better. 84.2% out of a total of 19 treated patients achieved stringent complete response, SCR, the deepest response possible. In dose level three, our recommended Phase II dose, 100% of patients achieved stringent CR. Median duration of response is not yet reached. Time to earliest response was 28 days. Patients on study were assessed for MRD at fixed time points. At month one, out of 16 evaluable patients, 81.3% had achieved MRD negativity by flow cytometry. At month six, 100% of all evaluable patients had achieved MRD negativity in all dose levels. All patients on study received a reduction in protein, with 95% of the patients achieved a 100% reduction. In summary, as previously reported, GC012F, dual-targeting BCMA/CD19 CAR-T, continues to show a very promising activity in relapsed refractory multiple myeloma patients with an impressive high overall response rate of 100% MRD negative stringent CR rate in the highest dose level, dose level three, the recommended Phase II dose with mostly high risk patients, 94.7% heavily pretreated patients, including anti-CD38 antibodies, PIs and IMiDs with a median of five prior lines of therapy. We are continuing to develop additional candidates on the FasTCAR platform, enabling next day manufacturing and faster speed to patients. In the coming months, we expect to move our dual-targeting product candidate for B-NHL into the clinical setting. Moving on to the TruUCAR platform. We reported data updates on GC027, an allogeneic CD7 targeted CAR-T cell therapy. With the novel design targeting CD7, GC027 is an off-the-shelf therapy and may have the potential as standalone therapy. It is currently being studied in a multicenter Phase I investigator-initiated trial, IIT, in China for the treatment of adults with relapsed refractory T cell acute lymphoblastic leukemia. T-ALL is highly aggressive, with most patients relapsing within two years after first diagnosis and survival rates at less than 25% after the first relapse. We use the design of a dual-function CD7 CAR to target both the malignant cells as well as the patient's own T and NK cells in order to allow the CAR-T cells to expand, reduce the risk of graft versus host and fratricide, as well as to deliver anti-tumor efficacy as standalone therapy. Data updates presented at this year's AACR Meeting continue to show encouraging efficacy of GC027 in T-ALL. Patients who had received a median of six prior lines of therapy received a single infusion of TruUCAR GC027 in one or three dose levels. Patients showed remission, with the longest ongoing duration of response at 16.8 months in one patient. At six months post treatment, three out of five patients, 60%, had maintained MRD negative CR. One patient maintained MRD negative CR until nine months. And one patient with primary refractory disease, no response to VDP regimen, maintained his MRD negative CR status until month seven. One additional patient treated presented initially with a high tumor burden and extensive extramedullary (NASDAQ

[Kevin Yili Xie:]

Thank you, Martina. We have significantly advanced our manufacturing capabilities in both the US and in China. In March, we announced our MSA agreement with the CDMO, Lonza, to support clinical manufacturing of GC012F in the US. We have made concrete progress towards the manufacturing GC012F for planned IND study with ongoing tech transfer. Moving forward, we plan to leverage Lonza's integrated services in CAR-T manufacturing, establish a state-of-the-art cGMP process, which will be a critical component of our IND filing. We remain on target to file an IND application for GC012F in the US and China in the first half 2022. Our US expansion is currently on the way, with ongoing appointments being made to grow our clinical development, laboratory, operations and research teams. In China, we're also expanding our manufacturing capabilities by building a new facility in Suzhou, in addition to our state-of-the-art, 56,000 square feet GMP manufacturing facility designed for fully closed production capabilities to reduce contamination risk and optimize cost efficiency. Our manufacturing and operational capabilities are designed to improve both the speed and availability of our cell therapy, so that our treatments can be available widely and rapidly to the cancer patients who need them. Turning to our financials. I'd like to touch on a few financial trends for the second quarter. Research and development expenses for the three months ended June 30, 2021 were RMB 65.3 million or US$10.1 million, as compared to RMB 40.8 million in the corresponding prior-year period. This increase was primarily driven by increases in labor costs, depreciation expenses of research and development facilities, costs incurred to advance preclinical and clinical pipeline, professional service expenses and share-based compensation expenses upon the completion of initial public offering. Net loss attributable to ordinary shareholders for the quarter were RMB 96.2 million or US$14.9 million compared to RMB 63.1 million for the second quarter in 2020. As of June 30, 2021, we had RMB 2,053.6 million or US$318.1 million in cash and cash equivalents and short-term investments. With that, I'd like to turn it back to the operator to open the session for your questions. Operator?

[Operator:]

. First question comes from the line of Joe Catanzaro with Piper Sandler.

[Joseph Catanzaro:]

Congrats on all the progress. I was wondering if you had any sense around the timing of a pre-IND meeting with the FDA for GC012F and what you would like to discuss at that meeting? And then, maybe relatedly, I was wondering if you could provide any updates on plans to move GC012F into earlier lines of multiple myeloma and when we could potentially see initial data there.

[Martina Sersch:]

We are planning on conducting multiple regulatory interactions over the next eight months before we're finally planning on filing our IND. And we are on track with those meeting requests and what will follow. We, at this point in time, though, will not disclose any details of the content of the questions. I hope you understand. And for multiple myeloma, as we have mentioned also in previous meetings, we are planning on moving into earlier lines of therapy based on the data we have generated in relapsed refractory multiple myeloma. So, that is currently the plan where we are working on.

[Joseph Catanzaro:]

If I can just squeeze in a follow-up, could you elaborate a bit more on the FutureGen collaboration and how many potential targets the deal covers? And relatedly, could you provide a bit more detail on the first generation enhanced CAR-T platform and how that could address what you see as maybe some of the challenges in solid tumors?

[William Wei Cao:]

First of all, on the first generation with enhanced CAR-T technology, the first publication shows, I think, in greater details, this enhancement is really a gene edited, knock-out PD1 molecule on the CAR-T cells. We have started clinical IIT three-and-a-half years ago. I think that was the first CAR-T cell, gene edited – autologous CAR-T cell gene edited entering clinical IIT trials. And the data was presented at conferences in Australia and the US. So, now finally, it's published. Now, PD-1 drugs or checkpoint drugs combination with CAR-T has been studied throughout solid tumor as well as hem cancer. And the result was not very impressive. Now, our gene edited autologous CAR-T, through the trials of those, the number of patients is very limited. Only seven patients. We do see clinical response. We do see a few patients achieved PR and SC . And you will think this is probably the best-in-class considering mesothelin-positive pancreatic cancer and cholangiocarcinoma, among the very, very difficult to treat solid tumors. But as we think, as the company's one of founding philosophy, we need to consider what is the best product for patients, not just the best science, best data in comparison with other CAR-Ts. 30% PR for solid tumors, personally, we don't think that's good enough. So, that's why we put that program in backburner, and we have been developing second generation of enhanced CAR. Now, I'm not going to disclose the detail too early. It's additional gene editing on the molecules that will be important for tumor microenvironment. And based on the size that we understand there are certain molecules in the tumor microenvironment are important in addition to PDL1. Now, the licensing agreement with FutureGen on the Claudin 18.2 is exclusive. And that molecule has been well tested by FutureGen in their preclinical development settings, including all these models, studies and of course, in vitro, in vivo studies. So, we have talked to several potential suppliers or companies who are developing antibody drugs targeting Claudin 18.2. And that's the selection we had based on the size. So, we're very truly excited about this selection and about the solid science that FutureGen has presented to us.

[Operator:]

. Your next question comes from the line of Kelly Shi with Jefferies.

[Kelly Shi:]

My first question is regarding GC012F. We have seen some positive developments in the design of CAR-T space recently in both China and US. And also, by the end of the year, we're going to have a true BCMA CAR-T potential in the market. I wonder whether this landscape change actually have some impact on your development plan, regarding which patient population you want to focus on moving forward. And the second question is for GC027. Could you elaborate on what's the next step and what's the next data? And also, based on the CD7 targeting strategy, are you going to also expand to additional targeting same CAR to treat beyond the T cell lymphoma and leukemia?

[William Wei Cao:]

I'm going to take first half of the questions regarding 12F and I'll invite Martina to chip in second half and the question around GC027. This is a common question that many people care about, obviously, for the reason that there are two products ahead of us. Looks like it's going to be approved. Second one also getting closer. We're coming with different angle, as you're aware, right, not just bispecific costs, also targeting primarily on different patient population. And on top of that, without moving to frontline as we propose planning the response which is superior, and the fast delivery from another time of acquisition of PBMC to product delivery, now it's being really frequently talked about in the industry. Fast delivery to the patient, that's extremely important, in addition to extremely high efficacy. Now, the safety profile, it is as important as efficacy. As you're aware, the data continue to be very consistent in that regard as well. Now, the persistence of the T cells, the CAR-T cell in the body has been very supportive to our theory of FasTCAR that improve T cell fitness. So, I think the product is going to be very competitive in both the standard sort of targeted population, as well as the population that we're proposing the frontline, as you mentioned. So, I'm going to invite to Dr. Martina Sersch to address the next questions and the second half of the question further.

[Martina Sersch:]

We don't have any plans to change our regulatory strategy, even though as one BCMA has been approved and we are expecting the other one to be approved at some point in time. As William already mentioned, we are dual targeting and we have many factors of differentiation. So, at the current point in time, our regulatory strategy remains as is. And for the second part of the question, GC027, we are planning on expanding the indication to AML. So we are planning on enrolling additional patients into CD7 positive AML patients.

[Operator:]

. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Dr. William Cao for closing remarks.

[William Wei Cao:]

Okay. Well, thank you again to everyone for joining us on the call. The Gracell team is very proud of what we have accomplished in the four years since our founding. We have rapidly expanded our teams in China and the US with exceptional talent. We have advanced our many clinical programs, and derisked others through clinical investigator initiated trials in China, while also expanding our manufacturing facilities to support our extensive pipeline. To support our R&D efforts, we continue to form new external partnerships and expand our internal manufacturing capabilities. In conclusion, Gracell is well positioned to deliver breakthrough CAR-T cell therapies capable of overcoming major industrial challenges by leveraging our proprietary FasTCAR and TruUCAR technology platforms. We look forward to further advancing our clinical programs and will keep everyone updated along the way. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation. You may now disconnect.