Gracell Biotechnologies Inc.
Q4 2021 Earnings Call Transcript

Published: 14 Mar 2022

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the Gracell Biotechnologies Fourth Quarter and Full Year 2021 Conference Call. I will now turn the conference call over to Dr. Kevin Xie, CFO. Please go ahead.

[Kevin Xie:]

Good morning, and welcome to Gracell's Fourth Quarter and Full Year 2021 Earnings Conference Call and Webcast. 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 share with you our recent business developments and upcoming targets for 2022. After our formal remarks, we will conduct a question-and-answer session. This morning, Gracell issued a press release announcing unaudited financial results for the quarter ended December 31, 2021. We encourage everyone to read this press release, and would like to remind you that this call is being recorded for replay. Please note that for certain information discussed on the call today, including financial data, clinical data, future plans of our programs, Gracell's management will be making forward-looking statements. Actual results could differ materially from these stated or implied by these forward-looking statements as a result of various important factors, and please refer to the Risk Factors section of our latest 20-F filings with SEC for a full disclosure of these risks and factors. The conference call contains time-sensitive information that is accurate only as of date of this live forecast, March 14, 2022. Gracell undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by securities laws. I will now turn the call over to Gracell's CEO, Dr. William Cao. William?

[Dr. William Cao:]

Thank you, Kevin. And again, welcome, everyone, to our fourth quarter and full year 2021 earnings conference call. Gracell has made substantial progress over the last year and continues to deliver across corporate, clinical and operational initiatives. I will elaborate on some of the key achievements and updates. Following this, I will turn the call over to our Chief Medical Officer, Dr. Martina Sersch, to discuss our pipeline developments and regulatory advancements in the U.S. and then to our Chief Financial Officer, Dr. Kevin Xie, to discuss financial results. In the end, I will share our anticipated milestones for the year to come. Since our last corporate update call on August 27, 2021, and we have continued to make progress across our innovative portfolio of pathologists and allogeneic CAR-T cell therapies, built upon our rich cell therapy and gene editing expertise and proprietary FasTCAR, TruUCAR and SMART CART technology platforms across multiple difficult-to-treat hematological malignancies and solid tumors. We are continuing to advance our FasTCAR autologous CAR-T platform, which is designed to overcome challenges of conventional CAR-T therapies by significantly shortening cell manufacturing time from weeks down to next day. Importantly, this also contributes to enhanced T cell fitness. This is supported by the vast data from our preclinical studies because our process manages to preserve T cell fitness, our cells are very potent and the therapy only needs a small number of cells in comparison to others, eliminating the need of ex-vivo expansion, which could result in cell exhaustion. If you to other CAR-T therapies, our dose ranges from 1/3 to 100 to other doses. And because our cells are more potent and expansion happens in vivo, the optimal environment for T cell proliferation. So the peak of expansion of our CAR-T cells reaches 3x that of certain marketed CAR-T cell products. And our AUC, area under curve, is about 2.5x of others. In November of 2021, our lead FasTCAR-T candidate, GC012F was granted orphan drug designation by the U.S. FDA for the treatment of multiple myeloma. 12F is a novel dual-targeting product candidate, specific for 2 different antigens, BCMA and CD19, which we believe has the potential to be highly efficacious. 12F has demonstrated fast, deep and durable responses in patients with relapsed/refractory multiple myeloma in an ongoing IIT study in China, with most patients on study being high risk according to mSMART 3.0 criteria, a difficult-to-treat patient population. We are very excited about being granted orphan drug designation for the treatment of multiple myeloma by the U.S. FDA as it qualifies Gracell as the sponsor of the therapy for certain development incentives. Dr. Sersch will share more about 12F and expand on its progress shortly. We have extended our time line for R&D submission in the U.S. for GC012F for RRMM to the second half 2022. While we have made significant progress with our tech transfer from our Suzhou GMP manufacturing facility to the U.S. CDMO. This revised time line reflects the impact to the industry-wide high demand of cell therapy manufacturing capacity. The verification runs on producing quality sales, and we continue to work closely with our CDMO to move forward. For the R&D filing in the U.S., we are on track to submit by the end of the year. The IND filings and further clinical development of 12F are a priority of Gracell. Our exciting advancement of 12F candidates is that we have dosed multiple patients in China Phase I IIT study evaluating 12F in a new indication, relapsed and refractory B-cell non-Hodgkin lymphoma NHL. 12F is the first BCMA CD19 dual-targeting CAR-T in human trials for B-NHL. We have a strong rationale and preclinical data to support this novel design. This is consistent with Gracell's goal of innovation and a focus on pioneering best-in-class candidates. Turning to our allogeneic TruUCAR platform, we have an IIT study underway for CD19/CD7-dual directed GC502 in adult patients with B-cell malignancies, including B-ALL and plan to present early first-in-human data from this study at AACR in April. We are very excited about this new candidate, as it is the first of its kind as of CD19/CD7 dual CAR allogeneic CAR-T and exemplify the TruUCAR platform's broad applicability enabled by the novel dual-directed CAR design. As a reminder, we shared data from the preclinical studies of GC502 last year at ASH. GC502 displayed strong antitumor potency and suppression of host versus graft response. For example, GC502 showed superior CAR-T cell expansion and also cytotoxicity, including in very demanding tumor rechallenge model. Also, it demonstrated robust activity in killing allogeneic T and NK cells to help suppress host versus graft rejection. We also compared with CD19 CAR-T control. The results showed very strong potency in animal models. We look forward to sharing the exciting early first-in-human data next month. As 2022 unfolds, we will continue to build on our solid progress achieved so far. Towards the end of the prepared remarks, I will share our anticipated milestones for this year. Now I will hand over the call to our Chief Medical Officer, Dr. Martina Sersch, to discuss the pipeline and our clinical programs. Martina, please?

[Dr. 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 lead program is GC012F. In 2021, we applied and were granted orphan drug designation for GC012F by the U.S. FDA for the treatment of multiple myeloma. We continue advancing our lead candidate GC012F in relapsed and/or refractory myeloma, as well as into earlier lines of therapy. We have previously reported preliminary clinical data at ASCO 2020, ASCO 2021 and EHA in 2021 in 19 patients, demonstrating fast, deep and durable responses in all dose levels in a very difficult-to-treat patient population, 95% being high-risk patients based on mSMART 3 criteria. At data cut off, January 12, 2021, overall response rate among these 19 patients was 94.7% with all responses being VGPR or better. 84.2% out of the total of 19 treated patients achieved stringent complete response, SCR, the deepest response possible. 100% of MRD accessible patients achieved MRD negativity. The safety profile of GC012F was consistent with previous findings and predominantly lower-grade cytokine release syndrome, mostly low Grade 1 or 2 with a median time to onset of 6 days, ranging from 2 to 10 days. No Grade 4 or Grade 5 CRS was observed. And also importantly, we did not observe any ICANS of any grade. To date, we believe this data is very promising and highly competitive, both for efficacy and safety. In addition to the excellent preliminary outcome, there are several key differentiators that highly distinguish GC012F from the current landscape. The first one being BCMA CD19 dual targeting. The second very important part is the much shortened manufacturing time, 22 to 36 hours, which may lead to a much faster treatment of patients without the need of a gene therapy and ultimately may lead to reduced health care costs. In addition, we have extended the indication for GC012F to B-NHL and are currently enrolling patients into an IIT study in China. GC012F is the first BCMA CD19 dual-targeting CAR-T in human trials for B-NHL. Most B-NHL cells express CD19, and data also suggests that 39% to 97% of clinical NHL cell samples also express BCMA. By simultaneous lead targeting BCMA and CD19, GC012F is designed to improve efficacy outcome in relapsed/refractory B-NHL patients. In the preclinical studies, GC012F has demonstrated very encouraging capabilities, including specific and dose-dependent killing of CD19 and/or BCMA positive tumor cell lines. Moving on to the TruUCAR platform, our allogeneic UCAR-T derived from T cells from healthy donors as an off-the-shelf CAR-T therapy. This novel design of a dual directed CAR utilizes 1 CAR to be a CD7 CAR intended to suppress host versus graft. This CAR has been optimized for induction of appropriate immunosuppression. With this construct TruUCAR is designed to be administered without the need of additional immunosuppressive therapies after standard lymphodepletion and offers further benefits in cost savings potentially -- and potentially safety. The second CAR is intended to target cancer cells. The second CAR can be switched to target different cancer antigens, and this potentially gives the TruUCAR platform, a broader applicability. GC027 is our TruUCAR enabled CD7-targeted CAR-T cell therapy for the treatment of T-cell acute lymphoblastic leukemia, TALL. We have previously reported the promising efficacy and safety data at AACR 2021 and have since added many more patients to the study. Currently, we are targeting regulatory interactions globally and in China during the next 12 months. As William mentioned, we are very excited about the new and second candidate on the TruUCAR platform, GC502, which is the CD19/CD7-dual-directed allogeneic CAR-T therapy for B-cell malignancies. While we have been very encouraged by the profile of GC027, GC502 is our first product candidate to truly demonstrate the potential and wide applicability of the TruUCAR platform to different types of cancers. We believe 502 is a promising off-the-shelf product platform, enabling the CD7 CAR to suppress host versus graft rejection response, while we added the second CAR, a CD19 CAR to target cancer cells. CD7 CAR will help create the environment for the CAR-T cells to expand without additional immunosuppressive drugs. We shared preclinical data of 502 at ASH 2021, which showed robust expansion and efficacy in patients. We will be presenting the first in-human clinical data at AACR in April. Our most advanced program is GC007g. Currently, a registrational Phase I/II clinical trial under China IND is ongoing for the treatment of relapsed/refractory BLL patients. We anticipate to soon be commencing the Phase II part of the study. 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 and is manufactured using healthy donor-derived HLA-matched T cells, offering an advantage over patients on T cells. Beyond the programs discussed today, we have a rich exciting early-stage pipeline of product candidates based on our FasTCAR, TruUCAR and SMART CAR technology platforms for several indications, including solid tumors and hematological malignancies that we continue to evaluate to move forward into the clinic. We are on track to commence enrolling in a China IIT study for GC503 and liso-cel in positive solid tumors, including ovarian cancer in 2022. With these additional indications, we are striving to complete our platform to include not only hematological malignancies, but also solid tumors, a hard to achieve goal for the industry today. In addition, we are expanding our teams, including regulatory and clinical operations in the United States to meet our demand. I will now pass it over to Kevin to discuss our R&D and manufacturing facilities and our financial results. Kevin?

[Kevin Xie:]

Thank you, Martina. Our U.S. expansion is currently underway, with ongoing employment being made to grow our research, clinical operations, regulatory and operations teams. In China, we're expanding our manufacturing capability by building a new facility in Suzhou, in addition to our state-of-art 66,000 square feet GMP manufacturing facility, designed for fully closed production capabilities to reduce contamination risk and optimize cost efficiencies. Our manufacturing and operational capabilities are designed to improve both the speed and the availability of our cell therapies so that our treatment 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. As of December 31, 2021, we had RMB 1,829 million or USD 287 million in cash, and cash equivalents and short-term investments. We're very well-funded with cash run rate into 2024. We expect the cash use for this year to be approximately USD 100 million or USD 120 million, primarily to fund our R&D and clinical programs in the U.S. and China to support our R&D filings and to support expansion of our GMP manufacturer facilities in Suzhou. Net loss attributable to ordinary shareholders for the 3 months ended December 31, 2021, was RMB 128.6 million or USD 20.2 million compared to RMB 99.9 million for the same period in 2020. Net loss attributable to ordinary shareholders for the full year 2021 was RMB 453.7 million or USD 71.2 million compared to RMB 274.6 million for the same period in 2020. Research and development expenses for the fourth quarter were RMB 107.6 million or USD 16.9 million, as compared to RMB 60.7 million for the same period in 2020. For the full year ended December 31, 2021, research and development expenses were RMB 326.9 million or USD 51.3 million compared to RMB 168.8 million for the same period in 2020. Increases were primarily due to increased spending to advance our early and clinical pipelines, higher headcount and increased expenses in share-based compensation. Administrative expenses for the fourth quarter were RMB 32 million or USD 5 million compared to RMB 24.8 million for the same period in 2020. For the full year, an administrative expenses were RMB 137 million or USD 21.5 million as compared to RMB 45.6 million in 2020. Increases were primarily driven by an increase in recognition of share-based compensation expenses as well as expansion of administrative functions. With that, I will turn the call back to William.

[Dr. William Cao:]

Thank you, Kevin. Again, we are very pleased with our progress across our pipeline. Looking forward this year, we expect to build on our record of achievements. We have an active year of milestones ahead. Key areas of focus this year encompass the following. Our priorities continue to advance in the tech transfer process for 12F with our U.S. CDMO, and now we expect to file the R&D in the U.S. and China for relapsed/refractory multiple myeloma in the second half of 2022. Concurrently, we are continuing to enroll patients in the Phase I R&D studies in China for 12F in RRMM and B-NHL and also are extending to earlier line multiple myeloma. We plan to submit clinical updates on these studies to major medical conferences this year. For the TruUCAR-T platform, we plan to present early first-in-human data from an IIT study underway for GC502 in adult patients with B-ALL at AACR in April. We are nearing the completion of enrollment study for GC027 in patients with T cell leukemia. We're also on track to commence the Phase II portion in 2022 of the registration phase I/II clinical trial for GC007g that is underway in China. Finally, under the SMART CAR platform, we also anticipate to commence enrolling in the China IIT study for GC503 in mesothelin-positive solid tumors, including ovarian cancer in 2022. In addition, we also plan to provide clinical data updates on current and new programs at major medical conferences and all published in lead journals. With that, I'd like to turn it back to the operator to open the session for your questions. Operator?

[Operator:]

Our first question comes from Joe Catanzaro with Piper Sandler.

[Joe Catanzaro:]

Maybe the first one from me. I understand that your CDMO has had some capacity constraints. And William, I think you may have alluded to this, but wondering if there have been any GMP runs and whether there's anything you could say around comparability at this point between the product being manufactured at the CDMO versus what was manufactured for the China IIT? Then I have a follow-up.

[Dr. William Cao:]

Okay. I want to take that question. And Martina, feel free to jump in. Well, the manufactured capacity right now is -- in the whole industry is in high demand, right? Adjustments were needed based on kind of competitive situation. So there is no -- nothing to do with the technical aspect. The technical parts, including the tech transfer, the trial runs, the SOP and the training is all good, all smooth. So it's simply a logistic -- small issue. Yes, that's what I can say. Martina, do you have anything to add or it's good?

[Dr. Martina Sersch:]

No, complete picture. Thank you, William.

[Joe Catanzaro:]

And then another question maybe something as well that William you may have mentioned. But for GC012F ongoing China IIT study, can you remind us of the myeloma cohorts that are currently enrolling in terms of line of therapy and whether there are any expectations to report updated clinical data from that trial sometime this year?

[Dr. William Cao:]

That’s certainly a Martina's question.

[Dr. Martina Sersch:]

Yes. Sure. Thank you. Great question. Yes, we have been continuing enrolling patients in our relapsed/refractory multiple myeloma study, and we're certainly planning on showing the data this year. Once acceptance is clear at the conferences, we will also issue a press release for acceptance. So you can look forward to that data. And for lines of therapy, we already talked about that we are moving into earlier lines of therapies, and we're also planning on submitting that data once available to one of the major consensus this year.

[Joe Catanzaro:]

Got it. And I guess, maybe if I could just squeeze one last one, in sort of more technical. For GC503, maybe can you elaborate a little bit on the approach and construct design that will allow you to take a tumor suppressive signal and translate that into a positive signal for T cell proliferation and persistence?

[Dr. William Cao:]

I think you’re might mixed up with the SMART CART and the TruUCAR-T platforms. In the TruUCAR-T platforms, we don't have a mechanism that can turn a suppressive molecule into positive. And now ,let me just elaborate how this 502, if you're referring, is based on TruUCAR-T platform. TruUCAR-T typically would have 2 CARs, 1 targeting CD7, which is pan-T NK marker. So the purpose of this CAR is to suppress allogeneic T and NK cell, allogeneic means from the patient to reject the CAR T cells. So allo rejection from patient T and NK could be detrimental to the CAR T cell’s persistence and proliferation, so the CD7 CAR is designed to prevent that. The second CAR is really the tumor antigen targeting CAR. In this case, the CD19, the GC502 is the best example to illustrate how this TruUCAR-T platform works. So the TruUCAR work in the way that I just described. Now this 502 is targeting CD19. And now this example really demonstrates the wide applicability by switching CD19 to other tumor antigens, for example, BCMA, any non-CAR-T tumor target. So that is also enhanced embedded in this TruUCAR-T platform to facilitate the TruUCAR-T to proliferate and persistent in the hostile environment. I hope I explained it well.

[Joe Catanzaro:]

Yes. No, that's helpful. I guess I was asking about GC503, apologies if I missed the boat, but we could maybe -- we can follow up on that offline. Thanks so much, William.

[Operator:]

Our next question comes from Kelly Shi with Jefferies.

[Unidentified Analyst:]

This is Dave on for Kelly Shi. Just have a few questions. One is regarding 012F in B-NHL? So should we expect any data this year?

[Dr. William Cao:]

Martina, you want to take that one?

[Dr. Martina Sersch:]

Yes, you should.

[Unidentified Analyst:]

Okay. And another one is for your upcoming presentation at AACR. Any color on like number of patients, data on the -- at the AACR?

[Dr. Martina Sersch:]

Should I, William?

[Dr. William Cao:]

Yes. Please take it, yes.

[Dr. Martina Sersch:]

Yes. So AACR, the abstract is still not out yet. So we can't give you any hint here, but it's not going to be very long. April -- beginning of April, AACR, so please hold on tight and you'll see the data.

[Operator:]

Our next question comes from Nick Abbott with Wells Fargo.

[Nick Abbott:]

In your prepared remarks, William, you indicated that BCMA expression on B cells ranges widely. I think the lower end was 39%. So my first question is, can you talk about where in the B cell developmental lineage BCMAs express or controls it? And are you able to modulate that? Would you be able to be, for example, pre-treat the patient with something that increases BCMA expression prior to CAR-T treatment?

[Dr. William Cao:]

Yes. That's interesting approach. I haven't thought about it, to induce BCMA expression on NHL. But this is our kind of philosophy, we want to utilize the power of a cell, not to give additional "help" to complicate the matter. As a representative of company's R&D team, we strongly believe the T cell has enough power. All you need to do is to leash the power without causing trouble. Now the TruUCAR design is exactly, one of the key design or the feature is to not include combination therapy. So preconditioning is easy, and it's -- the drug is safe. It can be -- PK-wise, can really help expression of BCMA on NHL that might be critical. And in our case, it's like any other potential tumor markers. The expression level doesn't have to be very high as long as it’s there. Now the data shows 39% to 90%, but the methodology behind this data might be classical IHC or flow cytometry, which are based on antibody findings. And then we know the antibody binding assays are not as sensitive as CAR-T. CAR-T is 1,000x higher. So we suspect, in those patients with lower BCMA expression, it doesn't mean they are not there, but they're just very thinly expressed. It's like CD19 on multiple myeloma. They are there, but they are weakly expressed. But the CAR-T can pick it up. So the -- we don't have this exclusion criteria, saying if the NHL patient has no BCMA expression, we'll exclude them. No, we don't do that. So at this moment, the dual targeting is going to help to -- for the CAR-T to pick up the NHL cells.

[Nick Abbott:]

As you think about going forward with the BCMA franchise, how do you think about adding a third CAR, so CD7 CAR? So combining the FasTCAR to TruUCAR platform, what are the considerations about expressing 3 CARs?

[Dr. William Cao:]

That's a very deep question, Nick. This is actually a very intriguing question. I have to say we are -- it's kind of in our consideration, but I cannot reveal anymore. It is one of the interesting idea, but I think the key question here is really the CMC. We have ample experience with dual CAR and dual CAR expressions and especially the CMC. So I can't give a clear answer at the moment, but I think that's an interesting part.

[Nick Abbott:]

Okay. And then just last one for me. You have the SMART CAR listed, is that expected to go into the clinic in China? Or is the goal to get it in the clinic in China this year as well?

[Dr. William Cao:]

Yes. It's going to clinical in China this year, and it's our derisk strategy.

[Operator:]

Our next question comes from Justin Zelin with BTIG.

[Justin Zelin:]

Just a quick one. You recently saw approval for Legend J&J's Carvykti/Cilta-cel. I believe it was the first FDA-approved China developed CAR-T. Just wondering if you see any read-throughs to Gracell and your pipeline, your strategy?

[Dr. William Cao:]

Yes, I think it's -- Martina, I think it's a good question for you.

[Dr. Martina Sersch:]

Sure. So this -- it was expected that Carvykti is going to get approval. We already consider that this is a part of a huge amount of BCMA-only targeted products. There are many out there. So we differentiate not only by being dual targeting, but also the fast manufacturing. So at this point in time, this is our strategy, and there is no need to adjust.

[Operator:]

There are no further questions. I'd like to turn the call back over to Dr. William Cao for closing remarks.

[Dr. William Cao:]

Thank you, again, to everyone for joining us on the call. The Gracell team is very proud of what we have accomplished over the last 5 years since our founding. We have rapidly expanded our teams in China and the U.S. with exceptional talent. We have the vast, many clinical programs and derisk 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 advance clinical development of breakthrough CAR-T cell therapies that have the potential to overcome key challenges by leveraging our proprietary FasTCAR, TruUCAR and SMART CART technology platforms. We look forward to further advancing our clinical programs, and we'll 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.