Stealth BioTherapeutics Corp
Q3 2020 Earnings Call Transcript

Published: 7 Nov 2020

[Executives:]

Henry Hess - CLC Reenie McCarthy - CEO Rob Weiskopf - CFO Jim Carr - CCDO Brian Blakey - CCO

[Analysts:]

Charles Duncan - Cantor Fitzgerald Yi Chen - H.C. Wainwright

[Operator:]

Greetings, and welcome to the Stealth BioTherapeutics Third Quarter 2020 Financial Results and Recent Business Highlights. A brief question and answer session will follow the formal presentation. It is now my pleasure to introduce your host, Henry Hess. Thank you, Henry. You may begin.

[Henry Hess:]

Good morning. I'd like to remind listeners that management will be making forward-looking statements on today's call, including, for example, expected timeline and plans for development of Elamipretide and other pipeline programs and discussion related to the company's financial position and cash runway. Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the Risk Factors section of Stealth Form 20-F filed with the SEC on April 1, 2020.

[Reenie McCarthy:]

Thank you, Henry. And thanks to everyone for joining us this morning to review our third quarter 2020 financial results and discuss recent business highlights. Also joining me on today's call, along with Henry are Rob Weiskopf, our Chief Financial Officer; Jim Carr, our Chief Clinical Development Officer; and Brian Blakey, our Chief Commercial Officer. So, we'll kick this off by talking about our dry AMD program. We were recently discussing the importance of mitochondrial bioenergetics for ophthalmic indications like dry AMD at a dry AMD Summit earlier this month. And it's clear from those discussions that there is growing recognition of the role of mitochondrial dysfunction in this disease. We're on the cusp of completing enrollment in our Phase 2b clinical trial in patients with geographic atrophy, we're about 90% enrolled. We have opened some additional sites to help meet our target of completing enrollment by year-end. We've also implemented patient-centric protocol to make our sites more accessible during the ongoing pandemic, including night and weekend visits and visiting nurses. We are continually monitoring our sites as well as incident rates across the country to assess the impact of any COVID-19 related discontinuation. If necessary, we will upsize our target enrollment to meet our criteria, which could extend enrollment into early Q1. However, we have no current plans to do that. Our core mission at Stealth is to provide life altering therapies to patients suffering from diseases involving mitochondrial dysfunction. Unlike geographic atrophy, which affects over a million eligible Americans, these other diseases are often rare diseases, sometimes even ultra-rare diseases. Barth syndrome, for example, is known to affect less than a 125 Americans. These diseases have they are not always well understood or well characterized. In most cases, they result in a severe burden of illness, which negatively impacts patient's lives in terms of their ability to conduct activities of daily living. In some cases, they lead to early mortality in young children adolescents and adults, which is the case in Barth syndrome. To better understand how these diseases manifest and what the unmet need really looks like, we've developed strong relationships with clinicians and patient advocacy groups. Recently, a group of over 4,000 members of the Barth Syndrome community signed a petition asking us to work with the FDA to provide access to own appetite to people with Barth as soon as possible.

[Rob Weiskopf:]

Thanks Reenie, and thank you all for joining us today. Before reviewing the financials for the quarter, I would also like to highlight a few important financial updates in the quarter. Last night, we announced the first closing under a Development Funding Agreement to support further clinical development of elamipretide.

[Reenie McCarthy:]

Thanks, Rob. Before opening for questions, really briefly we'll highlight our upcoming milestones that we've outlined. So, that will be completion of our dry AMD trial in terms of enrollment by year end, submitting our Barth NDA at the end of this year, initiating our trial and Friedreich's ataxia, early next year. Followed by planned trials in Duchenne cardiomyopathy and Replisome-related disorders, all while continuing to advance SBT-272, our second-generation clinical stage compound as well as our preclinical pipeline. We're excited to be able to move forward with all these initiatives and to deliver upon our mission of developing therapies for the serious unmet medical needs affecting our patients. And so, with that I know it's been a very busy week for a lot of reasons for many of you. So, I'll turn the call over for questions. Thanks for joining.

[Operator:]

Thank you. Our first question comes from Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

[Charles Duncan:]

Good morning, Reenie. Thanks for taking our questions. Congrats on the progress and the recent Morningside financing. Well, I had a couple of questions on elamipretide and then I did want to follow up with a question on 272 if I may?

[Reenie McCarthy:]

Sure, absolutely.

[Charles Duncan:]

Thanks for the clarity on the Barth NDA filing by end of the year. I guess, I'm wondering if really the key if you will, value creating event in the near term is not only the filing, but also the acceptance for review or do you feel good about the recent interactions with the Agency on Barth. And I guess, I'm wondering when you consider the comparison to natural history, yet the clinical data or observations that you've made, it seems to me that heart function improving and proceeding, functional improvement is kind of an obvious thing. But do you think that the agency has question about whether or not those observations could be effort dependent and not necessarily predictive of clinical value or do you think the Agency has I guess comfort around those observations?

[Reenie McCarthy:]

Well, I mean, as we shared in and appreciate the question. As we shared in our last update at the end of the second quarter, the Agency has expressed some concerns about the interpret ability of the changes in such a small data set with respect to cardiac function. So, this was 12 patients total. We did see that most of those patients during the double blind portion of the trial, after they received elamipretide, their heart function started to improve and really then reaching statistical significance in open-label extension with long-term therapy, but it's a very small subset of patients. And you're essentially looking for approval on the basis of the surrogate endpoint, if you're looking at that. So I think that's where tracking this and looking at the correlations of time for the recent -- presentation at the American Society of Genetics is helpful.

[Charles Duncan:]

Yes.

[Reenie McCarthy:]

But I do think that there were clear questions from the Agency about whether we should do an additional clinical trial here. I guess, I would say that, it's a very rare disease. We think the right trial design is a post-marketing design to track long-term outcomes. We recognize the need for that to be placebo controlled, and we're hoping to your point that the Agency does except the NDA and engage with us on the discussion around what a post-marketing trial should look like.

[Charles Duncan:]

And do you think advocacy is willing to be supportive of that general outline for a post marketing trial, and that may help the Agency understand the challenges in this patient population?

[Reenie McCarthy:]

Well, yes. I mean in a patient population that is less than 125 patients in the United States. To get a petition signed by over 4,000 people is pretty remarkable. And that was addressed to us and to the FDA. So I do think that advocacy is supportive based on that, that's something that I think certainly advocacy speaks for itself and has its own materials on this posted that people can look at. But from our perspective, we certainly feel compelled to respond to that outreach. I mean, we hope that the FDA will as well. I don't know what to make of some of obviously in the news this week is or other examples of the FDA exercising regulatory flexibility or considering doing so in much larger patient population. So, we're hopeful that we have a path forward here.

[Charles Duncan:]

Yes. I noted that as well, one of our primary thesis for neuro indicator line is that, that innovation in terms of regulatory thinking. Moving on to the Friedreich's Ataxia program that you mentioned, which is investigator-initiated. Will this be your primary the primary route forward for demonstrating or perhaps clinical activity with elamipretide and a vibrant set of indications or will the company pursue also a Friedreich's ataxia study.

[Reenie McCarthy:]

Yes. Our plan from that study is really we did this in AMP right as well. It's a good way for us to understand in the disease with a very well-characterized natural history, what endpoints we can look at. So there's two buckets of endpoints we're interested in, ophthalmic and cardiac, both decline in Friedreich's. The decline in cardiac is slower, right? So, if we were just trying to prevent the decline that might be a harder outcome for us to look at. If we actually can improve cardiac function like we've seen in Barth that could be an interesting endpoint for development effort that we would undertake. So, our hope is to be able to understand from that data, what elamipretide can do in that disease setting, and then design a controlled pivotal clinical trial to prove that.

[Charles Duncan:]

Okay. And final question moving onto 272, you mentioned intriguing profile in preclinical animal models for neurological indications. I guess, I'm wondering when could we see 272 move into actual efficacy studies beyond just the initial safety studies, when could we see the first efficacy study outlined and started?

[Reenie McCarthy:]

Yes. So Jim, I may ask you to help me out here. I think that what we do need to do long term talks for the neuro indications we're considering. So Jim, we are probably thinking earliest would be late next year probably into 2022. Is that right?

[Rob Weiskopf:]

I agree, Reenie.

[Reenie McCarthy:]

Yes.

[Charles Duncan:]

Okay. I appreciate all the color and thanks for taking our question.

[Reenie McCarthy:]

Yes, thanks Charles. Appreciate you joining.

[Operator:]

Thank you. Our next question comes from Yi Chen from H.C. Wainwright. Please proceed with your question

[Yi Chen:]

Hi. Thank you for taking my question. Would you be able to comment on how many COVID-19 related discontinuations have occurred so far?

[Reenie McCarthy:]

Yes. The percentages is fairly low. Jim, it's under 5% or something, right? It's so the percentage is fairly low at this point.

[Yi Chen:]

Okay.

[Reenie McCarthy:]

I think that the issue is for us that we are looking, we're seeing the third wave in ratcheting cases, and we just want to keep an eye on it. So, I think that from our perspective, the key takeaway for this call is not that we're particularly concerned about that, but that we are also not going to short cut short change the study if we see any changes.

[Yi Chen:]

Got it. So, for the Phase 3 trial in replisome-related mitochondrial myopathies, how many patients do you plan to grow and how soon can this trial be completed?

[Reenie McCarthy:]

So, I'm going to ask Jim to weigh in on this because he has done a ton of work digging into this patient population and thinking about different trial designs.

[Jim Carr:]

Sure, Reenie I appreciate the question. So, the primary endpoint would likely be the six-minute walk test, since that is where we saw the strongest signal. So, you can think of the trial design in the neighborhood of 100 patients. As you know, there is variability with that endpoint. We benefit from the fact that in the placebo group there was no apparent improvement in the six-minute walk test. So, we will be as aggressive as we can be with assumptions for this trial. But on the flip side of that, we do have to have a reasonable sample size to give us a good success. The length of the trial really depends on how briskly we can enroll the trial. So, we're hoping to have the trial under way in the second half of next year. And again, I just -- I hesitate to put a timeline on that because it's going to depend on our ability to quickly enroll it. We're thinking with duration of follow-up of between six months in a year. We haven't necessarily landed on that, but that too obviously drives the length of the trial. But the biggest concern is big we can roll it. This is a subset of the primary mitochondrial disease population, so it's more rare than our previous pain and effort. So, we are going to have to be very thoughtful about the sites we choose and just how quickly we can enroll the trial.

[Yi Chen:]

Got it, thank you. And on the Barth syndrome, do you expect any additional FDA feedback before you submit the NDA application?

[Reenie McCarthy:]

No, we are not. We did not request a pre-NDA -- pre-IND meeting with the Division of Rare Diseases and Medical Genetics. So, and that's the division where the primary IND steps for that program.

[Yi Chen:]

Got it. And final question for the Development Funding Agreement. Would you be able to provide a rough timeframe during, which you expect to receive the additional $85 million, I think.

[Reenie McCarthy:]

Yes. So, Morningside commitment was for $35 million, $20 million was upfront. The balance comes on near-term milestones, which are really around dry AMD and Barth, which could be end of year, kind of early next year, assuming we meet those milestones. The balance of the are kind of funding capacity under that agreement -- was really intended to kind of as Morningside consents for us to have additional fundraising flexibility, should we wish to utilize it. So, that's really something from management having a toolbox as we consider our overall strategies for financing the company.

[Yi Chen:]

Okay, thank you.

[Reenie McCarthy:]

Yes.

[Operator:]

Thank you. Our next question comes from Matthew Luchini with BMO. Please proceed with your question.

[Unidentified Analyst:]

Hi, this is Justin on for Matt. And thanks for taking our question and congrats on the progress. Two questions for me. So, for the like could you guys provide color on in terms of where you guys are, in terms of finding investors for the second $35 million? Like are they like to be assume that the second tranche available, what's the second, what's the status on the second tranche?

[Reenie McCarthy:]

Yes. So, as I just as we just sort of started to try to repeat about that, it was really intended to reflect the Morningside's concerns in the Board's authorization for us to utilize this, thus, again just another sort of tool on the toolbox as it were in terms of overall fundraising strategy. It's not. So, it's not like sort of anything that we're adding timelines around or thinking about it. It's just something that should management feel that it's appropriate to bring in additional funding under that structure. We have the ability to do so.

[Unidentified Analyst:]

Got it, okay that's helpful. And could you provide incremental color, the additional analysis that will be submitted for the NDA by year end. And if NDA were not to be accepted, like how much conviction do you guys have that the randomized withdrawal trial can support resubmission of the NDA?

[Reenie McCarthy:]

Yes. So, I mean in terms of as you know, when an NDA submission is put together, there is a lot of additional analysis been done. So, I don't know that I can really summarize that briefly on a call. But some of the work has entailed like further elucidation of natural history. And Jim, I don't know if you want to add anything there.

[Unidentified Analyst:]

I agree, Reenie. It's just a deeper dive into the datasets we've talked about in the past.

[Reenie McCarthy:]

And then, in terms of the randomized withdrawal. I think we've shared in the past that very small number of patients, which introduced those challenges with that design. But it is a design that the FDA has told us a couple of times now. That is an option for us. And so that's really directly responding to and following FDA feedback on the program. So I think that gives us some confidence that it's the path forward.

[Unidentified Analyst:]

Got it. Okay, that's helpful. Thank you. I'll hop back into queue.

[Reenie McCarthy:]

Thanks. Good to talk to you.

[Operator:]

Thank you. Our next question comes from Maury Raycroft with Jefferies. Please proceed with your question.

[Unidentified Analyst:]

Hi. This is on for Maury. So, you mentioned about possible planned resizing in dry AMD. Is that due to borrowing assumptions or is there any underlying reason for it?

[Reenie McCarthy:]

You're asking about potential upsizing. That was really just a signal that we -- so we took at our COVID risk factors as a separate comment, really for COVID to the extent that there are all ongoing risk factors. It would be around that trial because those are elderly patients who are obviously in a high-risk category. And we have been looking at across the country where we're seeing spikes and infection rates, over layered with where our sites are. Again, we haven't seen significant number of COVID related discontinuations at this point in time, but it's just something that we're going to continue to take a look at. And if that should change, because we are in the middle of another spike in the disease unfortunately, that might lead us to upsize the trial accordingly. But at this point, we have no plans to do so.

[Unidentified Analyst:]

Okay, got it. And it seems like in response to the FDA's comments, you're preparing for both protocols like as well as the post approval. So, is there possible to blending both approaches like as the near term and long-term plans financially?

[Reenie McCarthy:]

Yes. It could be. I mean, I think part of this is really a dialog with the FDA. We wanted to be responsive to their concerns, that randomized withdrawal is an approach that could be implemented more rapidly. It's a very small number of patients, and I can tell you there's not a lot of patient enthusiasm for it, just because these patients have been on therapy now for a couple of years. And obviously from that, you might infer that they wouldn't necessarily want to come off of that. But that being said, it is a near-term approach, it's responsive to the FDA's concerns. We do think that the more appropriate approach is the post marketing study. We think it's more scientifically robust. We think it will tell us important things about how the drug works in terms of potentially, extending lifespan for patients with this rare disease. So, that's really the reason to put both on the table.

[Unidentified Analyst:]

Got it. Can you remind us precedents for patient discussions with FDA. And if this has worked in the past and how can it get the stage from ?

[Reenie McCarthy:]

Yes. This certainly is precedent for patient advocacy interactions with the FDA. I think probably EXONDYS and Sarepta would be the poster child for that. There is also precedent for the FDA exercising regulatory flexibility in the context of very rare diseases. Sarepta is an example of that, as is not syndrome, which was Ultragenyx. And I think what we're seeing even this week in the biotech news with the interactions with Biogen and a disease which is much larger, right? But we are the data -- read some questions gives you some insight into ways that the FDA can exercise flexibility.

[Unidentified Analyst:]

Okay. And then for the program, have you brought any preclinical work in non-human primates can long-term?

[Reenie McCarthy:]

We have not yet done that, no.

[Unidentified Analyst:]

Okay, thank you.

[Reenie McCarthy:]

Yes. But we have done a Phase 1 study in people so.

[Unidentified Analyst:]

Right.

[Reenie McCarthy:]

For 272, yes okay.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing comments.

[Reenie McCarthy:]

Again, thank you everyone for joining today. I know it's been a incredibly busy week, both in the biotech world and in our country more broadly. So we appreciate as always your interest in our programs. Happy to chat offline, if people have other questions. Thanks for your time today. Have a good week.