Stealth BioTherapeutics Corp
Q3 2019 Earnings Call Transcript

Published: 14 Nov 2019

[Operator:]

Welcome to the Stealth BioTherapeutics Third Quarter 2019 Results Webcast. My name Jackie, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]I would now like to turn the call over to Mr. Henry Hess. Mr. Hess, you may begin.

[Henry Hess:]

Thank you. And 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, expectations related to our collaborations with Alexion, expectations for discussions and possible opportunities with potential partners and collaborators and discussions related to the Company’s financial position. 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’s latest 20-F filed with the SEC in April 2019. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so if our views change.Now, I’d like to turn over the call to Reenie McCarthy, Stealth’s CEO. Reenie?

[Reenie McCarthy:]

Thank you, Henry. And thanks to everyone for joining us this morning for our inaugural earnings call.Please join me also in welcoming Rob Weiskopf, our CFO, who joined our team in September. Also with us are Jim Carr, our Chief Clinical Development Officer; and Brian Blakey, our Chief Business Officer, who will be available for Q&A.So, I’d like to take a few minutes to highlight the progress that Stealth has made over the last few months as we’ve concluded dosing in our pivotal primary mitochondrial myopathy study, we’ve announced significant improvements in heart function with long-term therapy in our Barth program, we’ve progressed development of our pipeline with SBT-272 now poised to enter the clinic, expanded our team in preparation for our first potential product approval and taken strides toward the collaboration with Alexion that we believe positions us strongly for successful launch.We are committed to improving the lives of patients suffering from diseases as mitochondrial dysfunction. With that we’ve prioritized three main goals

[Rob Weiskopf:]

Thanks, Reenie. And thank you all for joining us today.Research and development expense for the three months ended September 30, 2019, was $9.8 million compared to $16.2 million for the same period in 2018. The decrease was primarily due to a $3.4 million net decrease in clinical trials due to timing of trials that ended in 2018, a $0.4 million decrease in discovery related expenses due to the timing of their activities and a $3.4 million decrease in contract manufacturing. These decreases were offset in part by an increase of $0.8 million in employee and consultant related costs.Turning to general and administrative expense. It was $6.3 million for the three months ended September 30, 2019, compared to $4.8 million for the same period in 2018. The increase in administrative expense was primarily attributed to an increase of $0.6 million in employee and consultant related costs, associated in part with build-out of the pre-commercial and compliance functions, $0.5 million in professional services activities related to operating as a public company and $0.4 million in pre-commercial activities, including building market disease awareness.Other expense was $0.4 million for the three months ended September 30, 2019, compared to $1.7 million for the same period in 2018. The decrease in other expenses primarily attributed to a $5.5 million decrease in interest expense related to convertible debt, which was converted into ordinary shares in conjunction with our initial public offering, an increase in interest expense of $0.1 million, offset in part by $4.3 million change in period over period fair value adjustments derivative liability associated with the convertible debt.Net loss was $16.5 million or $0.04 per basic and diluted net loss per ordinary share for the three months ended September 30, 2019, as compared to $22.7 million or $0.33 basic and diluted net loss per ordinary share for the same period in 2018. Finally turning to cash. Cash and equivalents were $37.2 million at September 30, 2019. And in October 2019 we received a $30 million payment associated with the Alexion option and share purchase agreements announced on October 10, 2019.With that, I’d like to turn the call back to Reenie.

[Reenie McCarthy:]

Thanks, Rob. Before we open up for questions, I want to reiterate again how pleased we are with the progress we’ve made not only over this past quarter but throughout the year. As we look into 2020, I am confident in our team’s ability to continue this momentum and transition successfully into a commercial stage company. We look forward to finishing the year on a strong foot and to reporting back on our various upcoming milestones in the following months.Thank you again for taking the time to join, and I’m happy to open up the call for questions.

[Operator:]

[Operator Instructions] And our first question comes from Charles Duncan with Cantor Fitzgerald. Please go ahead.

[Charles Duncan:]

Good morning, Reenie and team. First of all, congratulations on all the progress this year and thanks for taking my questions. So I had a couple of operational ones and then some pipeline. So maybe I’ll start with the operational one. Regarding the Alexion option, can you provide any more color on -- I guess you mentioned an option payment and then a near-term milestone when that option was exercised. Could you anticipate any of those occurring over the course of, say, the next 12 months?

[Reenie McCarthy:]

Yes, we could. So, certainly on option exercise, and then those near-term milestones, we do anticipate the potential for significant near-term milestones over the next 12 months.

[Charles Duncan:]

And can you order of magnitude those in terms of size maybe relative to the upfront?

[Reenie McCarthy:]

So it would be at a multiple of the upfront amount. And we’re not giving specific guidance on the amounts that are due as we’ve discussed with Alexion. But what we’ve indicated previously, and I can reiterate again, that we do believe that with the payments coming in from the Alexion transaction over the next 12 months, we will be positioned strongly for commercial launch.

[Charles Duncan:]

Okay, perfect. Yes, I figured you wouldn’t give us actual numbers. That’s okay, but that helps. Maybe moving on to the pipeline. First of all, with regard to elamipretide and MMPOWER 3, can you give us any color on the patients that have been enrolled with regard to the six-minute walk test enriching paradigm, how do you feel if you look across the patient population on a blinded basis, about, call it the quality of patients? Hate to use that word, but how do you feel about that?

[Reenie McCarthy:]

Yes, absolutely. Jim, maybe we’ve given -- I think we’ve previously shared the baseline six-minute walk data, so which was successfully enriched. Jim, maybe you can speak to that a little?

[Jim Carr:]

Yes. So the baseline six-minute walk test performance was a stringent 30 meters and we have shared that at scientific congresses in the past. So that certainly is reflective of our desire to focus on the low walkers. We do believe that based on our previous experience with the drug in the Phase 2 population that the low walkers respond better. But also just as important from my perspective is the fact that they displayed less variance between walking. So we win in a couple of ways by focusing on walkers. There’s less variability each time they walk, and again we feel like they respond better to treatment.

[Charles Duncan:]

Okay. Yes. That makes sense. Appreciate the added color. With regard to data timing, could we still anticipate first quarter and can you provide any color on any granularity with regard to that first half of the first quarter or anything? And then, is there any other additional non-clinical work that you could anticipate to enable an NDA? Then I’ll hop back in the queue.

[Reenie McCarthy:]

Great. So good questions. We are expecting data still in January of 2020 for our MMPOWER 3 clinical data. So we do expect still to be on track for January for announcing that data, and we are not anticipating further non-clinical work to enable our NDA submission.

[Charles Duncan:]

Perfect. Thanks for the added information.

[Reenie McCarthy:]

Great. Thanks for the questions, Charles.

[Charles Duncan:]

Thanks.

[Operator:]

Thank you. Our next question comes from Christopher Marai with Nomura. Please go ahead.

[Christopher Marai:]

Hi. Good morning. Thank you for taking the questions. Congratulations on the cardiac dataset for Barth. I think, that’s really encouraging [Technical Difficulty] potential for the drug and really indicative of [Technical Difficulty]. So, I was wondering if you could comment maybe on, number one, in Barth trail [Technical Difficulty] reduction in fatigue that could be through your mitochondrial myopathy trial. And then two, in MM trial, are you stratifying patients by cardiac involvement? Is there any indication perhaps that this drug would have a better outcome, whether a six-minute walk test or sort of [Technical Difficulty] patients with cardiac [Technical Difficulty] could you somewhat quantify for us just how many patients in MM may have that cardiac [Technical Difficulty]

[Reenie McCarthy:]

Sure. Thanks, Chris. So I’m going to take some of the first part of that and then ask Jim to kind of elaborate. With respect to the Barth trial, we are really excited by the improvements we’re seeing in cardiac function. As you -- as we said, that’s really the leading cause of early mortality in that disease, and it’s a very tough disease. We have seen strong correlation between the improvements in cardiac function and improvements in fatigue, six-minute walk, muscle strength in open-label extension. And one of the things I think that we are -- that trial has really informed us about, I mean, this is a very sick patient population that the longer duration of therapy, the greater the magnitude of those improvements across all of those endpoints. So, when we look forward to MMPOWER 3, where we’re treating now for six months versus only a month in the prior trial and only five days in the one before that, we do think that that longer duration of therapy may be important in terms of amplifying therapeutic benefit on fatigue as well as on six-minute walk test. You asked about cardiac involvement in the MMPOWER 3 clinical trials. So we didn’t -- we really weren’t capturing the cardiac endpoints in that trial.Jim can speak a little bit to the fact that frankly across the whole mitochondrial disease population, cardiomyopathy is really a leading cause of early mortality. But in that particular trial we are focused on the skeletal muscle function. Jim?

[Jim Carr:]

Correct. Chris, as Reenie mentioned, there was no particular focus on the patients with primary mitochondrial myopathy that had a concomitant cardiomyopathy. So we were -- frankly we’re indifferent to the cardiac status. Based on the literature, one can expect that 20% to 40% of patients with mitochondrial disease could have a coexisting cardiomyopathy, likely secondary to the mitochondrial disease. So this I think will be of key interest to us moving forward. But with respect to the Phase 3 trial, we did not pay particular attention to the cardiomyopathy that may have been coexisting.

[Operator:]

Thank you. Our next question comes from Matthew Luchini with BMO Capital. Please go ahead.

[Na Sun:]

Hey guys, this is Na on for Matthew. So two questions from me. And congratulations on the progress so far. Can you just give a little bit more specific color on the -- how Alexion can help you bring forward the peak sales and deeper penetration? Is that a function of similar call points, especially since Alexion also has a commercial footprint in the rare neurology space, so like maybe a similar call point?And then the second question is for SBT-272 which looks very interesting. And I know that the deal with Alexion is for subcutaneous product and this is an oral agent. But is there a possibility, like, are they waiting on maybe Phase 1, Phase 1/2 data before they can extend that option also to SBT-272? Thanks.

[Reenie McCarthy:]

Thanks, Na. I’m going to answer your second question first and then turn it over to Brian. The option that Alexion has is only to subcutaneous elamipretide. They do have the potential to extend that to a local ophthalmic formulation of elamipretide. But SBT-272 and all of our pipeline assets other than elamipretide are outside of the option arrangement with Alexion. So those are all fully owned by Stealth and there is no option that Alexion currently has to expand any rights into that pipeline that we own.So with that, I’ll push over to Brian to speak to the commercial synergies.

[Brian Blakey:]

Yes. So now that we have been working diligently with Alexion in multiple meetings, they’ve been very professional and very good to work with, I think we have around 30 sub-teams already up and running to make sure that we’re engaged and working synergistically. I think three key areas that they’re going to assist us in and going faster and deeper in penetration in the US market. One is with payers. They’ve already engaged with payers on the orphan area for their therapies and will help us because they have relationships which we will be hiring new people to go in there. I think secondly, as you mentioned, neuromuscular -- Reenie has said that we have started to get into that area pretty significantly and we certainly know the mitochondrial care network and we know the mitochondrial docs. But they have that footprint into the neuromuscular specialists. So that should assist us. And third, we have been working closely and consistently with the MitoAction and the UMDF as far as the patient advocacy groups. And I think that from speaking with Alexion, they have great ways to target patients, particularly ones that may be earlier in their journey -- in their patient journey and accelerating that patient journey into activation, diagnosis and treatment.

[Na Sun:]

Very helpful. And thank you.

[Operator:]

Our next question comes from Yi Chen with H.C. Please go ahead.

[Yi Chen:]

Thank you for taking my question. Just to clarify, when you says that the FDA end of phase meeting for Barth syndrome first part of 2020, does that mean first quarter 2020?

[Reenie McCarthy:]

We are hoping first quarter. We don’t have specific guidance to give on that. But we would anticipate that it could be within the first quarter. Yes. I mean, it just really kind of depends on the FDA’s calendar more than ours.

[Yi Chen:]

Okay, got it. And at this point, do you expect any potential revenue from elamipretide in 2020 at all, potentially generate from bulk use of it in Barth syndrome and primary mitochondrial myopathy?

[Reenie McCarthy:]

Yes. I mean, obviously, this is all regulatory timing dependent. But we still think that there is a potential for revenue in 2020 for elamipretide, yes.

[Yi Chen:]

Okay. And regarding the commercial rights outside the US that Alexion could potentially obtain, have they reviewed any geographic areas that they would preferentially target initially?

[Reenie McCarthy:]

We would -- we haven’t discussed in depth with them. But based on our preliminary conversations, we would certainly expect Europe, given their significant footprint there.

[Yi Chen:]

Okay. Thank you. That’s all.

[Operator:]

Our next question comes from Maury Raycroft with Jefferies. Please go ahead.

[Maury Raycroft:]

Hi, everyone. Good morning, and congrats on the progress, and thanks for taking my questions. Just wondering for the Barth meeting with regulators in the first part of ‘20. What are the potential outcomes from that? I guess would they potentially decide approval around that time frame? Or would they set a PDUFA date? I guess, what should we expect coming out of that meeting?

[Reenie McCarthy:]

I mean, it’s really an end of phase meeting for us to review all of the open label extension data with the new division that we’re sitting in. So we actually haven’t had a face to face meeting with the new division yet. We’ve had correspondence and interaction, but this will allow us to go in and review all of our open label extension data, which is getting stronger and stronger, and particularly with the cardiac data, which frankly is not on the FDA’s radar yet. That’s new data that we’ve really just announced. So, what we would expect coming out of that meeting is, it’s really just informing our path forward, do we need a pre-NDA meeting before we file the NDA, do we go straight to NDA. But it’s really just to kind of introduce the agency to the full dataset from open-label extension.

[Maury Raycroft:]

Got it. Okay. And then for -- on the Alexion update call, you mentioned you and Alexion were both blinded to the Phase 3 data. But just wanted to clarify if either you or Alexion had any access to full blinded data as the study advances?

[Reenie McCarthy:]

Yes. I mean, we’ll, obviously before database lock, be conducting blinded data review to make sure that we’ve accounted for any missing data -- really just as part of normal housekeeping around the close-out of a trial. But that’s something that is yet to occur.

[Maury Raycroft:]

Okay. And then I’m guessing you can’t provide too many more specifics around timing for when Alexion would make an opt-in decision after the Phase 3 readout. But I’m wondering if it’s fair to assume this would happen before a regulatory approval decision is made or if you can talk about potential mechanisms for Alexion to extend the opt-in time frame and whether this could be extended to after a regulatory decision is made?

[Reenie McCarthy:]

We would expect a decision to be made before a regulatory decision is made based on the terms of our agreement, and we do not anticipate any mechanisms for extension at this time.

[Maury Raycroft:]

Got it, okay. My last question is just on LHON. If there is any highlights from that Phase 3 protocol that you want to mention, that would be interesting.

[Reenie McCarthy:]

Not anything in particular. I mean, we did have a meeting with the FDA where we talked to them about endpoints. So I think this is just to kind of reflect our discussions with the FDA about endpoints. FDA was very interested in multiple parameters of visual function based on our Phase 2 data, certainly supportive of looking at visual field, which as you know in LHON being a disease of central vision. The visual field becomes very important for those patients. Also interested in color vision based on the Phase 2 data as well as the fairly robust patient perception of change video protocol that we shared with FDA where a number of patients were reporting improvements in color vision, materially impacting their quality of daily life. So I think that the purpose really of the protocol submission is to just really reflect those discussions with FDA in a protocol. The division of ophthalmology at the FDA is very engaged and very collaborative with sponsors and so we think it’s important that we continue that strong dialog and alignment before initiating the study.

[Operator:]

[Operator Instructions] And at this time, we have no further questions.

[Reenie McCarthy:]

Great. Thank you everyone so much for joining the call today. We look forward to talking to you early next year. Thank you.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. You may now disconnect.