Stealth BioTherapeutics Corp
Q4 2019 Earnings Call Transcript

Published: 1 Apr 2020

[Operator:]

Greetings, and welcome to the Stealth BioTherapeutics Fiscal Year 2019 Financial Results and recent business highlights call. At this time, all participants are in a listen-only mode . As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Henry Hess, Chief Legal Counsel for Stealth BioTherapeutics. Thank you. 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, 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 Form 20-F filed with the SEC on April 4, 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.

[Reenie McCarthy:]

Thank you, Henry. And thank you to everyone who’s joined us this morning to review our full year financial results and recent corporate progress. With me today is Rob Weiskopf, our CFO; as well as Jim Carr, our Chief Clinical Development Officer; and Brian Blakey, our Chief Commercial Officer, in addition to Henry and all of us will be available for question & answers. I want to premise today's call by saying we're all working virtually as I assume you are all as well. I hope everyone is faring well during these challenging times. Obviously, very challenging for some of the patient populations that we service as well. We are off to a strong start in 2020 with a clear focus on advancing elamipretide towards potential approval on Barth syndrome, an ultra-rare genetic condition characterized by cardiac abnormalities often leading to heart failure, muscle weakness, recurrent infections, delayed growth, and reduced life expectancy as a result of mitochondrial dysfunction. We presented very strong data from our ongoing open label extension study early in the first quarter of last year at the American Society of Human Genetics 2019 Annual Meeting. That data demonstrated that treatment with elamipretide resulted in a significant increase in average cardiac stroke volume. And more recently, we announced additional cardiac data at the American College of Cardiology 2020 virtual meeting, demonstrating significant improvements in left ventricular end-diastolic and end-systolic volumes, as well as trends in other cardiac parameters. We also recently announced results from our SPIBA-001 natural history comparative control efficacy study in Barth patients, demonstrating a greater than 80 meter improvement in the primary endpoint of 6 Minute Walk Test at one year compared to natural history controls with a P-Value of 0.0005, as well as significant improvements in secondary endpoints of muscle strength, five times sit-to-stand, and a multi-domain responder index. In early March, we announced that the FDA had granted us rare pediatric disease designation for Barth, for which we may be entitled to a rare pediatric voucher should we receive approval in conjunction with an expedited review. More recently, we met with the FDA to discuss the natural history comparative control efficacy study and the TAZPOWER open-label extension, cardiac surrogate endpoint and functional endpoint data. Our meeting was productive and informative relative to our regulatory path forward, and we look forward to providing further details once we've received the meeting minutes.

[Rob Weiskopf:]

Thanks, Reenie. And thank you all for joining us today. In 2019, we recognized $21.1 million in revenue associated with the Alexion arrangement entered into in October 2019. The revenue represents the portion of the non-refundable upfront payments that were recognized in full upon delivery of the top-line data for our PMM trial. Alexion has since terminated the arrangement and as such no additional revenue will be recognized. Research and development expenses were $44.6 million for the year ended December 31, 2019, down from $53.1 million for the year ended December 31, 2018. This decrease was primarily from a net decrease of $8.5 million in clinical trial costs due to the timing of the trials that ended in 2018, a $2.8 million decrease in contract manufacturing and $0.9 million decrease in discovery related expenses due to the timing of activities. These decreases were offset in part by increases of $3.6 million in employee and consultant related expenses, driven by the continued build out of clinical, medical affairs and regulatory functions and $0.1 million in other costs. General and administrative expenses were $22.3 million for the year ended December 31, 2019 compared to $22.2 million for the year ended December 31, 2018. The increase is primarily attributable to a net $2.3 million increase in pre-commercial activities, including building market disease awareness of primary mitochondrial myopathy and $1.8 million increase in professional services for activities attributable to operating as a public company, an increase of $3.2 million in employee related costs, offset by a decrease of $6.7 million in costs associated with the 2018 financing efforts and a decrease in legal IP fees of $0.5 million.

[Reenie McCarthy:]

Thanks, guys. That was a that was a hiccup on my end, tried to unmute myself and hung up instead. So, before we open up for questions, I want to reiterate again how pleased we are with the progress we've made this quarter, how excited we are with the progress we're making with our pipeline of mitochondrial targeted therapeutics. There's a rich history of mitochondrial dysfunction contributing to cardiac ophthalmic and neurological diseases, and extensive preclinical data demonstrating the promise of elamipretide and our other pipeline compounds in these areas. We're confident that we're poised to execute on that promise. I'm happy to open up the line for any questions.

[Operator:]

Thank you. At this time, we'll be conducting a question-and-answer session. Our first question comes from the line of Charles Duncan with Cantor Fitzgerald. Please proceed with your question.

[Charles Duncan:]

I wanted to ask you about that reading -- recent meeting, and it makes sense to me that you would wait for full minutes to be able to provide some guidance going forward, but you characterized it as productive and informative. And I guess we've talked in the past about a couple of scenarios going forward with regard to elamipretide in Barth. And I'm wondering if you can provide any additional granularity on what you anticipate to be the most likely scenario if we think 12-months out from now?

[Reenie McCarthy:]

So, it was a very productive and collaborative meeting with the FDA, Charles, and I appreciate you for asking the question. We had a number of FDA participants, very senior participants actually in attendance. You may or may not be aware of, but the division of gastroenterology and Inborn Errors has now reorganized into essentially a rare disease division. So, the head of that division, the Director and Deputy Director, are both on the phone as well as the Office Director.

[Charles Duncan:]

Do you have a pre-NDA meeting planned or are they waiting really to kind of green light that next step should it occur after they see this additional information?

[Reenie McCarthy:]

Well, so we were waiting for this meeting prior to submitting a pre-NDA meeting request, so that means the pre-NDA meeting is not yet scheduled.

[Charles Duncan:]

And then as you imagine, perhaps broader utility of elamipretide into other neuro developmental disorders such as DMD and Friedreich's, I think you’d mentioned the Cardiology Advisory Board. When do you anticipate holding that and when can we get some visibility on, call it, the outcome and thoughts in terms of going to the agency later this year?

[Reenie McCarthy:]

That's a great question. And Jim is on the phone, we are trying to work through the virtual scheduling of that, Jim we are targeting sometime this quarter?

[Jim Carr:]

Yes, this quarter. I was just going to say we have the attendee list, and as Reenie mentioned, it’s just working through the logistical challenges that exist that we're hoping for this quarter.

[Charles Duncan:]

Yes, I understand that, Jim. Is the key question for that Advisory Board, whether or not cardiovascular is a challenge for these patients or can it be measured within a reasonable period of time? What is really the thing you'd like to learn in talking to them?

[Jim Carr:]

So, our impression, our view is that the observations from Barth are applicable to other rare disease cardiomyopathies, and Friedreich's ataxia and Duchenne Muscular Dystrophy are certainly at the top of the list. So we want to get consensus that those findings are applicable to those patient populations. We feel that they are, but there's a lot of granularity involved. So for example, when does one introduce elamipretide in the setting of DMD, for example, just knowing the progression of the cardiomyopathy that ensues for most patients, what is the most meaningful time to introduce it, what would the endpoints be, et cetera. So again, just gaining more granularity about how we would actually pursue those endeavors.

[Charles Duncan:]

Last question for Rob. Rob, I guess I'm on the West Coast, so maybe the espresso hasn't kicked in yet, so I may have missed this. But did you talk about a guidance for going forward in terms of cash spend this year?

[Rob Weiskopf:]

No, not at this point.

[Charles Duncan:]

Okay. And is there a key lever that you're waiting for to come up within?

[Rob Weiskopf:]

Well, I think that if we look at our cash and equivalents of $50.8 million at December 31 and in conjunction with the reduction in operating expenses through the corporate reorganization that we did, our funds should be sufficient to fund operations through multiple inflection points, including the Barth NDA filing in the second half of 2020, as well as enrollment completion of dry AMD study.

[Operator:]

Thank you. Our next question comes from the line of Christopher Marai with Nomura Instinet. Please proceed with your question.

[Christopher Marai:]

I was wondering, if first if we could touch upon some of the potential data that you may be seeing for your next generation assets. You started the first in human trials of 272 in healthy subjects. And I was wondering the type of data you might expect to see from that study, and how we might be able to compare that to elamipretide to understand the molecule’s characteristics and potential flexibility going forward?

[Reenie McCarthy:]

Jim, do you want to take that question?

[Jim Carr:]

Sure. So Chris, the ongoing Phase 1 study with 272, for example, is it's a traditional Phase 1 first in human, single extending dose design trial. So, the primary objective of those kinds of trials is of course safety. The PK is also a component of that. So, the trial is ongoing and again, so we expect to get an impression about safety and an impression of PK.

[Reenie McCarthy:]

And then I think, hopefully then sort of triaging that with what we're seeing in preclinical models that we're running at the same time.

[Christopher Marai:]

Yes, I guess I was curious if you might have any other target engagement type data, anything else in that study just to be able to benchmark it versus elamipretide or other bioavailability data that could be potentially helpful, suggests that the molecule behaves differently from elamipretide in the ways that you were hoping. So, is it my understanding that that won't be there, it’s just sort of safety PK/PD?

[Reenie McCarthy:]

Safety PK/PD at this point in time, sort of moving forward, we might look to essentially get sort of CNS penetration, but we -- not in this first study.

[Christopher Marai:]

Secondarily, I understand that you’ve got good feedback from the FDA. How should we think about the potential in Europe for elamipretide in Barth? Obviously, it’s a relatively small population for Europe it might be something addressable also by Stealth, even to walk us through your plans to address that opportunity. And then lastly with respect to the FDA, you need to present against additional data analysis at 272. So beyond hitting the meeting minutes, what might be the gating factor, the timeline that it takes to get that analysis to the FDA? Thank you.

[Reenie McCarthy:]

So I'm going to ask Brian to speak to Europe and Barth, and I'll answer your second question first, and then hand it over to Brian. In terms of timelines for additional data to the FDA, we do have the week 72 analyses. We would have to -- so we have them internally, this is an open label extension. The provision of those to the FDA would be a fairly rapid undertaking for us. We would want to update our CSR with formal outputs, which requires the data cut and a little bit more of external lifting, so that timeline could take a little bit longer. But frankly, would still fall within the original timeline for data cuts to support our NDA to do those formal outputs. So the provision of top-line information to the FDA can happen quite rapidly from that perspective. So we are expecting to be able to turn around the analyses that they've requested and get those back into them shortly. So Brian, do you want to talk about Europe and Barth?

[Brian Blakey:]

I will do. Good morning, Chris. Hope you're having a good morning. So we have done some preliminary work in Europe. I'm talking to some of the larger countries in the big five, Germany, France, UK, about reimbursement for Barth. As you'd expect, it is an easier world for reimbursement for Barth because of such a small population and because of the devastation of the disease. So right now, we are evaluating and we're working ourselves at being able to go ahead and promote it into Europe versus we're in very early discussions with some strategic, to kind of do an analysis of which is better for us to do it or to be able to hand it off. So I think we'll be evaluating that over the next couple of quarters to see where we land and then move forward with that decision.

[Christopher Marai:]

And then in Europe, just for respect to promoting the product. Is it possible to leverage other potential compassionate access use pathways there to get drug to patient without going through the formal approval process? I know some companies have previously done that without -- and these processes enables then to market the drug without a formal approval . So is that how the company looks to bring the drug to patients in the Europe region going forward?

[Brian Blakey:]

I think Chris, that's one of the options we're definitely evaluating as through the compassionate use or expanded access programs to be able to get patients access to the drug and then convert them over and also start the reimbursement process. So, one of the areas that we are evaluating along with the strategic have been just the general promotion, what that would cost us to be able to do that.

[Operator:]

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

[Matthew Luchini:]

So I guess first, it sounds like you know what you're saying is the company is, I want come back to question of cash. Sounds like what you're saying is the company has funded until the end of the year essentially even with expense reductions in place. And so, just want to maybe have you guys talk little bit about how you're thinking about options to address cash needs beyond that point. I mean, you've highlighted a pediatric voucher. Maybe talk little about what else you're considering if it's development of some sort. And then, I guess more broadly, how we should be thinking about, I guess the relative prioritization of some of the different projects that are going on, Barth versus dry AMD versus certain of these early programs, especially given the delay in AMD data now being pushed, presumably from no earlier than let's say '21 at the earliest. So just help us think through how you guys are thinking about the company's evolution as we move from end of the year as you've got these sort of important data points to keeping things moving as we move into '21. Thank you.

[Reenie McCarthy:]

So in terms of how we're thinking about addressing cash needs going forward, that's obviously something that's dynamic and ongoing. We look at all options and explore all options. We do think that the potential of the pediatric voucher in Barth is material for us, could potentially fund us through Barth launch and potentially some additional indication expansion opportunities. So, that is fairly material but we would be expecting to see that potentially coming earliest would probably be Q1 of next year. So, in terms of other opportunities, business development, discussions remain ongoing. There is certainly some interest, particularly in the ophthalmic programs on the side. In terms of prioritization of projects, I think that Barth really does remain our priority focus but it's primarily regulatory spend at this point, so open label extension remains ongoing. But from a resource allocation perspective, those are mostly regulatory efforts that we're doing the lifting on right now. And in the related clinical support, AMD we are evaluating the data in AMD, looking to really understand the impact of the recruitment slowdown. I think we're going to have better insight into that coming out of next quarter, because we'll -- I hopefully understand the full scope of it. We did have the potential to do interim analyses of the AMD data. If you recall in Phase 1, we saw statistically significant improvements from baseline and visual function at six months for example. So potential there to do a data cut earlier at six or nine months in versus 12. So those are all things that we have under consideration as we look going forward. The preclinical work we think is important and is not taking significant resources. It's a lot cheaper to do mouse studies than it is to do human studies. So, we do think it's important to keep moving our pipeline forward. And again, there is some partnering and interest around that as well.

[Matthew Luchini:]

And I guess maybe in the context of the Barth NDA. Can you just remind us, are there any remaining either talks work that needs to be done or other preclinical activities. Basically what I'm thinking about is anything there, there's animal work that requires regular human interaction, such that that is challenged in terms of people even being able to get into the lab today. Is there anything like that for either for Barth?

[Reenie McCarthy:]

No, there’s not. In fact, the NP, so we've had a long regulatory history with Barth as you may recall. When we met with the NP last spring on the Barth program, they had signed off on our preclinical package, non-clinical package.

[Operator:]

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

[Yi Chen:]

Given the current situation of the coronavirus, when do you think the pre-NDA meeting is likely to occur and how soon can the company submit the NDA for Barth syndrome after the meeting?

[Reenie McCarthy:]

So, I think we're going to have to -- that question probably depends more on FDA than on us. But based on the interaction we just had, well, it was a little awkward to do by phone with the FDA. The FDA was extremely responsive, as I mentioned kind of staying up until 10

[Yi Chen:]

Second question, could you verify that the Phase 3 protocol for LHON has already been finalized with FDA input, and it's just that you're not starting the trial until 2021?

[Reenie McCarthy:]

We submitted that protocol in December to the FDA and we have not received feedback from the FDA on it yet. So we would like to receive that feedback. We did align with FDA on what endpoints we could look at in that protocol when we met with them last spring. So we do feel that we have high level alignment with the FDA on end points. But we certainly welcome their feedback on other aspects of trial design. And this time before we initiate the trial, we think will enable us the time to get that feedback. It's always better to have it going into the trial.

[Yi Chen:]

Lastly, could you update us on the topical ocular formulation of elamipretide? Is it already being developed?

[Reenie McCarthy:]

So we have used a topical ophthalmic formulation in the LHON Phase 2 study. So we did that was with eye drops. Our plan for Phase 3 was to move to subcu because we think there's higher concentrations in the . What we are looking at doing and we are -- this work is currently in progress is developing an IVT formulation of elamipretide.

[Yi Chen:]

So this ocular formulation is the same formulation that's going to be used in the future dry AMD trials after Phase 2b?

[Reenie McCarthy:]

After Phase 2b, we are exploring the potential of using an IVT formulation for AMD.

[Operator:]

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

[Maury Raycroft:]

I just had a few quick clarification questions. First one is for 272 for the initial Phase 1 clinical data. Is that still expected 2Q? And I was just wondering if that Phase 1 with clinical sites is posted online anywhere?

[Reenie McCarthy:]

So that is being conducted in the UK, and so I do not believe it is posted online anywhere. And in terms of timing of that data, I don't think Jim is on the line any longer, because he have another call at 9. So we may face some short, some small delays because of COVID sort of in the subsequent cohorts of that, so I would say Q2 into Q3. It doesn't impact any of our timelines in terms of what we were thinking about initiating other studies, because the preclinical data that we need to support those won't be until end of year.

[Maury Raycroft:]

And then for the midyear guidance for elamipretide, will that be guidance specifically based on minutes or will be based on FDA’s feedback on the requested on 72-week analysis too? And do you view this more as an update over the summer or could it be a fall update?

[Reenie McCarthy:]

I would hope to be providing an update over the summer. And I think to answer your question, we’re kind -- we’ve literally just met with yesterday. So, I think we need a little bit more time as it seems to kind of give guidance in terms of when we'll be submitting our next meeting request and just how we expect that back and forth to go. We'll also have to see, again, FDA is constrained, although, very impressively responding to us to-date. So, we'll have to see how that plays out over the next few weeks. But we would hope to provide an update, both on sort of minutes and hopefully subsequent interactions and we would hope that to be early summer timeframe.

[Maury Raycroft:]

So it could include some feedback on the 72-week analyses as well.

[Reenie McCarthy:]

Yes, it could…

[Maury Raycroft:]

So it depends on the FDA…

[Reenie McCarthy:]

Yes, I just don't want to speak for them, because these are kind of unprecedented times. So, I can't really rely on typical timelines from their perspective. But everything we've seen suggests that they are very responsive to us and very collaborative. And so we are optimistic that we’ll be business as usual from their perspective at certainly what they've demonstrated thus far.

[Operator:]

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Ms. McCarthy for any final comments.

[Reenie McCarthy:]

So appreciate everybody for hopping on the phone today. Appreciate the questions and hope everyone is doing well in these challenging times. Stay safe out there and we're again very optimistic about the milestones that we have coming forward, the team is continuing to make progress and we remain confident that we can deliver on our goals for this year. Thanks for your time.

[Operator:]

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.