Stealth BioTherapeutics Corp
Q3 2021 Earnings Call Transcript

Published: 11 Nov 2021

[Operator:]

Greetings. Welcome to the Stealth BioTherapeutics Third Quarter Earnings Conference Call. Please note, this conference is being recorded. At this time, I will now turn the conference over to Henry Hess, Chief Legal Counsel. Henry, you may now begin.

[Henry Hess:]

Thank you and good morning. With me on the call are Chief Executive Officer, Reenie McCarthy; Chief Clinical Development Officer, Jim Carr; Chief Business Officer, Brian Blakey; Vice President of Business Development and Strategy, Brian Hotchkiss; Chief Research and Development Officer, Marty Redmon; and Chief Financial Officer, Rob Weiskopf. Before we begin, I would like to remind listeners that management will be making forward-looking statements on today’s call, including for example, the company’s expected timelines and plans for development of elamipretide, SBT-272 and other pipeline programs, regulatory interactions and financial guidance regarding the periods in which it will have capital available to funds its operations. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those developed – those discussed in the risk factors section of Stealth’s Form 20-F filed with the SEC on April 6, 2021 and in our subsequent SEC filings. 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 welcome to those joining for our updates today. So, just as a reminder, coming into 2021, our goals were first to progress our ophthalmic franchise, where we are now positioned to read out on Phase 2 clinical data for elamipretide and extrafoveal geographic atrophy next spring and we are continuing to progress our intravitreal delivery formulation efforts to support potential partnering ahead of Phase 3. Second, our goal was to broaden our cardiology franchise, where we are continuing to try to elucidate a regulatory path forward in Barth Syndrome as well as making meaningful regulatory and preclinical progress in Duchenne muscular dystrophy ahead of the potential Phase 2 trial initiation next year. And our third goal was to broaden our neurology franchise, where we are now poised for next month planned initiation of our Phase 3 NuPOWER clinical trial in patients with primary mitochondrial myopathy due to nuclear DNA mutation. And that trial is enriched to enroll the subgroup of patients who responded in our mitochondrial myopathy program and where we are also preparing for our Phase 1 SAD-MAD trial of SBT-272 starting early next year, following multiple positive readouts from preclinical studies in several different models of neurodegenerative diseases, which collectively inform potential paths in ALS, Parkinson’s, Lewy Body Syndrome, frontotemporal dementia, and other tauopathies to name just a few. We anticipate numerous meaningful milestones as we head into 2022 and we believe that success on any of these initiatives maybe transformative for the field of mitochondrial medicine. So, I will be turning the call over to our Chief Clinical Development Officer, Jim Carr to provide more color regarding our pipeline updates. With Phase 2 dry AMD data readout just around the corner, we will start first with that program. Jim?

[Jim Carr:]

Thanks, Reenie and good morning to those on the line. Data from our geographic atrophy development program has been presented at recent ophthalmology conferences, including the EURETINA 2021 Virtual Congress, the Annual Scientific Session of the Retina Society, the American Society of Retina Specialists Annual Scientific Meeting and just yesterday at and over the upcoming weekend at the AAO. One of the important data points shared in these presentations ahead of our anticipated ReCLAIM-2readout next year is that the baseline demographics of the patients enrolled in our ReCLAIM-2 clinical trial are very similar to those of the geographic atrophy patients enrolled in the original ReCLAIM clinical trial. You can see a side-by-side comparison of these baseline characteristics on this slide. In both studies, we are studying patients with extrafoveal geographic atrophy, which are non-central lesions that do not impinge upon the fovea and with relatively smaller lesion sizes less than 2-disk area. These baseline characteristics may be important predictors of elamipretide’s potential to attenuate both loss of visual function in dry AMD and growth in geographic area. I will ask my colleague Brian Hotchkiss to speak to what these baseline characteristics may mean for geographic attribute progression as well as to the importance of that endpoint for potential partnering efforts for this program. Brian?

[Brian Hotchkiss:]

Thanks, Jim. We saw a correlation between smaller GAVs in size and improvements in visual function in our ReCLAIM Phase 1 clinical trial. So, we felt it was important to keep the lesion size similar – in our ReCLAIM Phase 2 trial and are pleased to have succeeded in that goal. We have also recently presented data summarized on this slide showing that GA patients with relatively more preserved mitochondrial function, which we are measuring by looking at the relative health of the mitochondrial-rich ellipsoid zones in the retina were much more likely to have greater improvements in visual function after 6 months of elamipretide therapy in ReCLAIM. On this slide, the pink indicates greater attenuation of the ellipsoid zone, which is generally thought to precede the growth of geographic atrophy and the green is healthy ellipsoid zone. You can see that the patients with more green indicating a healthier ellipsoid zone had greater improvements in visual function after 6 months of elamipretide therapy. This slide compares the geographic area growth observed after 6 months of elamipretide therapy and ReCLAIM with the growth observed in both the treatment and sham arm of Apellis’s Phase 2 FILLY trial and IVERIC’s Phase 2/3 GATHER 1 trial. While there are some differences in patient demographics between these trials, it’s been demonstrated in the literature that extrafoveal or non-central lesions, which we have focused exclusively upon grow more rapidly than lesions which impinge on the center of the phobia. For that reason, we are encouraged by these data which show a favorable comparison between the growth rate observed with elamipretide and other agents in development. I did mention potential pharma development partners are also focused on geographic atrophy progression as an endpoint of interest. So, this is an important biomarker as we plan for Phase 2 readout next year. Assuming success with development of our intravitreal formulation, which we are targeting for no more than once quarterly administration, we are hoping to identify a partner to collaborate on our Phase 3 development efforts for extrafoveal geographic atrophy. I will turn it back to Jim to discuss our cardiology franchise. Jim?

[Jim Carr:]

Thanks, Brian. As we have previously disclosed, we submitted our NDA for Barth Syndrome in August and we received and refused a final notification from the FDA in October. It was obviously disappointing with the FDA decline to review the NDA. We do want to meet with the FDA to discuss the rationale by SPIBA-001, our positive Phase 3 natural history controlled trial for which the data is summarized on the left hand side of the slide was not sufficient to support NDA filing and review. We also want to discuss once again whether there is any feasible path forward to generating additional data to support the review in this ultra-rare indication. We have accordingly requested a Type A meeting with the FDA in which the FDA granted yesterday. It is scheduled for later this quarter. We remain committed to the Barth syndrome patient population, which has petitioned both us and FDA for access to elamipretide, but beyond that, we also see meaningful value of this indication, which I will ask Brian Blakey to briefly address. Brian?

[Brian Blakey:]

Thanks, Jim and thanks to those in the line for joining today. Our market research in Barth syndrome suggests that diagnosis estimates maybe low. Market research also suggests that with the endpoint showing reverse cardiac remodeling, the reimbursement potential could be meaningful. While we continue to explore, we think that taken together, there maybe more patients in previously reported and that the value of therapy which may improve cardiac function could be high. We also have a rare pediatric designation for this program, which opens the possibility of a priority review voucher. For these reasons, we do see meaningful value in this indication that could support additional development efforts if we can align with the FDA regarding a feasible design and timeline. I will turn the line back to Jim to discuss our other clinical programs. Jim?

[Jim Carr:]

Thanks. And as Brian noted, we look forward to what we hope will be a constructive Type A meeting with the Division of Cardiology and Nephrology at the FDA on our Barth program scheduled later this quarter. We also have a pre-IND meeting scheduled next month with the Division of Cardiology to discuss our Duchenne muscular dystrophy developmental efforts. As depicted in this slide, mitochondrial dysfunction precedes both skeletal muscle and cardiac dysfunction in Duchenne. With better management of respiratory symptoms, the cardiomyopathy we are targeting with our developmental efforts is now the leading cause of early mortality in Duchenne. Cardiomyopathy onset is fairly early with sub-clinical signs observable as young as 6 or 7 years of age and late-stage progression to extensive fibrosis dilation and severely reduced ejection fraction typically occurring after late teenage years and often leading to premature cardiac death. We are hoping to intervene in the mid-stage of the cardiomyopathic decline when there is evidence of fibrofatty infiltration characteristics of the disease, but before the disease burden maybe irreversible or unstoppable due to extensive fibrosis and dilation. I have been working closely with the current project muscular dystrophy as part of their cardiac working group seeking to update the FDA’s guidance to industry and Duchenne. And we are bringing those consensus learnings forward into our development plan, which we will be discussing with FDA at our pre-IND meeting. To that end, we have invited both patient advocacy and leading experts on Duchenne to join us in our pre-IND meeting. We would like to align with the FDA and patient population endpoints and trial design ahead of the potential trial initiation during the second half of next year. We have also initiated several preclinical studies to support our developmental thesis in Duchenne and hope to be reading out in those during the first part of next year. Moving on to our neurology franchise, we will update you on our primary mitochondrial myopathy due to nuclear DNA mutations or nuclear PMM program as well as SBT-272 development efforts. Our NuPOWER Phase 3 clinical trial patients at nuclear PMM, is expected to initiate next month. We have partnered closely with patient advocacy groups, including UMDF and MitoAction as well as leading thought leaders worldwide in designing and launching this pivotal trial. This trial is enriched for the patients responded to elamipretide therapy in our prior MMpower-3 clinical program, which was a much broader basket design enrolling patients with PMM that had many different genetic mutations. We aligned with the FDA in this trial design over the summer and we look forward to being back in the clinic to progress development for this devastating disease. We are also bringing SBT-272 back into the clinic in a Phase 1 multiple ascending dose trial early next year. I will turn it over to Marty Redmon to update you in the preclinical data as it’s so excited about the potential of this next generation clinical stage compound to treat neurological diseases of mitochondrial dysfunction. Marty?

[Marty Redmon:]

Thanks, Jim. So I am happy to share with you today a sampling of the data we recently collected for SBT-272, a mitochondrially active chemical that we optimize for improved blood brain barrier permeation. To-date, we found 272 to be active in two different models of ALS, one of which may also be relevant for frontotemporal dementia or FTD and in a model of alpha-synuclein apathy, which maybe relevant to Parkinson’s disease and Lewy Body dementia. We are also generating data using 272 in-patient derived cells displaying tauopathy, which maybe relevant for FTD and progressive supranuclear palsy. Across these models, we have seen evidence of not only mitochondrial protection, but in certain models evidence of neural protection, reduced inflammation, reduction of protein aggregates, improve brain metabolism and reduced motor deficits. On this slide, you can see in the upper left data from the model of ALS, where SBT-272 substantially improved neuronal branching. Data from this model were presented most recently in October at the Northeast ALS Consortium. In addition, neuroprotective effects have been observed in the model of alpha-synuclein apathy, where SBT-272 reduced markers neuroinflammation shown on the bottom left and also reduced the level of protein aggregates shown on the bottom right. These data were presented this fall at the movement disorder society. On the upper right, our results showing the effect of SBT-272 on brain metabolism and a model of Huntington’s disease, we are excited about these results from a broad range of models and we are expecting to announce further results for SBT-272 and preclinical studies during the first half of next year. With that, I will turn the call over Rob Weiskopf to discuss our third quarter earnings. Rob?

[Rob Weiskopf:]

Thanks, Marty and thank you all for joining us today. As we have issued our press release this morning with our full financial results, I will try to be brief in focusing on the highlights from the quarter, which is summarized on Slide 15. Our cash and cash equivalents were $42.3 million at September 30, 2021, compared to $32.8 million at December 31, 2020. In September 2021, the company received $11 million of the remaining $27 million total due during the second half of 2021 from Morningside under the development funding agreement, which includes the $5 million milestone upon Barth NDA submission, and a $22 million balance that was committed as additional financing in May 2021. In October 2021, the company received $5 million of the additional financing and expects to receive the remaining $11 million on or around December 1, 2021. The company expects that its cash, cash equivalents and investments as of September 30, 2021, together with the $5 million of additional financing received in October and $11 million of additional financing expected in December, will be sufficient to enable it to fund its planned operations into the third quarter of 2022. Research and development expenses were $6.7 million for the three months ended September 30, 2021, compared to $6.2 million for the same period in 2020. The increase was due $1.2 million increase in preclinical costs to develop and expand our current pipeline, an increase of $0.6 million in headcount related costs and an increase of $0.1 million in manufacturing costs. These costs were offset by a net decrease of $1.4 million in clinical costs primarily driven by the close out of the MMPOWER-3 clinical trial. General and administrative expenses were unchanged at $4.7 million for the three months ended September 30, 2021, and in the same period in 2020. For the three months ended September 30 2021, there was an increase of $0.3 million in pre-commercial costs, offset by a $0.2 million decrease in facility related costs, and a $0.1 million decrease in costs of professional services. Other income was $5.1 million for the three months ended September 30, 2021, compared to other expense of $0.3 million for the same period in 2020. Other income in 2021, consisted of a $5.4 million gain due to the change in fair value of the derivatives liability offset by a $0.1 million loss due to extinguishment of the Hercules term loan and a $0.2 million in interest expense. Other expense in 2020 consisted of $0.3 million in interest expense. Net loss was $6.3 million or $0.01. Basic and diluted net loss per ordinary share for the three months ended September 30, 2021, as compared to $11.2 million or $0.02 basic and diluted net loss per ordinary share for the same period in 2020. I will turn it back to Reenie to conclude.

[Reenie McCarthy:]

Thanks, Rob. We are looking forward to numerous milestones over the next year including our Phase 2 extrafoveal geographic atrophy data and the initiation of multiple new development initiatives in rare diseases with high unmet medical needs. Our team is excited about our science with new pipeline compounds, SBT-272, and our pipeline series on SBT-550, continuing to add to our deep understanding of the potential of mitochondrial medicine to treat human disease. We are grateful for the opportunity to make a potential and meaningful difference in the lives of patients living with these devastating diseases of mitochondrial dysfunction and we look forward to delivering on our mission in the months ahead. With that, I will turn the call over for questions.

[Operator:]

Our first question is from the line of Yi Chen with H.C. Wainwright. Please proceed with your questions.

[Yi Chen:]

Thank you for taking my questions. Could you comment on your expectations regarding the readout from ReCLAIM-2 in the first half of 2022? And what kind of data do you expect would be good enough to ensure partnership for a Phase 3 development?

[Reenie McCarthy:]

Yes. Great question, Yi Chen. Thanks for that. So, I think what – we designed this trial to essentially duplicate the results that we saw in the Phase 1, obviously with the placebo control this time, and a longer treatment period where we would actually hope to see even more improvements potentially with longer treatment. So, our goal with that would be to be looking at improvements in visual function, particularly low light visual function, which is one of the first clinical manifestations of dry AMD. But very importantly as well, hoping to slowdown the rate of progression of geographic atrophy. And that’s why I am really mirroring the baseline characteristics of the patients we enrolled in the first trial is so important for us as we look forward to the Phase 2 data. In terms of partnering, Brian Hotchkiss, do you want to comment on what you think partners would be looking for there?

[Brian Hotchkiss:]

Yes. Thank you, Reenie. I think they would like to see consistency in our data from the Phase 1, but at least it’s consistent as other development programs have shown in the clinic like Apellis and IVERIC. But with the more – with a favorable safety profile that we have shown in our ReCLAIM-1 study if we can mirror that in the Phase 2, that would be sufficient combined with any benefit in dosing administration. Any of these would be looked at positively from the potential pharma partners.

[Yi Chen:]

Thank you. And in the first half of next year, should we also expect to see the completion of development for the intro vitro version of the drug?

[Reenie McCarthy:]

We do. Marty, do you want to provide a brief update there?

[Marty Redmon:]

Sure. So, we have concluded the feasibility stage. And we are just starting in vivo studies, to look at the pharmacokinetics for the rate of release over a period of months. And then we will proceed into chronic tox studies. So, that kind of encompasses the plan for next year, including the manufacturing, the scale up and manufacturing, to accommodate those in vivo studies.

[Yi Chen:]

Got it. Thank you.

[Marty Redmon:]

Sure.

[Operator:]

Our next question is from the line of Jason McCarthy with Maxim Group. Please proceed with your question.

[Unidentified Analyst:]

Hi, this is Naz on for Jason, and thanks for taking our questions. My question is on 272, when do you think you could file an IND and potentially initiate human clinical studies for ALS, or any other neurological disorder?

[Reenie McCarthy:]

So, I think we need to see what the results of the SAD-MAD come back with in terms of dosing. So, that is a study that we will be conducting first part of next year. I think, depending on those data, we will make the decision on IND filing and trial initiation. But certainly we want those results under our belt before we can initiate.

[Unidentified Analyst:]

When are those results expected?

[Reenie McCarthy:]

Well, that trial will be starting in the first quarter of next year. And Jim I think – certainly by year end, it would be it would be finished up. I don’t know that – Jim, do you want to comment on the timeline?

[Jim Carr:]

I think that’s right, Reenie, that would be towards the latter part of next year.

[Unidentified Analyst:]

Alright. Thanks for taking my questions.

[Reenie McCarthy:]

So that will be gating for IND submission.

[Operator:]

Thank you. At this time, we have reached the end of the question-and-answer session. And I will turn the call over to Reenie McCarthy for closing remarks.

[Reenie McCarthy:]

Great. Thank you so much. Well, thanks again to everyone for joining us on the call today. We are excited about the year ahead of us. We have a lot of new initiatives moving into the clinic and look forward to updating you on our progress in the coming months. Thanks for your time.

[Operator:]

Thank you. This concludes today’s conference. You may disconnect your lines this time. Thank you for your participation. Have a wonderful day.