ObsEva SA
Q2 2018 Earnings Call Transcript

Published: 11 Aug 2018

[Operator:]

Good day, ladies and gentlemen, and welcome to the ObseEva Second Quarter 2018 Financial Results and Business Update Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Mr. Mario Corso, Senior Director, Investor Relations. Sir, you may begin.

[Mario Corso:]

Thank you, Operator. Good morning, everyone, and welcome to today's call to review ObsEva's Second Quarter 2018 Financial Results and Business Update. On this call, I'm joined by Ernest Loumaye, our Co-Founder and Chief Executive Officer; Jean-Pierre Gotteland, our Chief Scientific Officer; and Tim Adams, our Chief Financial Officer. During the call today, we will make forward-looking statements, and we remind you of our safe harbor language. We will make forward-looking statements, including, but not limited to, statements relating to financial results and trends; the process and timing of anticipated future development of ObsEva's product candidates; our gonadotropin-releasing hormone, or GnRH, receptor antagonist, linzagolix, formerly, OBE2109; our oxytocin receptor antagonist, nolasiban; and our PGF2 alpha-receptor antagonist, OBE022; including clinical trial results and potential regulatory pathways toward gaining approval of our product candidates in the U.S., Europe and Asian countries as well as the therapeutic and commercial potential of ObsEva's product candidates. These forward-looking statements are based on ObsEva's current expectations and inherently involve significant risks and uncertainties. ObsEva's actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of these risks and uncertainties, which include, without limitation, risks related to ObsEva's development programs; clinical trial time lines and results; the uncertain clinical development process, including adverse events; the success cost and timing of all development activities and clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses, capital requirements and the need for financing; and other risks detailed in the risk factors and elsewhere in ObsEva's U.S. Securities and Exchange Commission filings and reports, including its 20-F report filed on March 9, 2018. ObsEva undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or changes in its expectations. I will now turn the call over to Ernest Loumaye, our Chief Executive Officer.

[Ernest Loumaye:]

Thank you, Mario. Good morning, everyone. On today's call, we will provide a business update, including clinical trial progress, second quarter of 2018 financial results and our outlook for achieving key future clinical milestones. In the second quarter, we took several important steps toward executing our strategy at

[Timothy Adams:]

Good morning, or good afternoon, everyone, and thank you for joining us on the call today. I will provide a brief description of our financial results for the second quarter of 2018 and our current cash position as of June 30, 2018. Before reviewing the quarterly results, I would like to highlight the 2 recent events that Ernest alluded to earlier, our completed follow-on offering and listing on the Swiss SIX Exchange. During the second quarter, we raised $87 million net of fees from our follow-on offering and our at-the-market, ATM, program. As you may know, this was our first follow-on offering, and we were pleased with both the demand and the quality of shareholders we attracted. We issued 4.75 million shares, resulting in net proceeds of $68 million. In addition to the follow-on offering, we issued 1.6 million shares pursuant to our ATM program, raising an additional $19.4 million net of fees. I'm pleased to report that we ended the second quarter with $166.8 million of cash on hand, and this now extends our cash runway into the first half of 2020. The financings come at an important time for ObsEva, as we continue to make great progress with all 3 of our new chemical entities. And the extended cash runway funds our operations beyond some very important milestones for all 3 of our assets. Our second major financial milestone occurred on July 13, when we officially listed our shares on the SWIFT SIX Exchange in Zurich. This was a proud moment for ObsEva, as Ernest and the management team opened the market that day, and we saw a strong demand for ObsEva shares. We did not issue any new shares on the SIX, but with secondary trading, have gained access to an expanded pool of investors as well as offering protection to minority shareholders that are afforded to domestic companies under Swiss law. As a Swiss company, we are very happy to have completed this important initiative. And now let me take a few minutes to discuss our financial results for Q2 2018. I will start with the income statement. Our net loss for the second quarter of 2018 was $18.2 million or $0.49 per diluted share, which compares to a net loss of $17.3 million or $0.61 per diluted share in the second quarter of 2017. This increase in net loss during the quarter was primarily driven by investment in our research and development programs. Research and development expenses were $14.7 million for the second quarter of 2018 compared to $14 million in the prior year quarter. This increase in investment is attributed to the clinical trial progress outlined by Ernest for all 3 of our development compounds. G&A expense in the second quarter was $3.5 million compared to $3.9 million in the prior year quarter. This reduction in spending was driven by lower stock-based compensation costs. Our cash balance at June 30, 2018, was $166.8 million, which includes the $87 million of net proceeds from our equity financings during the quarter. Again, it is important to note that the financings extended our cash runway into the first half of 2020. This time line allows for the achievement of the 6-month primary endpoint results from the PRIMROSE 1 and 2 trials as well as the expected completion of the additional nolasiban clinical trial work and planned a registration submission in Europe. Our use of cash from operations in the quarter was $16.7 million. This increased investment level is consistent with our expectations that cash would trend upward from the approximate $15 million of cash used in the first quarter of this year. The expanded cash use reflects spending in support of all 3 of our pipeline assets, which includes the patient follow-up on our Phase IIb EDELWEISS study in endometriosis, ongoing Phase III enrollment of PRIMROSE 1 and 2 clinical trials in the treatment of uterine fibroids, the completion of live birth and neonatal follow-up in the Phase III IMPLANT2 clinical trial of nolasiban, and patient enrollment in Part A of the PROLONG study of OBE022 in preterm labor. Again, we are very pleased with the clinical trial progress and the support we received from investors during the quarter as we extended our cash runway. Thank you for your continued support. And we will now turn the call back to the operator for questions.

[Operator:]

[Operator Instructions]. And our first question comes from the line of Martin Auster from Crédit Suisse.

[Martin Auster:]

I was hoping, Ernest, if you could maybe provide some kind of color around expectations for the upcoming 24-week results, specifically around the bone mineral density data, and kind of how you think this will help shape the profile of linzagolix relative to some of the competitors.

[Ernest Loumaye:]

Yes, thank you for your questions. So in the 12-week data we have the estradiol level, which are surrogate marker of possible impact on bone. I think we have discussed that in the previous press release. In short, we have clearly estradiol level below 20 picograms for the high dose, where full suppression is occurring. And for the 75 milligrams, which performed extremely well in terms of efficacy, we have median estradiol level, around 48 picograms per ml, which is at the upper end or mid-end of the 20 to 60 picograms window we are targeting. So really, this estradiol are telling us that it is likely that, indeed, at 24 weeks, for bone mineral density, we would see a significant impact on bone with the 200 milligrams and then insignificant impact with the 75 milligrams. Obviously, pending the actual data, we will confirm informed that to you when the [indiscernible] will be available. Now in the term of -- yes, so the second part of your question is how you differentiate. I think the 75 milligrams has been performing very well, very well in the Phase IIb in terms of efficacy. And as mentioned in this call, actually, we have closed to an effect seen with full suppression for how many parameters. And therefore, I think that this is something which is unique or has -- there is one competitor with no program at all with the partial suppression. And we have elagolix with the partial suppression in endometriosis, but only a full suppression with fibroids. So let's continue to track the data as they come. But it's really confirming our strategy, to focus as first line, directly the non-add-back option.

[Martin Auster:]

And then I just said a kind of a brief follow-up to that. Just in terms of the end of Phase II meeting that you're planning, are there specific facets of the Phase III trial program that you'd like to -- you're thinking about design for kind of label differentiation from products that are currently being developed or approved in the market? Or how are you approaching that meeting?

[Ernest Loumaye:]

Yes, I mean, this obviously is an important meeting. One of the priority will be to be a fully aligned with the FDA in terms of defining the primary endpoint and the pain recording tools that we have been validated entirely with the EDELWEISS trial. In terms of differentiation, I think that we are planning to have a long-term therapy with the non-add-back and to record additional paremeter, which has not been recorded by other companies, like for example, dyschezia, which is pain during defecation which is really bothering the patient and has been classified by patient as or 1 of the top 3 most bothering symptoms. And we are the only ones who have recorded that. And we show a very significant improvement on that parameter. This is one example amongst other that we can discuss in more details in other settings. Does that answer your question?

[Martin Auster:]

Yes, Ernest. I appreciate it.

[Operator:]

And our next question comes from the line of Kennen MacKay from RBC Capital Markets.

[Kennen MacKay:]

First one on OBE022 in preterm labor, Ernest, I was wondering if you could help us sort of understand the backdrops here. And from your perspective and some of the initial proof of concept data, what would be interpretable as sort of a positive result here? Result that is at least indicative of having an effect that may be beyond, for instance, placebo and something that could be robust in a randomized trial, if randomized trial is even needed in an invitation like this?

[Ernest Loumaye:]

Yes, Kennen. So as I mentioned, we have Part A, 8 patients open label. We are monitoring safety PK and efficacy. And then we will move to Part B, where we're placebo-controlled trial, double-blind, where we compare 60 patients with the treatment versus 60 patients with placebo, both on top of atosiban. Obviously, this is initial feedback on the first 5 patients, and by the way, we have #6 patient which is ongoing now. But the assumption is the following. The assumption is that with preterm labor and preterm delivery risk as defined in the protocol, we expect about 75% of subject not delivering with the standard of care. And we expect more than 90% with our product. So far we have five patients non-delivered within the seven days, and we'll continue to monitor that. So that's the expectation that should be driving the Part B conclusion in terms of moving forward to the next steps. Does that answer your question?

[Kennen MacKay:]

Yes, it should have. And I appreciate you outlining those 2 strategies -- apologies, I have missed that. And then separately, on nolasiban, I was wondering if you could just sort of run through time lines of the regulatory interactions relating to -- within the U.S., relating to the Phase III trial one more time. Apologies, I think on my end that may have broken up a little bit. And then plans for the U.S. Phase III, is that going to focus only on the sort of the D5 subgroup? Or will that also include some D3 patients as well, similar to the IMPLANT2 trial in Europe?

[Ernest Loumaye:]

Yes, in term of regulatory time lines, both for U.S. and for Europe, we have actual dates -- official dates from the authorities to feedback on our proposal. We are not disclosing the specific date because we can always change the date a bit. But what we can confirm, that we will report on the feedback of authorities both in Europe and U.S. by the end of the quarter. Regarding the IMPLANT3 trial, yes, we are focusing on day 5 embryo transfer, single-embryo transfer, to become consistent with our development strategy and to be consistent to the result of IMPLANT2, indicating that the best effect is seen on day 5, and because the field, the whole world is progressingly moving to day 5 single-embryo transfer as a standard of care. And U.S. is leading as it is currently the most advanced area in terms of implementing that policy.

[Kennen MacKay:]

Got you. And maybe 1 additional follow-up on nolasiban. As we think about interpretation of pregnancy rates versus live birth rates, obviously, there had been some competition out there. And with the atosiban data in IVF, they had shown sort of a 51% clinical pregnancy rate, but that's certainly dropped to about 38.5% in the live birth rates. Can you maybe walk through some of the differences between how you are sort of defining or measuring pregnancy rate versus what atosiban has done? And how we should be thinking about the drop from pregnancy rates to live birth rates that atosiban saw versus how we should be thinking about the live birth rate for nolasiban?

[Ernest Loumaye:]

Yes, that is a good question. I mean, what is important is the definition of clinical pregnancy rate. Because live birth, everybody agree, you have a baby you're alive. So okay? So when you're [indiscernible] first you give live birth. No, well, there is a nuance, I have to say, because for Europeans, live birth is any baby born alive after week 24, and for the U.S. is after week 20. But that's a detail because during that few weeks you don't expect that you have. So any possible difference between what we call clinical pregnancy versus live birth is related on the definition of clinical pregnancy. And I think that in the atosiban it's a net of original population, where you have a different timing of reporting what is a clinical pregnancy. Now we have used the most clinical definition, which is a live fetus demonstrated by ultrasound 10 weeks after embryo transfer, which corresponds about 12 weeks of pregnancy. Why did we select that? For 2 reasons. Why, it's because it is a criteria used by regulatory authorities, including in Europe to approve product. And two, it's because it's a period, which is completion of the first 3 months of pregnancy, after which pregnancy loss is usually minimal. So the discrepancy come from the definition of clinical pregnancy. Now we have reports of clinical pregnancy and live births in IMPLANT1, very, very small difference. And when you go to reference studies, like the one which compared 1 with 2 embryos, published in New England, which was really a key paper in the field for embryo transfer strategy. You see us saw the difference between 10 weeks of post embryo transfer versus live birth rate is really -- the difference is really minimal. Nevertheless, we remain cautious and we intend, as previously stated, to report the actual live birth rates in the very early beginning of Q4 this year.

[Kennen MacKay:]

Got you. Ernest. And maybe one follow-up on nolasiban if I may, and then I'll hop back in the queue. Just wondering from a commercial perspective if nolasiban is able to come to the market. And we do see another successful Phase III program here. I'm wondering if I could talk a little bit about sort of the competitive profile of nolasiban from the data that we have to date versus atosiban and maybe some potential tailwinds that nolasiban may see there?

[Ernest Loumaye:]

Sure. So the first thing to be aware is that atosiban is not available in U.S. and will never be available in U.S. So it's not available for clinicians in the U.S. Atosiban is available Europe and in some countries in Asia. In Europe, it is registered for preterm labor. It's not licensed. It's not registered for IVF use. And therefore, reimbursement will not apply to IVF use. I think, on top of that, the data generated with atosiban, although very, I would say, interesting and really supportive has never been definitively and properly assessed. There are variability in response. There are variability in blinding. So I think it was interesting to attract a field to that area, but the quality of the data is not what the quality of the data we are generating. And therefore, based on the fact that there are no definitive data with atosiban, we will have definitive data, there will be no reimbursement of atosiban. And on top of that, this is an infusion of about 4 hours while nolasiban is oral administration, and you are aware that embryo transfer procedure is actually an ambulatory procedure. The patient come in, get the embryo and go home. But if you have to put the patient in a bed and do an infusion and use an infusion kit and so forth, this is making life more complicated and more expensive. So altogether, we've perceived that atosiban has a very low competitive profile compared to nolasiban in the countries where it's available. And clearly, for the U.S., it's a no-brainer because it does not exist.

[Operator:]

Our next question comes from the line of Ram Selvaraju from H.C. Wainwright.

[Raghuram Selvaraju:]

I was wondering if you could perhaps, Ernest, give us some color on what you think are likely to be the determining factors that would effectively specify how long patients being given a GnRH receptor antagonist would typically stay on therapy. Because it's clear that we have a situation in which some of these patients would intermittently be treated over the course of -- as many as 24 months. But what I'm more interested in is the continuous therapy window. Is that likely to be three months or four months? And in your estimation, what's likely to drive how long patients would stay on the therapeutic like linzagolix?

[Ernest Loumaye:]

Yes. You'll remember, Ram, that the mean age at diagnosing endometriosis is around 30 years old. In the clinical trial, the mean age is about 32 years. So that means practically, this woman have to live for 20 years -- an additional 20 years with their conditions. For fibroids, it's more around 40, 42 years. It's more about 5 years to 10 years, I would say, to go to menopause. So the occasion is very relevant, it's important to go long term. We are aiming, in the European, posttrial, to administer the product for 12 months, which means that is the regulatory criteria for long-term treatment, long-term meaning, no real limits. We are very pleased that with the 6-months data published for elagolix, this -- they got the 24 months labeled for the non-add-back option. Only the six months for the high dose, but because in the Phase III -- initial Phase III program, it did not have add-back therapy, so no surprise in that loophole. But they are now generating long term. So I think for the non-add-back, we are going for long term. Now what about continuous versus intermittent therapy? I think we have to realistic, and I would think that proactively, patients will be treated for six months to 12 months, maybe 18 months, and then feel much better. And then stop, and then maybe 6, 12, 18 months later, symptoms will come back because we know we are never going to cure. And they will restart a new treatment. So it's difficult to give you a precise -- your life will tell us later on. But I would think that this patient can be treated for 10 years or 20 years, not continuously, but for relatively long period, with some breaks, some day off, some drug off as they feel. We know from previous experience there's another class which was [indiscernible] that when you stop treatment for 5 years for example, the symptom do not resume immediately. You have a period of grace, and then it's coming back. So expect the same thing with our GnRH antagonist. So it's not very precise as an answer, but I that will the reality, that we will aim at a label for long-term, whether it's going to be unlimited or 24 months or 3six months. Fine. But still, I think it's going to really address the need of these patients.

[Raghuram Selvaraju:]

That's very, very helpful. And then a couple of other very quick items, if I may. Do you have additional information at this time from the EDELWEISS study, pertaining specifically to differences in pain medication consumption? I believe I had asked this before when the EDELWEISS data were first released, but you didn't have that information and at that time. Is there any additional information you can share with us on this front now?

[Ernest Loumaye:]

Yes, what I can tell you is that we have a dose-dependent significant reduction of painkiller. Now what we are still analyzing is what type of painkiller? How do you define an increase of painkiller or not? There is a showcase to be -- we are currently analyzing why. Because you know that the DFA wants to see the benefits unrelated to a significant increase in painkiller. And it's quite difficult to define because if you take 1 NSAIDS per month. And if you then take 2 pills of NSAIDS a month, is it an increase of 100%? Do you double it? Or if you take 25 pills and you increase it to 30 pills, is that insignificant when it's only 50%? So you see, it's complicated. But what I can tell you that, for sure, there is an overreduction of painkiller -- whatever the type of painkiller, which is significant between placebo in a dose-dependent manner with linzagolix.

[Raghuram Selvaraju:]

Okay, great. Very helpful. And then on nolasiban, I just wanted to revisit the time line you expect for the second Phase III trial in terms of how you long do you anticipate it would it take to conduct enrollment, when you expect to start enrollment and when you expect to get top line data. And if you can confirm whether the live birth rates data, which is expected in the fourth quarter, is information that you would be in a position to disclose at the ASRM conference in Denver. Or is that slightly to be something you release after that?

[Ernest Loumaye:]

We will be able to release at the ASRM. And the current assumption is from start to primary endpoint is going to take about 12 months for the trial, based on the IMPLANT2 experience, yes.

[Raghuram Selvaraju:]

Okay. And then 1 quick question for Tim. Tim, can you just confirm that you don't anticipate there to be any significant changes in stock-based compensation on a quarterly basis going forward? Or if there are, what changes do you expected there to be?

[Timothy Adams:]

Yes, Ram, I think we're at about $4.5 million year-to-date, and that number should be relatively consistent for the second half of the year.

[Operator:]

And our next person comes from the line of Keith Tapper from BMO Capital Markets.

[Keith Tapper:]

I'm calling in for Do Kim. I wanted to check in about the pricing, so just the price of elagolix in line with your pricing strategy and whether you think at that level, it will be an obstacle for reimbursement?

[Ernest Loumaye:]

We are talking about the price in the U.S., as there been some information in the media -- specialized media, about the price that elagolix may ask or propose. We cannot comment on that because, obviously, we are not in control. What I can tell you is that the price that we heard in the media is significantly above our baseline assumptions, which is a good news. And there is no -- it's too early to decide, when we'll be on the market, whether we align or not to their price. But it's definitively well above our baseline assumptions. So it's a positive news.

[Operator:]

And our next question comes from the line of Kennen MacKay from RBC Capital Markets.

[Kennen MacKay:]

Just another quick follow-up on OBE022. Wondering if you can sort of comment enrollment into Part A of the trial and maybe anything that sort of you've learned from the enrollment process and strategy there that could enable tailwinds in enrollment in Part B. And moving forward here, obviously, preterm labor is a little bit of a -- sort of a crisis situation. And many patients enrolled, theoretically, could be a challenge. Although it seems like you've certainly done a good job with Part A here. So just any detail there, I think, would be very helpful.

[Ernest Loumaye:]

Yes, yes, I mean, you're absolutely right. It's a challenge in recruitment because, as you alluded to, it's an acute situation when you ask a patient to sign a 2-page informed consent and to take new drugs. And she's thinking about losing her baby or risk of losing her baby. So I think that's -- now the recruitment in Part A have been good, a little bit slower than we expect. But we see a positive impact because as we as accumulate data, now on the 6th patient, it's really encouraging. The two centers who are running the Part A, because the staff is more and more confident, and they can already tell the patient, "Look, other patients have been treated and has been well. It has been safe," and so forth. So I think it's a victorious process. Nevertheless, we should not underestimate the difficulty. And that's why we have aligned a list of centers, which are not only additional centers in Spain, continued in Finland, but also open center in Israel, Ukraine and Russia, if I remember well. As well as in Vietnam, where we identify a hospital which is dealing with 35,000 deliveries per year. So if 10% are preterm delivery you imagine the number of the days of preterm delivery. So in other words, yes it's a challenging. We are taking measures to, I would say, alleviate this challenge. And I think it's going to be victorious process because more data, more good results, easier or relatively easier it will be to enroll patients. I'll be needing time to release and to analyze some initial Part B data by the end of the year. We'll see how we progress and what we can do. But that's our objective.

[Operator:]

Our next question comes from the line of Biren Amin from Jefferies.

[Biren Amin:]

Just one on the nolasiban, have you discussed with the EMA on the design of the IMPLANT3 and acceptability of this design for the MAA filing?

[Ernest Loumaye:]

Yes, we have discussed that. We are discussing that. And we will report by the end of the quarter. But yes, we have discussed that as part of the consultation. Yes.

[Biren Amin:]

And Ernest, so day five would be acceptable to the EMA?

[Ernest Loumaye:]

I mean, the process is ongoing. As you know, we don't choose the centralized scientific advice process, which is written interaction more on specific protocol characteristics. So the process in Europe is to actually talk to national authorities, which are anticipated to be most likely the rapporteur and co-rapporteur, which are the 2 countries which will be mended on behalf of the 27 countries to defend and present the dossier at the centralized procedure. So we are talking to Holland and Sweden because they have -- they are well known and recognized for their expertise in women's health. And by the way, [indiscernible] we'll work with them. And so this is ongoing. So I cannot and I don't want to anticipate a premature conclusion. But again, we are confident that we'd be released that final opinion from these two countries by the end of the quarter.

[Operator:]

And I'm showing no further questions. I would like turn the call back over to Ernest Loumaye for any closing remarks.

[Ernest Loumaye:]

Thank you. Hold on 1 second, I have to go back to my concluding remarks. Right. So first, to thank everyone for taking the time to join ObseEva's Second Quarter 2018 Update Call. As you heard, we have outlined today very significant recent progress with all three development compounds as well as expanding the commercial and financial capabilities of the company. We are moving towards our goals of providing potential best-in-class therapeutical alternative across a range of women's disease and fertility condition. We look forward to providing further important update on each of our development compounds over the remaining 2018, including

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference call. This concludes today's program, and you may all disconnect. Everyone, have a great day.