Regulus Therapeutics Inc.
Q2 2017 Earnings Call Transcript

Published: 1 Aug 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to the Regulus Therapeutics Second Quarter 2017 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference Ms. Allison Wey. Ma'am you may begin.

[Allison Wey:]

Thank you. Good afternoon, everyone, and thank you for joining us to discuss Regulus' second quarter 2017 financial results and corporate highlights. We are joined by Jay Hagan, President and CEO; Dr. Tim Wright, Chief R&D Officer; and Dan Chevallard, CFO. Jay will provide opening remarks, Tim will share progress on the pipeline programs, and Dan will review the financial results before we open the lines for questions. Before we begin, I'd like to remind you that this call will contain forward-looking statements concerning Regulus' future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the safe harbor provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our filings with the SEC. In addition, any forward-looking statements represent our views only as of the date of this call and webcast and should not be relied upon as representing our views as at any subsequent date. We specifically disclaim any obligations to update such statements. I'll now turn the call over to Jay.

[Jay Hagan:]

Thanks Allison. Since our first quarter call in early May, we've accomplished many things some of which required making some tough discipline decisions. As you know these included rightsizing the organization to fit our strategy of balancing internal activities, while leveraging external resources to support our current programs, and engaging [app] to it is a good example of that, discontinuing certain programs in light of development regulatory or commercialization considerations, and focusing on our most promising ones. We also raised $46 million which extends our runway through Q1 2019 providing the necessary capital to get us to keep program milestones all of which I believe position us for longer term success. We also added a new board member in Pascale Witz. Pascale brings tremendous commercial and operational insights from her senior executive roles at both Sanofi and GE and we're honored to add someone of her experience to complement the existing Regulus board. With these major actions and decisions behind us, we're laser focused on execution and meeting our milestones. As strategy remains the same despite these changes namely to leverage our expertise to microRNA biology to advance therapeutics for significant unmet medical needs, partnering those programs that make sense in light of key considerations and keeping those that can be developed to commercialize with an efficient commercial footprint. I want to make special mention of the great work the team here at Regulus has accomplished amidst all of these changes. They are doing a terrific job in forging ahead focused on enrolling the 012 program, advancing the 4326 program into the clinic and delivering on our most promising pipeline candidates from the lab. Now I'll turn the call over to Tim who will provide an update on the 012 and ADPKD programs. Tim?

[Tim Wright:]

Thank you, Jay. We continue to make significant progress on our two lead kidney programs. Our multi advanced clinical program RG-012 is now in Phase 2 for the treatment of Alport syndrome. The protocols for the HERA study and the renal biopsy study have been submitted to the FDA. We are in the process of getting the study sites activated and we anticipate recruitment to begin shortly. We expect the completion of HERA enrollment by year-end. The interim analysis with all subjects at 24 weeks of treatment by mid-2018 and the topline results after 48 weeks of treatment by the end of 2018. The renal biopsy study will evaluate RG-012 renal tissue pharmacokinetics, target engagement and downstream effects on disease biomarkers. We expect data from this study towards the end of 2017. Our second kidney disease program RGLS4326 for the treatment of autosomal dominant polycystic kidney disease or ADPKD is progressing through the IND enabling phase and we are on track for IND filing by the end of 2017. We have plan to comprehensive Phase 1 program that includes single and multiple ascending dose studies with an additional repeat dose biomarker study in ADPKD patients slated for the second half of 2018. We are very excited to bring these two programs forward for the treatment of chronic kidney diseases for which there is great unmet medical need. Dan?

[Dan Chevallard:]

Thanks Tim. Coming out of the recent restructuring, changes in leadership, pipeline updates and successful financing, I'd like to step you through three main points to clarify our second quarter financial results and highlight. First, I'd like to summarize the recent corporate restructuring. As we previously disclosed, the restructuring was initiated in early May 2017. The net P&L impact of all related activities was $3.2 million which included approximately $2 million in non-recurring cash severance payments. As we look to the second half of 2017, the cash impact of these costs will be offset by personal savings of an equal amount over the balance of the year resulting in a net neutral cash impact to our 2017 operating plan. All restructuring related activities, charges and payments were incurred and have been paid as of June 30, 2017. Second, to review our operating expenses, our second quarter 2017 R&D expenses were $14.3 million or $14.8 million if you exclude net adjustments for restructuring charges including the $1.4 million reversal of non-cash stock-based compensation compared to $18 million in the second quarter of 2016. This decrease was primarily driven by reductions in spend and the subsequent discontinuation of the RG-101 program. G&A expenses were $7.1 million for the second quarter or $3.4 million if you exclude one-time restructuring charges compared to $3.7 million in the second quarter of 2016. Our net loss per share both basic and diluted was $0.41 per share in the second quarter of 2017 or $0.35 per share excluding these one-time restructuring charges compared to $0.40 per share in the second quarter of 2016. And third, I like to provide an update on our cash position. As Jay previously mentioned, we are pleased to have closed our recent financing this past week. Pro forma for the financing we ended the second quarter with approximately $83 million in cash and cash equivalents. At the midpoint of the year excluding restructuring costs, our 2017 cash flow was in line with our operating plan. As we look ahead and with the cash impact of the wind down our RG-101 and RGLS 5040 substantially behind us now, we are projecting an annualized cash burn rate of approximately $48 million. Combined with the recent financing, we now project our cash on hand to extent through Q1 2019. With that, I’ll turn the call back over to Jay.

[Jay Hagan:]

Thanks, Dan. So just to recap on our upcoming milestones over the next 18 months or so, first, we anticipate having HERA enrolled in renal biopsy data by year-end. Also by year end, we expect to have filed our IND for RGLS4326 for ADPKD initiation of Phase 1 shortly thereafter. We may also potentially nominate a new clinical candidate. In mid 2018, we project having interim look at HERA data with final data around year end 2018. Data from the ADPKD program throughout the Phase 1 program is expected throughout 2018 as well. In addition, we continue to be very active with potential partners for certain of our programs. On the investor front, we'll be at the Wells Fargo, Wedbush and Cantor Fitzgerald conferences through the remainder of this quarter. And with that, we would be happy to take your questions. Operator?

[Operator:]

[Operator Instructions] Our first question comes from the line of Matthew Luchini of BMO Capital. Your line is open.

[Matthew Luchini:]

A couple if I may. So first, the biopsy data, is the next big catalyst for you guys. Maybe you could help, just remind us in terms of framing of expectations. What we should be thinking about and looking for here? And if you could give a little bit of maybe compare and contrast on how should we thinking about what we might say here and even as we get into HERA relative to say what [PRADA] has recently presented. And then secondly, if you could just remind us the mechanics of the Sanofi opt-in. Is there a pre-specified window post data at which they must get back to whether or not, they are going to participate or is it more open ended than that? Thanks.

[Jay Hagan:]

So, why don't I - I'll just hit the last question, the mechanics of the Sanofi option and I will turn it over to Tim to walk through about the biopsy data and how to think about our data versus the recent PRADA data. So the way the deal is structured is that Sanofi has an option on RG-012 for worldwide commercial development and commercialization rights post a Phase 2 proof-of-concept study, which is defined as a one-year randomized study. It's an open option thought, whereby they could opt at any point between today and an outside date meaning a certain specified period of time post the completion of the one year proof-of-concept study. So, given that it’s not disclosed, you could imagine if there's a certain short period of time for them to evaluate that final dataset and make a decision on whether to opt-in. Upon the opt-in then, they would pay us an option fee, which is disclosed is $33 million, plus reimbursement of the vast majority of the development costs incurred to date, which is a number that will continue to grow through the course of this Phase 2 program, and we would project that would be well in excess of one year burn for us. And then they would take over ongoing development of the program and commercialization and we’re eligible for a development regulatory and commercial milestones as well as royalties in the mid teens on net sales. And with that, Tim will you cover off on the biopsy data, what we can expect as well as the way to think about our data from the HERA study versus PRADA.

[Tim Wright:]

We haven't posted our details on the biopsy study yet. They will be posted in the near future in clinical trial that go, once that study is up and running. But what we've disclosed is that, that study is actually now removed from the previous design of HERA and as a standalone study enables us to get a more rapid read on the pharmacodynamic effect and also tissue exposure levels of RG-012. Recall that the initial study design of HERA last year was pretty much looking for trends in EGFR. We've now powered this for statistical significance on EGFR at 48 weeks and we have fairly good confidence that we're going to see a clinically meaningful and statistically significant EGFR change based on preclinical data and also the natural progression of patients with Alport syndrome. Now the biopsy data now is important for us to assess both tissue exposure levels, target modulation that is mere 21 in the tissue and it’s using an essay that we worked out with Sanofi. And then also looking at both tissue, blood and urine biomarkers as potential early reads or pharmacodynamic affects that these preclinically are associated with efficacy. So it is confidence building in terms of generating patient data that will enable us to assess target modulation as I say tissue PK and also the downstream biomarker affects. Now related to PRADA, I'm not going to comment on the details on this but suffice it to say that it wasn't unexpected to see what they've shown already based on the data that they previously reported in diabetic nephropathy. And the main long-term outcome remains whether this will be at A) sustained and B) sustained off of therapy in particular because of the mechanism of action being as it is hyper filtration mechanism. So those are all the comments I can make about that at this stage with very limited data share with us so far.

[Jay Hagan:]

And you may have picked up that we’re more very pleased that Sanofi decided to keep their PRADA ownership words and participate in the financing that that was previously announced.

[Operator:]

And our next question comes from the line of Liana Moussatos of Wedbush Securities. Your line is open.

[Liana Moussatos:]

What are the steps needed to get to the renal biopsy data and to file the IND for 4326 by year-end and also when is your 10-Q coming out?

[Jay Hagan:]

When we did the Q Dan?

[Dan Chevallard:]

Yes, I can answer the 10-Q question so we’ll be filing the Q at the conclusion of this call today.

[Jay Hagan:]

As far that the specifics steps regarding the renal biopsy study as Tim mentioned we submitted the protocol and it’s activating the sites by allowing the patient.

[Tim Wright:]

To identify and the matter getting them up and running there is in progress and we're hoping for hitting that milestone maybe even ahead of the end of the year for that one. So as far as next steps, the next step will be for posting of some clinical trial at go from visibility standpoint we will be able to see the outline of that protocol at that stage.

[Jay Hagan:]

Yes, there is IRB approval to get the sites up and going, site initiation visits all that basic clinical operations blocking and tackling that goes to getting a study up and going. And as far as the IND goes, there again it's doing your non-GLP and GLP toxicology studies.

[Tim Wright:]

Yes, so in terms of that program everything is progressing on Q that is all the pre-IND work that we need to accomplish and we've already engaged a CRO for the site selection for that Phase 1 start, so not really sure I can share anymore with you except to say that everything looks very good and all the pre-IND work or the IND enabling work is being completed on time for a Q4 submission.

[Operator:]

Our next question comes from the line of Alan Carr of Needham and Company. Your line is open.

[Alan Carriers:]

Would you talk a bit more about cash used here at use and proceeds and to what extent are they directed to the two lead programs here in kidney disease and how much will you still be devoting towards the platform and new microRNA candidates?

[Jay Hagan:]

Yes, I’ll let Dan take that but the highest level clinical programs in general consume the vast majority of discretionary spent. So the way to think about I’ll put into four buckets of spend that maybe Dan can walk through at a high level, but we have a basically a fixed infrastructure here of employees plus what it cost to be a public company sort of fixed overhead costs which Dan will give you a sense of. And we got our 012 Phase 2 program then we've got the ADPKD program which would move through a comprehensive Phase I program next year in terms of use of proceeds. And then we have an ongoing active discovery effort here. But I want to make sure, I am emphasizing that as far as discretionary spend goes, just given the larger magnitude of doing clinical trials, the vast majority of that discretionary spend is directed towards us. Dan, you want to put any more commentary.

[Dan Chevallard:]

Alan I think how I color that further would be probably a quarter of our proceeds you can allocate towards fixed cost over the next seven to eight quarters. Better part of half of the proceeds are really going to be focused on driving the 012 program through the Phase 2, moving the ADPKD program into Phase 1, which will take us really through 2018. I’d say maybe the balance, the other 25% we continue to have a commitment to our research and pipeline development, and I think that would really constitute the remaining quarter of the proceeds if you were to say over the next several quarters or so.

[Jay Hagan:]

And we've articulated in Broadstripe down that we have a very active program in NASH, with multiple targets being pursued. We have backup Hep C program that pending a updated commercial assessment and business development outreach, where we can articulate what a commercialization plan would look like, would be an additional area of research, as well as other diseases of the liver that are yet undisclosed in kidney.

[Alan Carriers:]

And you mentioned that, you may bring another nominee - another program. I assume this is going to be in liver or kidney. Can you narrow it down even more than that?

[Jay Hagan:]

I would prefer not to narrow it down right now. We'll disclose it once we're making the commitment to start spending the more expensive IND enabling dollars on a program. But I will say that, there's timelines and project teams working on these various programs here, and as they advance along, and as we determine which look the most favorable and how we’re going to prioritize our spend, will be a position to nominate.

[Alan Carriers:]

And you are feeling at this point, in microRNA, the best target organs through that are kidney and liver?

[Jay Hagan:]

Well, we know we can deliver to those organs, and we’ve seen that, obviously with the galnac technology and other conjugation technologies, we know we can preferentially get to the liver. With our kidney program both naked [oligo], as well as proprietary chemistry we’ve employed in the 4326 program. We know we can get to the kidney with efficacious concentrations of oligo. Others have demonstrated in the industry an ability to deliver to the CNS, to the eye, topically GI. So, all of those are potential additional tissues that one could explore. And I also don't want to lose sight of the glioblastoma program, the one oncology program we have ongoing. Where because that disease is often coupled with surgical resection, there's an opportunity to deliver locally there and that program continues to be an area that we’re exploring that we highlighted last year at R&D day.

[Operator:]

[Operator Instructions] Our next question comes from the line of Madhu Kumar of Chardan. Your line is open.

[Christine:]

Hi. This is Christine on for Madhu. Most of my questions have been addressed. Just one on whether there will be any data for either of the two programs at ASN meeting this fall?

[Jay Hagan:]

We’re not planning to present this year, given the timeframe of where we expect data to come out and where we are with the programs. We’re focusing our efforts back here on on-site to get the activities all up and running to get those recruited.

[Operator:]

Thank you. And at this time, I am showing no further questions. I’d like to turn the conference back over to Mr. Jay Hagan, CEO for closing remarks.

[Jay Hagan:]

Yes. Thanks very much for your time and attention today and we look forward to providing updates as the next quarter progresses. Thank you.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everybody have a great day.