Selecta Biosciences, Inc.
Q4 2017 Earnings Call Transcript

Published: 16 Mar 2018

[Operator:]

Welcome to the Selecta Biosciences Fourth Quarter And Year-end 2017 Conference Call. [Operator Instructions]. This call is being webcast live on the investors and media section of Selecta's website at www.selectabio.com, and it is being recorded. For opening remarks, I would now like to turn the call over to John Leaman, Selecta's Chief Financial Officer and Head of Corporate Strategy. Please go ahead.

[John Leaman:]

Thank you, Brandon, and thanks to all of you for joining us this morning. Earlier this morning, we issued a press release containing our fourth quarter and year-end 2017 financial results and other corporate updates, and we filed our 10-K. The release in the 10-K can be accessed by visiting our website, selectabio.com. I'm joined today by Werner Cautreels, our CEO; and Skip Sands, our Chief Medical Officer. Before we get started, we would like to advise that certain remarks that are made during this call about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions 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 the Risk Factors section of our most recent annual report on Form 10-K filed with the SEC, which can be accessed at selectabio.com. In addition, any forward-looking statements represent our views only as of today, March 15, 2018, and should not be relied on -- upon as representing our views as of any subsequent date. While Selecta may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligations to do so even if our views change. And now let me introduce Werner, who will kick off our discussions.

[Werner Cautreels:]

Thank you, John, and good morning, everyone. Over the last year, we continued our mission to advance our pipeline of new class of biologic therapies that mitigate unwanted immunogenicity. Specifically, in 2017, we continued to execute on a comprehensive dose-ranging Phase II trial of SEL-212, our lead program for chronic severe gout, which we believe positions us well for a planned Phase III program which we expect to get underway later this year. We in-licensed the clinical stage oncology asset called LMB-100, and combined it with our proprietary immune tolerance agent SVP-Rapamycin to form our next product candidate, SEL-403. We dosed the first patient in our Phase I trial last week. We also generated and presented further preclinical data that demonstrates the potential of SVP-Rapamycin to transform the treatment paradigm in gene therapy by enabling repeat dosing. And we received $30 million in planned payments from Spark for the license that was executed in December 2016. And finally, we made key additions to our management team and Board of Directors as we entered the next stage of our evolution. Now let's focus on some of our more recent developments, starting with our ongoing Phase II trial of SEL-212. This is a product candidate consisting of pegsiticase, a uricase enzyme that has been shown to significantly lower uric acid levels in the blood, combined with SVP-Rapamycin to mitigate immunogenicity that normally occurs from the dosing of the uricase enzyme. SEL-212 was designed as a monthly debulking therapy that would enable the rapid dissolution of uric acid deposits in the joints, tissues and organs of chronic severe gout patients. There is currently only one FDA-approved therapy for severe gout patients. The uricase enzyme that has proven to be immunogenic, with the majority of the patients treated unable to complete their full therapy course. We believe there remains a high unmet need for a therapy that can clear uric acid deposits and tophi in patients. Now I will turn the call over to our CMO, Skip Sands, to provide an update on our SEL-212 program. Skip?

[Earl Sands:]

Thank you, Werner, and good morning, everyone. The focus of the ongoing Phase II trial is to evaluate different doses of both SVP-Rapamycin and pegsiticase, as we seek to define the optimal dose regimens for our Phase III program. As of March 9, 2018, we had enrolled 111 patients in total in the trial. I am pleased to report that we have completed the enrollment of patients in the cohorts that are receiving either 0.125 or 0.15 milligrams per kilogram of SVP-Rapamycin, in combination with either 0.2 or 0.4 milligrams per kilogram of pegsiticase. As a reminder, these cohorts are receiving a dose regimen consisting of the combination therapy for the first 3 months of treatment, and then pegsiticase only for the last two months of treatment. The results of the 3 combination doses will help define the dose regimen for regimens to carry forward into the Phase III program, in which we plan to dose the monthly combination therapy for the entire 6-month period of the pivotal trials. We plan to report initial data from these higher dose cohorts at the upcoming Pan-American League of Rheumatology Associations Congress, or PANLAR 2018, on April 9 or 10, and will host a conference call for investors that same morning. As has been the case in our past data announcements, you should expect to see patient's serum uric acid levels, ADA titers, tolerability data and gout flare rates. We are also pleased to report that in mid-February, we began dosing patients in our current Phase II trial who are expected to receive 5 monthly doses of SVP-Rapamycin in combination with pegsiticase. These patients will receive SVP-Rapamycin doses ranging from 0.1 milligram per kilogram to 0.15 milligram per kilogram, in combination with 0.2 milligram per kilogram of pegsiticase. We plan to present from these patients at an up and coming medical meeting in Q3 of 2018. And finally, we remain on track to begin enrollment of patients in our Phase III program of SEL-212 later this year. Now I will turn the call back over to Werner.

[Werner Cautreels:]

Thanks, Skip. As we have been executing our SEL-212 Phase II study, we also have been developing our next clinical program, SEL-403. In mid-2017, we in-licensed LMB-100 from the National Cancer Institute. This recombinant immunotoxin targeting mesothelin may hold great promise as an agent for various solid tumors, including mesothelioma and pancreatic cancer. However, it also has proven to be highly immunogenic, causing antidrug antibodies in all patients, which uniformly negated the drug's clinical activity. Working with Selecta, NCI generated preclinical data that were recently published in PNAS, showing that by dosing SVP-Rapamycin in combination with LMB-100, we can mitigate immunogenicity and restore the immunotoxin's antitumor activity. In January, we announced that the FDA had an accepted an IND for this combination therapy in patients with malignant pleural or peritoneal mesothelioma, who have undergone at least one regimen of chemotherapy. It is important to note that this IND submission was approved on the basis of our existing preclinical and clinical data from the SEL-212 program without additional combination toxicology data. We believe this is a reflection of a significant unmet need of these patients as well as the potential benefit/risk profile that has been established for SVP-Rapamycin in the SEL-212 program. And this IND was also based on data from LMB-100 in 2 Phase I trials that were conducted by NCI, one in mesothelioma and one in pancreatic cancer patients. In fact, last week, we began dosing the first patient in the Phase I trial that is being conducted under a Cooperative Research and Development Agreement, or CRADA, at the NCI. Up to 18 patients will be enrolled in this dose escalation trial. Patients will receive 4 treatment cycles, 3 weeks apart of the combination product, each consisting of an initial dose of SVP-Rapamycin together with LMB-100 on day 1 of each cycle and two subsequent doses of LMB-100 alone on days 3 and 5 of each cycle. The starting dose of SVP-Rapamycin will be 0.15 milligrams per kilogram and the starting dose of LMB-100 will be the maximum tolerated dose from the Phase I studies that were conducted with LMB-100 alone by NCI. The primary objective of the trial will be to evaluate safety and tolerability, but additional objectives include the measurement of ADAs and also an objective response rate assessment. In addition to this clinical progress, we announced in the fourth quarter, that we had named Stephen Smolinski to the newly created role of Chief Commercial Officer. He brings to us a tremendous amount of rheumatology and immunology experience from both large pharma and smaller biotech companies. Stephen already has been a key contributor to our Phase III planning for SEL-212, and he also started preparing our commercial plans in the gout space. We also named John Leaman as our new Chief Financial Officer, Treasurer and Head of Corporate Strategy. John joins us with an impressive and well-rounded track record in the life sciences space. And finally, in January, we announced my plans for retirement at the end of 2018. I joined Selecta in 2010, and I'm extremely proud of our many achievements over these past years. My thanks go first to our investigators and patients for participating in our clinical trials, but also to our employees, management and Board of Directors for working alongside with me to get us to this exciting stage. In conjunction with this announcement, the board named Dr. Omid Farokhzad, one of Selecta's cofounders, as Chairman of the Board, and we recently initiated a search for my successor. While I'm eager to begin the next phase of my life, that includes spending more time with family, my goal remains, first, to ensure that Selecta reaches its stated goals for this year. I'm pleased that we already have checked off one box by getting SEL-403 into the clinic. The next goal is to continue to execute on our Phase II program and thereof, Phase III program underway later in the year. In parallel with this, we will continue to ready our proprietary gene therapy candidate for MMA as we target an IND filing in 2019. With that, let me turn the call over to John Leaman to discuss our fourth quarter financial results.

[John Leaman:]

Thank you, Werner. Selecta reported $100,000 in revenue for the fourth quarter of 2017, which is down from approximately $2.9 million in the comparable quarter last year. The decline is primarily the result of the termination of our collaboration with Sanofi in late 2016 and reduced revenue recognized from the company's nicotine vaccine candidate grant award from the National Institute on Drug Abuse. Research and development expenses for the fourth quarter of 2017 were $13.6 million, which is up from $11 million from the same quarter last year. The increase is mainly the result of greater clinical costs related to our Phase II trial of SEL-212, planning for a Phase III program and incremental headcount-related expenses. General and administrative expenses for the fourth quarter of 2017 were $5.7 million, which compares with $5.8 million for the fourth quarter of 2016. The decrease is primarily the result of greater headcount and related salaries needed to support a clinical-stage public company, offset by a reduction in sublicensing payments made to the Massachusetts Institute of Technology resulting from the agreement with Spark Therapeutics. Overall, for the fourth quarter of 2017, we reported a net loss attributable to common stockholders of $19.5 million or $0.88 per share. This compares to a net loss of $14.1 million or $0.77 per share for the same period in 2016. As of December 31, 2017, we had approximately $97 million in cash, cash equivalents, short-term deposits, investments and restricted cash. This is down from approximately $105 million at September 30, 2017, as a result of our operating expenses, partially offset by payments from and stock purchases by Spark Therapeutics related to the license agreement we entered into with them in late 2016. I'm pleased to report that we have now received a total of $30 million since the initiation of this agreement. We continue to expect our cash balance is sufficient to fund our operations into mid-2019. Note that this guidance excludes any additional payments we might receive from Spark or other potential collaborators. That concludes our formal remarks. Now Brandon, would you please now open the line for questions?

[Operator:]

[Operator Instructions]. Our first question comes from Carter Gould with UBS.

[Jeffrey Hung:]

This is Jeff Hung, in for Carter. I think you mentioned in the prepared remarks, but for 403, what will be the lowest dose you'll start with LMB-100?

[Werner Cautreels:]

Thanks, Jeff. The lowest dose for that is the MTD, the maximum tolerated dose, that NCI has defined from two Phase I trials that were conducted using LMB-100 by itself. And that was done in two patient populations, one in mesothelioma and one in pancreatic cancer.

[Jeffrey Hung:]

Great. And then for 212, what level of confidence do you have that the SVP-Rapamycin doses are ranging from 0.1 to 0.15 milligrams per kilogram, with the 0.2 milligrams per kilogram pegsiticase for the 5 doses will be sufficient to help make a call on the Phase III design?

[John Leaman:]

Jeff, this is John Leaman. In answer to your question, I think, as we've described, we're going to be presenting data for the higher dose cohorts coming out in April. And I think it's that data that has helped inform what we have started with the combination doses. And I think we feel fairly confident that within the range that we've laid out, that we'll have the 5 combination dose that we can take into Phase III.

[Jeffrey Hung:]

Great. And then last one, beyond the clinical data readouts and the end of Phase II meeting, are there any other data or preclinical work that might be required before the start Phase III?

[Werner Cautreels:]

We have generated the preclinical data for the five combination dose, actually, for the continuous dose cohorts and the process in place for FDA approval prior to the forward combination dose. So we feel confident about that.

[Operator:]

Our next question comes from Difei Yang with Mizuho.

[Unidentified Analyst:]

This is actually Alex, on for Difei. Wondering if you could talk a little bit about some of the patients that have responded best to SEL-212, so far, across the various cohorts. Are you in a position to share some specific characteristics of those patients at this point?

[John Leaman:]

Thanks for the question. And again, this is John Leaman responding. I think we will plan on presenting some of the data that you've just described with the April update that we're going to give at PANLAR. So if you can hold that question, we'll plan on answering it in April.

[Unidentified Analyst:]

Okay. And another question, just on a standalone basis, should we expect Krystexxa and pegsiticase to behave more or less the same?

[Earl Sands:]

I think, I mean, they're obviously similar in terms of being uricase enzymes, but I think it's hard for us to basically opine on our data versus theirs until we fully form it. But I think what we would say, and I think to Werner's remarks, we both know that they create, without the addition of something like SVP-Rapamycin, significant immunogenicity and ADAs. So I think, based upon what you've seen from Krystexxa and obviously what we have described, I think you can draw your conclusion.

[Operator:]

Our next question comes from John Newman with Canaccord.

[John Newman:]

Great progress. First question I had is, I wonder if you could potentially comment on the number of patients and the number of patient groups that we might see at PANLAR for the SVP-Rapamycin at the higher doses?

[Werner Cautreels:]

Yes. Good morning, John. So in April, we will report on the patients that have received 0.125 and 0.15. There will be, actually, 3 cohorts with at least 10 patients in each of those cohorts. And not all of these patients will have completed the full 5 month, but they will be, to a large extent, well completed.

[John Newman:]

Okay. Great. And then in terms of the five dose regimen that you're currently working on, would you expect similar numbers of patients and similar numbers of cohorts or might that be a little bit different?

[Werner Cautreels:]

So for our guidance, we plan measuring cohorts with doses that range from 0.1 to 0.15 milligram per kilogram of SVP-Rapamycin, again, with approximately 10 patients of -- in the cohorts. Just to clarify, the patients in the initial cohort that were started to dose received 0.15 milligrams per kilogram of SVP-Rapamycin.

[Operator:]

Our next question comes from Chad Messer with Needham & Company.

[Gil Blum:]

This is Gil, on for Chad. I'm just curious about the LMB-100, are there other indications that you're going to be looking at except the mesothelioma?

[Earl Sands:]

As you know, mesothelin is a part of a lot of different tumor types, beyond mesothelioma, which it probably makes a lot of sense, right? Pancreatic cancer, over 90% of the tumor has mesothelin in it. So there's a lot of different tumor types to go to. I think the first 2 that LMB-100 was studied in was mesothelioma, which the trial that we're doing with NCI. But I think a second offshoot would likely be pancreatic cancer where it's also been studied. You can also look at other tumor types, breast, uterine. So there's many different tumor types, I think, we think it can be effective in, but we're starting in 2 that there's a large percentage of mesothelin in the tumor.

[Operator:]

Our next question comes from Alex Schwartz of Stifel.

[Alexander Schwartz:]

First question I had was, would you have any SEL-403 or other candidate posters or presentations at ACR? And if so, which one should we focus on?

[Werner Cautreels:]

This is Werner. That will be premature. I think we will not have enough data. And we'd have to get it with NCI it, so we will give guidance as we go forward. We did publish, actually, the preclinical work and the key orders of that are actually NCA -- NCI investigators, and that was published in January in PNAS.

[Alexander Schwartz:]

Okay. And then a second question, more of a modeling question. The $2.5 million cash payment you received from Spark during 4Q '17, can you disclose what that payment was related to? And do you anticipate any additional milestones from Spark this year as much as you can talk to that?

[John Leaman:]

Alex, thank you. I think in terms of what we can expect this year, I don't think we could guide to that because a lot of that has to do if and when Spark decides to put the combination into the clinic. However, on the $30 million in payments, those were preset sort of payments. So the $2.5 million was part of the greater $7.5 million that we received, $2.5 million in cash, $5 million in an equity sort of investment that was made back in October 31. That was all prespecified. So the $30 million upfront was prespecified and these payments were made on schedule and the $30 million was what we expected upfront.

[Operator:]

This concludes our question-and-answer session. I would now like to turn the call back over to Werner Cautreels for any closing remarks.

[Werner Cautreels:]

Thanks much, Brandon, and thanks, everyone, for joining us this morning. We hope that we can see some of you at the Needham Healthcare Conference in a couple of weeks in New York. And we look forward to speaking with you all again when we report the higher dose cohort data at PANLAR on April 9 and 10, and that will also have a conference call. So that concludes our call, Brandon.

[Operator:]

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.