Selecta Biosciences, Inc.
Q2 2019 Earnings Call Transcript

Published: 9 Aug 2019

[Operator:]

Good morning. Thank you for holding. Welcome to the Selecta Biosciences’ Second Quarter Financial Results Conference Call. At this time, all participants are in listen-only mode. This call is being webcast live on the Investors and Media section of the 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 Elona. Please go ahead.

[Elona Kogan:]

Thank you, and good morning, everyone. Earlier today, we issued a press release containing our second quarter 2019 financial results and other corporate updates, and we filed our 10-Q. This release and the 10-Q can be accessed by visiting our website at www.selectabio.com. I'm joined today by Carsten Brunn, our CEO; and Stephen Smolinski, our COO; Dr. Kei Kishimoto, our Chief Scientific Officer, who will be available for the Q&A portion of the call.Before we get started, we would like to advise that certain remarks that are made during this call, including, without limitations, statements about the Company's future expectations, plans and prospects, the potential of our ImmTOR platform, the anticipated timing of planned trial, related data readouts and ability of results to inform future trials, our collaboration with AskBio, our collaboration with CureCN, a development market potential for our product, the sufficiency of the Company's cash, cash equivalents and short-term investments 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 Selecta's most recent Quarterly Report on Form 10-Q filed with the SEC, which can be accessed at www.selectabio.com. In addition, any forward-looking statements represent the Company's views only as of today, August 8, 2019, and should not be relied upon as representing the Company's 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 obligation to do so, even if management's views change.And now let me introduce Carsten Brunn, who will kick things off today.

[Carsten Brunn:]

Thank you, Elona, and good morning, everyone. This quarter, we continued to gain traction and momentum for immune tolerance transplant, ImmTOR, and we're particularly excited about its potential in therapeutic biologics, enzymes and AAV gene therapy.The current challenge for drug development in these areas is the limitations caused by the body's own immune response. Many biologic therapies when administered will trigger the immune system to develop neutralizing antibodies that counteract their therapeutic benefit. Our answer to this challenge is our ImmTOR platform, which promotes selective immune tolerance of the therapy, allowing the therapeutic goal to be achieved.For our lead development program, SEL-212, for the treatment of chronic refractory gout, we have made good progress and patient enrollment is progressing in our six months head-to-head COMPARE trial designed to evaluate SEL-212 compared to Krystexxa in adult patients with chronic refractory gout. If successful, this trial will give us an opportunity to demonstrate the superiority of SEL-212. Stephen will talk in more detail about this program in a moment.We are extremely thrilled by our recently announced strategic partnership with Asklepios BioPharmaceutical, also known as AskBio, a proven leader in next-generation gene therapy development and scaled manufacturing to jointly develop, manufacture and commercialize a broad portfolio of AAV gene therapies. AskBio's gene therapy platform includes a robust pipeline of potentially curative gene therapies and extensive captive library, a flexible and scalable manufacturing process and several advanced AAV initiatives under development.The AskBio platform also was used in the development of two of the FDA-approved gene therapies available today, Zolgensma and Luxterna. This partnership will combine our unique ImmTOR platform with AskBio technology for human proof-of-concept trial to validate our joint portfolio of products and the potential for redosing in patients. Currently, the ability to readminister systemic AAV gene therapy is limited by the development of neutralizing antibodies against the AAV capsid.We believe that our platform has the potential to increase the proportion of patients who achieve and maintain therapeutic benefit. For example, the ability to safely redose will benefit patients who are initially underdosed or help restore transgene expression in patients who may lose expression over time. This is particularly important in pediatric patients for whom transgene expression may wane over time as they grow or in patients who experience organ damage such as liver inflammation, which can adversely affect transgene expression.Additionally, last year, we announced a collaboration with the European Consortium, [POCM], for the use of our ImmTOR platform in combination with their AAV gene therapy in Crigler-Najjar Syndrome, a rare genetic disorder characterized by inability to properly convert and clear bilirubin from the body. We are continuing to advance this collaboration and expect QCM to obtain scientific advice from the German drug regulatory authority in the second half of 2019. We expect this guidance will inform the clinical trial design.We remain focused on partnerships for our ImmTOR platform to realize our vision for gene therapy. We believe that ImmTOR has the potential to transform gene therapies requiring intravenous administration by more effectively targeting systemic diseases such as inherited metabolic disorders and muscular dystrophies, in which multiple vector administrations are likely needed to achieve full therapeutic efficacy. We believe that strategic partnerships can provide us with a portfolio of differentiated and durable gene therapy solutions to patients and their families.And before I hand it over to Stephen to go into more detail on our chronic refractory gout program, I would like to highlight some recent corporate updates. In July, 2019, we grew our team as we welcomed Dr. Alison Schecter as Chief Medical Officer. Alison was most recently the Global Project Head, Rare Diseases at Sanofi, and we look forward to benefiting from her extensive experience in drug development as we continue to advance our programs.Additionally, in June, Scott Myers of Rainier Therapeutics joined our Board of Directors. Scott is an accomplished and strategic leader with significant prior CEO experience. As you can see, we have built a lot of momentum in developing both our AAV gene therapy program and building our team to support continued advances in our ImmTOR platform.With that, I'll hand the call over to Stephen to talk more about SEL-212.

[Stephen Smolinski:]

Thank you, Carsten. Chronic refractory gout represents the most severely affected subpopulation of gout patients, who suffer from debilitating pain and disability. These patients experience high morbidity and mortality than other gout patients. As Carsten mentioned, we continue to believe that SEL-212 has the potential to address several unmet needs in chronic refractory gout patients, including sustained serum uric acid reduction, reduced painful flares and more convenient once monthly dosing. As a reminder, SEL-212 is a combination of ImmTOR, our novel immune tolerance platform, and pegadricase, our proprietary pegylated uricase.Recently at EULAR, we presented the full data from our completed Phase II trial of SEL-212. We continue to be encouraged by what we saw as the data showed that 66% of evaluable patients maintained serum uric acid levels of less than six milligrams per deciliter after five once monthly treatments of SEL-212 at dose of 0.1 or 0.15 milligrams per kilogram of ImmTOR in combination with 0.2 milligrams per kilogram of pegadricase.Additionally, it reduced tissue urate burden, low gout flare rates in severity and flares were observed. Only 35% of patients treated with five doses of SEL-212 experienced gout flares during the first month of treatment with continued reduction of gout flare rates over months two to five. SEL-212 has been generally well tolerated in clinically active doses following repeated administrations in the trail.In March of this year, we announced the initiation of our six-month head-to-head COMPARE Clinical Trial against the current FDA-approved uricase therapy, Krystexxa, which is designed to compare the efficacy and safety of SEL-212 to Krystexxa in adult patients with chronic refractory gout.Patient enrollment in the trial is ongoing and we expect to enroll 150 patients. The primary endpoint has been maintenance of serum uric acid levels below six milligrams per deciliter at six months and secondary end points include flares, quality of life, health assessment questionnaires and tophi resolution. We anticipate providing interim data analysis in the fourth quarter of this year as well as full statistical superiority data analysis in the second quarter of 2020.In terms of the market potential, there are roughly 160,000 patients in the U.S. with chronic refractory gout. Chronic refractory is a painful and severe form of inflammatory arthritis that can lead to bone erosions and joint deformities resulting in loss of function and disability. Only a small percentage of these patients are currently being treated.As we develop SEL-212, we are looking for consistent SUA control over six months and low flare rates. We believe this clinical profile along with its more convenient monthly dosing makes SEL-212 a very compelling product for patients and their providers.In fact, we recently conducted third-party market research, which showed the SEL-212 product profile was very positively received and rheumatologists bring SUA control, low flare rates, once monthly dosing, along with low incidence of infusion reactions as product characteristics that would allow them to increase the duration of treatment and potentially treat more patients.Based on our data and market research, we firmly believe SEL-212 has the potential to address many currently identified unmet needs in this patient population and represents over $1 billion market opportunity.With that, let me turn the call back over to Carsten to discuss our second quarter 2019 financial results.

[Carsten Brunn:]

Thank you, Stephen. Revenue recognized for the second quarter of 2019 was less than $0.1 million under our collaboration agreement with Spark, which compares to no revenue recognized for the second quarter of 2018.R&D expenses for the second quarter of 2019 were $12.1 million, which compares with $14.4 million for the second quarter of 2018. The decrease was driven by reduced salaries and benefits as a result of our headcount reduction at the beginning of fiscal 2019. There were further reductions in cost year-over-year as a result of the completion of our work on discontinued programs. These cost reductions were offset by the timing of costs incurred for both our Phase II and Phase III clinical programs.G&A expenses for the second quarter of 2019 were $4.1 million, which compares with $4.4 million for the second quarter of 2018. The reduction in cost was primarily the result of reduced legal fees, offset by increased professional fees. For the second quarter of 2019, we reported a net loss of $16.4 million or $0.37 per share, compared to a net loss of $18.8 million, or $0.84 per share, for the same period in 2018.As of June 30, 2019, Selecta had $42 million in cash, cash equivalents, restricted cash and short-term investments as compared to $48.7 million as of March 31, 2019. We believe our available cash, cash equivalents and restricted cash will be sufficient to meet its operating requirements into the first quarter of 2020.In summary, our unique platform truly has broad potential. Based on our clinical data, market research and feedback from physicians, we are particularly enthusiastic about our late-stage asset for chronic refractory gout, and look forward to announcing the interim COMPARE data in the fourth quarter. Additionally, we are eager to unlock the value of our platform with the potential to redose in AAV gene therapy and further progress our platform to partnerships, particularly with our new strategic partnership with AskBio.That concludes our formal remarks. Now we'll open the line of for your questions. Operator?

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Chad Messer from Needham & Company. Please go ahead, sir.

[Chad Messer:]

Great. Thanks for taking my question. Good morning and congratulations on your partnership with AskBio. It sounds like a high-quality group. Details are a little light on what the terms of the partnership are, which I have to assume is for strategic and competitive reasons. But I was hoping you can help me understand a couple of things a little bit better, one would be the impact on your financial situation, in particular, in the near term. And the other would be your ability to do other partnerships or basically what have you retained that's not in the partnership? You talked about a broad portfolio that you'll be working on with them? Any help you can give on those two would be much appreciated.

[Carsten Brunn:]

Chad, thank you for the question. So indeed, we're very excited to partner with AskBio because we think they're a partner of choice. They have a proven track record in gene therapy, having spun out companies. Their technology was involved in both approved FDA products, so we're extremely excited. Yes, we kept the details light. We have just announced the partnership. The plan obviously is for us to get into the clinic as quickly as possible. And I think all I can share at this point is going to be a liver and we plan to go into the clinic in 2020.And we would partner in a number of indications, which we have not disclosed yet, but we'll share more details over time. In terms of financial impact, we believe that the partnership will have little impact actually in 2019. We'll guide for next year what the cost will be. But I think for now, there be a little impact on our financial run rate. And so I think what's important as well and we talk about this that we obviously as a platform company look at additional partnerships. So this does not lock us up in any way. We partner with AskBio in a number of indications and we'll disclose those, but this does not limit us from further partnerships in the future.

[Chad Messer:]

Great. Thanks for that added information. And congrats, again, and looking forward to the 212 data next quarter.

[Carsten Brunn:]

Thank you, Chad.

[Operator:]

The next question comes from Derek Archila from Stifel. Please go ahead.

[Benjamin Porter:]

Hey, thanks guys. This is actually Ben on the line. Just wondering if you guys have heard an update from Spark about them opting in? And that's it for us. Thanks.

[Carsten Brunn:]

Thank you. So we obviously are in contact with our partner Spark. And they still have the opportunity to opt into four additional indications in addition to the hemophilia A indication, which they already have. And we will update you once we hear more news from them.

[Benjamin Porter:]

Okay. Thank you.

[Carsten Brunn:]

Thanks.

[Operator:]

The next question comes from Difei Yang from Mizuho Securities. Please go ahead, sir.

[Difei Yang:]

Hi, good morning, and thanks for taking my question. First, the question is around 212. Would you tell us if you will start the Phase III/IV 212 ahead of the interim readouts or after the interim readouts?

[Carsten Brunn:]

Difei, that's a good question. And I think what's important to remember is that the reason we started the COMPARE trial was basically for financial reasons. We had initial plans to do both the Phase III and COMPARE in parallel. But at this point, nothing prevents us from going into Phase III, except the fact we don't have the funding at this point. So we still have plans to start the Phase III as we see it kind of independent of COMPARE, but it is somewhat driven whether we're able to raise additional funds for that. So the plan is still to start the Phase III in Q4 and that is still possible.

[Difei Yang:]

Okay. Thank you for the clarification. And then with regards to the interim readout, how many patients? What is the range of the number of patients' data that we should be expecting?

[Carsten Brunn:]

That's a good question as well, Difei. So we have not guided to this and we'll not guide to this, but we commit to an interim readout towards the end of this year, which I think will give good guidance actually on what to expect for the final readout as well.

[Difei Yang:]

Okay, thank you. So then changing subject to the retreatment piece of the development, would you on the very high level make comments with regards to financial arrangement, not specifically related to AskBio, but in general, what is the typical upfront you would be looking for? And what's the typical royalty, et cetera and then following up on that with regard to Spark. Is there a deadline for Spark to opt in on the additional programs?

[Carsten Brunn:]

Another good question, Difei. Obviously, we don't comment on potential upfronts and royalties. So unfortunately, I can't answer that question. In terms of Spark, we actually have not disclosed the exact time, but you can expect towards the end of Q4, they will have to opt in the additional four indications that are still outstanding in addition to hemophilia A, which they opted in already.

[Difei Yang:]

Yes. Thanks so much for taking my question.

[Carsten Brunn:]

Thank you, Difei.

[Operator:]

The next question comes from Yun Zhong from Janney. Please go ahead.

[Yun Zhong:]

Hi. Thank you for taking the questions. And the first one is on the interim data readout in fourth quarter. Is it possible that there can be some statistical analysis depending on the data, the quality of data? And also, will it be in the format like you did for the Phase II with some projection on patients who have not completed full follow-up period?

[Carsten Brunn:]

Thanks for the question, Yun. So, as we have guided, we will do a numerical readout in Q4, and then we'll plan to do the statistical analysis for the final readout. I think what's important we don't take a penalty doing a readout as it's an open-label trial.

[Yun Zhong:]

Okay. And then the next question, I think – you still have two internal gene therapy programs. And I understand that the focus right now is on the gout program and also the collaborations. It's a good way to take advantage of the platform that you have. But do you still have plan, if you have sufficient resources, to develop your internal gene therapy programs?

[Carsten Brunn:]

Yun, you asked an excellent question. And indeed, we have two internal gene therapy programs. We have MMA and OTC. And we actually plan to put the MMA program into the partnership with AskBio as a liver-directed disease. We'll share more details once we have a detailed clinical plan developed with AskBio, but I think that's one of the areas that we will be bringing into the partnership in addition to ImmTOR.

[Yun Zhong:]

Okay. Great. Thank you.

[Carsten Brunn:]

Thank you.

[Operator:]

The next question comes from John Newman from Canaccord. Please go ahead.

[Justin Zelin:]

Hi, good morning. This is actually Justin Zelin on for John Newman. I'd like to congratulate you on the partnership agreement with AskBio. It's very exciting. Now I'm just curious if the partnership agreement contains plans who have additional development programs in addition to your methylmalonic acidemia program? And I have a quick follow-up.

[Carsten Brunn:]

Can you repeat the question, please, Justin.

[Justin Zelin:]

Yes. The question was if you have plans to have additional development programs with the partnership agreement with AskBio in addition to your MMA program?

[Carsten Brunn:]

The answer is a clear yes. There's a number of indications we're going to pursue together with AskBio. The first will be a liver-directed disease, but we'll have additional indications absolutely, and we'll guide to those over time.

[Justin Zelin:]

Okay. Great. And I noticed the agreement has a profit-cost share provision agreement. Will the percent breakdown with AskBio be 50-50 split? Or will that kind of depend on how much cost they're putting to the program?

[Carsten Brunn:]

Yes. It's exactly what I think. One of the reasons we're so excited to partner with AskBio, as I said, a proven track record of success is that it is a partnership of equals actually where we share costs, but also profits. And it's a true partnership where we jointly develop, manufacture and commercialize products. And I think that's what's extremely excited about this for us that we're equal partners in this in a 50-50 partnership.

[Justin Zelin:]

Excellent. Congrats again on the deal and thanks for taking the questions.

[Carsten Brunn:]

Thank you.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Carsten Brunn, Chief Financial Officer for any closing remarks.

[Carsten Brunn:]

Thanks so much. Thanks for your attention and for all the questions. And I just want to reiterate that our platform has truly broad potential and that we're particularly excited about late-stage asset for chronic refractory gout. We look forward to announcing the interim COMPARE data in the fourth quarter. Additionally, we are very eager to unlock the value of our platform with the potential to redose in AAV gene therapy and further progress our partnerships, particularly with our new strategic partnership with AskBio. Thanks again for your questions and your attention.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect, and enjoy the rest of your day.