Selecta Biosciences, Inc.
Q4 2019 Earnings Call Transcript

Published: 12 Mar 2020

[Operator:]

Good morning and welcome to the Selecta Biosciences' Fourth Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. 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 like to introduce Elona Kogan, General Counsel of Selecta. Please go ahead.

[Elona Kogan:]

Thank you and good morning everyone. Welcome to our fourth quarter and full year 2019 financial results and corporate update conference call. A press release reporting our financial results is available in the press release section of our website, www.selectabio.com and our Form 10-K for the fiscal year ended 2019 will be filed later today with the SEC.Joining me today is Carsten Brunn, our President and Chief Executive Officer; and Brad Dahms, our Chief Financial Officer. In addition, Dr. Alison Schecter, our Chief Medical Officer; and Kei Kishimoto, our Chief Scientific Officer will be available for the Q&A portion of the call.As a reminder, during today’s call, we will be making certain forward-looking statements, including without limitations, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, financial projections and our future expectations, plans, and prospects. These statements are subject to various risks that are described in our filings made with the Securities and Exchange Commission, including our most recent annual report on Form 10-K, which will be filed with the SEC later today.You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today March 12, 2020 and Selecta disclaims any obligation to update such statements even if management’s views change.I would now like to turn the call over to Carsten Brunn, our President and CEO. Carsten?

[Carsten Brunn:]

Thank you Elona and good morning. I appreciate you joining us today. 2019 was a pivotal year for Selecta. We made substantial clinical advancements, highlighted by the completion of enrollment in the head-to-head COMPARE trial for our lead product candidate, SEL-212, which is being developed for the treatment of chronic refractory gout.We were able to complete enrollment of the trial in seven months, which we believe speaks to the significant unmet need in patients with chronic refractory gout. SEL-212 combines our ImmTOR platform and pegadricase and the COMPARE trial is evaluating a once monthly dose of SEL-212 in comparison to biweekly pegloticase.The primary endpoint is the percentage of patients who maintain serum uric acid levels of less than 6mg/dL at three and six months 80% of the time. We expect to announce top line data from this trial in the third quarter of 2020. As we advance into our Phase 3 program, which I will outline shortly, we remain strongly encouraged that SEL-212 if approved could address some of the current unmet needs in the marketplace with a once monthly dosing profile and the potential to mitigate the formation of neutralizing antibodies without suppressing the immune system.We’re pleased to report that in January we had a productive discussion with the FDA in which we discussed a proposed design of the Phase 3 clinical program. The discussion has given us clarity on the registrational study, which will consist of two placebo controlled trials. Each trial will have a six months end point and one of the studies will contain a six month placebo controlled expansion to evaluate extended safety.As per suggestion to the FDA, we’ll be evaluating two doses of SEL-212. 0.1 milligrams per kilogram of ImmTOR and 0.15 milligrams per kilogram of ImmTOR versus placebo in each of the two trials. In other words, there will be two active treatment arms in one placebo arm. Patients will be randomized 1-to-1-to-1 with approximately 35 patients in each of the three arms in each trial.From a manufacturing perspective, we have enough supply to commence the Phase 3 clinical program. Our gene therapy program continues to be a strategic focus and we made important advancements in 2019 all of which support our entry into the clinic later in 2020. In December 2019, we were excited to report that we broadened our existing strategic partnership with AskBio.We jointly entered into a license agreement, and that which AskBio exercised its option to license development and commercialization rights to select us ImmTOR, immune tolerance platform for use in AAV gene therapy for the treatment of Pompe disease, which is AskBio’s lead indication. Pompe disease is a rare, genetic, lysosomal storage disease characterized by the abnormal buildup of a sugar molecule called glycogen inside cells.Under the terms of the agreement, Selecta received upfront payments totaling $7 million and is eligible to receive milestone payments of $237 million plus royalties on product sales. This builds upon the strategic partnership we announced in August 2019 with AskBio to jointly develop, manufacture, and commercialize a portfolio of AAV gene therapies with a lead indication in methylmalonic academia and several other indications, which we have not yet disclosed.Our partnership leverages the technology platforms of both companies with AskBio’s expertise in clinical and manufacturing AAV gene therapies and select as expertise in immune tolerance biology and there will be a human proof of concept trial to validate a technology and its potential for re-dosing in patients. The potential to redoes gene therapy maybe an important therapeutic break-through that is currently not possible to redose AAV gene therapy due to the development of utilizing antibodies against the AAV capsid.Pre-clinically, ImmTOR has been shown to enable repeat dosing and enhance first dose tranche and expression up to four folds, compared to gene therapy with AAV vector alone. We look forward to bringing our gene therapy programs into the clinic later this year. Our proprietary gene therapy program includes research in ornithine transcarbamylase or OTC deficiency, which we intend to advance and we look forward to providing updates on this program later this year.In 2019, we significantly strengthened our organizations leadership and financial infrastructure adding several new members to our executive team, appointing a new Chairman to our Board of Directors and completing a $7 million financing.We are proud to have welcomed Carrie Cox as our new Chairman of the Board of Directors. Ms. Cox is a renowned industry leader and successful biopharmaceutical executive. She has served on several boards and held the position of Chair for multiple biopharmaceutical companies and healthcare entities, including Cardinal Health, Celgene, Array Biopharma, Humacyte, Prism Pharmaceuticals, among many others.I'll now turn the call over to our Chief Financial Officer, Brad Dahms. Brad?

[Brad Dahms:]

Thank you, Carsten. Our detail financials are laid out in our earnings press release, which we filed this morning when we further outlined in our 10-K. So, I would just highlight a few items here. Before we delve into Selecta's finances, I want to note that the ongoing COVID-19 situation will not impact our clinical programs from a supply perspective.Now, with regard to our financials, we ended the year with 91.6 million in cash, cash equivalents and restricted cash. Net cash used in operating activities was $12.9 million and $51.4 million for the fourth quarter and fiscal year 2019, respectively, as compared to $12.7 million and $59.2 million for the same periods in 2018.As Carsten noted, we completed our private financing in December with a high quality syndicate of investors and certain board members, which resulted in a net proceeds to the company of 65.6 million.Together with the upfront cash received from the license agreement with AskBio for the lead indication and Pompe disease, we believe our current cash will fund operations into the first quarter of 2021. R&D expenses for the fourth quarter and fiscal year 2019 were $15.2 million and $42.7 million, respectively, which compares with $10.3 million and $47.7 million for the same periods in 2018.The quarterly increase reflects additional costs incurred specific to our Phase 2 head-to-head COMPARE clinical trial of SEL-212, for which we completed enrollment in December 2019. The decrease year-over-year reflects reduced costs in 2019, due to the completion of prior programs in 2018, combined with reduced salaries and benefits resulting from the headcount reduction in early 2019. The cost reductions were partially offset by an overall increase in costs incurred on our lead product candidate, SEL-212.G&A expenses for the fourth quarter and fiscal year 2019 were $4.1 million and $16.4 million, respectively, which compares with $5.1 million and $18.2 million for the same periods in 2018. The decrease is the result of lower salaries and stock compensation expense resulting from reduced headcount at the end of 2018, combined with reduced professional fees.For the fourth quarter and fiscal year 2019, we reported a net loss of $14.9 million, or $0.28 per share and $55.4 million, or $1.22 per share, compared to a net loss of $14.7 million, or $0.65 per share, and $65.3 million, or $2.92 per share, for the same periods in 2018.I’ll now hand the call back over to Carsten for closing remarks. Carsten?

[Carsten Brunn:]

Thank you, Brad. As mentioned earlier, 2019 was a year of substantive meaningful growth for us as we evolve in the areas of clinical and regulatory development, organization structure, finance, and strategic partnerships. In 2020, our focus remains on the further development of SEL-212 and look forward to announcing top line data from the compared study in the third quarter, as well as to the initiation of the Phase 3 clinical program in the second half of the year.In parallel, we will continue to advance our gene therapy program independently and with our partners entering the clinic in the second half of this year as we continue to pursue new breakthroughs in treating diseases that can benefit from redosing with gene therapy. We look forward to continuing to generate value from our ImmTOR platform.I'd like to conclude by reiterating our gratitude to the many people who have been supportive along the way, including our patients and their families, our investigators helping us with COMPARE and our great team at Selecta.With that, we’re happy to take questions.

[Operator:]

[Operator Instructions] The first question will be from Ellie Merle of Cantor Fitzgerald.

[Ellie Merle:]

Hi guys. Thanks very much for taking the question and congrats on all the progress. Can you discuss a bit of your perspective on the Krystexxa methotrexate combination study, you know if that study were to show you a significantly improved response rate versus Krystexxa alone, how would that effect your outlook for SEL-212 in the gout landscape from a competitive positioning perspective?

[Carsten Brunn:]

Thanks for the question. Obviously we’re following this study very closely. I think to date, we haven't seen any controlled data and we obviously are focusing on executing our COMPARE study and moving into Phase 3 in the second half of this year.

[Ellie Merle:]

Got it. And then in terms of the doses for the Phase 3, can you discuss a little bit more about the rationale for the multiple doses of ImmTOR versus you exploring a single dose?

[Carsten Brunn:]

Yes. I think that’s a great question as well. I think it’s quite common to explore two doses, obviously looking for the minimally effective dose. Chronic refractory gout is a heterogeneous disease, and therefore we want to test those two doses 0.1 and 0.15 in the Phase 3 program.

[Ellie Merle:]

Alright. Thanks for the color.

[Carsten Brunn:]

Thank you.

[Operator:]

The next question will come from Raju Prasad of William Blair.

[Raju Prasad:]

Thanks for taking the question. Can you remind us of the statistical analysis plan that you put in place for the head-to- head trial because of an ITT analysis and how you are dealing with potential dropouts on each arm? And then I have another question on the gene therapy platform.

[Carsten Brunn:]

Yes. So, good question Raj. So we, haven’t shared the details of our SAP, obviously the trial is powered to show superiority and in terms of differentiation in SUA levels we will disclose middle of this year in Q3 is the primary endpoint, which is SUA levels below six at months three and six, each end of the time, and some of the secondary safety measures.

[Raju Prasad:]

Great. Maybe just a quick follow-up on that. Can you just kind of provide some general color on the interim stopping rule criteria when that occurred, did that occur in the first month where the SEL-212 arm has kind of a higher standard? Or did it happen kind of towards the later where they had this similar stopping rule criteria?

[Carsten Brunn:]

Yes. We haven't disclosed any details, I mean actually be provided the – an early readout on December 2, but we have not shared the breakdown in terms of dropouts by months. We will obviously share this during the high-level readout in Q3.

[Raju Prasad:]

Okay. And then on the gene therapy platform it seems like you’re going to be advancing in kind of rare liver target diseases, is there plans or optionality to go into other tissue types? Or is it primarily liver focused, is there any color on potential expansion of the platform would be interesting? Thanks.

[Carsten Brunn:]

That’s an excellent question. So, you’re right. I mean all the data we have currently is in liver directed diseases and we’ll definitely go into a liver directed disease as a first indication, but I think from a scientific perspective there is no reason why it shouldn't work in other non-directed diseases because the immune response is still facilitated the same way. We don't have any data, but I think from a pure scientific perspective, we definitely see applications beyond just liver directed diseases.

[Raju Prasad:]

Great. Thanks.

[Operator:]

The next question is from Chad Messer of Needham & Company.

[Chad Messer:]

Great. Good morning and thanks for taking my questions. First one quickly on the AskBio deal just trying to understand a little bit of the mechanics there, you announced it – a big one in August and then talked about Pompe in December, is that the same deal we’re just hearing about one of the previously undisclosed programs and how should we expect to hear about other programs over time, is there – you announced them when they’re decided or when they reach a certain point in development?

[Carsten Brunn:]

Yes. Thanks for the question Chad. Yes it can be a little bit confusing. It’s important to understand that the announcement in August is around a strategic partnership where we co-develop and co-commercialize across a number of indications. So, we basically sharing cost, but then also profits, whereas in December was a pure licensing deal. So, they are completely separate transactions where we have licensed ImmTOR for the exclusive use in Pompe disease for AskBio’s lead program. So, there are two different collaborations, two different deals.

[Chad Messer:]

Okay, thanks. Appreciate the clarity there. And then obviously as you guys are trying to accomplish is redosing, very exciting advancement for gene therapy if you can pull that off, do you have any thoughts about when redosing is supposed to happen, how long between initial and subsequent doses, is that something you’ve worked out and can discuss?

[Carsten Brunn:]

Yes. I don't think we’re at this point yet Chad to don't talk about this, but I think what I can say we’re looking at initially, what we see as a proof of concept, if we were able to prevent information from neutralizing antibodies because that’s really the challenge right now if a patient is dosed to an AAV capsid, they have such high titers of neutralizing antibodies that it's impossible to redoes them, so we would in an initial experiment try to show that we can actually prevent the formation of neutralizing antibodies. The second step would be indeed to be able to redose, but we haven't guided to an exact outline to the clinical trial design for that.

[Chad Messer:]

Understood, and what do we know about the time course of development of neutralizing antibodies, is that something that happens in weeks or months or, what do we know?

[Carsten Brunn:]

That's a great question. I’ll let Kei Kishimoto, our CSO answer this one.

[Kei Kishimoto:]

Hi, Chad. This is Kei. You do see neutralizing antibodies come up pretty early. They will be seen over the first few weeks to a month after dosing and then the issue with redosing is that those titers will persist for years, if not decades.

[Chad Messer:]

Okay. Alright, great. Thanks guys. Look forward to hearing progress this year. Thanks.

[Carsten Brunn:]

Thanks Chad.

[Operator:]

The next question will come from John Newman of Canaccord.

[John Newman:]

Hi guys, good morning and thanks for taking my question. So, Carsten obviously there’s a lot of focus on the head-to-head study with pegloticase in terms of efficacy, but I just wondered if you could roughly outline what types of analysis you might be able to look at with regard to the safety for 212 as it seems like in your past studies you’ve been able to show pretty low incidence of gout flares especially the severe flare, so I'm just curious as to generally speaking what you might be able to look at in the upcoming head-to-head study? Thanks.

[Carsten Brunn:]

John, great question. I mean indefinitely there is a focus on safety and as you said, we’ll look at the overall AE profile, sUA profile and obviously, gout flares as well, and you now we obviously hold two similar results that we have seen in the Phase 2 dose-finding study where we saw quite a reduction in terms of number of gout flare. So, this will all be part of the analysis of this trial.

[John Newman:]

Okay, great. Thank you.

[Operator:]

The next question will come from Yun Zhong of Janney.

[Yun Zhong:]

Hi. Thank you very much for taking the question. So, the first one on the primary endpoint of the COMPARE study, 80% of the time in months three and six, we’re trying to use the primary, same primary end-point, I assume that was used in the pivotal studies of Krystexxa, but in your planned Phase 3 study it looks like it’s only one time point in month six, and is that 80% of the time or is that a single time point and during your discussion with the FDA did the agencies show any preference regarding what time point they would like to see?

[Carsten Brunn:]

Yes. That’s an excellent question. You’re exactly right. We are using in the COMPARE study exactly the same endpoints as Krystexxa per label, but we also have a secondary endpoint where we actually look at six months only. The FDA has changed their guidance. So, they are at this point only interested in a six-month readout and it will be also 80% of the time. And the rationale from them is that, obviously six months is the month that counts and they see, you know bringing patients in for weekly blood loss as a potential issue. So, they were very clear in their preferred or in their guidance actually that they’re only looking at six months for 80% of the time.

[Yun Zhong:]

Okay. Then the second question on the Pompe program, is AskBio going to take the lead in developing this program in terms of timing and strategic plan?

[Carsten Brunn:]

And as mentioned earlier, so we licensed ImmTOR to AskBio so they have the rights and they drive the program and they make all the decisions as well. So, it’s a question you have address to AskBio.

[Yun Zhong:]

Okay, great. Thank you very much.

[Carsten Brunn:]

Thank you.

[Operator:]

The next question comes from Difei Yang of Mizuho Securities USA.

[Difei Yang:]

Hi good morning and thanks for taking my question. Just a couple. The first one related to the in SEL-212 upcoming Phase 3 trial, how should we think about stopping rule with the head-to-head study if we look at head-to-head study would that be a reasonable base to think about stopping rule?

[Carsten Brunn:]

Yes, good morning Difei. Excellent question. Indeed we plan to use the same stopping rules in the Phase 3 as we’ve used in COMPARE for SEL-212, which is just to remind everyone SUA has to be below 1 and then month two to five SUA level is below 6, so we will use the same stopping criteria in the Phase 3.

[Difei Yang:]

Oh, thank you for that clarification. Then changing subject to gene therapy, would you give us a quick update on what Spark decided to do or they’re planning to do with the additional – with the opt-in additional indications?

[Carsten Brunn:]

Yes. That’s a good question as well. So, just to remind everyone, Spark or I guess, Roche now holds the license for ImmTOR in the use of hemophilia A and they continue to hold a license as they have the option to pick four additional indications. They have not opted in those and – which allowed us to obviously allow us to partner those indications or potentially develop them ourselves. And you can see with AskBio is one example how we can license those indications to other partners.

[Difei Yang:]

Oh, thank you.

[Operator:]

And this concludes the question and answer portion of the call. I will now turn the call back over to Selecta’s CEO, Carsten Brunn for any closing remarks. Carsten?

[Carsten Brunn:]

Thank you operator and thank you everyone who joined us this morning. We achieved critical benchmarks in 2019 as we further advanced the ImmTOR platform in chronic refractory gout in gene therapy. And we’re extremely excited about the upcoming milestones in 2020 and the continued growth of our company and its technology. We look forward to sharing further updates about the broad potential of the ImmTOR platform throughout the year. That concludes today's call. Thank you.

[Operator:]

Thank you. The conference is now concluded. Thank you all for attending today's presentation. You may all disconnect. Have a great day.