Sesen Bio, Inc.
Q1 2021 Earnings Call Transcript

Published: 10 May 2021

[Operator:]

Good day and thank you for standing by. Welcome to the Sesen Bio Quarter One 2021 Business Update Call. At this time, all participants are in a listen only mode. I would now like to hand the conference over to your speaker today, Ms. Erin Clark, Vice-President of the Corporate Strategy and Investor Relation. Please go ahead.

[Erin Clark:]

Thank you and good morning, everyone. Welcome to our first quarter business update call. On today's call, we will discuss our operating results for the first quarter ending March 31, 2021, as well as an update on the commercial readiness progress to date ahead of our target PDUFA date of August 18, 2021.

[Thomas Cannell:]

Thank you Erin and good morning everyone. Thank you so much for calling in and participating in our business update today. Please turn to slide three which is a summary of the three key takeaways for our call today. First, Vicineum has a unique and compelling value proposition, especially when it comes to its potential to improve patient outcomes while reducing overall healthcare costs. Second, we believe we have a clear regulatory path forward with potential approval in the U.S in August of this year and in Europe in early 2022. And finally given the substantial unmet need in bladder cancer and the highly differentiated clinical profile of Vicineum, we project a significant global commercial opportunity. Please turn to slide four. If you've been following us for a long time, like many of you have, we always start our presentation with the patient journey to make sure we are focused on realizing our mission to save and improve the lives of patients. It is important to understand the unmet medical need and bladder cancer through this lens, not only to understand why there is such a significant patient need for a product like Vicineum but also to understand why we believe prescribing physicians will prefer Vicineum versus available agents. An important takeaway from this slide is that you're all just play a key role guiding the patient through their journey. Most medical decisions, including treatment choice, will be decided by the patient and the neurologists and we'll talk about why that is important in a few minutes.

[Chad Myskiw:]

Thanks, Tom. If everyone can please turn to slide nine. Given the complexity of manufacturing biologics, we've purpose built a very reliable and robust supply chain with world class manufacturing partners, our current supplier for drug substances Fujifilm and for drug product Baxter. Both of these CMOs are industry leaders with a long history of manufacturing excellence, and a strong regulatory track record with the FDA and other regulatory agencies. To strengthen our existing supply chain we are currently transferring the Vicineum manufacturing process to Qilu pharmaceutical, our partner in the Greater China region to add them as an additional source of drug substance and drug product supply in the future. Qilu has a very large and experienced manufacturing team and already supplies commercial products to the U.S. so we feel very good about bringing them on board. For third party logistics and specialty distribution services, we are working with Cardinal Health in the U.S. Cardinal is one of the most well respected and capable players in this industry. It has significant expertise in cold chain logistics and deep relationships with the euro oncology community. So we feel very confident we can leverage the experience of our supply chain partners to support a world class launch of Vicineum. Turning to slide 10, and the manufacturing process for Vicineum, which is produced via E. coli fermentation process. The general approach of using microbial fermentation to manufacture recombinant proteins was really pioneered by Genentech in the 1970s with insulin and continues to be widely used to manufacture peptides and small proteins such as antibody fragments. This system is very well understood and well characterized. The specific process you see here is the proposed commercial process and was developed by Sesen Bio throughout clinical development, and then transferred to Fujifilm and Baxter. Fujifilm manufactures the drug substance. So that is all the steps up to an including bulk drug substance formulation. This material is then sent to Baxter for drug product manufacturing, which is just a fill finish and they will also do the labeling secondary packaging and serialization of the product. On slide 11, we've highlighted what we see as some of the key advantages of the manufacturing process for Vicineum in comparison to other biologics and gene therapies. We're using microbial fermentation, a well understood system that has and continues to be used to manufacture many recombinant proteins. The reliability of this system reduces the risk of manufacturing issues that can lead to supply shortages. And the non-muscle invasive bladder cancer space is very sensitive to supply issues, given the on-going VCG shortage and manufacturing problems with past products such as Valstar. Because microbial processes tend to be shorter and less complex than mammalian systems, and since we do not have any process intermediates or conjugation steps, as you have with antibody drug conjugates, we expect to achieve a competitive cost of goods. Finally having such strong manufacturing partners lead to a reliable and robust supply chain to support the launch of Vicineum.

[Monica Forbes:]

Thank you, Chad. Please turn to slide 12 for a few financial highlights. We significantly strengthened our cash position in the first quarter, ending with approximately $110 million in cash and cash equivalents. We also saw a strong increase in stock price and market cap versus year end 2020. With a strong balance sheet, we believe, we are well positioned to continue to build for a successful launch ahead of the potential approval of Vicineum in August of this year. Turning to slide 13, as we prepare for commercial readiness in the U.S., we continue to manage our balance sheet through stage gated investments which are focused on our highest priority initiatives, such as supporting the regulatory process in the U.S. and Europe, and the commercial launch of Vicineum in the U.S. illustrated by the dark blue bars. We also continue to strategically raise capital to strengthen our cash position as shown on the dark purple bars. I will remind you that given our strong cash position as of April 1, we shut down are ATM for April and May. We will reactivate the facility no sooner than June and will continue to operate it on a periodic basis consistent with our historical practice with the goal of minimizing dilution and decreasing the need to do a large diluted financing event. With that, I will turn the call back to Tom. Tom?

[Thomas Cannell:]

Thank you, Monica. So please turn to slide 14, which is a summary of the three key takeaways from our call today. First, Vicineum has unique and compelling value proposition especially when it comes to its potential to improve patient outcomes while reducing overall healthcare costs. Second, we believe we have a clear regulatory path forward in both the U.S. and Europe. We continue to work closely with the regulatory agencies as we approach upcoming milestones. Finally, given the substantial unmet need in bladder cancer, and the highly differentiated clinical profile of Vicineum, we project a significant global commercial opportunity. With that we will open up for questions, Ruby?

[Operator:]

Thank you Your first question comes from the line of John Newman from Canaccord. Your line is open. You can ask your question.

[Thomas Cannell:]

John, you might have to unmute John.

[John Newman:]

Hi, can you hear me?

[Thomas Cannell:]

Yep, I can hear you.

[John Newman:]

Alright, Tom sorry about that. So good morning, and thanks for all the updates. So it's, I just wondered if you could comment a bit on the design of the Phase 3 studies that were on for Vicineum. And the reason I'm asking is whether you would expect full approval or accelerated approval given that when I looked back at the guidance, it's it seemed to me at least like the design for your studies, I think was consistent with full approval. Obviously, that'll be up to the FDA, but just curious if you could comment there.

[Thomas Cannell:]

Yes, thanks. Thanks, John. It's a great question. Obviously, it's very topical, because last week, the FDA had ODAC meetings or advisory committee meetings discussing the accelerated approval pathway. So you're right in the February 2018 guidance, the FDA says that for Carcinoma in situ, you can conduct a single arm trial. And if that you would be eligible for either full or accelerated approval, they said we'll make that call during the review process. We had our first pre-BLA meeting in June 2019. And again, there was a lot of good news there, we had a clear regulatory path forward. And the FDA gave two pieces of guidance, they said, we expect that you'll need an advisory committee meeting. And we'll expect that you're on an accelerated not a full approval pathway, which means you'll need a confirmatory trial. So that's how we've been kind of planning things. And that was the guidance we gave at that time. Obviously, we feel like this as the data come together does, it just keeps looking better and better. And so it was really good news in February of this year when the FDA said Oh, it appears that it and addcom will not be required and we don't have one scheduled. What they haven't weighed in on yet, we probably won't learn until right around the PDUFA date, right around August 18 is whether they'll require an accelerated approval which means a confirmatory trial, which was their previous guidance or whether they're prepared to get full approval. So still, our guidance is the same based on what the FDA told us during the pre-BLA meeting. Our guidance is that we expect to accelerate approval, and we're ready, we have a protocol written, we're ready for a confirmatory trial if that's their decision. But and that would be great news, that would be a great event for us is to get that accelerated approval in August. But there is the chance of the upside scenario where we actually get full approval, and so that's something we'll all just be watching for as we approached the PDUFA date. Did you have a follow up question, John?

[John Newman:]

I did, actually. So, it's interesting. I'm just wondering, just in your view, what will change in terms of the views on the company, once Vicineum hits the market, just curious as to what investors might learn over time, when Vicineum or if Vicineum is approved, and in the market that could sort of, in your opinion, kind of change your views on the trajectory of Sesen?

[Thomas Cannell:]

Yes, it's a good question. And we get that we get that a lot. I will. Since this is all about forward looking statements remind everyone of flight to especially the risks and uncertainties. But, we've guided that we believe, based on the comprehensive Monte Carlo simulation, that there's an 80% probability of Vicineum having peak sales of one to 3 billion and you can use whatever PE ratios you want. But if we're right, the company value has the potential to be much higher than our current market cap. Right? And so if that happens, John, then, then I think the market will have learned and really come to understand three things; First of all, I'd say it's the it's the powerful role of virologists, which I alluded to talking about the patient journey. And then the clear understanding of the three key drivers that motivates them, all of which plan the favor, I think of Vicineum. So first, you're all just make decisions based on medical drivers, and especially the benefit risk profile, they're looking for product that delivers the best efficacy with the least safety risk. And we believe we're the clear winner versus Keytruda in that regard, because we have comparable efficacy, and a much better safety profile. Second of all urologists make decisions on emotional drivers, it's well understood, they're very loyal and committed to their patient. They do not want to refer to another doctor like medical oncology, because they're concerned that other specialties do not adequately understand bladder cancer. And if the urologist chooses Vicineum they get to keep treating the patient. If they choose Keytruda, someone else probably treat their patients. So we think the emotional drivers are a big factor that the market will come to understand. And then finally, it's the business drivers. It's important to understand, urology clinics make their money through treatment rooms and diagnostic tests. Yes, that if that urologist chooses Vicineum their urology clinic gets to keep treating the patient and running diagnostic tests every three months including cytology, cystoscopy, biopsy, counsel . On the other hand, if they choose Keytruda, the academic medical center, the medical oncology practice, derives that business benefit. And again, to this point, I believe that urologists are always going to do the best thing for the patient, always make their decision based on medicine first, but if you can choose the best product for the patient, the treatment adoption will be accelerated if that is a more profitable approach for the clinic and the doctor. So I think there's a lot for the market to understand about the urologist and the medical, emotional and business drivers that we think will really shape, the treatment of non-muscle invasive bladder cancer. The second thing, John, I think, is, and we've talked about this, there's a there's a good backup slide on this is the virtuous cycle that's created when you have the advocacy of all three customer segments patients, payers, and physicians. And, this is pretty rare for new product launches to have advocacy from all three segments. And here's why that's important, the stronger the advocacy from patients and their families, and the more they ask for a new product, the more likely the doctors to prescribe that product, that phenomenon has been well documented. The stronger the advocacy of physicians and key opinion leaders, the more likely that payers will add the product to formulary and reimburse the product fully. Remember, it's mostly physicians that sit on these Managed Care P&T committee, so that physician view really matters. And then the better the reimbursement is from payer, the lower the out of pocket costs for patients and the better the patient access to therapy. And I think when all three groups are advocating, the stronger the feedback loop is and that can drive I think very strong, early and sustainable uptake. So that's the second phenomenon, I think is the interplay and the virtuous cycle between the different customer segments. And I think that's fairly unique in our situation. Finally, I think something that people aren't completely paying attention to yet is just how lucky we are to have Keytruda as our primary competitor. Keytruda is arguably the most important oncology product in the modern era. I mean, as you know, well, John, they grew 30% last year with sales last year at $14.4 billion. And many I haven't seen your projections, but many analysts projected to surpass $20 billion, and become the bestselling pharmaceutical product of all time, and I believe it has right now the best brand image of any oncology products. So Keytruda is indicated for 19 types of cancer and in one of those NMIBC, we believe were better than them. We believe, we will surpass Keytruda, to become the market leader NMIBC. And, I think as you know, the real strength of our company, I think is the commercial and marketing expertise. And when you see the dominant market leader in one single area, it has a transformational effect on your brand image and the value of your company. So from a commercial marketing perspective, it's a very important phenomenon. So, anyway, we think we've got the best situation for a new product launch to be positioned against one of the most important oncology products of all time. And I believe by the time we potentially launch our next indication for potentially for head and neck cancer, that that'll be a whole different ballgame. So, basically what should investors be watching for? I think, watch the role of urologists and what motivates them, watch the virtuous cycle between physicians, payers and patients and watch the market share battle between Keytruda and Vicineum. And obviously, after August, we'll structure our presentation. So that's easy to follow. Any follow up on that, John?

[John Newman:]

No, that's great. Thank you, Tom.

[Thomas Cannell:]

Thanks, John.

[Operator:]

Thank you. Your next question comes from the line of Roger Song from Jefferies. Your line is open, you can ask your question.

[Roger Song:]

Great. Thank you, Tom for taking the question. Maybe just a quick follow up on John's question earlier. So obviously, if you can get the full approval in August, in August, there will be a real kind of upset. But just tell us a little bit about the logistics, because, as far as I know, you've seen the front the last the guidance, you may need to star the confirmatory study, study before the PDUFA day or maybe just to finalize the protocol. Probably you already get some additional kind of guidance from FDA if you need a confirmatory study. And obviously, you are having kind of back and forth with the FDA right now, so tell us a little bit what should we expect? What are going to happen before the approval decision In terms of the confirmatory study? You're saying your site inspection and the late cycle meetings?

[Thomas Cannell:]

Yes. That's a great question. And I think as I've said before, it's definitely the FDA is preference that you launch your confirmatory trial, right around the time of approval. So we, we had a Type C meeting with the FDA, we agreed on the protocol synopsis and the overall approach. As we've talked about, we plan on targeting the less than adequate BCG population, that's patients that have had only one to six installations. And so we will be ready to go. We have a team to put together a clinical trial, oversight team. And as we move through the process, if it seems increasingly likely that it's excited approval, we'll be ready in the third quarter to launch a study. I will say if even if they don't require a confirmatory trial, it's something I want to do anyway, as is to do that clinical trial in the less inadequate BCG population, we have data to suggest that Vicineum is even more effective in that in patients that have had less exposure to BCG. It also puts us on a path toward hopefully someday first line therapy, with or without combination therapy, depending on how we designed the trial. So even if we don't need the confirmatory trial, we do intend to do a study in that patient population. So that's kind of the thinking right now, Roger, and then what I would say as if we learn more at the late cycle meeting, which is mid July, then obviously we'll disclose that and might even you know, we'll come out and make sure that investors know what the update is there.

[Roger Song:]

Yes, I do have one follow up. So, yes. So first of all, thanks for the color things. And my next question is related to the financials, understanding your contracting CSO, and to do the sales, so just tell us a little bit about what is the level of the ramp up in terms of SG&A? And whether it’s the pace and the things you're having kind of one can million in the bank? And what is the current cash ?

[Thomas Cannell:]

Yes, yes, that's great. Well, I'll talk I'll just talk about the ramp of the contract sales organization, I’ll let Monica speak to kind of what we think that cost is per annum for a contract sales organization of that size. So we've said publicly, it's 35 representatives, and up to 10 reimbursement specialists. We are, we're we've got the National Sales Director hired as well as the VP of sales, we're in the process and close to finalizing all the region sales directors and, and then we're getting ready to go with the representative interviews, and then training. So all of that will happen throughout the spring, in getting those represents to be ready to be out there. And in August, same thing with the reimbursement specialist and the concierge, call center that will set up to support patients through the process. So, we have a lot of experience with Syneos. I've worked with them in the past, this is really their area of expertise, if they can find talent, have a very expeditious recruiting process, and then train those representatives, and they're going to be ready to go. So that's kind of how we're thinking about the rollout of the contract sales organization. Monica, I'll just let you talk about kind of OpEx in regard to that.

[Monica Forbes:]

Sure, thanks, Tom. Hey, Roger. So we haven't guided specifically on what our cash burn will be once we kind of stand up the sales force and build the full commercial team. But we have said with regards to the CSO, and the number of representatives that we will hire, we expect roughly $10 million to $15 million on an annual basis for that part of the part of the commercial team. And then I think you also referred to, our cash balance. And just with regards to the cash balance of $110 million at the end of the first quarter, we do expect that again, although we're not guiding on cash burn, we do expect the $110 million to be sufficient to fund operations through the fourth quarter of this year.

[Roger Song:]

Great. Awesome. Thank you. That's all for me.

[Thomas Cannell:]

Thanks, Roger.

[Operator:]

Thank you. Your next question comes from the line of Arthur from H.C. Wainwright. Sir, your line is open. You can ask your question.

[Unidentifed Analyst:]

Good morning, everyone. Thanks for taking my question. This is Arthur for RK. I just had a one question regarding the manufacturing part. So as we know, there's a industrial wide backlog for FDA conducted the on-site inspection. I just wonder how some of these that such kind of onsite inspections also require for the approval for the same year? And how the communication between you guys and the agents regarding that issue? Thank you.

[Thomas Cannell:]

Yes, I'll just answer that at a high level. And then I'll check with Chad to see if he wants to add anything on top of it. So again, as the FDA prepares for the mid -- for the late cycle meeting in mid-July, obviously, they're doing their clinical and their manufacturing site inspections. And as we mentioned, because of the pandemic, which again, there was just something in the pink sheets that there's been delays kind of across the board in the FDA getting out but we do feel confident that they'll have all of those wrapped up in time so that we can have a good really productive late cycle meeting in July and still on a pathway for potential approval in August of this year. And, and again, you can imagine the most important of those site inspections would be at Fuji, which is our bulk, drug substance manufacturer, and that's where probably 90% of the overall complexity and the work is around manufacturing. And we feel very confident we Fuji was with us when we had the Type E meeting with the FDA in terms of demonstrating analytical comparability. And they're a world class manufacturer with a real good track record with the FDA and from a regulatory perspective. So we feel good for us about how that's going. Recognizing the site inspections have been a real challenge for the agency since the pandemic hit. Chad, anything you want to add to that?

[Chad Myskiw:]

No, Tom, I think you answered that very well.

[Thomas Cannell:]

Great, thanks. RK do you have another question or a follow up.

[Unidentifed Analyst:]

No, thank you. Thank you for the color. Thanks.

[Thomas Cannell:]

Thanks, RK.

[Operator:]

Thank you. At this time, there are no further questions on queue. I would now like to hand the conference over to our President and CEO, Dr. Thomas Cannell.

[Thomas Cannell:]

Thank you, Ruby. And thank you, everyone, for your good questions today and your interest in Sesen Bio. I'd also like to thank take this time to thank our employees, you know, we only have roughly 30 employees. And they're just doing herculean work, in bringing this product to market and being prepared for manufacturing and supply chain and all the commercial prep that's underway. And so just want to thank the team for everything they're doing. They're just, it's just an outstanding effort. And they're working so well. You will be hearing again from us soon. Thank you again to all of our investors for your interest. And please stay safe and have a good week. So with that, that concludes our call for today. Thank you all very much. And Ruby, I'll hand it back to you.

[Operator:]

Thank you. This concludes today's conference call. You may now disconnect.