Sesen Bio, Inc.
Q3 2014 Earnings Call Transcript

Published: 13 Nov 2014

[Operator:]

Welcome to Eleven Biotherapeutics Third Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors & Media section of Eleven’s website at ir.elevenbio.com. This call is the property of Eleven Biotherapeutics and recordings, reproduction or transmission of the call without the express written consent of Eleven Biotherapeutics is strictly prohibited. As a reminder, today’s call is being recorded. I would now like to introduce Leah Monteiro, Corporate Communications Manager of Eleven Biotherapeutics. Please go ahead.

[Leah Monteiro:]

Thank you. Good morning. The press release with the company’s third quarter 2014 financial results became available at 7

[Abbie C. Celniker:]

Thank you, Leah and good morning everyone. This quarter we are very pleased by the accomplishments in our EBI-005 clinical program. We were especially encouraged by the top line safety and efficacy results of EBI-005 in the modified Conjunctival Allergen Provocation Test or CAPT model which was modified to mimic the late phase response in the Phase II clinical study. Importantly this enrolled patients with much more severe allergic conjunctivitis than our typically evaluated. Half of the study populations had not responded adequately to antihistamines and mast cell stabilizers and as such are different than the patients typically enrolled in the studies testing therapies for the early acute phase response in allergic conjunctivitis. We believe these data which showed biological activity in treating the symptoms of late phase allergic conjunctivitis further validate EBI-005 as a clinically active anti-inflammatory ocular agent. As a reminder EBI-005 is a topical novel interleukin 1 or IL-1 receptor blocker that’s in development for the treatment of moderate to severe dry eye and allergic conjunctivitis. This was a Phase II trial with the goal to study the safety and efficacy of EBI-005 in patients with moderate to severe allergic conjunctivitis and to identify an appropriate model to study the late phase response in this disease. We ran this Phase II study using two clinical repetitive allergen challenge models that were modified to drive the late phase allergic response. A modified direct Conjunctival Allergen challenger or CAPT model and a modified environmental exposure chamber or EEC model. Patients treated with EBI-005 in the multi cast model shows statistically significant improvement in three clinically meaningful symptoms that remained a secondary and exploratory end points in the trial. These were reduction in ocular itching, ocular tearing, and associated total nasal symptoms. In these models patients were challenged with allergen at multiple time points throughout the study including the two and one half week period after commencement of treatment with EBI-005 or vehicle. Patients treated in the EEC did not show the same specifically significant improvements in these end points including ocular itching which was the main primary end point in the study. The EEC model has not been recently used for the development of ocular drug, but rather has been used for the development of therapies for nasal allergy. Based on our results we believe the appropriate model to asses EBI-005 going forward is the CAPT model. In the CAPT model we noted that the observation of statistically significant results at the second to last and the final allergen challenge assessment time point support our hypothesis that EBI-005 is impacting the late phase response to allergen in this patient population. We believe EBI-005 could be a potentially useful treatment option for the subset of patients that are not adequately controlled by antihistamines or mast cell stabilizers or would prefer not to go on to steroids. Importantly EBI-005 was generally well tolerated with no treatment related serious adverse events and no drug specific antibodies detected. Allergic conjunctivitis or AC is an inflammatory disease of the conjunctiva, which is the membrane that covers the white part of the eye and it is caused primarily from a reaction to an allergen such as pollen or pet dander. This inflammation results in acute itching, redness, tearing, and other symptoms. According to a study on the management of seasonal allergic conjunctivitis published in 2012 in the peer review journal APTA Optimalogica (ph), allergic conjunctivitis affects 15% to 40% of the United States population and ranges in clinical severity from relatively mild common forms to more severe chronic forms that may cause impaired vision or even blindness. Our research indicates that there are about 11 million patients in the U.S. suffering from allergic conjunctivitis that seek diagnosis in medical treatment. Of the 11 million patients we believe there are approximately 4 million patients with moderate allergic conjunctivitis and 1.8 million with severe allergic conjunctivitis. We believe that prolonged and severe cases of allergic conjunctivitis are characterized by an inflammatory process that is mediated by IL-1. IL-1 stimulates the maturation and recruitment of antigen presenting cells, eosinophils, T cells, and other inflammatory cells that perpetuate or exacerbate the allergic response. IL-1 also mediates the expression of other cytokines and key chemokines that activate and direct white blood cells to the ocular surface or directly result in the symptoms of allergic conjunctivitis. Once again the team here at Eleven is excited about these data which will help us determine our path forward with EBI-005 as a potential new treatment option for patients with moderate to severe allergic conjunctivitis. We believe the CAPT model would be an appropriate model for future development. We look forward to providing more clarity on our plans for allergic conjunctivitis in early 2015. While allergic conjunctivitis and dry disease are different diseases, the Phase II results further support IL-1 as a target for ocular inflammation and helps confirm the safety profile of EBI-005. These data also helps further validate the mechanism of actions of EBI-005. The inflammatory provocations are different in allergic conjunctivitis and in dry eye disease, involving an allergic reaction versus desiccating stress in dry eye. But we believe that IL-1 levels are elevated and tears and tissues in both disease and that blocking IL-1 can treat symptoms of both diseases. We look forward to presenting allergic conjunctivitis data at the Medical Contact Lens and Ocular Surface Association's annual meeting on Friday, November 28, 2014. Recently another very exciting milestone for the EBI-005 clinical program was achieved. We completed patient enrollment in our first pivotal Phase III study of EBI-005 in patients with dry eye disease and expect to report top line results of that trial in the second quarter of 2015. This study is being conducted at over 40 study centers across the United States and over half of the subjects have completed the study at this time. 669 patients with moderate to severe dry eye disease have been enrolled and randomized for treatment with either EBI-005 or vehicle-control for period of 12 weeks followed by a 3 week safety assessment period. The co-primary end points of this study are change in total corneal fluorescein staining score which is a sign of dry eye disease and improvement in ocular pain and discomfort which is a symptom of dry eye disease. The safety and tolerability of EBI-005 compared to vehicle-control will also be evaluated using the same drug product that was used in the Phase II study in allergic conjunctivitis. This pivotal Phase III trial was designed based on the results observed in our Phase 1b/2a clinical trial of EBI-005 in patients with moderate to severe dry eye disease that was completed in 2014. We also plan to begin our 12 months Phase III safety study of EBI-005 before the end of this year. Dry eye disease or simply dry eye is a potentially debilitating disease of the eye that may in its most severe form have sight threatening corneal complications. Dry eyes is one of the leading causes of patient visits to the eye care professionals of the United States. According to market scope approximately 68 million people in the United States, European Union, and Japan and other developed markets have dry eye, including approximately 26 million who suffer from moderate to severe forms of dry eye. Approximately 19 million people in the United States have dry eye including approximately 7 million people who suffer with the moderate to severe form of dry eye. We believe that dry eye is a chronic ocular surface inflammatory condition and is initiated and maintained by inflammatory processes where IL-1 is a key player. We believe that stress on the ocular surface leads to excess production of IL-1 resulting in increased ocular surface inflammation and hyper sensitization of peripheral corneal nerves. Lastly we are pleased to announce that earlier in the third quarter we were granted a U.S. patent for EBI-005 which contains both composition of matter and method of use claims with the patent life through 2031. We turn now to our second program EBI-031, our novel IL-6 inhibitor for treatment of back of the eye diseases that is diabetic macular edema and uveitis. Previously we discussed an earlier candidate antibody, EBI-029 for the same indications. EBI-031 is an analog of EBI-029 that was further optimized using our AMP-Rx platform. We believe that EBI-031 binds to the identical binding site on IL-6 and has the same mechanism of action of EBI-029. However, evidence suggests that EBI-031 is more potent than EBI-029 which may extend the time between required administrations. Additionally we have engineered EBI-031 to have a prolonged half life in the vitreous compared to other antibodies but to be cleared more rapidly from the systemic circulation. This is an example of our overall strategy to design and engineer protein therapeutics specifically for the treatment of eye diseases. IL-6 is a cytokine that has previously been shown to be present at high concentrations in the back of the eye diseases such as DME and contributes to both the angiogenic and inflammatory components of diabetic macular edema and correlates with disease severity. By inhibiting IL-6, EDI-005 can offer an alternative to standard of care either as a standalone drug or in combination with VEGF blockade for patients. We continue to perform the preclinical studies and market analysis work necessary to make the next step development decisions with the goal of moving this product candidate towards clinical development. Eleven also continues to strengthen its Board of Directors with the addition of Wendy L. Dixon, PhD, a senior biopharmaceutical executive with commercial leadership experience formerly at Bristol Myers Squibb, Merck, and other companies. In addition to the addition of Wendy, two Board members who have been with us since our inception and have been instrumental in helping to move Eleven forward; Mark Levin of Third Rock Ventures and Noubar Afeyan of Flagship are stepping down. We continue to have representation from Third Rock and Flagship with Cary Pfeffer and David Berry staying on the Board. This is part of Eleven’s evolution as we bring on Board members with later stage product development and commercial perspective, such as Dr Dixon. Thank you to Mark and Noubar for guiding us through these transformative years. And now I’ll turn the call over to Greg Perry to provide a review of the financial results for the third quarter of 2014. Greg?

[Gregory D. Perry:]

Thanks Abbie. As Leah mentioned earlier this morning we issued a press release detailing our financial results for the third quarter of 2014. I’ll review the financial highlights and then speak to our cash position in our financial guidance. For the third quarter of 2014 we reported a net loss of approximately $10.7 million compared to a net loss of $4.7 million for the same quarter in 2013. Total revenue for the second quarter of 2014 was approximately $500,000 compared to $600,000 for the same period last year. Research and development expenses for the third quarter of 2014 were $8.9 million compared to $3.4 million for the same period in 2013, an increase primarily driven by EBI-005 related development expenses. G&A expenses for the third quarter of 2014 were $2.3 million compared to $800,000 for the same period in 2013. This increase was driven primarily by higher expenses related to operating as a public company since February 2014, and an increase in stock based compensation expense. We ended the quarter with $35.9 million in cash and cash equivalents and based on current operating plans we believe that we have sufficient cash and cash equivalents to fund our operating expenses, debt service obligations, and capital expenditure requirements into the first quarter of 2016. As a reminder this guidance does not include additional spending on any development cost associated with allergic conjunctivitis or EBI-031. Additional spend in these programs will be linked to securing additional capital. And lastly we plan to file our 10-Q by the end of this week and encourage you to read this 10-Q as it will include additional disclosure supporting our comments on EBI-005 in AC and EBI-031. And with that we can open up the call for question. Operator?

[Operator:]

(Operator Instructions). Our first question comes from the line of Ken Cacciatore from Cowen & Company. Your line is now open.

[Ken Cacciatore:]

Hi, good morning guys. So my question is maybe you could remind us of the patient entry criteria into the dry eye study. It seems as if the FDA clearly has setup high hurdles with the two end points and a lot of the work needs to be done in ensuring we have the right patients and ensuring the sight are as well prepared and as tight as possible, can you take us a little bit behind the sausage making so to speak of kind of clinical trial how do you get these sights prepared and nuances again behind the entry criteria for the patients? Thank you

[Abbie C. Celniker:]

Thanks Ken. Great questions. Things we think about every day. So, just to sort of divide it into a couple of different portions, one is sort of the sight criteria on how we setup the sights and confirm that the sights are prepared to really make the assessments of the patients such as they enter the study as well as measuring end points. And we have some training programs that assure that our physicians are able to for example measure all signs reproducibly and systems that ensure that patients are instructed appropriately when they are taking some of the surveys. And I will let Mike Goldstein answer a bit more about sort of how we have managed sights. And then with regard to the patient inclusion criteria, as you know, we used the data that we received from our Phase 1b/2a study to really understand the patient population that was most responsive from an efficacy perspective but also had the diminished or weak variability. So as we could really tighten up our probability of success in reaching both the sign and symptom endpoint. And Mike will talk about that briefly. And then finally I think it is very important to acknowledge that we know that careful management of the use of artificial tears is important and how we qualify patients for this study. And using tears in this study is something that we have prohibited as I think we have announced previously and Mike can talk a little bit more about the fact that we worked closely with the sights to assure that we are enrolling patients that we will be able to manage tear use with. So I will hand it over to Mike to talk about the sites, the inclusion criteria, and then some of the other aspects of how we are really addressing patient compliance, etc.

[Michael H. Goldstein:]

So thanks, Ken. So the trial really is predicated upon finding the right site. So we spent an extensive amount of time grading and training each of the sites and the sites we have been able to recruit for the study are very experienced in dry eye trial. We have set up a very extensive training program both for the site coordinators as well as for the investigators. And our monitors work very closely with the sites on continuous training for this trial. As far as the investigators, we of course we have the investigator meeting at the beginning of the trial we did something that was a little unique and that we also had a pre investigator meeting. We were able to get investigator feedbacks and buying into the trial before we actually even got things going. Once the trial was going, we actually have, as Abbie mentioned extensive training which involves an online training module which have to be passed in order for investigator to be involved with the trial. And then on an ongoing basis we have refiling requirement where investigators have to continue to retrain on our end points in order to sustain bulk of the trial. So as Abbie mentioned, there is a lot of thought and work has gone on this trial and we are very proud that we work very closely with the sites in ensuring the highest quality data possible. On your second point, in terms of inclusion exclusion criteria, as you had said the FDA does have a high hurdle and that you have to meet statistically significant improvements in both signs and symptoms of dry eye and where a lot of studies have run into trouble is that the inclusion criteria don’t actually meet up with that. And what we have done is we require subjects to enroll in the study based on having moderate to severe dry eye, based on inclusion criteria around the sign and the symptom. And we have -- so we have required both. So, again lining up our inclusion exclusion criteria with the endpoints that are required in these trials and we inform those decisions based upon our Phase II trial. And then the final question around Rescue Artificial Tear, as we all know this is a known confounder in many trials. And what we found in our Phase II trials is that those patients who were on the active drug use are far fewer Rescue Artificial Tear and those were on the vehicle control. What we have done in the Phase III trial is to say okay, we know it is confounder, we know those were in the active arm aren’t really using many Rescue Artificial Tear so we have restricted Rescue Artificial Tear use in the Phase III trial. And by that we mean we are not providing Rescue Artificial Tear and subjects are not use it but if they do use Rescue Artificial Tear we are asking about it and have been recording that. I don’t know if that answers your

[Ken Cacciatore:]

It does, its great, it’s very helpful, very comprehensive, thanks guys.

[Abbie C. Celniker:]

Thanks Ken.

[Operator:]

Thank you our next question comes from the line of Jason Gerberry from Leerink Partners. Your line is now open.

[Jason Gerberry:]

Hi, good morning. Thanks for taking the questions. Just a couple on the composition of matter patent, could you just comment is there a potential for any patent term extension on that or should we be modeling 2031 as sort of the back stop for the IP? And then just on the cash burn, just wondering as you talk about where you sit right now with cash and runway to 1Q 2016, should we be thinking about I guess a little bit of moderation relative to the burn this quarter, I assume that sort of -- you have kind of run into some big cost items in the quarter and just to how to think about quarterly burn going forward?

[Abbie C. Celniker:]

Thanks Jason. I’ll take the composition of matter and then hand it over to Greg to talk about the cash burn. So I think with all patents especially biologics or small molecules there is always strategy built-in to how the patents is constructed to look for some extension. But those are things that we will be doing but I think that the 2031 is a nice long patent runway. So, the ability to get extension much beyond that maybe challenging but we will continue to prosecute that strategy but right now I think the 2031 is the point that we are really focused on. And probably within the next year or so we will understand if we have more ideas. One of the things I do want to point out though is that it’s not just on the molecule that we have an IP portfolio developing, we also have a proprietary vehicle which is comprised of all previously used pharmaceutical agents for our ophthalmic diseases and it’s a very comfortable, well tolerated vehicle that we have filed IP around. And we do believe that there will be potentially a way to get some extension in our IP, based on how we think about the formulation. And then further more configuration of our molecule in preservative free delivery of IL. So just you know sort of ring sense of protection around the molecule that we are constantly working on. That’s all I have to say.

[Jason Gerberry:]

Abbie if I can just follow up on that real quick. I guess the assumption being that if you’ve got IP around the vehicle that there would be some sort of FDA mechanism requiring Q1, Q2 sameness for any generic. So IP on vehicle would be pretty strong in this space I have to assume?

[Abbie C. Celniker:]

That is true but also the very interesting challenge for us as a protein therapeutics applied topically for ocular disease is that from our composition of matter perspective we are under bio-similar legislation as opposed to under small molecule generic legislation. So we have a way of kind of using both approaches with the vehicle as well as the requirement for the demonstration. What’s required for the demonstration of the bio similar which is a much higher hurdle then it is for small molecule.

[Jason Gerberry:]

Okay.

[Gregory D. Perry:]

And Jason on the cash burn, clearly last couple of quarters we were pushing hard on Phase III enrollment and successfully completed enrollment there. And then also the AC trial, so clinical spend and CMC spend of the 22 is really big drivers here. So we do see a moderation of the cash burn a bit, kind of a down slope as we enter 2015 so that, it can give you maybe a little bit of the profile of what that cash burn looks like. So little bit moderated going through the next couple of quarters and then through the middle of 2015. And then it drives up a little bit, but getting us into 2016.

[Jason Gerberry:]

Okay and if I can just ask one more question, just on AC, I know after the last time we got together and spoke there was a little bit of uncertainty around whether the next step would be a Phase II or Phase III. I am wondering if you guys could comment in terms of where you’re leaning towards in terms of the next development step or we should kind of wait till early 2015 for that update? Thanks

[Abbie C. Celniker:]

Yes, I think -- I do think it’s appropriate to wait till early 2015 because we are going to be pursuing the development plan discussions with the health authorities primarily with the FDA. But just wanted to point out that as we have talked before, the trials for allergic conjunctivitis similar to dry eye are very capital efficient trials and they can be enrolled and completed very quickly. So it is one of the scenarios where there is great opportunity to do some very interesting work out of really good budget and still keep on very aggressive timelines. Right now all of the timelines for the approval of EBI-005 in dry eye are really linked more closely to some of our CMC work in our long-term safety assessment. That long-term safety study that we would be running for the support of the dry eye trial would also help us or serve person safety coverage in our allergic conjunctivitis program. So anything that we did do would all be done within the sort of considerations of what we are doing to develop in dry eye and wouldn’t be rate limiting in the approval timelines for EBI-005 in AC.

[Jason Gerberry:]

Okay, great. Thank you very much.

[Operator:]

(Operator Instructions). Our next question comes from the line of Liav Abraham from Citi. Your line is now open.

[Liav Abraham:]

Good morning guys, just a follow-up question on the allergic conjunctivitis program. Abbie in the past you have said that you anticipate that the AC indication would be approved assuming all goes well also dry eye. Just following on some of your previous or the comments that you have just made regarding the efficiency and just the duration of the AC trials which are quick and fairly simple and capital efficient, is there not a scenario under which the AC indication could be approved to be full dry eye and I guess what are the considerations then in timing here, would it be from a pricing perspective that you would want to potentially even if it were ready for approval before dry eye to launch it after. Just interested in your thoughts around this dynamics? Thanks.

[Abbie C. Celniker:]

Great, thanks Liav. Actually it is a great question and the really interesting thing for us has been in some of the pricing and reimbursement research that we have been doing where we feel very confident that the pricing of EBI-005 and allergic conjunctivitis could really be at parity with the pricing for dry eye even if it were to stand on its own. And as a result we are really not using pricing as the rate limiting step in the development decisions. It has been really some excellent work that our team has been doing to understand this and understand the price of other allergic conjunctivitis drugs and how we would be considered. So we are feeling pretty confident about not having to be controlled by staging things or staggering things by price anymore. I do think that from our perspective the question you ask if it is possible that you could accelerate? I think it is certainly a possibility but as I mentioned in the response to Jason's question, there are really just rate limiting aspects of our BLA program that are tied to validation of the commercial manufacturing as well as some of the other required safety assessments that are longer-term studies that we mentioned earlier in the call that we are going to be initiating by the end of this year. So, I think that having it happen before those activities are completed would be difficult. But, if for some reason we were really looking at opportunities to either change the way we are developing in dry eye or look at different opportunities there and get AC on the market first we certainly would have that opportunity.

[Liav Abraham:]

Great, thanks very much.

[Operator:]

Thank you. Ladies and gentlemen this concludes today's presentation. Thank you once again for your participation and you may all disconnect. Everyone have a great day.

[Abbie C. Celniker:]

Thank you.