XBiotech Inc.
Q4 2016 Earnings Call Transcript

Published: 16 Mar 2017

[Operator:]

Good day, ladies and gentlemen and welcome to the XBiotech Inc. Q4 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to turn the call over to Meg Lewis, executive assistant. Please go ahead.

[Meg Lewis:]

Thank you, operator. Before turning the call over to our CEO, John Simard, I would like to make the following remarks. During this call, forward-looking statements including declarations regarding management’s beliefs and expectations will be made. In some cases you can identify forward-looking statements by terminologies such as may, will, should, would, could, expects, plans, contemplates, anticipates, believes, estimates, predicts, projects, intends, or continue or the negative of such terms or other comparable terminology although not all forward-looking statements contain these identifying words.

[John Simard:]

Thanks Meg. Thank you all for joining us for our Q4 2016 update. After the update we will provide an opportunity for Q&A from the audience. I will first say a few words on our oncology programs. We were pleased to have our [pivotal] Phase III data from our European study, recently published in The Lancet Oncology. The Lancet Oncology is one of the world’s most prestigious oncology journals, and the publication [Indiscernible] your attention to our remarkable findings for our antibody to treat colorectal cancer. There are really so many important issues raised and addressed in this study. There isn’t time here to discuss them adequately. But in brief the published findings show that we have developed a new way to measure activity for cancer drugs in advanced cancer, and that the product of the natural human immune response our therapeutic antibody can be used in a way to fight cancer. These findings are the tip of the iceberg for a new approach to treat and evaluate cancer therapies. The data featured in the publication is the basis for the company’s marketing authorization application in Europe. We reported in December of last year that we had received our Day 180 List of Outstanding Issues from the EMA’s committee for Medicinal Products for Human Use. On the [quality] side, objections pertain primarily to benefit dose justification of the therapy and its pharmacokinetics. Pharmacokinetics are really a measure of the half life of the molecule in the blood. They wanted further clarification of these measures that we had provided. The quality objections related to qualification of the [line] that we used to produce the antibody and [Indiscernible] systems used to demonstrate robustness in the purification process as well as the clarification of critical process controls. There were no remaining objections for non-clinical aspects of the application in our Day 180 List. Recently we reported that we were granted an additional 30 days from the EMA to submit our responses to the outstanding issues. This extension was granted as a result of a clarification meeting held earlier in the year between XBiotech and the EMA. The 30 day extension has allowed us to conduct a study to further clarify the half life of our antibody in healthy volunteers. The study is completed now and has provided further PK data at multiple time points in the first 96 hours after dosing, which will enable a more detailed characterization of the peak concentration that we achieved in the blood, the half life of the molecule and the recurrence rate for the antibody at the time. We remain encouraged by the recent developments in correspondence with the EMA and look forward to addressing all outstanding issues in our response submission that we will be submitting next week. We expect opinion on these submissions within 60 days of the submission. During the intervening time, we will be presenting our findings and further explaining the evidence for our candidate therapy at an in-person meeting with the agency in Europe. We will keep you apprised of any material developments as they occur with the EMA during this time. Turning to our Phase III oncology program under USFDA fast-track designation this study is also in colorectal cancer, but it follows the more conventional regulatory path to product approval using overall survival as a primary endpoint. While this study is conventional in terms of primary endpoint, some of the more innovative measures that we did in our European study are in fact being performed at secondary endpoints as well in this study. In February, we announced the outcome for the first interim analysis of the study. An independent data monitoring committee was used to perform an unblinded review of the effect of our antibody therapy to improve overall survival in the treatment arm versus placebo. The recommendation to proceed with the study told us two crucial things. One that the study had no safety concerns, but two that there were sufficient indications of efficacy to proceed with this study towards the next endpoint. This study has already achieved the necessary events required for the second interim analysis and we are now preparing the data for the second independent data monitoring committee meeting, which is now scheduled to occur on June 9. Plans for exploring the use of our antibody therapy in combination treatments in cancer are ongoing. MABp1, as we call our monoclonal antibody, has strong potential for this antibody as a combination therapy. It was highlighted in a commentary piece by a leading cancer specialist in The Lancet Oncology in the same journal publication for the data findings. The commentary pointed out that combining agents with the antibody could enable it to be used in first or second lines of therapy to improve outcomes and survival in cancer, and we are currently exploring options to assess the potential of our antibody therapy in combination with other treatments including chemotherapy, EGFR inhibitors, and perhaps even immune checkpoint inhibitors as we look towards moving the drug in earlier phase therapies. We will certainly update you on this progress as well as it occurs. Now to discuss some of our non oncology programs. On our last call I had mentioned that the company had completed enrollment of the double-blinded, placebo-controlled study for hidradenitis suppurativa, which is an often serious and debilitating chronic inflammatory skin disease. Twenty patients with moderate to severe hidradenitis that had progressed on standard therapies were treated for 12 weeks with either our antibody therapy or placebo. Patients in this study under primary assessment of efficacy at 12 weeks and continue to follow up phase the assess time to relapse after an additional 12 weeks without therapy. The primary efficacy measure was an assessment of disease severity using a validated disease severity score specifically designed for hidradenitis. We are quite pleased with the results from that study. We were given findings that 60% of patients treated with the monoclonal antibody therapy in fact did achieve the primary endpoint versus only 10% in placebo. A renowned investigator leading this study stated that these results were groundbreaking for achievement of HS and we found these remarks and these findings indeed encouraging. We look forward to reporting the complete study findings in a future publication, which is in preparation and [Indiscernible] the conferences. We are exploring the potential for a pivotal Phase III study in hidradenitis, which we will update you as when they progress. Hidradenitis is really a part of our dermatology franchise that we are [Indiscernible] and this is indeed an important part of that strategy. And with that we recently completed a small dermatology study in another serious skin condition called pyoderma gangrenosum. Ten patients with pyoderma refractory to all other available therapies were enrolled and treated with MABp1 every two weeks for up to 16 weeks if they responded to the first four weeks of therapy. In this study one patient had a complete resolution of their PG wounds. Now only one patient but this disease is extremely severe. This particular patient was entirely [Indiscernible] and isolated because of the severity of the disease, and it was a life-changing recovery. Two other patients had improvement in their wounds, but didn't experience complete resolution by week 16. Pyoderma is another indication of the profound impact this therapy can have across different disease indications, and it continues to [Indiscernible] our belief in the importance of the dermatology franchise. On another note, in November we announced the research collaboration with Fabio Cominelli, a leading gastroenterologist at Case Western Reserve University. Dr. Cominelli’s research team are performing pre-clinical studies to help develop new treatments for Inflammatory Bowel Disease using XBiotech’s novel True Human antibody approach. This is a very important potential indication with approximately 1.6 million Americans and 5 million worldwide suffering from Inflammatory Bowel Disease, and as many as 70,000 new cases diagnosed yearly in the US. We look forward to seeing the results of Dr. Cominelli’s work in IBD and exploring the possible clinical use of this molecule in the future. We continue to assess our anti-IL 1 alpha pipeline both for subcutaneous and IV administration of the drug and to evaluate the best allocation for resources in advancing the particular programs in different key strategic areas. We have a continued and growing interest from physicians around the world that want to explore the use of IL 1 alpha in addition in treating [Indiscernible] and more common diseases, and we look forward to working with many of these and as we many as we can to bring this therapy to as many disease indications and people as possible worldwide. Now to discuss our lead anti-inceptive program, where our treatment True Human antibody 514G3 is being used to treat serious life threatening Staph bacterial infections, including MRSA. The 514G3 antibody has been the subject of a randomized, double-blinded, placebo-controlled Phase I-II study, where we have evaluated the dosing, safety and efficacy of the antibody in very serious disseminated blood infections. The company completed enrollment in this global study in December, and we are on track to announce the top line findings in the next few weeks. I hope we can have that information gathered together by the end of this month. It is really a matter of [bandwidth] now for us to decipher some of the key data points and to provide them in a concise and accurate way to the public and we will be doing that again as soon as possible. Our anti-inceptive discovery technology really does continue to push along to enrich the pipeline of candidate products we have. Our anti-C. difficile antibody candidate that we have been in the work of discovering for some time now has been encouraging to animal model testing. We are positively isolating antibodies against common influenza episodes that will allow us to target multiple strains of the virus with a single monoclonal antibody approach and we have also made good progress on our herpes zoster work, where we have short listed a number of antibody candidates, and those will go into testing for the ability to neutralize [Indiscernible] in the second quarter of this year. A lot of this infections disease work requires [biohazard content] that we don't have. So it is being partnered out with academic and other institutions. So we are at the stage where we are now relying on others to help us validate these kinds of anti-inceptives, but that is going well. With regard to manufacturing, we are continuing to ready our new manufacturing facility for commercial production. All remaining manufacturing equipment was installed in the fourth quarter of last year and commissioning and quantification efforts are ongoing. Full-scale manufacturing runs to support registration of the facility will start soon and will continue into the second quarter. I will now say a few words regarding our financials. From inception through December 31st of 2016, the company has accumulated a deficit of approximately $183 million. During 2016, the company incurred about $53 million in operating expenses, which was about $38 million more than our operating expenses in 2015. As of year-end 2016, XBiotech had cash and cash equivalents of approximately $34 million. In order of highest expenses first, cash expenditures during 2016 were attributable to clinical costs, construction and equipment in our manufacturing facility and finally personnel. Earlier this month the company completed the Registered Direct Offering in which we sold an aggregate of approximately $31.6 million of XBiotech common stock at a price of $15 per share. This offering was made pursuant to a shelf registration filed last year for 7 million shares. It was really a strategic financing that created enough runway to execute on our key near-term objectives including our marketing authorization activities, and allow us to achieve these key milestones before we were in need of further funding. With the proceeds of this offering, our current cash on hand is approximately $59 million, which will give us runway right into 2018. In summary, we remain on track in all key programs of the company, and we will continue to work diligently towards delivering on the industry’s most promising platform [indiscernible] therapies with our mission to care for patients for drugs that are safer than ever before. Thank you for your time. This concludes this portion of our Q4 and year update. I will now open the call to questions from the audience. Operator please go ahead. Thank you.

[Operator:]

Thank you. [Operator Instruction] Our first question comes from Kumar Raja with Noble Capital Markets. Your line is now open.

[Kumar Raja:]

Thank you for taking my questions. Congratulations for all the progress. For the phase 3 trials you recently released the data from the 50% event. What is the expectation when you will have 75% event and what is the expectation from that analysis [indiscernible] I think that you will be able to stop the trail at that point or will you need to go forward and have the overall survival data? And how can this data be used for the approval process in Europe and in terms of hydra data it is supportive, it looks like it support 300,000 patient market in U.S., how big of a market opportunities subset there you are looking at basically the patient who are not eligible for that [indiscernible]? Thank you.

[John Simard:]

Kumar thanks for going into the question. I appreciate that. I will get Mike Stecher, our Medical Director here to respond first and --

[Mike Stecher:]

First, on your question regarding the PT23 trial, the FDA trial so we achieved the milestone of 50% of events in January or actually in December, so the 75% of event milestone we have achieved now is we will have the interim analysis in June. It's not possible for us to say right now whether or not we will be further after that so we have the independent data monitoring committee but we are hopeful that we could achieve efficacy at that end point if we at that time. If we don't then the final 100% events will be probably for the end of the year. So it's at this point we are hopeful we can hit efficacy at the next end point or over the next time point but we may have to go end of the year to get to the final analysis. Regarding how this data can be used for the EMA submission, so the EMA submission is next week and there are way of course that we had our first interim analysis. But if we have to get to second interim evaluate efficacy again then the process the marketing authorization process decision will be rendered prior to that next analysis. So it's not going to factor in I would say into this decision. Regarding [indiscernible] you mentioned the incidents in United States so at this point we are still making decisions on how we would move forward. [indiscernible] designation however we can also apply for [indiscernible] designation without having to go head to head against -- because we are different molecule with the different target. So we could choose to go against them before them, after them, so those kind of decisions in terms of what the market size would be have not been made yet but that's something that we will be discussing over the next few months.

[John Simard:]

I would add to the question about the importance of the U.S. study findings. I think arguably the results that we already have from this first interim analysis I think could be viewed positively from the perspective of European application because what the go forward result means is that we in fact did have survival effect we just wouldn't have met the stringent requirements for statistical evidence of that that interim but if there was those survival benefits the study would have been stopped for futility. So I think the fact that we travel through that end point successfully means that we have got some positive signals there in support of the European application.

[Kumar Raja:]

Thank you for taking my questions.

[Operator:]

Our next question comes from Monish Bahl with MHB Capital. Your line is now open.

[Monish Bahl:]

Thank you. Good morning. John, you said a lot going on so I may have missed did you cover staff inspection program where -- I may have missed that talking.

[John Simard:]

Yes. We did Monish. Thanks for calling in. Yes we have all that data together and database is lot, it's as I mentioned we got a lot going on like you pointed out and we are giving some priority right now and we will get to that analysis shortly. It's a lot of – it's a complex population, its data that has to be looked at carefully and we need little time to sort of queue and get it out so we are on that very soon.

[Monish Bahl:]

[indiscernible] that event from reporting perspective?

[John Simard:]

Well, we plan to focus on these stuff data after we had this package after the EMA which is next week. So we are hoping to have the analysis done by the end of the month and reported sooner after.

[Monish Bahl:]

Okay. Got it. Sounds good and then with regard to collaboration partnerships of the company given the burn, the company there is lot going on are you looking to potentially partner some of your programs late stage development I am just wondering about it?

[John Simard:]

Yes, I mean, [indiscernible] partnering.

[Monish Bahl:]

Is there any partnering -- that makes more sense?

[John Simard:]

No. There is so many different ways to potentially do things. It's conceivable for any given – when you look at indication wise, so there is particular program that is more sensible than another. It's just driven by the opportunity is.

[Monish Bahl:]

Okay. Got it. Okay thanks a lot. Appreciate it. Take care.

[John Simard:]

My pleasure. Thank you for calling again.

[Operator:]

Thank you and I am showing no further questions. Ladies and gentlemen thank you for participating in today's conference. You may all disconnect. Everyone have a great day.