Selecta Biosciences Q2 2023 Earnings Call Transcript

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August 17, 2023

There are 9 speakers on the call.

Operator

Good morning, everyone, and thank you for joining the Selecta Biosciences Q2 2023 Earnings Call. At this time, all participants are in a listen only mode. Following management's remarks, we will hold a question and answer session. At that time, lines will be open for you. At this time, I'd like to turn the floor over to Blaine Davis, Chief Financial Officer of Selecta.

Operator

Please go ahead.

Speaker 1

Good morning, everyone, and thank you for joining our Q2 2023 financial results and business update conference call. The press release reporting our financial results is available in the Investors and Media section of Selecta's website at www.selectabio.com And in our quarterly report on Form 10 Q for the quarter ended June 30, 2023, which was filed earlier this morning with the Securities and Exchange Commission. Joining me on today's call are Selecta's President and Chief Executive Officer, Doctor. Carsten Brund and Peter Traver, our Chief Medical Officer. During today's call, we will be making certain forward looking statements, including, without limitation, statements about the potential safety, efficacy and regulatory and clinical progress of our product candidates, our financial projections and our future expectations, plans, partnerships and prospects.

Speaker 1

These statements are subject to various risks that are described in the filings made with the SEC, including our most recent report on Form 10 ks and quarterly report on Form 10 Q. You are cautioned not to place undue reliance on these forward looking statements, which speak only as of today, August 17, 2023, and Selecta disclaims any obligation to update such statements, Next step is required by law, even if management's views change. With that, I'd now like to turn the call over to Carsten.

Speaker 2

Good morning and thank you everyone for taking the time to join us. Thus far, 2023 has proven to be an important year for ImmTOR, Our precision immune tolerance platform, which we're leveraging to develop tolerogenic therapies that selectively mitigate unwanted immune responses. In March, we're thrilled to share positive data on both Phase 3 trials of SAL-two twelve in patients with chronic refractory gout. As a reminder, SALC-twelve consists of 2 components. First, the gaficase, a potent enzyme It has been observed to produce serum urate in refractory gout patients who continue to have serious disease symptoms That was debilitating joint pain and disfiguring tissue deposits of ureth called tophi.

Speaker 2

And second, Intor, which is our non encapsulated formulation, rapamycin, that is designed to condition the immune system to reduce antibody formation to drugs that are administered at the same time. The proposed mechanism to our action is the induction of immune tolerance rather than immune suppression as with other commonly used drugs. In May, we had the opportunity to showcase this positive data during a late at the European Alliance of Associations for Rheumatology or EULAR Congress. This was the first scientific presentation of our data To the key opinion leaders and physicians who treat patients with gout and who are well aware of the limitations of current treatment options, We were extremely encouraged by the response to the data, which reinforces our belief that SEL-two twelve could potentially serve at the once monthly safe and effective uricase based intervention for refractory chronic gout without the need for separate oral traditional immunosuppressants. We're currently focused on working with Sobeys, our SAL-two twelve development partner to pay for a biologic license application or BLA filing in the U.

Speaker 2

S. The filing remains on track for the first half of twenty twenty four. As a reminder, under our agreement, Tobey is responsible for regulatory and commercial activities in all markets outside of China, while Selecta is responsible for Sure. Selecta is entitled to receive up to €615,000,000 in remaining milestone payments from Sobeys, as well as tiered double digit royalties on net sales. With the potential for peak sales of SEL-two twelve for the treatment of chronic factory gout to exceed 700,000,000 We believe that SAL-two twelve has the potential to deliver significant and meaningful long term stockholder values.

Speaker 2

Importantly, The SAL-two twelve program serves as a validation for intra platform, which represents the only with positive Phase 3 data. While we firmly believe that the balance of our pipeline beyond SEL-twelve has the potential To generate meaningful returns for stockholders, we recognize that significant capital and time will be required to advance these assets to value creating inflection points on our own. As such, we've undertaken the decision to to spend further investments in all programs beyond SEL-two twelve and instead plan to pursue potential licensing and corporate development initiatives for these assets. These include ImmTOR, which can be combined with a variety of therapeutic approaches to reduce immunogenicity across a range of indications. ImmTORL, which combines our proprietary record T cell selective IL-two candidate with ImmTOR, SEL302 and AV gene therapy combined with ImmTOR for the treatment of MMA, Zork in next generation IgG protease for the mitigation of pre existing anti AB antibodies and our next generation IGA Protease for IGA nephropathy.

Speaker 2

To note, we will continue to work with our partner Astellas to advance the development of Zork in combination With AT-eight forty five, Acelus' AAV based therapy for the treatment of late onset Pompe disease in adults. As a reminder, we have observed a unique low cross reactivity profile in Zork that may provide therapeutic benefit to patients with pre existing immunity to AV. We believe our actions today will enable us to preserve Capital and ultimately maintain stockholder interest in SAL-two twelve without dilution that would have been necessary to support the continued development of the balance of our pipeline assets over the long term. With that, I'll now turn the call over to Blaine to review second for the financial

Speaker 1

results. Thanks, Carsten. The 2nd quarter financial results are detailed in the press release and 10 Q issued earlier this morning. So let me focus my comments on some key points. Select ended the 2nd quarter with cash, cash equivalents, restricted cash and marketable securities of 115,000,000 As a result of the initiatives we announced today, we expect these resources will be sufficient to extend our operating requirements into 2027.

Speaker 1

Collaboration and license revenue for the quarter of 2023 was $5,200,000 as compared to 39 point $3,000,000 in the Q2 of 2022. Collaboration and license revenue was primarily related to the shipment of clinical supply And the reimbursement of costs incurred for the Phase 3 DASOLVE program under the license agreement with Sobe. Research and development expenses for the Q2 2023 were $17,800,000 versus $19,200,000 for the Q2 of 2022. The decrease was primarily related to the capital prioritization initiative that was enacted in the Q2 of 2023. G and A expenses for the Q2 of 2023 were $6,100,000 as compared to $6,200,000 for the same period in 2022.

Speaker 1

The decrease was primarily the result of a reduction in expenses incurred for stock compensation. For the Q2 of 2023, we reported a net loss of 11,400,000 our basic net loss per share of $0.07 Let me turn the call back over to Carsten for some closing comments.

Speaker 2

In summary, we believe the initiatives we have announced today represent the best path forward to maximize long term stockholder value. We look forward to continuing to work with Sobeys in preparation for the planned BLA filing for SEL-two twelve in patients with chronic factor gout In the first half of twenty twenty four and for the balance of our pipeline, look forward to exploring opportunities to partner these programs in the coming weeks months. Now I'd like to open the lines to Q and A. Operator?

Operator

Our first question today comes from Joseph Schartz from Leerink Partners. Please go ahead with your question.

Speaker 3

Hi. Thanks very much for the update. I was wondering, since you alluded to Patients of current treatment options for treatment of refractory gout and KRYSTEXXA sales have been quite strong. I was wondering if you could walk Chris, through how the SEL-two twelve value proposition will compare to KRYSTEXX and how you get to your market opportunity estimates? Thank you.

Speaker 2

Yes. Thanks. That's a great question, Joe. Yes. So we remain very encouraged.

Speaker 2

We have done some market research recently, which confirms the potential. And I think we believe The fact that this is a monthly potential therapy and where we don't have to use an oral Immune suppressant, versus it's a very targeted approach with ImmTOR, you basically induce tolerance. So we believe that given the strong efficacy profile we have seen in the Phase 3 with The safety and tolerability we've also observed given the once monthly dosing, we think there's a tremendous market opportunity and we're actually encouraged by The strong sales of KRYSTEXXA, I think it's a great backdrop. It's a very attractive market with significant potential.

Speaker 3

Okay, thanks. And then which of the pipeline programs do you think could garner the most interest with partners? Have you already had any intelligence from the market for Such assets and what is the timeline for securing partnerships and what form of partnership would you seek to enter versus would be less interesting for Selective?

Speaker 2

Yes. So I think we believe obviously there's value at all our assets, but I think specifically, we had initially focused on ImmTOR IL and we think that remains a very attractive Asset for partnering and specifically for use in autoimmune disease. We believe that adding ImmTOR to an IL-two is really differentiating actually. So we're excited about this. But we believe Zork has host potential value, but also the IgA Provest in combination with ImmTOR.

Speaker 2

So I think all those That's our high value. We have not reached out to potential partners at this point. We'll do so in the

Operator

Our next question comes from Kristin Kuluska from Cantor Fitzgerald. Please go ahead with your question.

Speaker 4

Hi, good morning everybody. For ImmTOR IL, curious to hear more about the decision here given I know how Excited you've been on this program. I guess, why not conduct some initial IND enabling studies in house and then look to partner off of this? Would that be too expensive with your plans? And then just given the versatility of the program, even perhaps outside of autoimmune, How do you plan on approaching

Speaker 2

partners? Yes, I think the why now is a good question, Kristen. I think we've just looked at The development costs and the timelines to get to a meaningful clinical readout Versus the high value of SAL-twelve and came to the conclusion that it's in our stockholders' interest to Stop all investment basically. We haven't talked about our partnering strategy, but I think the low hanging fruit is really what we were focused on initially, which is inter IL for the use in autoimmune diseases, I think, because we Pretty detailed development program in place already, but I think there's also value in some of the larger autoimmune indications Where maybe IL-two alone struggled. I think that's another approach where the differentiation by adding ImmTOR to the mix Might be helpful also, but we'll update the markets once we had some initial discussions.

Speaker 4

Okay. Thanks. And then with your new cash runway guidance, I'm curious how much of this is implementing Any potential milestone and or royalty payments?

Speaker 1

Yes. Kristen, so the way we thought about the runway, we've incorporated the next regulatory milestone in the calculation of our cash runway. So as you think about The potential BLA filing in the first half of twenty twenty four, we haven't built in any future milestones or royalties to that calculation around 20 27. So we feel that that runway represents a conservative approach. And as SEL-two twelve moves forward through the regulatory process.

Speaker 1

Obviously, we will look at that cash runway and look at the initiatives we put into place and The ultimate impact on the cash runway overall. But in 'twenty seven, we feel very comfortable with and we've only incorporated A single regulatory milestone into the calculation of that runway.

Speaker 4

Okay, got it. Thanks. You've certainly kept us on our Todes on partnerships in the past. So looking forward to seeing what comes out of that in the next months here. Thank you.

Operator

Our next question comes from John Newman from Canaccord. Please go ahead with your question.

Speaker 5

Hi, guys. Good morning and thanks for taking my question. The question is you've got a very interesting structure around the royalties From SEL-two twelve with Sobe. If I can remember correctly, you basically don't pay taxes on those royalties. My question is, Will you look to retain that royalty structure long term in order to bring in potentially substantial Royalties that will be tax free or are you considering monetizing that royalty as it's pretty unique?

Speaker 5

We see a lot of Royalties monetized, but very few, if any, that have a tax free structure? Thanks.

Speaker 2

Yes, that's a great question, Sean. We haven't made a final on this at this point, but you are right. We have tax optimized this royalty stream, which I think a lot of investors actually haven't fully Appreciate it. We basically won't pay any taxes up to an amount of about $400,000,000 actually, so which is very significant. So, but we have not made a decision.

Speaker 2

I think for now, we just want to maximize the

Operator

Our next question comes from Gil Blum from Needham and Company. Please go ahead with your question.

Speaker 6

Good morning and thanks for taking our question. With the refocusing of just to help us understand with the refocusing of your efforts here, what additional Can you get to help sell 212 along? Is this going to change anything in your current relationship with Sylvia? Just to help us understand? Thank you.

Speaker 2

Yes. I don't think there is a change, Gil. We obviously working Closely with Sobeys to support the BLA filing, we remain responsible for the IMTRO manufacturing. I think what's important as well, we get reimbursed for those efforts, right? So I think that doesn't change in our plants moving forward.

Speaker 6

Okay. And maybe kind of as a follow on, What would you say is the next big thing for us to focus on, on the Street? Thank you.

Speaker 5

Yes, I

Speaker 2

think we've kind of we're putting the focus on SEL-two twelve and really the next big Kind of milestone look for is actually the filing of the BLA in the first half of twenty twenty four And then look for potential partnerships that for the remainder of the pipeline.

Operator

Our next question comes from Uyghur from Mizuho. Please go ahead with your question.

Speaker 7

Yes, guys. Thanks for taking my question. Curious, is there any conditions or financial conditions that would Allow you to maybe reverse course or are you is Considering partnership for mTORs and everything as a sort of the way going forward? Thanks.

Speaker 2

Yes. Obviously, we look at this Very carefully and we believe what we've announced today is the best path forward.

Speaker 7

Okay. So how should we kind of think about spending Because this quarter, it didn't look like there was a significant change from Q1 to Q2 And your cash runway sort of imply that spending would come down significantly. Would it be sort of Immediately in the 3rd Q4 or it's sort of more in the 2024 timeframe? Thanks.

Speaker 1

Yes. So a couple of comments there. As you might remember, the way we report R and D expense, it is inclusive of SEL-two twelve related activities. And as Carsten mentioned, that is a fully reimbursed set of expenses. So while you might see some ups and downs In reported R and D, we also would receive revenue from those reported expenses specifically associated with Cell-two twelve.

Speaker 1

So on the whole, when you look at overall R and D spend, it will continue to come down as it relates specifically to the initiatives we announced Earlier this year as well as the update that we provided today. That will carry forward through the second half of this year and then also throughout 2024 So again, there's a little bit of a nuance there in the sense that the way with which we report the SEL-two twelve related expenses, those will obviously continue as we move forward In partnership with Sobean moving to BLA, but overall, we do expect to see R and D expenses come down as we move forward from here.

Operator

Our next question comes from Ujjwalan Pachayathan from H. C. Wainwright. Please go ahead with your question.

Speaker 8

Hi, good morning, Tim. Thanks for the update. So a few questions from us. So firstly, you indicated that you are interested in potential partnerships To advance the pipeline, maybe just to take a step back, can you give us a sense of or maybe a high level update regarding the Circumstances that led to the termination of agreements you formerly signed with Takeda, Sarepta and Spark. And What implications or what point is the lessons we can learn from this that could potentially help you as you think about future partnerships?

Speaker 2

Yes, that's a good question. Obviously, if you look at specifically Takeda partnership, Takeda decided to exit AAV gene therapy and disbanded this unit completely. So they terminated all Partnerships including ours and Sarepta decided not to move forward. And Obviously, we had positive data along the way as was shown by the milestone payments we received, But they ultimately decided against this. But we're definitely we have a lot of experience doing partnerships And we were positive that we'll be able to monetize the various assets And not only in gene therapy, I think we have a much broader potential pipeline as well.

Speaker 8

Okay. Thanks for the color. And then late April, you announced a targeted headcount reduction of 25%. And today, let's say after implementing today's update, how many employees you might possibly have?

Speaker 2

Yes. So we are not announcing a risk today and we haven't guided to that. So I think Today is really focused on announcing that we are focusing efforts on 212 and that requires obviously quite a bit of headcount, which is reimbursed by And we're looking to partner our assets out. So we're not announcing a RIF today at this point.

Speaker 8

All right. Thanks so much.

Operator

And ladies and gentlemen, I'm showing no additional questions. I'd like to turn the floor back over to Doctor. Brunn for any closing remarks.

Speaker 2

Thank you, operator, and thank you, everyone, for joining our call today.

Operator

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

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Selecta Biosciences Q2 2023
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