ERYTECH Pharma S.A. (ERYP) Q2 2020 Earnings Call Transcript

ERYTECH Pharma S.A. (NASDAQ: ERYP) Q2 2020 earnings call dated Sep. 22, 2020

Corporate Participants:

Gil Beyen — Chief Executive Officer

Eric Soyer — Chief Financial Officer and Chief Operating Officer

Iman El-Hariry — Chief Medical Officer

Analysts:

Fred Gomez — Pharmium Securities — Analyst

Justin Walsh — JMP Securities — Analyst

Boris Peaker — Cowen — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the ERYTECH Business Update and Financial Highlights for the Second Quarter of 2020 Conference Call.

[Operator Instructions]

I would now like to hand the conference to your speaker today, Gil Beyen, Chief Executive Officer. Please go ahead, sir.

Gil Beyen — Chief Executive Officer

Thank you. Good afternoon, good morning. [Foreign Speech] Hoping you’re all well and safe, and thanks for joining us for our earnings call for the second quarter of 2020 and the first half year.

We announced our business and financial update yesterday evening. You should be able to access the press release and our earnings presentation on the Investors page of our website under Webcasts and link to slide show or via the link that was provided in the press release. With me on this call in three different locations this time are Dr. Iman El-Hariry, our Chief Medical Officer; and Eric Soyer, our Chief Financial and Chief Operating Officer.

Turning to Page 2. And before starting, drawing your attention to disclaimer on Slide 2, and you’ll see if you read it, COVID-19 is still there. We are overall succeeding well in minimizing its impact on our operations but the pandemic continues obviously to have an impact on our trials, as you will see in the in the update.

Turning to Slide 3, the agenda, so it’s the usual quarterly routine. I will start with a short business update focusing on the key highlights for the second quarter and year-to-date. Eric will then present the financial results for the first half of the year and summarize the major news flow and expected milestones for the next 12 months, after which the three of us will be available to respond to your questions.

Slide 4 before starting the update for completeness, a quick reminder on our Company. It’s a leader in red blood cells, especially focused on cancer and cancer metabolism. Our focus is on targeting cancer cells altered amino acid metabolism. With this, we are in three late stage, Phase 3 in pancreatic cancer, Phase 2 in triple-negative breast cancer and a Phase 2 in acute lymphoblastic leukemia. And as you know, we have our own production sites, one in Europe — in Lyon, one for Europe in Lyon and one for U.S. in Princeton. We are listed on Euronext and on Nasdaq. So everything we do is really on the two continents.

The graph on the right side, just remind once, it’s the survival curve of our Phase 2 study in second-line pancreatic cancer, which with a 40% reduction in risk of death rate is to our knowledge still the strongest result ever seen in a large clinical trial in second-line pancreatic cancer, and it’s this Phase 2 that obviously enabled us to transition to our pivotal Phase 3 TRYbeCA-1, which will again be the main focus of this update.

And the highlights of the update are on Slide 5. It’s not only TRYbeCA-1, I’ll start with TRYbeCA-1, but there is also important update on our NOPHO ISTs and NOPHO-sponsored trial in second-line ALL. And quite some updates on the financials obviously, second half financials, but also the cash and the financing instruments that we put in place on which, Eric will give you the feedback.

This allows me to start with the business update on Slide 6 you see and it’s a reminder, the design of the Phase 3 study, the TRYbeCA-1 study. It is — as you know pivotal randomized Phase 3 trial where we compared to standard of care chemotherapy which can be gemcitabine plus abraxane or a combination of 5FU, leucovorin and oxaliplatin for few weeks and it’s trial with about 500 patients and it’s with an primary endpoint of the overall survival. The trial was launched end 2018, is now running in more than 85 clinical sites in Europe, 11 countries in Europe and in the United States with a target enrollment of approximately 500 patients.

Two PIs, Pascal Hammel, on the left — the picture on the left, is the PI for Europe; and Dr. Manuel Hidalgo, the PI for the U.S. And I think the occasion to make a little publicity and invite you to our KOL call with Dr. Hidalgo, it will take place on September 29th at 10:00 AM Eastern Time, 4:00 PM in Continental Europe. And Dr. Hidalgo will there discuss the treatment landscape in pancreatic cancer, focusing on the challenges and opportunities for new treatments, specific in second-line pancreatic cancer. And there has been a press release with — already and a link to this site — to this KOL event.

So TRYbeCA-1, moving to Slide 7, the key highlights for the year-to-date. In March, it was still the first quarter, but we — for reminder, we had our three independent safety review by our IDMC. This time it was on the first 320 patients in the trial and again it was a confirmation of the safety profile of eryaspase that IDMC recommended to continue to trial as planned without amendments.

Then in April, we got the Fast Track designation, granted by the FDA, we were very pleased because it’s obviously a clear confirmation of the unmet medical need in second-line pancreatic cancer and of the interest in the results that we had shown so far in the Phase 2 study. And then more recently our trial passed the 90% bar, 90% enrollment bar, we have now more than 450 of the approximately 500 patients randomized and we’re in contract for complete enrollment in the fourth quarter.

Over the past months, since we COVID-19 outbreak, our clinical teams and investigators have made a tremendous efforts to ensure the continuity of the trial, all while [Indecipherable] obviously the safety of the patients, the staffs and the employees. We experienced some slowdown in our enrollment, especially with March, April, somewhat in May, but it picked up again to pre-COVID levels as of June.

And we mentioned in the last time also, the events are taking longer than we had originally — the events that will trigger the interim analysis are taking a bit longer than we originally expected, but now we can confirm based on a better view on the events that the two-thirds of the events that will trigger the interim analysis are expected to accrue before the end of the year.

The reporting where we originally said around year-end, we didn’t know whether the interim analysis, which come before or after the end of the year. Now given that this — so what we still see although effect all the operation COVID has no impact or little impact on enrollment, etc., where we see most of the impact is on data cleaning. So event-wise we’ve now guided more towards Q1, early-Q1 for the interim analysis.

Quick reminder on the interim analysis, it is an interim analysis for superiority only, no futility analysis. So two possible outcomes. The IDMC and it’s important to make this clear, so it’s — we are totally blinded to the study. It is the independent data monitoring committee that will look at the data so far with the two-thirds of the events and they can then all complete that the trial already met its plans primary overall survival endpoint and recommend to stop the trials, complete the trial, or they recommend continue the trial as planned until the final analysis and this is as before expected in the second half of 2021. So, it’s an error in the slide, it is second half of 2021. So that’s about the Phase 3 in second-line pancreatic cancer.

And gaining in importance and moving now to Slide 8 is the work we’re doing in ALL, in fact, it’s not us doing it, it’s the NOPHO, the Nordic Society of Paediatric Haematology and Oncology. We’re running this investigator-sponsored trial, obviously, we do — we produce the batches and we provide all the support that we can. This is a trial running in 22 clinical sites in the Nordic and Baltic countries of Europe with primary endpoint pharmacokinetics and safety.

This trial, we announced in June reached its target enrollment, in fact it’s unlaunched target enrollment originally was 30 patients, it was expanded to 50. And finally we completed, there were some over enrollment and we completed and concluded the enrollment at — they completed at 55 patients.

The NOPHO has provided some preliminary findings and we are very encouraged by them, so because they suggest that eryaspase achieved its target level and duration of asparaginase activity, its primary endpoint associated with acceptable — associated with an acceptable safety profile.

So now it’s waiting for the results, the final results, we expect them before year-end. And it’s important because we know this is an high unmet medical need. Patients who developed allergy to pegylated asparaginase have very little treatment options left, there is only ERWINASE and ERWINASE is experiencing still and since a long time, supply shortages. So the need for a second asparaginase in this setting is obvious. The FDA confirmed this in an initial meeting we have with them. So now based on what we will see in the Phase — in the final results, we will plan to go further with the FDA and discuss the potential talk through a BLA in second-line ALL. So, that’s for the NOPHO trial.

On the two other clinical trials, Slide 9, in fact before completeness, there is not much to say more here because there is nothing new here. The TRYbeCA-2 trial in triple-negative breast cancer continues to be enrolling in 17 sites in three countries. The target enrollment is 64 patients, the enrollment we mentioned last time is still slower than we hoped and we are assessing options to accelerate this enrollment in view of still being able to report results in 2021, most likely the end of ’21.

And then the Phase 1 IST in first-line pancreatic cancer. This is a trial where aerial space will be — the safety of aerial space will be evaluated in combination with FOLFIRINOX, a treatment regimen that is gaining increasing grant in first-line treatment of pancreatic cancer. And so Georgetown University will test — is sponsoring this trial, they obtained the IND to start — to get started. All the paperwork is ready, and so now we can confirm that we expect the trial to start enrolling. We said in the second half of 2020, so it will become the fourth quarter of 2020.

With this, I conclude the business update and I now hand over to Eric to provide an update on the financial results first half 2020 and on the recent financing activities and cash positions [Phonetic]. Eric, all yours.

Eric Soyer — Chief Financial Officer and Chief Operating Officer

Thank you. Thank you, Gil. Good morning, everyone. [Foreign Speech] We’re now reviewing the financial highlights for the first half of this year. We are on Slide 10 of the slide deck. And we’re starting with P&L information.

The net loss for the first half of this year 2020 was EUR35 million, that was up EUR5.7 million or 19% year-over-year. And this is due to a EUR5.1 million increase in operating loss and a EUR0.6 million decrease in financial income. The increase in operating loss EUR5.1 million was attributable to a EUR6.1 million increase in preclinical and clinical development expenses; a EUR2.1 million euro decrease in the G&A, of which EUR2.3 million was related to the end of manufacturing capacity expenses, which were mostly incurred last year 2019; and a EUR1.1 million decrease in income, of which EUR0.9 million consisted in the upfront payment from the June 2019 last year license agreement with SQZ Biotechnologies, which obviously did not recur this year in 2020. So those were the key highlights for the P&L information.

Now moving on to Slide 11 for comments on cash. And we’re starting with the mid-year cash position. As of June 30, this year, ERYTECH had cash and cash equivalents totaling EUR45.4 million, which is approximately $51 million, and that’s compared with EUR73.2 million at the end of December 2019 and EUR58.6 million at the end of Q1 this year. So that means, we had EUR27.7 million decrease in cash position during the first six months of 2020 and which were consisting of EUR14.6 million in the first quarter of this year and EUR13.1 million in the second quarter.

And that was the result of the EUR28 million net cash utilization, which was mostly comprised of a EUR29.2 million net utilization in operating activities, EUR1.1 million used for investing activities and EUR2.2 million generated in financing activities. In the period also, we had the appreciation of the U.S. dollar against the euro, which led to a EUR0.4 million favorable currency exchange impact. Those were the highlights on the cash flow for the first six months of this year.

And now, a word on our most recent financing initiatives and we’re now on Slide number 12 of this presentation. First, I’d like to recall that we signed an agreement in June this year with Alpha Blue Ocean, ABO, and European High Growth Opportunities Securitization Fund and that was for the issuance of a zero-coupon convertible notes with share warrants attached whereby the Investors committed to subscribe for up to a maximum of EUR60 million in the event of conversion of all the notes. This is currently subject to regulatory limit of 20% dilution and therefore, and obviously depending on market conditions, we may not be able to use it up for the maximum of EUR60 million, unless we seek further authorization.

To date, the Company has called two tranches of EUR3 million each, one in July and the other one in August. And therefore these drawdowns are not yet reflected in the Company’s cash position at the end of June.

Second, and today, and this is new, ERYTECH has also announced the implementation of an at-the-market or ATM program which will allow us at ERYTECH’s discretion to issue and sell ordinary shares in the form of ADSs, American Depositary Shares, on the Nasdaq market through its sale agent, Cowen and Company. That will be sales to eligible investors at a price equal or near to the prevailing market price on Nasdaq, keeping in mind that the issuance of new shares will also be subject to the same 20% dilution limit as for the ABO convertible notes.

Please note that the new shelf registration statement on Form F-3 was filed with the SEC yesterday, which is merely a rollover of the shelf registration we already filed last year and that will cover this ATM program. Of course the ATM program can only be used once the shelf registration statement is declared effective by the SEC.

And thirdly, the impact on our cash horizon. This new ATM facility together with the ABO convertible notes is complementing or financing our solutions and further extending our cash horizon. We believe that these new financing instruments altogether will now extend our cash horizon to the end of the third quarter of 2021, which is beyond the expected upcoming data results in ALL, the Phase 2 NOPHO trial and in second-line pancreatic cancer with the interim analysis for superiority. This runway projection is of course again taking into account the 20% regulatory dilution limit, unless we are again further authorized to use these instruments beyond this current limit.

That was the summary of our most recent financing initiatives. I am now turning to Slide 13 of this presentation for a quick wrap up of the upcoming news flows and key milestones. Starting first with the TRYbeCA-1 Phase 3 study, with more than 90% of patients of the trial, we expect to be able to complete enrollment in this study in the coming months.

Around the same time and before the end of the year, we expect the full results of the Phase 2 study in second-line ALL, acute lymphoblastic leukemia. We expect this full result will be reported before the end of the year. Again, this study, which we call NOPHO is an investigator-sponsored trial and is conducted in the Nordic and Baltic countries of Europe.

You certainly remember that we’ve provided an interim update on this trial last June, and the final results should now be expected for the end of the year. But again, keeping in mind that this is an investigator-led trial, so which is to say that we’re not really in charge of the timeline here.

Next is the initiation of the Phase 1 study in first-line metastatic pancreatic cancer. This will also be an investigator-sponsored trial in the U.S. with the Georgetown Lombardi Cancer Center. And we expect to start patient enrollment also before the end of this year.

And finally, but certainly very importantly as a company milestone is the interim analysis for superiority in the TRYbeCA-1 study, the Phase 3 clinical trial in second-line metastatic pancreatic cancer. As explained earlier by Gil, we now expect this interim results in the first quarter of 2021, with again two possible outcomes, either we can conclude early for superiority, if the primary survival endpoint is already met with only two-thirds of the events; or we continue towards the final analysis, which is expected in the second half of 2021.

With that, I would like to thank you already for your attention. And we will now open the call for any questions you may have. Again, I would like to remind any of you who would like to ask questions in French that you are of course very welcome to do so. [Foreign Speech].

Operator, Gil, this is over to you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Fred Gomez with Pharmium Securities. Your line is now open.

Fred Gomez — Pharmium Securities — Analyst

Yes, thank you for taking my question. I have a few. The first on TRYbeCA-1 in pancreatic cancer. We are now approaching the completion of the recruitment, can you tell us, can you give us an update about the geographic breakdown between the U.S. versus Europe, how many patients for each zone and also what you see for the interim analysis?

And do you expect to have more patients treated with the combination gemcitabine nabpacli, does this is for free or [Indecipherable]. And do you know exactly how many events you have now because we expect the interim to come shortly, but it seems that you don’t have at this stage the total number of events requisite. So how many events are we seeing now?

The second question, still it’s more on the regulatory side. Of course, the U.S. is the primary efficacy endpoint, but it’s likely that I don’t see it will have a look at the totality of the data generated in the Phase 3. You mentioned that there is a stratification by chemo regimen. Can we expect maybe if you miss the primary to identify maybe a subset of patients that’s responded with a better OS and also maybe a PFS. So, are you going to play with the regulatory, are you going to play with the regulatory year discussion in the future?

And the last one is, for the Phase 2 in leukemia, can we expect something at ASH this year? Thank you very much.

Gil Beyen — Chief Executive Officer

Thank you, Frederick. I think these are perfect questions for Iman.

Iman El-Hariry — Chief Medical Officer

Okay.

Gil Beyen — Chief Executive Officer

Iman, can you take them?

Iman El-Hariry — Chief Medical Officer

Yes, sure. Good afternoon, Frederick and hope you can hear me well. So on your first question around the geographic breakdown — I think if everyone mute the line please. So, this is erymethionase [Phonetic] is a trial. The study started in Europe long before it started in United States. We expect that the majority of the patients will come from Europe and we expect to up to maybe between 5% to 10% or a little more will come from the U.S. region. So, this is geographical breakdown. And just a reminder, we are not stratifying a region in the trial, so just as FYI.

In terms of the split of those their backbone chemotherapy using abraxane versus irinotecan-based chemo, we — since France is the highest enrolling country in the trial, we have more using abraxane as opposed to irinotecan. But overall, given the other European countries, the percentage is — I don’t have the most recent split, but our expectation it would be in the range of maybe 60 to 40 eryaspase, irinotecan give or take. in favor of the gem abraxane backbone chemotherapy.

In terms of the number of events for the interim analysis, as Gil mentioned earlier, we are expecting this to be before year-end. We are tracking a number of events on — regularly every other week. But as you would expect and particularly in this patient population that the events actually, they come in [Indecipherable]. So some will come soon or come later. And so overall, we are almost approaching the required number of events, the two-thirds of them — of the events in the trial. We were — are almost towards approaching 90% of the events. So we are very confident that we will accrue all the events before the year-end.

On your next question regarding the totality of the data and the stratification. We do stratify the chemotherapy backbone, so it would be the gem abraxane versus irinotecan-based chemotherapy. The irinotecan here can be the generic Irinotecan, it can come to — or Onivyde plus 5FU, leucovorin. The study, the primary endpoint will be the overall survival in the ITT population regardless of the backbone chemotherapy.

However, we are building hierarchical analysis in the trials to avoid multiplicity issue and the next will be looking at progression-free survival and then would be also looking at the subset of patients in each chemotherapy therapy are. And this will also be — we look at it in all the — in populations, i.e. the intent to treat data protocol and of course in all the first part and look at the consistency of treatment.

And to your question, you need to achieve a positive result in the ITT regardless of the backbone chemotherapy, however, there might be, when you start looking at each chemo subset, you may see a favorable response and that would be something to the agents to decide. But they will not be able to conduct unless we have an positive trial overall.

And then on your last question, which is the ALL. Yes, the answer is — the sponsor i.e. the NOPHO group have submitted abstracts to ASH, and hence the expectation is that they would be presenting the final full data at ASH this year, if their abstract is accepted.

I think this summarizes everything, so I hope I answered all your questions.

Fred Gomez — Pharmium Securities — Analyst

Yes. Thank you very much. Thank you.

Operator

Thank you. Our next question comes from Reni Benjamin with JMP Securities. Your line is now open.

Justin Walsh — JMP Securities — Analyst

Hi. This is Justin Walsh on for Reni. Assuming that TRYbeCA-1 succeeds and eryaspase is approved in second-line pancreatic cancer. How quickly do you guys think you’d be able to ramp up to meet the potential demand? And then related to that, is the Lyon facility sufficient to supply Europe and the Princeton facility sufficient to supply the U.S., and just sort of thinking in the context of the COVID world where cross-Atlantic transport of things might be more complicated.

Gil Beyen — Chief Executive Officer

Hi, Justin. Thank you. I’ll answer this. So, yes, indeed, there’s a lot of work ongoing in the Company, sort of planning for success. It is true that our — and independent of COVID, so we are now producing in U.S. for U.S. and in Europe for Europe. Princeton is our first facility in U.S., it’s been designed to be to meet the clinical demand but also early commercial. And the same for the Lyon facility clinical and early commercial.

I anticipate that we can cover the first year, year and half of its launch from these facilities. But you can imagine, as soon as we see positive data appearing that we will have a lot of efforts ongoing on design and setting up the next facility in U.S., most likely one on the West Coast just to cover geographic lead there because there is logistics component non-negligible in this product. So — and in Europe, most likely more towards the north of Europe for our second facility.

So teams are currently preparing the readiness for this, sort of site selection or at least location selection and then indeed we’ve shown it in Princeton that we can pull this off very quickly from sort of decision to operational readiness. And we will have to do that soon again, both in Europe and in U.S.

Justin Walsh — JMP Securities — Analyst

Thank you. And if I can just one follow-up. From your just discussions with physicians in KOLs in both the EU and U.S., how aware are they of the sort of the potential benefits of a various case and sort of how much legwork do you guys anticipate having to do versus physicians coming to you, since there is so much unmet need?

Gil Beyen — Chief Executive Officer

I think on — it’s a bit both. So, yes, there is still not enough knowledge about the product. And we will realize this, we are relatively small company, we’re relatively new kid on that. Now the thing is that we are very high on the radar screen, especially in both in pancreatic cancer and in ALL because the pancreatic cancer is second-line, you know it, nothing worked, nothing works as — if we will have, would have positive results there. I think, yes, it’s a close community the GI oncologist. So this would go quickly.

We would need and it’s part of our planning for success, increase the efforts on medical affairs, awareness creation etc. And the plans are there, the money not yet, but that’s what we were getting ready. And I would say the same in Europe. So that’s work to be done, but we have a team that is preparing the ground.

Justin Walsh — JMP Securities — Analyst

Thank you guys for taking the questions.

Gil Beyen — Chief Executive Officer

Thank you, Justin.

Operator

Thank you. [Operator Instructions] Our next question comes from Boris Peaker with Cowen. Your line is now open.

Boris Peaker — Cowen — Analyst

Great. My first question is on the impact of COVID. We saw patients in general in various clinical trials skipping their follow-up appointments and only showing up for treatment appointments. Can you just remind us how frequently do patients need to show up in the TRYbeCA study, how frequently? Are they just the follow up appointments versus treatment appointments?

Gil Beyen — Chief Executive Officer

Iman, can you take this question also?

Iman El-Hariry — Chief Medical Officer

Yes. Hello, Boris. And so in the treatment, it’s clearly dictated by the treatment itself. And as you know, the schedule is for every two weeks in the study, it’s a four-week cycle. Once patients go into a perhaps either disease progression more, they are followed up with survival. And at that point, it is every eight-week have visits, so this is the plan. We need to remember also, overall for survival, it can be a physical visit or it can be a phone call or in a different modes of communications to get that event for the survival.

So far on the impact of COVID, yes, there were actually very minimal delays in terms of the patient follow up during the — with the heat over the pandemic back in March and April. But overall, as we are going through the extensive data cleaning in preparation for the interim analysis, we are seeing and we are reviewing the database as we speak.

We are not as necessarily seeing a lot of these delays in terms of — getting the end of treatments at length, at least not different from what you will otherwise see in an non-COVID situation. So this is where we are at this moment. I think, again, the good thing for the study, it is a survival and that’s what will be, it will one way or the other to capture.

Boris Peaker — Cowen — Analyst

Got you. And my second question is on the ALL study being run by the NOPHO group. I’m just curious what efficacy results do you think we’d need to see to satisfy the FDA for approval, based on this data?

Gil Beyen — Chief Executive Officer

Iman, I’d suggest you continue.

Iman El-Hariry — Chief Medical Officer

Okay. I will take that. So the primary endpoint is looking at the pharmacological profile of eryaspase in patients who have experienced hypersensitivity actions to prior asparaginase, actually it’s really Oncaspar, which is the pegylated asparaginase. So in terms of the pharmacological profile, it’s asparaginase activity, so achieving a certain level of asparaginase in the circulation and not being diminished in terms of activity in the presence of perhaps neutralizing antibodies or anti-asparaginase antibodies.

So this primary endpoint is the major primary outcome for the trial and from a regulator perspective, the FDA has established this as an acceptable surrogate endpoint for approving asparaginase formulations in ALL. In addition to this primary endpoint, we will have a whole battery of other endpoints we would be clearly looking at, which something the FDA would like to see. For example, they need the level of asparaginase activity, this is something which was certainly looked into in the most recent asparaginase approval, the Asparlas.

And then of course the 6T [Phonetic] Anti-Estrogen antibodies neutralizing. Antibodies all of this will active at the support of data that the FDA would expect to see, and that’s also part of what we have received in terms of their feedback to us early this year.

Boris Peaker — Cowen — Analyst

But do you have any specific numbers the levels that you think would need to see?

Iman El-Hariry — Chief Medical Officer

The numbers is — right now it’s what is accepted is 100 units per — acceptable level. And in fact all our trials, we exceed this level by a very wide margin for a long period of time.

Boris Peaker — Cowen — Analyst

Got you. Thanks for taking my questions.

Iman El-Hariry — Chief Medical Officer

Thank you for asking.

Operator

I’m not showing any further questions at this time. I would now like to turn the call back over to Gil Beyen for closing remarks.

Gil Beyen — Chief Executive Officer

Great. I just want to thank everyone for your participation and attention and questions obviously. Thanks also for your continued support. We look forward to keeping you updated on the progress through the remainder of this year, and next year exciting news flow coming at least at the horizon. So thanks again for joining and wish you all a great day. Thank you.

Operator

[Operator Closing Remarks]