U.S. Markets closed

Edited Transcript of OBSV.O earnings conference call or presentation 7-Aug-19 12:00pm GMT

Q2 2019 Obseva SA Earnings Call

PLAN-LES-OUATES Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Obseva SA earnings conference call or presentation Wednesday, August 7, 2019 at 12:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Elizabeth Ijeoma Onyemelukwe Garner

ObsEva SA - Chief Medical Officer

* Ernest Loumaye

ObsEva SA - Co-Founder, CEO & Director

* Mario Vincent Corso

ObsEva SA - Senior Director of IR

* Timothy M. Adams

ObsEva SA - CFO

* Wim Souverijns

ObsEva SA - Chief Commercial Officer

================================================================================

Conference Call Participants

================================================================================

* Ami Fadia

SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst

* Justin Hayward Burns

RBC Capital Markets, LLC, Research Division - Senior Associate

* Mark William Connolly

Crédit Suisse AG, Research Division - Research Analyst

* Raghuram Selvaraju

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Turner Andrew Kufe

JP Morgan Chase & Co, Research Division - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Welcome to the ObsEva Second Quarter 2019 Financial Results and Business Update Conference Call. (Operator Instructions)As a reminder, this call is being recorded today, August 7, 2019. I would now like to turn the conference over to Mario Corso.

Please go ahead.

--------------------------------------------------------------------------------

Mario Vincent Corso, ObsEva SA - Senior Director of IR [2]

--------------------------------------------------------------------------------

Thank you, operator. This is Mario Corso, Senior Director, Investor Relations at ObsEva. Good morning to our listeners in the U.S., and good afternoon to those of you joining us from Europe. Welcome to today's call to review ObsEva's Second Quarter 2019 Financial Results.

On this call, I'm joined by Ernest Loumaye, our co-Founder and Chief Executive Officer; Jean-Pierre Gotteland, our Chief Scientific Officer and Head of R&D; Wim Souverijns, our Chief Commercial Officer; Tim Adams, our Chief Financial Officer; and Beth Garner, our Chief Medical Officer.

During today's call, ObsEva management will be making forward-looking statements, including but not limited to, statements relating to financial results and trends, the process and timing of anticipated future development of ObsEva's product candidates; our oxytocin receptor antagonist nolasiban; our gonadotropin-releasing hormone receptor antagonist linzagolix, formerly OBE2109; and our prostaglandin and F2 alpha receptor OBE022.

These forward-looking statements will include comments about expected clinical trial results and regulatory pathways in the U.S., Europe and Asia as well as the therapeutic and commercial potential of ObsEva's products. These forward-looking statements are based on ObsEva's current expectations and they inherently involve significant risks and uncertainties. ObsEva's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Risks and uncertainties include, without limitation, those related to ObsEva's development programs; clinical trial time lines and results; the uncertain clinical development process, including adverse events; the [success] cost and timing of all development activities in clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses, capital requirements and the need for financing and other risks detailed in the risk factors and elsewhere in ObsEva's filings with the U.S. Securities and Exchange Commission, including a 6-K report for the 3 months ended June 30, 2019, to be filed on or around August 7, 2019, as well as other reports filed on Form 6-K and 20-F.

ObsEva undertakes no obligation to update any forward-looking statements as a result of new information, future events or changes in expectations, except as required by law. I will now turn the call over to Ernest Loumaye, our Chief Executive Officer.

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [3]

--------------------------------------------------------------------------------

Thank you, Mario. Good day, everyone. I'm pleased to report that the second quarter of 2019 was busy and productive and that ObsEva continues to execute against its milestone across all of our programs. Today, we will be reviewing the status of all 3 of our new chemical entities in development as well as looking ahead to key clinical milestones expected later this year, which begins our exciting evolution to a commercial company.

I'm also pleased to confirm that today we announced the closing of a $75 million senior [secured] credit facility with Oxford Finance LLC, a non-dilutive financing, which significantly strengthens ObsEva's financial position by extending our cash handling to the fourth quarter of 2020. Our CFO, Tim Adams, will provide further comments later on this call.

Now to our pipeline. We've been particularly active with nolasiban [oral] compound development to improve the success rate of embryo transfer or ET following an in vitro fertilization for patients with infertility. It's our pipeline candidate closest to commercialization. As background, infertility is a global challenge of increasing importance. It's currently estimated that worldwide infertility affect about 10% of reproductive age couples and more than 2 million ART cycles are performed each year globally, a number that is certainly growing. Although, treatment for infertility has continued to improve over the years, one area that remains challenging is the embryo transfer process, which continues to have unacceptable rate of failure. There is a need for innovative treatment that increases the likelihood of successful embryo transfer, and we believe nolasiban has the potential to fulfill these needs.

We have made excellent progress on our nolasiban program. On June 4, we announced completion of patient recruitment in IMPLANT4, our confirmatory Phase III European registration trial. We initiated IMPLANT4 in December of 2018 and have enrolled approximately 800 patients who are undergoing [a day 5] fresh single embryo transfer, which involves more than 40 centers across Europe, Russia and Canada.

With an extremely high level of interest in nolasiban for both patients and physicians, IMPLANT4 fully enrolled within 6 months similar to our previous Phase III trial IMPLANT2. We are pleased to confirm today that we remain on track to announce results from the primary endpoint, ongoing pregnancy at 10 weeks post embryo transfer during the first quarter of 2019. Assuming positive results, our plan is to proceed with the marketing authorization application filing in Europe prior to the end of 2019, and we have already begun assembling the dossier.

During the second quarter, we announced the final safety follow-up on the IMPLANT2 trial, which showed no difference from placebo [in] development of health of infants follow-up for 6 months post birth as measured by the Age and Stage Questionnaire - Third Edition or ASQ-3 score. We are very pleased that extensive safety follow-up from the IMPLANT2 trial, including pregnancy, delivery and infant status at 28 days and 6 months post birth did not reveal safety issue related to the nolasiban treatment. This is consistent with our expectation that the window for the therapeutic effect of nolasiban is at the optimal time in the embryo transfer process.

Regarding nolasiban in the U.S. we participated in a very constructive End-of-Phase II meeting with the FDA during the second quarter to discuss the design and scope of the Phase III development program. Based upon this discussion, we plan to submit an updated IND and trial protocol this quarter with the goal of beginning the U.S. Phase III IMPLANT3 trial in the fourth quarter. We are pleased with the progress that we have made in finalizing the pivotal trial design and look forward to getting started as soon as possible.

We continue to believe nolasiban has great potential to significantly impact women experiencing the challenge of infertility. As I described earlier, infertility is a growing problem globally, which we note is a global challenge of increasing importance. The largest markets are Europe and China at approximately 800,000 annual treatment cycle each with another 260,000 cycle per year in the United States. We view China as one of the 3 most promising geographies for nolasiban. Indeed, population trends suggest that China is likely to have the world's largest IVF market in the near future. The market assessment that we commissioned is very encouraging in that IVF cycles in China are done on a cash paid basis with the cost of related drugs and service comparable to what we are seeing in Europe. So a very established and sophisticated market in China. Our strategic assessment conclude that development and commercialization in China would be best conducted by a multinational company with extensive local experience and resource. We have been exploring this strategy with a corporate objective to have a partner in place by the end of the year.

Before we move on from nolasiban, I want to share a few highlights from the key opinion leader of KOL event we held on July 17 in New York from investors and analysts on trends in embryo transfer and IVF and the potential of nolasiban. We were honored to have 3 accomplished leaders in the field of IVF U.S. discuss current clinical practice and how nolasiban could play a role [is available] in the future.

Overall, we were pleased to hear that our development strategy for nolasiban is well aligned with current IVF practice trends toward day 5 and embryo transfer as well as have the important merits of single embryo transfer versus double embryo transfer. Wim will talk about this more in a few minutes. Discussion also included very meaningful benefits of potential 11% absolute increase in live births following day 5 embryo transfer that we have observed in the IMPLANT2 trials.

Importantly, the KOL regard an absolute increase of 5% or more in live birth rate as clinically meaningful. Finally, clinicians emphasized from the patient perspective the significant physical, emotional and financial pain associated with failing an IVF cycle. The webcast link to this highly informative event can be found on our website and I recommend everyone to listen if you were not able to participate.

Let's move now to linzagolix, which we are developing as a potential best-in-class oral GnRH receptor antagonist for both uterine fibroids and endometriosis indications. We believe our strategy is unique to develop linzagolix in both indications with an option to control symptoms without the need for add-back therapy. This is in addition to a standard dosing option with full estrogen suppression that would be administered in combination with add-back therapy. With this approach, we aim to provide patients and providers with a wider range of treatment option that may allow for greater flexibility in the choice of therapy for individual patients based on their specific needs.

Our 2 Phase III trials for the treatment of heavy menstrual bleeding due to uterine fibroids, PRIMROSE 1 and PRIMROSE 2 continue to progress during the second quarter. Both trials have now complete patient recruitment of approximately 500 patients each, and we continue to expect the 6 months primary endpoint results from PRIMROSE 2 trial in the fourth quarter of 2019.

We expect to report primary endpoint results from the U.S. trial PRIMROSE 1 shortly thereafter in the first half of 2020. The timing of the data readouts continue to support our planned U.S. and EU regulatory submission in late 2020, which have shown data with 12 months of treatment for chronic indication. What makes us so excited about linzagolix in the uterine fibroids indication is to fulfill the promise of the GnRH receptor antagonist mechanism of action. Achievement of symptomatic Phase II partial estrogen suppression resulted in a need for add–back therapy to protect bone from estrogen-related BMD decline. Clinical data suggests that full estrogen suppression can alleviate heavy menstrual bleeding in patients but with a drawback of an associate decline in BMD at a level of 2.5% to 3% or even more in some patients, which necessitate add-back therapy for bone protection.

Our another approach is to partially suppress estrogen utilizing the linzagolix optimal PK/PD properties. If dosing with 100-milligram linzagolix results in a 40% to 50% patient responder rate with BMD remaining in the safe zone this could uniquely position linzagolix as the de facto first-line GnRH receptor antagonist for the treatment of uterine fibroids. We believe this is a differentiated and scientifically sound strategy that could avoid the use of add-back therapy in a significant proportion of patients who may not need it.

[After all, I'm] back to (inaudible), the standard postmenopausal hormone replacement therapy, which carries a black box warning for the risk of cardiovascular events, cancer and dementia. Even if this risk may be [fair], we nevertheless believe it's highly preferable to avoid exposing patient to HRT, who do not need it. Furthermore, clinicians are concerned regarding potential reduction of symptom relief associated with add-back therapy. Of note, beyond the well-established primary endpoint, the team was to deal with us to evaluate a number of important secondary endpoints, which include fibroid related pain and quality of life. These additional endpoints reflect some of the important additional [centers] and issues that affect daily life of patients with fibroids. We look forward to generating these important data just a few months from now.

Moving to endometriosis. During the second quarter, we announced long-term follow-up results from the EDELWEISS trial. This includes patient dose for 52 weeks as well as patients who have follow [up] for 6 months of treatment after receiving EDELWEISS for 6 months treatment period. The 52 weeks data was consistent with the initial 6-month result showing durable efficacy and the BMD impact that would be expected for partial and full suppression of estrogen. The 6 months follow-up of treatment revealed 2 interesting observations. First, there seems to be an efficacy carryover effect even after discontinuation of treatment. Secondly, BMD appears to rebound rapidly after stopping treatment with higher linzagolix dosage. In the first half of 2019, we initiated 2 Phase III trials for endometriosis-associated pelvic pain, known as EDELWEISS 2 and EDELWEISS 3, which combined would enroll approximately 900 patients in the U.S. and Europe.

As with uterine fibroids, we're studying 2 doses, one that can achieve partial suppression of estradiol with add-back therapy and full estro with add-back therapy to protect bone.

Based upon our Phase IIb data, we believe that the majority of endometriosis patients may be able to achieve a responder rate indicative of symptomatic relief with the lower dose and partial suppression, avoiding unnecessary exposure to add-back therapy risk [for] those patients who do not need it.

Now 2 years into the Phase III development of linzagolix, we are more convinced than ever that we are pursuing the right strategy with the right compound to meet the needs of women suffering from these debilitating diseases.

Now let's turn to our third clinical program the oral prostaglandin F2 alpha receptor antagonist OBE022, which is being developed for the treatment of acute preterm labor, a problem for which the short and long-term health medical costs are extremely high, [and the reception and those] unmet need for safe and effective option. OBE022 is being evaluated in a proof-of-concept Phase IIa trial being conducted in 2 parts, Part A and Part B. In late January, we announced results from Part A of the trial, which show that OBE022 was very well tolerated by mothers and fetuses and demonstrated that the pharmacokinetics of the drug are similar to those previously observed in nonpregnant women.

In addition, 8 of 9 patients dosing the single-arm combining OBE022 with the standard of care atosiban did not deliver during the 7 days dosing period. Part B of the trial began in the fourth quarter of 2018 and is a multi-center, randomized, double-blind, placebo-controlled parallel-group trial that will enroll up to 120 patients with preterm labor at the gestational age of between 24 and 34 weeks. The trial design assists efficacy, safety and pharmacokinetics. Efficacy defined as a delay of preterm delivery by at least 7 days, allowing for treatment of the mother and fetus to protect organ development. Part B will receive either OBE022 or placebo with a starting dose of 1,000 milligrams initially, followed by a 500 milligram twice a day for 7 days to women already receiving atosiban infusion for 48 hours. We were happy to see the Part A results led to expansion in participating countries and centers in (inaudible) trial. We recently achieved enrollment of 30 patients in Part B, the trigger for first interim analysis by the IDMC. The IDMC recommendation was to continue the trial as planned with no suggested modification to trial design, which we consider to be very encouraging.

As we have previously stated, we anticipate making a go/no-go decision on the further development of OBE022 later this year, based upon the results of the first 60 patients enrolled in the trial.

In summary, the second quarter of 2019 was another quarter of important progress with the 3 new chemical entities in our pipeline, and we are moving towards major milestones for each later this year. Before I turn the call now over to our Chief Commercial Officer, Wim Souverijns to update our commercialization plan, I would like first to introduce the newest member of ObsEva Senior Management team, Chief Medical Officer; Elizabeth or Beth Garner. Beth comes to us with great experience in the field of women's health and at a critical time as we continue to expand our clinical development program, and we start preparing our marketing authorization this year.

We would like to thank our previous CMO, Elke Bestel, for all of her hard work, and she will continue in the vital role at Pharmacovigilance overseeing the safety of all our products.

Now a few words from Beth.

--------------------------------------------------------------------------------

Elizabeth Ijeoma Onyemelukwe Garner, ObsEva SA - Chief Medical Officer [4]

--------------------------------------------------------------------------------

Good morning or afternoon, everyone. I'm delighted to have joined the ObsEva team. I joined ObsEva because of its unparalleled commitment to improving women's health and fertility. As an Obgyn, I believe the company is poised to have a substantial impact on some of the most challenging reproductive health conditions women and their health care providers deal with every day. A little about myself. I received my MD and MPH from Harvard and trained and practiced at Harvard Major Hospital, Brigham and Women's and Massachusetts General. I first entered industry 12 years ago, working on the HPV vaccine program at Merck then worked on the Elagolix program at Abbott, spent 2 years in medical affairs at Myriad Genetics. And for the last 5.5 years was Chief Medical Officer of Agile Therapeutics, a women's health company focused on contraception.

I'm looking forward to helping ObsEva maximize the potential of its highly innovative development pipeline endeavoring to bring new treatment alternatives to patients in need. I'm very happy to be here, and I look forward to working with all of you.

I will now turn the call over to Wim for commercial update.

--------------------------------------------------------------------------------

Wim Souverijns, ObsEva SA - Chief Commercial Officer [5]

--------------------------------------------------------------------------------

Thank you, Beth, and a very warm welcome aboard. It has been an exciting 9 months since I joined ObsEva, and we're making tremendous progress with each passing month. My primary focus has been on (inaudible) of the company for the commercialization of nolasiban in Europe, which if all goes according to plan is less than 18 months away. We're confident that with a strong foundation, including a growing infrastructure and a well-defined position in market, we're on the road to success. More specifically, we have made good progress in the [hiring] of the 3 global core functions, market access, marketing and medical affairs, and we have begun mapping European IVF landscape on a country-by-country basis. We're developing strategic plans to position nolasiban as a next frontier of infertility treatments, offering a potential step change in the success rate of embryo transfer following IVF. Recognizing that the field of IVF is as much about people and the desire for a baby as it is about science we focused also on evaluating the impact of cycle failure on individuals undergoing infertility treatments as well as the peers who cover the associated costs.

We believe that the value proposition associated with nolasiban's potential to increase live birth rates in fresh Day 5 single embryo transfer by approximately 35% based on IMPLANT 2 results is highly attractive. Patients and clinicians alike can experience higher success rates lessening the emotional, physical as well as financial pain for cycle failure. Health care payers on the other hand can reduce their costs, thanks to the increased productivity of IVF, i.e., fewer cycles needed to produce a baby, as well as the savings coming from less emotional distress in patients and the reduction in multiple pregnancies. The KOLs at our [real] investor event clearly recognize these different value drivers of the product. Our initial interactions with peers in several European countries lead us to believe that the potential benefits of nolasiban and its associated value proposition may be well received. Our present focus is now on formalizing the pharmaeconomic analysis in support of nolasiban. We're also in the process of preparing a recruitment of local talent to further plan market access and launch. The major markets of Europe and U.S. hold great promise for us, and we believe a relatively lean commercial organization can address the opportunity in these markets, given the concentrated nature of IVF centers.

As I said, we've made tremendous progress in my 9-month tenure at ObsEva, and we eagerly anticipate the IMPLANT4 trial results later this year which, if successful, will open our path to commercialization.

Now let's move to linzagolix. As the first readout from the Phase III PRIMROSE trial for linzagolix uterine fibroids later this year draws closer, we continue to watch closely the commercial evolution of the GnRH receptor antagonist class as well as any clinical data releases. We're highly focused on linzagolix best-in-class potential for both uterine fibroids and endometriosis indication, and our belief in its potential for differentiation is increasing. Recent developments have strengthened our view that the best way to address the needs of the broad patient population in uterine fibroids and endometriosis is to offer 2 dosing options. A first-line dosing option without the need for hormonal add-back therapy, and a second line higher dose with full estrogen suppression given with add-back therapy to protect from bone loss. We are the only company developing such a low dose, no-add back therapy option for the uterine fibroid indication. Our Phase IIb data in endometriosis indicated that the 75-milligram dose of linzagolix is nearly as effective as a 200-milligram dose to alleviating symptoms with a partial suppression dose for both indications with the option to dose higher as needed will be perfectly aligned with the way that physicians practice medicine in these diseases.

[As common] diseases, women have learned to cope with their symptoms sometimes for many years. Therefore, with ultimately having to start with a 3-drug regimen of GnRH antagonist and add-back therapy, clinicians and patients choosing linzagolix would have the option to initiate treatment with a low dose and no add-back therapy. Titration to the higher dose with the addition of add-back therapy could then be implemented after assessing an individual woman's response. We believe that the decision to use add-back therapy or hormone replacement therapy is to be carefully considered since although it provides the benefits of bone protection, it also has known drawbacks and is therefore potentially not appropriate for all patients.

Ultimately, we believe that physicians and patients should be provided with the opportunity to make these important treatment decisions together. So stay tuned for our 6-month primary endpoint results of the PRIMROSE 2 trial, which will provide insights into the profile of the lower 100-milligram dose as well as the higher 200-milligram dose, both with and without add-back therapy. The positive initial results and additional data on continued patient follow up, the timeline for a late 2020 NDA filing in uterine fibroids remains intact.

Finally, we're encouraged by the endorsement of the IDMC to continue the PROLONG study. Although OBE022 is at the earliest development stage of all our compounds, it addresses a major unmet need as safe and effective therapeutic options to [halt] preterm birth are very limited, and costs related to pre-term delivery and neonatal ICU hospital stays are very high. So we're impatiently looking forward to the data later this year for our go/no-go decision. So on that note, I will now turn the call over to our CFO, Tim Adams for a brief financial review.

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [6]

--------------------------------------------------------------------------------

Thank you, Wim, and thank you, everyone, for joining us on today's call. I will first spend a few minutes discussing our financial results for Q2 of 2019 and then discuss our cash position and outlook. Our net loss for the second quarter of 2019 was $34.8 million or $0.80 per share. This compares with a net loss of $18.2 million or $0.49 per share for the second quarter of 2018. The year-over-year increase in net loss was largely attributed to increased spending on the clinical development for nolasiban and linzagolix; and to a lesser degree professional fees related to market research and pre-commercial activities, staff costs and equity-based compensation. Research and development expenses were $28.4 million for the second quarter of 2019 versus $14.7 million for the second quarter of 2018. This increase resulted from the expansion and continued progress with the clinical trial development for nolasiban and linzagolix. As you may recall, we are currently conducting 5 Phase III clinical trials supporting nolasiban and linzagolix.

G&A expense in the second quarter of 2019 was $6.2 million as compared to $3.5 million for the second quarter of 2018. This increase is primarily attributed to higher staff costs and pre-commercial activities for nolasiban. Our cash balance as of June 30, 2019 was $98.5 million compared to $138.6 million at the end of 2018. Cash used in operations during Q2 was $19.6 million and reflects spending in support of all 3 of our pipeline assets, which includes the patient follow-up for our Phase IIb EDELWEISS trial in endometriosis as well as the commencement of the EDELWEISS 2 and 3 Phase III trials. The ongoing Phase III enrollment and follow-up for the PRIMROSE 1 and 2 clinical trials for the treatment of uterine fibroids. The enrollment of the confirmatory Phase III IMPLANT4 trial of nolasiban. Enrollment in Part B of the prolonged trial of OBE022 in preterm labor and initial pre-commercial spending related to nolasiban for the IVF indication in Europe. I am pleased to report that earlier today, we announced the completion of a $75 million credit facility with Oxford Finance. As you know, non-dilutive financing has been a high priority for us as we continue to invest in our promising pipeline and extend our cash runway. The funding is available to us in 3 $25 million tranches with the initial funding due at closing. The second and third tranches will be available at [our option] upon achieving clinical data milestones. Access to this capital provides us with additional cash runway and the flexibility to opportunistically utilize other financing vehicles, such as the equity capital markets should we choose to do so. The loan has a 5-year term with interest-only payments due during the first 36 months. The interest rate is 30-day LIBOR plus 6.25%, which today is just under 9% all in. This provides us with an attractive cost of capital relative to the various financing alternatives that were available to us. Our use of cash from operations in the first half of 2019 was $40.6 million, which we expect to accelerate in the second half of 2019 due to continued R&D investment. Our full year cash use expectation has been increased modestly to approximately $105 million to $110 million. This increase from approximately $100 million primarily includes additional investment for nolasiban development, pre-commercial and China partnership activities. Assuming full access to the $75 million credit facility announced today and including our updated budget, we now believe that our cash runway extends into Q4 2020.

In summary, we are very pleased with our progress to date, and we'll continue to invest in our promising pipeline that includes 5 ongoing Phase III trials and plans to begin a 6 trial before the end of the year. We are also preparing for the potential commercialization of our first product, nolasiban in Europe, which may be now less than 18 months away. With our existing resources and the Oxford transaction announced today, we are in a strong position to pursue our strategic plans. Operator, we are now ready for questions.

--------------------------------------------------------------------------------

Wim Souverijns, ObsEva SA - Chief Commercial Officer [7]

--------------------------------------------------------------------------------

Operator. I think we lost the end of that.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question, we do have a question from the line of Ami Fadia with Leerink.

--------------------------------------------------------------------------------

Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [2]

--------------------------------------------------------------------------------

Maybe the first question is maybe for Ernest. With the Phase III data for uterine fibroids expected later this year, can you help us compare the primary endpoint with some of the other Phase III studies reported out by either Orilissa or relugolix? And give us a sense of how we should compare the efficacy data points that we see from the study across trials, of course, with the caveat that there's only so much you can compare? And also, maybe what level of efficacy are you looking for as you sort of see that data? And if the low dose also demonstrates sufficient efficacy what are your expectations with regards to the duration of use that you can get on the label from the FDA? And I have a follow-up for Tim later.

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [3]

--------------------------------------------------------------------------------

Okay. Sure. Sure. So all 3 GnRH antagonist are addressing the main symptoms of fibroids, which is heavy menstrual bleeding. This heavy menstrual bleeding often leads to anemia. So this is a serious condition. The way we are measuring the bleeding and the reduction of natural bleeding is standardized and validate, which is the alkaline hematin method. That means that the cyanide-free material are collected [by] the patient and sent to a central laboratory. It's the same method used by all 3 GnRH antagonists and that is the method approved by the FDA. So we will be able to directly compare the primary endpoint between the different GnRHantagonists. What may differ in some case is the severity at baseline, which may have an impact. But I think that we are going for heavy menstrual bleeding, which means bleeding which exceed 80 milliliter per 28 days. So now, what are our expectations? We are developing, as mentioned, a low dose, no add-back option, which is 100 milligram and high dose add-back option, which is a 200 milligram. I think the 200-milligram plus add-back should compare well to the other, and we are expecting to have a responder rate around 70% of patients. Now should we reach the same level of response for add-back therapy? We believe that would be good, but it's not mandatory and it's not necessary. Given the drawbacks of add-back therapy, we believe that anything around 40% to 50% of responder rate with no add-back will make that option the first-line therapy.

If we can already save half of the population to be treated with a single drug and not 3 drugs, i.e. the antagonist plus estrogen plus progestin of add-back therapy this would make de facto as first-line therapy. Does that answer your question?

--------------------------------------------------------------------------------

Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [4]

--------------------------------------------------------------------------------

Yes. I think that's very helpful. And if you were able to get that target responder rate with a low dose do you think that, that could allow for a label without any limitations of use and really mostly on physician discretion?

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [5]

--------------------------------------------------------------------------------

Now that's probably a little too early, but we are generating data for 1 year and generating data with 1 year is positive which supports a long-term treatment.

Now like endometriosis, with this class of drug, we would like to treat for a couple of years, certainly. But we don't expect ourselves the patient will be continuously treated for 15 years, for example, because [by that] time they reach the menopause. And in that context, I think the data that we have in (inaudible) trial, we are very interested because there was a carryover effect of efficacy when you stop the trial. So yes, we are aiming at long term. We are producing data of 1 year, which should support long-term if positive and with an objective to treat as long as possible, but we can think also that in the future and with practice, you would go for treatment of 1 year, 2 years or 3 years then a drug holiday and then resume once it has been (inaudible) back.

--------------------------------------------------------------------------------

Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [6]

--------------------------------------------------------------------------------

Got it. Okay, that's very helpful. Maybe just a second question for Tim. With the $75 million funding that you've announced this morning, how does that put you in position to support everything that you need to do with the late-stage pipeline. It sounds like -- it allows you to sort of finance the ongoing studies. Does it also cover for the potential start of the nolasiban U.S. study as well as the commercial launch requirements in Europe?

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [7]

--------------------------------------------------------------------------------

Okay. It's Tim. So the $75 million credit facility, which we're thrilled to have in place, extends our cash runway into Q4 of 2020. As you know, we have 2 very important data readouts in Q4 of this year, the IMPLANT4 study for nolasiban and the PRIMROSE 2 readout for uterine fibroids. As we move into 2020, we will be running 5 Phase III studies, hopefully study #6, which would be IMPLANT3, would be up and running. So let's assume IMPLANT3 is up and running, so during the course of 2020, we're funding 6 Phase III study. So we're going to be quite active. And this cash runway really extends us about a year beyond the important data readouts that we have at the end of this year. We will begin some pre-commercial launch next year. We've done a little bit of that this year. Once we have positive data on IMPLANT4 then we will increase the investment as Wim has a lot of work to do for nolasiban in Europe, and he will go -- really start those activities at a higher velocity in calendar 2020. So it allows us to accomplish a lot of things that we want to accomplish, but certainly extending the runway beyond the data readouts of Q4 this year is certainly very important to us.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

Our next question comes from Martin Auster with Crédit Suisse.

--------------------------------------------------------------------------------

Mark William Connolly, Crédit Suisse AG, Research Division - Research Analyst [9]

--------------------------------------------------------------------------------

This is Mark on for Marty. So 2 related to the debt agreements, which we're pleased to see that you're able to get. So the press release mentioned that the debt is due August 1, 2024. I'm curious if there are any terms in the contract that require repayments sooner than that date and what those terms are? And then second, I guess, do the terms of the debt agreement impact your ability to pursue other non-dilutive financing strategies?

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [10]

--------------------------------------------------------------------------------

Yes, Mark, it's Tim. So it's a 5-year term loan from Oxford Finance. It is interest-only for the first 3 years, and then you begin to amortize the principal in years 4 and years 5. It's a first [security] interest in substantially all of the assets of the company, which includes the IP. So there are certain restrictions that I think would be very customary and typical [to venture] debt. If there is any new debt that came in, it would clearly be subordinate to what we have with Oxford. We are certainly free to pursue an opportunity for nolasiban in China that we have talked about extensively, Ernest mentioned it earlier on the call, where we're really looking to find that partner who can help us from a development, regulatory and commercial standpoint in China with nolasiban. So we have the opportunity to continue to work on that, which is a goal for us for this year.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

Our next question comes from Kennen MacKay with RBC Capital Markets.

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [12]

--------------------------------------------------------------------------------

Maybe one. Yes, okay. Go ahead.

--------------------------------------------------------------------------------

Justin Hayward Burns, RBC Capital Markets, LLC, Research Division - Senior Associate [13]

--------------------------------------------------------------------------------

This is Justin on for Kennen. I'm just wondering if you can provide an update on sort of the remaining moving parts that you're discussing with the FDA regarding the updated IND for nolasiban in the United States, sort of what talking points you've had out with them already and plan on incorporating in the IND? And then if you're able to discuss it and any sort of remaining touch points that you need to go over with them?

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [14]

--------------------------------------------------------------------------------

Yes. So as we say, we've been progressing on many aspects of the protocol design and have reached agreement on many of these aspects. There is a couple of aspects on the protocol design, which are still open. The FDA formats that they are discussing that internally. The plan is to submit the IND this quarter as we mentioned earlier with the justification for why [this trouble of] residual discussion point should be solved in the way we are considering. We are thinking it should be [such as time of] randomization and previous IVF failure (inaudible). With this justification and the updated protocol we'll file the updated IND, which would allow us then to receive the feedback of the FDA on the protocol [comment] and in parallel to start preparation for initiating the study. So we don't see for the moment any reason for not moving forward, continuing to dialogue with FDA and supplying with the rationale for why the protocol is finalized as it is today.

--------------------------------------------------------------------------------

Operator [15]

--------------------------------------------------------------------------------

Our next question comes from Eric Joseph of JPMorgan.

--------------------------------------------------------------------------------

Turner Andrew Kufe, JP Morgan Chase & Co, Research Division - Research Analyst [16]

--------------------------------------------------------------------------------

This is Turner on for Eric. A question to follow-up on PRIMROSE. We've seen from the recent competitor GnRH Phase III data, higher-than-expected or variable response rates in the placebo arm. I'd just be interested to get your take on that observation? And what level of placebo effect you anticipate in PRIMROSE.

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [17]

--------------------------------------------------------------------------------

Ours is a study which is double blind. So we cannot talk about our placebo responder rate. My interpretation is that the difference in placebo responder rate maybe due to the [fidelity] of the condition at baseline. Indeed, you would remember that the response that is defined by having less than 80-milliter blood loss for 28 days as well as a reduction of 50% from baseline for individuals. So I can imagine that if you have a less severe population, you may have a little bit higher chance to meet this criteria and [adjusted] by chance. Now is that critical or not? I'm not sure. At the end of the day, you want to have a number of patients responding. So I think we should address your question, when we have the data at the fourth quarter this year.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

Our next question comes from Ram Selvaraju with H.C. Wainwright.

--------------------------------------------------------------------------------

Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [19]

--------------------------------------------------------------------------------

Firstly, on the clinical front. I was wondering whether you have more visibility at this juncture regarding how long it's likely to take to discuss all of the remaining open items with the FDA and file the IMPLANT3 clinical trial protocol, whether you now think that there is a higher likelihood that IMPLANT3 would start before the end of this year or early in 2020? Also, revisiting a question that was, I think, posed earlier. I wanted to clarify and drill down on this a little bit. With respect to linzagolix and the potential competitive efficacy profile, what has your market research started to indicate with respect to the possibility of one of the following 2 scenarios: Either a, linzagolix has the no add-back therapy advantage but similar comparable efficacy to Orilissa and relugolix or b, linzagolix appears to demonstrate some kind of efficacy superiority even if only on a numerical basis, clearly not on a head-to-head basis with respect to relugolix and elagolix. And I just wanted to understand better whether there is a [picture resolving] here as to whether the advantage of not having to use add-back therapy would be sufficient to position linzagolix as a potentially best-in-class treatment if the efficacy profile is similar to that which we have seen with relugolix and elagolix, or if given the fact that elagolix is already on the market, given the fact that relugolix would probably reach the market ahead of linzagolix, if you need to demonstrate some kind of efficacy advantage in addition to the convenience of non-add-back therapy?

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [20]

--------------------------------------------------------------------------------

So Ram, let me take the first and will ask Wim to address the second one. The process is ongoing with the FDA. We are close enough to file an IND with the justification for the final protocol and to initiate the trial and then believe we gain traction, which may still be open and become for some aspect a (inaudible) issue. But we don't believe that this will be by any means, a reason for putting the IND on hold or we choosing to file the NDA. So for us, we are very confident of that. So I think, yes, we are aiming, whether it's late early -- late this year, or early next year to start. I think we have the Christmas period between the 2. And you know we may need 2 weeks on ethics committee because of the Christmas period. So we stick to starting the trial by the end of the year or early next year. Regarding the other question on relugolix positioning, I would like now to ask Wim maybe to comment on the need to differentiate based on the non-add-back and/or absolute superiority [of linzagolix].

--------------------------------------------------------------------------------

Wim Souverijns, ObsEva SA - Chief Commercial Officer [21]

--------------------------------------------------------------------------------

Thanks, Ernest. Yes, Ram. We actually are in the process of kicking off that research that you were asking for, so have actually market data on that later this year. But from the get-go, what I can say is that there is a patient population in fibroids that actually will not be suited for using add-back therapy. So if we can demonstrate your first scenario, similar efficacy, but no need for add-back on the 100 milligram that would allow us to address the population that the other therapies cannot. These are patients with a high BMI, hypertension, cardiovascular risk, et cetera. And in fibroids, these are women that are of a little older age. It's quite prevalent. So that segment of the market with same efficacy as our competitors, we can really win there. Now if we obviously have an efficacy benefit on top of that, that will facilitate things even more, and we'll have a broader expansion possible. But I do think that simply having an effective drug without add-back will allow us to grab a significant part of the market. We'll come back later this year with data on this from the U.S. market because what we anticipate is also that there will be a subset of patients that even if they would be physiologically able to take add-back therapy they wouldn't want to. So we want to assess what the profile is of these women, hopefully we can also assess of the size of that opportunity. But we believe that maximum of those women from a therapeutic perspective can't take add-back therapy. There's also a group of women that will not want to take it. And again, they are with similar efficacy, we would be the only player that can win in that segment. Does that answer your question?

--------------------------------------------------------------------------------

Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [22]

--------------------------------------------------------------------------------

Yes. So, that's extremely helpful. And I think that's important to realize that kind of no matter what the timing of linzagolix introduction to the market is or what potential lag there might be, there is a group of patients who are going to be available for you to take, no matter what happens as long as you demonstrate the ability to use linzagolix without the need for add-back therapy. Just 2 other quick things, if I may. Ernest, I was wondering if you could elaborate on what is going to underpin the go/no-go decision on OBE022? And then with respect to, again the debt just a couple of clarification points. I wanted to understand better whether your guidance for the projected operational runway with this additional financing assumes drawing down all 3 tranches or just the one you have already drawn down? And if this guidance also assumes that the go/no-go decision would be a go on OBE022?

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [23]

--------------------------------------------------------------------------------

Yes. So Ram, remember we are going to review the first 60 patients, 30 placebo, 30 active. So we have no formal fertility analysis on that. I think it's premature and can kill the product for no reason. So that would be, I would say, a qualitative assessment from a clinical standpoint into any trends in terms of efficacy and, obviously, good safety. So we will be, I would say, [liberal] to continue. I've seen in my life, interim analysis which were negative and then continuing the trial was positive. So I think we have to be careful here, but it's important that we will look to confirm that we can continue with some trend initiatives and some good safety. So that's the context for taking the analysis of the first 60 patients. In terms of cash handling, (inaudible) what I would like to make it very clear is that the cash handling was just $75 million. Last quarter of 2020 include budgeting of continuing prolonged full-blown IMPLANT3 continuation, stop and continuation and start of putting in place the commercial organization for nolasiban in Europe. So there is nothing which is subtracted from that cash runway. So it's a scenario with full-blown development of the 3 products, including initiation of the commercial organization. Now Tim, do you want to add something on that.

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [24]

--------------------------------------------------------------------------------

Yes. Just Ram, to your first question, I think, Ernest may have just said it, but the cash runway into Q4 of 2020, yes, includes the utilization of all 3 tranches. It's the $75 million, we do have a $10 million requirement of cash on the balance sheet. So it's a net $65 million that would be fully available upon reaching the milestones in those additional tranches. And [022] is included into next year as well.

--------------------------------------------------------------------------------

Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [25]

--------------------------------------------------------------------------------

Okay. And then I didn't see this specifically in the debt covenants, but I wanted to know if you could clarify these 2 items. Firstly, what do the debt covenants say about possible change of control? Is there some kind of blocking privilege that the lender has? If so, what is it, under what circumstances? And then also, if you could clarify whether there's any unusual end of term structure specified in the covenants, like a balloon payment or anything like that?

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [26]

--------------------------------------------------------------------------------

For change of control, Ram, we have the ability to work a transaction on the front end. But before we could consummate the transaction, the lender wants to have a say so to ensure that they get repaid. Now that's obviously going to happen because they have a pledge of the IP, and that's what the buyer ultimately is going to want. So I think we have a lot of room to run the business from an M&A perspective that would be appropriate for shareholders. In terms of any final payments, so we have the ability to prepay at any time. There are additional fees, if you will, for prepaying that would hit and that's effectively -- there's a final payment. If you let it all run to term at 5 years, there is a final payment I believe it's 6%, 7% approximately.

--------------------------------------------------------------------------------

Operator [27]

--------------------------------------------------------------------------------

Our next question comes from Do Kim with BMO Capital Markets.

--------------------------------------------------------------------------------

Unidentified Analyst, [28]

--------------------------------------------------------------------------------

This is Jameson dialing in for Do. Congrats on the progress. A quick question on nolasiban. As they're approaching commercialization, how are the talks with payers in Europe? And are you still using PGD as a comparable price point? Or are you approaching pricing from the standpoint of cost savings on the health care system? And a quick follow-up. Are you approaching the same -- are you approaching it the same way for the U.S. market?

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [29]

--------------------------------------------------------------------------------

Wim?

--------------------------------------------------------------------------------

Wim Souverijns, ObsEva SA - Chief Commercial Officer [30]

--------------------------------------------------------------------------------

So we have indeed spoken with payers in most of the European markets in the last 6 months, and we have gotten a very positive feedback. There is a great recognition of the value that nolasiban represents. As you have seen from our KOL event, there are different dimensions to it. First one is increasing productivity, the efficacy, which is higher. Second point is impact on the ancillary treatments for patients that go through failure. And the third point is the impact on the multiple pregnancies. The consistent feedback we're getting from peers is that we should be really focusing on the core, which is our productivity impact because that's sufficient to really justify the pricing assumptions that we are at the moment handling. It's -- we're very confident in our ability to do that and answering your question on whether we use PGD versus cost savings as a proxy or as a method to calculate, as you probably know in Europe, we really have to go through some sort of value for money over health economic assessment in some countries it's more formal than others but in general that's the practice. So a benchmarking to PGD is not sufficient. It can be an input, but it's definitely not what's going to give you reimbursement. So what we apply here is cost effectiveness assessment, we have at the moment a broad version of that. We will expand that in the next months to really go into the details for very formal applications. But that's the approach that we use.

For the U.S. will be something similar in that we will use value for money assessments, an ISO approach, I would say. It's true that in the U.S. sometimes benchmarks are more rather to be accepted as a reference, at least, they set the stage from a pricing perspective. I have to admit that we have had very limited discussions yet for the U.S. So we're going to be expanding with that research probably the beginning of next year because we also have a bit of time given the start of IMPLANT3 for the U.S. But the first responses that we're getting are similarly positive. I think there is a huge recognition in the payer community, that they've already seen a drug that has such a dramatic impact on efficacy. And efficacy here is translated in economic benefit because of the cost of IVF, the impact on patients, impact on the center. So we feel very confident that our value proposition will read through in our pricing that will ultimately be able to obtain in different markets.

--------------------------------------------------------------------------------

Operator [31]

--------------------------------------------------------------------------------

Our next question comes from the line of [Ruben] (inaudible) with [F U W].

--------------------------------------------------------------------------------

Unidentified Analyst, [32]

--------------------------------------------------------------------------------

I have some follow-up questions about the financing. I understand that beyond Q4 2020, you need some more finances. Can you indicate how large that's going to be? You said you're seeking [for] opportunities in China for nolasiban? Does that mean licensing nolasiban out for the Chinese markets? And is this a priority or do you also consider issuing more stock?

--------------------------------------------------------------------------------

Timothy M. Adams, ObsEva SA - CFO [33]

--------------------------------------------------------------------------------

Yes, this is Tim. So we have said it's a corporate objective this year to find the right partner for nolasiban in China. As you heard Ernest mention earlier, China is one of the largest IVF markets in the world. There seems to be a very strong demand for IVF and something that the improvements that nolasiban can bring. So our team has been working on finding the right partner. They need regulatory development, commercial expertise, and we hope that we have a deal that we can announce by the end of the year. In terms of future financing plans, our objective with this Oxford loan was to extend the runway approximately a year beyond the data readouts that are happening in Q4 of this year. So that's what we've been able to accomplish. We have not said, and we don't comment publicly beyond that in terms of what future plans are.

--------------------------------------------------------------------------------

Operator [34]

--------------------------------------------------------------------------------

I'm showing no further questions in queue at this time. I'd like to turn the call back to Ernest Loumaye for closing remarks.

--------------------------------------------------------------------------------

Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [35]

--------------------------------------------------------------------------------

Yes. So I want to thank everyone for taking the time to participate in this call. We clearly appreciate the opportunity to share the progress we have made and future for our innovative pipeline targeting important area of women's health and safety. So I wish you all a very good day. Thank you very much. Bye-bye.

--------------------------------------------------------------------------------

Operator [36]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.