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Edited Transcript of SELB earnings conference call or presentation 15-Mar-19 12:30pm GMT

Q4 2018 Selecta Biosciences Inc Earnings Call

WATERTOWN Mar 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Selecta Biosciences Inc earnings conference call or presentation Friday, March 15, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carsten Brunn

Selecta Biosciences, Inc. - CEO, President & Director

* John H. Leaman

Selecta Biosciences, Inc. - CFO, Head of Corporate Strategy & Treasurer

* Werner Cautreels

Selecta Biosciences, Inc. - Advisor

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Conference Call Participants

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* Alex Lim

* Benjamin Shipman Porter

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Chad Jason Messer

Needham & Company, LLC, Research Division - Senior Analyst

* John Lawrence Newman

Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst

* Yun Zhong

Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research

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Presentation

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Operator [1]

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Thank you for holding. Welcome to the Selecta Biosciences Fourth Quarter and Full Year 2018 Financial Results Conference Call. (Operator Instructions) This call is being webcast live on the Investor and Media section of Selecta's website at www.selectabio.com, and it is being recorded.

For opening remarks, I would now like to turn the call over to John Leaman, Selecta's Chief Financial Officer and Head of Corporate Strategy. Please go ahead, sir.

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John H. Leaman, Selecta Biosciences, Inc. - CFO, Head of Corporate Strategy & Treasurer [2]

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Thank you, Keith, and good morning, everyone. Earlier today, we issued a press release containing our fourth quarter and full year 2018 financial results and other corporate updates, and we expect to file our 10-K post-market this afternoon. This release and the 10-K, when filed, can be accessed by visiting our website at www.selectabio.com.

I'm joined today by Carsten Brunn our CEO; and Stephen Smolinski, our CCO, will be joining us for the Q&A portion of this call.

Before we get started, we'd like to advise that certain remarks that are made during this call, including, without limitations, statements about the company's future expectations, plans and prospects, the anticipated timing of planned trials, related data readouts and the ability of the results to inform future trials, our collaboration with CureCN, the sufficiency of the company's cash, cash equivalents and short-term investments and projections surrounding our cash burn rate constitute forward-looking statements under the meaning of Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of Selecta's most recent quarterly report on Form 10-Q filed with the SEC, which can be accessed at selectabio.com, and on Form 10-K when it's filed. In addition, any forward-looking statements represent the company's views only as of today, March 15, 2019, and should not be relied upon as representing the company's views as of any subsequent date. While Selecta may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so, even if management's views change.

And now let me introduce Carsten, who will kick things off.

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [3]

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Thank you, John, and good morning, everyone. Selecta accomplished a lot in 2018, and I believe we successfully laid a strong foundation for a year of execution in 2019. We're off to a solid start, kicking off this year with an equity fundraise of approximately $33 million in gross proceeds in January, and we're in the final stages of preparing to start a 6 months head-to-head COMPARE clinical trial that our lead program candidate for the treatment of gout, SEL-212 against Krystexxa later this month. All the past and future efforts have turned on a mission here at Selecta to advance our differentiated pipeline of biologic therapeutic candidates that mitigate unwanted immunogenicity, based on our immune tolerance technology, ImmTOR, which neutralizes antibody formation. We remain focused on our lead program in gout, we believe there's vast potential for technology, and our intent is to maximize its full potential, starting with gene therapy.

Before going to more detail on our pipeline, let me start by reviewing the corporate restructuring we announced in January. We streamlined our organization and reduced our budget workforce by 36%, which, coupled with the reprioritization of our pipeline programs, is projected to reduce the yearly cash burn by 19%, leaving us in a strong position to advance our development programs.

Starting with our lead program, we continue to believe that based on a robust clinical package, SEL-212 has potential to address several unmet needs in chronic refractory gout patients, including sustained serum acid reduction, reduction in painful flares and once-monthly dosing. Just as a reminder, SEL-212 is a combination of ImmTOR , our novel immune tolerance technology and pegadricase, our proprietary pegylated uricase.

In October 2018, we presented data from new cohorts of patients receiving 5 monthly combination doses of SEL-212 at ACR in Chicago. We subsequently reported data from all evaluable patients, including 5 patients who were controlled but had not reached 5 months of treatment at ACR, showing that 66% maintained serum acid levels below 6, up to 5 once-monthly treatments of SEL-212, at doses of 0.1 or 0.15 mgs per kgs of ImmTOR, in combination with 0.2 mg per kg of pegadricase. Furthermore, this data showed a reduction in total urate burden and lowered flare rates and severity. SEL-212 continued to be generally well tolerated. We look forward to continuing to develop this program with initiation of our head-to-head COMPARE clinical trial against the current FDA-approved uricase therapy, Krystexxa, this month. We anticipate announcing an interim 6-month data readout in the fourth quarter of this year and plan to announce full significance of the early data analysis in the first quarter of 2020.

The results of the COMPARE trial are expected to inform the design of the planned Phase III clinical trial, which we plan to initiate in the fourth quarter of this year. We believe that the head-to-head can potentially confirm SEL-212's ability to address several unmet needs for severe gout patients. There are roughly 160,000 patients in the United States with chronic refractory gout and only a small percentage are currently being treated by the current FDA-approved uricase. As we develop SEL-212, we're aiming for consistent SUA control, defined as SUA below 6 for 6 months, low flare rates and monthly dosing, which has potential to address currently identified unmet needs in this patient population and represents over $1 billion market opportunity.

Now turning to our other prioritized -- priorities for maximizing the potential of our proprietary technology platform, ImmTOR . We're encouraged by its ability to reduce tolerance and differentiation from systemic immunosuppression regimens that are not approved and yet to complete a well-controlled clinical trial. We believe our technology can potentially allow for the full benefit of biologics, including the redosing of AAV gene therapy programs.

In September 2018, we announced a collaboration with a European consortium CureCN, for the use of our ImmTOR technology in combination with AAV gene therapy in Crigler-Najjar syndrome, a rare genetic disorder characterized by an inability to properly convert and clear bilirubin from the body. This collaboration builds upon preclinical work that was published together with Genethon in major communications in October 2018, suggesting the potential for redosing gene therapy products with our technology. We look forward to dosing the first patient with this combination product candidate in the second half of this year.

Finally, we continue to be active in exploring potential additional collaborations with which to utilize our ImmTOR platform, both in gene therapy and other biologics with immunogenicity issues.

In conclusion, we believe 2019 will be a significant year of clinical results for ImmTOR platform, with initial interim data from the head-to-head COMPARE trial expected in the fourth quarter of this year, with full statistical superiority data expected in Q1 of 2020.

Secondly, we plan to potentially dose ImmTOR with AAV gene therapy in the second half of 2019 through our collaboration with CureCN, which will be the first opportunity to potentially translate the preclinical data for redosing published in Nature in October 2018 to the clinic. We look forward to providing you with updates in the coming year.

With that, let me turn the call over to John to discuss our fourth quarter and full year 2018 financial results.

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John H. Leaman, Selecta Biosciences, Inc. - CFO, Head of Corporate Strategy & Treasurer [4]

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Thank you, Carsten. For the fourth quarter of 2018, the company recognized $900,000 of revenue, which compares to less than $100,000 for the fourth quarter of 2017. The increase in grant revenue was the sole result of the conclusion of our grant with NIDA. Research and development expenses for the fourth quarter of 2018 were $10.3 million, which compares to $13.6 million for the fourth quarter of 2017. The decrease was driven by reduced expenditures for our preclinical product candidates, combined with the wind down of our Phase II clinical trial of SEL-212 in the second half of 2018.

General and administrative expenses for the fourth quarter of 2018 were $5.1 million, which compares with $5.7 million for the fourth quarter of 2017. The reduction in cost was primarily the result of reducing consulting fees. For the fourth quarter of 2018, Selecta reported a net loss of $14.7 million or $0.65 per share compared to a net loss of $19.5 million or $0.88 per share for the same period in 2017.

Selecta has $37.7 million in cash, cash equivalents and restricted cash as of December 31, 2018, which compares to cash, cash equivalents and short-term investments of $50.5 million at September 30, 2018. The company currently has an expected cash runway into Q1 2020, which includes proceeds net of underwriting discounts and commissions of $31.3 million from the company's recent follow-on offering in January of 2019.

That includes our formal remarks. Now we'll open the line for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Chad Messer with Needham & Company.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [2]

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Maybe just start with the interim SEL-212 readout. Can you kind of set our expectations, what triggers that readout? Is it a certain number of patients? How much data is coming with the interim?

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [3]

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Thanks, Chad. It's a great question. So as we guided, we plan to do the readout in the latter half of Q4, and we'll look at the patients who have completed the 6 months, basically. And obviously, assuming rapid recruitment because it is a trial with 2 active arms. And to my understanding, it's one of the first, actually, head-to-head comparisons. So we expect interest from both the investigators and from patients who participate in this. So that drives the interim readout.

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Chad Jason Messer, Needham & Company, LLC, Research Division - Senior Analyst [4]

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Okay. Great. And is it possible to show sort of what you've powered for? And if it's not, can you at least discuss what you guys would view a meaningful beat over Krystexxa to look like?

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [5]

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Yes. So we have not guided and don't plan to guide on that in detail. But I think if you look at the data we presented at ACR, where we had 66%, and the EULAR data, where we're in the 80s, so we expect efficacy somewhere in the middle of this. And then you can look at the label and the published data for Krystexxa and kind of to anticipate the spread we expect for this trial.

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Operator [6]

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And the next question comes from Derek Archila with Stifel.

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Benjamin Shipman Porter, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [7]

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This is actually Ben on the line for Derek. I guess, in light of the recent Spark deal, can we still expect to hear if they opt-in by the end of -- I think, you said by the end of, I think, this year. That's it.

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [8]

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Yes. Derek, thank you for that. So we have not had a chance to connect with Spark after the Roche acquisitions. We obviously planned to do this. But there is no reason why this guidance would change. So Spark/Roche have the opportunity to opt in until the end of this year. So that remains unchanged to our knowledge at this point.

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Operator [9]

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And the next question comes from John Newman with Canaccord.

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John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst [10]

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First question I have was just regarding the clinical design of the head-to-head study. Just wonder if you can talk to us a bit about the number of sites that will be enrolling and the geography of those if all of those sites will be in the United States?

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [11]

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Good question, John. So as we guided earlier, we are planning to use our Phase III sites for this, and we're looking at 40 to 50 sites throughout the United States for this trial. And then we also guided 50 to 70 patients per arm. So 40 to 50 sites, to answer your question.

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John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst [12]

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Great. And can you talk about what the overall length of follow-up is for this study? So after you report the statistical results in early 2020, how long will you be able to follow these patients in the head-to-head study?

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [13]

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John, we actually are determining this right now as we speak.

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Operator [14]

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And the next question comes from Difei Yang with Mizuho.

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Alex Lim, [15]

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This is Alex on for Difei. Any additional color you can provide around what the gene therapy trial in Crigler-Najjar would look like? Any insights on how you're selecting the first few patients. And are you going to be looking at liver function, for example? Any additional color around design would be helpful.

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John H. Leaman, Selecta Biosciences, Inc. - CFO, Head of Corporate Strategy & Treasurer [16]

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Yes. I think -- Alex, this is John. Broadly, I think the way we're looking at it is we would use basically our ImmTOR platform, post getting agreement from the regulatory agencies with their AAV gene therapy vector for Crigler-Najjar. And as you know, it's an enzyme that basically works on the metabolism of iron. I think, immediately what you'd have is, you'd have antibody data, it's a know whether we -- the ImmTOR actually didn't allow the patient to producing antibodies against the AAV vector. I think once you knew that, then depending on what the enzymatic levels were in that patient after they received their gene therapy, you'd have the ability to potentially redose that patient. And so I think at a minimum the data we'll be looking at is, basically, did they produce antibodies against that AAV vector, which would allow then the potential for the redosing. And then secondarily, as you've mentioned, we'll be looking at the enzymatic levels that the gene therapy was actually producing and that patient's liver to see whether that would give them enough of the metabolite to allow them to not have a liver transplant.

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Operator [17]

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And the next question comes from Yun Zhong with Janney.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [18]

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So first, a follow-up question on the patient enrollment in the head-to-head study. And I wanted to ask if you have any expectation in terms of the pace of patient enrollment, given that there are other studies ongoing for the similar patient population.

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [19]

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Yes. I mean, as I mentioned, we believe we anticipate fast recruitment of this because you do have 2 active arms in the study. And there's also the feedback received from the sites that there is interest to recruit rapidly here because patients will get an active drug on both arms.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [20]

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Okay. And then on the Cure's CNS (sic) [CureCN] study, gene therapy study, have you guided -- provided guidance on when initial data will be available?

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [21]

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We have not. We have only guided that we are conducting the preclinical studies in the first half of this year and initiate the second half of this year, the actual clinical trials. We have not guided on when we'll get results.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [22]

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Okay. And then the last question, before you start the Phase III study, do you plan or is it the requirement for you to meet with the FDA or no?

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Werner Cautreels, Selecta Biosciences, Inc. - Advisor [23]

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Yes. At this time, we'll probably plan another interaction with the FDA just to confirm the design of those Phase III programs as you move that forward.

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Yun Zhong, Janney Montgomery Scott LLC, Research Division - Equity Research Analyst & Director of Biotechnology Research [24]

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And that will be after the interim data from the Phase II -- sorry, head-to-head study?

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Werner Cautreels, Selecta Biosciences, Inc. - Advisor [25]

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We'll determine that in a bit. There is a lot of different time points when we can submit different data points down to them and seek for guidance. So, again, as move forward in that, we'll make sure we keep people informed as to the next steps.

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Operator [26]

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And as there are no more questions at the present time, I would like to turn the floor to management for any closing comments.

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Carsten Brunn, Selecta Biosciences, Inc. - CEO, President & Director [27]

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No. Thank you very much for your attention. Thank you.

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Operator [28]

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Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.