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Edited Transcript of SESN earnings conference call or presentation 12-Nov-19 1:00pm GMT

Q3 2019 Sesen Bio Inc Earnings Call

Cambridge Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Sesen Bio Inc earnings conference call or presentation Tuesday, November 12, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chad Myskiw

Sesen Bio, Inc. - Senior Director of Strategic Planning

* Monica Forbes

Sesen Bio, Inc. - CFO

* Thomas R. Cannell

Sesen Bio, Inc. - President, CEO & Director

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Conference Call Participants

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* Jiale Song

Jefferies LLC, Research Division - Equity Associate

* John Lawrence Newman

Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Sesen Bio 3Q 2019 Business Update Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Senior Director, Strategic Planning, Dr. Chad Myskiw. Please go ahead, sir.

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Chad Myskiw, Sesen Bio, Inc. - Senior Director of Strategic Planning [2]

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Thank you and good morning. Welcome to today's conference call to discuss our third quarter business update and upcoming milestones. On the call with me today are Dr. Thomas Cannell, President and CEO; and Monica Forbes, Chief Financial Officer.

Earlier this morning, we issued a press release outlining our third quarter 2019 financial results. The press release and the slides to which we will refer are available on the Investors section of the company's website at sesenbio.com.

Today's discussion will include forward-looking statements related to the company's current plans and expectations, which are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in Sesen Bio's most recent annual report on Form 10-K and other SEC filings. These statements represent Sesen Bio's views as of this call and should not be relied upon as of any future date. Sesen Bio undertakes no obligation to publicly update these forward-looking statements.

For today's presentation, we anticipate 15 minutes of prepared comments, leaving the rest of the hour free for the Q&A session.

With that, I'll turn the call over to Tom.

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [3]

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Thank you, Chad. Good morning, everyone, and thanks so much for calling in. So I'd ask you to turn to Slide 3. We try to start all of our meetings with the patient's journey. It's our mission to save and improve the lives of patients, and we remind ourselves that patients being treated for bladder cancer go through an exhausting, arduous and humbling journey, and we need to do everything we can to help improve the patient experience and clinical outcomes.

Turning to Slide 4. This shows our leadership team, which is a top-notch commercial stage team. They're very talented. They work very well together, and we enjoy the strong support of a very experienced Board of Directors. This gives me a lot of confidence as we approach 2020, which in almost every dimension will be a transformational year for the company.

Please turn to Slide 5. You can see that this is our seventh Investor Relations event in 2019. We are committed to providing you with timely updates, which are transparent and informative. This morning, we'll review about 10 content slides as we take you through the prepared comments, but we would also refer you to about 50 slides of backup, which are there to make sure you have the information you need for your diligence on the company.

And now I'd like to turn it over to Monica Forbes, our Chief Financial Officer, who joined Sesen Bio in August and is doing a great job for us in the CFO role. Monica?

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Monica Forbes, Sesen Bio, Inc. - CFO [4]

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Thank you, Tom. And good morning, everyone. Turning to Slide 6. I would like to take this opportunity to provide a brief overview of some financial highlights for the third quarter of 2019.

We ended the third quarter with $57.9 million in cash and cash equivalents, which we believe is sufficient to fund investment in our strategic priorities into the fourth quarter of 2020. These strategic priorities include completion of the VISTA trial, successful tech transfer and scale up for commercial manufacturing and supply chain buildout, and regulatory activities leading to the anticipated completion of the BLA submission in 2020 as well as limited spending on U.S. prelaunch market readiness activities.

As we disclosed in our 8-K filed on October 29, we entered into transactions with holders of our outstanding 2018 and 2017 warrants, which resulted in the exercise of 3.4 million warrants for proceeds of $2 million. More importantly, the modifications made to the 2018 and 2017 warrants that remain outstanding increase our flexibility in raising additional capital, including the possibility of raising capital through an ATM facility, which we are currently exploring. We currently have roughly 105 million shares of common stock outstanding or 134 million shares reserved on a fully diluted basis, which includes outstanding warrants and stock options.

Tom, I'll hand it back over to you.

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [5]

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Thanks, Monica. Turning to Slide 8. I want to remind you of the huge unmet need in this area. Bladder cancer is the sixth most prevalent cancer. It is the single most expensive cancer to treat and it creates one of the worst, if not the worst, patient experience of any form of cancer. What this means is that our key stakeholders, including patients, physicians and payers, are very anxious to bring new and innovative medicines to the market and their health and support is invaluable as we work to gain regulatory approval of Vicinium.

And as you can see on Slide 9, since the FDA was founded in the early 1900s, only 3 products have ever been approved for nonmuscle invasive bladder cancer. Thiotepa and VALSTAR are very seldomly used, leaving BCG as the only real treatment option. And as you know, there have been significant global shortages of BCG, which are expected to continue through at least 2020. The combination of the huge unmet need and very limited treatment options helps demonstrate why it's so important that we bring Vicinium to market expeditiously.

Again, just a reminder on Slide 10 that Vicinium was a very unique and differentiated product. Vicinium is a fusion protein, which selectively targets and kills bladder cancer cells, while generally leaving healthy cells alone. The most important thing about Vicinium is probably how it kills the cancer cells through a dual mechanism of action. Not only does it have a direct and immediate effect in destroying the cancer cells, we also believe that through immunogenic cell death, Vicinium is able to activate the patient's immune system and enlist the patient's cytotoxic T cells to attack and kill the tumor.

In market research, doctors are very interested in the MOA, and they tell us that Vicinium is almost like a combination of a chemotherapy agent with a direct killing effect and BCG, which activates the patient's immune system. We believe this dual MOA helps to explain why we're able to demonstrate strong and sustainable antitumor effects while maintaining a favorable safety and tolerability profile.

The immune activating component of the mechanism of action also explains why down the road we may be able to demonstrate a synergistic effect with immune checkpoint inhibitors, such as anti-PD1s and anti-PD-L1s. And we have an NCI trial underway to test this hypothesis.

On Slide 11, you can see how clear the regulatory path is moving forward. And again, I want to put this in the context of time. We had our first Type B face-to-face meeting to discuss Vicinium with the FDA in 2007, 12 years ago, and it has been a careful and steady development program, working closely with the agency every step of the way to make sure our trials are designed in alignment with FDA guidance. And you can see that there's been tremendous acceleration in 2019. Everything on this slide, other than fast track designation, has happened in the past 6 months. By the end of this year, we'll have had 4 major face-to-face meetings along with weekly correspondence with the agency. And it feels like every time we meet with the FDA, they request the next meeting, which really speaks to the partnership with them, their support and their efforts to not be rate limiting. Lastly, in 2020, we expect to start discussions with the EMA on the regulatory path forward for Vicinium in Europe.

So please turn to Slide 12, and I'll give a quick update on the meeting we had last week with the FDA. We reached agreement with the agency on the design of our post-marketing confirmatory trial for Vicinium. The confirmatory trial will now address a much broader patient population than had been originally discussed. We will enroll patients who are not able to receive adequate BCG for whatever reason, side effects, drug shortage, treatment discontinuation, et cetera. Adequate BCG is defined by the FDA as patients who have had at least 7 doses of BCG. So our study will focus on patients who have received 1 to 6 doses and those may be full or partial doses.

As you know, the sole manufacturer for BCG in the U.S. has said they can only provide 60% to 65% of the demand for BCG, and they expect shortages through at least the end of 2020. So this could leave 35% to 40% of patients requiring BCG, who simply do not have access to it and therefore, could qualify for our trial. It is our expectation that should the confirmatory trial be successful, labeling would be updated to include this expanded population of patients.

We also came to agreement with the FDA on a control arm for the study. This FDA is allowing us to compare to a standard of care for patients receiving less than adequate BCG, even though there is no official FDA guidance in this area. This allows us to design a 2-arm trial with the power to demonstrate superiority for the primary efficacy endpoints of complete response and duration of response and also for key secondary endpoints, such as safety, quality of life and survival. In thinking about payers from a global perspective, we believe that the ability to demonstrate superiority relative to standard of care and collect the right data to inform key analysis will help support reimbursement in this expanded patient population.

On Slide 13, I want to highlight what we feel are the most important aspects of our clinical data set. As you know, we see very good efficacy at 3 months, roughly a 40% complete response rate in Phase II and Phase III, and we see strong durability of the complete response. Perhaps the most important efficacy data we have were the time to cystectomy data because the FDA states that the goal of therapy in patients with BCG unresponsive nonmuscle invasive bladder cancer is to avoid cystectomy.

You can see that the average patient on Vicinium was cystectomy free for 930 days. These are patients who have failed on BCG, and in the absence of Vicinium, their only other treatment choice is radical cystectomy. We know these data are especially important to patients and payers.

While it's still early, we see very promising survival data, with overall survival at 96% at 24 months. And as those data mature, we think those could become very important.

Finally, probably the biggest source of differentiation for Vicinium is the strong safety and tolerability profile. The vast majority of AEs are mild to moderate and only 4% of patients experienced a treatment-related grade 3 to 5 AE. That number is less than 1/3 of what we have seen reported in the checkpoint inhibitor class. And we know how important patient safety is to prescribing physicians, especially in this cancer type, where the average patient is in their 70s and still faced with many years of treatment for bladder cancer.

On Slide 14, just a reminder of the huge global commercial opportunity for Vicinium and the compelling market research -- market feedback we have received on -- from urologists. We also give you additional data and guidance on the market opportunity in the U.S. and outside the U.S. to help inform your models on Slides 51 to 59.

Having spent most of my career on the commercial side of the business, what jumps out at me is the virtuous cycle that exists when payers, patients and physicians all strongly advocate for a product and are willing to take action. So often in a product launch, you're lucky to have even one of those groups advocating for you. And so far, we have seen strong support from all 3 stakeholder groups, which could create a unique opportunity for a strong launch with sustained and possible growth.

And because of the strong global demand that we anticipate, if you turn to Slide 15, I just want to remind you how much work we are putting into our manufacturing and supply chain. Our manufacturing is based on a microbial expression system, which is a tried and true process for biologics. This process was developed in the 1980s for insulin and has been refined and perfected ever since. We are partnering with very strong manufacturers, Fuji and Baxter, and we believe this should yield a low cost of goods with a highly reliable process that minimizes the risk of supply shortages, which is obviously a very important issue for our customers.

So to summarize, we believe there is a huge unmet medical need, and we are bringing to market a highly differentiated product with a very strong benefit risk profile. We believe there is a well-defined regulatory pathway and a significant commercial opportunity, and we move forward every day with a laser-focus on saving and improving the lives of patients with bladder cancer.

And with that, we are right on schedule, and we'll open up the call for questions. Josh?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from John Newman with Canaccord.

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [2]

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Congrats on all the progress. So Tom, I'm curious, in terms of the confirmatory study that you discussed with the agency, what are the key endpoints that, that study will focus on?

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [3]

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Yes. Thank you. So as per the FDA guidance on products under accelerated approval and confirmatory trial endpoints, the primary endpoints will be complete response rate and duration of response. And as I mentioned, we're going to power the study so that we can show superiority versus standard of care in that -- for those endpoints.

The secondary endpoints will be quality of life, and that will be a variety of quality of life metrics. We, at this point, expect to follow the EORTC, the European Organization for Research and Treatment of Cancer, for their quality of life questionnaire. It'll also be survival -- not only overall survival, but progression-free and event-free survival, and then all of the safety and tolerability endpoints that you also saw in the VISTA trial. And then finally, we will add an endpoint for delayed complete response in order to assess patients that did not have a complete response at 3 months, but may go on to a complete response later in the course of therapy. So those are the endpoints, John.

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [4]

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Great. And just one additional question, which is, do you still expect the FDA to hold an advisory panel in 2020 for Vicinium?

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [5]

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Yes. It's our expectation that we will have an advisory committee meeting in 2020. And the primary question for that ADCOM will be, are the data that we presented, do they represent clinical -- clinically meaningful efficacy. I think that's the question that the agency will be asking. And I think that, that'll be kind of the standard now for any products with trying to gain an indication for nonmuscle invasive bladder cancer.

Just a reminder, the last product they approved for full approval was BCG in the 1980s. And in the 2018 guidance, the agency is actually siloed on what threshold of complete response and duration of response would indicate clinically meaningful efficacy. So I think they haven't addressed that in guidance. They really want to turn it over to key opinion leaders and practitioners to provide their input on what is clinically meaningful. Any other questions, John?

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John Lawrence Newman, Canaccord Genuity Corp., Research Division - Principal & Senior Healthcare Analyst [6]

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No. That's all.

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Operator [7]

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(Operator Instructions) Our next question comes from Roger Song with Jefferies.

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Jiale Song, Jefferies LLC, Research Division - Equity Associate [8]

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First of all, congrats on the positive update. So my first question is, Tom, so I -- you kind of give us some flavor around the confirmatory population. Can you just help us to understand a little bit kind of better what will be the kind of targeted population if your confirmatory study is successful? And how big is it compared to VISTA population?

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [9]

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Yes. Great. Thanks, Roger. Let me talk about the targeted population first, then we'll talk a little about study size. So the targeted population, as I mentioned, is very different from our Phase II and Phase III trial. In our Phase II and Phase III trial, we followed the FDA guidance on what is adequate BCG, which is apply at least 5 doses in the first course and 2 doses in the second course of therapy. So that's great, and we have those data, and we'll be able to get good labeling around second line use of Vicinium after adequate BCG failure.

The difference in this study now is that the FDA has letting us approach the less-than-adequate patient population. So we're defining that as having 1 to 6 doses of BCG. And as you know, those might be full doses, but often doctors are splitting BCG by half or even 1/3. So it's 1 to 6 doses and it might just be even a fraction of the dose in some patients.

We think that's important for a number of reasons, that patient population. One is we think it's real world because, again, the manufacturer BCG can only provide about 60% to 65% of the demand for BCG. So right now, in the real world, patients don't have enough BCG to get through the full course of treatment. We also think it's really good for us because as we presented before, Vicinium does particularly well in patients that have less exposure to BCG.

In our VISTA trial, our Phase III trial, as you know, the average patient had 15 doses of BCG. But we saw significantly better -- and in fact, you can go to, like, Slide 42 in our backup if you want to see significantly better complete response and duration of response in patients that had less exposure to BCG. So we think this trial sets us up to even show better efficacy and better benefit risk. So that's the patient population.

And then the other question you asked, Roger, was around study size. So at this point, what I would say is we have agreement with the FDA on the high-level elements of our clinical study. But what we will do is now put together a study protocol and a statistical analysis plan. We'll submit that to the FDA and request a Type C meeting. So I'm not ready to kind of guide specifically yet because we really wanted to go to the next level and get the agency's feedback and alignment on the exact study protocol. But what I can tell you so far, as we've been discussing using Simon's 2-stage design, probably a 2:1 or a 3:1 ratio between the size of the control group and the treatment arm. And then with an 80 kind of -- 80% power to show statistical superiority, we think probably the control arm is 30 to 40 patients, and we think probably the treatment arm is 90 to 100 patients, given what we know right now about our efficacy and standard of care efficacy. Again, all of these details will be much, much better refined once we have the next meeting with the FDA, but that's kind of our current thinking.

And then Roger, just the other piece of that is, we are working simultaneously with regulatory bodies around the world and with potential partners around the world. So we do think this is a global trial. We think there's a North America arm with patients in the U.S. and Canada, there's probably a European arm, and there's probably a Japanese arm. And so if you think roughly half of those patients, 70-or-so patients are in North America and then the other half are outside the U.S., that's how we're thinking about the global design of the trial.

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Jiale Song, Jefferies LLC, Research Division - Equity Associate [10]

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That's great. That's very, very helpful. So maybe just one quick follow-up. You talk about this kind of expected size, the expectations. So can you just elaborate on -- a little bit more on your expectations for the control arm? And what is your expectation for their CR and duration of response?

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [11]

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Yes. So the control arm, we're actually right now working with -- talking to urologists and our key opinion leaders to really understand. I mean we know sometimes they're using mitomycin, sometimes using gemcitabine, sometimes they use VALSTAR, and we're really trying to understand exactly what that control arm will be. What we'll do is we'll define a couple of choices for physicians in the control arm based on our current understanding of standard of care, and that will be the comparative group.

The -- and I'm not sure this is what you're getting at, Roger. But the other thing about control arm in a -- when you're using a Simon's 2-stage design, if you have a primary hypothesis on the efficacy that you would expect from the control arm, but if there's -- if after 15 or 20, the patients are enrolled and you see futility, you see that the control arm is not even as effective as you thought, then you can drop the control arm and this methodology allows you to switch back to a single arm trial, having already shown superiority versus the control. So with that part of what we'll design with the agency is this Simon's 2-stage design, so we can make sure that there's not futility in the treatment arm. Did you have another follow-up, Roger?

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Jiale Song, Jefferies LLC, Research Division - Equity Associate [12]

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No. That's it. Very helpful. Congrats again.

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Operator [13]

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Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Dr. Cannell for any further remarks.

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Thomas R. Cannell, Sesen Bio, Inc. - President, CEO & Director [14]

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Okay. Well, great. Thanks so much, everyone, for calling in. I think when we look at the future now, we have a number of exciting events ahead of us. And I mean, obviously, the next big value inflection point is the BLA submission. We will start next year to be announcing partnerships outside the U.S. We expect that to be -- those to be meaningful announcements and help inform people about the market opportunity outside the U.S. for their models. We expect positive ADCOM, that's probably the biggest value inflection point we have as we look forward. After that, we look forward to FDA approval, to early commercial success and a number of important milestones after that.

So we very much appreciate all of you coming along the journey we've been on so far, and we look -- very much look forward to working with you on a very exciting future to save and improve the lives of patients. Thanks so much, and thanks for calling in.

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Operator [15]

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Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect.