U.S. Markets closed

Edited Transcript of VSC.DE earnings conference call or presentation 8-Aug-19 12:00pm GMT

Q2 2019 4Sc AG Earnings Call (German)

Aug 12, 2019 (Thomson StreetEvents) -- Edited Transcript of 4Sc AG earnings conference call or presentation Thursday, August 8, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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

Corporate Participants

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

* Anna Niedl

4SC AG - Corporate Communications & IR Officer

* Frank Hermann

4SC AG - Chief Development Officer

* Jason Loveridge

4SC AG - Chairman of Management Board, CEO & MD

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

Conference Call Participants

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

* James Francis Thomas Mainwaring

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

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

Presentation

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

Anna Niedl, 4SC AG - Corporate Communications & IR Officer [1]

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

Thank you, operator. And welcome, everyone, to today's 4SC conference call on our key developments in the first half of 2019 and our current business outlook.

I'm Anna Niedl, Corporate Communications and IR Officer. And here with me is our CEO, Jason Loveridge, who will give you his review on the first half of this year. And then we will open up the call for questions, in which our Chief Development Officer, Frank Hermann, will also take part.

I'm sure you've already seen our press release this morning. And the presentation for this call is available for download on our website. You can find it in the Investors & Media section, under Investor Information and then Conference Calls & Webcasts. The slides will give some support for Jason's comments. Anyway, you should be able to follow the call even if you don't have them in front of you.

Before I hand over to Jason, I would like to give you our brief reminder. During today's conference call, we may make projections or estimates regarding plans and objectives relating to our future operations, products, services or future financial results; or any assumptions underlying or relating to any such statements, each of which constitutes a forward-looking statement subject to risks and uncertainties, many of which are beyond our control. Actual results could differ materially, depending on a number of factors.

And with those formalities out of way now, I'll hand over to Jason.

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [2]

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

Thanks, Anna. And welcome, everybody, to the Q2 Conference Call 2019 for 4SC.

I'm going to use the presentation that Anna referred to as a base for my presentation.

So I propose to start on Slide 3, which is just a reminder to everybody, an overview of the company. So we have 2 clinical-stage compounds, resminostat and domatinostat. Both are orally available small molecules. We have some significant near-term catalysts, which I'll describe in more detail towards the end of the call. And currently, the head count sits at around 47 people.

Moving on to Slide 4 and a very brief overview of the financials. Clearly, for more details, please refer to the Q2 report. The important factors, I think, are the fact that at the end of Q2, we had almost EUR 18 million of cash on the balance sheet. We added an additional EUR 11 million to this as a result of the recent capital raise, and the funds that we have on hand should suffice for 4SC for at least the next 12 months.

The current burn rate is about EUR 1.2 million per month, which was below the current forecast of EUR 1.4 million to EUR 1.6 million. The difference is really a matter of timing, more than anything else, and there are no significant deviations. Going forward, we expect the average monthly operational cash use to be maintained at around EUR 1.4 million to EUR 1.6 million on a monthly basis.

Moving on to Slide 5. This is an overview of the company's clinical program. Starting with resminostat. You will probably, or at least most of you will know resminostat is in a pivotal study in cutaneous T-cell lymphoma. That study, we expect to complete recruitment towards the end of this year; suffice that we will see, hopefully, top line data around the middle of 2020. Our partner in Japan, Yakult Honsha, has the drug in a Phase II study in biliary tract carcinoma, where we expect also to see data in 2020. And then we have an extensive program for domatinostat. Several studies are sort of ongoing. SENSITIZE in particular is completing this quarter, the third quarter. And we expect to present top line data either at ESMO or via a press conference around the same time. EMERGE, we expect stage 1 of this study, which is a dose escalation in microsatellite-stable gastrointestinal cancer patients, to complete around the mid -- around the end of 2019. And then the remaining 4 studies: MERKLIN-1, MERKLIN-2 in Merkel cell carcinoma; domini (sic) [DONIMI] in the neoadjuvant setting; and the Triple Combination in the melanoma setting, we expect to start in the fourth quarter this year or very early 2020.

Moving on to Slide 5 -- sorry. I'm sorry, Slide 6. What we try to do in this slide is to rationalize for you the strategy that sits behind the current studies that we have ongoing for domatinostat. So both EMERGE and SENSITIZE will give us safety data in combination with checkpoint inhibition and provide a recommended Phase II dose with which to go forward into the remaining studies. We also expect to get some indicative efficacy data from both SENSITIZE and EMERGE.

And the current strategy and thinking is really to try and utilize the drug in 2 key areas, either in very late-stage patients, so patients that have second-line disease or relapsed or refractory on checkpoint inhibition, so patients that are very ill and have very few therapeutic options. And here it's important to go into an indication where you understand the mechanism of action by which the cancer is able to avoid immune surveillance. And here we -- there is a lot of published data in Merkel cell carcinoma to indicate that downregulation of MHC and prevention of activated T-cells getting into the tumor are 2 key mechanisms for immune evasion in Merkel cell, and these are 2 properties that domatinostat is very good at promoting. So here in this very difficult patient population, it's very important to target the indications to where you believe your drug can have substantial clinical benefit.

The other area that you want to try and pursue is earlier in disease when patients are much healthier, when patients have a more intact and functional immune system and where it's likely that the tumor is more homogeneic and hasn't differentiated into many different types. And this is the neoadjuvant setting. Here we want to combine domatinostat with checkpoint inhibitors prior to tumor resection and to follow those patients post resection using some series of end points that give early indication of either a durable or curative response.

So the area that we're primarily avoiding is the most popular area for combination therapies, which is the advanced, unresectable but naive to checkpoint inhibition, where many companies are competing and where we believe this is not the right space to go, at least initially, to share a proof of concept for your drug.

So finally, on Slide 7, we see a very important 12 to 18 months coming up for 4SC. For 2019, in domatinostat, we expect to complete the SENSITIZE study and, as I said earlier, report data at either ESMO or around the same time via press release; and to initiate the MERKLIN-2 study in checkpoint refractory or progressed in Merkel cell carcinoma patients; initiates the domini -- DONIMI study in the neoadjuvant setting and the Triple Combo study in melanoma.

For resminostat, importantly, we expect to recruit sufficient patients in 2019 to see the 125 events required to unblind the study, and that we expect to see somewhere in the middle of 2020.

So for 2020, domatinostat, we expect completion of the EMERGE study, at least part 1 of that early in 2020. We will complete the domini (sic) DONIMI study late in 2020, as well as the Triple Combination study. We also will initiate early in 2020 the MERKLIN-1 study, which is in checkpoint-naive first-line Merkel cell carcinoma patients.

It's an important year, 2020, for resminostat because we will complete the pivotal RESMAIN study, hopefully, seeing a positive top line data that will allow us to file for orphan drug designation in cutaneous T-cell lymphoma, to file our marketing authorization in Europe and Japan and the United States; and also for Yakult Honsha to complete and report data from the biliary tract carcinoma study in Japan.

So with that, I would like to conclude and open the session to questions.

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

Questions and Answers

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

Operator [1]

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

(Operator Instructions) The first question from the phone lines today comes from James Mainwaring from Stifel.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [2]

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

So I've got a few questions and, for the first one, just sort of want to touch on the cash burn effects and just get a little bit more color on the timing. Or [what confirms that we're going to] step up that cash burn in the second half? And sort of linked to that is you obviously had a bit of a step-up in receivables in the first half and sort of whether some of that is going to unwind as well.

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [3]

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

So yes. Obviously, as we initiate the MERKLIN studies and the other studies, there'll be an increase in the cash burn, but that's taken into account in the forecast. But we still expect cash to be sufficient to take us out through the next 12 months. We are obviously also investigating a number of different routes to raise additional funds and we expect to have a positive conclusion to that in the near future.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [4]

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

Okay. And then -- and so just talking about the MERKLIN, I mean sort of previously I had sort of assumed that it would be sort of 1 pivotal study in MCC. And obviously, you've -- you're talking about 2. Just I mean it sounds that you're going to run them yourself. And I mean are there sort of other investigator-led studies? I think when you released the data from SENSITIZE safety cohort, you talked about running melanoma trials as well. I'm just sort of wondering if there's any sort of partnerships or investigator-led studies as part of that or whether you're seeking to run them all yourselves.

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [5]

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

So I'll briefly answer that and then pass to Frank maybe for some additional comments. So both the DONIMI study in the neoadjuvant setting and the Triple Combo study will both be ISTs. And one will be with a European group, and one will be with a U.S. group. In the case of MERKLIN, we believe there's utility for our drug both in checkpoint-naive patients and in late-stage patients. It's MERKLIN-2 which we are thinking could become a pivotal study after the first stage. And MERKLIN-1 is an investigative study. Frank, do you want to add some commentary to that?

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

Frank Hermann, 4SC AG - Chief Development Officer [6]

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

I think the sponsorship of each studies, either 4SC sponsored or investigator sponsored, was clearly described by Jason. Beyond that, potentially investigators reach out to us and we discuss scientific new concepts, but there is nothing fixed. But we get some discussions about investigators from the trials, but as outlined here, this is the plan for the next 1 and 2 years.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [7]

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

Okay. And are you planning on initiating both MERKLIN-1 and -2 at the same time, or is it in sequence?

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [8]

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

In sequence. So MERKLIN-2 will start in the second -- sorry, in the fourth quarter of this year, and MERKLIN-1 will start in the first quarter of 2020.

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

Operator [9]

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

(Operator Instructions) We now have a follow-up question from James Mainwaring again from Stifel.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [10]

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

Okay. I'll just answer -- ask one more. It was just a clarification point on the finishing of SENSITIZE, you said, by the end of this quarter. Was that just the data analysis being finalized in this quarter, or was that the 2 additional cohorts? And if it's not the 2 additional cohorts, when is that likely to be finished?

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [11]

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

Frank, can I ask you to answer that one?

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

Frank Hermann, 4SC AG - Chief Development Officer [12]

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

Yes. Yes, sure. So our plan is to -- so with the predefined 3 cohorts, we are currently analyzing and, as Jason mentioned, will be presented at an upcoming conference. The end of the recruitment of the additional cohorts, the 2 cohorts, in the Phase Ib part is expected by end of the year.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [13]

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

Okay. And roughly, sort of how long are patients within -- on treatments for that? Is sort of mid-2020 a sort of top line readout, or is it kind of past that?

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

Frank Hermann, 4SC AG - Chief Development Officer [14]

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

Well, I think it's important to say that SENSITIZE, the Phase Ib is a safety study, so the primary end point is safety. This is an ongoing process, and that DLT, the dose-limiting toxicity, period is the primary end point. However, we have a fixed evaluation also on efficacy on an ongoing basis, but primary end point is safety. And as reported recently, that also the third dose cohort, predefined dose cohort, was clear at phase, which is a very important milestone for us, also to transfer these information to the additional studies we are planning, and is an important basis to proceed with our development plan.

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [15]

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

Okay. And just one follow-up for you, Frank. Is the EMERGE trial expansion arm due to start in the first quarter of 2020 if the safety data is by the end of this year?

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

Frank Hermann, 4SC AG - Chief Development Officer [16]

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

Could you please repeat?

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

James Francis Thomas Mainwaring, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [17]

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

So in the EMERGE trial (inaudible) obviously there, I mean you're obviously hoping they're getting the 3 cohorts worth of safety data by the end of this year. And they've got a -- I think, I believe, a 69-patient expansion arm after that. Is that sort of due to start in early 2020 given if the safety data is okay?

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

Frank Hermann, 4SC AG - Chief Development Officer [18]

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

Yes. So it's -- the first part is the dose escalation safety part. And of course, we can only say what has happened. We don't know what will happen with respect to recruitment and recruitment speed, but -- and also what safety signals we see, but we expect to open the -- or that of Phase II, so the expansion cohorts will be open for recruitment early 2020.

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

Operator [19]

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

We now have another question from [Peter Serj] from -- and he's product investor.

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

Unidentified Participant, [20]

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

This is [Peter] speaking. I have a question regarding the capital increase earlier this year. It was obviously not as successful as expected. Maybe you have a feedback from the market why. And what are the implications from that?

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [21]

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

So the implications are that obviously it limits the amount of cash we have to execute on the programs that we've put forward. Currently, the EUR 11 million that we raised gives us sufficient cash for 12 months, but we currently have a number of ongoing programs to potentially add new capital to the company, which we are optimistic about and would expect to report on fairly soon. With respect to feedback from the market, I think people view the story quite positively. I think at the moment, the general view is we'd like to see more clinical data. And that's why I think the second half of this year and obviously next year is incredibly important for us because we will see clinical data from SENSITIZE. We'll see clinical data from the first part of EMERGE. We'll see clinical data from both ISTs domini (sic) [DONIMI] in the neoadjuvant setting and the Triple Combo. And most importantly, we'll see the top line data from RESMAIN. So I think that's fundamentally the main feedback from the market. And so we expect to be able to satisfy those questions over the next 12 months.

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

Operator [22]

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

(Operator Instructions) We have no further questions, so I'll hand back over to you, Jason and Frank.

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

Jason Loveridge, 4SC AG - Chairman of Management Board, CEO & MD [23]

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

Okay. Thanks, everybody, for dialing in to the call. And hopefully, we've been able to address your questions. And we look forward to the second half of this year, where we will see some important clinical data releases, and then on to 2020. And we'll be back on the Q3 call.

Thank you very much.