Ablynx NV (OTC:ABLYF) Q4 2013 Earnings Conference Call February 27, 2014 10:00 AM ET
Edwin Moses - Chief Executive Officer
Antonin de Fougerolles - Chief Scientific Officer
Wim Ottevaere - Chief Financial Officer
Dominique Tersago - Chief Medical Officer
Matthew Chabert - Bryan Garnier
Jan De Kerpel - KBC Securities
Samir Devani - WG Partners
Good day and welcome to the Ablynx's full year results 2013 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Edwin Moses, CEO, Ablynx. Please go ahead.
Good afternoon, everyone, and thank you for joining us on this webcast, where we have the pleasure to present our 2013 results. I am Edwin Moses and will be giving this presentation. And I am joined by our CFO, Wim Ottevaere; our CSO, Tony de Fougerolles; and Dominique Tersago, our CMO. Our colleagues will be available for the Q&A session.
And I'd begin by asking to read our Safe Harbor statement, as we may be making forward-looking statements as part of this discussion. This afternoon, we'll begin by reviewing 2013. We will then detail some events, which have taken place since the yearend. And finally, we will provide you with our view on the rest of 2014 and key milestones for the company, before taking your questions.
We believe 2013 has been truly transformational for Ablynx, both in terms of progress in R&D and business development. In addition, there has been an important change in our board and the shareholder structure, which will further facilitate the company's growth and development.
Compelling data from our anti-IL-6R program, together with its subsequent landmark deal with AbbVie represented a key achievement for Ablynx last year. This is a second clinical proof-of-concept for Nanobody program and another strong endorsement of our unique platform by a leading pharmaceutical company.
Two other partners Boehringer Ingelheim and Merck Serono, both began Phase I trials of Nanobody, and these resulted in multimillion euro milestone payments to us. Indeed, with Merck Serono, we also signed our fourth discovery collaboration, which may have an important positive impact on our pipeline and cash flow over the next years.
Commercially, we closed the year with a deal in which we licensed our anti-RANKL Nanobody to Eddingpharm in the Greater China. With China itself expected by some commentators to become second-only to the U.S.A. in sales of pharmaceutical products by 2016, gives us entry into emerging markets, could have a significant long-term importance for Ablynx.
2013 also saw three new members join and strengthen our executive management team. With the departure from the board of the three remaining directors representing venture capital investors, we took the opportunity to separate the roles of CEO and Chairman and created replenish, independent and industry-experienced board, capable of leading the company through its next stage of growth and development.
The very positive news flow during the year also allowed just over 17 million VC-owned shares to be placed with long-term institutional investors. This represents just over one-third of the shares in issue and has resulted in the free float now reaching about 85%, another important milestone.
Let's now take a look at the excellent financial results for 2013. We saw 34% growth in revenues. Operating expenses well-controlled and net cash burn, excluding the AbbVie $175 million upfront and €31.5 million from the private placement, at just €20 million. The both mend to the guidance were given.
Cash at yearend is €200 million and although more than half of it is already committed under the AbbVie deal, we have a very robust cash position, which gives us considerable financial flexibility over the next year.
Now, let's look in a little more detail on the evolution of our pipeline. Many of you will be familiar with this pipeline graph, which represents approximately 30 Nanobody programs at various stages of discovery and development. This slide illustrates the broad number of therapeutic areas for Nanoboadies are potentially applicable, and the different types of risk reward strategies we have in place across the portfolio.
Let's now focus on key events during 2013 with programs in Phase II clinical development, specifically the anti-IL-6R and the anti-vWF program. In February, we published a 24-week data from the study of our anti-IL-6R Nanobody, ALX-0061 in 37 patients for rheumatoid arthritis, aiding through some of the efficacy data from the 24 patients in the trial, who remained on an unmodified dose of our drug.
If we just look at the ACR50 score for these patients, there is a 50% reduction in signs and symptoms, and we see that 71% of patients achieved this state at 24 weeks. Even though this is a small data set, it is encouraging. Since the anti-TNF-alpha product Humira from AbbVie achieved an ACR50 score in the range of about 40%, and it's the world's biggest selling drug with sales of over $10 billion in 2013.
The efficacy data for ALX-0061 together with result reporting in potential favorable safety profile were presented to a range of pharmaceutical companies around the world, as we search for our preferred licensing partner to help take this program into next stage of clinical development.
AbbVie were the company we chose based on a number of factors, and at least because of their commitment and desire to invest to help maximize the potential of ALX-0061 combined with a detailed knowledge and extremely successful worldwide track record in their target market.
The deal we struck with AbbVie for ALX-0061 was quite remarkable, and include $175 million upfront payment, another $665 million in potential milestones and potentially double-digit royalties. Ablynx is responsible for carrying out the Phase I subcutaneous study this year, and then a Phase IIb study in rheumatoid arthritis and a Phase II study in lupus, both starting in 2015.
If after these studies, AbbVie wishes to proceed further with these indications, it will then pay additional milestones and be responsible for all subsequent development and commercialization cost. We believe that ALX-0061 has blockbuster potential and the featured clinical trials reflect the data we've seen so far and it could become a product with sales in billions of euros.
Now, let's switch to our other active Phase II program, our anti-von Willebrand Factor Nanobody, caplacizumab, targeting acquired thrombotic thrombocytopenic purpura, TTP. In context to ALX-0061 caplacizumab is being developed for rare disease, where we estimate just 10,000 patients present to doctors each year in major markets.
We have orphan drugs status, caplacizumab, to acquire TTP in both Europe and the U.S.A., and currently there is no specific drug treatment for this odd tracking disease. Patients have to undergo multiple plasma exchanges.
You remember that we started a Phase II TITAN's trial in late 2010, to study the effective caplacizumab in the treatment of TTP on top of the standard of care, plasma exchange. Our goal was to recruit 110 patients. In August last year, we indicated the recruitment is slower than we had hoped for and we amended the clinical study protocol to help us include additional patients into the trial.
Although, we still had some improvement in recruitment by yearend, in January we decided to self-recruiting in the study and analyze the proof-of-concept early. We now expect to have data from this study in midyear, and if positive, we could proceed to a Phase III study in 2015.
Encouraging data will also enable us to advanced filing discussions to determine the best options to this program going forward and help best to achieve rapidly peak annual sales of caplacizumab, which we currently estimate could be in the range of €200 million.
This next slide outlines the key events relating to the Nanobody programs, the Phase I stage of development. In June, Merck Serono began the third Phase I with a bi-specific Nanobody, targeting interleukin 17A and interleukin 17F proteins for potentially use in rheumatoid arthritis and other inflammatory diseases.
This program is fully licensed to Merck Serono, and they are now responsible for all development costs. Ablynx received a €2.5 million payment when the Phase I was initiated and has the potential to receive additional milestones and royalties as the program progresses.
In July, we began two further Phase I study for the anti-RSV Nanobody, ALX-0171. In one study, we are looking at distribution of the product in the lung after inhalation. And in the other we are determining if bronchial constriction occurs in patients with hypersensitive upper airways due to the ALX-0171, and if it does, whether it can be reversed. The data from these studies are expected in Q2 and we still expect to start the Phase II pediatric study in the second half of this year with the advent of the winter season.
Our partner Boehringer Ingelheim also started a Phase I trial last year with a Nanobody, which could be important in the treatment of Alzheimer's. The initiation of this study resulted in a €5 million payment to Ablynx. So in total, there are currently three Nanobodies at the Phase II stage of development and four at Phase I.
Since the end of 2013, we've compiled some additional important preclinical data. Firstly, for our anti-RSV program, we completed studies in a lamb model. The lamb model is believed to more closely resemble a situation in an infant in terms of weight, lung, such as viral replication than more widely used cotton rat model, for which we had previously shown positive data.
The lamb has been affected with the RSV virus and then not treated to three days, until the viral load peaks. This is a mix of potential situation, when infants might first be presented to a doctor. For those of them treated by inhalation of ALX-0171, we show an approximate 100,000-fold decreased in viral load after six days compared with non-treated animal.
There was also and almost 80% reduction in lung lesions from about 40% to less than 10%. These very significant findings were complemented by strong apparent improvements in behavioral activity and general well-being.
We are very encouraged by these data and look forward to the forthcoming pediatric study, which will provide guidance in the safety and potential therapeutic value of ALX-0171. We would remind you this is very large potential market with some 300,000 infants in the major markets hospitalized each year within RSV infection. Of course, there is no specific therapeutic approach in general use.
Since the end of 2013, we also completed the preclinical study for our anti-IgE Nanobody for potential use in severe allergic asthma. We previously noted, this Nanobody had a deal mechanism of action and was differentiated from the benchmark product Xolair from Novartis.
However, having completed all the preclinical studies and having review the market opportunity again, we believe that we do not have a potential for multiple advantage when compared to Xolair, and have therefore taken a strategic decisions to stop the programs and reallocate the sources to other projects.
This last slide is related to the pipeline and look beyond 2014. It indicates key proof-of-concept data we might expect over the next three years. As already discussed, we expect to have Phase II data from the TITAN study mid this year. In 2015, we anticipate the readout from our Phase II study with our inhaled anti-RSV Nanobody.
And then in 2016, we expect the readout from the Phase IIb trial with ALX-0061 in rheumatoid arthritis patients, together with possibly three other POC data sets from Nanobody programs being led by our partners. All these together with a number of new Phase I starts, illustrate that our pipeline has achieved important critical mass, and promises a broad range of significant data over the next years.
Let's turn briefly now to partnerships. This slide summarizes the key ongoing collaborations we have. The deals range from early discovery through the licensing of clinical assets, and there are now more than 25 active partner programs with six different companies. These partnerships are key and enabling us to exploit the Nanobody platform as widely as possible and are generating more than €300 million in cash to date for our activities.
Informally, we also see many of the companies so impressed by the platform that they come back for more. Two deals with Boehringer Ingelheim, four deals with Merck Serono, and now at the beginning of 2014 a second deal with Merck & Co., to follow-on from the ion channel deal that we signed with them in 2102.
The second Merck & Co. deal is in a very exciting area, immuno-oncology. It is a discovery of ours, so we are using the unique format and flexibility of Nanobodies to generate a number of Nanobody-candidate, including bi and tri-specifics, and returned exclusivity on selected targets, in Merck's case €20 million upfront and will pay another €10.7 million in FTE cost over a three-year period.
Ablynx's growth will be eligible for another €1.7 billion in milestones plus royalty. This is an excellent example of combining the expertise of one of the emerging leaders in the field of immuno-oncology, with our world-class capability in discovery and development of Nanobodies to generate a partnership, where we really believe that one-plus-one can equal three.
This immuno-oncology area is quite large and we still have plenty of additional targets and opportunities, if we wish to enter into more partnership or perceive programs in our own in this rapidly developing field. This is illustrated well in the next slide.
On the left-hand side of this slide, you can see the theoretical Nanobody constructs, which we've explained in the past with an engineer. Monvalent binders have been generated over 100 different targets. We've also said that we can combine Nanobodies in multivalent, multifaceted format, and we've indicated that we can combine Nanobodies to therapeutic targets with Nanobodies to other targets increased to half life or enhance accumulation in affected tissue.
What we haven't said to be shown before is now described in the middle of the slide, where you can see resident patients with more than 30 constructs that we have actually engineered, and they derive a preclinical proof-of-concept stage or in-clinical stage of development. This gives certain impression of the huge amount we've achieved over the last years in the Nanobody technology.
Finally, on the right-hand side you see the range of checkpoints inhibited and related proteins important in immuno-oncology, many of which may be considered to be therapeutic target on their own or increasingly in combination.
The Nanobody technologies are ideally positioned directly to generate more specific construct for research that allow the most effective construct in combination to be designed and tested, and then potentially taken into development and commercialized. In this field with Merck & Co. expected to go from Phase I to commercialization in just four years with a lead anti-PD-1 molecule, speed and formatting flexibility at the discovery stage empowerment, and that is exactly what the Nanobody platform can deliver.
So what can we expect from the rest of 2014. In terms of clinical data, we'll get the Phase II results from the TITAN study in the first half, during which time we will also see the results from our current Phase I study with ALX-0171. During the rest of the year we will also generate data from our Phase I subcutaneous study with ALX-0061, which will start in the next couple of months. And certainly around that Merck Serono should produce results from the Phase I Nanobody trial they are currently running.
In terms of initiating trials, we'll start the Phase II pediatric study with ALX-0171 in the second half of this year and we will continue to preparing to commence into the Phase II study with the ALX-0061 in rheumatoid arthritis and SLE due to start in 2015.
During 2014, we may expect to see up to four additional partnered Nanobodies enter the clinic for the first time. We will continue to invest in early stage Nanobody discovery programs as both in our own and with partners to ensure a growing product pipeline. In the last six months alone, we've initiated more than 10 such new discovery projects.
Finally, we have already signed an important collaboration with Merck & Co. this year, but we could also enter into other collaboration, and we expect to receive additional milestones from existing partnerships. Management of our net cash burn remains a key focus for us.
Turning to summary. 2013 was an excellent year in a multitude of areas where we ended stronger in terms of finance, pipeline, partners, management, board and shareholder side. 2014 has started with a bang with the Merck & Co. deal, and we look forward to the rest of the year and continuing the strong progress and the service that we have achieved.
Thank you for your attention. And we can now open up the floor for questions.
(Operator Instructions) We will now take our first question from Matthew Chabert from Bryan Garnier.
Matthew Chabert - Bryan Garnier
Two questions, if I may, first one on the Merck & Co. deal. Edwin, you mentioned that the government timings in oncology are pretty short. I was wondering if you could give us a sense of the mix, was it preclinical, and can you point the midterm milestone that you expected for this alliances program? And second one on the ALX-0061, I think you guys were planning to initiate the Phase I subcutaneous in Q2 this year. I missed the beginning of the call, so maybe you mentioned that already, but is this timing a concern? And could you give us maybe some details on the works you guys have done on this and initial briefings on trials for the Phase I?
I'll take the first question, then I'll hand over to Dominique for the second question. In terms of the Merck & Co. deal, that's in a very beginning phase, the programs are just beginning as we ultimately signed the deal a few weeks ago. Our job is to generate these Nanobodies to create the constructs and then Merck & Co. will actually be carrying out the testing for that.
Typically for us as an average for Nanobodies, we take from start of discovery through to an IND stage, something like about four years. That would be an average historical achievement. And some of it can be a little quick, some of it takes a little bit longer. So that gives you an idea about how long it takes.
In terms of ALX-0061, headline answer to your question is, yes, we are on target. But Dominique, would you just like to say what we've been doing over the last few months.
With the regards to the design of the Phase I study we are looking into the PKPD model to help us determine what threatens we need to investigate, and those have now been determined. We have engaged with Phase I CRO, who will then conduct that study for us. So as Edwin said, we will start that in Q2 as planned. Then we also anticipate the readout to be available and to confirm the dose regimens that we are also planning for the Phase II studies in rheumatoid arthritis to start early in 2015. So that is all on track.
We will now take our next question from Jan De Kerpel from KBC Securities.
Jan De Kerpel - KBC Securities
I have a few questions. First of all, can you elaborate a little bit on the TTP trial in event that when would you consider the results to be sufficiently encouraging to move forward, so what are your thresholds that you are doing there? And Edwin, I believe you already indicated that you would consider partnering, if the results were positive. Are you already engaged in discussions and what kind of partner would you look for or would you consider moving into Phase III on yourself? So that's on the TTP trial.
With the ALX lines, 65 molecule not being pushed forward, could you indicate which programs are currently in the preclinical stage, which are not partnered, so which are fully owned by Ablynx? And then a small question on ALX subcutaneous, what kind of loadings are you using, so you said that that dose regimens are determined, can you disclose what these are?
But let me see if we can capture them all. So I'll start on the TTP-I and ask Dominique to pick up the question regarding what we might state. But if I start with the commercial side of that, we've indicated on TTP that we have for some time being discussion with a variety of different partners, we do this in all our clinical programs to learn with regard to what partners think about the strategy and our approaches. And we have found that there is considerable interest in this TTP area.
It's honestly going to be data driven and that will depend on the outcome of data, the level of interest upon us. And what we want to do is see the data first, then have the more in-depth discussion with partners, and then be in a position to decide whether it makes sense for us to be part of that program that time will take it forward.
We think that if we would decide to take it forward, we have the sources to the Phase III, because they're not going to be a large Phase III study. So it's not a resource question, it's more whether we think a partner would help us to commercialize out kind of the development and commercialize the product more quickly.
Dominique, can I ask you to say something about what we might expect from the TTP study?
I think it's difficult to say what we might expect. I think this is going to be very clearly something, which as Edwin indicated, it will be driven by the data, by the results. As you know, in the design of the trial, we are looking 40% reduction in the time to platelet response from a number of key secondary endpoints, such as exacerbations, rate of exacerbation rate.
And in the actual understanding of how we can see itself evolve and what it response to, the level of ADAMTS13 and sign activity is also very important. So we will be looking at sub-group analysis. So there are a lot of complex variables to be assessed. We're having to stop the recruiting in January, we stopped at a point in time when we have sufficient patient numbers to be able to make, to have sufficiently large data sets to be able to make informed decisions.
Thank you, Dominique. And to your second question, and you referring to effectively stop the anti-IgE program, ALX-0962, we expect that there maybe another three or four programs into the clinic this year, but they will be partnered programs. We consider the partnered programs are important as well as our own in-house programs.
And as you know Ian that we generally don't disclose [ph] events that are in research until they reach a preclinical development stage. So we've got a lot of activity at the discovery levels, as we talked about just to give you an indication, having started, as I mentioned, my 10 programs there on our own partners in the last six months. So a lot in the early stage pipeline, but we really don't specify the programs until they reach preclinical development.
Dominique, I'm just going to hand back to you on ALX-0061, Ian asked about the question of loadings.
Well, I think what we are evaluating here is the bio availability, so we are looking at three subcutaneous doses and two intravenous doses. The dose levels are such probably not that relevant. I think we will be reviewing more information about Phase II studies towards the end of the year, when the dose levels that will be used in Phase II will also be disclosed.
We will now take our next question from Samir Devani from WG Partners.
Samir Devani - WG Partners
I just wanted to check at the upfront. How much you recognized in the P&L for 2013 and how much you're going to recognizing in 2014?
Wim will answer.
So on the total $175 million, and I think it's important to just to explain that we, let say, recognized the upfront in line with the expense of 70% of completion that there were used. And of course in the first year now, in 2013, we didn't spent too much. So it's just a few millions that were recognized in the P&L in 2013. In 2014, of course it will certainly increase and in '15, '16 certainly are biggest spending year. So in fact climbing in 2014 up to '15, and then in '16 are the biggest expenses.
Samir Devani - WG Partners
Just to be a bit more specific, when you say a few million, we took in €3 million or €4 million.
It's in the neighborhood of €5 million, I'd tell you.
There is just one question after coming through from Jan De Kerpel from KBC Securities.
Jan De Kerpel - KBC Securities
I was wondering on the timeline of the partnered projects that would go into the clinics, so from Merck Serono, sorry, that would give results for the Phase I, Merck Serono and Boehringer. Will the market be made aware of the results and should we expect some payments to be up on positive results to be disclosed.
I'd say there were no, frankly, there are no milestone payments on positive results of the Phase I. And we ask them, especially the partners the timing and what exactly will be there to say. So we would certainly hope that the study is completed, and how much detail is still a matter of discussion at the moment.
Jan De Kerpel - KBC Securities
Is there any guidance visible for what's the timing on it, would it be first half, second half?
More likely to be second half. So that's the best we can say.
There are no further questions at this time. I will now hand back to your speakers for any additional or closing remarks.
Now, I'd just like to thank you for attending this presentation. I think we've had a very strong 2013, a good start to 2014 and a lot of exciting potential events happening over the next some months, so we look forward to speaking you again. And thank you for joining the call. Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!