Celyad (CYAD) CEO Christian Homsy on Q4 2015 Results - Earnings Call Transcript

| About: Celyad (CYAD)

Celyad (NASDAQ:CYAD)

Q4 2015 Earnings Conference Call

March 24, 2016 13:00 ET

Executives

Christian Homsy - CEO

Patrick Jeanmart - CFO

Analysts

Edward Tenthoff - Piper Jaffray

Roderick Verhelst - Petercam

John Savin - Edison

Mark Pospisilik - Kempen

Bruce Jackson - Lake Street Capital

Operator

Ladies and gentlemen, thank you for standing by and welcome to the 2015 Financial and Operational Update. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions] I must provide that the conference today is being recorded on Thursday, March 24, 2016. And I shall now hand over to your speaker for today, Christian Homsy. Please go ahead, sir.

Christian Homsy

Thank you. So these description are for Celyad and welcome to the call. I'd like again to reiterate over the press release that was sent, the achievements that were -- that the company has made over the 2015 and beginning of 2016 period, obviously 2016 started with the acquisition of OnCyte which as you know has been transformative for the company, again, a technology in which we have been able to bring all the expertise that we have been through the cardio development program into the CAR T space being one -- the only company in CAR T space that has treated more than hundreds of patients in cell therapy settings.

That was followed by capital two transaction that important growth to company had again euros and cash with end statistics. We continue to the CHART-1, last patient was treated in July, and we also initiated the first patients in our NKR-2 trial at the Dana Farber Cancer Institute. The company is reinforcing it -- has reinforced significantly with quality resources with hiring of key personal and we completed the year with quite significant patent grant that was granted to us by the USPTO covering other generic queues which are off the CAR-T space. So that has positioned us very well we think for 2016 building the route for a potential partnership with pharmaceutical company.

So in 2016 what we are in terms of guidance, the -- we are looking forward to the results of CHART-1 by the end of June. With obviously it's a battle and we have no information on the patients but if we have -- if we can leverage what -- if we can at least build on the data that we had from the Phase II trial, as well as the interim analysis that was looked at by the DSMB, we're extremely optimistic and confident about the outcome of that program. But we will have the outcome of it read by the end of June.

We will obviously start the CHART-2 trial after the data of CHART-1 so that in case any changes to the design of CHART-2 needs to be made, it can be made just once without having to go to the FDA and change while the first patient have already been included.

In terms of partnership, we have just announced an agreement with Institut Curie which as you all know is a premier institution for the treating of cancer in Europe. We have only partnered with Dark Miscodrage [ph] and with Dana Farber Cancer in the U.S. and we look forward to expanding our partnerships with top tier academic institutions worldwide as well as with pharmaceutical companies and corporate industry. We have just finished today our R&D day on the immuno-oncology space which was attended by more than 150 people. We were investors and analysts, and attracted, developed interest from key opinion leaders in the field that has been presenting the rationale for NKR-2 program as well as the follow-up program of D786 [ph] and NKP-13.

So we're looking forward to competing the NKR-2 trials by the first four cohorts as we committed to will be read in June and we will probably expense a three additional levels because we have not yet reached the maximum dose would be planning to compete in another three dose levels that should be completed before the end of the year and therefore on time for us.

We also the preparing ourselves and getting ready to file solid tumor trials to be started by the end of this year as well. We're excited because the outcome of our preclinical work in the solid tumor is second to none and as well again the myeloma field, so we think that this program will progress hopefully very nicely in 2016 and beyond.

With the I will leave the floor to Patrick Jeanmart, our CFO, who will take you over in more detailed operation issue, as well as financial outcomes. And then we will take the Q&A session at the end of the call. Thank you.

Patrick Jeanmart

Thank you, Christian. Let me start first with the position of days starting with the queue of advanced program. In more detail on the CQ of CHART-1 clinical trial being the first -- the ongoing trial in Europe and Israel, we've got positive recommendation from the Data Safety Monitoring Board in March 2015 recommending the company to pursue the recruitment of the of trial without amendment of the protocol. This recommendation was built on read out of interim data available in February 2016.

Then later in 2016 in just one we compete in all as Christian mentioned a few minutes ago. And we expect to after nine months last station visit being so the primary end point last visit of the last patient in end of April this year, precisely, April 30, which then allow us to confirm the guidance we gave to the market on the communications of the read out of the top line data of that trial by end of June this year. We also took some incentive with the European Medical Agency to which we initiated the certification of the non-clinical dataset of CQ in view of the future market filing that we intended to file in November this year. If you remember, we also filed in 2014 the certification of the quality packets. That would mean that then by November it will be only the clinical package that will have to fly to the EMA.

On CHART-2 being the US file, we received in December 2015 the approval to use of whole catheter for that trial, you may remember that we are using in the European Phase III C-CAT, the FDA allowing us to use C-CAT in U.S. will also allow us to compile data of the two trials to support on market approval in the U.S. On the oncology path, on top of the acquisition of OnCyte, OnCyte being the company that owns all the IP on the platform, we progressed significantly into the clinical development of our lead program being in CHART-2. We recently announced that we have starting whole month of the third cost. And we are confident that we could see posted 15th read out of the first four crossed by mid of this year if at all possible at ASCO beginning of June.

Importantly also, on the oncology platform on top of the patent that we're granted at the time we acquired the platform, we had at that time only two patent granted on the autologous approach. We were lucky to have a first allogeneic patent granted to the company but in November 2015 which were followed human data by a second patent also granted on the allogeneic. The first patent granted in 2015 was more method patent covering a lot of different methods. And basically it is what we could turn into an umbrella patent in a sense that it covers different methodology that ends up using a CHART with the TCR application cell. All companies are academic using that falls under general of that patent. The second patent granted recently is most specific to our technology of seen technology and there again, it's a significant asset to the company as it protects its allogeneic approach.

On the corporate and financial highlights, needless to mention the change of the name of the company moving from Cardio3 Biosciences to Celyad in May 2015 reflecting our ambitions to become a leader, a global leader in all cell therapies, not only cardiology. We also negotiated new agreement with our Chinese partners -- financial Chinese partner medicine and medicine over the term of that agreement will committed to finance the clinical development of CQ in Greater China against a future marketing license assuming we have market approval over there. Also we were lucky to have significant number of senior executives and directors that joined the company in order to strengthen the management buddies of the group, not only in Belgium but also in the U.S. We also recently opened our Boston offices and from there we will manage all of our clinical but also investor relations shortly in the U.S.

On the finance point, Christian mentioned it so we are compete to financing around in 2015, the first one being the project that was kept at the time at 10% of the market company meaning EUR 52 million, well oversubscribed among U.S. and European investors, 50-50, which was later on in 2016 followed by an IPO on the NASDAQ where we raised $100 million, again placed to Europe investors and U.S. investors this time, 80% placed to us, 20% place to others. We completed 2015 with a cash position of EUR 108 million, which if you look at the financial that we attach to the press release, it brings us in a very good position compared to the burn rate that we reported end of 2016 amounting to EUR 27 million, talking about the Europe deal operating cash flow. The expected burn rate of 2016 will be relatively higher but should be in about EUR 35 million. So that gives you a perspective of how long we could finance our operations.

Maybe just a few words before moving to the Q&A on one, the highlights of 2016 and then on some specifics of the financial statements. Into 2016, just as Christian mentioned, we were very happy to announce the partnership with Institut Curie, which will really help us developing the older clinical path and the huge potential of our NKR platform. Also, as I mentioned, we got the secondary generic patent granted by the USPTO, also progressing into the ongoing Phase I2a trial in NKR-2 trial.

I would finish this presentation with covering very quickly the financial statements, starting with the P&L. We reported a net loss of EUR 29 million, completely in line with our expectation and the guidance we gave to the market. We -- more importantly looking at the cash flow statement, so we have burn about EUR 27 million in operation this year to be compared with what we brought at mid of June and last year.

So again, in line with the guidance we gave to the market and this does not need to be reported to the cash in hand we have at the end of the year. And since finishing on the balance sheet, of course the total balance sheet increased significantly as a consequence of mainly two elements; the first one being the acquisition of the OnCyte Company and all the CAR-T technology platform which is reflected on the assets into the intangibles and in the liabilities in the contingent liability. The contingent liabilities should be read as the net present value of the future milestone and payments due to the former owner of the technology.

Then the second element that impact mostly the total balance sheet this year was of course the outcome of the two capital raising that we did, during which we in total gathered more than EUR 120 million which again you will find in the cash and shop investment on one side among the liability on the capital.

That ends the presentation, and I'm glad to open the Q&A session.

Question-and-Answer Session

Operator

Thank you very much, sir. [Operator Instructions] Our first question today is from the line of Mariana Bremen [ph] from UBS. Please go ahead.

Unidentified Analyst

Hi, this is for Andrew Peters. I have a couple of questions, one of them -- so you just want us positive, what is the next commercial steps that you guys are planning to undertake?

Christian Homsy

Sorry, Mariana, we did not hear the question very well. You said the CHART-1 is positive, what are the next commercial?

Unidentified Analyst

Yes, what are the next steps that you are planning to undertake like how should we be thinking about commercialization of secure?

Christian Homsy

Okay. Well, it's a good question. I think it will depend on the magnitude of the outcome in the CHART-1 trial. It is possible or probable that we will discuss partnership opportunities with pharma companies whether it's a large global pharma companies or local regional ones, specialty pharma companies in order to maximize the potential return we could have on this asset. So I think we don't want to speculate, we will wait to see the outcome of the trial before defining the various stats that we could follow for the commercialization.

Unidentified Analyst

I see. I was also wondering you have mentioned today during the presentation going into the solid tumor trials, and I was wondering what -- and also how informative are those in hematological trials is going to be for the solid tumor?

Christian Homsy

The solid tumor trials are mostly there to determine the maximum coverage of dose, as well as the PK. So the kinetics of the product so that we can start our next trial in solid tumors, as well as the Phase II trial in project with the answer to the remaining questions we have. In other words, how many injections need to be done, how separate one from the other they should be. If we have to take what has happened in animals, we know we're going to be able -- we're going to have to probably inject two or three times the product over a course of couple of months. And -- but that will be led by what we see in the human trials.

Unidentified Analyst

And one more, like you mentioned earlier today that you think that the technology is going to be a highly, it could -- can be combined with other immuno-oncology therapies that are out there. Are there any trials being planned and is there clinical work that's been done? And if such trial would be underway, are you thinking about doing it alone or in partnership?

Christian Homsy

It's actually the other way around. We believe that our product -- our product candidates can potentially be active by itself. However, we're going to be testing -- like we said for the patient in minimum models that demonstrated that for us was not adding any value. We probably will do the same with other immuno-oncology products such as NTPG-1 or anti-PIG-1 etcetera. But again, this is where we need to progress step-by-step and see if the hypothesis that we have derived from the current animal work do hold in addition to pre-clinical work. All this should be completed before as we can start our next solid tumor trials before year end.

Unidentified Analyst

That's all. Thank you very much for taking the questions.

Christian Homsy

Thank you.

Operator

Your next question is from the line of Ed Tenthoff from Piper. Please go ahead.

Christian Homsy

Hello, Ed.

Edward Tenthoff

Hey, how are you? Thank you very much for taking the question. I just want to congratulate you guys on a very successful R&D Day in New York today. Two quick follow-ups if I may, the -- when it comes to deduced clarification, did you say that the Phase I NKR-2 update would be at ASCO and that you would actually start solid tumor trials by year end 2016? Are those two accurate statements?

Christian Homsy

That we would start solid tumors by the end of 2015, that is accurate. We will be -- we have a poster presented to -- that we will -- in which we will be representing data at ASCO whether it will the full four cohort or whether we're going to have 11 or 12 patients is yet to be determined because the trial is progressing quickly but some of it is not always in our control but things are looking very positive for the moment and I think we will be able to report the data at ASCO.

Edward Tenthoff

Awesome, that's great to know. Now at the R&D Day, you guys laid out a very ambitious plan, both in terms of solid tumors but also in terms of some of the follow on products such as B7 card and NKR-30. So what is the kind of sequence in terms of auto-LO [ph] initiation? When do you think you could actually be in the clinic with your first allogeneic product?

Christian Homsy

So we gave guidance at the R&D Day that we should be in the clinic next year with our other products, the first other product NKG. We are looking forward to doing this with also with some partner that expect interest in this. We will see that it materializes on time but certainly we are saw that trial over the course of 2017.

Edward Tenthoff

Okay, excellent. Great updates and I'm excited for the data this summer.

Christian Homsy

Thank you.

Patrick Jeanmart

Thank you.

Operator

Thank you very much. The next question is from the line of Roderick Verhelst from Petercam. Please go ahead.

Christian Homsy

Hello, Roderick. Roderick you should be on mute.

Roderick Verhelst

Hello, are you guys hearing me now?

Christian Homsy

Yes.

Roderick Verhelst

Sorry. First, thank you for taking my questions. I wanted to touch on the combination treatment. If I understand correctly, you guys are not planning and you actually see your product -- standalone product, is that actually based on the data that you see now in the Phase I trial because it seems that you are quite confident. Second question is bit on the dosing, you already indicated that you are going to extend additional cohorts on top of the originally planned four cohorts, and this is bit surprising because if you look at the concentration being invested in cohort three and four, that's more than the same concentration that's used for the CA-19 quality product. So why do you want to -- I know that you want to cohort the very limit on the safety level but it's a bit surprising for me that you would go to additional concentration levels. And where do you want to stop it? Is it the additional three levels or do you really want to push it until you see clear and safety issues? And then the last question is bit on the partnering, you said it a couple of times, you also mentioned it now that you're looking for in the pharma partner, and now you also indicate that it is likely linked with the allogeneic platform, can you please confirm this? Thank you.

Christian Homsy

So the first question was on the dosage, and the cohort of our Phase I study is the maximum tolerated dose. I think we are still at very low levels compared to other CA-19, we're about -- this at cohort three will be about 30x lower than other CE-19 trials. And also about in the same we'll go lower than what has been found in animals. So we believe that it's just lightening, we're going to have to pursue -- to additional three cohorts to get in the ranges of the other companies, as well as own animal data. So we're very far yet from what the others have done. Remember what the dose we reported, four dose versus what other companies report, which is dose per kilogram of patients. So this is a bit different. So does that answer your first question?

Roderick Verhelst

Yes. And can you already given indication on the dosage you're going to test in the new reported into open?

Christian Homsy

Yes, we continue to increase by half the log at each time. So now we're -- those cohorts, the dose number four is circulating. So we're going to be going to 100 million cells and then 300 million cells and then 1 billion cells.

Roderick Verhelst

Okay, that's very clear. Actually my first question on what's on that you're quite clear, that you're not really looking into the combination treatment side? Not at this moment because you see your product has done the lone product and my question is bit -- if that directly linked with the data that you see from the Phase I trial?

Christian Homsy

No, it is not. The data we have from the Phase I trial, still, as we said in very low doses. We would see what the outcome is on this as we progress through the doses. However, the mode of actions we've had are very -- tackle the tumors from the four different angles including the release in the break angle. We have lining expressions on MDX season [ph] and also expression of the ligands on interior cells. So we are attacking the tumor from a number of different angles and which we believe would make the combination treatment less relevant for us. That means that we will never ever use any of those, well, certainly not, we need to touch that but for the moment at least, in animal models it doesn't look like it's going to be an important -- as I feel, critical learning for us.

Roderick Verhelst

And may I as well repeat also my last question, it was on the partnering. You indicated a couple of times during the R&D presentation, and also now during this presentation you indicated that it's going to be linked with the allogeneic part, now the allogeneic parts that you guys have, can you confirm this or it's indicated that the partner is going to come in from the allogeneic platform?

Christian Homsy

Well, the partnership that we're talking to -- the pharma companies that we're talking, we are talking to a number of them. Some express more interest in the allogeneic portfolio other in the portfolio. I think the allogeneic has put up some demand for some investors that coming -- some companies widely taking care of two program but that I mean not for others. So it's a good when we say which one ran out first but we certainly want to push forward with the partnership discussion and collaboration on many of our actives.

Roderick Verhelst

Okay. So it's actually going to be different types of partnerships with different parties on the respectively different platforms, okay. Can you give also the timing on these discussions or is it maybe too soon to give an indication?

Christian Homsy

It is too soon. Roderick, thanks for trying but I think it's a good try but it's bit distinct for us, again, it's on the timing.

Roderick Verhelst

Okay, thank you.

Christian Homsy

Thank you.

Operator

[Operator Instructions] The next question is from the line of Michael Flemix [ph] from KBC Securities. Please go ahead.

Unidentified Analyst

Hello, good evening. I have one question left. At the moment, filing, so for example, if also developing an allogeneic CAR-T self-help line. And I was wondering since your last patent approval and if there are developments or developments of other companies, for example, our currently infringing your quite patent.

Christian Homsy

Michael as you know there is research exemption for anyone working in the field, in other words, until you go commercial no one infringes anybody but if to be clear based on the currency pattern, and until it is challenged or revoked, actually it is revoked actually, that patent does cover any allogeneic cohorts whether it is the company that mentioned or any other, they would be infringing our current line of patents, yes.

Unidentified Analyst

Okay, that's clear. And that's it, all the other questions were already answered. And also congratulations on the excellent R&D Day as today.

Patrick Jeanmart

Thank you.

Christian Homsy

Thank you, Michael. I appreciate it.

Operator

Your next question is from the line of Andrew Peters from UBS. Please go ahead.

Christian Homsy

I believe the question of Andrew were addressed by Mariana, the first one. So we may move to the next question.

Operator

Okay, thank you, sir. The next is from John Savin from Edison. Please go ahead.

John Savin

Thank you very much. After all the fantastic R&D stuff, I thought I'd ask a financial question, related to R&D though which is, if things move forward very quickly, any of the continued liabilities which I believe are due to the acquisition last year, going to fall due -- in other ways, aren't going to be turning out, I need milestones, the shareholders.

Patrick Jeanmart

No, the next one is actually due at the success of the Phase I being initiation of the Phase IIb trial, so that will be both 2017.

John Savin

Okay. Are there any further magnitude you can give us?

Patrick Jeanmart

We did not give guidance and we're not giving guidance from that.

John Savin

Okay, thank you.

Operator

[Operator Instructions] The next is from the line of Mark Pospisilik. I'm sorry, if I said that wrong. From the line of Kempen. Please go ahead.

Mark Pospisilik

Hi guys, few questions from me. When on the mid-2016 topline data for the NKR-2 program, I was wondering if you could add any currency or what to expect? And I know it's focused on dose and safety plus if there is any reasonable expectation of signs of efficacy at all even if it's minimal or insufficient sign, essentially used adults, simply two platform to show any efficacy, the urban regional expectation or whether we might see something at that point? And I guess a related one is, if you have any expectations onto the timescale as a response and we ask ourselves because in immuno-oncology as you know, the responses are different than obviously the conventional cancer therapy. So I'm going to guess that expected time is going to be too long so that same as 2016, I mean not a good time to kick in? Thanks.

Christian Homsy

So we do expect to have efficacy data reading in around ASCO throughout June, it's possible. I wouldn't bet that that would happen because we're still very bullying the doses. But because of the affinity of the ligands with the receptor, that may actually occur. But it's -- I wouldn't bet on it but it may actually occur, we will see. We certainly are entering within those five/six, we are like -- what would be the expected efficacy doses, so let's see -- now you need to understand Mark that contrary to the other criteria, this is not the criteria that we inject and then it expands through in a way that -- in a very significant way in the body in which basically the body serves as the petridish. In an instance we injected those and got those efficiently getting because ourselves going after about 10 days. And that is by design, because we want to get rid of all these issues related to long-term persistent of this cells and I think the R&D day-to-day that was very well presented as being an important advantage. So that was the question I would ask. You said any other Mark? Mark? Your mute is…

Mark Pospisilik

Sorry, I was on mute again, sorry. Yes, the second question was up on the timescale, the profile of NKR-2 is quite different from the conventional CAR-T's and which I mentioned the sales, it's a smaller dose and the cells are clear relatively quickly. It was more of an induction of an immune response but for the time scale, you having clarity on that is simply…

Christian Homsy

We should see some -- actually it's sufficient to do something serious with the CAR-T. So in other words, responsible in a couple of weeks and then potentially offer a second injection, a complete response but this is again, premature, we need to wait until we see the outcome of that Phase I data.

Mark Pospisilik

Okay, great. Again, one just quick follow-up with -- because you distinguish pharma quite clear from the other CAR-T's, I mean which platform or candidate would you appoint to as the most comparable in profile to than CAR-T?

Christian Homsy

Well, we have a very unique position in market, not only we have a recapture that is very broad in its applicability, so it can target many, many different cancers and I don't think any other company or academic institution has anything close to that, but also we have probable in users extremely strong efficacy, reeling and picking up settings meaning that we are installing tumors and liquid tumors and I don't think anybody else could be compared to that. If you add to that fact that we have another genetic tolerance platform and that we have a fairly strong hold of the genetic space, I think that this opportunity that came across and acquired in generic is absolutely limit.

Mark Pospisilik

Okay, thank so much for the clearance.

Christian Homsy

Next question?

Operator

Thank you very much. The next question from the line of Bruce Jackson from Lake Street Capital. Please go ahead.

Bruce Jackson

Hello, good afternoon.

Christian Homsy

Hello, Bruce.

Bruce Jackson

So a couple of questions to clarify the timelines. With the European CHART-1 submission to the EMEA that takes place at the end of this year, then what do you think you might get European approval and would you commercialize the product immediately or will there be a slight time lag?

Christian Homsy

Well, as you know Bruce in Europe, we need to get approval, we also need to get reimbursement from the various countries and that process isn't centralized and so you have to get that from various countries independently from each other. The regulatory country has anywhere between 12 and 18 months to get approval for product once affidavit has been filed. So we think, we hope we will soon get based on the nature of the product, there would still be hope to get the marketing authorization before the end of 2017 if the trial outcome is positive. And if that is the case then we will mostly start commercialization on a limited scale in the beginning of 2018 until we get reimbursement for C-Cure in various geographies.

Bruce Jackson

Okay. And then with the CHART-2 trial if we begin enrollment during the second half of 2016, how long do you think will take to fully enroll the trial, do the follow-ups and then submit the, are you still thinking about the BLA?

Christian Homsy

Yes, so the CHART-2, there is no reason for CHART-2 to last longer in terms of enrollment and follow-up later than CHART-1 and CHART-1 has taken from first patient to last patient follow-up, has taken 2.5 years. So, that's one of the things Celyad is quite basically, proud about that we are capable of actually executing strategies very swiftly and there is no way CHART-2 should be different.

Bruce Jackson

All right, super. That's it for me. I got all my immunotherapy questions answered this morning. Thank you.

Christian Homsy

Thank you.

Operator

There are no further questions waiting.

Christian Homsy

All right then, if you don't have questions we will close the call. Thank you very much for attending, and we look forward to exciting 2016.

Operator

Thank you very much. Ladies and gentlemen that does conclude the call today. Thank you all for participating. You may now disconnect your line.

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