Regulus Therapeutics Inc (NASDAQ:RGLS)
Q2 2016 Results Earnings Conference Call
August 02, 2016, 5:00 pm ET
Alison Wey - Vice President, Investor Relations and Corporate Communications
Paul Grint - President, Chief Executive Officer, Director
Jay Hagan - Principal Financial Officer, Chief Operating Officer, Principal Accounting Officer
Matthew Luchini - BMO Capital
Alan Carr - Needham & Company
Liana Moussatos - WedBush
Jeff Chen - Cowen and Company
Bill Tanner - Guggenheim Securities
Good day, ladies and gentlemen and welcome to the Regulus Therapeutics second quarter 2016 earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded.
I would now like to introduce your host for today's conference, Ms. Alison Wey, Vice President and Investor Relations and Corporate Communications. You may begin.
Thank you Vicki. Good afternoon everyone and thank you for joining us to discuss Regulus' second quarter financial results and recent events. We are joined today by Dr. Paul Grint, Chief Executive Officer and Jay Hagan, Chief Operating Officer. Paul will provide opening remarks, Jay will review our financials results and then we will open the lines for questions.
Before we begin, I would like to remind you that this call will contain forward-looking statements concerning Regulus' future expectations, plans, prospects, corporate strategy and performance, which constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our filings with the SEC.
In addition, any forward-looking statements represent our views only as of this date of this webcast and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements.
I will now turn the call over to Paul.
Thanks Alison. Welcome everyone and thanks for joining us this afternoon. The second quarter was very busy and productive on multiple fronts. I will spend a few minutes this afternoon highlighting some of our accomplishments from the second quarter, discussing the FDA's request regarding the clinical hold of RG-101 and outlining what we have to look forward to over the next few quarters.
I would like to spend a minute discussing RG-012 for the treatment of Alport syndrome. In May, we presented preclinical and longitudinal data from ATHENA, a natural history of disease study in patients with Alport syndrome, a debilitating chronic kidney disease at the European Renal Association meeting. We are very excited about this program and the opportunity it presents. It's a high unmet medical need on open population with no existing therapy. Data from the Phase 1 study that we completed last year plus the ATHENA data have informed the Phase 2 proof of concept study design.
We recently submitted the Phase 2 protocol to the FDA, the details of which we will share when we enroll the first patients in the study. Data from this study could be available in the second half of 2017. And if favorable, our partner Sanofi Genzyme has the option to take over the development program. If the option is exercised, we would receive a milestone payment and recoup the vast majority of our development costs incurred to-date. Downstream, we are eligible for milestones and royalties and, importantly retain rights to co-promote in the U.S.
Now turning to RG-101 for the treatment of chronic hepatitis C virus infection. In early June, we announced that we met the primary endpoints in the ongoing Phase 2 closed-face sandwich study of virologic response at 12 weeks following treatments. RG-101 combination therapy has to-date shown compelling SVR rates with a shortened four week course of therapy, delivering up to 100% response rates in combination with Harvoni and nearly 90% for the Olysio and Daklinza arms.
Also in June, we expanded our clinical collaboration with GSK to conduct a dose ranging Phase 2 study of RG-101 with GSK's long-acting parenteral formulation or LAP as a potential single visit cure for HCV. Data from the current ongoing study of RG-101 in combination with GSK's investigational NS5B polymerase inhibitor, we hope to report at ASLD in November.
As you know, last week we received a formal clinical hold letter from the FDA requesting information required to address the clinical hold that we previously announced. The FDA has requested detailed safety data analysis from preclinical and clinical studies, exploration of potential mechanisms of hepatotoxicity in nonclinical models, review and input from independent hepatotoxicity experts, the additional PK data from the U.S. Phase 1 study and the risk benefit assessment for the proposed therapeutic regimens containing RG-101.
Much of what is being asked of us is information we have or can obtain over the next couple of months. We anticipate submitting the aforementioned information by early Q4. Once the FDA receives our written response, we will be notified of their decision within 30 days. Our strategy remains unchanged for RG-101. We are interested in developing a safe and effective treatment for HCV that could be administered in four weeks or less.
We believe such as regimen is highly differentiated and represents a significant improvement over current standard of care. This is being further validated by the market research conducted with physicians and payors. Over the next several quarters, we expect to report more data from these ongoing studies, which will help define the breadth of RG-101's potential and form the basis for the optimal commercialization and partnering strategy.
The back half of 2016 looks just as busy as of first half during which we plan to initiate the RG-012 Phase 2 study, report data readouts from the ongoing closed-face sandwich study and the GSK collaboration, address the clinical hold and announce a new clinical candidate at our first R&D day in early December.
With that, I will turn the call over to Jay to review the financial results. Jay?
Thanks Paul. We ended the second quarter with a strong balance sheet. Cash, cash equivalents and short-term investments of $108 million. This compared with $106 million at the end of the first quarter and $115 million at year end 2015. Given our current operating plan, we anticipate ending 2016 with approximately $75 million to $80 million in cash and we believe this will take us into 2018, at which time we expect several programs will have made significant advancements.
As you know, in June we secured a $30 million growth capital credit facility with Oxford Finance and received $20 million at closing under an initial term loan at very favorable terms. The loan provides for interest-only payments for the first two years at a rate equal to the sum of 8.5% plus the greater of 0.44% or the 30 day LIBOR rate. An additional $10 million will be available to us subject to the achievement of a certain specified milestone. We are very pleased with these terms and the flexibility it offers us.
We recorded revenue for the second quarter and six months ended June 30 of $0.5 million and $1 million respectively. This compared with $3.8 million and $8 million for the same periods in 2015. Revenue for first half of 2016 and 2015 consisted of amortization of upfront payments from our strategic alliances and collaborations. Second quarter 2015 revenue included $2.6 million for research services under our strategic alliances and collaborations. Revenue for the first half of 2015 included $3.2 million for research services and $2.9 million in preclinical and other milestones.
R&D expenses were $18 million and $34.8 million for the three and six months ended June 30, 2016, respectively, compared with $19.2 million and $32.6 million for the same period in 2015. R&D expenses were consistent for the three months ended June 30, 2016 and 2015, excluding one-time nonrecurring severance charges recorded in June 2015. The increase for the six months ended June 30, 2016 was driven by an increase in our aggregate clinical trial program costs.
G&A expense were $3.7 million and $8.8 million for second quarter and first half of 2016, respectively, compared with $5.8 million and $9.5 million for the same periods in 2015. These decreases were primarily driven by nonrecurring severance charges recorded in June 2015, partially offset by an increase in recurring personnel costs for the three and six months ended June 30, 2016.
Net loss for the second quarter was $21.1 million or $0.40 per share and $42.3 million or $0.80 per share for the first six months of 2016. This compared with a net loss of $21 million or $0.41 per share and $35.5 million or $0.70 per share, for the same periods in 2015. In short, our spend, remains d in line with our operating plan and the cash runway extends through some key milestone events, many of which Paul outlined in his remarks.
And with that, I will turn it back to Paul.
I think we are ready to take questions, Vicki. Thank you very much.
[Operator Instructions]. And our first question comes from the line of Matthew Luchini with BMO Capital. Your line is now open.
Hi. Thank you so much for taking the questions and congrats on the progress. So I just wanted to try follow-up a little bit on some of the information that's going to be going back to FDA, specifically if you could talk a little bit about the additional type of PK data that's been requested? And what, if anything, you might be bale to glean from it? And then secondly, does the detailed safety data that you will be submitting, does that include anything beyond what's already in the scope of the IND? And then just quickly on RG-012, I know the design is going to be coming up when the first patients is dosed but I was wondering if you could share a little bit about how quickly your expectation is to enroll patients off of ATHENA? I believe you indicated previously that was the plan into that study? And how we should think about the rate of enrollment into that trial? Thank you.
Matthew. Good afternoon. It's Paul. Thank you for the questions. So I will just take them in order. So the PK data and exposure data that the FDA has requested is data that comes from the Phase 1 study that we conducted in the U.S. So just to remind you, we open the IND with this Phase 1 protocol. It is a study looking at the PK of RG-101 in patients with either severe renal compromise or on dialysis. And so we are just in the process of receiving this data now. And so, not surprisingly the FDA has requested to see that. And so we will be providing that as part of our responses.
The second part of your question was the safety analysis. Yes, you are correct. We will be doing a safety data cut across all the studies with RG-101 that we have conducted. So that will include the original Phase 1 protocol that was conducted in the Netherlands, clearly the Phase 1 study that's in the U.S. currently together with the other two Phase 2 programs. So that is the sandwich design study and the GSK combo studies that's being conducted in Europe. So we will be doing a safety data analysis across all those studies.
And then on the question with regard to enrollment for RG-012. Yes, you are correct. It's our anticipation that some of the patients who enrolled in the ATHENA natural history study will be eligible for the entry criteria for our Phase 2 proof of concept study. So clearly, we hope to be able to role those patients over to the Phase 2 study. Beyond that, it's a little difficult at this point to predict enrollment. Clearly, we are using many of the sites that we used for the Athena study, sites both in the U.S., Canada and a number of European countries and Australia. So we have a number of sites participating in the Phase 2. And we are optimistic that we will get this enrolled in a reasonable time period.
Okay. Thank you.
And our next question comes from the line of Alan Carr with Needham & Company. Your line is now open.
Thanks for taking my questions. A couple of follow-ups on those. One of them, in terms of what the FDA wants, it sounds like obviously no clinical studies, but I guess can you give us a sense of how much might be needed that in terms of preclinical studies, if any? And then also, maybe give you chance to comment on some of the data from the natural history study and how that might have influence protocol design here for the Phase 2? In other words, can you give us an update on what you are thinking about primary endpoints and that sort of things for that?
Yes. Alan, this is Paul. And thanks for your questions. So with regard to the preclinical information, clearly as we talked about before, we have conducted a significant formal toxicology program with RG-101. There is a lot of information in the IND that exists and I think to be helpful to the FDA we can take a lot of that information and put into a format that perhaps would be more helpful with regard to answering that question.
Aside from that, there's a lot of other data as one things about, for example, the miR-122 knockout animal and other pharmacologic models on animals, animal work that's been done. So we are in the process of compiling all that data together with in vitro studies that we have done from a transborder standpoint. So we have a lot of information. I think it's really incumbent on us to put it into a logical format to help the FDA with respect to some of the questions they have.
So for the RG-012 proof of concept study, at this point we are not going to talk about the detail of the Phase 2 design. Part of the goal, just to remind you, there are several goals of the ATHENA natural history study, one of those goals was to see if we could identify patients that progress, let's say at faster rate with respect to decreasing GFR. And we have been able to do that in the ATHENA study. So that clearly is a patient population that we are interested in moving into the Phase 2 proof of concept.
Obviously measuring or having GFR as an endpoint is an important one in that study, but also we, I think as you recall, in the ATHENA study, we were doing significant amount of work on a lot of other biomarkers, both blood and urinary. And we will be including the ones that we believe are relevant that we have identified in the ATHENA study in the Phase 2 proof of concept as well.
But we look forward to starting the Phase 2 study in relatively near future. Once we have, we will share much more of the design with respect to the entry criteria, the nature of the overall design, dosing scheme and the tests that will be conducted on the patients.
I get it. Can you clarify one point, you submitted the protocol and it takes usually 30 days for them respond and if no response, then it's the clearance to go ahead then?
And our next question comes from the line of Liana Moussatos with WedBush. Your line is now open.
Thank you for taking my questions. Does the cash runway into 2018 include the milestone mentioned for Sanofi? And what disease areas are being considered for the fourth clinical candidate?
Yes. Hi there, Liana. It's a good question. As far as the cash runway goes, that assumes no opt-in from Sanofi. It's not that we can predict that, but we don't want to have that in our operating plan as a base assumption. So obviously if we are successful in demonstrating proof of concept and Sanofi opts the program, we have a much more significant runway from those proceeds.
Yes. Liana, this is Paul. In answer to your second question, with regard to the fourth clinical candidate, so I think as we talked before, delivery is critical. So we are very much focused on liver targets and kidney targets. And so we have candidates in those areas at the moment. There is a well through our process and that's where we are focused. We are looking at other organs and interesting targets. And one point I did make in the script, which we really announced today for the first time is that historical or really over the last few months, we haven't had the opportunity to talk much about our portfolio, not surprisingly much of the interest has been in the RG-101 program and the RG-012 program and RG-125 is clinical programs.
But we are really looking forward to our first corporate R&D day which we plan to host in early December, where we are going to have the opportunity to talk a lot more about the pipeline as well. The candidates that we have coming through, the important disease areas that we are working in but also I think which something the people will find very interesting, just the overall way we go about our target identification and validation process and how we now, in my view, have a very sophisticated way for developing oligonucleotide therapeutics targeting microRNAs. So I think of it will be a very exciting time at the R&D day.
And our next question comes from the line of Jeff Chen with Cowen and Company. Your line is now open.
Hi. Thank you for taking my question, maybe one for Paul. In terms of preclinical studies, are there any additional studies that you are planning to conduct to perhaps review some mechanism of actions that the FDA has requested? And also have you talk to hepatotoxicity experts and if you have gotten any kind of feedback and impressions from them? Thanks.
So yes, a good question. So there is a limited set of studies that we are contemplating conducting on top of, as I said, what we have already done which is a significant program. And basically let me just take a step back and just remind you what we have seen in the two serious adverse events reported that we have discussed in some detail on previous goals and also at EASL medical meeting. What we are seeing is isolated increases in bilirubin. And this is not seen with concomitant, significant concomitant increases in other liver enzymes.
As we look at the overall pharmacology and toxicology program which we have conducted, we have not seen increases in bilirubin in a number of different animal species or studies that we have conducted. And so right now for us, there is no obvious mechanism that would associate these. We have some ideas and we will continue to pursue those. But as I indicated earlier, we will be putting all the data together in a logical fashion that helps the FDA address some of the questions that they have asked.
With regard to hepatotoxicity experts, we have not at this point solicited significant feedback. What we need to do for this group is to put together all the safety analysis that we have underway. Clearly they need an overall picture of the program and what we have seen, not just from the hepatotoxicity standpoint, but the overall safety of the program. So we are in the process of doing that. Once the data packages are complete, obviously they will go to hepatotoxicity experts and we await their review with interest.
And our next question comes from the line of Bill Tanner with Guggenheim Securities. Your line is now open.
Thanks for taking the question. Jay, I had one for you. You mentioned or Paul may have mentioned, but maybe you could speak to it, on the Alport program that if Sanofi Genzyme opts in, that you the company will receive a milestone payment. I think the comment was that will largely cover the investment. So can you give us a ballpark as to what that number is? If you already mentioned it, I apologize.
Yes. The specific numbers are not disclosed in the contract. So I think until we achieve them, when we will be disclosing exact amount but there is a milestone payment at the option decision plus reimbursement for the vast majority and that's as close of an approximation we can give you on the clinical development costs incurred to-date. So we know what that number is. And so in terms of giving you a sense of guidance, it's a significant number that would extend our cash runway is what I was alluding to. But that's not in the guidance that we have provided when we said we had cash into 2018 with our existing balance sheet.
Got it. And not to pin you down, but that extension, would that be like 2019, give an extra year, something like that? Or can you comment as to that?
Something like that.
Okay. And then Paul, I had a question, just on some the needs that the FDA has relative to 101 and I know in the press release there was a comment about risk benefit assessment for the proposed therapeutic regimens. Maybe you care to explain a little bit what that actually entails? How that's done? And then I guess, absent a clear understanding as to the mechanism, how do you actually come up with some kind of a proposal that has some scientific or medical underpinning?
Yes. It's a good question. So as we have laid out, the FDA asked us a for a number of different things, many of which were logical and we anticipated they would request. They have asked for the risk benefit analysis which personally I think is a great opportunity for us to layout how we see the positioning of RG-101 as we talked about with either significantly shortened oral therapeutic courses or potentially what really excites us is the one visit cure situation.
Just to remind you, we are in Phase 1 in the U.S. Obviously IND is being filed, but we have not at this point had the opportunity to dialogue with the FDA and help them understand where we are trying to take this program and if you like, how it's differentiated from the current approved oral DAA agents that have treatment courses for eight to 12 weeks generally. So I personally think that this request for risk-benefit analysis gives us I think a tremendous opportunity to review somewhat what's happening out there in the real world based on the DAA experience but also more importantly to allow us to put our case as to where we see RG-101 could potential play a role in the future.
Yes. Okay. And then maybe just one last one or one other one, so as it relates to the potential mechanisms of hepatotoxicity, you mentioned that in the IND there were some information. I wasn't really sure if you felt like that addressed it, but I am assuming that if there is any work that needs to be done, these would be somewhat standard nonclinical hepatotox testing?
Yes. You are correct. Yes, the last part of your question there, you are correct. What I was alluding to, just to remind you, we have put some of the data out publicly. We conducted a tox program that's involved multiple doses. So this was actually four doses given to mice and nonhuman primates over a period of 12 weeks at very significant multiples above where we are in the clinic. And to this point, we haven't seen changes in bilirubin or clear evidence of hepatoxicity. So I think the key question here really is, if you are like on target or off target tox and we have not seen anything to this point that would suggest inhibition of mir-122 is directly related to bilirubin changes. So I think you raised in the second part of your question exactly, there are certain other tests that we are currently working through to see if we can identify some other potential mechanisms.
And then just one, you mentioned that you file and 30 days later the FDA typically would give a response and somewhat unfamiliar on my part, in the history, what's the likelihood that this would need to be done iteratively? I am assuming obviously, the company wants to put forth the best foot and have all the data that FDA would need to resolve it, but is there a probability that they would say, okay, this looks good, this looks good and you need to go back and do a little bit more here?
As a company, we are going to and we have indicated the time frame, we are going to take the time to provide the most comprehensive response that we can based on the data set that we currently have or the data that we are going to generate in the near future. I can't put a percentage, I don't think or we can't estimate at this point. Clearly, our goal is to get off clinical hold. We can't really speculate at this point. So we will do the best job we can to answer all the questions with the information in hand.
Got it. Okay. Thank you.
Bill, this is Jay. Bill?
There is a mandated 30 day clock they have to reply.
Right. Okay. Perfect. All right. Thank you.
And I am showing no further questions at this time. I would now like to turn the call back over to Dr. Paul Grint for closing remarks.
Thank you again for joining us on the call today. We look forward to providing additional updates throughout the year. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.
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