ERYTECH Pharma S.A. (NASDAQ:ERYP) Q2 2022 Results Conference Call September 13, 2022 8:30 AM ET
Gil Beyen - Chief Executive Officer
Eric Soyer - Chief Financial and Chief Operating Officer
Dr. Iman El-Hariry - Chief Medical Officer
Conference Call Participants
Jacob Mekhael - Kempen
Good day, and thank you for standing by. Welcome to the ERYTECH Business Update and Financial Highlights for the Second Quarter of Year 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Gil Beyen. Please go ahead.
Thank you. Good afternoon, good morning. Bonjour a tous. Thank you for joining us for our business and financial update call to discuss the business highlights year-to-date and the financials for the first six months of this year. We announced our business and financial update yesterday evening, and the press release and the webcast presentation can be found on the Investor Relations page of our website.
Joining me on the call today are Dr. Iman El-Hariry, our Chief Medical Officer and Eric Soyer, our Chief Financial and Chief Operating Officer.
Before starting on Slide 2, I'd like to draw your attention to the disclaimer reminding you that today's call includes forward-looking statements such as related to the company's operations, timelines, and financial. And as you know, they all involve risk and uncertainties that could cause actual timings and results to differ.
Switching to Slide 3. The agenda for the call, and quite standard. I will, as usual, start with a short introduction and present the key business highlights of the year-to-date, focusing on Q2 and events that occurred after our call, last call in May. After this, Eric will present an update on key financials and the cash balance, and he will also summarize the strategic priorities and expected milestones for the year to come, before we then open the lines for Q&A. All three of us will be available for your questions afterwards.
Now moving to the presentation, a quick company overview of Slide 4, it's for anyone new to the company and for completeness. Brief overview of ERYTECH. ERYTECH is focused on the development of [indiscernible] based therapies red blood cell based therapeutics. And we’ve been in this field since quite a time, we have been working first with a lead product eryaspase Graspa, with which product we established the proof of concept in leukemia in pancreatic cancer, two different clinical trials. And I'll explain more about this, we recently decided not to pursue further development of eryaspase. And this is following a setback, a phase 3 trial that did not achieve its primary endpoint, and also new regulatory hurdles that we encountered for our development in P&L. More about this in a minute.
So the focus is now really on our preclinical pipeline. Preclinical pipeline, which includes work in rare diseases and work also on Extracellular Vesicles, we call it ERYCEV. Erythrocyte derived Extracellular Vesicles, exosome-based. Exciting possibilities there, earlier stage, obviously. And then the other key element is strategic partnering that we have announced since quite a while and where we're making good progress.
And then on Slide 5 brings me to the key items for the second quarter and year-to-date. Quite an intensive. So first of all, obviously, there was -- in April, the sale of the Princeton facility. Princeton facility is a state-of-the-art cell therapy facility that we built in 2018. This was in view of the phase 3 clinical trial with Graspa in pancreatic cancer, for the trial and for the early commercial.
On the trial that did not turn out positive, this facility was clearly too big for our needs. We then launched the sales process and we are to find a good partner with Catalent. We sold the facility to Catalent, one of the leading CDMOs in cell and gene therapy, and consideration we received was $44.5 million. Also, our entire team -- site team transferred to Catalent, this was in May. That was the first item.
The second item was more difficult one. This was in August recently, and this is where we have to announce that after a long development path and encouraging data in ALL, hypersensitive ALL, we decided to no longer pursue our plan to in -- our path to a U.S. approval. You may remember that we had been encouraged by positive data that we saw end of 2020 in a phase 2 trial run by the NOPHO, which is the pediatric oncology group of the Nordic countries in Europe. Based on this trial, we have a long dialogue with the FDA, dialogue to explore the path to approve an indication based on this IST run in Europe.
The dialogue rounded up very well with a good pre-BLA meeting already more than a year ago, this was in June 2001. After which we had multiple exchanges and data requests with the FDA, including the submission of pediatric plan, this was in July, initial pediatric plan, IPSP. And
there we received feedback in August, feedback that asked for additional clinical data. So basically, then we had a long evaluation of this feedback, the possibilities, pros and cons. But after all -- and taking into account this need for additional data and the need -- and the changes in the competitive landscape, approval in this very small indication, we took the difficult decision to abandon our plans with Graspa in ALL. So clearly, we announced this a few weeks ago and it's the start of a long development in the long work with Graspa in ALL.
Then another element, the number three here on this list is that we recently received the feedback or the results from the start of the TRYbeCA-2 trial, [understated] TRYbeCA-2 trial was a Phase 2 trial to evaluate eryaspase Graspa in metastatic TNBC, triple negative breast cancer. This was a trial a view of building on the pancreatic trial and a view of broadening out to other solid tumors that will get enrollments 64 patients. But we stopped enrollment when we saw the disappointing results of the pancreatic Phase 3 trial with TRYbeCA-1 trial, we stopped enrollment at the end of last year. So we have 27 patients enrolled at the time, 11 and 14 respectively -- in their respective groups, it was a randomized trial.
The trial’s Steering Committee met now very recently in September and reviewed the results of these patients. Overall conclusion was that the treatment was well tolerated and that no clinical benefit was demonstrated. Now it's in fact difficult to draw any conclusions, given the immature closure of the trial and the small number of patients. But absent a clear signal, this result reinforced our decision to stop the Graspa development altogether.
So now obviously, this means quite a change for the company with the lead being abandoned. So the priorities for the company now is A, deep restructuring. Cost reduction and restructuring. We launched it already in earlier this year. We have performed staff reductions in U.S. and are now -- have launched a restructuring plan to all -- social plan in France, this has been launched and now also recently approved by the Labor Authorities. And then Eric will provide more detail in terms of what is the financial impact of this cost saving plan.
Second priority after the sort of earlier change is clearly to focus on our preclinical programs. We have been -- work ongoing as I mentioned in rare diseases and then this specifically, the new kid on the block, but in the meantime quite nicely advanced is a work on our Extracellular Vesicles, the exosome-like program. Vesicles derived from loaded red cells. So it's building on our ERYCAPS technology. We encapsulate drugs in red cells and then we do the physical issue.
We have presented first results, this was feasibility in vitro earlier this year and we are now working on vivo work and also further feasibility. So this technology holds a lot of promise for what we believe in the -- promise on immune oncology application on the one hand and potentially also for the delivery of genes of RNA, non-viral gene delivery, for example. So work to be done still, but at least interesting and quite an exciting platform to work on. More to come from the results soon.
And then the third and the last bullet on this slide is the strategic partnering. So we've launched this process already in November last year after the phase 3 setback in pancreatic cancer. First step has been the sale of the Princeton facility to Catalent, and we are now with – obviously, we continue with this, when we stepped behind this we then broadened out -- looked at very different strategic options. We have now -- after a broad screening of potential opportunities we’ve zoomed in on a few valuable and important lead options. And we mentioned in the press release, we hope to be able to provide an update soon in the fourth quarter as we said.
And the partnering, where and which thing is really building on the -- what ERYTECH has to offer. We are a listed company, we have an -- Eric will explain, solid cash basis. We have a great team left after restructuring. We have a manufacturing facility in the -- cell therapy manufacturing facility. And obviously, we have our Eryaspase and ERYCEV platform, so around these elements we are -- we have searched for partnering options, and we're now pursuing very unique options in -- as we speak.
So with this, I will stop the introduction and handover to Eric, who will provide an update on our Q2 and first half financials. We will also at the end summarize the news flow, after which we'll come back, the three of us, for Q&A. Eric, the floor is yours.
Thank you, Gil. Good morning, everyone. Bonjour a tous. We are now reviewing the financial highlights for the first half of this year in Slide 7 of the slide deck and we're starting with P&L information.
As Gil just explained, a number of unusual significant events happened in the first six months of this year from the sale of the U.S. production facility to the restructuring and resizing of the company's operation in France. And these transactions obviously impacted our financial results as of Q3. But beyond the one-off impacts of these significant unusual transactions as we call them, the financial results for the first half of '22 confirmed a steady and notable decrease in operating expenses and cash degradation. And that's in connection with the completion and closure of most of our clinical development activities and the related decrease in protection activities.
With that, net loss for the first half of 2022 was EUR1 million, which is a EUR27 million improvements over the same period of last year and obviously, related mostly to the EUR24.4 million net capital gain on the sale of our production facility in Princeton.
Operating expenses of EUR25.2 million were also showing a EUR6 million decrease, that's minus 19% year-over-year with a EUR5.9 million decrease minus 25% in R&D expenses, again related to the decrease in clinical development activities. Total operating expenses, including asset improvement provision of EUR2.5 million on Lyon production facility related to the ends of eryaspase operations, and a EUR1.9 million provision for restructuring and resizing -- also [indiscernible] just mentioned, related to the French operations.
Income tax included also a provision as of June 30, 2022 of EUR3.7 million, that's actually $4.1 million, reflecting the best estimate to date of the tax impacts of the capital gain from the sale of the Princeton facility.
So now moving on to Slide number 8 for comments on cash. So as of June 30, 2022, ERYTECH cash and cash equivalents of EUR53.3 million, that's approximately $55.8 million, compared with EUR33 7 million as of December 31 last year. This is a EUR19.6 million increase in cash position during the first half of '22, and that was the result of the net cash of EUR37 million, 30%, when EUR6 million received from the sale of the Princeton facility net cash inflow, EUR20.4 million of net cash utilization in operating and investing activities, obviously including the sale of the Princeton facility. And EUR2 million of net cash generation generated in financing activities, including a EUR3 million pre funding of the expected 2021 R&D tax credit.
In the periods the variation of the U.S. dollar against the euro led to EUR0.4 million positive currency exchange impact.
I wish to remind that ERYTECH has not drawn any charge on the convertible loan facility, the so called OCABSA, since last year 2021. And there are no outstanding and converted notes. The OCABSA financing line has expired in June 2022.
Already this year the company initiated as Gil mentioned that, already a deep restructuring and cost reduction program, which is now further intensified with a halt of the BLA process. And considering this ongoing initiatives to reduce operating expenses, the company believes that its current cash position can sense its current programs and planned operating expenses to meet 2024.
Now, and before we move on to Q&A, a very quick summary of our key strategic priorities and upcoming milestones in the next six months, and that's slide number 9 of the presentation. We're mentioning the still ongoing rESPECT study, this is an investigator responsive trial, Phase 1 trial in first time pancreatic cancer with results expected by the end of this year. But again, the company has no further plan at this stage to continue developments with eryaspase in this indication.
In closing, main expected milestone for the rest of the year will be the update on the ongoing strategic review and partnering process. The sale of the Princeton facility was already a first step in that process that gave us the means and latitude for a strategic foundation of the company. As Gil explained already, we are in this process of evaluating variables strategic options. And we expect we hope to give further updates on these strategic initiatives in the fourth quarter of this year.
With that, I would like to thank you already very much for your attention. And we will open the call for Q&A. Gil, Iman and myself will be happy to answer any questions you may have.
Operator, over to you.
[Operator Instructions] Our first question comes from Jacob Mekhael with Kempen.
I just had one. Maybe if you could just elaborate on what kind of partnerships you're looking at at the moment, and just give a bit more color on that?
Jacob, Gil here. So basically as we have to face the reality that we don't have a lead program anymore. So we still have the early stage programs with the real sort of the focus of our partnering is really sort of trying to leverage our listings, our cash, our preclinical programs. And obviously, the team that has done a great development even if the results were not what we hoped.
And so what this brings us to is merger/reverse-merger that type of options. And clearly, we can add something to not accompany and what obviously, we don't have is a lead program. And so basically, a synergistic way of bringing companies in the space together. So also, our facility -- our facility in Princeton had a lot of value, our facility area was smaller, but still also for a cell or a gene therapy company clearly can bring us significant value.
Does that answer your question?
Yes, it does. Thank you very much.
At this time, I am not showing any other calls in queue. I would now like to turn the conference back to Gil Beyen for closing remarks.
Okay. Thank you, Michelle. Just want to thank everyone for participating in this call, for your attention, for your question, for your continued support of ERYTECH. And wish you a great rest of the day. And I look forward to speaking again at the next occasion, at our next call probably. So thanks a lot and have a great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.