ERYTECH Pharma S.A. (NASDAQ:ERYP) Q3 2022 Earnings Conference Call November 22, 2022 8:30 AM ET
Gil Beyen - CEO
Eric Soyer - CFO and COO
Conference Call Participants
Boris Peaker - Cowen
Good morning, and thank you for standing by. Welcome to the ERYTECH Business Update and Financial Highlights for the Third Quarter of Year 2022. 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 turn the conference over to your speaker today, Gil Beyen CEO of ERYTECH. 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 for the third quarter of 2022 and the financials for the first nine 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.
Turning to Slide 2, before starting as usual, I have to draw your attention to the disclaimer to remind you that today's call includes forward-looking statements. And as you know, they all involve risks and uncertainties that could cause actual timings and results to differ materially.
Slide 3, the agenda. 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. I will start with a short introduction and present the key business highlights of the year-to-date, focusing on the more recent ones, the ones that occurred after our last call in September. After which, Eric will present an update on our key financials and cash balance, he will also summarize the expected milestones before we open up the lines for Q&A At which all three of us will be present.
So Slide 4 and this is really an update or an overview for anyone new to the company I think most of you know, but for completeness, with ERYTECH, ERYTECH, the name says it's focused on the development of red blood cell based therapeutics. We have been active in this field for quite some time focused and developed the proof of concept with a product eryaspase which is asparaginase and capsulated in red blood cells, and for which we have had encouraging preclinical results in the ALL lymphoblastic, acute lymphoblastic leukaemia and pancreatic cancer.
But as this will be point on the next slide, we have recently decided not to pursue further development in this -- with this product. Focus is now on our preclinical programs. We're still working on the encapsulation, the ERYCAPS platform, but now working with vesicles derived from these -- are from the loaded red blood cells, also preclinical programs in rare diseases, and the other priority clearly is pursuing partnering options more in a minute.
Quickly then to Slide 5, the business highlights. The main news items of the third quarter and year-to-date. The first one was already largely presented at our last call is the fact that indeed in August, we decided to no longer pursue our activities to try and obtain an U.S. approval for Graspa in a subsegment of ALL in hypersensitive ALL. And this was based on feedback we just had been received from the FDA, for which it became clear that we needed additional clinical data, which in the competitive environment, and the whole context of this specific sub indication was an impossible task for us.
Another one, also presented in September was that we had an -- there was steering committee in the TRYbeCA-2 Phase 2 trial in triple negative breast cancer, which saw good safety but no efficacy signal. It was a small number of patients because we stopped this trial prematurely, but still there was not a sort of a single baseline which we said we should continue this activity. And the results of this combined then with the earlier setback in the pancreatic cancer Phase 3 trial. This was at the end of last year of that together that just took the decision to stop the Graspa or eryaspase development altogether.
The priorities of the company now. First of all, the deep cost restructuring, cost reduction and restructuring. We've launched this already, as soon as we had the news, but mainly after the sale of the Princeton facility, we have performed staff reductions in the U.S. and have also implemented now a restructuring plan, a plan [indiscernible] in France, which is not fully implemented. And so now, still at the end of the implementation, but compared to the number of people at a time, we announced the pancreatic Phase 3 trial, which is end of last year, we are now at roughly 75%, less than at that time, so small, steep reduction of the team size.
The second priority for the company and of the remaining 45-ish 40-45 people we have kept a core team in our R&D programs so the focusing on the second priority our preclinical activities, especially on the vesicles, the extracellular vesicles, it's the exosome like, but now derived from red cells, where we held, where we see a lot of promise for immuneoncology applications, and potentially also for RNA and or other non-viral gene delivery. We have over the past months shown in-vivo -- in-vitro visibility. In-vivo work is ongoing and we expect to be able to provide an update in the beginning or in the first quarter of next year.
We're also working on rare disease programs that we already had. In fact, rare disease programs while we were working on Graspa but they were sort of did not get much attention, so we're now re reviving giving it -- renewed giving them renewed attention. Also here expect to be able to provide updates in the first quarter of next year.
And then the third and main priority of the company is we've announced it already after the Phase 3 trial results is the search for strategic options. We've realized that every tech still has a lot to offer, but doesn't have a lead program anymore. So the sale of our U.S. production facility, the Princeton facility to Catalent was a first step. And we are now working on different options. We did a broad screening.
We've zoomed in on a few valuable options and hope to be able to provide an update before the end of the year or at least in the coming months. What we're trying to do here is recapitalize on ERYTECH being a listed company with cash. Eric will provide an update, which still a GMP facility with technology, IP and the core team -- research core team, also a corporate infrastructure that can support such a company in a combination.
So that's it for the Slide 5 for the highlights. I will stop here and hand over to Eric, who will provide an update on the financials for the first nine months. And we'll summarize the news flow afterwards. Eric, all yours.
Thank you. Thank you, Gil. Good morning everyone. Bonjour a tous. Will now reviewing the financial highlights for nine-month period ended on September 30, we're on Slide 7 of the slide deck. And we're starting as usual with the information.
As already noted, in our previous call for Q2 results, the financial results for the first nine months of '22 confirmed a significant and accelerated decrease in operating expenses and cash utilization in connection with the completion and closure of multiple clinical development activities and also the debt restructuring of the company.
As a result, the net loss for the first nine months of '22 was €6.2 million, which was a €35.4 million improvements over the same period of last year, reflecting the €24.4 million net gain on the sale of the Princeton facility and the sharp decrease in operating expenses that show an accelerated decrease of €15.5 million, that's minus 33% year-over-year, it was minus 19% at the end of June. The cost reduction was mostly on R&D with a €14.4 million decrease in expenses related to the gradual termination of clinical programs, while G&A expenses also showed a €1.4 million decrease over last year.
Total operating expenses of €31.2 million included an unemployment provision of €2.5 million mainly on the Lyon production facility, and related to the end of the eryaspase operations, as well as a €1.9 million provision for restructuring related to the staff reduction plan in France. Income tax included in '22, a provision of €3.8 million, still reflecting the maximum potential tax impact of the capital gain from the sale of the Princeton facility until further analysis.
We're now moving on to slide number eight for comments on cash. At the end of September this year, ERYTECH had cash and cash equivalents totaling €47.3 million or approximately $46.3 million, compared with €33.7 million at the start of the year. The €13.6 million net increase in cash position during the first nine months of '22 was the result of the net cash of €37.6 million received from the sale of the Princeton facility; also a €27.4 million cash utilization in operating and investing activities, of course, excluding the sale of the Princeton facility, and a €1.6 million generated in net financing activities.
And that was including the €3 million prefunding of the expected '21 R&D tax credits. And finally, in the period, the variation of the U.S. dollar against the euro led to a €1.7 million positive currency exchange impact. As already mentioned, the company has initiated earlier this year a deep restructuring and cost reduction program. And these cost reductions have been further intensified with the health of the Graspa program and the early process.
Considering these ongoing cost reductions, the company believes that its current cash position can fund its current programs and planned operating expenses to meet '24. This is of course sort of a theoretical runway as we will obviously not sit on this cash for 20-plus month or plan is Gil mentioned that to restart the company on a new development pipeline with a strategic partner in which case, the current projections as these will not be relevant anymore.
Now and before we move on to Q&A, a quick wrap up of our key news flow and milestones expecting over the next six months. This is Slide number nine of the presentation, which are reflecting of course our key current priorities. Starting on one end, with the focus on the ongoing preclinical programs and more particularly our program with red blood cell derived extracellular vesicles, we called this novel technology, ERYCEV.
We expect to report on our preclinical results in a few months. And of course, on the other end, an update on or partnering process was still evaluating a number of strategic options to best leverage the company's assets and capabilities in a business combination with a strategic partner. Valuable options are under discussion. And we expect to get further updates on this hopefully before the end of the 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, myself will be happy to answer any questions you may have.
Operator Katrin, over to you.
Thank you. [Operator Instructions] Our first question comes from Boris Peaker with Cowen. Your line is open.
Great. Thanks for taking my questions and good morning or good afternoon, depending where you are. I just have one simple question and that is are there any clinical data readouts specifically that we should be expecting particularly maybe from the new ERYCEV program I don't know over the next six to 12 months? Will we see any visibility into that clinically into this program?
Hi, Boris. Good morning. Gil here. On the ERYCEV or the preclinical programs nothing to expect in the next six to 12 months, they're preclinical still and still some work to IND. The preclinical readouts still is the ongoing rESPECT trial, it's a Phase 1 trial in first-line pancreatic cancer, and IST run by Georgetown University, where the trial is still treating patients. And we heard from the PI that he wants to present this data at ASCO. So it's -- what is it -- June, nine months away?
Got it. Thank you very much. Thanks for my question.
Thank you, Boris.
Thank you. And there are no other questions in the queue. I'd like to turn the call back to Gil Beyen for closing remarks.
No questions then, then want to thank everyone for your participation, your attention and your continued support for ERYTECH. As always, we'll keep you posted on progress and wish you a nice rest of the day. And speak to you soon, at least at the next call in a couple of months. Have a good day.
This concludes today's conference call. Thank you for participating. You may now disconnect.