Assembly Biosciences, Inc. (ASMB) Earnings Call Transcript & Summary

Good afternoon, and welcome to Assembly Bio's Phase II Expansion Study Update Webcast and Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to hand the call over to Lauren Glaser, Senior Vice President of Investor Relations and Corporate Affairs for Assembly Bio. Please go ahead.

Good afternoon, and thank you for joining us as we discuss interim results from Study 211, our Phase II extension study, monitoring patients with chronic hepatitis B virus for sustained virologic response or SVR, following discontinuation of treatment with vebicorvir and a nucleoside analogue. This afternoon, we issued a press release providing an update on this ongoing study as well as a second press release reporting our financial results for the third quarter ended September 30, 2020. These press releases are available in the News and Events section of our corporate website at www.assemblybio.com. Please note that a replay of today's call and audio webcast also will be available from our website. In a moment, I will turn the call over to our Chief Executive Officer and President, Dr. John McHutchison, to provide opening remarks, and then we will host a Q&A session. Joining John for the Q&A portion of the call will be our Chief Medical Officer, Dr. Luisa Stamm; our Chief Scientific Officer of Virology, Dr. Bill Delaney; and our Chief Financial Officer, Tom Russo. Before we begin, I want to remind you that we will be making forward-looking statements, including statements regarding our future research and development plans, evaluation of interim data, the timing of clinical trials, trial results and therapeutic potential of our development programs. These statements are subject to the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. They involve certain assumptions, risks and uncertainties that are beyond our control, and actual results may differ materially from these forward-looking statements. A description of these risks can be found in our latest SEC disclosure documents and press releases. Assembly does not undertake any obligation to update any forward-looking statements made during this call. I'll now hand the call over to our CEO, Dr. John McHutchison.

Thanks, Lauren, and thanks to everyone for joining us today on short notice as well. While we're beginning to analyze the latest Study 211 data, and we don't have many of the answers yet, the study has not achieved a meaningful sustained response rate to date. So we felt it's important to now provide you with the update. The study is still ongoing. And we'll continue to collect and analyze data with the goal of informing our development programs in the hepatitis B field generally. So we appreciate your patience and expect to submit more detailed results to future scientific meetings as well. What we do know is 39 of 41 hepatitis B patients in Study 211 have now relapsed between the 4- and 16-week time points following treatment discontinuation. The study is the first in the hepatitis B field to explore whether a sustained response or SVR could be achieved off therapy with the core inhibitor dual combination regimen. Study 211 patients were virologically suppressed for at least 8 -- 12 to 18 months of treatment with our core inhibitor, vebicorvir and a nucleoside analogue or Nuc. The patients who met the treatment stopping criteria was withdrawn from therapy, and they've been assessed monthly since then for relapse. The study was designed to measure the proportion of patients with SVR off-treatment at 24 weeks. Because this represents an endpoint that allows our regulators to consider an approach to ultimately register a drug regimen as a finite therapy for patients with hepatitis B. As we mentioned in our press release, 22 of the 23 patients with E antigen-negative hepatitis B have relapse, which is defined as off-treatment quantifiable DNA by the cobas assay with a lower limit of quantification of 20 international units. For an SVR 4 -- rate of 4% at the last visit. 16 of these patients first relapse at post-treatment week 4, but 6 relapsed also at post-treatment week 12 or 16. If we look at the E antigen positive patients, 17 of 18 have relapsed at post-treatment week 4 for an SVR rate of 6% at the last visit. In terms of SVR, the focus of this experiment, our hope, as I have said, had been that we might see at least 15%, a percentage that would have marked a significant first advance towards a potential hepatitis B finite therapy, but these results, as I've described them today, have shown us that we fall short of this mark. I'm sure you all have many questions about what we should and what we might glean from the data, as do we, and we'll be continuing our analyses in the coming weeks, and as further data are collected in the study. Specifically, we'll look to understand all we can given the relatively small sample size, and this will include subgroup analyses of the populations of patients who initially achieved an early SVR from those that did not as well as the timing of the relapse with regard to the demographics, the disease characteristics and of course, our laboratory assessments with our more sensitive assays as well. It's important to note that the study was the first of its kind involving core inhibitors, and it's one of the many steps on the path to transform hepatitis B treatment from currently it's lifelong therapy. Firstly, by delivering a more effective chronic suppressive therapy, in particular, addressing the unmet need of full viral suppression for the estimated 10% to 30% of patients who don't achieve that on a Nuc alone, and I'll talk about this in a little while. And then eventually, of course, to the ultimate goal of finite therapies and then cure -- functional cure of hepatitis B. If we look back at how the treatment landscape evolved for HIV and hepatitis C, there were many disappointments before we started seeing the major leaps forward in efficacy and ultimately, all those successful regimens. Bill Delaney and I were just recalling the other day, one of the combination therapy approaches with multiple Phase II studies we ran for hepatitis C, combining 3 distinct oral antivirals with interferon. While the results of this approach were disappointing in terms of the SVR rate and also resistance, the study provided important information or those studies provided important information that helped us push on. Ultimately, we learned from that and remained sort of relentless in our efforts to drive the field forward to develop new treatment options for those patients with hep C. With that experience and our collective resilience in mind, the detailed analyses we will conduct on Study 211 may give us some insight for future study design such as whether a longer period or treatment duration, different or more stringent stopping criteria, focusing on specific subpopulations might increase the potential for sustained responses off-treatment, and this all remains to be seen, of course. In many ways, hep B is more challenging than hepatitis C. The task will be harder, as I've said from day 1 here, really, and the progress will be incremental. But I'm confident that an experienced team like ours will get there over time. We are in this for the long run. When I joined the company a little over a year ago, I outlined what I believe were the ways of development that the company would frame our approach to hepatitis B upon, and that included 4 distinct and parallel strategies to advance our pipeline of core inhibitors. Even with today's setback, 3 of those 4 strategies remain on track. Unfortunately, as a company, we are well positioned to continue to advance them and are already doing so in important ways, which I will now describe. Our first strategy has always been to deliver a better chronic suppressive therapy. We have already shown in our Phase II trial, Study 201 and 202, that the addition of vebicorvir to Nuc therapy can achieve a more rapid and complete level of viral suppression than seen with Nucs alone and with the similar safety and tolerability profile. These data form the basis for our intended Phase III registrational program for vebicorvir plus a Nuc,as better chronic suppressive therapy. We plan to include multiple patient populations in the Phase III registrational program, and for it to be conducted globally and in China with our partner, BeiGene. One of the 2 populations we plan to include is the partially virologically suppressed population of patients. There's a clear unmet need here since an estimated 10% to 30% of hepatitis B patients do not reach their treatment goal after a year or more on a Nuc therapy. And this is a sizable group that has no approved alternative approaches today, but we can address this with vebicorvir. The addition of a core inhibitor may make deeper suppression of virus possible for a greater percentage of these partially virologically suppressed patients. So they achieved that treatment goal of having unquantifiable HBV DNA. If successful -- if successful in the setting, vebicorvir would represent the first new mechanism approved in hepatitis B for about 25 years, and it has the opportunity to make a unique contribution to the field and to the patients that would require it. Our second population will likely be treatment-naive patients for these registrational programs as even for this group, a core inhibitor plus Nuc regimen leads to faster and deeper viral decline, and the literature suggest that over time, this will correlate with better clinical outcomes. So for chronic suppressive therapy, we have already achieved agreement with the Chinese regulatory body on our Phase III registrational studies, and we are continuing our discussions with the FDA. We have been working with our partner, BeiGene, to prepare to initiate the Phase III registrational trials globally and in China during the first half of next year, 2021. Stay tuned, please, for more details on that Phase III program between now and the early part of next year so we've made good progress on that behind the scenes. The second strategy is to pursue finite therapy initially with a dual combination of vebicorvir and a Nuc. While the strategy hasn't achieved what we had hoped in the experiments I've just described to you today, we continue to execute on the third arm of our strategy by developing more potent next-generation core inhibitors 2158 and 3733, which is structurally distinct from vebicorvir and from each other. In our clinical studies, 2158 demonstrated tenfold grade of potency than vebicorvir, and 3733 showed 40 to 50-fold greater potency than vebicorvir in inhibiting the formation of new cccDNA, which is crucial to depleting the minichromosome pool. For 2158, we continue to enroll patients in a Phase II multicenter randomized placebo-controlled trial in combination with entecavir, in treatment-naive E antigen positive patients. 2158 also has FDA Fast Track designation, and we anticipate sharing interim Phase II data in 2021 next year. In parallel, 3733 is in a Phase I study, evaluating the safety, tolerability and pharmacokinetics in healthy subjects at the current time. Now the fourth and final strategy of what we've been trying to do over the last year or 2 is to study what can be achieved by introducing additional orthogonal mechanisms to the core inhibitor plus Nuc regimen. Combining multidrug regimens with nonoverlapping mechanisms has the potential to generate higher response rates in certain populations of patients. During the first half of 2021, we plan to initiate a Phase II trial that will evaluate vebicorvir combined with a Nuc and Arbutus' RNAi therapeutic. AB-729 as a treatment for patients with chronic hepatitis B. We have also been planning in parallel to initiate a triple combination study in the first half of 2021 and to evaluate the addition of interferon with its many pleiotropic immunomodulatory mechanisms of action to the vebicorvir and Nuc dual combination regimen. So we're well positioned to move ahead with these 3 strategies in parallel because we have the right team to work on hepatitis B and move the field forward. I've said this repeatedly. I'm proud to be working with a team of veterans in liver disease and virology who have deep experience in hepatitis B. They span the research, clinical, operational and regulatory functions, just to name a few, and have all worked tirelessly to advance new treatments for patients. This is the team that can rise to the challenge, and we have the resources to support our efforts with cash that's expected to fund our planned activities into the second half of 2022. So before we open the call to Q&A, I'd like to summarize what's on the horizon for the company. Next week, we will have 4 posters at AASLD, including 2 late breakers. Among these are the Phase II safety profile for vebicorvir, which continues to be differentiated and more on the potency and resistance profile of 2158 and 3733 versus vebicorvir from Bill Delanay's group. During the first half of 2021, we also expect to initiate the planned Phase III chronic suppressive trials in China with BeiGene, as I've outlined today. We also plan to initiate 2 triple combination studies, 1 with vebicorvir and Nuc and Arbutus' RNAi therapeutic AB-729 and the other with vebicorvir and Nuc and interferon. Also in 2021, we anticipate sharing interim data from the ongoing Phase II trial of 2158, as well as the Phase II treatment intensification trial for vebicorvir plus Nuc in patients with partial virologic suppression that I've described to you today. With that, we are now happy to take your questions. And as a reminder, I have Louis, Bill and Tom here with me. So operator, if you could go ahead and open the Q&A session, that would be wonderful.

[Operator Instructions] Your first question comes from the line of Salim Syed.

Great. John, a couple for me, if I can. So from the press release, it looks like most of the patients had relapsed post-treatment around week 4. So I'm wondering, one is, do we know that these patients are being treated long enough? Is the stoppage criteria correct? Or does it put the stoppage criteria that's been put in place into question? And also, along the same lines, does this put into question what we know about cccDNA turnover being into that 16- to 28-week timeframe? Or is there any possibility here that it's actually longer than that? And then the second question is if you could just outline the thing would be helpful for folks. The chronic suppressive therapy value proposition, both from a dollar perspective and also from a clinical perspective. What did it actually means for patients clinically? And why it's meaningful to be knocking down virus faster, but still not being able to get to finite therapy if they were to take a core inhibitor with a Nuc?

Thanks, Salim. Three questions. I'll start. I'll ask Bill Delaney to chime in a little bit on cccDNA. And I'll -- then Tom and I will address the chronic suppressive therapy proposition. So yes, have we treated the patients long enough with vebicorvir and a Nuc 12 to 18 months, I said today. Are our stopping rules adequate? Is the turnover of cccDNA longer than we think it is, which is what you might have intimated? Or is it actually just the potency of this drug in terms of a finite therapy? We know it's a potent drug. There are DNA and RNA reductions a 24-week period of time, 48-week period of time that we see that's leading to our work on chronic suppressive therapy. So I don't know all the answers to those questions right now. I do feel, though, as I've said before, that this is a critically important mechanism of action. It blocks 3 additional steps in viral replication and it is a potency issue. We have more potents as I've described -- more potent compounds, as I've described, coming behind. Bill, why don't you have a word or not about what you think this -- the result of this experiment means in terms of cccDNA half-life or durability or ability to eradicate. I don't think it does answer the question, but I'd like to hear what you said.

Yes, John, thanks. And I agree with what you said. And the figures that you cited, Salim, are the best figures that we have now, but they are estimates. Obviously, direct -- hard to directly measure given the location in the liver and the difficulty in getting biopsies. But I think this could be related to potency in addition to potentially the half-life being longer could be related to potency, in particular, the second activity of the compound to block the formation of new cccDNA. So that's a question we can answer with the compounds coming on pipeline following vebicorvir. And so that's something we had in mind from the beginning that we didn't know what level of potency we needed to reach.

Thank you, Bill. The other thing I would say, Salim, that I -- is that this doesn't -- the result of this experiment doesn't make me feel any less enthusiastic about core inhibitors doing what they're doing because we know there's a greater reduction in DNA. There's a greater reduction in pgRNA over that period of time. I also still strongly believe that pgRNA reflects cccDNA. We've got some more data we're showing in some of our posters at AASLD, and some more clinical data around that with one of our collaborators as well. So this result shouldn't be misconstrued as pgRNA no longer being a good surrogate for cccDNA. I don't think there's anything that suggests that. Salim, The last question. So we haven't answered your question, but we've said a lot, but we just -- we're talking to you here. We haven't put all of those answers right. Chronic suppressive therapy. I haven't talked about this. I've mentioned it on and off. But if you look at the literature, particularly in E antigen positive patients that start higher, higher baseline viral loads, 10% to 30% of patients might be 10% for E antigen negative and up to 30% for E antigen positive, do not suppress and they have residual detectable HBV DNA at the end of a year or 48 weeks of therapy. That is an unmet need. It's an unmet need for which there's no approved drugs. The regulators understand this, and it's a unique opportunity. And that is something that we have felt very strongly where there is a place for our drug right now, independent and in parallel of the experiment we were doing and described today, the stopping experiment. So that's why we've been doing it. It's why we found BeiGene as a partner because we need to get this started. And our data sets and our regulatory interactions support us getting started. Tom, any comments on -- I've talked about the importance from a clinical perspective, Salim. But Tom might want to talk about opportunity.

Sure, John. I can add just a couple of comments to that. Obviously, you talked about the unmet need, and you highlighted 1 group. When we're through our regulatory interactions, we can be more specific about the full design of the Phase III program. But the way you can think of this maybe in terms of the potential opportunity is that hepatitis B as recently as 2017 before one of the products went generic was a $3 billion global market. And we're talking about an unmet need group that doesn't have an option today that we can uniquely address with vebicorvir that has a 10% to 30% patient population readily identifiable. And so I think in terms of what the order of magnitude could be of the commercial opportunity, it can give you a flavor or a range, and we think that is meaningful for a company of our size.

And your next question comes from the line of Mr. Geoffrey Porges.

Great. So obviously, we're going to follow up on this question, John. My first question is, if you're suppressing the HBV RNA to undetectable levels, then how could a second or third-generation more potent antiviral, suppress it even more? And what in this data or in any other data set gives you confidence that just an increase in potency is going to make a difference? Because I thought the theory here was that prolonged suppression would prevent the turnover of the HBV DNA and therefore, lead to the gradual wind down of that residual HBV DNA. So why do we care about a more potent drug? Or should we really just evaluate this on the potential for that small group of patients for whom suppressive therapy might be beneficial and justified?

Thanks, Geoff. I don't think we should evaluate the drug just on the potential for it to be a drug used for patients who have got partial virologic suppression as a better chronic suppressive therapy. I still believe that with a more potent drug that's acting on the target and acting on cccDNA more potently for 24 hours a day, we should be able to completely shut down in some patients, cccDNA, that's the hope. And we could achieve that with a more potent drug. We are using assays as well, Geoff, that are very sensitive, but it could be that there's some logs or some small amount of cccDNA, not reflected in peripheral serum pgRNA that's persisting as well. And Bill and I often talk about this as well. So I do believe that we need to do the experiments with the more potent drugs, looking at different sets of stopping criteria, perhaps we can modify them and make them more stringent. I'm not sure we can come up with a more sensitive assay for pgRNA, we've really pushed the technology there. And then I would just ask Bill to talk something about the characteristics of drugs and their potency in terms of what they're doing in the hepatocytes and their on action on formation of cccDNA, et cetera.

Yes. Thanks, John. And I agree with what you said. We know Nucs don't get rid of all the replicating DNA in the periphery. But we know that the serum also only gives us kind of a glimpse of what's going on in the liver, and we've pushed the assays to the limits we can. Maybe they could come a little further. But in terms of the potency of the drug, I think we need to turn off viral replication completely to be able to see the turnover consistently or to get the maximum slope on the turnover. And the compounds coming in the pipeline behind vebicorvir. One of the things we focused on was the second activity of not just blocking active replications of preventing the coordination of new cccDNA. And as we've said here, the newer compounds are in order of magnitude or more potent, 10 for 2157 -- 2158, and 40- to 50-fold more potent against that cccDNA formation activity for 3733.

Geoff, the -- thank you, Bill. The other thing I would say, Geoff, is Virology 101. If we are going to be able to create better curity for finite therapies for hepatitis B, it's got to be about nonoverlapping orthogonal mechanisms of action. And core inhibitors are blocking 3 additional mechanisms of action within the viral life cycle. So if we can apply potency to that, I believe and I've always believed that we should be able to get there. Now whether do we need a dual combination for some patients, whether we need triple for other patients, we've got all of those experiments ongoing. They are our parallel strategies as well as our chronic suppressive therapy. Long answer, hard to answer it, but that's my thoughts on it, Geoff. I hope that's okay.

But, John, can I just -- I just want to follow up on this because if I'm going to the bottom of the Grand Canyon, and then I'm staying at the bottom of the Grand Canyon, in terms of viral load, the Grand Canyon doesn't get any deeper in terms of it being undetectable. So do I really care about a more potent antiviral that takes me down the slope faster because -- and that's where I think the analogy with HCV I'm struggling with because, of course, HCV was about shrinking the duration of treatment, whereas here, you had super prolonged suppression of detectable virus. So again, are you -- what's the evidence that it matters, how potent it is other than HCV?

Well, I think it's just -- it's a historical perspective about virology here, Geoff, that even when you get to something that you can't measure, you know you've got a number of logs below that. So you might think you're at the bottom of the own Grand Canyon, but there's another part of the Grand Canyon that's a lot deeper somewhere else. And I mean that's the basis and the hypothesis is about driving viral replication down with the most potent drugs of each class. Bill, do you want to say something else or not?

Yes. No, just in that analogy of the bottom of the Grand Canyon. I mean there are several pieces of literature that suggests that there's more replication going on in the liver than you can see in the serum. So it's not -- we can't measure everything by the serum, although that's the practical thing we can measure during the clinical trial on a longitudinal basis. But yes, I would agree. We don't know that we're at the bottom of the Grand Canyon yet. And until we reach the bottom of the Grand Canyon, we won't accelerate that slope.

And your next question comes from the line of Mr. Michael Yee.

You have Kelechi on for Michael. I guess related to question from Geoffrey Porges. In the data that you'll be collecting and analyzing, is there anything specifically that you'll be looking for to give you confidence that you're actually going down the right path with inhibitors? And related to that, also I know it's early, but can you speak to whether there were any meaningful differences in the viral set points for the various markers, specifically pgRNA following relapse?

Yes. So we're still analyzing all of the viral set points. And yes, this is a rolling data set. We've got new pieces of data almost every day this week. And this is a very recent change. I can tell you that it wasn't so many days ago where in the E antigen negative set of patients, we were above my threshold or expectation for 15%. So this is all happening real-time guys. It's not something that we've been sitting on for a long period of time. So I think we are trying to understand all of this. In terms of viral set points, I don't think we have any important information. I'll ask Luisa to comment on that. And your first question about are we heading down the right direction with core inhibitors? I mean core inhibitors are the only mechanism in patients with hepatitis B right now that have shown significant reductions in placebo-controlled trials compared to standard of care alone that create greater reductions in DNA and pgRNA, and that's the premise for our package and our discussions with the regulators about better chronic suppressive therapies. There's nothing else out there that's really that far along. Viral set points, Luisa, do you want to say something about that? So I think it's very important that based upon this one experiment, which we were doing as a stopping therapy in parallel with the chronic suppressive therapy, in parallel with the more potent drugs and in parallel with the triples, we don't just now discard the mechanism. That is not the right approach, and it will not be out of approach either. Luisa?