Bonesupport Holding AB (publ) (BONEX) Earnings Call Transcript & Summary

Welcome to the BONESUPPORT Press Conference 2021. [Operator Instructions] Today, I am pleased to present CEO, Emil Billbäck; CFO, Håkan Johansson; and CMO, Michael Diefenbeck. Please begin your meeting.

Yes. Thank you very much, operator. This is Emil Billbäck. I would like to welcome everyone to this information session, where the purpose is to quickly cover the FORTIFY study, the readout that we announced briefly last night and the path forward. And as the operator mentioned, I'm also joined here today by Dr. Michael Diefenbeck, who is our Chief Medical Officer and Executive Vice President; and Håkan Johansson, our CFO. I will march through the presentation fairly quickly, and then open up for questions and try to provide as much clarification on this topic as we can. So if you help me, operator, please then go to the next slide. So the FORTIFY study was designed in 2015 and '16. At that time, the only path to market for CERAMENT G, BONESUPPORT substitute containing antibiotic would be a PMA route. And the study was, hence, constructed to show superiority of CERAMENT G versus purely standard of care. And the study design has been selected with that specific and only purpose. I'm not going through a lot of details on how the study was constructed because I think there is good information in the public domain on this. You have it also in the presentation in front of you. What I will mention, though, is that the primary endpoint was a composite efficacy score, which ways together 3 independent effect parameters and arrive at a final number. Next slide, please. What I do want to spend a little bit of time is used to describe the patient that has gone into this study. So what we mentioned in the design is that this is Gustilo Anderson 2, 3A and 3B. And I can imagine that's a little bit cryptic. But basically, what we're talking about here is trauma that have been exposed to such force that the bone has penetrated the soft tissue and the skin. That's an open fracture. And the open fractures are the most difficult fractures and trauma events that can happen and they're categorized on the so-called Gustilo Anderson scale or categorization. The patients that were included in FORTIFY, 1/3 of them was in Category 2 1/3 in Category 3A and 1/3 in Category 3B. The biggest injuries are very severe. And they also present a very high variability in bone healing infection, the infection can occur directly after the accident or it can occur after a few months, even with strong intervention, mainly the reasons for ending up in an open fracture, a traffic accident, but there are also patients included from construction workers, for example, or ballistic injuries people that have been shot simply or had a gun wound. There are also soldiers, for example, U.S. Army soldiers that have been included, 80% of the patients in FORTIFY are male and 20% are female. In the control group or the patients that received CERAMENT G, the average age was 38 years, and the young patient was 17. We'll go to the next slide. This is not a real bone. This is a plastic bone. It just displays how the surgical technique was conducted with a metal rod or a metal nail that was forced down through the intramedullary canal to stabilize and immobilize the fracture. This is not a very common method used in Europe, but the standard of care in the study was defined based on what is used many times in the U.S. surgery. We'll go to the next slide, please. So what are the circumstances specifically influencing FORTIFY? I already spoke about the very high variability with trauma patients. That's why studies made on trauma patients have to have big populations, and they're usually very expensive studies and with certain difficulties to recruit, which we also have reported on -- in FORTIFY with delays that were announced at a quite early stage in the study. Also what you see normally with is that patients it's not a chronical condition. It's something that happens. And once the patient has fully recovered, usually, they walk away. They walk away from the situation and walk away from health care and they walk away from studies that they might be part of. This is a common phenomenon. And unfortunately, the dropout rate in the FORTIFY study has been exceptionally high. In the end, only 143 patients qualify for the primary composite endpoint. And the way that the study was constructed, even though patients were followed at certain time intervals, it's the 12 months results that matters, and you have to be part of the study for the whole way with all the parameters included. If you withdraw on one of the parameters, you are excluded regardless of how well you have performed on other parameters. So 143 study objects, if you compare it to other studies, you can say, well, that's quite a high number actually. Well, no, it's not. If you have subjects with very high variability, you need a very large patient population to be able to draw significant and make conclusions. And this is the problem we have seen with FORTIFY that during the COVID pandemic, there has been an exceptionally high dropout and a dropout of the nature where patients have decided just not to show up at the hospital visit that they have been requested to come to. Next slide, please. So what has then come out in the results? Well, Unfortunately, the FORTIFY results are inconclusive. This is very disappointing for, of course, the management team, the Board of Directors, I can imagine the entire organization at BONESUPPORT and I can imagine also at quite a few of the shareholders. We did expect based on study results we have seen from many other parts of the world with other patients that this would come out in positive favor of CERAMENT, but it didn't. The main reason for this is the very high dropout rates, which was 29%. FDA and -- well, the general community has a guideline that below 5% dropout rate is a well-controlled trial with a minimal bias. FDA has a limit at 15%. So FDA would not like a study with a higher dropout rate than 15% to go into a PMA application. There are some extreme cases where slightly higher numbers, even up to 20% has been accepted. But unfortunately, we are at 29%, which means that the entire study is labeled as inconclusive. None of the parameters can actually be used due to that fact. The composite endpoint is inconclusive, and the secondary endpoints are inconclusive. The only solid readout is on the safety parameter for CERAMENT G that came out very well. The study was intended to show superiority in efficacy and safety, the safety 1 was met, but it could not be shown that CERAMENT was better. I would like to emphasize one thing very strongly. And that is this study does not show that CERAMENT G is equal to standard of care. That is not what the study is designed to do, and no such conclusion can be read out of this. If that is what wanted to be tested, the study would have to be constructed in a different way with a completely different design. So I think that's important to keep in mind, the study could not show that CERAMENT G is better than standard of care. But that's the only thing that could be read out at this point. In our press release from last night, we were prudent to show what the primary endpoint is successful, both for CERAMENT and the control group, 64% with CERAMENT and 66% with the control group. Of course, it would have been nice to see CERAMENT have a few percentage points or quite a lot of percentage points higher than the standard of care. But this is actually completely irrelevant given how the study was constructed. Only when these 2 numbers are different enough to provide statistical significance, does it really make any difference. The standard deviation with these patients enrolled makes this number also inconclusive because it only takes a few patients in either direction to completely skew the results. And here, we see now the difficulty and the challenge to make the study with few participants, a few final objects, completing the study and a very high variability in individual results. So next slide, please. And concluding up my presentation, what are the next steps? Of course, as I said, we're very disappointed to see this. We always knew that there's a risk of doing trauma studies and especially when you have a high dropout rate and come closer and closer to where your statistical significance is, is impossible to show and then eventually pass that line. The study results though from FORTIFY does not at all influence the breakthrough device designation that has been given, both in bone infections and intro The result of FORTIFY does also not influence at all the De Novo application for CERAMENT G in the indication of infection. We have a timeline for submitting additional data to FDA on bone infections where in all the novels, you have 3 major themes or 3 major categories. You have safety data that has to be in place. You need efficacy data and you need a control group. And with our submission on bone infections, it was the control group that needed to be strengthened. Something that we have worked upon since March of this year, and we're pleased to announce that we will meet the deadline as communicated back then. The team has worked hard and we have progressed. When it comes to the indication, infection prevention, meaning using a bone graft substitute with antibiotic even though there's no sign of infection, as you would have for trauma, for example, we will now need to reconnect with FDA, take a look at the results and also discuss what potential pathways are there to the U.S. market for CERAMENT G for the indication trauma. We will be open-minded and we will consider different options such as piggybacking potentially on future approval on CERAMENT G for bone infections. Will there be a separate De Novo application for the indication trauma? We don't know. We cannot answer that question today. And we prefer to have a discussion with FDA and then give a clearer notice to the market. instead of being speculative. We are, as I said, disappointed, but we're not beaten. We are determined to bring CERAMENT G to the U.S. market. and we will continue on that path forward and with that vision. So with this, I conclude my presentation, and let's open up for questions that you can address either in verbal directly to me and the team here or in written, then we will also bring them up.

[Operator Instructions] The first question comes from the line of Erik Cassel from ABG Sundal Collier.

So I have a couple of questions mostly on clarification. And first off, can you give any more color on the individual component end points? Was there a statistically nonsignificant trend towards benefit in CERAMENT G?

Sorry, I didn't hear the first part of the question. It was the statistical significance on what?

Statistically, nonsignificant trend towards benefit with CERAMENT G. Basically, the point estimate, was it significantly better with CERAMENT G than the control group?

So when you look at the detailed results, and looking at aid groups, looking at different Gustilo Anderson categorization and dividing it down for some of the analysis we have done, you can see clear trends in different directions. The unfortunate part with this is that once you go down in the subgroup and you already from the top down, have too few patients, you end up in speculations because there's no statistical significance. And we have our policy. I think this is very well supported in the dialogue with FDA that we don't give data that we cannot prove and validate. So I prefer not to talk about some of the trends that we have seen in the material as that could create false impressions.

Okay. Understandable. But given the anticipated dropout rate was 15% to 20% in the study, which would have yielded somewhere between 160 and 170 patients, then 143 is not that far off, I mean, 17 patients. So I mean the increase in sample variance should not weigh on the significant a lot here in my view. But could you perhaps clarify this a bit? And if it's a close call on any of the secondary parameters?

There was a close call on some of the secondary parameters. And what was made but anyhow come to this conclusion is that with the dropout rate of 29%, the FDA would with very strong certainty conclude the study as inconclusive. The primary endpoint as defined back in 2007, together with FDA is a composite, which of course can have One of the parameters that makes up the composite be in strong favor of either the treatment or the control group, but it could then be derailed by other parameters of the composite end point. That is a big risk you take when you construct a study with composite endpoints.

Okay. I understand. And then what magnitude of benefit on the secondary component end points on deep infections and reoperation, respectively? What's the study power to detect?

We have to look that up, and I'm not sure we released that data as the agreement with FDA was that it was the primary endpoint that should be successful. And that's how the study was defined. There are some of the secondary endpoints that are closer to statistical significance. And where I'd probably disagree a little bit with you is that even though 143 million looks to be a decent number, there is a very high variability with those patients that are included. So the standard aviation is borderline extreme. There's also this component of who are the people that drop out. And unfortunately, it becomes a bit speculative because once the person drops out, they are excluded, of course, from the final primary endpoints. But there's a big difference here between CERAMENT G that has an 18% loss to follow-up and the control group of 9% was the follow-up. And loss to follow-up is, of course, where the patient decides, I'm not going to go to the hospitals. If it's fear of COVID or if it's because the patients have yield or other reasons, we can only speculate in that because when we cannot reach the patient anymore, we cannot ask them for why they have made such a typical decision. So unfortunately, when you have this dropout rate, there becomes a lot of uncertainties. And we don't share more data because we're used to this is going to lead to speculations rather than clarity.

Okay. Just the last one for me. I mean the U.S. case doesn't seem to be over. I mean the optimum way forward is obviously De Novo for trauma and infection. But how likely do you think it is that you have to collect any additional data for this to come through? Do you think you can use the EU data for this De Novo application? And if you have to collect more data, how much cash burn do you expect that would result in?

I think those are very good questions, Erik, of course. And I think those are questions that we should jointly try to answer over time. I mean I can clearly tell that you're thinking here in the right direction. De Novo is definitely the pathway, which you would find retrospectively now is more suitable for a combination device like this. But it wasn't available, as I said, when the study was constructed. So I think what we want to do now is, of course, to get together with FDA first and make sure that we have a shared view on what the next steps could be, and then I'll promise we will be very clear in communicating to the market how we see that going forward. We should bear in mind, though, that the burden of data, if it's clinical data, retrospective data, data mining, is significantly less with a De Novo than this with a PMA. So we're talking about different dimensions of cost, of course. But I would like to come back to that once I can give statements which we can stand behind fully.

The next question comes from the line of Sten Westerberg from Analyst Guiden.

Yes, trying to straighten out the patient numbers, 143 of 201 patients were evaluated meaning that 58 patients were not evaluated. This number, 58 patients, is not corresponding to the loss of follow-up, which I calculate to be some 27 patients. Am I getting the numbers right here? And if that is so, what is making up the difference between 58 and 27?

Yes. Thank you, Sten. So the drop out -- the total number of dropout patients is 58%. And that means the dropout is defined as people -- or, sorry, patients that have been enrolled and included that then doesn't fulfill the follow-ups and the parameters that are required for the 12 months. Loss to follow-up is one of the reasons for dropout. So you're correct on your numbers. And you can say that in addition to lost to follow-up, there are other reasons. There are people that have patients that have died during this period. There are also patients that have had potential comorbidities that have made them excluded from the study or other things that have happened in their life that they haven't continued. While we decided to publish not how many people that have died because we found that to be relevant, but how many that are lost to follow-up is patients that have seemingly gone through successfully the parameters tracked in the study. But for no reason that we have been able to determine decided to walk away. And that measure stood out. There's a lot of different reasons for dropout, but that was stood out in this study with a very high number for the CERAMENT group and also quite a high number for the control group. So the loss to follow-up is a subcategory under the total drop on.

Okay. Second question, if I may. The historical infection rates where we sometimes -- I think we've heard numbers like 50%, the at least in the Group III Gustilo Anderson, they can not really have been the case in this study. I mean, it's enough to fail on one of the components in the composite endpoint in order to not reach the end point, I guess, though infection rates appears to have been pretty low in this study. Is there any reason to speculate in not very reflective -- study not reflecting the general infection rate in U.S. centers?

I think that's absolutely a valid question. What we have seen in Gustilo Anderson Category 3 is infection rates up to 52%. But it ranges basically from 30% to 52%. And then with lower categories, of course, the infection rate drops even further. But you are correct, every clinical study is a microcosmos with certain procedures and processes that have to be followed. And if you walk into a hospital and you sit down as an observer and you look at how patients are being treated with trauma, you will come out with a certain infection rate as an observational study. If you have an intervention and you say, "This is how you need to treat the patients, and we will be standing here monitoring every step" many times, there is a slightly better outcome. Infection rates decrease because there's more meticulous protocols to be followed. We have seen in this study slightly lower infection rate in the control group than has been in other reference studies. That could have influenced also. But again, it could be speculative to make statements on that as the difference between the groups were inconclusive.

Okay. Finally, 1 last question. I mean we are experiencing extraordinary times in healthcare, and you've not really picked up the COVID item in your study. In what way could the pandemic have provoked the loss to follow up? It's difficult for me to see why there would be difference between the group? And would you care to expand a little bit on how it could have influenced the study?

Yes. It's absolutely undeniable that COVID has influenced the study and the follow-up and especially the loss to follow up. We -- given also that you see that loss to follow-up is significantly higher with the treatment group. Somehow -- I mean, we know from other studies that when patients recover, they are less likely to be compliant. And if you have an environmental factor with concerns about infection fear about the COVID pandemic, I think it's fair to say that it has a contributed effect on people, unfortunately, decided to self-isolate and not continue the study that otherwise was the aim for following them up with this injury. We followed over time the -- both the recruitment of the study as well as the follow-up. Not all data has been disclosed to us. So the very high dropout rate was also a big surprise for us when we opened the envelopes yesterday. And we can see that both follow-up and recruitment rate in the study in general was strongly influenced by COVID. And I think also if you look at the enhancements that are being made around the world for med tech, biotech and pharma companies, we are not alone with this observation if judging how many clinical studies that are being pulled or postponed or modified during these very special times.

[Operator Instructions] We have no further questions, so I will pass back to the speakers.

Yes. So thank you, everyone, for joining this call. Hopefully, we have been able to provide a bit more clarity and detail on the FORTIFY study that came out in conclusive. And again, what that means is that the study cannot be used for the purpose it was intended and no conclusions in either direction can then be given. We thank you for your participation, and we also encourage those of you that would like to learn more about the company to contact us directly, and we will try to be as open and frank as we can also about our way forward. Once we have had further discussions with FDA, and we have a clear direction, we will make sure we communicate this in a transparent way as we always do. Thank you very much.

Thank you for attending. You may now disconnect your lines.