Cartesian Therapeutics, Inc. (RNAC) Earnings Call Transcript & Summary

So really quickly on disclosures. So for important disclosures, please see the Morgan Stanley research disclosure website. And if you have any questions, please contact your Morgan Stanley sales representative. So thank you all for joining us for the Cartesian fireside chat. I'm really excited to welcome Carsten and Milos Miljkovic, the company's CEO and the CMO. Welcome, Carsten. Welcome, Milos. And I'm Ross Cohen, and I work in the health care investment banking at Morgan Stanley. So maybe just kicking off, for those of us who aren't, say, familiar with the Cartesian story, can you maybe just give us a quick background overview on the company and what you guys are up to?

Yes. So maybe just disclaimers as well. Forward-looking statements that might change in the future. Cartesian is an mRNA CAR T cell therapy company. We are focused exclusively on autoimmune disease. We have a lead asset in Phase III, it's called Descartes-08. What makes technology unique is that we use mRNA versus DNA, which allows us to dose in an outpatient setting without lymphodepletion. mRNA is transient in nature, so there's no risk of secondary malignancies. We see Descartes-08 as a pipeline in a product. We're also running a Phase II open-label study in SLE right now. And we have an IND allowed for a pediatric study as well. And the last thing I'd say, we manufacture in-house, which allows us to control costs. It's our own operators, we can make process improvements in-house.

Yes. And so maybe on DC-08 specifically, and it's engineered using mRNA and you're targeting BCMA specifically, which is a little bit different than the broader field. So what's kind of the unique combination, especially when you compare to more DNA-based CAR Ts within the space? And could you just kind of point us to those levels of differentiation and then specifically around the clinical profile for autoimmune disease?

Yes. So I think in essence, DNA CAR Ts are designed to treat cancer fundamentally. You have to lymphodepletion. This is done in an inpatient setting. There's toxicity associated with lymphodepletion. You can give a [ SUBLOCADE ] dose cell proliferate, they don't know when to stop. You have toxicity such as CRS, ICANS and you're on the risk of second malignancies, which is totally acceptable if you have a cancer and have weeks to live. Autoimmune disease is very different. These are chronic diseases, oftentimes younger patients, not necessarily lethal, just chronic. So it's a different risk-benefit profile. So mRNA is uniquely suited to that because it's transit in nature. So as I said earlier, we don't have to lymphodepletion. We give it an outpatient setting. It's a 20-minute infusion, very much like a biologic and a physician doesn't have to track the patient for 15 years. So that's a fundamental difference around administration and the kind of patients you would attract to this or try to recruit. And then BCMA, we think that's actually the better mousetrap potentially. It's more targeted. BCMA is expressed on [ lung ] plasma cells. So the cells that actually make the pathogenic auto antibodies. So you got the root cause of the disease and also a second type called plasmacytoid dendritic cells, pDCs. They are myeloid lineage. They play a role in early inflammatory processes. So it's kind of a two-pronged approach, and you have fewer cells to go after where CD-19, you have a lot of bystander cells, not directly impacting or playing a role in the disease. So we think that combination makes us quite unique. We also -- we're agnostic to the antigen. We also have an early CD-19 asset, but decided actually not to take it into the clinic.

Yes. No, that makes sense. And then on that, earlier this year, you released 12-month Phase IIb data in myasthenia gravis specifically. So maybe can you just give us a little bit of background on the overall study and what that data looked like?

Yes. So it was a randomized placebo-controlled trial, where every eligible patient and there were patients with AChR antibody positive and seronegative myasthenia gravis was apheresis. So it's an autologous product to do leukapheresis. Everybody had a Descartes-08 lot and a placebo lot manufactured. And then they were randomized 1:1 to get one or the other once a week for 6 weeks. That's the dosing regimen we established based on open-label data, and that was blinded. Then they have blinded follow-up at month 2 and month 3 and month 3 was the primary endpoint readout where it was a very positive study. So we use a scale called MG composite for response. And we had around 70% responders in the Descartes-08 arm and 25% responders in the placebo arm. So it easily cleared statistical significance. What's more important is that those responses deepened further in patients who got Descartes-08, so that at month 4, they had on average 5.5 improvement in MG-ADL, which is a scale used in myasthenia gravis. It's common across studies, across the field. And when you look at patients who never had prior complement inhibitors or FcRn inhibitors, those patients did even better. The MG-ADL improvement there was 7.1 at month 4. And those improvements carried over to month 12, so that, for example, that group with no prior biologics, they still had average 6.8 point improvement of MG-ADL by month 12. Now I'm talking improvement in numbers. Patients don't know what 4.5 point improvement means. Many neurologists don't really think that way either. What they do know is who has or doesn't have symptoms. So there's something called minimum symptom expression. It means MG-ADL of 0 to 1, so no symptoms or almost no symptoms of ADL. And 1/3 of patients -- of all patients had minimum symptom expression on month 6. And in that no prior biologics group, 57% of those patients had minimum symptom expression by month 6, and all of them still had minimum symptom expression at month 12. So we were able to achieve no symptoms of MG-ADL in more than half of those patients and carry that over to month 12 after only 6 weeks of treatment.

That's amazing. And then that speaks, I think, to the efficacy point that's been pretty profound. And then maybe shifting gears to this on the safety side. It feels like the mRNA component of this is very uniquely differentiated from some of the DNA-based CAR-Ts that you alluded to. But maybe just go into more -- some more specifics around the data that you saw, specifically around ICANS and CRS, for example, and how that's so differentiated in terms of your platform versus the others?

Yes, absolutely. So we did not see any CRS cytokine release syndrome or ICANS in any of the patients either in this study or in prior studies, open-label studies. Everybody got treatment outpatient. There's no lymphodepletion chemotherapy. So there were no hematologic toxicities. There was no broad immunosuppression, no risk -- increased risk of infection, no hypogammaglobulinemia. People didn't need to get revaccinated. The only specific side effect that we saw were infusion reactions that happened 4 to 6 hours after infusion, and they're fevers that completely resolved within 24 hours. And we checked cytokines for those patients because you're always concerned that somebody develops a fever after a CAR T therapy, is it CRS. And the cytokine profile did not match CRS at all. And none of these patients received tocilizumab or steroids, but still were completely back to baseline within 24 hours.

Yes. And then in terms of, I guess, how that impacts your ability to dose patients in different settings? How does that play as well given where obviously you can avoid some of the certain infusion centers versus others? And how does that help you kind of from a commercial perspective, too?

That's a very important question because conventional CAR Ts still -- they've been approved for years now. They're still limited to academic medical centers, tertiary care centers and it's inpatient administration only. With Descartes-08, as I said, all the patients were dosed outpatient and about 20% of clinical trial sites in the Phase IIb were community clinics, where it was an outpatient infusion center, not tied to a big hospital, and they were able to administer it without any issues. And the patient experience is more like getting a biologic than getting conventional CAR Ts. So there's no chemotherapy. You get premedications, it's 30 minutes. The infusion is around 20 minutes, and there's 1 hour post-infusion observation time. So around 2 hours of infusion share time, that's same or better than the many biologics.

That makes sense. And so maybe shifting gears to back to the development. You recently initiated the Phase III AURORA study. Can you maybe just give us an overview of the design of the trial and also how the enrollment has been going so far?

Yes. So the design is very similar to the Phase IIb. I mean, even with a 30-patient study, we achieved statistical significance in the primary endpoint. So we tweaked it a bit more to have even more power. And it's around 100 patients. Again, it's a randomized placebo-controlled trial. Everybody gets a freeze. There's Descartes-08 lot in a placebo lot manufactured for everyone. It's AChR positive patients only. One thing we learned from the Phase IIb is that for seronegatives, this community clinics don't have the best diagnostic capabilities and you need an adjudication committee. There's a lot more overhead to get those patients and a lot more noise, and we want to go for as clean a signal as possible. And the primary endpoint is MG-ADL, which is a common primary endpoint across all myasthenia studies at month 4. And we do have follow-up all the way through month 12 because it is important to demonstrate that durability. The FDA actually has reviewed the protocol and the statistical analysis plan, and we have an SPA, a special protocol assessment from them, meaning that it's been vetted and we really feel comfortable with the design and the statistical plan. We did start the study May of this year, and we haven't really talked about much about the enrollment pace. We want to make sure that the site activation and all of the other site activities are as planned to get a better hang of the enrollment curve. What we did say is that we feel comfortable with a similar pace to the Phase IIb trial, which took about a year to enroll, and it's a matter of just having more sites.

No, makes sense. And then maybe just double-clicking on the primary endpoint with MG-ADL at month 4. What are your expectations there? How should we think about that in terms of the endpoint? And what do you think will be required to have a competitive edge there?

So there are 2 different questions. So one is from a regulatory perspective, MG-ADL has been used. 2 points is considered clinically meaningful. We use a 3-point cutoff as criteria for response just to demonstrate the depth of response that we expect with Descartes-08, that's from a regulatory perspective. From demonstrating how Descartes-08 would be better than everything else that's out there, we're really focusing on the depth of response. So we are -- minimum symptom expression is measured by MG-ADL, and we are tracking that throughout the study and the durability of response. So we're really focusing on the 12-month data there as well to show that the responses that are achieved at month 4 are maintained to month 12.

Makes sense. And then assuming all goes well with the Phase III, what are the next steps in terms of the regulatory landscape and then also commercial as well?

Yes. So I think the path is very clear since we negotiated an [ SDA ], which basically means the FDA is comfortable with the endpoint with the statistical analysis plan. So it's a positive study. We can file a BLA basically. In terms of commercialization, the nice thing is there's always a perception that it's a very crowded field, MG, which it is and it isn't. I mean there's a lot of me-toos around complements and FcRn antagonist. I think our approach is really unique. We're truly disease-modifying. And I think that really kind of sets us up for a very different value proposition that we have both for physicians and for patients because on biologics, you basically have to treat chronically, and you can't do this because of immune suppression. So they're kind of on off therapy a lot. And I think a single course of therapy and you're basically 6% are symptom-free for at least a year, I think that's a real differentiator. It's a fairly -- I would say it's a small physician population. It's still a rare condition. So we think we can definitely pull this off ourselves in terms of executing on this. And obviously, we're starting conditioning the market through the Phase III. We're creating more awareness. Maybe just one fun data point. We've done some quantitative market research because there's always a lot of anecdotal KOL one-offs. So we've interviewed 100 neurologists and with very little market conditioning, 1/3 of those physicians based on the Phase IIb data, actually would prescribe Descartes-08 ahead of an FcR antagonist or complement inhibitor. And that's without any prior market conditioning. I think that bodes well. But it's still a CAR T, and we have to work with the centers around so how do you handle this with apheresis and all of that. I mean there's definitely -- we need to explain this for sure. But it will be early adopters and many of the sites involved in clinical trial will be early adopters. And we still have ways to go in terms of timing to launch.

Yes. And so basically, as you look at the different protocols, the different KOLs effectively, there will be some people who maybe take it to first line, others may be taking to second line and that evolves over time. Is that how you think?

Yes. I think -- I mean, actually, interesting enough that physicians don't think first line, second line, they tailor it to patients, but there will be physicians, early adopters, they'll use it first. And there'll be others like, well, I'm going to give a biologic first. And then if they fail, I'm going to use it, have a good experience and then use it earlier. It will depend on our price as well, I think, adoption. I think the encouraging thing is that 70% of patients are biologic naive. So it's a pretty large pool of patients who benefit from this as kind of a first-line therapy.

Yes. No, makes a ton of sense. And so maybe going beyond MG, can you talk a little bit about your other clinical plans around DC-08? You have maybe top line coming up around SLE in the second half of this year and then you're planning a pediatric study. So maybe starting with SLE, what sort of data should we be expecting from you guys?

Yes. So first, we think SLE is a good second indication for kind of validation of the platform. SLE is driven by pathogenic autoantibodies, multiple, more complex than MG, but also pDCs play a role, the plasmacytoid dendritic cells. So if we see efficacy in SLE, this opens up a number of other potential indications. It's an open-label study. It's the same dosing regimen as in MG, so 6 weekly infusions. And then we have a range of endpoints, a lot more complex. One that seems to emerge a little bit as the benchmark is a dose response, so patients in full remission, but we're looking at [ SLAT-2Kase ], SRI, PGA. So there's a number of outcomes. And it's going to be a handful of patients. And it's -- as I said, it's kind of a signal finding and platform validating study. Yes.

And then maybe shifting gears on to the pediatric basket trial. Can you walk us through how you think DC-08 in kids makes sense as opposed to other cell therapy in autoimmune?

Yes. I think it's a reflection that the FDA is comfortable with our safety profile. So they allowed an IND in a pediatric basket in rheumatology and neurology. And it's basically the pediatric versions of diseases we're interested in. So there's pediatric MG, there's pediatric SLE. There's -- we're especially interested in juvenile dermatomyositis. We have a pediatric rare disease designation, which I think is attractive also financially. And the other thing that's nice is very few tertiary centers actually that treat. So you have to activate very few centers. Those patients are very concentrated. So there's a high unmet need, but also a pretty high price point. So I think it's a unique position that we can take that other the DNA CAR Ts can't from lymphodepletion.

Anything worth noting around the trial design specifically or any nuances there?

So it's an open-label study, and it's the same dose and schedule as we did in the myasthenia gravis and lupus studies. Because we are starting weight-based dosing on a lower weight, the first few patients will get a bit smaller doses. So we'll be extra cautious, the same way we did for the myasthenia study. So the first 3 patients had intrapatient dose escalation. But again, it's no lymphodepletion chemotherapy, and it will be only the first infusions that are administered inpatient with the monitoring, everything else will be outpatient. So it's not only we think FDA may be comfortable with the safety profile to allow it in the pediatric population, but parents, when you talk about, okay, what treatments are available, not having chemotherapy or somebody who doesn't have cancer, that's a pretty important point. And then the schedule, those children mainly still go to school. So having a time-limited treatment that's 6 weeks potentially during summer vacation off school and then you're potentially set for the whole year, that gives the family a lot of freedom and flexibility rather than constant checkups with the rheumatologists or the neurologists on, okay, when is the next dose, what will the next treatment line be?

Yes. And I mean, it feels like it's very obvious from a patient standpoint. I guess how big do you think that opportunity could become?

I mean it's sizable. Once you combine all those, it's a pretty sizable population. And it's a pretty -- as I said, it's a targeted physician group that treat those. It's basically the same physicians. So it's -- I think from a commercial execution, it's a handful of MSL that can call on those. So I think it's an attractive, it's not the main focus, but it really speaks to the safety of this and it's something that -- it's a unique niche for us that's quite attractive and with high unmet need. Makes sense.

And then maybe shifting to DC-15, the next-gen product. So maybe just quickly touch on what the program is. It's on track in Phase I study in multiple myeloma, how is it differentiated and just a general overview.

Yes. So just maybe around the multi myeloma, we're not in oncology. We're doing the study in multiple myeloma because we can do the highest dose right away. So this is only intended for autoimmune disease, just to clarify. So DC-15 is a next-generation asset. It's at least in vitro 10x more potent. We've engineered a CAR protein. So it stays after killing cycle on the cell surface, goes through a couple of killing cycles. So at least in vitro is 10x more potent. We'll see how this translates. It's a small safety study, Phase I. We get safety data, some PK data, and we'll make a decision towards the end of the year, whether we move it forward. And at the end, we have to prioritize our portfolio and see from a resource perspective, where does the investment make the most sense. The nice thing about Descartes-08 is we have accumulated a lot of safety data. So we have the opportunity to take it in multiple indications. The nice thing about autoimmune disease care is there are so many indications to go after. There's larger ones we could explore as well. But I think for now, we just guided we'll have Phase I data towards the end of the year, and we'll give further guidance when we go with the asset.

And then I guess if all goes well with the safety studies, are there any specific next steps? Obviously, you mentioned that you'll figure it out then. But anything that comes to mind [ initially ].

Yes. I mean it's the first piece is indication selection, what indications. And I mean, there are a lot of large indications actually that are underserved. RA, for example, is a great indication. They're fairly capital intensive. So we'll have to decide whether that's worth doing with DC-15. I think for now, we are kind of balancing what can we pull off ourselves, we manufacture in-house. And I think having DC-08 in multiple indications, a lot of advantages actually around scale. And DC-15 is a next-generation asset. We have more in the pipeline. And what you see is really a step change we're looking for. And we have a couple of follow-on assets as well with even better CAR constructs.

Yes. And maybe to that point, I guess, when you look at the next 12 to 18 to 24 months, what really gets you excited? What are you focusing on.

Yes. I mean we're obviously super excited to be in Phase III and executing that study. I mean a huge milestone. I think we're actually the first company to actually run a proper Phase III, a retooled Phase II study. So I think that's a big deal. I'm excited about the upcoming SLE data. I think that's an important milestone for us kind of validate the platform. And we're excited about the [ PEAK ] study as well that's kicking off.

And then maybe a little bit on the capital piece, current runway, projected runway. How do you think about capital raising and what does that look like?

Yes. So we're kind of in a good position. As of last quarter, we had $162 million cash on hand. We're extremely capital efficient. So that takes us into mid-'27. That includes completing the AURORA Phase III study in MG, includes in-house manufacturing. So that's kind of the guidance we have given. So we don't have to raise money before the Phase III. It's never prudent to wait that long, but we're not an immediate need to raise capital. It depends a little bit on the SLE data and what our plans are around that. So we'll have more guidance on that later this year as well.

Yes. On the manufacturing point, because in CAR T, that's obviously very critical to have a supply chain and trusted manufacturing. Can you kind of walk through what you have in-house and how your strategy has been around that?

Yes. So we have actually -- we have 2 GMP sites, both in Maryland. We have a Phase I, Phase II site kind of served the Phase IIb study. And we have a new Phase III/commercial site also in Maryland. And we've really made a strategic decision to keep it in-house versus going with the CDMO. We got somewhat lucky. We found actually a Phase III site pretty much with very little investment in our backyard. So that made it easier. But I think there's a huge advantage by owning the supply chain 100%. You control costs, your own operators, you can make process improvements. You're not competing at a CDMO with a big pharma. CDMOs have obviously high turnover. So I think that that was the rationale. Our process is very reproducible. We can -- in the future, if we do co-commercial, if we go into Europe, we can go with the CDMO. We don't have to do it in-house. But we just felt for the first indication for the first product, it makes sense it's more capital efficient as well. The process itself actually is simpler than the DNA CAR Ts. What's very imaging with the DNA CAR Ts and quite from a cost perspective is the [indiscernible] viral vector actually. So we don't use an integrating vector. We also apheresis cells, we enrich them for CD8-positive cells, and then we grow them into the billions and then we transfect them at the very end versus DNA CAR Ts, they transfect them early on and they're harder to grow. And we get up to 2 full treatment cycles out of one apheresis that further reduces the cost. We have lower COGS to begin with, and we further reduce it if we get 2 apheresis -- 2 full infusion cycles out of apheresis.

Yes. And then on the redosing point as well, for example, you go a year and then a patient might need to be redosed, which is actually pretty unique to your platform. How does that work in terms of manufacturing? Are you able to recycle cells or how does that...

Yes. So when we harvest the cells, we aliquot them. So if we get in the best case, we get 12 aliquots. We ship 6 to the sites. They get infused over 6 weeks. We keep the rest. If the patient moves somewhere else, we can ship it to another site. So -- and we have multiple years of stability. So it doesn't seem to be an issue or a great limiting at this point.

Yes. Got it. And then maybe last point on -- you brought up Europe, for example. But how do you think about the ex U.S. market in all of this?

Yes. I mean we're running a global study. So we'll generate data in Europe. It's obviously more complex and cell therapies had a slower uptake in Europe, oftentimes driven by reimbursement challenges. But we definitely have the option through the study actually to have a Europe strategy. It's too early to say whether it's a go alone or a partnership. But I think the primary value actually is still for us in the U.S. But as I said, we run a global study, so it enables us to also move forward commercially in Europe in the future.

Yes. No, that makes sense. And that's really all I had. I guess are there any other topics you feel like we didn't hit that you want to close on?

No, I think the one thing I just want to bring up when we talk to investors and we talk to physicians, there's oftentimes a disconnect around the excitement. We often hear from investors, yes, I'm not sure CAR Ts make a ton of sense in autoimmune disease. We've talked to the physician community, they're extremely excited about this data. I mean we talk about functional cures. I mean this is transformational. I mean this is truly disease-modifying. And we had a couple of months ago an advisory board with the top KOLs in MG, and I walked away pretty excited actually. I mean they're just saying, this is really unique that you have a cell therapy profile in an outpatient setting administration. I mean that's really unique. So -- and I wish sometimes investors would appreciate that more. And -- but it gives us confidence that there's a huge unmet need and a willing prescriber base actually to use it in practice.

Yes. No, it's super exciting. And honestly, thank you for sharing it with [indiscernible] for joining us. And so Carsten, Milos, thanks for your time. I really appreciate it. And thank you all for joining us as well.

Thanks for having us. Appreciate it. Thank you.