Cellectis S.A. (ALCLS) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Cellectis Third Quarter 2023 Earnings Call. [Operator Instructions] Please be aware that today's conference call is being recorded. I'd now like to introduce our first speaker, Arthur Stril, Chief Business Officer. You may begin.

Good morning, and welcome, everyone, to Cellectis Third Quarter 2023 Corporate Update and Financial Results Conference Call. Joining me on the call today with prepared remarks are Dr. Andre Choulika, our Chief Executive Officer; Dr. Bing Wang, our Chief Financial Officer; and Dr. Mark Frattini, our Chief Medical Officer. Yesterday evening, Cellectis issued a press release reporting a corporate and business update for the third quarter 2023 and its financial results for the 9-month period ended September 30, 2023. As a reminder, we will make statements regarding Cellectis' financial outlook, including the sufficiency of cash to fund operations in addition to its manufacturing, regulatory and product development status and plans and product development of its license partners. These forward statements, which are based on our management's current expectations and assumptions and on information currently available to management, including information provided or otherwise publicly reported by our licensed partners are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 20-F filed with the Securities and Exchange Commission, SEC, and the financial report, including the management report for the year ended on December 31, 2022, and subsequent filings Cellectis makes with the SEC from time to time. I would now like to turn the call over to Andre.

Thank you, Arthur, and good morning, and thank you, everyone, for joining us today. Last week, we announced a strategic collaboration and investment agreement with AstraZeneca. We're very proud to initiate this partnership with one of the top leaders in the pharma space, sharing our strong commitment and ambition in cell and gene therapy. Why AstraZeneca? Because, we have been very much impressed by the long-term strategy in this space, backed by a strong commitment and development already made paving the way toward a top leadership in this arena. We strongly believe that together, with AstraZeneca, that next generation of genomic medicines will be developed under our collaboration to revolutionize medicine across a number of therapeutic areas in the years to come. As part of our agreement, AstraZeneca has agreed to make an initial payment of $105 million to Cellectis, composed of $80 million equity investment in exchange of 16 million ordinary shares at $5 per share and a $25 million upfront payment under the research collaboration agreement. Cellectis is also eligible to receive an additional $140 million equity investment in exchange for 28 million convertible preferred shares at $5 per share, subject to Cellectis shareholders' approval and several other conditions of closing. Now some words about the research collaboration. Very ambitious proposals to develop novel cell and gene therapies across oncology, immunology and rare diseases. We have exclusively reserved 25 genetic targets for AstraZeneca, from which up to 10 novel candidate products could be explored for development. The beauty of this agreement is that our clinical stage asset, UCART22, UCART123 and UCART20x22, remain under our own ownership and control, and you should expect regular updates in the advancement of these programs for us. Within the collaboration, we will leverage our cutting-edge innovation and best-in-class manufacturing capabilities, develop new disruptive product candidate and AstraZeneca will have an option for a worldwide exclusive license on 10 of the candidate products we exercised before IND filing. Our research costs under the collaboration will be funded by AstraZeneca and we're eligible to receive an IND option fee and development regulatory and sales-related milestone payments ranging from $70 million and up to $220 million for each of the 10-candidate product plus shared royalty. We're very excited to get to work with AstraZeneca to leverage our capabilities and build the next generation of genomic medicines to address area of high unmet patient needs together. During this past third quarter, Cellectis innovation team excelled in releasing disruptive preclinical data on gene editing of hematopoietic stem cell gene therapy for an immunological disease, data on our proprietary TALE Base Editor technology and a multi-armed allogeneic CAR T-cell targeting MUC1 for triple-negative breast cancer, demonstrating one more time the span and the power of our gene editing platform and to develop next-generation cell and gene therapies for patients with unmet medical needs. In addition, our clinical team will be presenting updates of results for the Phase I BALLI-01 trial of UCART22 and preliminary results of the NAtHaLI-01 trial evaluating UCART20x22 in refractory or relapsed B-cell non-Hodgkin lymphoma at the American Association of Hematology Annual Meeting. But I will let Mark in a couple of minutes, talk about these abstracts. However, one thing I would like to highlight and what Mark is going to present after is the importance of the know-how in manufacturing. In cell therapies, nothing is more important that the fitness of the cell that will be injected to patients. The quality, the reproducibility of manufacturing is one of the game-changer in the success of these therapies. This is why we have fully internalized manufacturing. Now this work is totally completed, and this is why it's going to make a difference. Cellectis will continue to control strictly cash burn in these difficult market environment, and we will continue to focus our efforts and expenses on advancing our core clinical trial, BALLI-01 evaluating UCART22, NAtHaLI-01, evaluating UCART20x22, and AMELI-01 is evaluating UCART123. With that, I would like to turn the call over to Dr. Mark Frattini, our Chief Medical Officer who will give an overview of these clinical trials. Mark, please go ahead.

Thank you, Andre. We will be presenting updated results of the Phase I BALLI-01 trial of UCART22 in relapsed/refractory B-cell acute lymphoblastic leukemia and preliminary results for the NAtHaLI-01 trial, evaluating UCART20x22 in relapsed/refractory B-cell non-Hodgkin lymphoma at the American Association of Hematology 65th Annual Meeting in December. As Andre just mentioned, regarding our clinical trial, BALLI-01, evaluating UCART22 in relapsed or refractory B-cell ALL, we have a comparison between a product manufactured at a CDMO. This is process 1, and the same product manufactured in-house here at Cellectis. This is process 2. In vitro comparability study suggested that UCART22 process 2 manufactured by Cellectis Biologics, is more potent than UCART22 process 1 manufactured by an outside CDMO. In June, at the EAK Congress, we showed you data of patients enrolled at dose level 3 with 5 million cells per kilogram with UCART22 using process 1. Since then, and as of July 1, 2023, 3 patients were enrolled into the first UCART22 P2 cohort at dose level 2, at 1 million cells per kilogram. UCART22 P2 was administered after fludarabine, cyclophosphamide and alemtuzumab or FCA lymphodepletion and was well tolerated. No dose-limiting toxicities or immune effector cell-associated neurotoxicity was observed, and the CRS observed was grade 1 or 2. There was a higher preliminary response rate, 67% at dose level 2 with 1 million cells per kilogram with UCART22 P2 compared to a 50% response rate with a dose 5x higher at dose level 3, of UCART22 P1 that was manufactured by an outside CDMO. UCART22 expansion was observed in the responding patients and correlated with increases in serum cytokine and inflammatory markers. The study continues to enroll patients at dose level 2i, 2.5 million cells per kilogram with UCART22 P2. We will also be presenting preliminary results of NAtHaLI-01 study, evaluating UCART20x22, the first allogeneic dual CAR T-cell product in patients with relapsed/refractory B-cell non-Hodgkin lymphoma at the ASH meeting in December. In this case, UCART20x22 has been fully manufactured in-house by Cellectis at our Raleigh manufacturing plant. As of July 1, 2023, a Three patients were enrolled and treated at dose level 1. Here, we are using a flat dose of 50 million cells for patients over 50 kilograms. Cytokine release syndrome grade 1 or 2 occurred in all patients and all CRS resolved with treatment. No immune effector cell-associated neurotoxicity or graft-versus-host disease was observed. There were no UCART20x22 dose-limiting toxicities, and there was 1 CLLS52 or alemtuzumab DLT. All patients responded at day 28 with 1 partial metabolic response and 2 complete metabolic responses in patients who had failed prior autologous CD19 CAR T-cell therapy. UCART20x22 expansion correlated with increases in serum cytokine and inflammatory marker levels as well as with cytokine release syndrome. These initial data with 100% responses at the initial dose of 50 million cells per patient supports the continued study of UCART20x22 in relapsed/refractory B-cell NHL, and the study continues to enroll. Lastly, our AMELI-01 study evaluating UCART123 in patients with relapsed or refractory acute myelogenous leukemia continues to progress and enroll patients in the FCA 2-dose regimen arm. With that, I would like to hand the call over to Dr. Bing Wang, Cellectis' Chief Financial Officer, for an overview of our financials for the third quarter of 2023. Bing, please go ahead.

Thank you, Mark. I would like to highlight that in our financials, the cash, cash equivalent and restricted cash position of Cellectis, excluding Calyxt, as of September 30, 2023, was $72 million compared to $95 million as of December 31, 2022. This $23 million difference mainly reflects $79 million of cash out, which includes $23 million for R&D, $12 million for SG&A, $32 million for staff cost, $8 million for rents and taxes, $4 million of reimbursement of the PGE loan and $2 million unfavorable impact of foreign exchange partially offset by a $23 million net cash inflow from the capital raise closed in February and a $21 million net cash inflow from the European Investment Bank loan. A $6 million of net cash received from the research tax credit prefinancing, a $1 million cash inflow related to the grant and refundable advance from BPI, $3 million of financial investments, capital gain and interest and $1 million reimbursement of social charges paid on stock options and a $2 million net cash inflow from licenses and other cash received. With cash and cash equivalents of $67.4 million as of September 30, 2023, and the $105 million from the AstraZeneca agreement, the company believes that we have sufficient resources to continue operating for at least 12 months following the consolidated financial statements publication. Additionally, the MOU contemplates that AstraZeneca will make a potential further equity investment in Cellectis of $140 million by subscribing 2 newly created class of convertible preferred shares of Cellectis. If confirmed, the closing of the additional investment will remain subject to Cellectis shareholder approval with a 2/3 majority of the votes cast by voting shareholders and a clearance of such investments from the French Ministry of Economy, according to the foreign direct investment branch regulation and other customary closing conditions. Concurrent with these additional $140 million and our anticipated borrowing of EUR 15 million under the tranche fee of the EUR 40 million finance contract with a European investment bank, the company believed that we would extend its cash runway into 2026. The closing of the proposed Calyxt merger was finalized on May 31 of 2023. Consequently, Calyxt was deconsolidated and presented as discontinued operations in the financial statement only until May 31, 2023. The net loss attributable to shareholders of Cellectis was $58 million or $1.07 per share for the 9 months of 2023, of which $53 million was attributed to Cellectis' continuing operations compared to $79 million or $1.74 per share for the 9 months ended September 30, 2022, of which $73 million was attributed to Cellectis' continuing operations. The $21 million decrease in net loss between the first 9 months of 2023 and 2022 was primarily driven by a $14 million decrease of R&D expenses, a $4 million decrease of SG&A expenses and also an increase of $4 million of the financial gain due to the deconsolidation of Calyxt compensated in part by the decrease of fair value of Cytovia's note receivable and a decrease of $2 million loss from the discontinued operations attributable to the shareholders of Cellectis. These downward impact on the net loss were partially offset by a decrease of $1 million revenue and other income. The adjusted net loss attributable to shareholders of Cellectis, which excludes noncash stock-based compensation expenses was $57 million were $1.05 per share in the first 9-month period of 2023 compared to a loss of $72 million or $1.58 per share in the first 9 months of 2022. We are laser-focused on spending our cash on developing our clinical candidates and operating our state-of-the-art manufacturing facilities in Paris and in Raleigh. In addition, our focus on maintaining an efficient corporate infrastructure should also enable more limited growth in G&A spend. At this point, I'd like to hand it back to Andre for closing remarks.

Thank you, Bing. To close out this call, I would like to reiterate how excited we are about the strategic collaboration with AstraZeneca and how much confident we are about the continued progress of our 3 ongoing clinical trials in hematological malignancies as well as our continued development of our preclinical programs. At Cellectis, we strongly believe that our product candidates, our technologies and our in-house manufacturing capabilities will lead us and our partners to a paradigm shift for patients with hard-to-treat cancers, positioning us at the forefront of this promising medical and scientific field. With that, I would like to open the call for question and answers.

[Operator Instructions]. Our first question is from Kelly Shi with Jefferies.

This is Dev on for Kelly Shi. Congratulations on the updates. I have one question on UCART20x22. You showed great result at DL1. So my question is, do you plan to increase the enrollment sites? And how many dose levels do you anticipate to study before finalizing the RP2D?

Great. Thank you very much for this first question, which will go to Mark.

Thanks for the question. And yes, we will -- we anticipate doing an escalation, obviously. And the data from the subsequent escalation will obviously determine where we stop and call an RP2D. So right now, it's to be determined with the clinical data.

Our next question is from the line of Gena Wang with Barclays.

This E Wang Gena. I have 2 questions on your clinical programs. One is that you previously guided UCART123, I believe by end of 2023 max, like the time line for right now, would it be a breaker for ASH? And another question is the next step for UCART22. You mentioned about potential to advance to pivotal study without further dose escalation, is that still the plan?

Thank you very much for both questions. Definitely for Mark.

So for 123, as you know, we began at ASH last year, we announced how we were remodeling the treatment program to include a 2-dose regimen and we are continuing in that 2-dose regimen in dose escalation. So we anticipate that we will rebuild clinical data at some point next year. And in terms of 22 study, yes, we -- in fact, we even pointed out in the abstract for ASH that we have dose escalated to 2.5 million cells per kilo with the 22 P2 product. So we will see where that data bears us out and as we move ahead.

Gena, do you have any questions?

Maybe one last follow-up question on the AstraZeneca deal. Is there a time line that they have to select certain lead targets? And would you only get keep it as your own like [ wholly owned ] if they turn it down, turn some targets down?

Sorry, I'm not sure I understood -- this is Arthur. I'm not sure I understood the end of the question. But definitely, so as part of the agreement, AstraZeneca, we'll have to choose up to 10 candidate products from a pool of 25. And then once the 10 products are selected, the remaining non-selected targets will come back to us.

Our next question is from the line of Yigal Nochomovitz with Citi.

This is Carly on for Yigal. Two from us. First on UCART22 and 20x22. Just wanted to clarify if we should expect data on additional patients at ASH relative to the abstract or will the ASH data be focused on longer-term follow-up from the patients, just the patients included in the abstract. And then the second question is on the potential additional $140 million equity investment from AstraZeneca. Just wondering if you can clarify if there's specific trigger for that from AstraZeneca side and what the potential timing might be?

Great. So I'll hand it over to Mark for the first clinical question, and then I'll take the question on the AZ deal.

Thank you, yes in terms of the 2 abstracts that we will be presenting, we will be presenting some follow-up on the patients described in the abstracts.

Yes, on the $140 million, so this is subject to a few closing conditions, including approval of our shareholders at a 2/3 majority of the vote cast, clearance according to foreign direct French -- foreign direct investment, French regulations and a couple of other customary closing conditions. We're working expeditiously to finalize these.

Our next question is from Hartaj Singh with Oppenheimer.

And I got 2 questions. One is you're starting to show some complete responses in BALLI and NAtHaLI. I was wondering what would you view as sort of like a durability from a durability perspective? How many months of follow-up would you like to see? And when you could classify these as being very durable responses, especially on the CR side. And my second question is just specific to UCART123. Have you switched over to the commercial product there also? And if not, what's the timing on that?

Thanks for those questions. And Mark, over to you.

Thanks, Hartaj. I'll start with the 123 first. And for the 123, we are still currently using the CDMO-made product for 123. And that's where we are with that right now. In terms of your first question, yes, we are definitely seeing CRs, as you pointed out, in the 2 studies. I think importantly, did stress for the 20x22 studies at the initial dose level, we did see 2 metabolic CRs, and these were in patients that failed prior CD19 CAR T in addition to several other therapies. So I think in the setting of 19 failures having 2 CRs is great news at this dose level. I think in terms of your question for durability, I think that remains to be seen given the line of therapy that we're in and giving the extensive therapies that these patients have been relapsed and refractory from I think at some point, looking in the 3- to 6-month range is not unreasonable to look for good duration of response in these patients.

Our next question is from Jack Allen with Baird.

Congratulations to the team on the progress. My question is also as it relates to the ASH abstracts. Really impressive results out of the UCART20x22 program at the first dose level here. I was wondering to see if the team had any comments about the need-to-escalate dose or are you satisfied with the early results you're seeing here. I'd love to hear about that.

Mark?

Jack, thanks for the question. And yes, as you point out, 3 out of 3 responders at the initial dose level, and as also you can see the safety was quite good at this dose level as well. And I think given both of those facts, we will be -- we will, in fact, be dose escalating this study just to see where we can get at the next higher dose level. So stay tuned for that.

Got it. And then just one brief follow-up. As it relates to longer follow-up on these patients, could you provide some context around when the data cut was taken for ASH and what you expect to present at the conference? And then just to clarify, we should be primarily focused on additional data from the first 3 patients rather than a second dose cohort as well.

Yes. So we'll be focusing on the first 3 patients for the poster presentation.

Yes. Any thoughts on additional kind of follow-up or what kind of result we could expect from those 3 patients at the conference?

So we'll give some further follow-up that we have on them. So please come by and visit us at the poster.

Our next question is from Salveen Richter with Goldman Sachs.

This is Lydia on for Salveen. Could you just remind us of the strategy for UCART20x22 in terms of the targeted patient population given the positive data at ASH?

Thank you very much for the question. That would be for Mark.

Yes, thank you for the question. So we are -- this is in third line or greater that we're using this and this is prior CD19 failures are also included in this study. So that's where we're continuing.

Our next question is from the line of Silvan Tuerkcan with JMP Securities.

Congrats and thanks for taking my question. My first question is, now that you have human data with UCART22 with the product 1 and product 2. Do we know what -- why products 2 is so much more potent? Do you have any measures of like cytokines or [indiscernible] et cetera. And then my second question is, are there any more near-term milestones associated with Allogenes, anti-CD70 or anti-Claudin 18.2 programs that you could be getting?

Great. Thank you very much for both questions. I'll hand it over to Andre for the first one.

Thank you very much for the nice question because I think that the manufacturing definitely makes a huge difference. And as Mark described in his presentation, there is process 1 that was the process that was used that the CMO initially and the 1 we've implemented after internally, there's the process 2. So there's like a few things that have changed. We know exactly why, one day someone asked me a question about how we do it, how we can do cells that have so much potency. And let me tell, I'm going to share the secret with you here online. So I see all the faces around me, too awkward, like, Oh, Andre don't do this, I'm going to do it. But we've done close to 10,000 batches internally in process development. We've done and crushed and crushed and crushed cells and tweaked every parameter and there are hundreds of parameter. This is called experience. And we are the ones that have invented the concept of allogeneic CAR-T. I can tell you like the process didn't came out like this, like from the ground. It took a long time before we got to the point where we are. And today, I think that we're probably the best under the planet to do allogeneic CAR-T. As Mark said, come at our poster session at ASH, watch the expansion of the cells even at super low doses. You will see what it means to have such type of experience. And experience cannot be invented in a day. It can be transmitted, but we do not transmit these 10 years, of crushing, batch after batch small, midsize, large-size batch, in GMP conditions, et cetera, up to the time we have tweaked all parameter to a perfection. That's the answer. And for the Allogene.

Thanks, Andre. And on the Allogene question, so we definitely have a significant vested interest in Allogene's success just remembering up to $410 million in development and sales milestone for CD19 through our agreement with Servier and up to $2.8 billion in development and sales milestones with [ Allogene ]. So we haven't disclosed the granularity of the milestones, but we'll definitely communicate that and when Allogene hits those milestones, and we get the amounts in our bank.

Our next question is from the line of Yanan Zhu, with Wells Fargo.

Congrats on the progress. This is Kuan-Hung on for Yanan. So my question is on UCART22, so can you give us more detail about the Grade 5 AE that was revealed in the abstract? And how that may affect the further study conduct?

Thank you for the question, and this will be for Mark.

Yes. So as we revealed in the abstract, this grade 5 event happened after -- long after -- several couple of weeks after the day 28 assessment in this patient who had a morphologic leukemia-free state. So it was a bacterial infection that the investigator related to everything, which is why it's there. So it's really not affecting anything as we move ahead.

Got it. And is there a way to find out by how much of that was contributed by the UCART22 itself or the lymphodepletion?

Yes. So there's -- as we'll show on the poster, there's a level of expansion that was seen with these cells by flow cytometry at the time point of this event happened we don't believe there were any UCART22 cells remaining. So we think that the likelihood it was less related to UCART22. This was a patient who was -- again, as outlined in the abstract was super heavily pretreated. They failed allo transplant, they failed prior autologous CAR-T times 2 infusions. They failed multi-agent chemo, and they also failed blinatumurab, inotuzumab and venetoclax. So the cumulative dosing of the prior chemo that they made and going into the study very hypocellular explain some of the issues that developed.

As there are no further questions, I would now hand the conference over to Andre Choulika, CEO, for closing comments.

Well, first of all, I would like to thank the team for helping in doing the call here. It's been a pleasure to prepare this together. And I would like to very warmly thank all the analysts that have been following the company and supporting and watching what we're doing, it's very valuable. And I would like to make a special word also to our long-term shareholders that has been continuously supporting the company over the past years. And I hope that the company is going to have like a very strong end of '23 and '24 and '25 and '26. So we'll come up very soon for an update on the progress. Thank you very much.

Thank you. The conference of Cellectis has now concluded. Thank you for your participation. You may now disconnect your lines.