Cynata Therapeutics Limited (CYP) Earnings Call Transcript & Summary

All right. Good morning, and thank you for joining Cynata's Clinical Trial Results Webinar. Hosting this morning is Chair, Geoff Brooke; CEO, Dr. Kilian Kelly; and Chief Business Officer, Dr. Mathias Kroll, who will take you through the Phase II acute graft-versus-host disease and Phase III osteoarthritis trial results. Then I'll take questions at the end of the presentation. [Operator Instructions] And lastly, as a reminder, this call is being recorded and will be available on the investor hub very shortly. I'll now hand over to Geoff to formally commence.

Thank you, Lauren. Geoff Brooke here, I'm the Chairman of Cynata. And as Lauren said, we have the CEO, Kilian, with us as well as the Chief Business Officer, Mathias. I'm sure like everybody else, we're quite -- more than quite, we're very disappointed and quite shocked by the results that we've seen last week. And then we thought the best thing to do would be following the press release is to do a webinar and lay it all out and allow people to ask questions. So I'm glad we've had so many people take up the offer. And again, I just can't tell you how disappointed we are. Everybody has put their heart and soul into this for numbers of years, let alone shareholders' investment in cash, hard-earned cash. So we completely understand that. We've in fact, put cash ourselves. So we understand the disappointment, not only from an employee point of view, a clinician point of view, but also a shareholder point of view. So with those brief introductions, I'm going to hand over to Kilian, our CEO, to run through the results. Thanks, Kilian.

Can you hear me? I'm sorry, I think I have disconnected. [Technical Difficulty].

We did rehearse this 5 minutes ago and it worked.

Can we see the presentation?

Yes. All good.

Okay. Okay. I apologize again to everybody for that. I'm not sure we obviously had some technical difficulties. So thanks for joining us this morning. Obviously, this has been a really disappointing past week for the company and for all of our shareholders. This is clearly not where we wanted to be. So today, we just really wanted to go through what happened and where we are now and what next. So of course, we announced the results of both of our trials last week, the graft-versus-host disease and osteoarthritis trial. We weren't, of course, expecting both trial results to come out within the same week, but that's the way it's sort of panned out really because the osteoarthritis trial ended up reading out a bit later than we had anticipated and the GvHD results came in slightly ahead of schedule. So by sort of coincidence, they coincided. Now as I'm sure you all know, neither of them met the primary endpoints. So there were no statistically significant differences between the active control -- active and control groups on either of the primary or key secondary efficacy measures in either study. The graft-versus-host disease outcome was particularly unexpected, as, of course, our Phase I trial had given us really positive results. And that really gave us a lot of grounds for optimism. Unfortunately, the Phase II results just haven't been consistent with those initial Phase I outcomes, which, as I said, beyond being disappointing is a real surprise for us. The osteoarthritis trial was always, of course, in a bit of a different category and that we did not have previous data using our own product in osteoarthritis. The results, we did see that the pain reduction in the active group was in line with expectations, and it was sustained right to 2 years. But unfortunately, the same was true in the placebo group. And so there were no differences between groups, even though the pain reduction in the active group really was in line with our expectations. I suppose it is important to say that in both trials, we saw that the products were safe and well tolerated. And so we didn't see any real differences between the active and control groups in either trial. And that's, of course, very consistent with our previous data and indeed, data with MSCs more generally. So starting with the osteoarthritis results. And again, as I mentioned, no safety concerns identified. But unfortunately, on the efficacy side of things, there were no statistically significant differences between the 2 groups. And we had co-primary endpoints in this trial. One was a measure of pain, which specifically is the patient acceptable symptom state or PASS. And basically, what this is, is a measure of what proportion of participants reach a predefined threshold for knee pain. And basically, that threshold is a level below which pain is not considered to really bother the patients on an ongoing basis. So what we saw was in the active group, we saw 51.7% of patients achieving that threshold, which just for interest, the trial design assumed that we were aiming to see 50% of active group participants reaching that threshold. So as I said, that part of it was in line with expectations. But then when we looked at the control group, the protocol, the study design had assumed that 35% of patients in the control group would meet this threshold and the trial was powered to show a difference between the assumed 50% versus 35%. But unfortunately, we saw an extremely high response rate in the placebo group of 48.1%. And needless to say, that is not statistically significant. When it comes to the cartilage thickness loss, so this was assessed using MRI. And we did not see any apparent effect on cartilage thickness loss. So in fact, nominally on the face of it, the amount of cartilage lost in the active group was slightly higher than in the control group. But again, there's no statistically significant differences there. And we -- I think we're concluding there that there's no evidence of an effect on cartilage thickness after that 2-year time point. So as I said, the pain intensity reduction, which sort of is a different way of looking at pain through the PASS -- compared to the PASS threshold. This was our secondary endpoints. And again, we saw that substantial and durable reduction in knee pain intensity at every time point all the way from 3 months to 24 months compared to baseline. So the average reduction in pain score in the active group out to 24 months was 26.8 out of 100, and it was 25.3 out of 100 in the control group. So again, the issue we have there is that it's really indistinguishable from the control group. The actual effect we saw in the pain group or in the active group rather, is in line with expectations. But sadly, the high response in the control group has meant we've not been able to show any difference. So this trial, of course, is being run by the University of Sydney, and they are continuing to analyze additional outcome measures. They will be reported in due course. They include things like other measures of symptoms, including the knee osteoarthritis outcome score or KOOS, which is a more sort of holistic measure of symptoms and measures of quality of life and so on. So of course, those data will be analyzed further. When it comes to graft-versus-host disease, so -- and again, no safety concerns identified. But again, unfortunately, no significant differences between groups in the primary or secondary endpoints or the key secondary end points at least. So we saw a very slightly higher numerical overall response rate in the active group of about 57.7%, but that was compared to 54.8% in the control group. That was the primary end point. I think we would have to acknowledge that in both cases here, things haven't really gone the way we would have expected or hoped. So that control response rate is quite high, but not completely unprecedented. There were 2 other trials with very similar protocols run partly overlapping with our trial, one by using a CSL product called Alpha-1 Antitrypsin and the other run by a U.S. company called Equillium. And interestingly, the trial with the CSL product had a control response rate of about 45% but the Equillium one had a control response rate of about 55%. So I guess, unfortunately, our control response rate is in line with the upper end of that range, but also the active response rate is certainly not what we had hoped it would be. We hoped it would have been much higher than that. And then when we look at the secondary endpoints, it's largely a similar pattern with no significant differences between groups. The overall survival rate is, of course, nominally higher in the active group compared to control. But the reality is at this early stage of day 100, most patients in both groups have actually survived to that time point and the difference is really hard to kind of draw any conclusions from. So unfortunately, those results just have not worked out the way we had hoped. And I know we've got a lot of questions. I know we're going to move to questions in a moment, but already quite understandably, people are asking how is this possible when we saw such great results in Phase I. And I think there's perhaps a few different answers to that question. Of course, we don't know exactly why. But our Phase I trial was in -- it was a slightly different patient population. It was patients that already failed to respond to steroids. And at that time, there was no other approved treatment for those patients. So we were able to enroll patients in an open-label trial with our product. And then there was no additional treatment really to be introduced at least an approved treatment. In this trial, there is now an approved treatment called ruxolitinib. And we enrolled newly diagnosed patients with GvHD in order to get in before ruxolitinib was available to be used. But what we have seen is that a lot of the patients in this trial got ruxolitinib. Once they got ruxolitinib, they have to be considered nonresponders. And I guess the question is whether the clinicians waited long enough to allow the MSCs to work. Obviously, the clinician's best interest or have the best interest of the patients at heart. And if they feel a new therapy is warranted, then they're going to use it. And of course, that's the way it has to be. But I think that is an important difference, and it was something we were aware of. To expand on why did we do a trial in that population when we did something different in Phase I, as some of you who have been following for a while will know, the reason is that if we had tried to do exactly the same type of trial as Phase I in steroid-resistant patients, it would have been difficult, if not impossible, to do that trial because ruxolitinib is now approved for that population and pretty much everybody who fails to respond to steroids gets ruxolitinib. If we tried to do a trial where patients got our product instead of ruxolitinib, it would have meant asking people to be -- to withhold the only approved treatment for a condition which is life threatening. That would have been challenging probably to get approval for. But even if we did get approval to do that trial, the feedback from clinicians really was quite unanimous, which is it would have been very, very difficult to enroll patients in that trial because you would have had to ask them to be willing to go without that approved treatment. We did also look at other options like adding our product to ruxolitinib. That's not ideal either because one of the things that we know that we have an advantage of is safety. So our product, again, as shown in these trials, has a very clean safety profile, whereas ruxolitinib causes a lot of very problematic side effects. But if we give our product together with ruxolitinib, we would have the ruxolitinib side effect occurring in our patients, too. So we would have lost that advantage. And it also would have been quite challenging to show a statistically significant improvement on the ruxolitinib response rate, which is about 60% without doing a very large trial. So that wasn't optimal either. We also looked at doing a trial in patients who failed to respond to ruxolitinib as well as steroids. The issue with that is there's really not many of those patients, and those patients are very sick. So it's a very difficult population to do a trial in. So that's why we did the trial that we did. And unfortunately, it hasn't worked out as we'd hoped or expected. And that's really all I've got on the results for now. I know everybody wants to know what next. And as we mentioned in our announcement on Friday, the Board is -- as we speak, we are considering all available options as to what next. And we intend to make an announcement or announcements about that very soon, as soon as we possibly can. What I can say for now is our cash balance, of course, isn't huge, but it has arguably been slightly preserved by the fact that we have terminated the follow-up in the GvHD trial, and we will be seeking to cut as many costs as we can in order to prolong that runway in order for decisions to be made and next steps to be worked out. And I should also remind everybody that we do expect R&D tax incentive rebates, which is typically received around October each year, and we'll be aiming to get that as soon as we possibly can. This year, we're expecting that to be in the region of $1.2 million to $1.3 million. So I guess at that point, Lauren, I can probably pause and move to questions.

Yes. Thank you. So we've had quite a few come through, as I mentioned, prior to the webinar. So we'll get through as many as we can in the next 13 minutes. The primary question seems to be what is the future of Cynata's broader pipeline like your clinical -- your kidney transplant trial and whether you will be proceeding with the diabetic foot ulcer trial?

Yes. So the kidney transplant trial is still continuing. A reminder that, that trial is being run in partnership with Leiden University Medical Center in the Netherlands. So we agreed to supply the product for use in that trial, and we do retain the commercial rights, but the trial is actually being conducted and funded by LUMC. And so that is continuing. We're currently in the second cohort of that trial announced late last year that the first cohort of 3 patients have been reviewed by the DSMB, and they recommended that we continue. So that's still ongoing. The diabetic foot ulcer program again, a reminder for everybody that we completed a Phase I trial about 18 months ago now with some really encouraging results. At that time, we mentioned -- we announced to the market that we were not going to invest in a further trial ourselves at that time, in part to our focus on the GvHD and OA programs and, of course, the fact that would require further funding. We have engaged quite widely with potential partners over that time. Our view is, I think that, that trial does require further investment from Cynata, the program rather, more than likely to conduct another trial. Clearly, if results last week had gone the way we would hoped, we would have been in a position to fund further development in DFU and indeed other programs. Last week has clearly changed things. That's not to say we are unable to do that or we won't or we can't. But I think we have to acknowledge right now that with the current cash balance that we have, that is not sufficient to fund another trial. So we do need to evaluate our options on that, and that will certainly be part of our upcoming announcements.

And do you believe there is still the potential clinical application left for the iPSC platform and Cymerus more broadly?

Yes. So look, I think we have generated a lot of very strong data over the past number of years. We have shown in preclinical studies and in vitro studies that the cells we make work very well in terms of what we are looking for MSCs to do. Of course, we have generated very positive earlier clinical data as well. I don't think the results last week sort of invalidate any of the previous data. It's more a case of those trials have not worked out the way we wanted to. And of course, that is a very big impact on us as a company. But it doesn't mean that everything we thought was wrong and that these cells don't work well or that we can't use our process to make cells. So absolutely, I still believe in the platform and its ability to make MSCs that are very consistent and functional and potent. So of course, the challenge we have now is figuring out how further development of that program can be funded basically.

And so you mentioned that the trials that the control group responses were higher than expected. Was this a design flaw of the trials? Or are you confident in how the trials are designed?

So I don't think it was a design floor per se. I think I should probably take the 2 trials separately and because they are very different, of course. Osteoarthritis had a co-primary endpoint and indeed secondary endpoints related to measurement of pain. That is -- look, there's different sort of -- for example, one could have argued that the secondary should have been the primary or vice versa. But as it has turned out that we didn't see an effect on either of those. Pain is clearly a very subjective endpoint. It is very difficult to assess. There are many, many examples of trials with pain endpoints where outcomes like this have happened. And I think it is fair to say that if somebody knew that they had received a placebo treatment, it's highly unlikely -- sorry, if all of those people have known that, it's highly unlikely that almost 50% of them would have reported that their pain was resolved and then they had a sustained resolution for 2 years. So the reality is pain is something with a very well-recognized placebo effect. The outcome we saw is certainly higher than what had been expected, but I don't know that there's a way to completely avoid that in a trial in this indication. So I don't think we would say it was a design floor per se. It's a challenging area to study. And yes, I think we could argue that we perhaps have got a bit unlucky with the placebo response, but it is what it is. I don't think that there was -- as I said, there certainly are different ways that pain can be assessed. But I think that what we saw suggest that even if we had chosen a different primary pain endpoint, it probably wouldn't have been that different. I know from a discussion with the principal investigator on Thursday evening when we had these results, he made the point that there really is a huge amount of expectation around stem cell-based treatments and people really want to get treated with these types of products, and it's possible that, that has just had an influence on the perception of the patient. If people believe that they have been given an effective treatment, it can really change their own perception of pain. So I think maybe that might be it. When it comes to GvHD, as I mentioned during the presentation there, study design has again got challenging in this indication because of the approval of ruxolitinib. I think also, as I mentioned, we had sort of 2 issues in that the control response rate was certainly at the very upper end of the range that had been seen previously in similar trials. But also the response in the active group was certainly not as high as I expected to see. So was that a design flaw? Well, again, as I said, we looked at numerous different design options. None of them were really ideal. We decided a number of years ago back in 2022, I believe it was maybe even late 2021, that this was the best approach given the current treatment landscape. I think that was even with the benefit of hindsight, I don't think that was an incorrect decision. But I think we have learned perhaps that the availability, not just from our trial, but from the other 2 similar trials run at the same time or more or less at the same time. I think we've learned that the fact that ruxolitinib is available to be used means that in a lot of cases, I think it is being used in patients quite quickly after the investigational treatment. And that means that there's a very small window for the investigational treatment to be effective, and that may have been what has hurt us here. So that's definitely something we'll give some further thought to.

So quite a few questions have come through in regards to the MSCs themselves. And could it be that poor manufacturing batch could be a possible reason or does some work need to be done on the potency of your assays? Could it be a dosing issue?

So yes, look, obviously, our product and -- our manufacturing process includes an extensive QC testing on every batch. So we don't have any reason to believe that there was something wrong with the way these cells were manufactured. And I should also add that multiple different batches we used across these trials. So certainly, there's nothing that would make me think that was the problem. The other thing, of course, that is important is that the cells are handled properly at the hospitals. And there were a lot of hospitals involved across these 2 trials. We certainly, again, have no reason to believe that, that wasn't the case. We did everything, I think, that could be done in terms of training the site staff and so on and so forth. So I don't have any reason to believe that, that is the problem. And of course, that's something that always has to be asked. Was that the issue? Did we sort of have a product that was not manufactured well. But as I said, I don't think that's the case. In terms of would have been different if we gave more doses, again, it's a good question, a question that always has to be asked. I think when we look at the GvHD trial, in particular, though, as I mentioned in most cases, the nonresponders were given ruxolitinib well before day 28. And once they get ruxolitinib, they are nonresponders according to these trial protocols, no matter what happens next. So even if we'd continue to give more MSC doses and even if that did have a benefit, it wouldn't have actually changed the outcome because they've already got ruxolitinib. So I don't think that would have made a difference. And when it comes to osteoarthritis, well, they got 2 doses upfront within the first couple of weeks and a further dose after 1 year. One could certainly speculate that giving more frequent doses might have led to a better outcome. But I think it is worth saying that there have been quite a lot of other MSC trials conducted with MSCs and osteoarthritis. And there are a few, if any, that would have given MSCs more frequently than what we did. So again, I don't think we have a sort of a basis to conclude that, that was the problem. I guess it's also fair to say you can't completely eliminate that as a possibility either. And that's certainly also something we'll give further thought to.

And possibly the last question for today is what is the future for Cynata? And do you believe that you are a viable company?

Yes. So again, as I mentioned at the start, the Board is really actively reviewing our current situation and working out what is next. So I can't answer that until those decisions are made, and we make those announcements. Again, as I mentioned, we do have cash in the bank to continue operating for now. So we will have to basically work out very soon, and it will be very soon, I can assure people of that what we are going to do next, and we will announce that to investors as soon as we can. But yes, as I said, we're confident in our ability to, if you like, keep the lights on, while we work through all of this, evaluate the different options and then make the right decision for the company and for our shareholders. Obviously, our job is to represent the best interest of shareholders, and that's what we're doing. So we're trying to find the best outcome from a bad situation for all of our shareholders.

There are all of the questions. I'll hand one more. Why was more cash not raised to protect against this? Or why is the raise not be done?

I seem to have lost sound again. I don't know if I can still be heard. [Technical Difficulty].

Maybe we might leave it there. Geoff or Mathias, did you have any closing remarks before we wrap up for today?

Looks like Kilian's back. Are you back, Kilian?

It doesn't appear to be. We might just leave it there.

Yes. Long again, just repeating what Kilian said, we're as disappointed and surprised at the results as anyone else. And we felt like we did everything that we could. And as Kilian explained, the Board is going to meet, in fact, in 15 minutes, 14 minutes, the Board is going to meet to continue this process of trying to understand what the company -- what happened and what the company should do now. We, again, really appreciate all of the support from the shareholders, not only financially, which is considerable, but also in other ways, we've had great support from shareholders, and we are just so, so apologetic and sorry about this surprise outcome on both indications.

Well, that concludes today's webinar. Thank you, everybody, for joining. Hope you enjoy the rest of your week. Thank you, Kilian. Thank you, Mathias, Thank you, Geoff.

Thanks everybody.