Poxel S.A. (POXEL) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Poxel Half Year Results 2020 Conference Call. I'll now hand the call over to Madame Jonae Barnes, Senior Vice President, Investor Relations, Corporate Communications and Public Relations. Madame, please go ahead.

Good afternoon, and welcome to Poxel's First Half 2020 Financial Results and Corporate Update Investor Conference Call. I'm Jonae Barnes, Senior Vice President, Investor Relations, Corporate Communications and Public Relations. With me on the call are Thomas Kuhn, CEO; Anne Renevot, CFO. Also joining us today are David Moller, CSO; and Noah Beerman, President of U.S. Operations and EVP of Business Development. They will all be available for the Q&A when the call is complete. Earlier today, we issued a press release which included our first half 2020 financial results and a corporate update. For those of you who don't have a copy, you can access it in the investor relations section of our website at poxelpharma.com. As part of the presentation, we will be using slides to this discussion. You can access them on Poxel's website, in the Investors company information section, under the name of first half 2020 financial and corporate update. Before we begin, I would like to read our forward-looking statements. Some of the statements contained in these presentations constitute forward-looking statements, which are statements that are not historical facts. These statements are based on the company's current strategies, plans, objectives, assumptions, estimates and projections. Investors should therefore not place undue reliance on those statements. The company makes no representations, warranty or predictions that the results anticipated by such forward-looking statements will be achieved. And such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Forward-looking statements speak only as of the date that they are made, and the company does not undertake to update any forward-looking statements in light of new information or future events. In the context of the COVID-19 outbreak, which was declared a pandemic by the World Health organization on March 12, 2020, the company is regularly reviewing the impact of the outbreak on its business. As of the date of this conference call and based on publicly available information, the company has not identified the occurrence of any material negative effect on its business due to the COVID-19 pandemic that remains unresolved. For today's call, Thomas Kuhn, our CEO, will provide an overview of the first half clinical and corporate accomplishments and milestones. Anne Renevot, our CFO, will present a summary of the first half 2020 financial results. Thomas will then provide an update on Imeglimin in Japan and the U.S. and Europe. Dr. David Moller, our CSO, will provide an update on PXL770, PXL065 and additional opportunities from our direct AMPK and deuterated TZD platforms. Thomas will then conclude the call with our upcoming milestones, and we will move to the question-and-answer portion of the call. I will now hand the call over to Thomas.

Thank you, Jonae. Good morning, good afternoon, everyone. Thank you for joining us today. I'm very pleased to report that, during the first half of 2020 and through mid-September, we accomplished several important corporate and clinical objectives. They are all listed on Slide 3 and include the following. For Imeglimin for the treatment of type 2 diabetes, the Japanese new drug application was submitted by our partner Sumitomo Dainippon Pharma. This was a significant milestone for the Imeglimin program and for us Poxel, and it bring us one step closer to commercialization. Sumitomo is [ currently ] targeting a product launch in the fiscal year 2021, which is April to March. For Imeglimin in the U.S., Metavant is continuing to have regulatory discussions with the FDA for the Phase III program in patients with type 2 diabetes and CKD stage 3b and 4. For PXL770 for the treatment of NASH, we reported encouraging results from the PK/PD trial in June, when the trial met its primary end points and objectives. We also presented new preclinical results related to improvement in inflammation. And we'll be presenting additional data at several upcoming medical meetings between now and the end of the year, including EASD, AASLD and the NASH Summit. The Phase IIa trial is on track, and we expect the efficacy and safety results in approximately 100 NASH-likely patients around the end of the month. For PXL065 for the treatment of NASH, I'm very pleased to report, especially in the context of COVID-19, that the initiation of the Phase II efficacy and safety study in approximately 120 biopsy-proven patients began early September. The streamlined Phase II trial was designed given the wealth of knowledge with pioglitazone, including data in NASH; and a 505(b)(2) regulatory pathway, which offers the opportunity for an efficient and lower-risk development program. The goal of the trial is to identify the optimal dose or doses for the Phase III registration trial. In addition, we also reported other exciting preclinical results for PXL770 and our direct AMP kinase activator platform. Positive results in a NASH model were reported for PXL770 combinations, with several other emerging classes. Also positive results were reported for PXL770 and AMP kinase activation in additional chronic and rare metabolic disease. David Moller, our CSO, will discuss these preclinical results in further detail later in the presentation. There are a few corporate highlights that I would like also to mention. We strengthened our financial position through several successful financial initiatives by multiple sources. They included drawing down the second tranche of the IPF loan of EUR 10 million and also a capital raise of EUR 17.7 million during the first half of the 2020. And subsequently, in Q3, we received the Sumitomo milestone payment related to the JNDA submission of EUR 4 million. So in total, this amounted to EUR 31.7 million. In addition, earlier this year, we expanded our management team with the appointment of David Moller, our CSO. David comes to Poxel with deep expertise in treating metabolic disease and in drug discovery and development at major pharmaceutical companies such as Eli Lilly and Merck and in the biotechnology area. He is responsible for leading scientific-related activities to support the advancement of the company, including scientific innovation and scientific communication, at Poxel. I will now hand the call over to Anne for the financial updates on the first half 2020.

Thank you, Thomas. Good afternoon, everyone, and thank you for joining us today. I will now review our financials, which are on Slides 5 through 9. So let's start with Slide 5, and it's the income statement. As a preliminary comment, please note that there was a change in accounting policy in 2019, resulting in an adjustment to the Sumitomo Dainippon Pharma partnership revenue recognition, with no effect on cash. The results for the first half of 2019 were retroactively adjusted [ accordingly ]. Poxel reported revenues of EUR 6.4 million for the first half of 2020, as compared with EUR 19.2 million for the same period last year. The revenue includes a EUR 4 million milestone payment from Sumitomo Dainippon Pharma for the Imeglimin JNDA submission, which occurred in Q3 2020 but was recognized in Q2 2020 according to the IFRS 15 accounting standards. To a lesser extent, the revenue also includes an allocated portion of the EUR 36 million upfront payment received from Sumitomo Dainippon Pharma relating to the strategic corporate partnership announced in October 2017 as well as the residual Imeglimin Phase III program costs that were re-invoiced to Sumitomo Dainippon Pharma. Moving to the operating expenses. As a biotech company, the majority of our resources are allocated to research and development activities. R&D expenses amounted to EUR 12.6 million for the first half of 2020, as compared to EUR 24.2 million for the same period last year. They mostly reflect the clinical study costs incurred for PXL770 and PXL065, Poxel's 2 Phase II clinical-stage programs for the treatment of NASH. Please note that there was a significant decrease of the costs for Imeglimin, as the Phase III TIMES program in Japan is now fully completed. And the cost recorded in the first half of 2020 only refers to residual clinical and regulatory costs. G&A expenses amounted to EUR 5.9 million for the first half of 2020, as compared to EUR 4.9 million for the last year, for the same period. The financial income amounted to EUR 0.2 million for the first half of 2020, as compared to EUR 0.1 million for the first half of 2019. It's mostly reflective of the change in fair value of the IPF warrants and the interests attached to this debt. The net result for the financial period ending June 30, 2020, was a net loss of EUR 12.1 million, as compared to a net loss of EUR 9.8 million in the corresponding period in 2019. So moving along Slide 6 with the balance sheet. As of June 30, 2020, cash and cash equivalents were EUR 46 million, as compared to EUR 37.2 million at December 31, 2019. Cash and cash equivalents, net of financial liabilities, were EUR 29 million as of June 30, 2020, as compared to EUR 27.4 million at December 31, 2019. The cash and cash equivalent figure at June 30, 2020, includes the second tranche of IPF loan of EUR 10 million that was drawn down in March and a capital increase of EUR 17.7 million in May 2020. In September 2020, Poxel received a EUR 4 million milestone payment from Sumitomo Dainippon Pharma for the Imeglimin JNDA submission, which is not included in the June 30, 2020, cash position, but as mentioned earlier, it was recognized in revenue, according to the IFRS 15 accounting standard. Moving to Slide 7. The shareholders' equity at June 30, 2020, amounted to EUR 45.3 million. This reflects the first half 2020 net loss and the EUR 17.7 million capital increase in May. Total financial liabilities amounted to EUR 18 million. They [ actually ] include the IPF loan of EUR 16.5 million from the first 2 tranches. Trade payables amounted to EUR 6.9 million, as compared to EUR 16.5 million at December 31, 2019. The significant decrease is related to the completion in December 2019 of the Imeglimin TIMES program. So please, let's turn to Slide 8. Cash flow from our operating expenses (sic) [ activities ] for the first half of 2020 is negative EUR 14.5 million, as compared to minus EUR 11.7 million for the first half of 2019. Cash flow from financing activities were EUR 23.2 million. They correspond to the capital raise of EUR 17.7 million in May with the U.S. and European investors reflected in capital increase. And they also correspond to the second tranche from IPF of EUR 10 million that was drawn down in March. On Slide 9, we have listed relevant shareholder information. So we would like to note that our historical shareholders Bpifrance and Andera Partners remain co-holders, and our shareholder base is table. So I will conclude my presentation by pointing out that our cash runway is through 2022 with our current business plans. I will now hand the call over to Thomas.

Thank you, Anne. Moving along to Slide 12, I would like to give a brief update on Imeglimin. Poxel successfully led and completed the Phase III TIMES program in Japan in December last year. This was a major achievement for the company. The TIMES program met its primary and key secondary end points as well as important objectives in all 3 pivotal trials, showing consistent and clinically significant reductions in [ HbA1c ]. Through this year, we continued to work very closely with our partner Sumitomo Dainippon Pharma on activities related to the submission of the Japanese new drug application, which happened in late July. We received a payment of EUR 4 million for this milestone achievement. As previously mentioned, the target launch for Imeglimin in Japan is anticipated in 2021. And the JNDA approval will trigger milestone payments of EUR 14.2 million as well as the ability to draw down EUR 13.5 million from IPF partners. In Sumitomo's fiscal year 2020, they are expected to have the #1 diabetes franchise in Japan, and they have given financial guidance of approximately $900 million in sale for this franchise. Based on Imeglimin's product profile, we believe that this is an important product in Sumitomo's pipeline and that it has the potential to be an important new therapeutic options for patients with type 2 diabetes in Japan. In the Phase III program, Imeglimin demonstrated robust efficacy with a favorable side effect profile which was similar to placebo in the TIMES 1 monotherapy trial and sustained efficacy with a favorable safety and tolerability profile in combination with insulin in TIMES 3. The data observed in TIMES 2 demonstrated its potential as an add-on to other approved agents. Of note were the results with DPP-4 inhibitors, where robust efficacy was observed. And DPP-4 inhibitors are the market-leading class in Japan and prescribed to approximately 80% of treated type 2 diabetic patients. We believe the Imeglimin profile also has the potential to be particularly important for sensitive patients population, such as the elderly which represent approximately 60% of patients in Japan. Turning to Slide 13. For Imeglimin in the U.S. and Europe, Metavant had a constructive meeting with the FDA in the first quarter of 2020 about the Imeglimin Phase III plan. The FDA has provided Metavant with a path forward for a Phase III program in type 2 diabetes patients with chronic kidney disease stage 3b and 4. Given the FDA feedback on Imeglimin and the new draft guidance concomitantly released by the FDA in March 2020, Metavant is evaluating adjustments to its initial Phase III plan. Further interactions with the agency are planned for the second half of 2020 to address the recommendations. We will provide an update once the Phase III plan has been finalized. I will now hand the call over to Dr. David Moller, who will provide an update on PXL770, PXL065 and additional opportunities from our AMP kinase and deuterated TZD platforms. David?

Thank you, Thomas. Let's turn to Slide 15. I'll begin with an update on PXL770, our first-in-class direct AMPK activator. AMPK is a master regulator of several important metabolic pathways as well as pathways linked to the control of inflammation, and it's a novel target for NASH and a range of other chronic and rare metabolic diseases. To date, we've reported encouraging results in 148 patients from multiple clinical studies. This includes a Phase I program in healthy volunteers and a more recent PK/PD trial in likely NASH patients. The results have shown dose-proportional pharmacokinetics; a favorable safety and tolerability profile; and most importantly, target engagement and efficacy signals. Taken together, these results support the pursuit of AMPK activation for NASH and for other chronic and rare metabolic diseases. Let's move now to Slide 16. I'm pleased to report that the 4-week PK/PD placebo-controlled study in 16 likely NASH patients met its end point and objectives. PXL770 demonstrated a PK profile that was similar to the one observed in healthy volunteers in our Phase I program and was also observed to be safe and well tolerated. Notably, PXL770 induced a statistically significant suppression of de novo lipogenesis, which is linked to AMPK and is known to be an important contributor to the accumulation of liver fat or steatosis, that underlies the pathophysiology of NASH. A statistically significant improvement in glucose tolerance during a glucose challenge test was also observed in this nondiabetic population. Moreover, we observed additional significant improvements in several indices of insulin sensitivity. Thus, this trial confirmed target and pathway engagement with PXL770 and further implicates its potential utility in other metabolic diseases. Our clinical results represent the first human experience with a specific AMPK activator, and they support our hypothesis that this novel mechanism could have a beneficial role in controlling key pathways that lead to liver injury and NASH or utility in other indications. Moving now to Slide 17. We are looking forward to upcoming results from the Phase IIa 12-week randomized, double-blind, placebo-controlled trial. This trial is evaluating approximately 100 diabetic and nondiabetic likely NASH patients in the U.S. In this study, 3 doses of PXL770 versus placebo were evaluated. The primary end point of the trial is a relative change in liver fat content based on MRI-PDFF, an imaging-based biomarker that allows for quantitation of steatosis in the entire liver. Although other biomarkers are also being measured, please note that we don't have histology and therefore won't yet have measured independent effects of AMPK activation on inflammation or fibrogenesis that have been observed preclinically. Nevertheless, we expect to see effects on multiple disease-related parameters, which could further confirm potential efficacy in NASH as well as shedding light on other related indications. We worked very closely with the contract research organizations and investigators during the COVID-19 pandemic, and I'm very pleased to say that we've been able to stay on our time line during this challenging time. We expect the results from this study around the end of the month. Turning now to Slide '19. 2 weeks ago, we initiated DESTINY 1, a dose-ranging Phase II trial with PXL065 for the treatment of NASH. As a reminder: PXL065 is a new chemical entity derived from pioglitazone; specifically, a deuterium-stabilized single stereoisomer which has been shown to retain NASH efficacy without triggering PPAR gamma-related side effects in multiple preclinical studies. Its mechanism involves modulating non-genomic pathways such as the mitochondrial pyruvate carrier. DESTINY 1 is a Phase II 36-week randomized, double-blind, placebo-controlled study that is designed to assess efficacy and safety of PXL065 in approximately 120 noncirrhotic biopsy-proven NASH patients across multiple clinical sites in the U.S. The primary end point is the change in the percentage of liver fat content based on MRI-PDFF. The study will also assess effects on liver histology and other important biomarkers. Results from this Phase II study are anticipated during the first half of 2022. Based on the PXL065 results to date and a wealth of available clinical trial results with pioglitazone treatment for NASH, we were able to design a streamlined Phase II trial with the goal of identifying the optimal dose or doses for a subsequent Phase III registration trial. The doses that will be evaluated are 7.5 milligram to 22.5 milligrams daily, a range that we believe has the potential to demonstrate an important therapeutic profile versus 45 milligrams of Actos, the brand name for pioglitazone. Please now advance to Slide 21. AMPK is a compelling target that's been observed to modulate both metabolic and inflammatory pathways. And our preclinical data and evidence from the literature highlights the potential for PXL770 to show even greater additive or synergistic benefits to treat the root causes of NASH when combined with other agents in development. Therefore, we studied several combinations in a classic rodent NASH model. These include PXL770 with semaglutide, a GLP-1 receptor agonist; obeticholic acid, an FXR agonist; and MGL-3196, a thyroid hormone receptor agonist. As shown in the example data here, co-administration of PXL770 with semaglutide resulted in further improvements in several key disease-related parameters, including hepatic steatosis and plasma ALT. Additional benefits were also observed with the other agents' study to date. These studies highlight the potential for complementarity with a broad range of other classes in NASH. Let's now turn to Slide 23. In addition to an ongoing effort to expand our pipeline through new external partnerships, our internal efforts are focused on pursuing both next-generation AMPK activators and new deuterated TZDs that operate through non-genomic pathways, including MPC, the mitochondrial pyruvate carrier. We envision that these molecules may have the potential to treat a range of disorders, including rare metabolic diseases such as adrenoleukodystrophy or mitochondrial disorders; rare and common forms of chronic kidney disease; as well as additional endocrine disorders. On the next couple of slides, I will describe some newer example data. On Slide 24, you'll see results generated in collaboration with Jaspreet Singh at Henry Ford health in Detroit, Michigan. Several studies were conducted in order to assess the effects of direct AMPK activation in models of adrenoleukodystrophy or ALD and adrenomyeloneuropathy or AMN, a deadly inherited rare metabolic disease characterized by neurodegeneration. In cells from AMN patients lacking the ABCD1 peroxisomal transporter, PXL770 suppressed pathologic elevated levels of very long-chain fatty acids. Alternative fatty acid transporters ABCD2 and ABCD3 were also up-regulated, implicating the potential to circumvent defects in ABCD1. Not shown on the slide are effects of in vivo PXL770 treatment, which also reduced elevated levels of very long-chain fatty acids in both brain and plasma of mice with ALD. The full set of data from these studies will be presented in an upcoming scientific congress. Let's now turn to Slide 25. I'd like to first underscore the compelling rationale for AMPK activation in both diabetic kidney disease and in autosomal dominant polycystic kidney disease or PKD, as you can appreciate from the summaries on the left side of the slide. The upper right panel shows results from experiments assessing PXL770 in ZSF1 rats, a model of diabetic cardiorenal disease. These studies were performed in collaboration with Professor Paul Mulder from the University of Rouen medical school in France. In this model, PXL770 prevented disease progression. Compared to untreated ZSF1 rats, kidney function as measured by GFR was improved. And albuminuria was nearly normalized, as depicted here. Additional improvements in diastolic cardiac dysfunction were also observed. The full set of data from these studies will be presented later this month at EASD. In the lower right panel, you can see that both PXL770; and metformin, a weak indirect AMPK activator, were observed to dose dependently reduce cyst volume using an established Madin-Darby kidney cell model of PKD. The effect of PXL770 was quite robust and was also correlated with AMPK activation. Newer data using an in vitro human cell PKD model shows a similar effect. Overall, our data support the continued pursuit of AMPK activation for diabetic nephropathy and/or PKD, both of which are large markets with substantial residual unmet medical need. I'll now turn the call back over to Thomas, who will provide an update on our upcoming milestones.

Thank you, David. Turning to Slide 27. For the remainder of this year, we will have several upcoming important events, including the PXL770 Phase IIa efficacy and safety results in approximately 100 likely NASH patients around the end of September; finalization of the Imeglimin Phase III plan in the U.S. by Metavant; additional preclinical data related to our AMP kinase and deuterated TZD platform; and presentation for Imeglimin, PXL770 and PXL065 at several scientific meetings and published results in peer-reviewed scientific journals. Our cash runway is through 2022 with our current business plan. And it has the potential to bring us through many important milestones, including the approval and launch of Imeglimin in Japan which is a time period that has the potential for a milestone payment from Sumitomo of 42 -- EUR 14.2 million and royalty payments as well as the ability to draw down the third tranche of the IPF loan for EUR 13.5 million. In closing today's call, I would like to reiterate our commitments to our mission of developing safe, innovative therapies for the treatment of metabolic disease. We believe that our scientific approach of targeting the crucial dis-balances at the core of metabolic disease has the potential for a differentiated product profile to address unmet medical needs. We look forward to advancing our programs further and presenting and publishing our results. We are grateful for your support as we continue to build off of our accomplishments so far achieved this year. Operator, you may now open the line for questions.

[Operator Instructions] We have one first question from Mr. Jason Butler from JMP Securities.

Congrats on the progress. First off, just for the upcoming results for 770, can you maybe just benchmark for us based on the competitive landscape what you would like to see or view as a minimum impact on liver fat mass to move the program forward?

Yes, absolutely. David, do you want to answer this question from Jason?

Sure. Thanks for the question, Jason. So let me just underscore the fact that AMPK is a different mechanism from many others. And we know that it has additional benefits on inflammation and fibrogenesis as well as potentially inhibiting apoptosis in hepatocytes, and those are parameters that won't necessarily be directly measured in this study without histology. So reductions in steatosis are just one of the components of the mechanism. And we anticipate -- we'd like to see something at least in the 25% reduction range. Or up to, say, 30% or greater would be what we're looking for in the study.

Great. That's helpful. And then in terms of DESTINY 1, obviously it's very early, but can you just give us a flavor of the trial initiation feedback you've received, especially in light of ongoing pandemic? Just what's been -- how is it going so far, essentially?

Yes, absolutely, yes. So things are progressing well. So we initiated the enrollment a couple of weeks ago. And it was good to see that, one, we could open many sites across the U.S. concomitantly. It was a key criteria for us to really initiate this trial given the pandemic. We wanted to have the vast majority of the sites opened at the same time. And so that's why we really -- enrollments well -- started pretty well there. It's, of course, a bit early to confirm really our guidance in terms of timing, but things are absolutely good. And we believe that the sanitary conditions remain similar. We have really the good organization to progress this study as planned, with a good general investigator or good investigators and medical team working on this trial. So, so far, so good. And of course, we'll keep you posted on this progress.

Great. And then just one more for me on the -- potentially the next-generation AMPK activators. When you think about the rare metabolic indications or the renal indications, are there certain pharmacological attributes or profiles that you're looking at that may be better suited to these additional indications versus NASH? And just how should we think about what the profile of next-generation compounds could look like as you think about those indications?

Yes, absolutely. Good questions. David, again do you want to maybe answer this one in terms of which criteria we believe are critical in these platforms?

Yes, great question. So for example, in kidney disease there is a greater percentage of beta 1-containing isoforms. That's one of the subtypes of AMP kinase, so we would want to ensure that we have good activity on the beta 1-containing isoforms, which we do by and large with our series of molecules. And for adrenoleukodystrophy, which involves the central and peripheral nervous system, we want to make sure we have adequate tissue exposure in those tissue compartments. And we're looking at that as well in some of the preclinical models. So those are sort of some of the examples of the different aspects we're looking at. We think our molecules are generally well suited to at least some of these indications.

And maybe I can add that we have a very broad library of compound, Jason, with different chemical series there. And that's why we want to leverage really these for this additional indication, as it's very important for us to really broaden our pipeline.