ProKidney Corp. (PROK) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Day 2 of the 22nd Annual Morgan Stanley Healthcare Conference. I'm Judah Frommer, one of the smid-cap biotech analyst here. We're very pleased to have Bruce Culleton from ProKidney with us this morning. Bruce, before we jump in and I'm just going to read a couple of disclosures. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So with that, maybe we can start off for those who may be less familiar with just a brief introduction of ProKidney and your REACT technology.

Thanks, Judah. Thanks for having us as well. So ProKidney went public in July of 2022. We are a cell therapy-based company, headquarters at Winston-Salem and Boston. And REACT is an autologous cell product. So we take patients cells from a kidney biopsy primarily focused on patients with advanced kidney disease. We take that biopsy back to our manufacturing site in Winston-Salem. The cells are digested, goes through a series of steps where we end up with a cryopreserved product, mainly tubular epithelial cells, which we can talk about in more detail. And then eventually, that cryopreserved product gets back to the clinic. The cells are injected back into the kidney cortex by an interventional radiologist.

Got it. Okay. So you mentioned a couple of the cell types that are in your lead product, Rilparencel. Can you give us a little bit more on why you chose to leverage those cells and how they contribute to kidney function?

Sure. So that's a history lesson. That's before my time since I've started ProKidney, but I'll tell you the story. So early on, the early scientists involved in a different version of ProKidney, actually took cells from kidneys and tried to determine if those unfractionated cells when reinjected, when grown and reinjected if they're unfractionated, did anything different compared to different layers of cells that would come out during the suspension, part of like the manufacturing process. And they tested different layers of cells. Eventually, what they found was, there was one specific layer which turns out to be our product today, that has more bioactivity that led to at least in rodent models, less inflammation, less fibrosis and an improvement in survival in those animals. And so that was how we ended up with that selection of cells, which turns out to be primarily not completely, but primarily tubular epithelial cell.

Got it. Okay. And can you walk us through how Rilparencel is manufactured and administered?

So once we get the cells back into our manufacturing facility, we do digest the cells not really proprietary in what we do from a way of digesting the cells. Those cells are then undergo a series of steps where they're exposed to different stimuli, different cultures, the cells are expanded, eventually, it goes through another step where we choose out that layer of cells that's specific to our product. That same layer of cells that proved activity within the animal models. And we take those cells, purify those cells and turn it into our cryopreserved product. That product can sit for a long time. Eventually, we choose a certain part -- a certain number of doses to go back to the clinic. We have a capability of making not just 2 doses, but 3, 4, 5 in some patients. One dose goes back to the clinic. It's typically injected back into the same kidney that was biopsied in that same patient and then 3 months later, the second dose is injected back into the other clinic -- into the other kidney into the contralateral kidney.

Got it. Got it. Okay. And you're focused on diabetic chronic kidney disease. Can you talk about standard of care there and unmet need in the indication and how Rilparencel can fit into that?

Yes. So diabetic kidney disease is obviously a big problem. But there's also coming with big problems. There's a lot of people interested in the diabetic kidney disease space too, which we've seen real advances in treating patients over the last 5 years, maybe longer. Early on back in the late '90s, early 2000s, the RAS inhibitors with some good clinical data came to the market, made a big difference in the treatment of patients with diabetic kidney disease. Before that, if you had diabetic kidney disease and lots of protein in your urine, patients were really on a really slippery slope to dialysis. They lost about 10% of kidney function per year. The RAS inhibitors decreased that by almost half. And then more recently, we've got great data on SGLT2 inhibitors, nonsteroidal MRAs and more recently, the GLP-1s, all showing benefit within the diabetic kidney disease space. Some people have proposed 4 pillars of care for those patients. And obviously, if you're a patient today with diabetic kidney disease, this is good news, right? Most of the data from those trials comes from patients who have Stage IIIa, even some Stage II patients, diabetic kidney disease, but they show great benefit. A small number of patients in those trials do have more advanced kidney disease, IIIb and IV. That theory that we're more focused in -- the data there is more sparse, but still there seems to be some benefit with those 4 pillars across even within that subgroup. But even with that benefit, we do see a continued unmet need, patients do progress despite being on these treatments. They continue to -- some patients continue to have a decline in their kidney function. And today, for example, in the U.S. there's about 140,000 patients per year that start dialysis and about half of those patients have diabetes. So there's still a big unmet need.

That makes sense. Okay. So jumping into the data a little bit. You do have a Phase III trial underway. But before we get to that -- before we could talk about some of the Phase II data you've generated to date, what gives you confidence about those studies? So maybe starting with REGEN-007, you reported some interim data back in June. Investors were fairly focused on this data set, because its design is a little closer to the Phase III. So can you recap the design of this study and your high-level takeaways from the data?

Yes. So the 007 data was, as you said, the interim results we talked about in June. It's an open-label study that's in diabetic patients. There's some type 1 diabetic patients and there's type 2. So it's not just all type 2 patients. The study was designed to test two different types of interventions. So there was a Group 1, if you like, that's really aligned with our Phase III study. And those Group 1 patients had a biopsy, got injected and then 3 months later got injected into the contralateral kidney. That's the group that we're primarily interested in, because it's so similar to our Phase III program. The other group was a group of patients who got a biopsy, got injected into the kidney where the biopsy was done, and then we waited -- and we waited for more, what I say, a physiological trigger, it's really a biochemical trigger. It's really a change in their eGFR or a change in their UACR, the urine albumin creatinine ratio. And if any patients met those triggers, then they will get injected. And in retrospect, that may have sounded like a good idea to start with, but in essence, we're waiting for patients to get worse and then we inject them. And what we saw from that Group 2, and then I'll get back into the more interested Group 1. What we saw in that Group 2 was that's probably not the way to go, to let patients get worse and then inject them. And so that's definitely not the path that we're on for today. Now Group 1, we focused our results. We focused our presentations primarily on Group 1. What we saw in Group 1 was 24 subjects in total. 13 of those subjects had the follow-up that we were looking for. But in both the 13 subjects and in the 24 subjects that got at least one injection. We saw out to 18 months, we saw a change in kidney function that was more similar to what you'd see with just aging. And it was around a minus 1 decline in kidney function over the course of 18 months. Now this was an uncontrolled study. And so we tried our best to identify an external control and so we went to Dr. Tangri and his group at the University of Manitoba and Dr. Tangri and his group have published a lot on kidney failure risk equations. They have their own company. They are part of labs, they're part of how a lot of clinical groups use their formulas to actually guide their clinical decision-making. So we went and worked with Dr. Tangri. We had access to some of the SGL2 trials. And we asked them to form a synthetic control group based on data from those trials. So he matched those 13 people with about 10 patients from those trials. So a 10:1 match. And we compared to what happened to those control group patients versus the patients in 007. And over the course of 18 months, those control group patients lost about 6 mls per minute versus the minus 1.3 that we saw over the course of that same period of time. So admittedly, that was an external control post talk. We really wanted to see how this -- how our study could compare against some type of control group. But it also gave us even more strength, we felt, to say that we're on the right track with our Phase III program.

Okay. Got it. So speaking of the Phase III. So I guess, specifically from that Group 1 in REGEN-007, what do you see as the read-through for the Phase III program? You mentioned a couple, but...

So of those 13, again, these are small numbers. So we acknowledge some of the limitations that I think some of the analysts have brought forward too. But at least it's very directional. Of those 13, 10 of those people actually fit the criteria for a Phase III program at that time. And when we looked at those 10 people, we saw a very flat line, essentially a stabilization of kidney function over that -- over that 18 months. So we -- again, we think that, that's helpful for a Phase III program. The number -- I mean, we've been asked, and I think the relevant question is, well, did you have anyone die? Did you have anyone that ended up on dialysis? That well, we had about 100 patient years of follow-up in that group, and we had one event. I think we had a death. And so too small a number is, I mean, that's less than what we'd expect but still too small a number to actually take any strength from that observation.

Okay. Got it. And I think you guys will plan to provide another update in the first half of next year on this study. So what should we expect from that data set?

So we -- the study, we're planning to finish the study in the first half of next year. So we'll probably provide more final results towards the end of the first half of next year. What we'll have is obviously a more mature data set. We'll have -- instead of those 13 subjects, we'll have more longer follow-up on the 24 subjects. Most of those subjects have gotten second injection. There's one person who didn't on those 24. So we'll definitely have more maturity limited to 24 subjects and we'll be able to report out on, again, some events, but also we're primarily looking at change in eGFR over time.

Okay. That makes sense. You had another Phase II study RMCL-002 that had an interesting design where patients were treated immediately -- some patients were treated immediately, others had their treatment deferred. So can you just remind us of what the rationale was behind that study and again, a recap of the data we saw from there?

Yes. So just another history lesson. That study started in 2016.

Yes, right.

Most of the patients were -- the majority of the data points, I should say, were collected during the pandemic, which created its own challenge. In 2016, the company was private. It was a small company, and they were really just building some of their clinical operations, functions and their manufacturing facility was primarily like an R&D facility at that point in time. So that was 2016. They were really, in my mind, two control groups in that study. One was initially at the beginning of the study. We think of this as Group 1 and Group 2. Group 1 was the active treatment group, they received rilparencel, what we call REACT today. They received rilparencel as soon as the product was available. And Group 2 was the deferred group. They -- if they were a randomized to Group 2, then they didn't receive rilparencel till after 12 months. And during that 12 months, they continue to receive what was typical standard of care at that point in time. Now the other control group that I just mentioned was not just that randomized control group at the beginning of the study, but it was also almost like an embedded control group of a pre-group and a post group. And so the pre-group was the standard of care who then after 12 months, got injected with rilparencel and then we're able to follow that group over a period of time. Now the point that you just made, the patients who were treated initially with rilparencel in Group 1 compared to those patients who got treated in the delay group, they had very different responses from an eGFR perspective. And arguably, the first group, the active group, had a minimal, I'd say, minimal positive impact -- positive effective of rilparencel. But what we saw with the Group 2 after they got treated they went from a decline of minus 2 to minus 4 to really a flattening out and very similar to what we saw in the other Phase II study. The question, obviously, is what happened to those patients when they were initially treated. And I don't have a smoking gun that I could point to, but I do have some things that as we look into the data, which provides some insight. The first is that if we look at the data, we recognize that patients who have more than 5 grams of protein in the urine, we measured UACR in the Study 2, but more than 5,000 grams -- milligrams per gram per day of albuminuria. Those patients just like went like that. And just by chance, there were more patients in those active treated group than in the other group. So that was just by chance. But there really was no benefit seen. Those patients just continue to bottom out. And that's typically what you see clinically. I mean, I've treated a lot of patients with diabetic kidney disease. And unfortunately, you see those patients who have lots of protein in your urine, and there's very little that you can do. You could throw everything at them, and there's -- they just seem to be on that slippery slope to dialysis. So that was one, there was an imbalance in the albuminuria in the Group. The other thing was just the way the study was designed was that for the first 12 months, first 18 months, more patients in the active group obviously got injected first. So -- and that's just the design of the study. And just to make it clear, if you're a randomized to, if you were a patient 1 in the study, and you're randomized to the deferred group, you didn't get rilparencel until 12 months later. Whereas if you were in the active group, you got rilparencel right away. And that apply it for patient #2 and patient #3 and patient #4. It wasn't a randomization error, it was really just the design of the study. Now my hypothesis here, and I mean there's lots of parts of medicine where we could say that the supplies that this was -- there was a lot of learning that happened early in the study, learning in how you inject the cells and the patients learning at the interventional radiology side, small company didn't have all the same sort of capabilities, resources that bigger companies have. So I think there was all a learning curve at that point too. That probably impacted the cell.

That makes sense. And correct me if I'm wrong, but I think based on the subgroup data, you did make a protocol amendment for your Phase III PROACT 1. So can you walk us through that?