PureTech Health plc (PRTC) Earnings Call Transcript & Summary

Okay. Hello, everyone. Good morning for those on the West Coast. Good afternoon for those in the East Coast. I'm Andy Singer with Credit Suisse. I'm very happy to introduce the team at PureTech Health. I'm joined by the executive management team led by Daphne Zohar, who is the Founder and CEO of PureTech Health; Bharatt, who is the President; and Eric Elenko, who's the Chief Innovation Officer. This is a company I've known for a long time. They are leaders in innovation in biopharma. They've created a number of very innovative and leading founded companies across a range of therapeutic areas, a range of technologies. They've been very innovative financially and structurally. And they've got an exciting internal pipeline as well. So with that as an introduction, I'm happy to turn it over to Daphne.

Thanks so much, Andy, and thanks to the Credit Suisse team for putting together this health care conference and enabling us to participate virtually. As a reminder, during today's call, We will be making certain forward-looking statements. These statements reflect PureTech's current expectations regarding future events. Forward-looking statements involve risks and uncertainties, and actual events could differ materially from those projected here. PureTech is an advanced biotherapeutics company that is led by a management team of business leaders with a strong track record of discovering and developing new medicines, delivering them to market and maximizing shareholder value. PureTech's Board of Directors and R&D Committee includes former CEOs and CSOs of major pharma companies, entrepreneurs and award-winning academic and clinical leaders who leverage their expertise to support our mission in a hands-on manner. Across our Wholly Owned Pipeline and Founded Entities, we have 24 product candidates and products, including 12 that are clinical stage and 2 that have been advanced from inception at PureTech and are now cleared for marketing by the FDA and European authorities. An important and underappreciated point, all of the underlying programs and platforms were initially identified or invented and then advanced by our team through key validation milestones. We are proud of our track record clinically, particularly in stages where industry failures are typically high. We think that these outcomes result from our unbiased discovery process that starts with proprietary insights informed by signals of human efficacy and is followed by execution of the key experiments that derisk the program if they go well or, equally important, enable us to move resources to more promising programs, if that's where the results lead us. We collaborate with a group of world-leading experts. And together, we identify, invent and advance scientific breakthroughs, usually before [indiscernible] in major scientific journals. Our focus has been centered on the biology of the brain, immune, gut or BIG Axis. 20% of the entire immune cell population is in the gut, in addition to 500 million neurons. Key components of the BIG Axis, such as the gut epithelial barrier, microbiome and the lymphatic system, play important roles in protecting and influencing the immune system and CNS. Our R&D model has yielded significant value as summarized on this slide. We started PureTech with limited resources and partnered with venture capital investors in sharing the cost of early development by housing the new medicines in what we call our Founded Entities. As these programs succeeded and PureTech's resources grew, we developed our Wholly Owned Pipeline where we will maintain 100% ownership. Our Wholly Owned Pipeline was formed in the same way as all of the medicines we've been involved in discovery and advancing, with a disease focus and data from our scientific experts usually prior to publication. The biggest difference in our strategy going forward is that we will retain 100% ownership in these programs and are more focused on a subset of the brain, immune, gut axis, the biology of the lymphatic system and related immunology. We still hold a sizable equity ownership in our Founded Entities and continue to benefit from their growth as they have many upcoming catalysts and like partnered programs, can serve as a source of non-dilutive funding. Monetization from our Founded Entities could come in the form of M&A transactions, IPOs and subsequent value growth and/or royalties from product sales. PureTech is well capitalized with $387 million in cash on a parent company level, which we've guided will take us into the first quarter of 2024. This is conservative as it assumes no additional founded entity monetization events. The Founded Entities are also well capitalized, having raised approximately $1 billion in the last few years. We believe our achievements have significantly outpaced our market capitalization, primarily due to reasons around our London listing. Our current value is underpinned significantly by our cash and Karuna stake without even accounting for the significant value that rests within our clinical-stage wholly owned pipeline, 8 other founded entity stakes and royalties due to us from Karuna and 2 other founded entities. Our team is fully aware of the value disconnect, and we are committed to proactively addressing it. As part of our commitment to driving value for shareholders and broadening our shareholder base via access to the U.S. capital markets, we are advancing a U.S. listing on NASDAQ of American depositary shares, which is imminent. In the next 2 slides, I'll describe 2 case studies of Founded Entities, and then I'll spend the rest of the time digging into our Wholly Owned Pipeline. We created the KarXT platform, knowing that despite the billions of dollars in sales of current drugs, there hasn't been a new mechanism of action drug in 60 years in schizophrenia, with patients experiencing residual symptoms and often debilitating adverse events with current treatments. We collaborated with leading schizophrenia experts who agreed that the most intriguing new approach that they were aware of was xanomeline, a muscarinic agonist, which had shown great promise, but was held back by mostly GI-related tolerability issues caused by xanomeline binding to muscarinic receptors outside the brain. At PureTech, we came up with the idea of combining xanomeline with trospium chloride, a muscarinic antagonist that doesn't cross the blood-brain barrier. Allowing for the therapeutic effect in the brain while dampening down peripheral AEs, we licensed xanomeline from Lilly, conducted a key clinical trial showing our KarXT approach led to much greater tolerability. And then we brought in Steve Paul, who is one of our early advisers on this program, and he had developed several important antipsychotics when leading R&D at Lilly, including xanomeline. We brought him in to be the CEO of Karuna. We raised an A and B round from ARCH and other investors, and Karuna went public. Following an extremely successful Phase II readout late last year, Karuna's value appreciated significantly. Since January, we have monetized a small portion of our ownership stake for approximately $347 million. And it's important to note that we're still the second largest shareholder, where we maintain a 12.7% equity interest as well as the right to receive royalties from future sales as a co-inventor of the core technology. We remain very excited about Karuna's prospects, including the planned Phase III trial slated to start later this year as well as results from the healthy volunteer study for dementia-related psychosis anticipated in Q2 of next year. Another founded entity that came from our brain, immune, gut axis discovery platform is Vedanta Biosciences, which is developing a new class of therapeutics harnessing the human microbiome to treat serious diseases. In forming Vedanta, we collaborated with leading immunologists who pioneered the current understanding of how the immune system recognizes and responds to microbes. Their work led to the realization that gut microbes are required for stimulation of a range of immune responses, including, among others, making Th17 and regulatory T cells and thus are potentially useful as immunotherapies. Vedanta has built an industry-leading platform of rationally-defined product candidates and currently has 4 orally-administered clinical-stage product candidates in development for the potential treatment of serious infection, cancer, food allergy and inflammatory bowel disease and in June, announced positive top line results from 2 Phase I studies of its IBD candidate, VE202. The sentiment around the microbiome has positively shifted recently, driven by Phase III data from another company in the field that is using a composition of fecal material fractions. While this progress is good for the field, Vedanta is the clear leader as it does not use fecal material fractions for its product candidates. Vedanta uses a differentiated approach of consortia of individual, well-defined and characterized strains of bacteria. Vedanta has the largest collection of individual strains of bacteria isolated and characterized from healthy human microbiome from 4 different continents, similar to a small molecule library, that can be grown individually in large quantities at its GMP manufacturing facility, lyophilized into powder form, mixed together and administered orally in capsule form. We can expect top line results from multiple clinical studies as we look ahead to 2021, and we believe that the microbiome field is on the cusp of major validation, with Vedanta leading the way. Our Wholly Owned Pipeline, focused on the lymphatic system and related immunology, is a major new driver of our future growth. We are now in the clinic and anticipate several important upcoming milestones, which I'll discuss momentarily. The lymphatic system represents one of the key components of the brain, immune, gut crosstalk and serves 3 central functions. The first function is to maintain fluid balance. Disruption of lymphatic flow leads to lymphatic disorders like lymphedema and has intriguingly recently been discovered to play a key role in neurodegenerative diseases. We are advancing novel therapeutics to address lymphatic flow disorders. The second critical function of the lymphatic system includes acting as a super highway for immune cell trafficking and programming. Lastly, the lymphatic system plays a key role in absorbing dietary lipids. We are leveraging this function to directly drug the immune system by orally administering molecules into the lymphatic system where immune cells are programmed and where they traffic. Through our internal efforts and working with our network of scientific collaborators, we're advancing therapeutic programs that leverage the lymphatic system as an avenue to modulate the lymphatic and immune response to disease. And you can see the pipeline -- internal pipeline on the right-hand side of the slide. So I'll be talking through a couple of the product candidates. The lead candidate from our Wholly Owned Pipeline is LYT-100 or deupirfenidone, which has the potential to treat a range of conditions involving fibrosis, inflammation and impaired lymphatic flow. We initially came to this program through our focus on lymphedema, a serious lymphatic flow disorder with no approved therapeutics. There are several additional important indications we are able to pursue, which I will describe shortly. Lymphedema is a chronic condition that afflicts about 1 million people in the U.S. and is characterized by severe swelling in parts of the body due to the buildup of limb fluid, inflammation and fibrosis. Through our relationships with some of the world-leading lymphatic experts, we became aware of unpublished preclinical work showing that pirfenidone, which is an anti-inflammatory anti-fib agent approved for the treatment of idiopathic pulmonary fibrosis or IPF, reduces tail volume substantially in a well-established preclinical model of lymphedema. Pirfenidone is a successful drug product where it has generated significant sales revenues, as shown on the top right. However, pirfenidone is not a well-tolerated drug, which results in significant discontinuations or dose titrations and reductions that come at the expense of that. LYT-100 is an oral deuterium containing analog of pirfenidone. It retains the same intrinsic pharmacology of pirfenidone and has shown a differentiated and superior pharmacokinetic profile compared to pirfenidone in human studies. It was also previously evaluated in Phase I clinical trial conducted by Auspex Pharmaceuticals, a company that our President helped to build and drive through its acquisition by Teva in 2015. PureTech acquired deupirfenidone from Teva in 2019 and has confirmed that deupirfenidone reduces tail volume to close to baseline in that same preclinical model of lymphedema. The potential for LYT-100 extends beyond lymphedema and includes pulmonary indications like IPF, where LYT-100's potential advantages over pirfenidone could be a game changer. We believe the potential advantages of LYT-100 over pirfenidone include enhanced exposure, less frequent dosing, improved tolerability and potential for increased efficacy. Along with the clinical pharmacokinetic data on LYT-100, we have preclinical data that has demonstrated the anti-fibrotic and anti-inflammatory activity of LYT-100, which reduces pro-inflammatory cytokines like IL6 and TNF alpha and suppresses TGF-beta and downstream signaling to inhibit fibrosis. We have a strong IP position around LYT-100, which is a new chemical entity with composition of matter IP. In March 2020, we initiated a multiple ascending dose study to further evaluate the safety, tolerability and pharmacokinetic profile of LYT-100 in healthy participants. The results are anticipated this quarter. The acquisition of LYT-100 allows us to pursue a range of inflammatory and fibrotic indications outside of lymphedema. Given the approval of pirfenidone for treating IPF, we are actively exploring advancing LYT-100 for IPF as a potentially superior treatment option with its favorable pharmacokinetic and tolerability profile in a range of pulmonary indications. Nobody really knows how IPF starts, but some experts believe that IPF can be triggered by an acute event like a virus, which triggers the inflammation and fibrosis cascade. We are now in a unique situation where there's a large population with the same acute viral trigger that could lead to inflammation, fibrosis and ultimately, potentially IPF. As a result, one area we believe is worthy of study with LYT-100 is Long COVID and its respiratory complications. The COVID-19 pandemic has affected tens of millions of people globally. There are many therapeutic approaches that target the acute phase of the disease, but we are one of the only companies that we know of addressing Long COVID or long-haul COVID, which is an important and emerging public health issue. Fibrosis and inflammation are a common mechanism across several lung diseases. And there is increasing data that the respiratory complications of COVID-19 begin during the acute phase of illness and may have persist well beyond the acute phase. According to a research letter published in JAMA, more than 40% of COVID-19 survivors assessed still reported shortness of breath and averaged the 60 days following symptom onset. And if you look back at SARS Classic, patients develop persistent lung fibrosis and up to 1/3 of MERS patients had lung fibrosis after recovery. Clinicians are already documenting rapid progression to lung fibrosis in patients with COVID-19. We announced our plans to advance LYT-100 as a potential treatment for Long COVID respiratory complications linked to inflammation and fibrosis and to related issues. The global randomized placebo-controlled Phase II trial is expected to start this quarter, with top line results expected in the second half of 2021. We are also actively evaluating LYT-100 for the treatment of additional fibrotic and inflammatory disorders where we think the advantages of deupirfenidone over pirfenidone could be very important. In addition to our Phase II study for the treatment of Long COVID respiratory complications and related sequelae, we expect data from our multiple ascending dose study and food effect study in healthy participants this quarter. A Phase IIa proof-of-concept trial in people with breast cancer-related upper limb secondary lymphedema is also expected to begin in the second half of 2020, with top line results expected in the second half of 2021. Secondary lymphedema is the most prevalent form of lymphedema, and it can develop after surgery, infection or trauma and is frequently caused by cancer or cancer treatments. There are approximately 500,000 breast cancer survivors with secondary lymphedema in the U.S. The proof-of-concept study will look at exploratory endpoints, including bioimpedance spectroscopy, serum inflammatory biomarkers, relative limb volume and patient-reported outcome measures. As mentioned, we are also exploring the potential application of LYT-100 in additional respiratory conditions, including IPF and interstitial lung diseases. Beyond LYT-100, we are pleased with the progress of our novel fully-human monoclonal antibody candidate targeting a powerful immunosuppressor to treat intractable cancers and other immune disorders. We are advancing LYT-200, which targets galectin-9 for a range of cancer indications. LYT-200 is a fully-human monoclonal antibody that targets galectin-9. It has been developed for the treatment of solid tumors currently underserved by approved checkpoint inhibitors. In our preclinical models, we showed that LYT-200 has potential for single agent efficacy as well as combination and potential of anti-PD-1 and chemotherapy. LYT-200 inhibits tumor growth and increases survival in pancreatic cancer models where anti-PD-1s don't work. It causes more profound tumor growth reduction than an anti-PD-1 in the gold standard melanoma model and also induces intratumoral immune modulation and causes accumulation and activation of intratumoral cytotoxic T cells. In addition, it robustly restores T cell activity in patient-derived organoids across multiple gastrointestinal tumor types. There's also a biomarker opportunity which we think could be quite important. We plan to file an IND for LYT-200 and initiate a Phase I study in solid tumors this quarter, with the results anticipated in 2021. Our clinical trial of LYT-200 is a Phase I open-label randomized -- sorry, nonrandomized clinical trial of LYT-200 alone or in combination with chemotherapy or an approved anti-PD-1 agent in relapsed/refractory metastatic patients. We plan to initiate the clinical trial under a dose escalation, with dose expansion protocol as per recent FDA guidelines. The dose-finding part of the study will be open to all comers, metastatic cancer patients with solid tumors who have failed previous lines of treatment. We intend to identify the recommended Phase II dose of LYT-200 for further evaluation as a single agent and evaluate its safety in combination with chemotherapy and a checkpoint inhibitor. We then plan to proceed with expansion cohorts in pancreatic cancer, colorectal cancer and cholangiocarcinoma as preplanned expansion cohort tumor types, with potential to consider other tumor types. In expansion cohorts, we plan to assess the relevant efficacy signals across all cohorts as well as further confirmed safety and assess multiple pharmacodynamic parameters. To achieve this, throughout the study, we plan to collect tumor tissue samples through biopsies as well as patient blood samples. As a representation of our unique and productive R&D engine, captured here are some exciting catalysts that we have achieved this year across our Wholly Owned Pipeline and Founded Entities as well as the multiple value drivers expected, including at least 12 clinical study initiations, the full commercial rollout of 2 founded entity products through 2021. In addition, there's the possibility of potential monetization events across multiple founded entities through 2021. Looking ahead, we anticipate another catalyst-rich year in 2021, with additional clinical readouts and initiations and importantly, an increasing focus on our Wholly Owned Pipeline. As we grow PureTech going forward, we are building a major biopharma company. We plan to drive product candidates forward through clinical development and potential commercialization; to continue to grow and expand our Wholly Owned Pipeline, which is focused on the lymphatic system and related immunology, an area where we believe we have a leadership position; derive value from the growth of our Founded Entities, similar to how one would with partnered products, for example, through monetization events. And then we know that we have many exciting opportunities before us. And we plan to develop the core ones internally but also the ones that are noncore, we have the potential to partner or spin out of our Wholly Owned Pipeline. Most importantly, we're excited about the potential of the new medicines that we've discovered and developed to make a major difference in the lives of patients. I'd like to thank you for your attention today, and we look forward to answering any questions. My colleagues, Bharatt Chowrira and Eric Elenko, join me for Q&A. So back over to you, Andy.

Okay. Thank you very much, Daphne. Happy to open it up for questions from investors and from listeners. In the meantime, while the questions queue, I'll ask a few questions just to start things off. Daphne, can you talk a little bit about how you weigh investment in the internal Wholly Owned Pipeline versus follow-on investments in the Founded Entities?

Yes. It's a good question. So as I mentioned, we have a very strong cash position on a PureTech parent company level, and we've guided that, that will take us through the first quarter of 2024. The way that we look at it is that we have reserved some cash for potential support of the founded entities. But frankly, they haven't really needed our cash. Usually, the rounds are oversubscribed, and there's not really a need for us to participate. So we have reserved some cash for that, but really most of the cash is going to advance our internal pipeline through key clinical proof-of-concept milestones. So that's really -- the bulk of the cash is going to support our internal pipeline.

Okay. Thanks. And beyond the lymphatic-targeted medicines, I know that the company's history is really starting with the need and then figuring out what is the best solution for that need. Are there other medical needs or areas of unmet medical opportunity that you're targeting beyond the lymphatic system that's earlier in development?

Yes. I mean, I think that the lymphatic system, for example, we got to this program, LYT-100, through our focus on lymphedema. So we basically started with the unmet need, the disease. And there are a range of lymphatic disorders as well as intractable cancers and other inflammation, fibrosis-related conditions that we're looking at. We do continue to have this disease focus but it's increasingly through the lens of the lymphatic system and the related immunology where we have a leadership position.

Okay. And then just switching to galectin for a moment. Can you give us a little bit of an update on the landscape? What else is out there in terms of other galectin-targeting therapies, whether they be antibodies or other approaches? And then how does 200 differ from what else might be in development?

Yes, great. I'm going to ask Eric Elenko, my colleague, to answer that one. He's been driving that program forward.

Yes. to our knowledge, there aren't other companies that are as advanced as we are with regards to galectin-9. There is another company working on galectin-3. But with regards to galectin-9, particularly in the context of oncology, we're, to our knowledge, the furthest advanced. And our antibody is highly specific to galectin-9 versus the other galectins.

Okay. And then just back to deupirfenidone for a moment. I see that it's a very broad development program. Can you highlight the indications that you're pursuing, what you think is going to be the greatest focus in terms of resources and capital over the next, call it, 12 to 18 months?

Yes. So we have a few different indications that will drive some of the resource allocation, but I would love to have my colleague, Bharatt Chowrira, talk about some of the potential indications that we could be pursuing there and the ones that we are pursuing.

Yes. So with the deupirfenidone, right, so when you think about -- I don't know if you remember, Andy, the story with Auspex, right, so where we had a deuterated form of tetrabenazine. And there, the primary -- most of the value for the company was driven by that program that was -- that's currently in the market now called Austedo. Teva is expected to do about $700 million in sales this year. And that has been approved for 2 indications so far. Huntington's -- movement disorder in Huntington's and tardive dyskinesia. So a similar story, even though there is a generic in the market, there's a preferential prescription for the deuterated form of tetrabenazine. So very similar story you can envision for deupirfenidone, where pirfenidone has been approved for IPF, has a breakthrough designation for unclassifiable interstitial lung disease, large market opportunity there. But what's great about the deuterated form of pirfenidone is because we have composition of matter patent and because based on the past precedents, we would be entitled to an NCE designation as well as for orphan indications, you could potentially get orphan designation, and you'll be able to take advantage of 505(b)(2) regulatory pathway. And so that's the beauty of the deuterated form of some of these molecules. And so deupirfenidone allows you to not only go after IPF, for example, where it is -- the parent has already been indicated but a range of other fibrotic and inflammatory conditions of the lung as well as, as Daphne was mentioning, we have lymphedema, which there are 1 million patients in the U.S. alone conservatively, and there are no pharmacological treatment approved for treating lymphedema. And half of those 1 million patients are breast cancer patients who have currently no really approved pharmaceutical treatment. So we see a big opportunity there in lymphedema. And then as Daphne was mentioning, this post-COVID lung complications is a growing issue. And with more than 50 million people now infected with COVID-19, and a number of them who are actually recovering are not fully recovering. So we see that being an important treatment option for some of these patients who are coming off of the viral infection and recovering but not fully able to get back to normal and still face significant lung complications. And so the underlying that is, is fibrosis inflammation. So we think there is a role for that. And there's a whole bunch of other fibrosis and inflammatory conditions that one could envision going after. So we see this as a pipeline within a product kind of an opportunity with deupirfenidone.

Thanks. That's a great overview of the program. Just a few follow-ups there. A lot of patients, breast cancer patients, et cetera, suffering from lymphedema. It's a really exciting opportunity to bring a new therapy to those patients. Where are you in terms of working with FDA, European regulators in terms of defining a path to registration and the relevant endpoints? I believe you mentioned this would be the first drug that could potentially be approved for this indication.

Yes.

Yes. I don't know if -- Eric, would you like to take that one?

Sure. So the lymphedema study is being done ex-U.S., and the primary endpoint there will officially be safety and tolerability, and there'll be a number of secondary endpoints. The goal really is to identify a secondary -- an endpoint that would be used for a larger, double-blind trial where efficacy would be the primary endpoint. As you said and as we've discussed, there is no approved drug for lymphedema, so choosing an endpoint that would be appropriate is going to be key. And that's going to be one of the really important warnings from the next study. So based on the results of that study, we would then go to regulators and propose an endpoint but we want to do it with empirical data in hand.

Okay. Thank you. And then last question, is there a rationale or plans to develop any kind of inhaled form of deupirfenidone to treat IPF?

We currently don't. I mean, this is an oral small molecule, right? So we believe that because of this deuteration, we should be able to treat these patients on a twice-a-day dosing regimen, with a fewer pills than what pirfenidone is currently being administered. Pirfenidone is currently is 3 times a day, and they have a total of 9 capsules per day, which is also a significant pill burden for these patients. So we think with this deupirfenidone, we should be able to address both the dosing frequency as well as pill burden. That should translate into a more tolerable dosing schedule.

Great. Well, I want to say thank you to the PureTech team. Daphne, Bharatt, Eric, thank you for joining us today. Really enjoyed the discussion and the presentation. And with that, we will conclude the session. Thank you.

Yes. Thank you so much, Andy. Thank you to the organizers.

Thanks, Andy.

Yes. Thanks.

Take care.