PureTech Health plc (PRTC) Earnings Call Transcript & Summary

Good morning. Welcome to the 42nd Annual JPMorgan Healthcare Conference. My name is Edwin Zhang. I'm a member of the JPMorgan healthcare team and the moderator for this session. Today, I would like to introduce you to the team from PureTech Health. Please join me in welcoming our presenters, Daphne Zohar, Co-Founder and CEO; and Eric Elenko, Co-Founder.

Thanks so much, Edwin, and thank you to the JPMorgan team for inviting us to present today. Welcome to all of you who are joining us here in the room and those of you who are joining us via webcast. We're coming off of a very successful 2023 with strong clinical and strategic progress. And we're at a turning point this year for our company as we sharpen our focus on pulmonary and rare disease in our wholly owned pipeline and as we advanced 2 new founded entities that we'll be saying more about in 2 important additional therapeutic areas. We'll be making some forward-looking statements today. And we ask that you review those -- the full list of risks and uncertainties at sec.gov. Our mission at PureTech is to give life to new medicines. In order to change the lives of patients with devastating diseases. And I'm really proud of the progress that we've been making and delivering on this mission. We've now taken forward 28 new therapeutics and therapeutic candidates from our R&D engine, 2 of which have reached -- they were taken from inception at PureTech through FDA and EU regulatory clearances and a third has recently filed for FDA approval. And I'm enormously proud of the statistics on the bottom of this slide, Slide 4, where it shows that greater than 80% of the trials that have been run by PureTech and our founded entities have been successful. In fact, our track record of clinical success is such that we're basically 6x more likely to have clinical success than the industry average. So I'm very proud of that. And the way that we do that is through a strategy that we've now proven and repeated. It's underpinned by 3 pillars. The first pillar is that we're starting with drugs that already have efficacy. They already have activity. And those drugs were previously held back from advancing by some key limitation that we're now able to address with our technology. So the second pillar is to take our technologies and address the key limitations of those active drugs in order to unlock the benefit for patients. We then take forward these medicines, and we do what we call our killer experiments. And that basically enables us to test the hypothesis. And if the hypothesis doesn't work, we can move our resources to more promising programs. On the other hand, if it does work, we've really derisked the program. So these are the 3 pillars and -- if you've heard of PureTech, you might have heard of what's called the hub-and-spoke model, which we pioneered. And really, the summary of this is that there's a hub or a core group of people and capabilities at the center. And that hub is then enabling us to develop new medicines, some of which we advance in wholly owned programs. And some of which we advance through founded entities that we create. So you might have heard of some of our founded entities, and there are some advantages to this model. The first of which is it's very capital efficient. It aligns also our interest with the interest of shareholders because we are incentivized to move our resources to the programs with the greatest probability of success. And then I think the third really important element of this model is the fact that it brings in non-dilutive capital. So we have not had to raise money from the capital markets in over 7 years. And we last reported cash of $320 million in -- on a PureTech parent company level. We've guided that our operational runway will take us into the first quarter of 2027. Now that does not yet account for the Karuna/BMS transaction, which is going to bring us another gross proceeds of around $294 million. Importantly, we still have other benefits from the Karuna royalties and milestone payments, which I'll touch on in a moment. So the other thing to note about these founded entities is that they're pretty independent. They're bringing value back to us. They've raised about $3.8 billion since July of 2018, and of that, 96% has come from third parties. This is a snapshot of our wholly owned pipeline, and we're going to be talking more about our wholly owned program, LYT-100 as well as other wholly owned programs, which we're advancing through 2 new founded entities, Seaport Therapeutics and Gallop Oncology. But before we do that, I want to talk about why it is that we advance some of these programs and founded entities and how that's been a successful model for us. And I want to take the example of the KarXT program at Karuna to walk you through that case study. I'm just going to move forward to Slide 16. So in the case of KarXT, we invented that program. So it was Xanomeline was active drug. It was sitting on a shelf Eli Lilly. Because it had some key liabilities that they and other pharma companies couldn't address with traditional chemistry approaches. Members of our team, including Eric Elenko, who is here with me today, came up with the idea of the KarXT program, which is really addressing the key liability of GI-related AEs. We then got the program out of Eli Lilly and ran our killer experiment, which was a key tolerability proof-of-concept study, and that showed 50% reduction in the tolerability related AEs. So what was very exciting about that was we already knew that the drug had efficacy or activity, and we have now shown that we could reduce the tolerability issues. And then we spun this out and you probably have heard of Karuna Therapeutics. They've since then had 3 successful registration-enabling studies, which is really rare and unusual on CNS. And I think part of that is because we're starting with an active drug. The other part of it relates to the team. And this has been really successful for not just patients, which I'm really inspired by the fact that this will be the first new mechanism for patients with schizophrenia in over 50 years if it's approved. But also to our shareholders because it's enabled us to generate cash, which we've now both put into our pipeline, created a whole new group of wholly owned programs that are really exciting. But we've also returned some capital to shareholders. And once the transaction with BMS closes, we'll update our -- basically our guidance regarding our capital return strategy. So to take a step back, we put in about $18.5 million into this program we've taken $815 million off the table, and that's prior to the transaction closing. We'll get another $294 million from that. And then we are able to receive up to $400 million in milestone payments from the Royalty Pharma deal, as well as if this ends up being a blockbuster medicine, then anything above $2 billion in annual sales, we will get a 2% royalty on. So it's been an enormous success and we're building on that same strategy with both our wholly owned programs and our founded entities. And I want to talk about the strategy and how it's being applied internally with LYT-100, which is our most advanced wholly owned program. So many of you are familiar with IPF or idiopathic pulmonary fibrosis. This is a fatal and progressive disease. It's a rare disease. It causes scar tissue in the lungs. And it is unfortunately -- basically people who are diagnosed only have 2 to 5 years median survival. There are 2 drugs that actually work for patients with IPF, one of which is Pirfenidone and the other is Nintedanib. The problem with those drugs is they have very significant GI tolerability issues that cause patients to not be able to stay on the drug at the right dose and really not benefit. Pirfenidone is an active drug. It actually extends life in these patients by 2.5 years. And remember that these are patients that typically live a maximum of 5 years, so 2 to 5 years on average. So it is an active drug and there's been over a dozen studies in both late stage and real-world efficacy studies that show that it works, but it has these GI tolerability issues. LYT-100, we think this is our program that's wholly owned. We think it's a potential game-changer for patients with IPF. So what we've done is we've made a substitution. This is a duterated form of pirfenidone. So we've made a substitution that improves the metabolic stability and PK while maintaining the pharmacology or the activity of the drug. And what you see in the middle of this slide, Slide 11, is that the Cmax is reduced. So the peak drug concentration, which is associated with the tolerability issues is reduced, but the AUC is maintained, and that's really what's associated with efficacy. In fact, we've shown that we've been able to reduce the tolerability-related AEs. We ran a head-to-head study with pirfenidone versus LYT-100, and we showed that we were able to reduce those tolerability related AEs, the GI tolerability AEs by about 50%. Now before we ran the study, we did what we always do. We went to experts and we said, what would be clinically meaningful. And all of them basically came back with around 25% reduction would be clinically meaningful. So we were thrilled to see a 50% reduction. I can't promise that we're going to see that going forward, but anything greater than 25% would be really meaningful for patients. What we've also done is we've been able to dose higher than the approved dose of Pirfenidone in terms of exposure level. And this slide is very dense, but the key takeaway of this slide, which is Slide 13 is that we have now shown that a higher dose by about 43% higher than the approved Pirfenidone exposure. We're able to take that forward. And this data was presented at CHEST just recently. So that was very encouraging to us, and we're taking both doses forward. Now what's nice about this program is there's 2 ways that we can win for patients. The first is if we have better safety with similar efficacy to Pirfenidone. So patients can stay on the drug at the right dose, benefit and potentially see the benefits of extended life and better quality of life. The other potential way to win is that we actually see better efficacy at the higher dose. And we're taking both of these doses forward in our Phase IIb study, which is the first of 2 registration-enabling studies that we're doing for patients with IPF. And this study is going to read out at the end of the year at Q4, 2024. Very important milestone for us, and we're really looking forward to it. So we recently announced, and we're going to pivot now to these new founded entities that we announce that we're going to be forming. The first of which is Seaport Therapeutics, which is focused on CNS disorders. So what we're doing here is we're building on the same strategy that we used in developing KarXT. But the way we like to think of this is it's almost like Karuna on steroids because we have this cliff platform, which enables us to create multiple new programs. And each program has a novel composition of matter IP. What the Glyph platform does is, and I'm going to talk a little bit about it, is it helps to overcome some of the liabilities that have held back important new classes of CNS medicines. So -- and I'll just say that following on this proven strategy, the Glyph platform, the team that was involved in inventing and some of the team that was involved in advancing KarXT we've now been able to generate a pipeline of programs which are advanced. So we now have already 3 programs that we've announced, one of which already has Phase IIa proof of concept. Another one is entering the clinic and there's more coming behind that. So it's incredibly exciting. It's been moving very quickly. The Glyph platform takes advantage of how our body -- how the lymphatic system absorbs fats in order to traffic therapeutics into the lymphatic system and basically give you one free pass through the circulation before the drug gets to the liver. So what that does is it enhances oral bioavailability in drugs that have poor bioavailability due to first pass metabolism and it also can be beneficial in addressing hepatotoxicity or liver-related tox. And we've shown with this platform proof of concept. So here's the pipeline on Slide 21 of the programs that we've developed so far that we've announced with the Glyph platform that we're going to be advancing through Seaport Therapeutics. And the first of those, which I think is important for a few reasons. One is that we've actually shown the proof of concept for the Glyph platform. The second is that we've actually shown activity that's relevant for potentially for disease, is Glyph allopregnanolone, which we're advancing for neuropsychiatric and rare CNS conditions. Allopregnanolone is known to have activity in a number of conditions, including depression and other conditions, including some rare diseases. But the method of administration, which is a 60-hour IV infusion for endogenous allopregnanolone, has really held back the broad potential of the drug. There are some oral chemical analogs that have been developed, but we believe that the endogenous form has some significant advantages, both in the realm of activity, but also in the realm of tolerability. So LYT-300 retains the activity and potency of endogenous allopregnanolone in an oral form. What we've shown so far is a few things in both preclinical models and humans. In humans, we've shown that 9x greater oral bioavailability compared to allopregnanolone what's been published on allopregnanolone. So that's enormously exciting. We've also shown target engagement with GABAA receptors via beta EEG. And we've shown that this is generally well tolerated. Just -- was it 2 months ago, I think, yes, just 2 months ago, we announced positive Phase IIa proof-of-concept data in what's called the Trier Social Stress Test. It's a validated clinical model of anxiety where you put people into stressful situations, these are healthy volunteers, and then you measure salivary cortisol levels. And what we saw in this study was that LYT-300 had a really terrific effect size, which was similar to what has been seen in the past with alprazolam or Xanax in the TSST, so 0.72. The p-value was 0.0001. And again, it was generally well tolerated. All treatment-related AEs were transient mild or moderate. This further supports both the Glyph platform and also this -- the potential for this program in anxiety-related disorders. We're also pursuing a rare condition called FXTAS with LYT-300. FXTAS is fragile X-associated Tremor/Ataxia syndrome. It's a rare condition and there are currently no treatments available for these patients. In fact, there's only one treatment that's shown any benefit, and that's IV allopregnanolone in a small end study. It was an open-label study and it showed benefit for these patients. So we're moving forward in FXTAS as well, and we'll be starting Phase II study in 2024. Now I'm not going to get into the details of all of the other programs in Seaport, but you'll see that the same strategy is applied. For example, LYT-310 is an oral form of CBD. And what it does is it has the potential to really broaden the indications that one could pursue and the patient populations because it has improved oral bioavailability and the potential for reduced GI and liver-related tox. We've shown already some really exciting data in preclinical model that is highly validated. And where it showed basically that LYT-310 was more effective at preventing seizures at a dose that was 3x lower than an oral CBD formulation. And this model has 80% of the approved antiseizure medications for focal seizures were actually active in this model. So it's -- unlike most preclinical model is actually pretty predictive. LYT-320 is a Glyph form of agomelatine. This is a drug that is approved in Europe and Australia. It is a novel mechanism. It's differentiated from SSRIs, but it has low oral bioavailability, which leads to hepatotoxicity and requires liver monitoring. We have created a form LYT-320, which has the potential to really reduce the risk of liver monitoring, and we've shown that in an important model called the DILIsym model. So really excited to tell you more about Seaport as this progresses, but expect this to move very quickly. The second founded entity that we announced is earlier stage, but also very exciting and important because it has the potential to really make a difference for patients who are living with cancer, including both solid tumors and liquid tumors. So Gallop oncology is targeting galectin-9. It's a novel monoclonal antibody candidate, which is targeting Gal-9 and it's in clinical studies right now. We've announced some preliminary data, both at ESMO IO and recently we announced some top line early results in AML, in single agent. So at ESMO IO, we announced that of the head and neck evaluable patients, which were 4 patients. Three patients achieved some disease control, including one complete response, one partial response and one stable disease and that's notable in this patient population. In AML, in single agent, what we've seen so far, these are -- it's early days, and we're still dosing up in both of these, by the way, a majority of patients have achieved stable disease and at the 7.5 migs per kigs size dose so far. A median duration of treatment was 77 days with blast reduction observed. So that's pretty notable. Because one of the other drugs that typically used here has about a median duration of treatment of about 2 months. So early days, but exciting so far. So we have 4 milestones coming up in 2024, including the one that you see on Slide 34, which is bolded the results from a registration-enabling study in IPF for LYT-100, and that's a really important one, but you'll see many milestones here, both in our wholly owned programs and in our founded entities. So we're really excited for 2024. And I'd like to just note that it wouldn't be possible to do this without the amazing team of people that we have at PureTech who are dedicated to changing the lives of patients with devastating diseases. And bringing new medicines to life. So thank you very much for your time. And I'll invite Eric Elenko, my Co-Founder and Chief Innovation Officer, to answer questions with me. Thank you.

Thank you so much for that, Daphne. Now we will kick off the Q&A portion of the presentation. So if you do have a question, please raise your hand, and we will bring a mic to you. So I will actually kick off the first question for the Q&A session. It's a question for Daphne and Eric. You recently announced that you're sharpening your focus within the wholly owned pipeline and particularly in the pulmonary and rare disease area. Could you sort of talk about -- what are the advantages of the hub-and-spoke model that PureTech pioneered?

Sure. So the hub-and-spoke model has a few advantages, one of which I think is really important, and that is that our team is motivated to do experiments that will really clarify the value of programs. And if those experiments don't work because we have multiple ways we could dedicate our resources, we'll move our resources instead of just running another study. So I think that, that's a really important advantage. Another advantage is the fact that the team is shared across multiple programs is capital efficiency. And then the third advantage, which I talked about briefly before is being able to generate nondilutive cash.

Thank you so much for that.

How in the world are you getting clinical trial success rates that are 6x normal. That is really shocking and it's spectacular because it's not just the success rates, it's also the incredible decrement in cost that would be associated with any way of increasing clinical trial success.

Thank you. It's good to see you. Yes, I think that the key factor here is we're starting with drugs that are active. So we're taking some of the unknown out. And we're also really understanding what the liabilities of those drugs are. We have the benefit of seeing past clinical results and designing the study with a lot more knowledge than one would typically have. I think on some level, it's maybe a little bit less [indiscernible] sounding, but we're -- for patients, we're able to open up new classes of medicine that otherwise they wouldn't have access to.

I'm happy to ask another question here. So PureTech started Karuna Therapeutics from scratch and recently had an extremely successful exit. So was Karuna sort of a onetime occurrence? Or do you think there's a way to systematically reproduce what has happened?

Yes. We're very much building on that strategy. And I'm going to ask Eric to comment on this since he was really one of the driving forces behind Karuna and KarXT.

Sure. And with the caveat in the beginning that we can't guarantee Karuna like returns each time, I think that might have been the disclaimer slide. Yes, Karuna was at an accident. There were clear elements that we think are reproducible. So: One, having a drug that had clear pharmacological benefit; second, an area of great unmet patient need where it's clear that a drug with the characteristics that it has would benefit patients; third is a clearly identifiable problem associated with the drug; and fourth is a way of overcoming that problem. And that's really at the core and the heart of the strategy for drug development that PureTech is pursuing, either in the case of LYT-100 with deuteration or in the case of the various Seaport programs where the Glyph platform underlines how we're circumventing the problems associated with the drugs. That historically have occurred and where we think circumventing those problems could really open up a lot of potential impact for patients.

Thank you so much for that. Happy to ask follow-up questions here. So how does LYT-100 tied to your overall R&D strategy? And how is it differentiated compared to Pirfenidone?

Eric, would you like to take that one?

Sure. I think it really dovetails with the answer to the last question, which is, really, it's -- this idea of taking a drug where there's clear data in terms of efficacy. And that's clearly the case with Pirfenidone, I think Daphne was outlining, the efficacy that drug has. However, really, the issue has been GI-tolerability and as a result of that, you got patients dosing down, discontinuing. And a lot of patients just not even starting a drug even though it's a deadly disease. And so really, the idea here is to be able to circumvent those side effects through the duration, and then that can allow for greater tolerability. Greater tolerability could lead to greater time on drug, not dose reducing and there's evidence for a dose dependence in terms of efficacy and also even being able to go to a higher dose, which again, it's an empirical question, but there's good reason to think that could, in fact, lead to greater efficacy. So I think it really all ties to this idea of known pharmacology and then solving the problem that's held back the drug.

Thank you for that, Eric. So another question that I have is your CNS program is primarily generated from the Glyph platform. Could you sort of describe what are some of the potentials and applications of the platform and sort of the indication it could potentially target?

Yes. So I touched on that a little bit before, and we're looking at medicines that have activity, but have a liability, including low oral bioavailability due to first pass metabolism and also hepatotoxicity. Those are the main characteristics of the drugs that can apply to -- we've looked at and applied it to dozens of compounds. There's some specific chemical characteristics that we know of that this platform lend itself to and others where it doesn't -- it can't really work in some other areas like biologics, for example.

So how does that -- could you sort of talk about how that sort of relates to producing drugs that aren't just me too and will have a larger impact if the starting point relies on drugs with clinical evidence.

For sure. And I think that the KarXT program is a perfect example of that, and there's other programs like that, where it was advanced to a certain point you see signals of efficacy or -- and -- but then you see these liabilities emerge. And what we believe and we're really inspired by is the ability to make a difference for patients with mental health conditions. And many of the experts that we talk to know of drugs like this where they say, I really wish that drug had been moved forward, and that's really what happened with [indiscernible] we're seeing that with other ideas that are coming from our experts and from our internal team.

Got you. Thank you for that. So I'll just ask a couple more here to close out the session. So given that CNS space, obviously booming has lots of tailwind within the particular field. So what do you -- in regards to Seaport therapeutics. What differentiates Seaport from some of the other emerging players within the CNS space?

Eric, would you like to take that?

Yes. And I agree with the comment that if you look at the focus on CNS. CNS is very much coming back into focus. And I think people are recognizing that it is possible to make a difference for patients in a number of these diseases, which historically perhaps happen tougher to treat, which is really wonderful to see. And I think really what differentiates Seaport as a basic drug development strategy. Unfortunately, one of the challenges in CNS is that a number of the diseases just have unknown pathology. What fundamentally causes a number of these diseases that are either psychiatric or neurological just isn't known. And that inherently increases the risk of taking drugs where there is a first-in-class mechanism in no human pharmacology. So our approach, we're very cognizant of that, again, is to rely on drugs where there is human evidence, and that's really the philosophy that human pharmacology is the most important data and really the driver in selecting mechanisms and drugs to drive forward using our proprietary technology to circumvent the problems that perhaps have helped those drugs back so they couldn't be used.

Thank you for that.

Can you talk a little bit more about galectin-9 in oncology. So I normally think a lot about oncology drugs. And I've never heard of anything that started with Galectin. So you know what -- I don't even know like what -- do you have ideas about the mechanism or whatever is in the public domain.

Eric?

Yes. I appreciate the question. Thank you for asking that. So we're excited about our program. We called LYT-200, really for 3 reasons. One is the mechanism that I'll describe shortly. A second is we have a very robust set of preclinical data. And third, as Daphne was outlining, it's early days in the clinic, small end, but we're starting to see signals that we have an active drug. And in terms of mechanism, we're developing the drug both for hematological malignancies with initial focus on AML and high-risk MDS and then also solid tumors with initial focus on head and neck and urothelial cancers. If you look at AML, when you block galectin-9, we've done this, what you see is apoptosis of the malignant cells, and DNA damage. And that's a very exciting mechanism. And then Galectin-9 is also known to interact with the number of binding partners to have an immunosuppressive effect. So the idea is by blocking galectin-9 and our antibody is an IgG4, so it's a blocking antibody. It's a way of relieving that immunosuppression. And because there are multiple binding partners and multiple immunosuppressive pathways, we think that's a very promising approach. One of the problems that IO has really faced is that within the tumor microenvironment, one might eliminate one immunosuppressive pathway, but then there are multiple other immunosuppressive pathways, which, of course, is why everyone moves to combination. But in this case, one target might actually be a way of going after several immunosuppressive effects simultaneously.

So we're going to thank you for spending your time here with the PureTech team and another round of applause for the wonderful presentation.

Thank you.