SanBio Company Limited (4592) Earnings Call Transcript & Summary

So good afternoon. Thank you very much for coming to this update meeting today. My name is Keita Mori, CEO of SanBio. As you can see, we have a number of topics today, so I'd like to go straight into the subject today. So first, a brief update on the finance results. First, I'd like to go over the income statement. As we are product development stage, R&D cost is the important factor for our business. And as you can see, our R&D costs fell by about $2 million year-to-year due to lower clinical churn expense despite the rise in the manufacturing-related expense. But as you see, overall, it's about $20 million last year, and this is about $18 million this year. So overall, the spending is about the same, and we continue to proactively conduct development to increase the value of our products and the company. Now going to the balance sheet. Here, the important aspect is the cash. And in the last 6 months, with the spend, we have a decrease of about $27 million equivalent. However, we continue to have a very stable base of over -- about $100 million as a cash and equivalent to conduct our business in a smooth manner. So next, I'd like to go over the second section of the TBI filing in Japan. I believe this is the topic that the -- everybody, including investors, are most interested in. As with the long history of SanBio, TBI in Japan is the first indication and the first country that we anticipate the approval and the launch of the product. So I'd like to talk about the 3 key issues. This has been the most important aspect or us. We updated back in December of last year about the timing, most specifically, delay in our product filing, because we wanted to take more time in working on the stable supply. And in March of this year, we tried to disclose as much as possible about the challenges we have, and we have characterized the 3 areas of the challenges. So we've been working on this very diligently. We formed a CEO direct project against these 3 issues, and we have been able to, for example, mostly complete the tech transfer, and we have made a lot of good progresses in all 3 areas, solid progress. Going forward, we will be focusing and working on the product filing and that will be led by the leadership, new leadership by the new Executive Vice President, Mr. Aki Tsujimura. I'd like to spend just a short comment on each of the 3 key issues. The tech transfer, we have added resources who's done this tech transfer successfully in the past. And we also worked -- in spite of the COVID-19 situation, we worked very closely with our manufacturing partner, and we have been able to make this solid progress, mostly complete status. In the separate management system, we have recruited a talented, experienced individual as well as we expanded our team. We also were able to work very closely with the facility -- production facility, and we have been able to make progress as planned. Specifically, we have been able to create systems and enrich the system, for example, quality assurance system. The last key issue of the testing procedure, we have been able to develop this robust assay or test procedure, and this is in the final stage. So all in all, we have made solid progress in all the 3 key areas of issues and as planned. Based on the solid progresses of the 3 key areas, we continue to pursue aiming to file product approval by the end of this fiscal year. I'd like to also mention the potential risks as this is, I think, important for everybody, including the investors. The potential risks that we can foresee is -- or include, as we discussed, the product with the agency, the time of the discussion may take longer than we anticipate, for example and/or we may receive additional issues or additional homework, per se, from the agency in these discussions. But if we receive those situations, obviously, we will diligently work towards these issues and try to resolve them as rapidly as possible. So now I think -- now I'd like to go into the topic of the stroke. This goes back about 1.5 years ago when we first announced the disappointing top line results of the stroke 2 study, Phase II study. However, with our team's diligent analysis in details in different aspects, we have been able to come to a conclusion to this study. So we'd like to share these results with you today. This is the press release that we issued yesterday regarding the new detailed analysis as well as the planned -- our plan going forward. Now I'd like to switch over to our Chief Medical Officer, Dr. Bijan Nejadnik. So Bijan, please.

So thank you, everyone, for attending our meetings today, should I say, welcome back. I was with you last year. I'm glad to be here, and also for us to be able to kind of present the result of our analysis on the STR-02 or Stroke Phase II. Does everyone hear me well? Because I'm not sure here. Awesome. Thank you. So as you know, the study, STR-02 was performed -- conducted in the patients with past history of ischemic stroke. Those patients were randomized into 3 different arms: the sham group, who got the surgery without the injection; and the patients with 2.5 million and 5 million cells implanted in their brain. All the patients would follow up 6 months after the implementation of the cells. The Fugl-Meyer Motor Scale was used as the primary end point. More precisely, an improvement of Fugl-Meyer Motor Scale of 10 or more was assumed to be positive in those patients. As you can see on the results, there were 15% or so in the treatment group and about the same number in the control group for overall results being negative, especially with the p values. So the question was, why? Whether the drug is not working or we did not enroll proper patients, the patients who could benefit from the drug. That was puzzling because the drug would have worked with mainly SB623 cells, have worked in other conditions, including ministroke as well as in traumatic brain injury. But then more importantly, the question was raised by mostly external stakeholders and regulatories to show what would be the clinical meaningfulness of Fugl-Meyer Motor Scale. In any measurement instrument, which is used in clinical trials, in view of approval, one has to show that, that improvement is not only statistically significant but also clinically meaningful so that the patients improve to the level that will change their life. Now if you go to the next slide. All right. So the idea was that how do we define, how do we evaluate or assess the clinically meaningful in an instrument of measure for a clinical trial? That has not been only the question for us but for a great number of clinical trials run. For them to define if they have a statistically significant results that, that would effectively change either the quality of life, the function or other qualities of life in those patients. The notion of minimally clinically important difference has been debated in the literature and by other experts over time several times. So the main issue here is to try to find a method in which you can find that MCID or minimally clinically important difference. There have been several methods, mainly Delphi panel, anchoring and distribution methods used with the experts and the outcome measure opinion leaders in the literature but also within the clinical trials, trying to define the MCID. The Delphi panel is a panel of independent, nationally recognized experts who are gathered together by an institution which is independent from sponsor. And they, with consensus, agree by reacting to the realistic clinical vignette or clinical scenarios provided by another key opinion leader to see where they can define the cutoff where an instrumental measure could be clinically meaningful. The anchoring method is to try to perform the statistical analysis to find out whether an instrumental measure, when it's related to another one, which is clinically relevant, at what cut off it becomes clinically meaningful. And distribution method is a way to do the analysis of inherent coherence within an instrument measure. We did all 3 of them. And all 3 of them very, very consistent for Fugl-Meyer. Now one important point is that the expert panel from the beginning, they thought that if a patient have upper extremity or a lower extremity motor deficit, the upper extremity should be evaluated by itself as well as the lower extremity. Of course, we could do both of them together as well. In another word, if somebody's upper extremely, upper lien has a severe motor deficit and improves enough to change their life, including getting an employment or having a better activities within the house or in their activity of daily living, that should be assumed to be clinically meaningful if that changes the life. The same for lower extremity, if they cannot walk fast or they cannot walk well, but then they walk much better, that's very important as well. They can go shopping et cetera. But then also, you can also combine them. So that was a very important point. That was a major point that led us to evaluate what we call the composite Fugl-Meyer Motor Scale, where each of those were looked at separate, upper extremity, lower extremity and combined. The final results of all 3 analysis came down to be a Fugl-Meyer of upper extremity 6 or more, a lower extremity 4 or more or a combined of 9 or more would be clinically meaningful. Now remember, upper extremity in total Fugl-Meyer score is that anybody, a normal person can make is 66. 6 is about 10% -- 9%, 10% of it. However, when the patients are coming in, generally, they come with about half of that, means that about 30 or so. So they get better about 20%. So that was based on event that we did not necessarily looked at it within this trial. We just wanted to see what would be -- for Fugl-Meyer in a generic way, would be the clinically meaningfulness. So if you go to the next slide. Very interestingly, we applied that to this study. In another word, we didn't go from this study to that but from this to this study, and we did not know what we are going to encounter. Now what we realized is that when we did the analysis now and the overall population, the treatment group improved -- 39% of the patients improved or their responders if you use the composite Fugl-Meyer Motor Scale that now even without knowing what this study would have been, independently from that we have looked at and assessed to be clinically meaningful as opposed to 31% in the control group. So this is a very important difference. Obviously, there is a significant difference, although that was not statistically significant. Now we knew previous -- prior to that, and that has been defined in the literature as well, that the strokes with the lower volume, they have better outcomes. That goes without saying that also there are many studies that have looked at this, and I will show you in a minute. So we try to apply that on a lower volume versus higher volume, and we had a cutoff, specific cutoff of the volume of a stroke that included about half of the patients in our trial, namely 77 patients. In that group of patients, the composite responders were 49 of the patients as opposed to 19% in the control group. And surprisingly, that showed that, that was statistically significant with a p-value of 0.02. Now that has been a great revelation to us and especially the fact that we have defined the MCID before analyzing this data. And then granted that 77 patients, that means about half of the patients, would have been theoretically statistically significant but also clinically meaningful. So the next slide, we wondered why. And if you go to the next slide, please. We looked at everything to see if, not only, of course, intuitively and clinically, that would make sense that smaller volume do better. But why did this respond so well to SB623? Now when you look at the literature, for example, overall, a meta-analysis of 1,665 patients showed clearly that a large follow-up volume of stroke was associated with worst functional outcome overall. And if you look at the right upper panel, this is the base line. This is not the effect of SB623, but that the rat at the baseline showed exactly the same thing: that the smaller the volume, the better evolution of the disease. Now on the right lower panel, you will see 2 images. We injected the SB623 in a normal brain. It stayed there. As you can see in the line, these are the cells that stay there in normal brain. They are live, but they are not doing much. Now if you look at a stroke, stroke is basically necrosis of the cells and the necrosis of the cells means that the internal area of this stroke is a cavity in which, not only the SB623, but nothing can survive. But then there is surrounding area, which is called the penumbral tissue or penumbra. That area is still viable, but there's no function. Now you can imagine that if you have an area that reports to the upper extremity movement, and that area, only a part of it is destroyed, then you have a chance. You have enough viable tissue that is functional, so that the SB623 work with that. And we have shown with the mechanism of action how the SB623 engages the remaining cells and the remaining structures of an area of the brain, which is not functioning, but still has some level of viability and some level of plasticity so that the functions can be restored. If that area is too large, then the whole functions related to upper extremity, it just is within the necrosis and the cavity, so there is not much to improve. So overall, results was that clearly, the STR-02, the Phase II stroke drug that did not reach it primary endpoint as it was designed, it was a great study, because it had a large number of patients with different characteristics, including different volumes of the stroke, where we could finally read what the Phase II trials are meant for. They are meant for designing the next trial to defining the patients in which it were effective, and we feel pretty confident that with this analysis, that we know what our next step is. Thank you.

Thank you, Bijan. So the last topic going forward, I'd like to talk about the -- our future plan. This slide is actually taken from our update meeting from a year ago. The reason why we, again, showing this is, as Bijan updated today, we had the new news on the stroke today. I think in the last 1.5 years, I think we have had a lot of questions or concerns and hopes on the stroke from the patients or families. But today, we wanted to make sure that we clearly communicate that we are on track to pursue many indications, including stroke. As you can see, unfortunately, we are behind from the point of the time line. However, the direction that we are going remains unchanged, and we will be focusing on becoming a global leader. So in order for us to become a global leader, we are also -- we are making a new structure or new management for a global leadership. Specifically, Mr. Aki Tsujimura is now becoming the new Executive Vice President and Chief Operating Officer and will be in charge of the entire operations at SanBio. I myself will focus on the mid- to long-term goals of becoming a global leader and making sure that we have a clearer goals, strategies and approaches so that we get there. I think -- Mr. Tsujimura, I think, is already very well-known in the pharma biotech community 2 years ago. Myself and the Chairman, Kawanishi really wanted Mr. Tsujimura to come and join us and join our forces to take the company to a global leader, and Aki Tsujimura joined. Mr. Tsujimura, prior to coming to SanBio had one of the very top positions of the Santen Pharmaceutical companies. And since he joined SanBio, he has shown -- demonstrated tremendous leadership in and outside of SanBio. So going forward, we will be growing our business with Mr. Tsujimura as the key leadership. And together, we will be continuing to make progress towards global leadership with everybody at SanBio. I'd like to also continue updating about our new leadership. I've mentioned about Aki Tsujimura. In addition, as everybody knows, Bijan, who just presented today, is heading up as the Chief Medical Officer; Mr. Yamamoto, heading up the business; and Mr. Kakutani, heading up the management administration, finance. As you can see, we are in a big change. We're taking company from a development stage to a fully commercialized, fully integrated commercial pharma company. And this time, we have recruited a new leadership to our company in the areas of the technical operations. Mr. Chris Horan just joined us a couple of months ago. So Chris comes SanBio with a tremendous background, for example, heading up the global supply chain at Genentech, Roche. And most recently, he was heading up the technical operations at a growing biotech company called Dermira and contributed in the growth of this company, which eventually became a successful acquisition by the big pharma Eli Lilly. I really look forward to Chris in enhancing and establishing our very important, stable supply infrastructure for the years to come. So Chris, could you make a brief introduction?

Thank you. Good afternoon. I really feel privileged to be a part of SanBio's quest to bring stem cell therapies to patients. This is my 32nd year in the biopharma industry, having worked for Merck for Genentech, Roche and for Dermira as Keita-san has just highlighted. I've enjoyed the opportunity to have extensive international experience and have lived and worked in Australia, Asia and Europe and have had the opportunity to work with some of the best Japanese pharmaceutical companies. When I was at Merck, I worked closely with Banyu. And when I was at Roche, I was responsible for the technical operations liaison with Chugai Pharmaceuticals. I also feel privileged to be at SanBio at this critical time. I enjoy launching products. While Head of Global Supply chain at Roche, I had the opportunity to participate in the launch of 9 new biopharmaceuticals. And at Dermira, I helped launch the company's first commercial product and bring a biologic through Phase III development in preparation for a BLA filing. So this is a great opportunity for me to contribute to SanBio's mission. I thank you for the opportunity to introduce myself and convey my excitement to be part of the SanBio journey. Thank you.

Okay. Thank you, Chris, for your introduction. I'm Akihiro Tsujimura. I'm Vice President and the CEO of SanBio Corporation. From here, I'd like to cover next fourth slide. And before going into the development front, I'd like to summarize the result of our assessment for STR-02 study. As our CMO, Bijan Nejadnik has explained, we used composite Fugl-Meyer Motor Scale as a new end point in our assessment. We defined MCID based on the composite FMMS, then we corroborated the STR-02 data based on this new end point and obtained a positive result, which represent approximately 50% of total enrolled patient in this STR-02 study. With respect to the patients, who has infarct areas smaller than certain sites, 49% of the treatment group patient achieved the end point and 90% of the sham group patients achieved the end point, and the difference between 2 groups showed statistically significant. With these positive results, we have decided to initiate 2 clinical trials for ischemic and hemorrhagic stroke indications. We need to consult with the regulatory agencies as long as possible, but we are currently expecting to restart Phase IIb or Phase III for ischemic stroke and the initiate Phase IIb for hemorrhagic stroke. We have decided to prioritize the ischemic stroke program and the hemorrhagic stroke program in Japan and postpone the growth of our Phase III TBI program to the next fiscal year or later. We made this decision because of the following reasons: first, we have a very limited number of resources; the second, we believe the prioritization of 2 strong trials in Japan, will contributed a lot to maximize the corporate value of SanBio. We are pursuing strong evidences for efficacy and safety of these trials in Japan. We are going to start our consultation with PMDA as soon as possible, so that we will be able to inform you of the outline of our study plan after our consultation. With respect to ex-Japan territories, we'd like to consider several development options. However, our priority is running clinical trial studies by ourselves. As I'm showing in this slide, there is a huge number of patients who are suffering from TBI, ischemic stroke and hemorrhagic stroke. We would like to accelerate our drug development to contribute to these patients as soon as possible. From here, I'd like to ask Hiro Yamamoto to update current status on TBI launch preparation activities in Japan. Hiro?

Okay. Thank you, Aki. Let me update our current SB653 launch data for TBI in Japan. Overall, about 80% of the preparation is completed and the main progress since last time is a distribution system development. We have already completed the IT program and just started the real product distribution trial to the hospital with Suzuken, the Japanese medical wholesaler. We have also conducted 3 market researches. On the next slide, I'm going to share those results. This is a slide showing the TBI patient journey and the touching point between doctor and the patient. For example, the patients who has brain damage, let's say, by a traffic accident, they are carried to the acute hospital and they are treated by the neurosurgeon. After that, they are moving to recovery hospital. In this grade, the main doctor is changed from the neurosurgeon to the rehabilitation doctors or specialists or orthopedics. Therefore, our SanBio medical members, also the marketing members need to cover variety of the department for the promotional activity in the 3 different phases such as acute recovery and the chronic TBI phases. On the next slide, this is a more specific data, which shows where the TBI chronic phase patients are distributed. If we issue our group round numbers, right-hand side, emerging, really, more than 50% of the chronic TBI are home-based treatment, including the patients who are conducting the rehabilitation with out-of-pocket. Also, the second biggest population here is after the secondary emergency care center at the neurosurgeon's department. Based on those research data, we will allocate right resource also the budget to the biggest patient segmentation to identify the patient. In summary, now we know the patient's journey and the patient's distribution. We are sure, once we launch the product, we can contribute for the patients with SB623. This is my presentation. Then last part, I will pass the presentation to the CEO, Keita. Thank you.

Thank you. So as a number of us updated today, in the last 6 months, first of all, we have been working on the 3 key issues, and we have made a solid progress in these areas. And now we are focusing on the preparation for the product approval submission as well as the product launch. We also updated today on the stroke outcome. And after many -- about 1.5 years has come, but now we are going to restart the stroke initiative once again. So overall, we at SanBio will be working on TBI, stroke, also hemorrhagic stroke. We'll be initially pursuing the initial launch in Japan and then also in United States, Europe and China and globally. And in order for us to pursue this global launch in business, we are also making enhancements to our leadership. Together, we are working as a team and take the company as a global leader and make the new therapies available to the patients all over the world. This continues to be our vision, and I wanted to remind everybody that we are going to do this clearly. So this concludes our update today. Thank you very much for taking this time and listening to and coming to this presentation for updates. Thank you.