Transgene SA (TNG) Earnings Call Transcript & Summary

Hello, and welcome to the Transgene 2019 Annual Results Conference Call. My name is Lydia, and I will be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Lucie Larguier, to begin today's conference.

Thank you, Lydia. So I'm Lucie. I'm Director of IR at Transgene. Philippe Archinard, Chairman and CEO; as well as Jean-Philippe Del, our VP Finance, are with me today for this call. Today's presentation is available on the webcast page accessible on our Investor page and we have the link embedded in our press release. [Operator Instructions] I'd like to remind everyone that today's discussion contains forward-looking statements which are subject to multiple risks and uncertainties. We would also remind you that this call is being recorded and that it will be available on our website. So with this short introduction, I now turn the call over to Philippe Archinard.

Welcome, everyone. We achieved multiple important advances in 2019, both on our novel platforms and on our clinical assets, while strengthening our balance sheet through a rights issue of EUR 46.7 million (sic) [ EUR 48.7 million ] last July. As you can see on Slide 3, our portfolio currently consists of 4 immunotherapy drug candidates in clinical development stage. Both technologies are based on optimized poxviruses. These viruses have multiple advantages, including large genome and an established safety profile. More importantly, we believe that they have a real potential in immuno-oncology as they are known to stimulate both innate and adaptive immune response. Our 2 clinical-stage therapeutic vaccines are TG4001, currently being evaluated in a Phase II trial in HPV-positive cancers; and TG4050, the first individualized treatment based on the myvac platform assessed in 2 Phase I trials. Oncolytics, as you know, can affect tumors directly and can be engineered to incur therapeutic payloads to modulate the tumor micro-environment. Our 2 oncolytic viruses in clinical development stage are TG6002, assessed in 2 ongoing Phase I/II trials; and BT-001, the first oncolytic based on the Invir.IO platform and which is expected to enter in clinics before the end of 2020 through a collaboration with BioInvent. Now turning to Page 5. You can see the progress we made with our novel myvac and Invir.IO platform during the course of last year. We completed all the regulatory steps required to start the U.S. and European clinical trials of TG4050. Two trials, as you've noticed, started in January this year, and the clinical development is being co-funded by our partner NEC. On the collaboration with AstraZeneca, based on the Invir.IO platform, we are progress -- we are making very good progress. The first multifunctional oncolytic viruses have already been delivered to them to complete the preclinical in vivo evaluation. The Invir.IO platform has also generated a number of exciting new oncolytics candidates, including BT-001, which is being developed, again, by -- with BioInvent. Preclinical results generated with BT-001 were remarkable, and we are working out to make sure we can take this first Invir.IO oncolytic program into clinic before the end of this year. On the clinical front, we had a year of contrasts. We obtained very encouraging results for TG4001 that were presented at ESMO last year, but we also got disappointing outcome in the Phase II trial of TG4010 and with Pexa-Vec in hepatocellular carcinoma. We are confident in the potential of our 4 clinical assets: TG4001, 4050, 60 -- 6002 and BT-001 as well in the potential of our innovative platforms myvac and Invir.IO. We closed the year with EUR 43 million of cash at hand, which allow us to be focused on executing our ongoing development. Slide 5 (sic) [ Slide 6 ] is showing the expected news flow for this year. So we will be reporting the data from the planned interim analysis of TG4001 in the coming months. And we'll also be able to communicate on the first Phase I data from TG6002. We just learned that the AACR annual meeting is postponed or at least will not take place as plan. We have 3 poster accepted at this convention, featuring the great preclinical data from BT-001; the data -- the vaccine design principles, the algorithm developed by NEC for TG4050; and the third poster, which we have not yet disclosed the content. We were -- to be totally transparent, we were at a conference earlier this week, and there were very few attendants. Anyhow, the contacts were good, but the reach is clearly not sufficient. So we are, like many other companies, assessing our options to make sure that our data will get the visibility they deserve in the coming weeks and months. Second part of the year will also be busy, again, BT-001 will be entering the clinic. We will further develop our scientific communication plan on our new platforms and will complete the delivery of the drug candidates to AstraZeneca. We have already delivered the first products to them and first option exercise is possible by the end of this year. In addition, we also plan to select one candidate out of the Invir.IO platform and submit the clinical trial application this year in order to enter into clinic in 2020. I know you're all eager from the -- for the first myvac data, and I'm pleased to tell you that we should get them on the first half of next year, together with the first TG6002, IHA. So I just remind you that we've just initiated a trial where the product is administered via the intraventricular route. So let's start a rapid review of our clinical portfolio, moving to Slide 7. TG4001 is a therapeutic vaccine vectorizing E6 and E7 of HPV16 antigens and IL-2 designed to educate the immune system against HPV-positive cancer cells. Results were presented at ESMO, and they are shown on Page 8 (sic) [ Page 9 ]. Key takeaway are that 3 of the 6 patients treated with the higher dose of TG4001 showed durable partial response and that T cell response against HPV16 E6 and E7 antigens were detected in patients' blood. This gives us confidence for the future development of TG4001. We have recruited enough patients to proceed to the planned interim analysis, which results are expected in second quarter of this year. I would now like to turn to our novel, individualized immunotherapy product TG4050 on Slide 10 (sic) [ Slide 11 ]. We found novel, fast, innovative way to vectorize neoantigens and create personalized therapy. Over the last 18 months, we've made significant progress. We have finalized the manufacturing process, set up a dedicated GMP production unit within our own facility. And this unit is dedicated to the manufacturing of TG4050 clinical batch. In parallel, we've signed a major partnership with NEC. Their artificial intelligence and more generally, all-digital science represents a very differentiated asset, we feel. Not only will it help us to build the best possible individualized treatment for our patients, but also, it will help us learn more from the results generated in the trial, the so-called translational data, but also, we are hopeful to use them in preclinical research. NEC is committed to investing in innovation and immuno-oncology, in particular, and this is evidenced by their decision to contribute to 50% of the cost of our upcoming clinical trials. We have obtained for TG50 the clearance from 3 major health authority, the USFDA, the U.K. MHRA and the French ANSM to launch our 2 clinical trials, and the first patients have been enrolled at the very beginning of this year. Slide 11 (sic) [ Slide 13 ] shows you a few of the parameter that are taken into account to select the neoantigens. We will not get into the detail, but HLA binding, RNA abundance, tumor presentation and of course, distance to self are among the many criteria that are computed by this algorithm. And this was precisely some of the data that we were expecting to present at AACR. We now also have the myvac project KOLs on board: Matthew Block, the PI of the ovarian cancer from the Mayo Clinic in Rochester, Slide 12 (sic) [ Slide 14 ]; and Professor Christian Ottensmeier from the University of Southampton, the PI of the head and neck trial on Slide 13 (sic) [ Slide 15 ]. The enthusiasm from clinicians for this individualized approach is very clear. We've been very encouraged to see the actual inclusion rate, which surpassed our expectation. We plan to provide the first clinical readout from the TG4050 trial including translational data in the first part of next year. I would now like to turn to our oncolytic virus portfolio on Slide 15 (sic) [ Slide 17 ]. We are all familiar with our patented virus, the vaccinia, Copenhagen strands, TK and RR deleted. It has been designed to combine multiple mechanism of actions, such as the lysis of cancer cells, the induction of a durable immune response and the capacity to deliver large payloads in the tumor. One of the major advantages of vaccinia viruses lies in their ability to be administered via multiple route, which overcomes the IT-only administration limitation of most oncolytics. Turning to Slide 16 (sic) [ Slide 18 ]. TG6002 is the first of our next-generation oncolytics. It has been designed to express the FCU1 genes. This is a proprietary genes that enables the production of 5-FU, a widely used chemotherapy agent locally in the tumor cells. 5-FU is an effective chemotherapy. It's backbone of many treatments, mostly for gastric indication, but it has a difficult safety profile. By using 6002, we enable the local production of high dose of 5-FU directly in the tumor, which we believe, will deliver improved efficacy. And in addition, this local production avoids the severe adverse effects of 5-FU when given systemically. We are now investigating TG6002 via intravenous administration and intrahepatic artery administration in an indication where 5-FU is currently the reference treatment. These clinical trials are described on Slide 17 (sic) [ Slide 19 ]. Phase I dose escalation part of the IV trial is ongoing in patients with GI adenocarcinoma. We have reached the highest-dose level, and we will report first data in Q2 this year, this upcoming quarter. Second trial has just started in England. And in this study, TG6002 will be, again, administered via the hepatic artery. The administration route is well-known. This administration route is well-known as it is used for chemoembolization, which is one of the standard practice in liver met treatment. So we believe that we will be able to deliver more concentrated dose of TG6002 to the tumor, while limiting systemic exposures. This trials aims at expanding the market potential of TG6002 in this indication. And we expect to communicate the first data in the first part of next year. Turning to Slide 18 (sic) [ Slide 20 ]. The potential benefits of oncolytics -- oncolytic viruses generated by our Invir.IO platform is attracting significant industry attention. And the first evidence is our recent deal with AstraZeneca. Under the collaboration with AZ, we are currently developing 5 oncolytic viruses directed at some very innovative targets. Their confidence in our platform is a strong validation of the potential of this novel product that can be generated using this proprietary platform. We have delivered the first constructs, and we are on track to deliver the rest of them in due time. It has generated EUR 1.3 million of revenue related to the achievement of certain preclinical milestone in addition to the $10 million we received at the signing of the collaboration. AZ can exercise an option to further develop each of these novel drug candidates, and we hope that the first one could be achieved around year-end. We are also excited about the prospect for our own pipeline products. Turning to Slide 19 (sic) [ Slide 21 ]. We have also made good progress with BT-001 and have started the clinical development phase of this first candidate from the Invir.IO platform. This novel oncolytic encodes an anti-CTLA4 antibody, developed by BioInvent, and human GM-CSF. This multi-arm product candidate is designed to combine the efficacy of vectorized therapeutic and the oncolytic. The aim of this approach is an improved tolerability profile with an enhanced efficacy. As I said earlier, we already generated very exciting preclinical data for this product, and we hope we will be able to communicate them at an upcoming scientific congress. With the clinical trial application already submitted, we believe we can start the first human trial before the end of this year for BT-001. I will now hand over to Jean-Philippe, who will walk you through the financial results.

Thank you, Philippe, and hello, everyone. We are now on Slide 21 (sic) [ Slide 23 ]. Our P&L is in line with our expectations and reflects that we have allocated most of our resources to strategic clinical and preclinical operations. Revenue stood at EUR 13.7 million, and I will detail them on the next slide. R&D expenses increased to EUR 31.4 million in 2019 from EUR 27 million in 2018, mainly due to the acceleration of external expenses for clinical projects and the setup of the new manufacturing unit dedicated to personalize our small clinical batches. General and administrative expenses remained under control at EUR 7.1 million in 2019. Operating loss stood at EUR 25.5 million loss. And as a reminder, the operating profit in 2018 was mainly due to the result of the EUR 35 million income generated by the transaction with Tasly Biopharma last year. The net interest income amounted to EUR 6.7 million in 2019 compared with a net loss of EUR 2 million in 2018. The change is due to the decision taken to stop the clinical development of TG4010, which led to a downward revaluation of EUR 8.7 million of the financial debt related to the conditional advances of the ADNA program. As a result, our total net loss stands at EUR 18.8 million. Let's go into the details of revenue on Slide 22 (sic) [ Slide 24 ]. Revenue from license and collaborative agreements amounted to EUR 6.7 million in 2018 (sic) [ 2019 ] compared with EUR 1.3 million in '18. This significant increase is mainly due to the collaboration signed with AstraZeneca in 2019 that generated EUR 5.3 million booked in revenue over the year. The research tax credit amounted to EUR 6.5 million in 2019, slightly increasing from EUR 5.7 million in 2018. As a result, we registered EUR 30.7 million -- EUR 13.7 million revenue in 2019. Turning now to Slide 23 (sic) [ Slide 25 ] and the detail of R&D expenses. They rose to EUR 31.4 million in 2019, mostly due to the increase of external expenses and as I have already said, the setup of the new manufacturing unit. The other R&D expenses remained stable. You can see on Slide 24 (sic) [ Slide 26 ] that our cash burn was reduced to EUR 20.5 million in 2019, excluding the EUR 46.7 million (sic) [ EUR 48.7 million ] net proceed of the rights issue, compared to EUR 24.5 million in 2018. This reduction was mostly driven by the EUR 8.9 million received in June last year from AstraZeneca. At year-end, our cash available was at EUR 43.3 million. And for 2020, we expect our cash burn to be around EUR 25 million. And we believe that we have sufficient financial visibility to cover our current development plan. With that, let me now turn the call back to Philippe.

Thanks, Jean-Philippe, for the financial update. To conclude before the Q&A session, we have a clear strategy that we are continuing to execute effectively. 2020, we'll continue to provide multiple clinical readouts and we have adequate funding to cover our plans. Based on the progress we are making with TG4001, TG6002 and our 2 technology platforms, myvac and Invir.IO, we are confident in Transgene's future. With that, we will now take your questions.

[Operator Instructions] Our first question has come through from the line of Jean-Jacques Le Fur of Bryan Garnier.

Just a quick question regarding TG4010 and Pexa-Vec to understand if you had any chances in past few weeks or months to have a deeper dive in the results to better understand what happened, especially on the TG4010. If you may -- if you were able to identify, for example, a subpopulation, which may have well responded to the drug? So if you have more idea of what happened on these 2 drug, and especially TG4010?

Thanks, Jean-Jacques. It's Philippe speaking. So as we said in December, we are analyzing the data. We understand more things than we were 2 months ago. Having said that, we said that we will communicate the full data at a upcoming medical conference. I mean, nowadays, it's becoming a bit more difficult to predict which one will take -- will eventually take place. In any case, we will find a way to communicate this data and to take lessons from what we've learned. But clearly, indeed, some of the patients were not of the best possible prognostics and other behavior, which did led to the outcome. In any case, this chapter is closed, in terms of 4010 development. And what we are doing is more to educate us to help us grow the body of data and information and to apply this for the rest of the development of our vaccine portfolio.

We have no more questions at this time. [Operator Instructions] We have no questions at this time. I would turn the call to your hosts.

Okay. Must have been very clear. So just to conclude, again, with our clinical and preclinical product portfolio, we think we are ideally positioned as a key innovator in precision oncology, and we will deliver multiple milestones in the upcoming 12, 18 months. We are confident that by delivering on our strategy, we'll be able to generate significant value and improve options to patients. We have made great progress in our research and development plans. We have made great progress with our 2 existing partners. We have delivered and over-delivered on this collaboration. We will be initiating 4 new trials this year. We'll have 2 clinical readouts this year. And with all of this, we think we will hopefully deliver important inflection points for Transgene in the coming months. So with that, I'd like to conclude the call today, and thank you for your time.

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