Transgene SA (TNG) Earnings Call Transcript & Summary

Hello, and welcome to Transgene 2021 Full Year Results and Business Update. My name is Suzanne, and I'll be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand over to your host, Cécile Razimbaud, Junior Corporate Communications and IR Manager, to begin today's conference. Thank you.

Hello, everyone. I'm Cécile Razimbaud, part of the IR team at Transgene. During our results call today, Hedi Ben Brahim, Chairman and CEO, will provide you with an overview of the important progress we have made during the period; and Jean-Philippe Del, Chief Financial Officer, will provide an update on the financials. After, both Jean-Philippe and Hedi we be available to answer questions. Before I turn the call over to Hedi Ben Brahim, I would like to remind everyone that today's discussion contains forward-looking statements, which are subject to numerous risks and uncertainties. The presentation of the webcast can be accessed via the investor page of our website, www.transgene.fr, and at the press release issued today. If you are listening to this to the webcast via Internet, you will not be to ask questions. If you wish to ask questions, please make sure you join us via one of the conference call numbers that are available in today's press release. With this short introduction, I will now turn the call over to Hedi Ben Brahim.

Thank you, Cécile, and welcome, everyone. Thank you very much for joining today's update call. So today, I would like to start by outlining the significant progress that we have made across our pipeline in 2021, the details of which are set out in this slide. As you can see, we have delivered the first highly promising data with TG4050. We've continued to progress the clinical development of TG4001 and to generate exciting clinical and preclinical data with our novel oncolytic viruses, TG6002 and BT-001. We have been able to deliver this important milestone based on our world-leading technologies, which are designed to allow us to deliver virus class immunotherapies to greatly improve the treatment of patients with solid tumors. I think you are now quite familiar with our portfolio, with our 4 products in clinic, 2 therapeutic vaccines and 2 oncolytic viruses, plus the new partnership we have with AstraZeneca and the first license option and the partnership we disclosed recently with PersonGen, and we'll come back on all these products right away. So I would like to start by reviewing what has been a major step for the development of TG4050 for individualized cancer vaccine, which is based on myvac, our cutting-edge proprietary viral vector vaccine platform. myvac is built on an improved virus delivery system based on the MVA strain that we have been using for our previously developed vaccines. This has been engineered to enhance priming of the immune response against the target neoantigens. The potential of this individualized vaccine has been enhanced via the incorporation of multiple highly novel technology. This includes access to our partner, NEC, their proprietary AI technology as well as our viral engineering technology, which together, allow us to select the best cancer mutation, or neoantigen, and to ensure that they are able to generate the optimal immune response for every patient being treated. The further key component of myvac is a process that we have developed in conjunction with a range of partners, which has allowed us to design and manufacture each individualized vaccine for clinical use within the time frame that is suitable for the patient journey. As with any new technology approach, we are continuing to work on optimizing our myvac production capabilities. As you know, we are currently conducting 2 clinical trials with TG4050, in Europe and U.S., for ovarian cancer and head and neck cancer. We are very grateful for the support of all the physicians and support staff and patients who are participating in these studies. And I would like especially to mention Dr. Matthew Black from the Mayo Clinic in the U.S. who is leading the ovarian cancer study, and Professor Christian Ottensmeier from the Clatterbridge Cancer Care Center in Liverpool, who is leading the head and neck trial. Last November, we achieved a major milestone in the development of the myvac platform and TG4050 when we announced a range of clinical and immune response data on the first 6 patients included in our 2 clinical studies. These data are highly promising and give us great confidence in the potential of TG4050 as an individualized immunotherapy. We saw that TG4050 had a good safety profile with side effects similar to previous observation with the MVA viral vector, mainly mild and transient symptoms, primarily injection site reactions and was able to prime the immune system. Very importantly, we saw the first signs of clinical activities. So I would like to -- now to briefly run through the key data that we already released in more detail. The first patient observed an unprecedented rate of T cell response against a specific tumor habitat that we were able to measure in the 4 patients that we've evaluated. In order to generate TG4050 for each patient, we started -- we start with a sample from the patient obtained through routine medical procedures. From this sample, we are able to identify mutations, both a bit of Class 1 and Class 2. And we used this to design vaccine able to induce multiple T cell response in the patients. In the evaluation of the patients, we saw 6 to 11 responses to the vaccine epitopes that we are able to detect at day 64 following the initiation of the treatment. Responses were observed for all subjects in both indications with a median of 10 positive response for patients. These responses were either amplifications of preexisting responses or de novo responses induced during the vaccination. These 13 responses data are highly encouraging. So we are also very pleased with the immune cell data that we have outlined at the bottom of the slide. These data show how the immune cell population in the patient change, indicating that TG4050 was generating an antitumor response. What we have said was more precisely, the decrease in naive and memory C4 and CD8 T cell over the course of the treatment period. While we observed an increase in the effect of subgroups of CD4 and CD8 cells prime neoantigen in TG4050 at day 64. This maturation and differentiation of C4 and CD8 into effector cells are consistent with the development of an active adaptive response. And in addition, the phenotype of the NK cells suggests ongoing antitumor activity as a result of TG4050. I would now like to briefly summarize the early clinical data we observed in the first 6 patients for -- from the ovarian cancer trial and 2 from the head and neck trial. In the ovarian study, we observed 1 patient who, after an elevation of CA-125, experienced a normalization of his ovarian cancer biomarker when treated with TG4050. This patients saw no clinical progression of cancer during the 9-month follow-up period and until death an unrelated clinic illness. The second patient with radiologic lesions was stable and still under treatment 9 months after the first injection in November last year. Turning to the head and neck study. One patient achieved stable disease and was still under treatment 10 months after the first injection, while the second patient achieved stable disease and was still under treatment 5 months after the first injection. As we have indicated previously, we intend to provide updated clinical data for both studies with TG4050 at the AACR meeting, which is taking place next month. We also intend to release more clinical data during the course of 2022 at other major conferences. The immune and clinical data we are generating from the first 2 clinical trials will be used to identify the most appropriate clinical development path for TG4050, including a Phase II trial, which is expected to start in 2023. Turning to TG4001, which is also an MVA-based therapeutic vaccine, we are going -- progressing our randomized Phase II trial based on very encouraging Phase Ib/II data we released 2 years ago. In this trial, TG4001 is being evaluated in combination with avelumab versus avelumab alone. In patients with HPV16-positive anogenital cancers without liver metastasis. In the Phase Ib part of the study, it was clear that the absence of liver metastasis was key to delivering the best outcomes from the combination of TG4001 and avelumab therapy. I'm pleased with the pace of recruitment into the study, and we should be able to proceed with interim analysis on around 50 patients enrolled on the fourth quarter of 2022. This trial has been designed to demonstrate the contribution of TG4001 plus avelumab versus avelumab alone in a population of patients that mostly did not receive prior therapy with cancer blockers. A positive interim analysis will allow us to further progress the trial and enroll up to a further 100 patients with the aim to demonstrate the power of the combination regimen. We also have also been making extremely good progress with our pipeline of oncolytic viruses based on our industry-leading Invir.IO platform. We believe that this unique platform, we are well placed to generate multiple ideal oncolytic viruses to treat a range of solid tumor and metastasis. We have set out unique features and key benefits of the Invir.IO platform, which we believe makes us a world leader in the oncolytic virus space. So this includes the large viral capacity, up to 25 kilobases, allowing it to carry multiple payloads; tumor-specific replication by design; tumor eradication, including metastasis; and safe and effective when administered via a range of routes, including the intravenous routes. We have been continuing to make excellent progress with our second oncolytic virus, BT-001, from our Invir.IO platform, which we are developing with BioInvent. BT-001 has been designed to combine the powerful activity of BioInvent anti-CTLA-4 antibody, which will deplete Treg and increase the immune capacity of the tumor with the oncolytic virus' ability to stimulate a strong immune response. BT-001 is expected to show a better tolerability profile in humans than an anti-CTLA-4 antibody administered via systemic growth. This outcome has already been seen in the preclinical models. In the last 12 months, we have published a very promising preclinical data in high-impact journals and presented this data at major conferences where they have generated significant interest. This data generated in several tumor models support the dual mode of actions of BT-001 with high intratumoral expression of an immune checkpoint inhibiting antibody targeting CTLA-4 along with a robust antitumor activity. We are currently evaluating BT-001 in a Phase I/IIa study with the support of Merck KGaA and Pfizer, which supplied avelumab. We are looking forward to presenting the first data from this study in Q2 2022, allowing us to move to the next part of the trial. Here, the aim is to rapidly generate data in combination with a checkpoint blocker and identify the most promising tumor indication for this regimen to target. With regard to the intravenous administration, we are pleased that the first clinical data with TG6002, which were presented at AACR and ESMO later showed it could successfully be administered via the intravenous route. We are really confident that developing OVs that can be delivered via the IV route with the major events and to provide an extraordinary opportunity to enlarge the number of cancers that could be treated by this novel class of therapeutics. Importantly, we have demonstrated that even at the highest dose tested, the safety profile of TG6002 when given via the IV route meets our expectations. The dose cohorts also provided evidence that the virus is able to reach the tumor site, replicate within these tumors and express a fully functional transgene and assessed by the detection of 5-FU chemotherapy in the tumor of the patients. These data and the fact that we have been -- that we have seen much higher concentration of chemotherapy in the tumor site than in the blood of past enrolled patients confirmed the delivery capabilities of the virus backbone of TG6002. Outside our own oncolytic virus pipeline, we were pleased to announce in December 2021 that our partner, AstraZeneca, have decided to exercise its first license option for its only OV candidate generated from our collaboration that we signed in 2019. As a result, Transgene received $8 million as an option exercise payment and is eligible receive development, regulatory and sales-based milestone payments as well as a royalty based on future commercial sales. The 2019 collaboration we signed with AstraZeneca covers 5 innovative Invir-IO-based armed oncolytic immunotherapies, which are based on our proprietary backbone, integrating one or more transgene chosen by AstraZeneca. Under the collaboration, AstraZeneca will oversee the clinical development of the OV it's selected to license. We have provided a summary of the attraction of our highly productive Invir.IO platform and the multiple opportunities we have to generate significant shareholder value. Following this overview of this exciting progress we have made with our pipeline of immunotherapies in the last 15 months, I would like to hand you over to Jean-Philippe, who will run you through our 2021 results and our finances.

Thank you, Hedi. 2021 finance now. Our P&L in 2021 was in line with our expectations with higher income from our collaboration and also higher costs as we expanded our investments in clinical trials. Our income from collaboration and licensing agreements increased to EUR 10 million in 2021 from EUR 3 million in 2020, with mainly the income recognized from the collaboration with AstraZeneca over the period amounted to EUR 9.9 million in '21. This increase is largely due to the first license option exercised by AstraZeneca in '21 for EUR 7.1 million for the first oncolytic virus developed by Transgene. In 2021, public funding for research expenses accounted for EUR 7 million in income versus EUR 6.4 million in 2020, and this is mainly due to the retail tax credit. Turning now to costs over the period. Our operating expenses increased to EUR 40.9 million in 2021 from EUR 33.9 million last year due to the acceleration in our clinical development. Net financial income resulted in a net income of EUR 4 million in '21 compared to a net income of EUR 6.8 million in 2020. Finally, the net loss was at EUR 19.5 million in '21 compared with a net cost of EUR 17.2 million in '20. The net loss per share was EUR 0.21 per share in '21, same as in 2020. We have set out here in more -- in more detail the breakdown of our R&D expenses, which increased to EUR 32.9 million in 2021 from EUR 27.3 million in 2020. Within this, costs allocated to R&D amounted to EUR 12.4 million in 2021 compared to EUR 11.5 million in 2020 due to the increase in [ IP ] for the manufacturing activities. Share-based payments amounted to EUR 1.7 million in '20 versus -- in '21, sorry, versus EUR 0.8 million last year with a new preshare plan granted in 2021. External expenses for clinical projects amounted to EUR 6.3 million in '21 compared to EUR 5.4 million in 2020. And this increase is mainly due to the start of new clinical trials, notably with TG4050 and BT-001, and the acceleration of clinical trial expenses for TG4050. The other external expenses, including expenses for research and manufacturing, were at EUR 4.5 million in '21 versus EUR 2.4 million in 2020. And this increase is mainly related to the start of a new process development project in 2021. Lastly, operating expenses, including the cost of operating research and manufacturing laboratories amounted to EUR 5.1 million in '21 compared to EUR 4.6 million in '20. This increase is mainly due to internal manufacturing activities, especially for the individualized vaccine, TG4050. Here we provide more details of our financial position. The cash burn in 2021 was at EUR 10 million, excluding the capital increase, compared with EUR 17 million in 2020. I remind you that we received EUR 17.4 million in September '21 with a partial sale of the Tasly BioPharmaceutical shares. At the end of 2021, we had EUR 49.6 million in cash and cash equivalents, following the completion of a EUR 34.1 million private placement in June '21. In addition, I remind you that we still hold Tasly BioPharmaceutical shares that are valued at EUR 18.9 million at the end of December '21. As a result, we have financial visibility until the end of 2023, a period during which we expect to deliver multiple key milestones across the pipeline. To conclude, on ESG, so we are really proud to share with you our last year's innovation that's reflecting our continuing efforts and commitment in this front as well. With that, we will now take your questions.

[Operator Instructions] The first question comes from the line of Jean-Jacques Le Fur from Bryan Garnier.

Three questions, if I may. The first one is with the arrival of Steven as a business intelligence position. Is it a clear signal that you want to accelerate or to sign significant agreements like some of your competitors did, I think, about Vaccibody, I don't remember the name -- the new name of this company, that Vaccibody signed with Genentech? Or will you prefer smaller agreements, if I may say, like the one you signed with AstraZeneca? It's like this one could be interesting. But on upfront and so on, it was quite smaller than what we saw with Vaccibody. That's my first question. Second question is a financial one, with cash in hand, including Tasly shares of about EUR 68 million, is it fair to assume a linear spending through 2022 and 2023, I mean about EUR 34 million each year? Or would we see a sort of, let's say, EUR 20 million, EUR 25 million this year and an acceleration in 2023 with additional clinical trials? So second question. And my last question is despite, I understand, that you will give update at AACR for TG4050, do you have any idea of what is the status of these 3 patients for which you gave results -- clinical results last November? So do these patients continue to be stable? Are they in good health? So do you have some visibility on how are they today?

Thank you, Jean-Jacques. And I will start with the question 1 and 3 and I will leave 2 -- second to Jean-Philippe. So the first is the arrival of Steven, and we didn't mention Steve is in the room. So I won't say anything bad against him today. No, we are very proud, very happy to have him on board. I mean he's been here 5 weeks already, making a difference and giving us a lot more exposition in the industry and in the U.S., bringing his expertise and energy. So that's great. Yes, I think we have a great portfolio with the products that are today clinical that you know and the other ones that we are developing that are still at preclinical stage and we have not disclosed but are moving forward. Yes, we are interested in making major deals. I don't think we have -- we know we have a rich portfolio and, once again, other products coming so we won't push them until the end of all of them for sure. And of course, significant deals could be possible. You mentioned the AstraZeneca deal, I think was a great deal. Of course, if we did the same today, I hope and would work that we wouldn't have the same financial terms. If we did it 3 years ago, when the platform was much, much younger, much less advanced, that, as proof, for example, the IV route was just an idea, just a promise. Today, we have great data and the signature in itself by AstraZeneca brings a lot of value. So I think it's a great deal. And today, I would be happy to have similar deals but of course with other financial terms. Regarding AACR, so yes, we'll communicate on TG4050. And lastly, if we have the status of these patients, yes, we have. Unfortunately, today, we cannot disclose any more data. We'll -- once again, they will be shared next month in April. But I mean, if I could share my mood, I'm very much looking forward to this data. You know that individualized treatment is complex. So that we have to set the high very -- we have to set the bar very high in terms of results. We are excited. We were excited in November to see the first signs of clinical activities from the first patients. And I'm sure we will have very interesting data to share at AACR on how these patients are doing, are they still fine. In the head and neck patients, how are evolving the patients that don't receive the treatment, that would be a good benchmark. So just please wait just a few more weeks.

Yes. And I'll take your second question, Jean-Jacques. So if you have a look to our P&L, you probably see that we have already increased our operating expenses this year compared to last year. So we were at EUR 34 million of operating expenses, we are in '21 at EUR 40 million. It seems that the trend is really to increase this expenses level. For the future, the difference will not be so important, but we -- for sure, we expect to have a slight increase in operating expenses because all our clinical products are today in clinical developments.

The next question comes from the line of Arsene Guekam from Kepler.

I have only 2 questions, and these questions are linked with the previous asked by Jean-Jacques. Could you update us on your partnership strategy for you. When do you think it will be the good time to license part of your portfolio? This is the first question. And the second one is, when I have a look on your oncolytic virus platform, I think this platform is versatile, so you can engineer a lot of different oncolytic viruses. However, you don't have all the know-how in-house, you need to find some partnership. And my question is, are you going to accelerate the number of partnership in order to increase your portfolio in this field?

Thanks. Great question. So on the partnerships, of course, we have our ideas on when it make the more sense, but also depends on what the partners in front of us are interested in. I think there are some natural windows, like this one with TG4001, having some very important milestones at the end of the year, and with the internal data, there will be a window of opportunity. We will be preparing the next trial at that time. So here will be a question to assess the interest of partnership at that stage or to continue the development of our own. The same for TG4050 now with the first readout. So we are studying the message. We are -- when we are getting more and more patients. On the contrary, for example, BT-001, we are just -- we are still in the monotherapy attending dose. So today, the product is still young. I think it needs a bit more maturation so that we could go out and promote it. Jean, do you want to make any comments or?

Yes. But at the end of the day, the strategy is to license this drug is not to continue the development by your own until the end.

Until the end, for sure, it's too fa,r, not probably not the right time to talk about it, but for example, for TG4050, we will go into a into Phase II, and we will continue to lead that product on TG4050. It's not opposed to copartnership, but still, we will make -- I mean to keep the control. BT-001, of course, we are still once again in the monotherapy Phase I. We can and we will continue to put our product forward, preparing Phase II after that. So we still have much time to create value and more data. TG4001, of course, is much more advanced. We must have a plan on our own to put that product on the next phase that could be -- this could be a registration trial. Once again, let's wait to see the data at the end of the year. We see the excitement that we get outside, the level of [indiscernible] that it can reach, and we should be ready to continue on our own or discuss the partnership, we will -- and then we will assess on the best decision at that time. Regarding the oncolytic virus platform, you're right that it's very versatile. We can put cytokines. We can put monoclonal antibodies and even more crazy things in it, and we can put several of them. We want to develop the best possible product. We are expressing virus. We have also some expertise of some payload that we can put in it, but we know that on some topics, there are partners out there that can do -- can bring us -- take some technology bricks that we don't have. But what we did with BT-001, and I think it's better for us to do a best-in-class with our partners than doing alone a product that will not be at the right level. So the -- in terms of partnership for the oncolytic virus, part of the development will be on our own, 100% with our payload, and new products could be also with partners. And I think we'll continue to do both. Once again, when it makes the most sense, when we think we can have the best product in-house, we do that. When we need a partner, we do that without hesitation. So we have not disclosed -- we have disclosed -- I mean, the other partnership with PersonGen, but it's the same because it's our product combined with their product, but we are already preparing a new partnership where we can encode an outside payload in our oncolytic virus platform.

We have no further questions in the queue. [Operator Instructions] There are no further questions. So I'll hand back to your host to conclude today's conference.

Thank you. Thanks, everybody, for your time and your very stimulating questions. I'm very confident that our proprietary attractive clinical and preclinical pipeline of immunotherapies will help Transgene to deliver multiple high-value milestones in the year to come. These achievements will result in Transgene to become and to be clearly recognized as a key innovator in the immuno-oncology space globally. We also believe that by successfully delivering our programs, our strategy, we will be able to generate significant value for our shareholders and improve options for patients. With this, I would like to conclude today's call. Thank you very much, and goodbye.

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