BioLineRx Ltd. (BLRX) Q4 2015 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the BioLineRx Fourth Quarter and Yearend 2015 Conference Call. All participants are at present in listen-only mode. Following the management's formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] I would now hand the call over to Ms. Vivian Cervantes of PCG Advisory to read the Safe Harbor statement. Vivian, please go ahead.

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are indeed forward-looking statements. The words anticipate, believes, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect BioLineRx's business, financial condition and other operating results. These include, but are not limited to the risk factors and other qualifications contained in BioLineRx's annual report on Form 20-F, quarterly reports filed in our 6-K and other reports filed by BioLineRx with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. BioLineRx expressly disclaims any intent or obligation to update these forward-looking statements. At this time, it is now my pleasure to turn the call over to Mr. Phil Serlin, Chief Financial and Operating Officer of BioLineRx. Phil, please go ahead.

Thank you Vivian and good morning everybody. Thank you for joining us on our fourth quarter earnings conference call. This morning we will review our accomplishments during 2015 and in recent months, which reflects significant progress on our existing programs, both from a development and from a regulatory perspective, as well as our entrance into the exciting area of immuno-oncology. We will also provide you with an update on clinical programs and our upcoming milestones, discuss our financial results and then open up the call to Q&A. Joining me in today's discussions are Dr. Kinneret Savitsky, CEO of BioLine, as well as Dr. Arnon Aharon, Chief Medical Officer, who will be available towards the end of the call to respond to questions on our clinical studies as necessary. During today's call, we will focus our clinical discussions on our three main product candidates, particularly on BL-8040. I will review BL-7010 and BL-5010, while Kinneret during the prepared remarks will focus on our BL-8040 lead program, including a review of our catalyst for 2016 and 2017. Turning now to BL-7010, our clinical program for celiac disease and the gluten sensitivity market, we recently announced receipt from a notified body Europe of its designation under the medical device pathway in Europe. Over the past year we have invested considerable efforts in examining the potential BL-7010 as a food supplement in order to address the multibillion dollar market for gluten sensitivity, which we believe, has a significantly shorter time to market than drug or device pathways, especially in the U.S. market. We are now conducting a number of activities towards development of BL-7010 as a food supplement, including the development of a suitable product formulation, preparation of the document necessary for a graph designation submission, and preparations for a relatively small clinical trial to support future marketing efforts. We expect to complete these activities by mid-2017, in order to support future expected partnering discussions for the food supplement market in the U.S. and other relevant territories. In parallel, we are continuing to evaluate our pathway to celiac disease in Europe, including a decision on the timing and scope of the next efficacy study in the coming months. In this respect, we note that over the last few months there have been several developments in the biopharma industry and the field of celiac disease, that we are reviewing in connection with our celiac development plans. For example, Innovate Biopharmaceuticals Inc. has recently licensed to Alba Therapeutics assets for the treatment of celiac disease and Roche recently announced that it is in the midst of conducting of Phase 1 study in celiac patients. Regarding BL-5010, our partner, Omega Pharma, now part of Perrigo, is swiftly progressing in the development of this product as a novel OTC solution for the non-surgical removal of benign skin lesions. During the third quarter, Omega Pharma made BL-5010 submission for CE Mark registration and has completed the initial manufacturing process automation to support the product's commercial launch, expected in Europe this year. We also look forward to the potential expansion of this product to other markets and to non-OTC indications, for which we still hold the rights. As part of the continued evaluation of our portfolio assets, since the beginning of 2015 we have terminated one clinical and three preclinical stage therapeutic candidates; BL-7040 for the treatment of inflammatory bowel disease of IBD, BL-8030 for the treatment of Hepatitis-C, BL-1110 for the treatment of neuropathic pain and BL-9010 for severe allergies and asthma. We are currently in the midst of preparing for new programs to enter our therapeutic pipeline that suit our focus on oncology and immunology, as well as programs under the Novartis collaboration. In this regard we fully intend to source and in-license several new clinical and preclinical assets during 2016. We are excited about our prospects ahead. We continue to believe that BioLine's true value remains in our ability to advance our current pipeline to meaningful inflection points and our proven capability to identify, in-license and advance new promising assets to fuel our continued growth. I’ll now turn the call over to Dr. Savitsky, who will discuss our lead program, BL-8040 in detail.

Thank you, Phil and good morning everyone. I will dedicate most of my prepared remarks to BL-8040, our unique oncology platform, including some exciting milestones in the coming months, and our recent disclosed entry with this platform into the new-norm quality space. To begin, we are very excited to partner with Merck in the field of cancer immunotherapy. This collaboration allows us not only to enter the exciting field of immuno-oncology through a partnership with a pioneer and leading player, but also to evaluate the potential of our lead drug candidate, BL-8040 in the difficult to treat pancreatic cancer population. Our agreement with Merck, fixed to evaluate the combination of our BL-8040 CXCR4 antagonist with Merck Anti-PD1 immunotherapy KEYTRUDA in a Phase 2 study of the challenging metastatic pancreatic cancer patient population. The planned Phase 2 study, which is jointly designed will be an open label multi-centered single arm trial, designed to evaluate the clinical response, safety and tolerability of the combination of BL-8040 and KEYTRUDA, as well as multiple pharmacodynamic parameters, including the ability to improve infiltration of T-cells into the tumor. We are hopeful that this study will show that the combination of BL-8040 with KEYTRUDA has the potential to expand the benefit of immunotherapy to cancer types that are currently resistant to immuno-oncology treatment, such as pancreatic cancer. Our BL-8040 has been shown in several clinical and pre-clinical trials to be very robust mobilizer of immune cells, and to be effective at inducing direct tumor cell space [ph]. Recent findings also suggest that CXCR4 antagonists such as BL-8040 may be effective in inducing the integration of antitumor T-cells into the tumor micro-environment. Therefore, when combined with KEYTRUDA, we can enable the activation of antitumoral immune T-cells. BL-8040 has the potential to enable T-cells to better reach tumor cells in the fight against pancreatic cancer. Building on this, we continue to evaluate BL-8040’s potential for additional collaboration programs in immuno-oncology, further expanding upon our unique oncology platform. As previously noted, CXCR4 antagonist has been identified as potentially synergistic with immune checkpoint inhibitors. As such, we believe BL-8040’s best in class position make it a great candidate for such collaboration. Turning to BL-8040’s other indications, I will begin with our most advanced program, our ongoing Phase 2 clinical study of BL-8040 for the treatment, relapse or refractory AML, where we remain on track to reporting top line results of the full study by the end of this month. Recent data for the escalating stake of this study presented at the Annual ASH Conference in December of 2015 continue to show highly encouraging results. BL-8040 is a single agent and in combination with cytarabine, was found in one cycle of treatment to be safe and well tolerated as all those have tested, as to and including the highest dose level of 1.5 mg/kg, with no major adverse event. The data showed BL-8040’s strong antileukemic activity, as reflected in the clinical response rate of 38%, consistent demonstration of robust mobilization of cancer cells from the bone marrow, and significant induction of cancer cell death. Following only two days of monotherapy, BL-8040 triggered an average of 44 mobilization of immature AML progenitor cells from the bone marrow to the peripheral blood, thereby making these cells more sensitive to the cytarabine, and improving its efficacy. BL-8040 also showed the direct and significant cytotoxic effects on the immature leukemic progenitor cells in the bone marrow following the two days of monotherapy. Finally, BL-8040 induced leukemic progenitor cells store [ph] differentiation as evidenced by a 58% medium decrease in the number of bone marrow leukemic progenitor cells, along with a threefold increase in differentiated granular size in the bone marrow biopsy conducted on day three of the treatment cycle prior to the cytaribine treatment, as compared to the biopsy performed at baseline. Even the top line results expected later this month confirm the data seen from the dose escalation stage of the trial. We plan to schedule meetings with the regulatory agents in order to decide on our next steps for this indication. Building on this, we are on track in developing BL-8040 for a number of other oncology and immunological indication. This includes our second AML treatment plan. This will examine BL-8040 as part of the second stage treatment, known as consolidation therapy to improve outcome for AML patients who have achieved remissions after the standard initial treatment regimen, known as induction therapy. The consolidation therapy is aimed to eliminating the minimal residual disease left in the bone marrow after induction therapy that can lead to a relapse. In August, we began a large Phase 2b trial, initiating our Phase 2b study in consolidation AML. This is a double blind placebo-controlled study in up to 194 patients. Approximately, 40% of AML patients who achieved first complete remission ends up relapsing within one year, despite the current standard consolidation therapy. And this relapsation has a very poor prognosis, despite further therapy. We are hopeful that our BL-8040 platform will help reduce or eliminate the minimal residual disease due to its dual mechanism of action. Based on positive results from our ongoing Phase 2 relapsed refractory AML clinical study, which showed substantial mobilization of AML cancer cells from the bone marrow to the peripheral blood, as well as induction of apoptosis of AML cells, we believe BL-8040 will be a promising addition to consolidation therapy for AML patients. A third indication for our BL-8040 platform is for the mobilization of stem cell from the bone marrow to the peripheral blood circulation, where they can be harvested for a transplant, supporting bone marrow transplantation and the treatment of hematological indication. In March we reported positive safety and efficacy results from a Phase 1 study, in this indication with the full study finding presented at the EHA conference in June. The study showed that BL-8040 was safe and well-tolerated at a dose of up to 1 mg/kg and induced dramatic mobilization of hematopoietic stem and progenitor cells at all doses tested. The cells collected from the healthy volunteers were also assessed for viability and quality in vitro and in vivo. Importantly, we show that collection of CD34 plus cells was accompanied by mobilization and collection of colony-forming cells as well as T, B and NK cells. These recovered cells were of exceptional quality, and showed excellent engraftment in radiated mice, followed by a rapid reconstitution of normal hematopoiesis. As discussed previously, this data supports the use of BL-8040 as a single-agent, single-injection, one-day regimen for the collection of stem cells. This is a major improvement over currently available procedures, which are lengthier and require multiple administration and multiple time-consuming apheresis sessions. Moreover, we see an improvement in composition of the collective cells, suggesting the potential of the better quality graft that may improve stem cell transplantation outcome. Following a productive meeting with the FDA in October, we announced the filing of regulatory submission required to commence a Phase 2 trial for the use of BL-8040 in stem cell mobilization in December. We are looking forward to starting the Phase 2 study in the next few weeks. Our fourth BL-8040 indication is for a combination treatment, with a standard-of-care immunosuppressants for the two bone marrow failure condition, hMDS and aplastic anemia. One type of treatment for this bone marrow failure condition consists of immunosuppressive therapies. However, a large fraction of patients do not respond to this therapy. Preclinical data suggest this BL-8040 promote stem cell proliferation and differentiation, thereby allowing recovery of hematopoiesis. In November 2015, we announced the start of the Phase 1, 2 trial for this indication, in up to 25 patients, in collaboration with MD Anderson. Treatment for these two bone marrow failure conditions represents a significant unmet medical need, and we hope that BL-8040 as part of a novel treatment regimen will significantly improve bone marrow cellularity and peripheral blood count. We continue to expect partial results from this study by the end of 2016. Finally, we continue on our plan for an additional Phase 2 study in AML patients with FLT3-ITD-mutation. AML patients with a FLT3-ITD-mutation exhibit full response and high relapse rate to chemotherapy, and only transient response rate to FLT3 inhibitors. Preclinical data showed that by inhibiting the CXCR4 receptor, BL-8040 enhanced the effects of FLT3 inhibition in killing FLT3 mutation leukemic cells. The study is aimed to improving the response of FLT3-ITD-mutated AML patients through treatment with a FLT3 inhibitor. We plan to commence this trial, in collaboration with MD Anderson in the second half of 2016. We are focused on moving forward with our aggressive clinical development strategy for BL-8040. The multiple indications provide us with an ability to pursue several high potential unmet medical needs, while reducing the overall development risk for our in novel platform. Further, our entry into immuno-oncology through our collaboration with Merck, not only validates our technology platform, but also extends upon our market opportunities to support and guide us in the expensive development program for BL-8040 across multiple indications, as well as in the development and commercialization affords for additional future oncology projects. We have recently established an Oncology Scientific Advisory Board, consisting of globally recognized clinicians and transitional scientist in oncology. With the knowledge and experience of this impressive group of key opinion leaders, we look forward to realizing the potential of this promising oncology platform, and to reaching several meaningful development milestones during 2016. During 2015, we continue to invest significant effort in our new strategic collaboration with Novartis for the core development of novel clinical stage therapeutics originating from Israel. We continue to jointly screen and evaluate promising therapeutic candidates to be developed under the collaboration, and will provide timely updates on the therapeutic candidates when selected. We also continue to evaluate other potential collaboration arrangement to maximize the value of our current pipeline access, as well as talking to potential partners in order to monetize our non-core program. Before I turn the call back to Phil for the financial overview, I would like to welcome Dr. Merril Gersten, who is joining our Senior Management team. Yesterday we announced Merril's appointment as our new Chief Scientific Officer. Merril brings with her many years of leadership in both academia and the pharma industry in the U.S., and we view her relocation to Israel to join our company as a huge vote of confidence in our pipeline and capabilities. I am confident that she will bring great value to BioLine, and we are all looking forward to begin working with her. And with that, let me now turn back the call to Phil.

Thank you, Kinneret. Let me please turn your attention to the financials for the 12 months ended December 31, 2015. I will only go into detail on the most important financial statement items. Research and development expenses for the year ended December 31, 2015 were $11.5 million, a decrease of $400,000 or 3.4%, compared to $11.9 million for the year ended December 31, 2014. The decrease is primarily due to reduced spending on BL-7010 and various other projects, partially offset by increased spending on BL-8040. Sales and marketing expenses for the year ended December 31, 2015 were $1.0 million, a decrease of $600,000 or 37.5%, compared to $1.6 million to the year ended December 31, 2014. The decrease was primarily due to lower professional fees, related to business development activities carried out in 2014, including professional services related to the collaboration agreement with Novartis and the out licensing agreement with Omega Pharma regarding BL-5010. G&A expenses for the year ended December 31, 2015 were $3.7 million, largely flat with 2014, as we continue to rein in our fixed cost. Our operating loss for the year ended December 31, 2015 amounted to $16.2 million, a decrease of $1 million compared to the operating loss of $17.2 million in 2014, primarily driven by an overall decrease in research and development and sales and marketing expenses. Our net loss for the year ended December 31, 2015 amounted to $14.4 million, compared with a net loss of $11.0 million for the corresponding 2014 period. The 2014 period reflects significant non-operating income related to the reevaluation of warrants for accounting purposes on our balance sheet, as well as financial income relating to exchange rate changes. Our operating cash burn was $14.2 million for the year ended December 31, 2015, compared to $15.8 million in 2014. The $1.6 million decrease in net cash used in operating activities during the 2015 period primarily reflects the reduction in our operating loss. We ended the year with almost $48 million in cash, cash equivalents and short-term bank deposits, leaving us with a cash runway of around three years and allowing us to move forward with our aggressive clinical development strategy for BL-8040, continue to advance clinical development to BL-7010, and efficiently pursue the multiple opportunities we hope to realize under our Novartis collaboration. That concludes the formal part of our presentation. Operator, we are now opening up the call to questions. Thank you.

Thank you. Ladies and gentlemen at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Joe Pantginis from Roth Capital Markets. Please go ahead.

Maybe just two quick questions, or not necessarily quick, but on 8040. So can you just remind us logistically how many patients are we looking for with regard to this, and the months' update for the relapse refractory study. And then I guess more towards forward-looking views, you said you were going to look to engage the regulatory authorities following this data. Can you at least share with us maybe some of your initial goals, pending the feedback of the type of regulatory path you can look forward, because obviously this is a major unmet medical need.

I'll answer that. In terms of the number of patients that we're going to totally present the data, we're sticking at around 50 patients, depending on the amount of this but that's the ball park figure. And in terms of our future discussions with the agency or other regulatory agencies about the development path, certainly that will center around the acceptance of any type of end points for registration that might not be overall survival or what -- or to what limit of follow up will we need to follow the patients. These are a crucial element in the design of a Phase 3 and that would be what we would like to initially discuss with the agencies. Does that answer the question?

It does. And I guess the second question and then I'll jump back in the queue is, maybe could you add a little more detail, because you have a very, very intriguing type of study with regards to -- with your KEYTRUDA study. And I also like that you are looking for additional collaboration as well in immuno-oncology. So maybe can you focus a little more on the mechanism of action that 8040 is inducing with regard to changing the tumor micro environment to allow the additional infiltration of seals?

Sure, absolutely. So I'll start with the second part of your question, and that is the mechanism of action. There have been publications by us and there is about the tumor micro environment and the lacks of infiltration of seals into the tumor that is mainly presented by the micro environment being immune-suppressive rather than immuno-permissive. We see that a lot of the seals cannot infiltrate because they are stuck at the periphery of the tumor, based on the SDF-1 CXCR4 connection. It is our belief that if we will be able to block that, the infiltration will be dramatically more efficient. We have preclinical data supporting that. In terms of the clinical design, again correlated with the mechanism of action, we will start the study with I think an agent period, followed by a combination and treatment cycle and what we believe to be a strong validation of the mechanism of action will be if we will be able to show infiltration as the single agent type, or first step of the study, and then that clinical effect going onwards with the combination in treatment cycle.

Just bear that we are not the only one with a CXCR4 antagonist, who also go into the oncology space or entering the oncology space. BMS and also Lilly announced in the past that they are getting into the field of immuno-oncology. So there is a solid ground for a CXCR4 antagonist involved in the immuno-oncology space.

The next question is from Jason Kolbert of Maxim Group. Please go ahead.

Hi, guys. This is Jason McCarthy. Jason Kolbert can have a question behind mine. And I'm really interested in your combination therapy with the PD-1 and pancreatic cancer with 8040, and I'm curious to hear your thoughts on how standard of care chemotherapy is going to impact your study of the utility of 8040, in particular for pancreatic cancer, which is stubbornly hard and hard to get piece of into. You need something like Gemcitabine to soften that up but these chemotherapy agents influence the immune response in multiple different ways depending on the agent you pick and I'm curious, how you are going to factor that into study design?

Yes, that's a great question Jason. So to start with -- we are not combining at this initial point, the chemotherapeutic agents with our combinations. So we start with BL-8040, the immune checkpoint only type initial phase. Your question about the role of a chemotherapeutic agent, that has a lot to do with antigen presentation, breakage of tumor cells, increasing the immune system's viability of factures of cells, so on and so forth. We are keeping that in mind. However, for this early proof of concept, in order for that to be relatively clean, we are basing our efforts on BL-8040 must be through that -- alone at this stage.

And just, there is a bit in other studies of Anti-PD1 or any other checkpoints, there were not significant effects in solid tumors such as in the case of pancreatic cancer.

Maybe I’ll add another sentence. What we see is that when we look at the immune checkpoint in addition in any kind of agent used, experience in pancreatic cancer, there is very little to none response. So, by that I think that leaves room for us to show any kind of improvement by that sort of legging out the role of CXCR4 in the combination. It will try to go three arm, that’s what I tried to say earlier, that as you said the definition of what drives the effect will be hard to determine. So if we’ll be able to show in early stage that the two agents combined have a clinical benefit, which is by far more than what immune checkpoint inhibitors have removed, that will single out that the merit for the combination is there.

And also just follow up, with the selection of [indiscernible], I would imagine that your patients are going to late stage and they’re going to be on standard of care chemotherapy. If you are driving -- BL-8040 even alone drives T-cells into a pancreatic tumor. I guess my question is, is the selection of the agent, the chemotherapy agent going to influence that those cells will be functional?

Correct, and again we’re testing based on a preclinical level in terms of which are the immune or the chemotherapeutic agents that are best synergizing with the effect that we have with the immune checkpoint inhibition. However, when we’ll get to the combination, I guess clinically that it will be very hard to stay away from the [indiscernible] type compound.

This is Jason Kolbert. One of the things that we don’t talk enough about on these calls is where you are with Novartis, and what the pipeline and the news flow and the next possible candidates that we might see emerging out of that collaboration. Can you take a minute and just remind me on what type of things you’re working on and what the news flow associated with Novartis might look like?

So, I’ll just say that we cannot disclose too much about the collaboration. I’ll say that in general this collaboration started at the first-half of 2015. Since then we have the multiple JDC’s [ph] meetings together with Novartis in which we review a bunch of compounds and projects. These projects are getting into the diligence by both parties, by BioLine and by Novartis and it's a long process. Having said that, we expect probably this year to see the first program getting into the pipeline.

[Operator Instructions] The next question is from Joseph Pantginis of ROTH Capital Partners. Please go ahead.

I just wanted to focus a little bit on 7010, specifically the food supplement route. So what are you looking at from a potential formulation standpoint? Would it be a pill that you would take along with food that contained gluten? Is it a -- basically, what’s the path forward here that you might be looking at? And do you have any data to support taking it with varying levels of food? Thanks.

In terms of the formulation, as we intend for the food route, it will be probably a pill, although we do investigate the option of that being a sachet, for people that prefer something that comes with a drink rather than to take a pill. Obviously that will be taken with food, and we have a lot of preclinical and clinical data supporting the dosages that needs to be taken with food in order to be able to capture the glycine that are dissolved from the gluten after each one of the meals. So we’re quite confident that we can find the right dose, and the dose form is a bit flexible but it's going to be orally taken, either a pill or a sachet with the food.

There are no further questions at this time. Before I turn to Kinneret Savitsky to go ahead with her concluding statement, I would like end by saying that a replay of this call is scheduled to begin two hours after the conference call. In the U.S., please call 1-888-254-7270. In Israel, please call 03-925-5945. Internationally, please call 972-3-925-5945. Dr. Savitsky, would you like to make your concluding statement?

Yes. I would like to thank all of you for joining us on today’s call. We are pleased with our accomplishments since the beginning of 2015, including our continuous steady progress on our existing clinical program, as well as the initiation of new collaborations and new trials that extend upon our [indiscernible] indication. We remain well capitalized to achieve all of the significant milestones we have discussed today, and look forward to entering in this exciting period for BioLine and our shareholders. Thank you again for joining us, and for your continued support. Good bye.

Thank you. This concludes the BioLineRx fourth quarter 2015 conference call. Thank you for your participation. You may go ahead and disconnect.