BioLineRx Ltd. (BLRX) Q1 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the BioLineRx First Quarter 2016 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 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, everyone. Thank you for joining us on our first quarter earnings conference call. Our agenda this morning is to go over our first quarter activities and progress made with our clinical development efforts, provide an update on these clinical programs and 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. To begin, in recent months we have provided six updates on our clinical development program, four of which were focused on our lead oncology and hematology platform BL-8040. With regard to our BL-8040 program, we announced successful top line results in our Phase 2a study in relapsed and refractory AML. The signing of our immuno-oncology cost share and collaboration with industry leader Merck for a Phase 2a study in pancreatic cancer and we remain poised to start the study midyear 2016. We initiated the Phase 2 study in allogeneic stem-cell transplantation with partial results expected by the end of 2016. And also we detailed the mechanism of action regarding BL-8040’s anti-cancer effect at the recent American Association for Cancer Research or AACR. We are excited about all these developments as we drive clinical evidence in support of our lead drug program. Kinneret will provide additional details on these during her prepared remarks. Quickly turning to the remainder of our clinical program updates, during the quarter we were pleased to announce confirmation of a medical device classification for BL-7010 in Europe where we continue to evaluate a pathway for celiac disease. Meanwhile, for the U.S. market where the device designation is not available, plans are underway to begin an efficacy study for BL-7010 as a food supplement for gluten sensitivity, which we believe has a significantly shorter time to market than a drug pathway. Activities included development of a suitable product formulation, preparation of documents necessary for GRAS designation submission, and preparations for a clinical trial to support future marketing efforts. We continue to expect to complete these activities by mid-2017 to facilitate future expected partnering discussions for the food supplement market in the U.S. and other relevant territories. Turning to dermatology, our partner Omega Pharma now part of Perrigo recently received CE Mark approval for BL-5010 as a novel OTC solution for the non-surgical removal of benign skin lesions. Omega has just launched the product in Europe with the first indication being warts and verrucas, also known as plantar warts, and they expect to gradually introduce the product in a number of additional countries over the next six to nine months. In parallel, we note that Omega is also committed to leveraging BL-5010 for a second indication and has already started their activities in this direction. Building in our Omega relationship we look forward to the potential expansion of this product to additional markets and to non-OTC indications where we still hold the global rights. Finally, we remain active in our asset evaluations under our Novartis collaboration for the co-development of novel therapeutics originating from Israel. Novartis has already flagged several preclinical projects, which we intend to bring into our pipeline over the next few months, and our fully funded in our operating plan. We continue to jointly screen and evaluate promising preclinical and clinical therapeutic candidates to be developed under this program, and will provide timely updates on candidates when selected. With $45 million in cash on our balance sheet as of the end of the first quarter, we are also well positioned to carry out our strategic and operational plans through the end of 2018. With that, I’ll now turn the call over to Dr. Savitsky.

Thank you, Phil, and good morning to everyone. I’d like to start off by saying that BioLine is off to a solid start in 2016. We have a product which just commenced a commercial launch by our partner Omega in dermatology, a European device confirmation for celiac disease and an ongoing and active partnership with Novartis. In addition and most importantly, we have shown continued validation for our lead drug platform BL-8040 including the collaboration with immuno-oncology market leader Merck in pancreatic cancer as well as steady progress across multiple clinical fronts. In this regard, as mentioned, we have reported successful top line results at the end of Q1 in our Phase 2a study in relapsed and refractory AML and we look forward to presenting the detailed results of the study at an upcoming U.S.-based scientific conference. Let me now take this opportunity to dive a little deeper into the Phase 2a study results just announced. In this study, BL-8040 showed a triple effect on the leukemic cells. First, BL-8040 monotherapy triggered robust mobilization of AML cells from the bone marrow to the peripheral blood, thereby sensitizing these cells to chemotherapy and improving its efficacy. Second, BL-8040 monotherapy showed a three to four-fold increase in the direct apoptotic effect on the leukemic cells in the bone marrow. Last, BL-8040 monotherapy induced leukemia progenitor cells towards differentiation. As a result of these factors, we reported a 38% complete remission rate in the study compared to historical complete remission rate in similar patient populations with similar treatment regimens of approximately 20% for Cytarabine on a standalone basis. We are excited by these results. We believe they show a clear anti-leukemic effect and give us confidence to continue clinical development of the compound in AML. As we have previously reported, we are also investigating BL-8040 in an earlier treatment line for AML known as consolidation therapy. The purpose of this treatment line is to improve outcomes for AML patients who have achieved remission after the standard initial treatment regimen known as induction therapy. The consolidation therapy is aimed to eliminate the minimal residual disease left in the bone marrow after induction therapy that can lead to a relapse. In August 2015, we initiated our Phase 2b study for this indication, a double blind, placebo-controlled study in up to 194 patients. Following current standard consolidation therapy, approximately 40% of AML patients who achieved first complete remission ends up relapsing within one year, and these relapsed patients have a very poor prognosis despite further therapy. The positive data recently reported from our Phase 2 relapsed and refractory AML clinical trial for BL-8040 are very relevant to a reduction or elimination of minimal residual disease, and we believe that this substantially reduces the risk in this large Phase 2b study. Accordingly, we are hopeful that BL-8040 will be a promising addition to consolidation therapy for AML patients. We plan to meet with the regulatory authorities in the next few months in order to get a clear understanding of the development pathway to registration for BL-8040 in the AML space, and we will announce the timing and other details of the next clinical trials for this indication in the second half of this year. As previously reported, we signed an immuno-oncology collaboration agreement with Merck in January to conduct a Phase 2a study in the difficult-to-treat pancreatic cancer population. This study remains on schedule to begin in midyear 2016. This collaboration seeks to evaluate the combination of our BL-8040, CXCR4 antagonist with Merck’s anti-PD1 immunotherapy KEYTRUDA. The planned Phase 2a 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 and their reactivity. 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 treatments, such as pancreatic cancer. Our BL-8040 has been shown in several clinical and preclinical studies including the Phase 2a results in AML recently reported to be a very robust mobilizer of immune cells and to be effective at inducing direct tumor cell death. Recent finding also suggest that CXCR4 antagonist such as BL-8040 may be effective in inducing the infiltration of immune cells including T-cells into the tumor micro-environment. Therefore, when combining with KEYTRUDA, which enables the activation of anti-tumor – immune T-cells, BL-8040 has the potential to enable activated T-cells to various tumor cells in the fight against pancreatic cancer. We believe that Merck’s participation in this study provides significant validation of the large amount of positive clinical data accumulated thus far for BL-8040. I have previously mentioned our active efforts in the field to develop future collaboration for BL-8040. We continue to believe there is an opportunity to build on our Merck collaboration in immuno-oncology by leveraging BL-8040’s inhibition of CXCR4 as potential synergistic with other immune checkpoint inhibitors and in other indications. Another indication for our BL-8040 platform is stem cell mobilization for transplantation, meaning the mobilization of stem cells from the bone marrow to the peripheral blood circulation where they can be harvested for transplantation, supporting bone marrow transplantation. In March, we initiated a Phase 2 trial for allogeneic stem-cell transplantation. This Phase 2 open label study is being conducted in collaboration with the Washington University School of Medicine, Division of Oncology and Hematology and will enroll up to 24 donor/recipient pairs. The protocol for this study was procured following a meeting with the FDA in October of last year. At that meeting, we received several key insights regarding the future development plan through registration for BL-8040 in allogeneic stem-cell transplantation. We are pleased to be collaborating with the Washington University School of Medicine whose bone marrow and stem-cell transplantation program is one of the largest in the world in this Phase 2 trial for our lead oncology platform. As discussed in previous calls, last year we completed a successful Phase 1 safety and efficacy study in healthy volunteers supporting BL-8040 as one day single dose collection regimen for rapidly mobilizing substantial amount of stem cells. This represents a significant improvement upon the current standard of care. There are no approved drugs for stem-cell mobilization to support allogeneic transplant and we are looking forward to the partial results expected by the end of 2016 and top line results expected by the end of 2017. In summary, our BL-8040 drug platform continues to take center stage at BioLine along multiple indications with large unmet medical needs. In parallel with our internal clinical development program, we continue to be out in the field looking for future collaboration and to expand upon our current market opportunities. Our global access to cutting-edge assets and capabilities is solidly in place and we have the resources to leverage these opportunities including a balance sheet that supports our development and growth efforts. With that, let me turn back the call to Phil.

Thank you, Kinneret. I won’t spend too much time discussing our financials on this call. I invite all the listeners on this call to review our quarterly 6-K, which contains our financials, operating and financial review and press release. I will mention that we had a $700,000 decrease in R&D expenses this quarter from $3.2 million in Q1 '15 to $2.5 million in Q1 '16. This decrease reflects the completion or winding down of two clinical trials in 2015 and the first quarter of 2016. We expect R&D expenses to gradually increase in subsequent quarters over the rest of the year as we continue to ramp up on our Phase 2b trial in consolation AML and our Phase 2 trial for allogeneic stem-cell transplantation. We ended the quarter with $45 million in cash, cash equivalents and short-term bank deposits, leaving us with a cash runway through 2018 and allowing us to move forward with our aggressive clinical development strategy for BL-8040, continue to advance clinical development in 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. Ladies and gentlemen, at this time we’ll begin the question-and-answer session. [Operator Instructions]. Your first question is from Jason McCarthy of Maxim. Please go ahead.

Hi, guys. This is Gabrielle Zhou for Dr. McCarthy.

Hello.

Hi, guys. This is Gabrielle Zhou for Dr. McCarthy.

Hi. We hear you. There’s a little bit of some noise on the line but go ahead.

Yes, so congratulations on all the continued progress and having a first commercial product in BL-5010 emerge from the company. So my question is, can you discuss in more detail some of the potential programs BioLine may be trying to identify as part of the Novartis collaboration? Would there be a focus on anything in particular such as immuno-oncology, inflammatory disease or would you be aiming for assets that would be complementary to the existing assets? Thank you.

Okay, so thank you for the question. I’ll start and divide my answer into two parts. We’re in licensing programs either to our own pipeline which is mainly in oncology and immuno-oncology, these type of projects. And for the Novartis collaboration and these projects under this collaboration might be in other fields as well as long as Novartis can contribute their knowhow in this field where we are lacking the knowledge. Right now, I cannot specify exactly which projects are about to enter. As we stated in our press release, some of the programs were already started by Novartis and will probably get into pipeline in the near future.

Okay, great. Thank you. I have a follow-up question. So can you review with us the size and scope of the combination study of BL-8040 and KEYTRUDA in pancreatic cancer? And what will the primary endpoints the study may be?

Thanks, Gabrielle. It’s Arnon. I will answer that. So in terms of the sample size of the study, we can disclose that the study sizes around 30 stage IV pancreatic cancer patients and that the endpoints include evaluation of response to treatment plus multiple pharmacodynamic parameters of both KEYTRUDA and BL-8040 within tumor biopsies and goes without saying that we will follow the overall survival of those patients during that study. So we envision that following this study we will have quite a significant amount of data regarding the activity of the combination.

Okay, great. Thank you so much.

You’re welcome.

Your next question is from Joe Pantginis of ROTH Capital Partners. Please go ahead.

Hi, guys. Good morning. Thanks for taking the question. I wanted to focus on AML first, if you could just sort of give us a little bit of your wishlist before you talked to the regulatory authorities about the path forward? Is it possible you can combine the relapsed/refractory and the consolidation indications by having a potential accelerated approval for relapsed/refractory and then full approval from consolidation?

Well, that’s a great question and let’s start with the wishlist. We would like and we were very interested to learn whether the well-anticipated change in the FDA perspective of primary endpoints for AML has already taken place. We are aware that they’re not willing at this point in time to accept any approvals other than ones based on overall survival. So, obviously, a major discussion with them would be what would be a suitable endpoint for relapsed/refractory AML as well as what will be a suitable primary endpoint for consolidation. We will discuss with them potential sample sizes, study designs and surrogate endpoints that can be used in order to expedite approvals. We are currently looking at both treatment lines with the – we have a study running in consolidation, so we believe that the mechanism is supported there. We will try to learn what the different environment is both in the EU and in the U.S. for that treatment line and potentially we’ll base our decision about what to take forward based on that data.

That’s helpful. Thank you. And if I could just switch quickly over to 7010, with regard to the U.S. efficacy study as a food supplement, is there anything you can share about the potential design? And is it ethical to have a placebo-control in that type of group?

Well, again, a very good question. In essence, when we look for a food supplement we need to switch our hats and look at a hat that targets healthy population that’s not classified as suffering from disease. Gluten sensitivity is not regarded as a medical condition which defines as a disease. It’s not part of the DSM. In essence, those patients suffer discomfort and some disabilities that are based on their exposure to gluten. And in regards to the placebo use, yes, indeed that is a very suitable way to test that entire population.

Thank you very much.

The next question is from Mike King of JMP Securities. Please go ahead.

Good morning, guys. Thanks for taking the questions. A couple of quick ones. Number one, you guys didn’t speak to the recent announcement of the collaboration with the Canadian consortium. So I just wondered if you could talk a little bit about that and what attracted you to it. What your hopes are for the output from that? Is it analogous to your collaboration amongst the Israeli academic institutions?

Hi. This is Phil. We’ve been looking historically – I think we’ve mentioned in the past, historically, we’ve been looking outside of Israel for about 30%, 40% of our pipeline anyway. And so we’ve been speaking with a number of companies and TTOs and we’ve been going to conferences, et cetera, et cetera. We have looked at a number of projects at MaRS. We’re very impressed by the quality of their projects and we’re speaking to them all the time. And we thought it was time and so did they that we put this into a framework agreement. We didn’t give a lot of detail about the agreement. There are some exclusivity portions of it that provide us with a first look at certain things. And so we’re very hopeful to bring in some quality projects in the future from this.

Any disease area of focus, Phil?

No. We’re looking at our pipeline for oncology and immunology mostly. As you know, the Novartis collaboration is an Israeli-based collaboration, so I don’t know how relevant it would be for Novartis, but for us we’re obviously looking at oncology and immunology.

Okay, terrific. And then just maybe longer term, bigger picture question, as the different programs internally and I guess as well externally continue to develop and evolve, do you foresee a point in time which BioLine changes its corporate structure to do sort of affiliate companies or spin-off companies, et cetera?

Well, this is something that we’re debating from time to time. We do see this; having everything in the same company has lot of advantages. Since we accumulate data and we can actually use the data and the knowhow in other projects, for example, the preclinical group was doing so many toxicology studies on different projects and this knowhow is a big advantage of having everything in the same place, the same company which can contribute to the different projects. If we will separate these projects into different companies, it will be harder to actually use this knowhow and also there will be a less incentive to terminate projects. If we see that a project is not successful, we would like to be able to terminate this as soon as possible, because drug development is an expensive business.

Okay, all right. Thank you very much.

Thank you, Mike.

[Operator Instructions]. There are no further questions at this time. Before I turn to Kinneret Savitsky to go ahead with her concluding statement, I would like to end by saying that a replay of this call is scheduled to begin two hours after the conference. In the U.S., please call 1-888-295-2634. 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 off to a solid start to 2016 with steady progress on our existing clinical program as well as the initiation of new collaborations and new clinical studies that expand upon our scope of indications. We are well funded to achieve all the significant milestones. We have mentioned and look forward to entering 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 first quarter 2016 conference call. Thank you for your participation. You may go ahead and disconnect.