BioLineRx Ltd. (BLRX) Q2 2016 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the BioLineRx Second Quarter 2016 Conference Call. All participants are 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 a 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 on ahead.

Thank you, Vivian, and good morning, everyone. Thank you for joining us on our second quarter earnings conference call. I’d like to begin by relating to the press release we issued this morning outlining senior management changes at BioLine. As announced, Dr. Kinneret Savitsky is stepping down from the role of CEO, and I’m assuming this position as of October 10, 2016. We are also pleased to announce the promotion of Miss Mali Zeevi to Chief Financial Officer, also effective October 10th . Mali currently serves as BioLineRx’s Senior Director of Finance and Reporting. With these changes we expect a seamless transition in the coming weeks and look forward to communicating and corresponding with you in our new roles. The Board and Management team of BioLineRx would like to take this opportunity to thank Kinneret for her dedicated leadership and solid commitment to the Company in these last 12 years. Kinneret was one of the first employees hired by BioLine. Joining the Company in 2004, as VP of Research and Development and General Manager of BioLine Innovations, a BioLine subsidiary and taking over the CEO role in 2010. During Kinneret’s tenure the Company has recorded a number of significant achievements in development, partnering and strategic collaboration activities. In passing the baton, we look forward to realizing the full potential of BioLine’s pipeline and collaborations as we leverage our core capabilities and global access to cutting edge technologies to deliver best-in-class therapeutics in areas of large unmet clinical need. To that end, we invite you to join us at our annual investor breakfast, where we plan to elaborate on our vision and pipeline programs specifically, BL-8040. Our investor breakfast this year will be held in New York at the Convene Conference Center near Grant Central Station, on September 22, 2016. Now before we turn to our main agenda this morning, I want to remark on our NASDAQ market listing, which of course is extremely important to us. On July 20, we were notified about the NASDAQ stock market that we were not in compliance with the minimum bid price requirement of $1 per share having traded below that price for 30 consecutive business days. This notification is no immediate effect on our continued listing with the NASDAQ capital market and we have 180 calendar days or until January 17, 2017 to regain compliance with the minimum bid price of $1 per share for atleast 10 consecutive business days during this period. We intend to cure the deficiency within the prescribed 180 days with a focus on fundamental business and operational drivers including a number of potential significant value add catalyst, which are expected to occur by the end of this year. Our agenda this morning is to go over our second quarter activities, including a progress report on our clinical development efforts and provide you with an update of our upcoming target milestones. We will also discuss our financial results and then open up the call to Q&A. Joining me on today's call are Dr. Kinneret Savitsky, Chief Executive Officer of BioLine; and Dr. Arnon Aharon, Chief Medical Officer, who will be available towards the end of the call to respond to questions as necessary. On our call today, we will be covering four key areas. First, our BL-8040 program activities including an update on our immuno-oncology collaboration with Merck and our recently announced immuno-oncology collaboration with MD Anderson, second, the early commercial activities of BL-5010, our partnered asset, third BL-7010 as a food supplement and fourth, our active asset discovery and in-licensing activities with Novartis. With regard to our lead BL-8040 program, we believe recent announcements such as the two phase 2a studies at BL-8040 with Merck's KEYTRUDA in pancreatic cancer as well as presentations on BL-8040 at leading medical and scientific conferences validate our lead oncology platform from a clinical and a scientific aspect. We believe this paves the way for additional future collaborations particularly in the high value field of immune oncology. To this end, I’d like to turn the call over to Kinneret to discuss this technology platform.

Thank you Phil and good morning everyone. We are pleased to highlight steady progress made across our BL-8040 program. In late March, we announced successful topline result of BL-8040 in combination with Cytarabine, one of the standard of care chemotherapies in our Phase 2a study in relapse and refractory AML. In this proof of concept study, BL-8040 showed a triple effect on the leukemic cells, robust mobilization, apoptosis and terminal differentiation. As a result of these factors, we reported a 38% complete remission rate in the study compared to historical remission rate in similar patient populations with similar treatment regimens of approximately 20% for Cytarabine on a standalone basis. We now look for it to providing the full result of this study in a presentation at the upcoming SOHO Conference in Houston in September. We are excited by the Phase 2 relapse and refractory AML as a result. We believe they show a clear anti-leukemic effect and give us confidence to continue clinical development of the compound in AML with focus on an earlier treatment line for AML known as consolidation therapy. The purpose of this treatment line is to improve outcome 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. Following current standard consolidation therapy, approximately 40% of AML patients who achieved first complete remission end up relapsed within the first 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 potentially relevant to a reduction or elimination of minimal residual disease. Accordingly, we are hopeful that BL-8040 will be a promising addition to consolidation therapy for AML patients. In August 2015, we initiated our Phase 2b study for this indication, a double blind, placebo-controlled randomized multi center study in up to 194 patients in collaboration with a German Alliance Leukemic Group. We expect to complete this study in 2019 with possible interim results in the first half of 2018. In January, we entered the promising and high value field of immune-oncology in the framework of our collaboration agreement with Merck to conduct a Phase 2a trial of BL-8040 in combination with Merck KEYTRUDA in a difficult to treat pancreatic cancer populations. And in June, we announced the regulatory submission to conduct this Phase 2a study named the COMBAT study, which remains on schedule to begin shortly after recipient of regulatory approval expected in the third quarter of 2016. This collaboration seeks to evaluate the combination of BL-8040, a CXCR4 antagonist with Merck’s anti-PD1 immunotherapy KEYTRUDA. The COMBAT 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 in up to 30 patients with metastatic pancreatic adenocarcinoma. We are hopeful that this study will show us 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 immune-oncology treatments, such as pancreatic cancer. Our BL-8040 has been shown in several clinical and preclinical studies 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 the anti-tumor immune T-cells, BL-8040 has the potential to enable activated T-cells to better reach the tumor cells in the fighting against pancreatic cancer. Earlier this week, we also announced a second Phase 2a collaboration study using BL-8040 with KEYTRUDA in pancreatic cancer. This time the collaboration partner is MD Anderson Cancer Center. The study will be conducted as an investigators contract [ph] study as part of strategic clinical research collaboration between Merck and MD Anderson and to evaluate KEYTRUDA in combination with various treatment and novel drugs. The open-label single center single arm phase 2 study will focus on the mechanism of action by which both drugs might synergize. In addition to accessing clinical response the study will include multiple assessments to evaluate the biological anti tumor effects induced by the combination. BioLine will supply BL-8040 for the study, which is expected to commence later this year. We are very excited that Merck and MD Anderson selected BL-8040 to be tested under their collaboration and this second line study is further validation of the potential of combining KEYTRUDA and BL-8040 for the treatment of metastatic pancreatic cancer currently resistant to immunoncology treatment. We remain active in our efforts to develop additional collaboration for BL-8040. We continue to believe there is an opportunity to leverage BL-8040 in addition of CXCR4 as potentially synergistic with other checkpoint inhibitors and in other indications. BL-8040 is currently being investigated in a Phase 2 study for stem cell mobilization in an allogeneic settings. The open-label study is being conducted in collaboration with Washington University School of Medicine Division of Oncology and Hematology, a premier site for stem-cell transplantation in the U.S. and will enrol upto 24 donor recipients paired. We expect to report partial result by the end of 2016 and topline results by the end of 2017. In summary, our BL-8040 oncology platform takes center stage at BioLine. We believe that we have established compelling signs and industry partnership to bring this technology to market. To that end, we believe we have reached timely and strategic point at BioLine as we pass the baton to Phil Serlin to breach [ph] our scientific and drug development expertise with strategic business and financial leadership. In closing, I would like to thank BioLine’s highly professional management team and employees, our board of directors and our shareholders for their dedication and support. Phil?

Thank you, Kinneret. Now turning to the remainder of our program updates. During the second quarter we’ve been pleased to note our first partnered assets have become commercially available, BL-5010 by Omega Pharma in a number of European countries. This follows receipt of a CE Mark approval in March as a novel OTC solution for the non surgical removal of warts. Omega continues to expect to gradually introduce the product in a number of additional countries over the next six to nine months and beyond that timeframe for additional territories. We do not expect royalty revenues to be significant in 2016 as the product is in the initial launch phase. Overtime, however we expect revenues to gradually increase as the product penetrates and gains market traction. Our current estimate for peak future royalty revenues in the Omega territories from this first indication is in the $2 million to $4 million per year range and it may take a few years to gradually reach this level. In parallel, Omega has also started to develop a second OTC indication for BL-5010. We believe that the size of the market for the second indication will be similar to the first. I would just like to remind everyone on this call that we invested only about $3 million in this program and that we have strong patent protection all the way through 2034. Looking forward, building on our Omega relationship we expect to extend the OTC rights to this product to additional markets such as the U.S. as well as the Rx [ph] indications where we still hold the global rights. Our additional BL-5010 development efforts are also aided by the clinical and manufacturing data accumulated by our Omega Pharma to which we have full access. Now turning to BL-7010, we are increasingly looking to the U.S. market for this asset with plans underway for an efficacy study to BL-7010 as a food supplement for Gluten sensitivity. Since a device pathway is not available in the U.S. we believe this program provides for a significantly shorter time to market than a drug pathway. It also addresses the larger, multibillion dollar market opportunity of Gluten sensitivity. Our current activities include the 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 expect to complete these activities by mid-2017 in order to support partnering discussions for the food supplement market in the U.S. and other relevant territories at that time. We will also continue to evaluate the pathway in Europe for celiac disease and we’ll make a decision about the timing and scope of the next efficacy study for European registration later this year. Regarding our strategic collaboration with Novartis, we are pleased to have recently announced our first project in-licensed under the framework of this collaboration. This first project which was in-licensed from Hadasit, the Technology Transfer Company of Hadassah Medical Organization in Jerusalem is in the exciting area of liver fibrosis treatment and in particular non-alcoholic steatohepatitis or NASH. The drug candidate BL-1210 offers a novel mechanism for controlling liver fibrosis through modulation of the immune system. In this pre-clinical project developed by Professor Rifaat Safadi, head of the liver unit at Hadassah Medical Center. BioLine will address the novel drug target that will modulate the immune system to ultimately reduce the liver fibrogenesis and therefore reduce liver scarring. By limiting the fibrosis process this way, the goal is to potentially control the disease progression. We look forward to providing you with updates on this project. We remain actively engaged in our collaboration with Novartis. We continue to jointly screen and evaluate promising preclinical and clinical therapeutic candidates and expect to in-license additional promising projects under the collaboration in the next few months. Our global access to cutting edge assets and capabilities is solidly in place. We ended the second quarter with around $42 million in cash and believe we have the resources to leverage these opportunities as well as support the development and growth efforts. Let me now discuss our financial results for the second quarter. Turning your attention to the financials for the six months ended June 30, 2016, please note that we will only go into detail on the most important financial statement items and we invite you to review our quarterly 6-K which contains our financials, operating and financial review and press release for additional information Barring the expenses for the six months ended June 30, 2016 were $5.3 million, a decrease of $800,000 or 13.5% compared to $6.1 million for the comparable period in 2015. The decrease resulted primarily from lower expenditures for BL-7010 during the 2016 period as well as the conclusion of one of the clinical trials for BL-8040 in 2015. G&A expenses as well as sales and marketing expenses for the six month periods in both 2016 and 2015 were substantially similar as we continue to keep a tight rein on our fixed costs. Our operating loss for the six months ended June 30, 2016 amounted to $7.6 million compared with an operating loss of $8.5 million in the corresponding period in 2015 and this is mainly due to reduced R&D expenditures in 2016. Our net loss for the six months ended June 30, 2016 amounted to $7.2 million, compared with the net loss of $9.1 million for the corresponding 2015 period. The 2015 period reflects significant non-operating income related to the revaluation of warrants for accounting purposes on our balance sheet, as well as financial income relating to exchange rate changes. Our operating cash burn was $7.4 million for the six months ended June 30, 2016 which was substantially similar to the comparable period in 2015. We ended the June quarter with almost $42 million in cash, cash equivalents and short term bank deposits providing us with the cash runway through at least the end of 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 under our Novartis collaboration. That concludes the formal part of our presentation. Operator, we are now opening up this call to questions.

Thank you. [Operator Instructions] Your first question is from Joe Pantginis of ROTH Capital Partners. Please go ahead.

Hi, guys. Good morning. Thank you for taking the question. First, I'd like to start at the top, first, Phil, congratulations on the movement and management. And Kinneret, thank you very, very much for all the effort that you put in. You know, it's been great having the professional relationship with you. And I wish you the best going forward. With that said, I just curious what the potential impedes [ph] was to these management changes as well as can we anticipate any sort of strategy changes in the company or is it basically steady [Indiscernible]?

I'll let Kinneret answer the questions, as far as the reasons for the change.

Okay. So, I was out there over 12th years in BioLine and almost seven years as the CEO. I saw this was the time for me to make a change. Also from Company's perspective I believe that this is a good for us to make this change than Novartis collaboration is already producing projects, our oncology program BL-8040 shows already clinical data efficacy data in AML and stem cell mobilization. And we have the high profile collaboration in the IO, the Immuno-Oncology space. So, I feel that this is the right time to make this move. So I approach the Board and ask them to find a replacement. And I was very happy to learn that Phil was selected and I wish him lot of success in this new role.

Thanks. I'll just add to that, that we expect the seamless transition in the next few weeks and I don't see, as Kinneret pointed out, we have a lot going on, a lot of positive things going on. I think our most important effort in the next number of months would just to be to execute on our current business plan and meet our targets and meet our milestones.

That's very helpful. Thank you. And best of luck to both of you. I guess, if I could just switch gears to 8040, I just want to make sure with regard to your earlier comments that I hear correctly and that I have the overall profile correct for AML. Kinneret, you mentioned that the focus is going to be obviously on the consolidation study and the opportunity there. So, how should we view the relapsed/refractory setting and even with the upcoming data, how are you viewing it as the benchmark -- I'm sorry, what you viewing as the benchmarks for success in that study, you're looking more for just continued activity at driving that population to help your views towards the consolidation or just your general views on the profile for AML? Thanks.

Arnon, do you want to take that?

Yes. Sure. Thanks Joe for those questions. So, let me start with that the first part addressing the reference and what we see as the Standard of Care that we compare our results to in the relapsed/refractory AML study. So, we used and we've already made it public. The control group from the VALOR study that was done by Sunesis that included around 370 patients in his control ARM. Similar population more or less that were treated with high dose Ara-C, those were are latest scientifically valid type control and they have been performing at around 18% overall response rate similar to what we have seen at a rate of around 38%. That is to stick about what we've seen in clinical trials, but we've also have approached our KOLs and the treating physicians and we learned as we expect that the real life numbers are also around the 20% response at the salvage setting for high dose Ara-C. So, we're quite confident that the results that we're seeing at a range of 40% response are better than what we see with Cytarabine alone if you look at that salvage setting. With that said, we are not only focusing on the response data, we look at into the, our pharmacodynamic by that and that was also published. We have seen that BL-8040 has some properties that other compounds do not have as the Cytarabine are very robust mobilizer. It has [Indiscernible] capabilities, differentiative capabilities so on and so forth. From all those we have learned that potentially the best place for BL-8040 in the AML treatment sequence is not necessarily the salvage setting, but rather the earlier line of consolidation were the micro-environment plays a significant role in the outcome of the patient. We are using the data we have and extrapolating those data into the treatment setting which is now becoming more and more popular with aims to reduce minimal residual disease, by that increasing the relapse-free survival of the patients and endpoint that is becoming more and more attractive and we're in discussions with the regulatory agencies in regards to the ability to use that as an endpoint for registration. That is the rationale in AML of this earlier line treatment shift to explore BL-8040 in what we think might be a more favourable treatment line.

That's very helpful. And I guess, is it possible to extrapolate that the market size for the consolidation setting for 8040 could be potentially increased based on the anticipated approval for the sales?

Absolutely, when you look at the initial treatment line for AML, we are expecting 70% of patients to respond to initial induction treatment, out of those 70% that responded the vast majority will be treated with consolidation treatment that is as opposite to the amount of patients that are requiring re-salvage treatment down line the treatment line.

Okay, great. Thank you very much guys.

Thank you.

Thank you.

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

Hi, guys. This is Jason McCarthy for Jason Kolbert. Phil, congratulations on the change in management. Kinneret, I'm so sorry to see you leave. We've joined interactions together. If we can go back to – I just want to build on what Joe was talking about the Phase 2b study. Can you give us a sense of the speed of enrolment, now that data is coming in 2019 and maybe what delta progression that your survival that you're expecting to see? And trying to give us a sense of what a pivotal study, the size and scope could look like, because if you're moving from relapse/refractory back and focusing on consolidation, I would have imagine that you need at least one pivotal study potential two?

Hi, Jason. That's Arnon. Thanks for the question. So, first in regards to the ongoing study we haven't disclosed the recruitment rate, but what I can tell you now is that it took us a bit of time to get all those close to 30 sites enrolling patient and now we're in full gear. So, we are recruiting quite nicely. In terms of the duration of the study please note that we will require 12 to 18 months of follow-up before those patients recur. So that's the reason why it's prolonged. Although its look that relapse-free survival, it doesn't open label extension that looks at overall survival. However, the follow-up period there is a bit longer than what we did to-date. That's why we are looking at that. We are also based on what you said our building a program for an interim analysis that interim analysis will be an evaluation of the responses at around mid study between the treatment groups and that will give us an initial indication whether we have or not a single in-depth patient population. We also haven't disclosed the delta or the percentage change that we are looking for in between the treatment arms and what the studies powered for. However as a general concept without specific study related number, I can tell you that anywhere above 10% difference in our RFS [ph] in 18 month between any treatment will be a significant result.

Okay, great. And if you're in consolidation in that patient population versus relapse/ refractory, could you use this data for registration if its significance or do you need a pivotal study and maybe the size of a pivotal study that you might need?

So, we are in discussions with the regulatory authorities about that. It obviously will depend on the results and their robustness of their results. Our initial plans although these are not finalized with the regulatory authorities, yet we are – I would say building on another single pivotal study the most.

Okay, great. Thanks for taking the questions. Congratulations again, Phil.

Thank you very much. I appreciate it.

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

Hey, good morning, guys. Thanks for taking the questions. And let me eco everyone's else sentiments to both Phil and Kinneret. Just a quick question on 8040. In the pancreatic setting I remind you that a publication recently in – I want to say, nature medicine, that had to do with different molecule FAK inhibitor that had effect on the tumor trauma in micro-environment. I just wonder if you could remind us what role of 8040 maybe presenting a similar biological effect and if that's what you're looking for as far as the combination studies with [Indiscernible] concern?

Great. Go ahead, Arnon.

Thanks Mike. In essence what we're looking for is quite similar to the study I've mentioned. With the bit more detail and some more mechanistic rationale, what we're looking for here is we know that the tumors that are not responsive for any immuno-oncology type treatment as single agent are suffering from a variety of causes that are driving those lack of responses, one of those being the infiltration and the attraction of the immune cells into the tumor mass [ph]. There's a lot of chemokines that have been shown, they have something in animals through that. One the robust, ones was CXCR4 that based on the CXCR4 and CXCL12, Access is actually dissolving the micro-environment resistance or lack of penetration of T-cells into the tumor mass. We have preclinical data that support this. Others have preclinical data to support it. In our studies both of them, the one that we run separately with Merck and the one that Merck and MD Anderson Cancer Center are running, both will look carefully into the changes in the micro-environment, the infiltration, as well as the correlation of these findings with clinical response. So, we feel that between these two studies if there is in effect there either pharmacodynamic or pharmacodynamic that is accompanied by clinical benefit, both will be flashed in those two studies supporting further developments in the pancreatic arena.

Okay. That's helpful. And then I just, you know, I think, Joe P. ask the question about, future strategy of the company, and I know we've had this discussion in number of times about what is BioLine want to be when it grows up? And I'm just wondering if we're going to see any folks going forward, let's say further on oncology as suppose to various outside of oncology? Thank you.

Yes. So, I mean, obviously as we've mentioned in the past, we're focusing on oncology and immunology, I will say and I'm not trying to avoid the question, but I do think that we mentioned that we're having Investor Breakfast in New York on September 22, and at the breakfast we are intending to set forth our overall strategy for the company. How we would like to -- BioLine to look in five years from now – three to five years from now. And so, I would like to push that off until that time when we will both discuss that at the Investor Breakfast and also put out a press release relating to that.

Okay. Fair enough, Phil. Thanks, appreciate for taking my question.

Thank you.

[Operator Instructions] There are no further questions at this time. Before I ask Mr. Phil Serlin to go ahead with his concluding statement, I would like remind participants that a replay of this call is scheduled to begin two hours after the conference. In the U.S., please call 1-888-326-9310. In Israel, please call 03-925-5904. Internationally, please call 972-3-925-5904. Mr. Serlin, would you like to make your concluding statement?

Yes. I would. I would like to thank all of you for joining us on today’s call. We remain commitment to making steady progress on our existing clinical programs as well as the introduction of promising new programs and assigning of new collaborations. We remain well funded to achieve all of these significant milestones we've mentioned and look forward to keeping you updated as we execute on our plans. Thank you again for joining us and for your continued support. Have a good day.

Thank you. This concludes the BioLineRx second quarter 2016 conference call. Thank you for your participation. You may go ahead and disconnect.