Immunic, Inc. (IMUX) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen and welcome to the Vital Therapies’ Third Quarter 2015 Financial Results Call. At this time, all participants on the phone lines have been placed on mute. Later we will conduct a question-and-answer session. [Operator Instructions] Please do note, today’s program is being recorded. I would like now introduce your host Al Kildani, Vice President of Investor Relations and Business Development. Please go ahead.

Thank you, [Rowan]. Good afternoon. My name is Al Kildani, Vice President of Investor Relations and Business Development. Thank you for joining Vital Therapies' management team on our conference call to discuss the Company's operations, update and earnings for the third quarter ended September 30, 2015. On today's call are several members of Vital Therapies' senior management team, including Dr. Terry Winters, Co-Chairman and Chief Executive Officer; Mike Swanson, Chief Financial Officer; Dr. Duane Nash, Executive Vice President and Chief Business Officer; Rob Ashley, Executive Vice President and Chief Technical Officer; and Dr. Jan Stange, Chief Medical Officer. Before we begin, we'd like to remind you that some of the statements we make today will include forward-looking statements, such as statements related to the timing and conduct of our clinical trial programs, future clinical trial results, the timing of certain development goals, including regulatory filing, our projected cash runway and plans and objectives of management for future operations. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual events or results to differ materially, including the risk that our clinical trials program is delayed or ultimately unsuccessful. Please note that these forward-looking statements reflect our management's views only as of today's date and we disclaim any obligations, update any forward-looking statements expect as required by law. Please refer to our SEC filings for a more detailed discussion of the risk factors that could cause actual events or results to differ materially. Vital Therapies property makes available on its website reports that the Company files or furnishes with the SEC, corporate governance information, press releases and other posters and presentations. A replay of this call will be available on our website later today. I would now like to introduce Dr. Terry Winters, Vital Therapies' Co-Chairman and CEO.

Thank you, Al. Good afternoon everyone and welcome to our third quarter 2015 update call. First, a brief summary of the company for those of you who may be new to our story. We're developing ELAD, an extracorporeal, human allogeneic cellular therapy which could improve survival in liver failure. ELAD is a phase three clinical trial stage and has orphan drug designation in the United States and the EU. Assuming successful clinical results in the future, we plan to seek regulatory approval and commercialize ELAD directly in most major markets of the world. The agenda for today's call will be to review key developments, including; number one, actions taken since the announcement of results from VTI-208 Phase III clinical trial and alcohol-induced liver decomposition or AILD subjects. Two, our plans to move forward with the purpose new Phase III trial [to be named] VTL-308, including a regulatory update and anticipated milestones. Three our upcoming late break of presentation of the VTI-208 results at the American Association for the Study of Liver Disease or ASSLD meeting later this month as well as a poster presentation expanding on our work regarding ELAD’s potential mechanism of action. Four measures taken to strengthen our financial condition including the recent financing and finally the summary of our financial results for the third quarter ended September 30, 2015. After this, we will open up the call for Q&A. I would like to begin with the summary of our activities since August 21 announcement of the topline results of our VTI-208 Phase III clinical trial, which failed to achieve its primary or secondary endpoints. Since then we have conducted an extensive review of the VTI-208 data and it appears that reduced ELAD tolerability in subjects with high Model of End-Stage Liver Disease, or MELD, scores, exacerbated in older subjects, contributed to the overall failure of the study. In particular, those subjects with kidney dysfunction and serious blood coagulation problems, both components of MELD score, had poorer outcomes. We therefore, focused our resources on analyzing the VTI-208, data to determine the optimal limits for a new Phase III trial based on age, MELD score, and the three components of MELD score, that measure kidney, blood coagulation and liver functions. Our recent news release describe the post-hoc subset analysis of 60 VTI-208 subjects with these optical limits that would have shown statistical significance in the VTI-208 trial has subset being pre-specified. We intend to use the parameters of this subset as the basis of a proposed new Phase III trial to record VTL-308. We have best data guide us to this population whose key limits are age, less than 50 years, MELD score less than 30, creatinine less than 1.3 mg/dL, international normalization ratio or INR less than or equal to 2.5 and bilirubin greater than or equal to 16 mg/dL. As previously reported here are several functions for this 60 subject post-hoc subset. The overall survival through at least 91 days on a Kaplan-Meier basis showed a p-value of less than 0.01 and a hazard ratio of 0.28 to see a copy of the Kaplan-Meier curve please refer to our October 16 news release. 91 day survival in this subset was 93% for the ELAD group versus 61% for those treated only with standard-of-care. The p-value was 0.01 on a Pearson's Chi-squared basis. And the survival benefit appeared durable with survival at the end of 180 days of 89% for the ELAD group versus 48% in those treated only with standard-of-care. Again on a Pearson's Chi-squared basis the p-value was less than 0.01. Although the results of this post-hoc analysis showed statistical significance, it was not pre-specified and there is no guarantee that the results of the planned VTL-308 Phase III trial will replicate the results of this subset. We are continuing our analyses of the VTI-208 data particularly with respect to further defining ELAD’s mechanism, of action; we look forward to sharing any additional data with you when it becomes available. We are also pleased to note that apart from the reduced tolerability to ELAD observed in subjects with kidney and blood clotting dysfunction, we saw nothing in the data that gives us any additional concerns about the safety of ELAD in the planned VTL-308 population. The adverse event profile was comparable to that observed in previous ELAD studies in similar populations. Turning to regulatory matters, we submitted a Type C briefing document to the FDA that included a draft VTL-308 trial protocol based on the target population described earlier. We expect to receive feedback from the FDA by year-end. We also expect to be allowed to proceed with the VTL-308 trial, although there is a possibility that FDA could have substantive comments on our trial design and statistical plan that could result in changes to the trial design and the anticipated timeline. In Europe, we expect to submit the first two clinical trial authorizations or CTAs soon to the authorities in the U.K. and in Ireland and we will be starting the submissions to the ethics committees of the clinical trial sites soon afterwards. Germany and Spain CTAs will follow later. We are also planning to request protocol assistance from the European Medicines Agency or EMA. Europe has a centralized product licensure system, but a country-by-country clinical trial authorization system. VTL-308 is designed to enroll approximately 150 patients. Assuming a hazard ratio of 0.4 and outcome is consistent with the VTL-308 subset we've identified. A trial of this size would be powered to greater than 95%. 40 clinical sites in the United States, the United Kingdom, Ireland, Germany and Spain are being targeted. Most of which will be sites with the high enrollers in the VTI-208 trial. We have begun the process of opening sites and anticipate enrolling our first VTL-308 subject in the first half of 2016 assuming the FDA does not have comments on our trial design and statistical plan that result in a change to our anticipated timeline. VTI-208 was an important study in the area of liver failure so we are delighted that on November 16 the results will be presented in the late breaking session at the at The Liver Meeting, the annual meeting of the AASLD to be held in San Francisco. The presentation will be the first one of the session which begins at 3 PM Pacific time and will be given by David J Reich, MD, Professor and Chief of the division of Multi-Organ Transplantation and Hepatobiliary Surgery, and Vice Chairman of the Department of Surgery at Drexel University College of Medicine and Hahnemann University Hospital in Philadelphia. In addition, we will have a poster presentation on Tuesday, November 17 between 8 and noon Pacific that reports further work on ELAD's mechanism of action. The poster is entitled ELAD VTL C3A cells may impact liver regeneration through secreted factors. This works builds on our prior studies into the potential mechanisms by which we believe ELAD may contribute to improved outcomes in subjects with AILD. We planned to make this poster available on our website and issue a more detailed news release after the AASLD presentation. During the conduct of the VTI-208 study we were able to collect an extensive library of samples of both blood and ultrafiltrate from some of the ELAD treated and control subjects who are participating in the study. Both within our VTL research laboratories and through outside contractors with particular expertise, we are analyzing these samples in order to help ascertain the changes in the levels of biomarkers and metabolites that are associated with AILD and treatment with ELAD. For example, through an outside collaboration we have started to obtain data on the levels of various conjugated and unconjugated bile acids, fatty acids and other metabolites to ascertain whether they are patterns distinguished ELAD treatment from standard of care in AILD subjects. We are in the process of analyzing these data and correlating them with patient outcomes. We anticipate preparing the future abstract submission on our findings for presentation at an upcoming scientific conference. We recently convened a meeting of Scientific Advisory Board to review these date and to recommend the most appropriate course of action to analyze these samples going forward to further inform patient selection and treatment strategies. We anticipate reporting our findings at upcoming medical and scientific conferences during the next 12 months. It should be noted that these findings have yet to be demonstrated in patients and correlated with clinical outcomes. Before turning the call over to Mick Swanson, our CFO for discussion of third quarter financial results, I would like to make a few comments on the financial condition of the company. A result of the VTI-208 data it was unfortunately necessary to take measures to preserve capital for our next trial. And that required meaningful workforce reduction and implementation of other cost-cutting measures as we announced on September 3. This was not an easy process for anyone involved and I want to again thank each and every one of our former employees for their hard work, passion and dedication during their time with us. The workforce reduction should not impact our ability to execute on the enrollment of VTL-308 as most of the cuts were in areas involved in regulatory and pre-commercialization efforts that have been deferred for now. On October 22, we announced pricing of a public offering that resulted in net proceeds to the company of $32.4 million. Assuming that the FDA does not have comments on our trial design and statistical plan that results in a change to our anticipated timeline and that our forecast are subject to enrollment and other important trial parameters proved to be correct. These funds when added to our existing cash should be sufficient to fund the company to release the topline data from VTL-308 in mid-2018. Now, I’ll turn the call over to Mick Swanson.

Thanks Terry, and good afternoon. We ended September 30, 2015 with cash and cash equivalents of $59.8 million and as Terry just mentioned we received $32.4 million and net proceeds from our follow-on offering in late October. Our average monthly cash usage for operations and capital expenditures during the first nine months of the year was approximately $4.7 million. Assuming we limit our focus principally to the VTL-308 clinical trial, we expect to be able to get our average monthly cash usage to drop by over third as a result of the workforce reduction and the discontinuance of our VTI-210 and VTI-212 clinical trials. Our use of cash will change based primarily on the timing and enrollment of the VTL-308 trial. Summarizing our results for the quarter ended September 30, 2015, the company reported a net loss of $12.3 million including approximately $900,000 in severance charges related to the workforce reduction. Non-cash expenses for stock-based compensation, depreciation and amortization totaled $1.5 million in the third quarter of 2015, this compared to a net loss of $12.8 million for the corresponding period in 2014 including non-cash expenses of $1 million for stock-based compensation, depreciation and amortization. For more details on these financial results please refer to our press release issued earlier today. With that I’d like to turn it back to Terry.

Thank you, Mike. Before we take your questions I would like to summarize our key upcoming milestones. Firstly our presentation of the VTI-208 data at the late breaking session of the AASLD meeting on November 16, together with a poster presentation on the further findings regarding ELAD's mechanism of action at another session on November 17. Second FDA feedback on our briefing document including the proposed trial protocol for VTL-308 anticipated by year-end. Third the first subject enrolled in VTL-308 anticipated in the first half of 2016. Finally, additional presentations on ELAD's mechanism of action including analysis of samples from the VTI-208 should be at medical meetings in 2016. So now I would like to open up the call to your questions. In addition to Mike Swanson joining me for the Q&A portion of our call are Dr. Duane Nash, Executive Vice President and Chief Business Officer, Rob Ashley, Executive Vice President and Chief Technical Officer and Dr. Jan Stange our Chief Medical Officer. Operator can you please provide instructions and open up the call for questions.

Of course. [Operator Instructions] Our first question comes from the line of Matt Keller from Credit Suisse. Your line is open. Your question please.

Hey guys thanks for taking the question. I guess is first getting back to your comments on the FDA potentially having comments on trial design and statistical plan is there anything specific you think the FDA might want to change or is that more of just a general restatement that put in there?

No, Matt it’s really a general risk statement so just can’t ever predict what will come out the FDA as I am sure you know.

Got and I know you submitted fairly recently but is there been how is the dialogue been thus far on this FDA given you anything at all?

No, not a present

Okay perfect and then just lastly when will you start enrolling in Europe and is there expectation that this 308 trial gets you approval in Europe?

So when was start enrolling in Europe I hope is going to early in 2016, but I think you know that it's some a lot of bureaucracy both in Europe and the U.S. to get these trials to the enrollment stage and touch your second question yes we would expect the trial to send a good chance of getting us approval in Europe.

Great thanks for taking my questions.

Thank you, Matt.

Thank you. [Operator Instructions] I am showing no further questions. I would like to turn the call back over to management for any additional remarks.

Well, thank you, thanks to everybody for listening we look forward to end of the call and the New Year. Thank you everybody. Bye.

Ladies and gentlemen, thank you very much for your participation. This does conclude the program. You may now disconnect.