Immunic, Inc. (IMUX) Q3 2016 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Vital Therapies third quarter 2016 financial results conference all. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Al Kildani, you may begin.

Thank you, Shane. 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 results for the third quarter ended September 30, 2016. On today's call are several members of the Vital Therapies' senior management team, including Dr. Terry Winters, Co-Chairman and Chief Executive Officer; Dr. Duane Nash, President; Mike Swanson, Executive Vice President and Chief Financial 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, conduct and enrolment of our clinical trials, future clinical trial results, the timing of certain development goals, including regulatory filings, possible mechanism of action of ELAD, 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 at our clinical trials program is delayed or is ultimately unsuccessful. Please note that these forward-looking statements reflect our management's views only as of today's date and we disclaim any obligation to update any forward-looking statements expect as required by law. Please refer to our SEC filings for a discussion of the risk factors that could cause actual events or results to differ materially. Vital Therapies promptly makes available on its investor relations Web site reports that the company files with or furnishes to the SEC, corporate governance information, press releases and other posters and presentations. A replay of this call will also be available on our Web site later today. We encourage investors to use our investor relations Web site as a way of easily finding information about Vital Therapies. I would now like to introduce Dr. Terry Winters, Vital Therapies' Co-Chairman and CEO.

Thank you, Al and good afternoon everyone. Welcome to our third quarter 2016 update call. You may recall that we recently promoted Dr. Duane Nash to the position of President and I am delighted to have him handle the call today. Over to your Duane.

Thank you, Terry. I would like to begin with our usual summary of the company for those of you who may be new to the story. We are developing ELAD, an extracorporeal human allogeneic cellular therapy, which could improve survival in acute forms of liver failure. ELAD is at the Phase 3 clinical trial stage and has Orphan Drug Designation in the United States and Europe. Assuming successful clinical results in the future, we plan to seek regulatory approval and commercialize ELAD directly in most major markets of the world. VTI-208, our first Phase 3 trial which reported top line data last August, enrolled 203 subjects primarily in severe acute alcoholic hepatitis, but did not meet its primary or secondary survival endpoints. However, encouraging data from pre-specified subgroups combined with post-hoc analysis of combinations of these parameters led us to the design of a new Phase 3 trial called VTL-308, which is underway. The agenda for today's call will be first to review the status of the 308 trial, a second welcome and new addition to our board of directors, Faheem Hasnain, formerly President and CEO of Receptos. Third, update our continuing work on ELAD's mechanism of action. Four, review our financial results. Five and finally, we will open up the call for Q&A. First, we will discuss the status of our VTL-308 phase 3 clinical trial. This trial is our priority and as of today we have enrolled a total of 20 subjects with 33 sites now open in the U.S. and Europe. As we noted earlier in the year, we have been behind plan and site openings. For instance, as of our second quarter conference call in August 2, we had opened 23 sites. Since that time we have opened an additional ten sites and are ahead of our projections for site openings in the U.S. Moreover, we have now worked through bureaucratic challenges we were facing in Europe which were delaying openings on that continent. In order to make up for the delay we saw in Europe, we plan to increase our target to 50 site openings worldwide by the end of Q1 2017. There are 20 subjects currently in the trial compared with 8 subjects as of our report on August 2. Because of the delayed site openings, we are also behind our enrollment projection. However, as I just mentioned, we believe we can make up for that delay by enrolling at more sites and we believe this will preserve our ability to readout data in mid-2018. In sum, we have gone from 20 sites in June to 33 now with a target of 50 by the end of March 2017. This is a very large increase in sites and is expected to have a significant impact on the pace of enrollment. We do acknowledge that enrollment has been effected by our discipline and only enrolling those subjects who meet the trial's criteria. As a result of our trial design, we have an unusual ability to confirm subject eligibility prior to randomization. We believe it is critical we maintain this discipline and only enroll suitable subjects in order to increase the possibility we have a successful result. Finally, we are encouraged that over the last three months we have been enrolling subjects in the 308 trial at almost double the rate of enrollment for those subjects in the 208 trial who met 308 criteria. We have also been gratified to see our rates of screening increase over the course of the trial and we expect this will be further accelerated as we ramp up outreach programs to help our sites identify and enroll appropriate subjects. Switching topic to corporate governance, we are delighted that Faheem Hasnain has joined our board of directors, as we announced on August 15. He has also made a personal investment in our company. Faheem was formerly President and CEO and a Director of Receptos, which was developing auto-immune drugs and was acquired by Celgene last year for $7.8 billion. Prior to Receptos, Faheem was CEO of two biotechnology companies after a very successful career in the drug and biologic business with several large biotech and pharma companies. His experience will be invaluable to Vital Therapies as we plan for the possible commercialization of ELAD. Faheem has agreed to chair a new commercialization committee of the board that will also include JJ Bienaime, CEO of BioMarin, Cheryl Cohen, former Chief Commercial Officer of Medivation, Phil Croxford, CEO of Gamma Medica, and Doug Godshall, former CEO of Heartware. We welcome Faheem to our board and look forward to working with him. On the R&D front, we have presented two posters and made related presentations at an international symposium on liver disease, which took place in mid-September in Rostock, Germany. Both presentations can be found on our Web site. The first poster is titled Hepatic Inflammation and Cellular Therapy. It reported data from laboratory studies that describe how VTL C3A cells secrete known anti-inflammatory factors in response to certain pro-inflammatory substances which are known to be present in increased amounts in subjects with alcoholic hepatitis. Preliminary data in a small subset of subjects from prior ELAD clinical trials suggest that this maybe a potential mechanism by which cell based treatments such as ELAD may provide benefit to patients with alcoholic hepatitis. The second poster is titled VTL C3A Cell-Secreted Factors Reduce In Vitro Hepatocellular Injury via Multiple Mechanisms. It discussed mechanisms by which our cells may promote hepatocyte survival. One such mechanism is the inhibition of Apoptosis also known as programmed cell death. This may improve liver function and may increase survival on patients with severe acute alcoholic hepatitis. We continue to work on mechanisms of action focusing particular effort on the impact of factors secreted by our cells on other cell types in the liver such as endothelial cells that line the walls of blood vessels. We are also developing blood cell models to study the effect of these secretive factors. This is pertinent because the ability of white blood cells to fight infection is known to be impaired in patients with severe alcoholic hepatitis, likewise improvement in white cell function may provide an avenue for obtaining therapeutic benefit. Before turning the call over to our CFO, Mike Swanson, for a review of our financials, I have a corporate update to report on. A securities class action complaint was filed earlier this year in the Southern District of California against the company and certain of its officers alleging securities law violations. This complaint was voluntarily dismissed by plaintiffs in August. No payments were made in connection with any of the plaintiffs claims and at this time there is no litigation pending against the company. I will now turn the call over to Mike.

Thanks, Duane, and good afternoon. We ended the third quarter with cash and cash equivalents of $68.1 million. Our average monthly cash usage for operations and capital expenditures during the first nine months of the year was approximately $3 million. We continue to expect our use of cash will vary primarily based on the timing of enrollment in our VTL-308 trial. It will also increase to support expenditure for longer lead time activities that could support a future biologics license application submission. Also, as reported, based on our current plans, we believe our existing cash and cash equivalents will be sufficient to fund the company through the first quarter of 2018. Through September 2016, we have raised net proceeds of $11.2 million from our at-the-market, or ATM, sales agreement since initiating the program in March and from the private placement with our new director. In addition, net proceeds of $602,000 were raised under the ATM in October. Summarizing our results for the quarter ended September 30, 2016. The company reported a net loss of $10.2 million or a $0.32 basic and diluted loss per share. This included non-cash expenses for stock-based compensation, depreciation and amortization totaling $1.8 million in the third quarter of 2016. This compared to a net loss of $12.3 million or $0.51 basic and diluted loss per share for the third quarter of 2015, which included $1.5 million for the same non-cash expenses. For more details on these financial results, please refer to our press release issued today and our quarterly report on Form 10-Q. With that, I would like to turn it back to Duane.

Thank you, Mike. So before we take your questions, I would like to summarize our key upcoming milestones. First, quarterly reports on the progress of the 308 trial. Second, presentation of a poster at the American Association for the Study of Liver Diseases annual meeting on November 11. Discussing the alcohol relapse data collected from our 208 trial. Third, the possible publication of the VTI-208 results in a peer reviewed journal. Also, we will be presenting at two upcoming investor conferences. First, on November 8 we will be at the 25th Annual Credit Suisse Healthcare Conference in Scottsdale, Arizona. Second, on November 16 we will be presenting at the Stifel 2016 Healthcare Conference in New York. Both presentations will be webcast live and links to each webcast can be found on our investor relations Web site. I would now like to open up the call to your questions. In addition to Terry and Mike, joining me for the Q&A portion of our call are Rob Ashley, Executive Vice President and Chief Technical Officer; and Dr. Jan Stange, Chief Medical Officer. Operator, can you please provide instructions and open up the call for questions.

[Operator Instructions] And our first question comes from the line of Katherine Xu of William Blair. Your line is now open.

So Duane, can you provide a little bit more color on the reasons for the delay in Europe and also with your internal projection, how enrollment progress will look like, especially compared to 208?

Sure. Yes. Great to speak to you, Katherine. So I think what we might do, to simply things, is we will take these questions one at a time. So maybe can you repeat the first question?

Yes. I am just wondering any color on the delay in the enrollment for I guess, [indiscernible] particularly in Europe?

Sure. Yes. Rob, would you like to answer that question.

Sure. Hi, Katherine. We ran into some bureaucracy associated with [indiscernible] approvals in the United Kingdom which delayed us a little more than we expected. We had to go around a couple of loops. However, that situation is now completely resolved. We are opening sites as we speak, in Europe, in the U.K. we already have sites open in Germany and Spain and we are completing opening the few sites which remain in the portfolio in Germany and Spain. So I think that we will be seeing a deal of activity from our European colleagues going forward now. The bureaucracy in Europe, particularly in the U.K. is horrifying and we you just got to work through it and it takes time and it seems to take more time every time you go through it.

Yes. That helps. And then with regard to your enrollments projection. So you are still looking at potentially completing enrollment by end of 2017 or 2018? I mean how [indiscernible] what you saw with 208?

So unfortunately we don’t have a crystal ball so we don’t know anything for certain but we do feel very good about completing enrollment around year-end '17, early '18, to enable us to still read out data in mid '18. So far we think the major limitation to enrollment has been in opening sites. Fortunately, we are in a far better position right now than we were recently. So at the end of June we had 20, we are now 50% above that and we should be at 50 by the end of March. One thing which we are very gratified to see is that particularly if we look on a site by site basis, the sites are able to find these patients more quickly than they were able to find equivalent patients in the 208 trial. We think in part that’s because of some of the outreach efforts we are helping them with to build up referral channels. And quite frankly, we have spent, we plan to spend a lot more time doing that to help them get these patients because one of the things you will recall from our prior discussions is this is really an earlier, or patients in earlier stage of the disease rather than the 208 trial, many of whom were already beginning to go into multi-organ failure.

And then can you comment on the enthusiasm level that you observe in the community just over the past quarters and any [indiscernible] or anything notable?

So I may have Jan answer that since he is the one who is in most frequent contact with the PIs?

Yes. We see that the enthusiasm level is still there, actually growing and I think that also a consequence of that any alternative therapies that have undergone larger trials recently, like the STOPAH study looking at combinations of Pentoxifylline and steroids or both drugs by themselves, didn’t really impact three month survival at all. So this is one chance for the patient and that is reflected in the enthusiasm of our sites to get those patients into the trial.

[Operator Instructions] And I am showing no questions in the queue at this time. I would now like to turn the call back to Dr. Duane Nash for any further remarks.

Great. Well, thanks everyone for their attention today and go Cubs.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.