Silence Therapeutics plc (SLN) Q4 2019 Earnings Report, Transcript and Summary

Hi, good afternoon, everybody. I’m very pleased to be able to present the 2019 results for Silence Therapeutics. I think this is quite an extraordinary time, so I hope that everybody on the call is safe and well. We have been continuing to go forward with the business, and perhaps we can cover that a little bit further. But going to the first slide, obligation is to show you the Safe Harbor statement and to say that everything in this call is governed by that statement. If I move to the agenda, what I would like to do is make a few opening remarks, and then I’m going to ask Rob Quinn, our Chief Financial Officer, to take you through the results. And then as Heidi has said, we’ll have a Q&A session. So I’m Iain Ross, I’m the Interim Executive Chairman, and I’ll cover how we’re getting on with the CEO recruitment in a few minutes. We also have Dr. Giles Campion, who is our Head of R&D and Chief Medical Officer; and also Dr. John Strafford, who is our Head of Business Development. Moving to the full year results, the highlights and what I’d like to do is just cover a few of the operational highlights achieved during the year, but also just talk a little bit about what we’ve been doing in the first quarter of this year. So as far as 1919 – sorry, 2019 was concerned, we have advanced our two late-stage preclinical programs to the point of being close to getting into the clinic. Obviously, there has been some disappointment that we haven’t moved into the clinic in the first quarter with SLN124, but I think the reasons that we put out in our recent statement will give people comfort that now is not the appropriate time to start a clinical trial with COVID-19 being around. We, during the year, were very excited to announce our first real, major relationship with Mallinckrodt and this we’re looking at to complement assets that we have. We received a large upfront $20 million, $5 million in equity and also a $2 million milestone payment has already been paid, and Rob will cover how that’s been handled in the accounts. We also settled a license agreement with Alnylam. This was a dispute before my time that was ongoing and that was settled. And we receive – albeit minimal, but we do receive some milestone payments – sorry, some royalty payments. During the year, I think, the highlight is that the new leadership team has been put in place, apart from a few changes at the Board level. More importantly, we managed to basically attract Dr. Giles Campion to come take over our R&D and be our Chief Medical Officer. We promoted Rob Quinn to become Chief Financial Officer. We also promoted John Strafford to become our Chief Business Officer. We appointed Barbara Ruskin as our General Counsel and Chief Patent Attorney. Barbara had been working with the company for some time as a consultant, but we’ve managed to persuade her to join the company on a full-time basis. And to join also Jorgen Wittendorff, who joined as a really fantastic background in manufacturing. And with all these high tech companies, the important thing is you have to be able to make the product in sufficient quantities. So we’re very pleased that Jorgen joined us. And also Linnea Elrington is our Head of HR and a very important member of the team. So we’ve had a very good year. And as I said in my report, I believe the company has come of age in that we are now well positioned to take the company forward. That has actually been proven in the first quarter of the year. We signed a technology evaluation agreement with Takeda, and I believe that after 12 months, there may well be an opportunity to develop that relationship further. We formed a Scientific Advisory Board to be led by Professor Gordon Duff. We opened up our office in the United States, and Barbara Ruskin is working out of there. And we also, just throughout the year, really expanded our efforts on the U.S. investor relations, and we’ve been participating in a lot of conferences and in fact, this week is the first week that we’re actually going to do our first virtual roadshow, and there are a lot of American institutions involved in that. The other two issues, I suppose, in quarter one is the deal that we announced with AstraZeneca, which we are very excited about, which we believe purely validates our platform, and this is an extensive partnership, and Rob will go in with John into the details of that. And the last thing to say is that I am making extremely good progress and I did emphasize at the beginning that I am the Interim Executive Chairman. It is my plan to return to being the non-Executive Chairman in the first half of this year. So I’m hoping that we will be making an announcement certainly within the next few weeks of where we’ve got to with the appointment of the new CEO. I can say that we are attracting a very high caliber of talent, and I think RNA is a very hot place to be at the moment. You will have seen some of the recent announcements from our competitors. And generally, there’s a lot of focus on this area of science. So I’ll hand over now to Rob to go through the financial highlights and be very happy to take any questions at the end. Rob?

Thanks, Iain. So starting on the financial highlights on Slide 4. So net cash, including term deposits, was increased £7 million in the year from £26.5 million to £33.5 million. Our cash position has been further strengthened by the multi-target collaboration announced with AstraZeneca in late March. Cash at the end of March 2020 was £41 million, with a further $60 million due from AstraZeneca. In total, we now have pro forma financial resources of £90 million or $110 million, which sees us funded beyond 2022 and in a strong position to accelerate our lead programs, SLN360 and SLN124. Moving to the next slide, revenue was £244,000 was recognized in 2019. And it is important to note that as Iain pointed out $22 million was received from Mallinckrodt in the form of an upfront payment and a $2 million milestone payment, but we are only recognizing $171,000 of that. For IFRS 15, revenue relating to the collaboration should be recognized over its multi-year term based on the work carried out in the period. Clearly, in the second half of 2019, we were just beginning to ramp up activities on that collaboration. And when you look at this in the round in terms of the total cost over that collaboration, you can see that over that period, it was a relatively small proportion, but be in no doubt that, that cash has been received. As Iain pointed out, we also recognized and received our first revenue relating to our license agreement with Alnylam. As a reminder, Silence is eligible for a 0.33% to 1% royalty on sales of ONPATTRO in Europe. In the year, R&D costs increased 37%, rising to £13.3 million, and this was due to progression of SLN360 and SLN124 towards the clinic. Admin expenses reduced from £10.8 to £9.6 million, and this is largely driven by the fact that 2018 included a cost around litigation proceedings against Alnylam. For Silence, tax is a credit due to the UK R&D tax credit scheme whereby a portion of our R&D expenditure qualified for tax credit. This payment is typically received in Q3 of the following year. A credit of £3.3 million was recognized in 2019 and increased versus 2018 due to higher R&D expenditure. Moving to the next slide, as a reminder, on the 25th of March, we announced our multi-target collaboration with AstraZeneca, covering both hepatic and extrahepatic targets. All of the targets are novel and not currently in our pipeline. And to be clear, this deal does not include SLN360. We maintain full rights to both of our lead programs, SLN360 and SLN124. The deal will cover up to 10 targets, and we expect for five targets to be started within three years. For each target, we are eligible for $100 million in milestone payments and high single to low double digit royalties. The first milestone payment is a $10 million option fee payable upon candidate nomination, and we expect the first such payment to be made in 2022. Thanks for your time. I’ll now open the line to questions and hand over to the operator.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Miles Dixon from Peel Hunt. Please ask your question.

Hi, Iain, and Rob, Giles, John, and thank you very much. Just if I can very briefly, given the sheer volume of opportunity there in front of you, whether it be from partnering or development of your in-house pipeline, how do you see that moving forward? Are you going to roughly divide your effort in terms of partnering with other companies or even further with the existing relationships you have? And I guess what I’m really asking is do you have an optimum number in mind for your internal pipeline? Thank you.

Yes. Thanks, Miles. I think it’s a very good question because we have signed three significant partnerships. And whilst the Takeda partnership is albeit a technology evaluation, we believe that, that goes well that we will actually have an opportunity to extend that. In addition, as you know, Mallinckrodt has an option to name a further two targets and we think there’s no reason to suggest that they won’t take up that option during this year. So actually, with three solid relationships and also our internal pipeline, which of course we talk about SLN124 and SLN360, but we do have other undisclosed targets coming along, you’re absolutely right. We need to execute. And one of the things that we are doing at the moment is we are actually building the infrastructure to do that. So as I sit here now we are heavily recruiting a number of people, particularly in clinical and also in manufacturing. So it’s about execution and building the business. As to where we’d go in the future, well, clearly, as Robert said, it is our intention to hang on to our internal pipeline. We want to develop those assets, so we can use our platform, of course, to get valuable validation of our technology, but we can also use that to fund some of our own internal projects as well. So I think where we’re at the moment is we are taking breath, we are making sure that we have the infrastructure in place to take forward those partnerships and our current internal pipeline. But of course, there are other things that we want to do using our platform to produce other targets for ourselves. But I think the new CEO will have quite a job to review that when they come in. And I think there is a clear opportunity for us to make in the latter part of the year a clear statement of where we intend to go forward and where we intend to put our efforts. So I think it’s a good question, Miles, but as an Interim Executive Chairman, I’m ducking the answer and saying that the new CEO will be presenting a strategic plan in the second half of the year.

No problem. Totally understood. Does that extend to your – the knowledge assets that you have out to there as well, whether it be your Scientific Advisory Board, I think, you’ve been very…

Absolutely, I mean, I think the quality of the Scientific Advisory Board that we’re putting together obviously, clearly it is shaped towards helping us with the development of our own internal pipeline. And obviously the jewel and the crown there, what the emphasis being switched more towards there is SLN360, but we also believe SLN124 has a valuable place. So our Advisory Board has been made up with those two projects in mind. And I think you will see the Advisory Board expand with particular other competencies as time goes on.

Brilliant. And does that equally apply to the relationships that you have with, like Genomics England, for instance, where, I believe, you did some...

No.

Okay. Thank you for answering.

[Operator Instructions] And your next question comes from the line of Nathaniel Calloway from Edison Group. Please ask your question.

Hi guys. Thank you very much for taking the question. Mine is basically, I was just wondering, since you’re giving us a bit of detail on the time lines for the AstraZeneca collaboration and the Mallinckrodt collaboration, I was wondering if you can give us any sort of visibility on the Takeda collaboration as well, if you have any sort of time lines or goals to meet for that program.

I think – it’s Iain here – I think that’s a hard question to answer in that we have been very much working on one specific target which is a proprietary target for Takeda, which they don’t want revealed. And what we were able to say is that within 12 months from now we will be able to maybe talk further about that. But really, we are working very specifically on one target.

All right. Thank you for that. That’s my only question.

Thank you. Your next question comes from the line of Craig McDougall from Overcastle [ph]. Please ask your question.

Hi, Iain. Good afternoon.

Hi, Craig.

Iain, just quickly, actually I’m not surprised to hear about the kind of volume, or quality, and caliber of CEO applicants you’ve received. Do you think you could say perhaps how that might shapen or accelerate the group’s capital market strategy, particularly towards considering and confirming a plan for a NASDAQ listing?

Yes, I think it will. I think where we currently are with COVID-19 without a CEO and with certain uncertainty in the markets, I wouldn’t want to articulate it now. But I do believe around the time the appointment of a CEO we should make it fairly clear what our intention are. What I would say, Craig is that we are continuing to have a lot of discussions with institutional investors in the United States. And as I said at the very beginning, we are actually going on a virtual roadshow for the rest of this week and we have had no trouble filling that in that there’s a lot of interest in RNAi at the moment. And you are right, now is the time for us to capitalize on that interest. But until we have our leader in place, I think it would be premature to do anything.

No, of course, and is that right, did you say you might have something to add to that in the next few weeks?

I certainly, have got something to add to the fact that we’re looking to make some form of announcement in May regarding the CEO position.

Okay, excellent. Well, we’ll look forward to that. That’s a lot. Thank you.

Thanks, Craig.

[Operator Instructions] Your next question comes from the line of Jens Lindqvist from Investec. Please ask your question.

Hi gentlemen. Good afternoon. Just on SLN360, could you please outline just briefly the potential differentiation of this program versus Novartis Antisense program, TQJ230, which is already in Phase 3. I think you’re even referring to the New England paper with the Phase 2 data on that product in your earnings this morning, so it would be helpful, please. Thank you. And I guess secondly on the – does that shift in priority in favor of SLN360, does that also reflect, I guess, a development – a change in development strategy towards larger indications, away from the niche orphan strategy that you’ve had so far? And then finally just a very brief question on the numbers, could you just please remind me what the goodwill on your balance sheet represents please? Thank you.

Giles, would you like to take the first two parts?

Sure, yes. So the molecule that’s being developed by Novartis was licensed from Akcea, IMS, and that is a single-stranded GalNAc-conjugated antisense molecule. So it’s different from the double-stranded siRNA molecules, also GalNAc-conjugated, which are being developed both by us and also by Amgen. So Novartis is about to get the – well has already started its Phase 3 outcome study. I think the importance is in terms of the technology one, I think, the siRNA molecules are proving themselves to be extremely safe, have – are very potent in action and have a very long duration of knockdown. And I would point to the model of inclisiran which is an sRNA that is being developed by – just recently been acquired by Novartis in an acquisition of $9.7 billion to indicate the profile of that molecule, which is very safe and can be dosed monthly – sorry every six months in terms of LDL-C reduction. So we anticipate with siRNA a similar sort of profile of action, both in terms of potency and duration of action. The Novartis compound is currently being given every month. And we feel, certainly in a prevention indication, such as the prevention of cardiovascular events, that having a potent molecule which is extremely safe and only dosed twice a year would give a distinct advantage.

Okay. Thank you.

And then maybe just to answer on the goodwill point, it’s Rob Quinn speaking. So the goodwill, Jens, relate to the acquisition of AstraZen, which is essentially the science behind Silence Therapeutics here, which was a German private company, reverse merged into SR Pharma back in 2005 to create Silence Therapeutics, and that’s what that relates to.

Okay, great. Thank you. Thank you.

I think the other point that you asked there, Jens, was about the change in priority. We’re not moving away from rare diseases or anything like that. It’s just simply that we believe that SLN360 is the jewel in the crown and we need to move forward as quickly as possible with that. And we just wanted to reflect that. It doesn’t mean that we think any less of the rest of our pipeline, but we do want people to understand that we think this is a very exciting asset, and there will be some significant movement forward in that during this year.

Okay, got it. Cheers.

There seems to be no further questions at this time please continue.

Okay well thank you very much, indeed, everybody. I wish everybody a safe and well few weeks. I certainly know that we’re most likely going to be locked down for a bit longer here in the UK. But we look forward to updating you as we go along. As I said, I think, there’ll be an announcement regarding the CEO within the next few weeks. I think if people look at 2019 it was an extremely successful year. It was a year of getting things in shape, and moving things forward and also starting to announce collaborations, which validate our technology. I think if 2019 was exciting, I think 2020 is going to be even more exciting. So thank you very much, indeed, for your time, and I look forward to speaking to you all in the near future.