Alaunos Therapeutics, Inc. (TCRT) Q1 2023 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Alaunos Therapeutics First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Lobo. Please go ahead.

Good morning. Earlier this morning, Alaunos issued a press release announcing financial results for the three months ended March 31, 2023. We encourage everyone to read today's press release as well as the Alaunos quarterly report on Form 10-Q for the quarter ended March 31, 2023, which was filed this morning with the SEC. The company's press release and annual report will also be available one the Alaunos' website at alaunos.com. In addition, this conference call is being webcast through the Investor Relations section of the company's website, and will be archived there for future reference. Please note that certain information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Participants are cautioned that this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 10, 2023. Actual results could differ materially from those stated or implied by the forward-looking statements made today due to risks and uncertainties associated with the company's business. Information on potential risks and uncertainties are set forth in our most recent public filings with the SEC at sec.gov. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this webcast, except as may be required by applicable securities law. With me today are Kevin Boyle Senior, Chief Executive Officer; Drew Deniger, Vice President of Research and Development; and Mike Wong, Vice President of Finance. Abhi Srivastava, Vice President of Technical Operations will also be available for the Q&A session. With that said, I would like to turn the call over to Kevin. Kevin you may go ahead.

Thank you, Alex. Good morning everyone, and thank you for joining us. The disruptive technology Alaunos is delivering to patients has the potential to transform the cancer treatment paradigm. We believe that our innovative approach, targeting high-frequency driver mutations is the most promising therapy for solid tumors. We're encouraged by the fact that our first patient treated had a meaningful clinical response and established for the first time that non-viral TCR-T cells can bring hope to patients with high unmet clinical need. And we are not alone in our excitement. Our accelerated enrollment compared to the prior year highlights the enthusiasm shared by the prospective patients. The Alaunos team is off to a productive start in 2023 as we progress towards important clinical milestones. We've worked diligently to advance our TCR-T library Phase 1/2 trial and have accelerated enrollment with a manufacturing suite that is busier than ever. Since our last update, we have implemented multiple enhancements to our screening enrollment and manufacturing protocols that we added through an IND amendment at the end of 2022. We aim to build on the encouraging early clinical data we have generated to-date and expect to report interim results in the third quarter including new data from multiple patients. In addition to the clinical progress made, we've also taken important steps to strengthen our balance sheet. The full prepayment of our loan with Silicon Valley Bank enables us to move forward unencumbered by debt. Our recently amended agreement with Precigen eliminates royalty and milestone obligations to Precigen. Altogether, we believe that we are taking the right financial and corporate steps as we work towards becoming a Phase 2-ready company by the end of 2023. I'd like to discuss our TCRT library Phase 1/2 trial in more detail. We have worked to capitalize on the growing excitement and momentum around this trial. As you will recall, this is a basket trial targeting driver mutations across six solid tumor indications, non-small cell lung, colon, endometrium, pancreas, ovary and bile duct cancers. We are actively enrolling patients at MD Anderson with any one of these six cancers based on matching both a specific mutation and HLA combination to a TCR that is available in our library. During the first quarter, we worked to operationalize the critical enhancements to our screening enrollment and manufacturing processes that were included in this expansive fourth quarter 2022 IND. These improvements have facilitated faster patient accrual. We have also implemented cryopreservation to our manufacturing process, increasing flexibility for patient scheduling and treatment. Since adopting cryopreservation, we have manufactured multiple patient products with viability, purity and TCR positivity comparable to our prior process. We believe that, these enhancements will enable us to meet our program milestones this year. Additionally, our investigators at MD Anderson have been staunch supporters of this trial, identifying promising patients and generating, a fully booked manufacturing schedule through the coming months. Looking ahead, early translational data from our first three patients treated will be highlighted in a poster at the 2023 ASCO Annual Meeting taking place in early June. In total this year, we anticipate treating between nine and 12 patients completing the Phase 1 portion of the study. As we progress towards this important milestone, we'll provide a more fulsome readout with new clinical data on multiple patients in the third quarter. We are singularly focused on advancing our TCR platform targeting solid tumors. Recent corporate and capital changes have supported our belief in the tremendous upside potential of this platform. In April, we were pleased to amend our license agreement with Precigen. This amendment maintains our exclusive rights to use Sleeping Beauty, or TCRs targeting neoantigens, including driver mutations. At the same time, the amendment eliminates all commercial sales-based royalties, and milestone obligations due to Precigen. This represents a potential savings of over $160 million. In return, Precigen regains the rights to our noncore CAR-T and IL-12 assets. As Alaunos is one of the most advanced TCR-T companies targeting driver mutations, we believe that un-encumbering our TCR-T assets, allows us to maximize the shareholder value and further facilitate partnering discussions. There have been several partnering transactions announced recently in our space, and we believe this is a positive sign for TCR companies. I would also like to highlight that earlier this month, we fully prepaid the remaining balance owed under our term loan with Silicon Valley Bank. This prepayment also allowed us to upgrade the quality of our depository bank to further protect our cash. The decisive actions with regards to our SVB loan and Precigen licenses, allow us to move forward unencumbered by these obligations. Also on the corporate side, we are excited to welcome Robert Hoffmeister to our Board of Directors. For those of you, who don't know Robert, he is an expert in the discovery and development of engineered TCR therapies, and brings a wealth of experience in cancer immunology. We are thrilled to have him on the Alaunos team and Drew and Abhi have already been leveraging his insights and expertise. In addition to the exciting progress, we've made in the clinic and enhancements to our corporate structure, we're making significant progress towards expanding our industry-leading library of TCRs through the Hunter platform. I would like to now turn the call over to Drew to highlight these ongoing R&D efforts. Drew?

Thank you, Kevin. Good morning, everyone. I'm excited to share with you an update on the continued progress of our R&D efforts including Hunter. As a reminder, Hunter is our cutting-edge proprietary TCR discovery platform and is the foundation of our two-pronged library expansion strategy, to increase the addressable market for our therapeutic drug candidates. One way, we are expanding the library is by adding TCRs targeting more HLAs combined with our current KRAS TP53 and EGFR mutations. Another way is adding more TCRs targeting new mutations, within these critical gene families. Through this strategy, we believe we can bolster our IP portfolio, strengthen our pipeline for next-gen TCRT, and potentially deliver effective treatments to a larger number of patients. We have already shown twice that we have the manufacturing and regulatory structure to expand our clinical library. When we added the two additional TCRs to the library last year, we brought the total number of TCRs to 12. Our screening match rate has grown to over 10% as a result and effectively doubled the potential addressable market. This year, we expect to grow the library to 15 total TCRs as part of our strategy to expand the number of patients that could potentially benefit from our TCR-T cell therapy. We recently expanded the infrastructure for our Hunter platform, to increase throughput of TCR discovery. We have introduced new bioinformatics capabilities and advanced lab equipment, which greatly increases screening rates, while maintaining our high TCR discovery success rate. Dozens of tumor samples have already been processed, and we anticipate ramping up our screening pace in the second quarter. From each tumor sample, we can line up thousands of individual T-cells and sequence them simultaneously, as single cells. We are then able to make the TCR and identify, which ones are reactive to a specific mutation in HLA combination. Once the TCR is identified as a valuable addition to our clinical library, we can amend our, I&D to incorporate the new TCR. We think we can do this in nine to 12 months which we believe is markedly faster than competing platforms. We are proud of Hunter believe it offers significant advantages over traditional TCR discovery methods. We believe, our rapid and high throughput approach to generate proprietary TCRs potentially increases the value of the company's pipeline. These TCRs may be used in the exploration of next generation TCR-T cell therapies, including Membrane-bound IL-15 and multiplex TCR-T, which aim to further deepen clinical responses. We also believe Hunter has the potential to generate out-licensing or partnering opportunities that could result in non-dilutive capital. I'm so proud of the team, who has more than doubled the screening pace over the past year and strongly believe that we will be successful in identifying valuable TCRs for Alaunos. I would now like to turn the call over to Mike, for a financial update.

Thank you, Drew. As an organization we remain intentional with our capital. With the team of less than 35 people, we continue to make valuable investments to fulfill our commitments to patients and to create value for our shareholders. We are confident, based on recent conversations that our science will continue to be recognized by investors for what it is a unique and disruptive technology that has promised to be curative for solid tumors. Now, allow me to review our financials for the three months, ended March 31st 2023. For the first quarter of 2023 we reported a net loss of approximately $10 million or a $0.04 net loss per share compared to a net loss of approximately $9.8 million or a $0.05 net loss per share for the same period in 2022. As we look into the numbers in a bit more detail, research and development expenses were approximately $6.5 million for the first quarter of 2023, compared to approximately $5.6 million for the same period in 2022, an increase of 17% which was primarily due to increased manufacturing and TCR discovery activities. General and administrative expenses were approximately $3.2 million for the first quarter of 2023, compared to approximately $3.5 million for the same period in the prior year, a decrease of 10% which was primarily due to lower professional fees as we continue to be focused on being good stewards of capital. As of March 31st 2023, Alaunos had approximately $37.4 million in total cash balances. Our operating cash burn for the first quarter of 2023 was approximately $9.4 million, compared to approximately $7.8 million in the same period in 2022, an increase of approximately $1.6 million. This amount was in line with our expectations as it reflects the increase in our manufacturing activities resulting from the active enrollment of patients in our TCR-T library Phase 1/2 trial. Based on our current operating plans, we continue to expect our operating cash outflows for 2023 excluding debt service costs to be between approximately $35 million to $40 million. As a result, we expect to have sufficient cash resources into the fourth quarter of 2023 to fund operations and R&D programs. As Kevin noted earlier, at the beginning of this month we fully repaid the remaining amounts owed under our term loan with Silicon Valley Bank, which was $11 million as of March 31st 2023. We are pleased to report that with no remaining obligations to SVB a restricted cash balance of $13.9 million as of March 31st 2023 has also been fully released back to Alaunos. This allows us to have complete operational control over our cash, and eliminates additional interest expense. I'd like to leave you with a biotech capital markets update. Investor engagement remains encouraging and evidence points to capital markets being supportive of transactions for companies with differentiated science. Despite the disruption following regional bank failures, the follow-on market continues to outpace this point last year. $7.3 billion has been raised by 60 follow-ons year-to-date, compared to $4.6 billion raised in 44 follow-ons at this point in 2022. We believe this is a positive sign for biotech which is also aligned with the interest we have received from prospective investors. I would now like to turn the call to Kevin for closing remarks.

Thank you, Mike. Enrollment has been brisk and manufacturing suite has been occupied. We've told our hard-working employees buckle your seatbelt low and tight around your waste and be prepared for an exciting ride. Things are getting busy around here. I am proud to say that we have manufactured multiple products at the same time and our team is committed to producing therapies for patients in need. The translational data is most encouraging and we will share an update at ASCO including safety, persistence and efficacy data. We look forward to providing an interim trial readout in the third quarter, highlighting additional patients treated. We are also enjoying success identifying new TCRs in our Hunter program. We will strive to strengthen our IP position, generate partnering opportunities and increase the addressable market with this platform. The building momentum and interest in our TCRT platform gives us great confidence in the potential value of our disruptive technology as we seek to revolutionize the treatment of solid tumors. I'd like to thank all of my colleagues at Alaunos, as well as our patients, shareholders and partners for their continued support as we weaponize the immune system with powerful TCRs to treat solid tumors. We will now open the call to questions. Cory?

Thank you. At this time we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from Prakhar Agrawal at Cantor Fitzgerald. Prakhar, your line is open.

Hi, good morning, everyone, and thanks for taking my question. So first question is for the update at ASCO, it seems that there is translational data getting presented for patient three as well for whom we have not seen any efficacy. So could you confirm if you get any efficacy data for patient number three? If not what translational data would you be presenting, and why only translation data for third patient? And I had a couple of follow-ups please.

Absolutely. So we're limited in part Prakhar by what we can say since the full abstract has not been released with ASCO. But the poster will as you say include data on patients one, two and three that we've previously disclosed that we've treated. The embargo will lift and the full abstract will come out on May 25th, I believe in the afternoon. But before that time unfortunately we are not able to disclose any further detail on the data being presented. What I can say is we believe that the data that we're presenting is just the start and we look forward to providing a more wholesale in the third quarter of this year as promised with additional patients.

Got it. And Kevin second question, if I heard correctly nine to 12 patients are expected to be dosed by end of the year to complete Phase 1, which seems lower than the 12 to 15 patients target noted previously. So maybe first, if you could confirm whether there has been a change in the target enrollment for Phase 1, any reason for this change? And will we have enough patients at each dose to make a call on the recommended Phase 2 dose?

Thanks for the question. Just simple math adding the three patients that we treated last year, the nine to 12 range. And if you add three patients that we already treated in 2022 gets you to the same guidance that we provided previously 12 to 15 patients. So guidance has not changed and we're really quite encouraged by how engaged RPIs have been, literally fighting over manufacturing slots that we have to get their patients enrolled in this trial. So very excited about the momentum that we have and look forward to providing further updates.

Got it. Thanks for the clarification Kevin. And last question for me, cash guidance is until 4Q and you have the interim update in Q3. The timing of the interim data is quite close to the cash runway guidance. So there's a lot of stake from this interim update. You have more visibility than us. How confident are you at this interim update will be meaningfully positive to finance the company? And could you explore other financing avenues before the interim? Thank you.

Mike, do you want to take that?

Sure. Thanks Prakhar. Yes we believe our cash runway will set the next data readout in our library Phase 1/2 trial, which is obviously an important inspection plan for Alaunos. And from a fundraising perspective, we continue to be good stewards of capital as mentioned earlier and we remain sensitive to dilution. With that said, we remain opportunistic and consider all options available to us.

Thank you.

Thank you very much. Standby for our next question. Our next question comes from Thomas Flaten of Lake Street Capital Markets. Thomas, your line is open.

Good morning guys. I appreciate taking the question. I'm curious in the interim readout in Q3, is it reasonable to assume that we'll see patients that have been dosed at the third dose level as well, or will they be from the second dose level only?

Thomas, we would steal the thunder if we gave you any more insights about what we would release with regards to the third quarter. I will say just as a reminder the trial design is quite flexible with regards to how many patients get dosed at this level. We're going to be guided overall by conversations with our PIs with regards to dose levels and what they believe is the appropriate number of cells with regards to treating those patients. What I can reiterate is that there will be multiple patients that we will be speaking to when we provide a clinical update in the third quarter and are very excited to provide an update to our investors, prospective investors and research analysts.

Got it. And will that release be done in the context of a scientific meeting or just something that you do on a stand-alone basis?

We're going to keep all options open and be flexible in that regard. I think it's important to just have the flexibility at this point. What we do want to commit to is just as we had guided earlier honing in on that guidance to say it will be in the third quarter. So we look forward to connecting with everybody then. And I think everybody will be excited as we are. We hope to hear an update on the trial.

And switching gears a little bit maybe a year ago, we were talking about having capacity for one patient per month kind of was the maximum. I mean you guys have done a great job in expanding your manufacturing capacity. But I was wondering if you could contextualize for us as you move into Phase 2 next year what that manufacturing capacity needs to be? And over what time period do you guys think you can get there with current resources and planned resources for that matter?

Sure. Why don't I pass that over to Abhi since he's in charge of manufacturing here.

Thanks, Thomas for this question. We are very excited about our manufacturing platform. As we mentioned last time, we have expanded our manufacturing capacity for Phase I which is two patients per run. That really has worked out pretty well especially after the introduction of the cryopreservation to our program which is well received by our PIs, which has really helped us out putting our schedule upfront into the calendar. So we are busier than ever in our manufacturing suite. As far as increasing the capacity for the Phase 2 we are investing in a multipronged manufacturing strategy. We're going to be -- we have a multiple option in our side where we can expand our manufacturing capacity in multi-different way either in-house or going to the CDMO or the combination of hybrid approach we're going to be utilizing one of those as time comes. And whatever is in the best interest of the company as well as the shareholders. So we are very excited about it and we are looking forward to going into the Phase II and making more patient cells

Excellent. Appreciate you guys taking the question. Thank you.

Thanks, Thomas.

Thank you very much. Please stand by for our next question. Our next question comes from Swayampakula Ramakanth of HCW.

Thank you. This is RK from H.C. Wainwright. Good morning, Kevin.

Good morning

So in the third quarter you're expecting to put some additional data out there on the current study. How many patients do you think you can get to by that time? Because obviously you're making multiple changes not only on the manufacturing side, but also on the trial itself you said you did some amendments. So kind of two questions. One is like what sort of amendments helped increase the enrollment rate? And two are we talking more like seven, eight patients are almost getting to the end of the trial sort of data we'll have there? Just trying to get a feel for things.

Absolutely. Okay. And it was great seeing you last week. So the I&D amendment in the fourth quarter of 2022 was really excellent. It -- we took our learnings from the clinical trial in 2022 and just adapted. And so in the fourth quarter the updates included a combination of things. One is we combined what we had as separate protocols under treatment and screening combining that to one. And that really made the entire enrollment process a lot easier both for patients and for physicians. So I think it was well received by our PIs also well received by patients who are interested in this study. One in the details a little bit more is we no longer had a requirement for retesting of the tumor mutation. Previously, we had required a retest of the mutation if we had more than six months between the last test. What we learned and what we've shared previously is in our early learnings post-treatment biopsies we've been able to confirm that the mutation has remained present. And so we felt quite comfortable that since these driver mutations are at the core of cancer that mutation is going to remain. And so we eliminated that retesting aspect and that also really facilitated and eliminated a prior hurdle. So again taking our learnings. The other thing that we did is added cryopreservation. And let me tell you that just has made the predictability great. We talked about the ability of getting the patient cells earlier in their cancer journey. And that's allowed us to manufacture products in a very efficient way, freeze down the products and have that ready for the patients, if unfortunately other treatments fail them and they are ready for our treatment. And so, those are the learnings. That's the amendment that's really facilitated enrollment and has really kind of buoyed us and exciting. And I applaud all of you analysts were trying to figure out more detail of how many patients we've treated to the -- as we're trying -- I'm going to do my best though early in the morning to not answer that and leave you wanting more at the update in the third quarter if that's all right.

I wish you had one less cup of coffee this morning, Kevin, it would have been helpful. So, talking to Drew and a question for Drew, on the Hunter platform, it's great to hear that you can expand the platform to produce additional TCRs. So, in terms of trying to generate non-dilutive funding through partnerships, what sort of targets are you looking at, or can you give us any additional color as to how you are able to attract some partnerships or you're in the process of attracting additional partnerships?

Good morning, R.K. Thank you for the question. We are so proud of our Hunter platform and we have a very high success rate of TCR discovery. So we believe that as we explore partnership opportunities that would be attractive to a potential partner. We're able to look at multiple different targets. At the same time we're really focused on KRAS P53 and EGFR as part of our library expansion strategy. We can go after other targets as needed. It's important to note that the TCRs that we do discover are exclusively owned by Alaunos and are proprietary, so we could use those for TCR-T or for other treatment modalities. And so we're quite excited about that part of the Hunter platform as well.

What's nice about this platform as Drew is able and his team is identifying not just these driver mutations, but has the ability to identify many other assets that could be valuable for partnering and that sort of robust flexibility and power of discovery. And I think you also heard Drew highlight the fact that, there's been some recent implementations over there increasing the throughput. So the -- you can think about it two ways, they can either be discovering more things more quickly and processing more samples or you're getting more efficiency out of all the people that are on the team with the adoption of some AI tools and some adoption of new equipment and new processes. So the bioinformatics team is -- it's amazing how they harness the power of AI to really accelerate the throughput over there.

Thank you. One last question from me on the cash. So, did the release of the restricted cash, the $13.9 million. Is that included into the $37.4 million that you're talking about, or is that -- is this 13.9% in addition to the 37.5%.

Hi R.K., thanks for the question. The $13.9 million of restricted cash is included in the $37.4 million of total cash balances that we had as of March 31, 2023. And as mentioned earlier, our cash runway is expected to extend into the fourth quarter of 2023, which is in line with previous guidance.

Perfect. Thank you for taking all my questions gentlemen.

Thank you. We appreciate your participation in today's conference. This does conclude the program and you may now disconnect.