Earnings Transcript for ERYP - Q3 Fiscal Year 2023

Operator: Good day, and welcome to the PHAXIAM Therapeutics Business Update and Financial Highlights of Q3 2023. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would now like to turn the call over to Thibaut du Fayet, company CEO. You may begin.

Thibaut Fayet: Thank you very much. Yes, good morning to all of you. Thank you for joining for our conference call today, whose objective is to present PHAXIAM business and financial update. I'm here with Eric Soyer, our CFO; and also with Pascal Birman, our CMO. And three of us, we will perform this presentation and will be available for Q&A afterwards. We have disclosed yesterday evening a post-market press release. And you will find both with the presentation. These two documents can be found on the IR page of PHAXIAM website. Okay. If we are moving to the presentation, just as an agenda, we are proposing to first to make an overview on our strategy, PHAXIAM strategy, to do afterwards business update and clinical update. And then Eric will present the financial updates, mainly the Q3 financial results. And then we'll be ready for -- I mean, to answer your question. Okay. If we move on to PHAXIAM strategy on slide number five. Our ambition is really to create a global leader in phage therapy. And this ambition relies on different aspects. The first one is to position PHAXIAM as a global player. First, leveraging through clinical operations. And currently, we have been clearly positioned as the main European player. Within our pivotal trial, we have open site in France, in Spain and very recently, we opened also site in Germany, in Netherlands. It's why we are clearly positioned at the Europe in phage player. And thanks to ERYTECH base and team presence in the U.S. we are also having objective extending our position to the U.S. And I think that the first interaction we had with FDA is clearly demonstrating our ambition in the U.S. as a future global player. The second point, and I will come back to this afterwards, is ready to expand our clinical portfolio in high-value indication associated with severe resistant infection, for which we could claim for high price. But I will come back to this in a minute. The third point of this strategy is really to intensify BD activities and market access strategy. We consider a strategic alliance with complementary biotech in Europe and in the U.S., considering that in this industry there is a lack of economy of scale, and it's why we should leverage on alliance with competitor partners. And that's the first aspect. We are considering another example of this kind of alliance in the IVD industry as we have developed Phagogram, which is a kind of phage susceptibility testing capability. Here we are currently discussing with IVD strategic players to set up alliance. And I would also comment the market access strategy, which is a very important aspect. In Europe and mainly in France, we received the regulatory status related to compassionate treatment. And currently, we're in a position to sell our treatment for this compassionate use. Our strategy is really to extend this compassionate selling status in other European countries. It's not the case in all of them, but we could extend our revenues and also to be prepared for early access. Because thanks to this first regulatory status, we are eligible to early access, which could enable us to pre-commercialize our treatment once we have generated proper and robust Phase 2 clinical data. It means this market access consideration is of high importance to us. Then the fourth point relates to the implementation of a global manufacturing strategy. We are first -- our first objective is to consolidate existing industrial partnership, which are already in place with a strategic partner because we are currently outsourcing or manufacturing, but which is a major competitive advantage for our company so far due to the exclusivity that we have within this agreement and also with the very low cost that it's providing to PHAXIAM. Beyond this objective to consolidate this manufacturing partnership, we will develop a global manufacturing strategy in line with our international development. In other words, as we are currently considering for global clinical development, global Phase 2, Europe, U.S., we also have to adapt and to design a consistent manufacturing strategy to have access to U.S. capabilities. The last point, which is also important, is -- the ambition is to boost R&D capabilities and expand our phage platform. A few months -- a few weeks ago, we have disclosed that we are now working on the fourth target, which is Klebsiella, very complementary to the first three pathogen on which we are working. Beyond this, we are also extending our phage portfolio, our phage cocktail. And we're also preparing in research future development programs. We are at the preclinical stage working on bacteremia, which is a potential clinical indication on which we could develop candidates. Beyond this, we have also in research announced, as we were merging with ERYTECH, that we wanted to develop drug-based bacteria phage and bacteria phage derived enzyme endolysins, considering that endolysins are a very complementary technology pillar to phage to be developed. And it's what we are currently starting in research. And I would say, in any case again, to reinforce these capabilities, we intend to leverage on strategic research alliance. And I would say, as a whole on open innovation to accelerate and complement our internal research portfolio. And I would take an example on this. We have disclosed two months ago a strategic research alliance with Vetophage, which is a European biotech developing phage endolysins in the field of animal health and with which we negotiate option license rights at minimal cost, so that we can have access to more phage, more endolysins to be applied to human health. In a nutshell, that these are the main six important points on which we rely to develop this global leadership ambition in phage therapy. I would maybe comment -- the slide -- the following slide, which is slide number six, explaining our ambitious clinical strategy. The first point, we target -- and that's a change that we have explained when we merged with ERYTECH, I mean Pherecydes and ERYTECH six months ago, five months ago. The idea is really to target this high-value indication, targeting severe resistant infection with high unmet medical need. And this kind of indication may be associated with high mortality rates, to be decreased. Can take the example of endocarditis infection, for which we're this month initiating a clinical trial in Europe, and mainly in France. But also ventilated-acquired pneumopathies for which we are preparing also an investigator-sponsored trial, with mortality rates reach around 30% to 40%. It's been that here, there is a major medical -- clinical challenge to reduce this mortality. Another aspect is that we could target, and it's what we are doing, we are targeting high budget impact indication like PJI, Prosthetic Joint Infection. This indication has very high cost of surgery, rehabilitation cost and that the global budget impact for the health system is very high. And here, the objective is to reduce significantly the budget impact. So that we can claim high price, thanks to the mortality rate decrease or the budget impact decrease. That's the first aspect. The second point, our clinical strategy consists in accelerating our path to registration, as we can leverage on a large, and Pascal will come on this, large compassionate clinical data, compassionate real-life data demonstrating tolerance but also activity, demonstrating clinical benefits. And this enabled us to accelerate our plan, and it's why -- the first aspect is that we prepare the first global Phase 2 study for patients in Prosthetic Joint Infection as required there, or there, it's a standard of care, debridement, antibiotic therapy and implant retention. Our U.S. competitor currently are mainly positioned in the U.S. and they are not currently able to conduct a global clinical development. And it's why -- and we will come back to this, we received very recently an FDA feedback on our clinical plan. And we are currently in a position to prepare for global Phase 2 clinical development. And that's the first aspect. The second point is to say, in this move to registration that in Europe we could leverage after this Phase 2 on early access pathway in some European countries like France, Germany and some others, but independently on a potential Phase 3 or pivotal trial. That was the second aspect. And beyond this, we intend to gradually diversify our clinical portfolio towards the high-value indication, and to extend this portfolio to indication like endocarditis infection, which is the Phase 1 PK trial that we're initiating this month. Beyond this, we have also other options of the high-value indication for which we could consider clinical development. But what's important in this, I would say, first horizon is to remain a tight focus on this indication. These are the three main aspects of this clinical strategy. And I would move to -- and to move on the following slide, slide number seven. I would like -- before handing over to Pascal, our CMO, I would like to explain why we consider that Prosthetic Joint Infection, PJI, is a very high-value indication. First, because the standard of care is really insufficient as it remains challenging to treat. It requires heavy dose of systemic antibiotic in addition to surgery for many months, even at 10 years. The second aspect is that the unmet medical need remains very high. There is still a failure rate of the standard of care, standard of treatment, again, which is there at -- amounting to 50% -- 50%, 55%, and that there is important room for improvement. And for this indication, there is still a very high risk of reinfection, 60%; amputation, 11%; and even mortality at five years at around 25%. It's been that -- the level of unmet medical need is still very high, on the top of, I would say, a very high budget impact indication, but I will comment this. Then the third point making this indication as an attractive indication, it's a relatively high incidence in U.S. and Europe side. In '27, we are assessing the incidents amounting to 60k-70k patients. And of course, due to the aging population, this incident is growing. And to come to the last aspect, which is the high budget impact, it's still in U.S. and in Europe, a substantial economic burden. In the U.S., an average cost of treatment is in this range of $150,000. In Europe, it's, of course, at a lower price, but still in the range of €50,000 to €70,000, depending on the country. It's why the budget impact and the -- is massive, and the opportunity for reducing this burden is -- could enable our company to claim high price. And just I would like -- just as a conclusion on this, I would like to take a concrete example. Currently, in France, as we have this compassionate status and as we are supplying the physician and the patient with our treatment, we are selling our product. And we are selling our phage in the range of €20,000 to €30,000, still demonstrating our ability to price at a high level in infectious disease. It's why we consider that PJI, as a first lead indication, is very attractive, as the first indication. Okay. It's why I propose now to hand over to Pascal, our CMO, who will give a bit more detail regarding the last update of our clinical plan. Please, Pascal.

Pascal Birman: Thank you, Thibaut. So I hope everybody can hear me well. So I'm on slide number eight. So we got the feedback from the FDA on our first proposal for a PJI study and which confirm the regulatory pathway in the U.S. They confirm the value of the clinical development in this indication. And in particular, they confirm that our non-clinical and pharmaceutical current package is adequate to support clinical development in the U.S., which is, of course, of most importance. And also they provide clear development guidelines for a Phase 2 study in the U.S. We are waiting for also the feedback that we expect to get from the European Medical Agency, the EMA. We expect to get this feedback from a scientific advice meeting, which should take place in January next year. And based on both FDA and EMA feedback, we should be in a position to finalize the design of our next global Phase 2 study in prosthetic joint infection. If we move now to the next slide, slide number nine. In addition to this PJI indication, we have another important indication with our phages against Staphylococcus aureus, which is endocarditis. Endocarditis infection with Staphylococcus aureus where we are planning to start very soon the Phase 1 PK and safety study. This study will take place in patients who have infection due to Staphylococcus aureus endocarditis infection with an indication of surgery. And the objective will be, when we will administer the phages by intravenous administration to assess the concentration of these phages in the blood, but also in the valve, which is infected by the bacteria, to identify what is the optimal method to administer the phages by IV route, which will be important for the next efficacy data studies that we plan to perform in endocarditis, but also in potential other indications where there is a need to administer the drug also by IV routes. We already obtained the agreement from the French medical health authority, the ANSM, to perform the study, which will be performed in France. And we expect to get a first patient by the end of this year, with data expected by the middle of next year. If we move to the next slide, slide number 10. It is also important to understand that we can also, I would say, expect some good results from all these data from all these studies because we already have quite a substantial number of data from real-life administration of our phages related to compassionate access. Since 2017, we have treated more than 90 patients on this compassionate access. And actually since June 2022, we have obtained from the French agency an authorization for -- a specific authorization for compassionate access with our phages against Staphylococcus aureus in osteoarticular indications. And overall, we have now reviewed data from about -- from 77 patients, most of them treated for prosthetic joint infections due to either Staphylococcus aureus or Pseudomonas aeruginosa. And coming to this data, we can show that there has been no safety issue. No serious adverse reactions have been reported from the prescribers. And in terms of activity, in this population, which is in therapeutic impasse, which is a very severe population where previous treatments have failed, we have seen at least elements of activity in combination with antibiotherapy with about three quarters of the patients, around probably 75% of the patients, who have seen no recurrence of infection three months after administration of the drug, drug which is administered, for example, for PJI by intra-articular administration directly into the site of infection. So there's been also some publication of these individual cases, which has been performed in the literature. And so based on this data, we have some, I would say, quite promising data, which make us very confident about the outcome of the trials we are doing thus far. The last point I wanted to mention also on Slide 11 is about our Phagogram platform. Phagogram is an in-vitro diagnostic test, which is designed to assess the in-vitro activity of our phages on the patient's bacterial strains. So for our phages against Staphylococcus aureus, we have performed now more than 100 phagograms. We have two phages available against Staphylococcus aureus. And we have been able to show that quite all -- in all cases, actually, in 98% of the cases, at least one of the two phages is active in vitro against this Staphylococcus bacterial strength from the patients. So it demonstrates that we have a high spectrum of activity of our phages. And that probably in almost all patients, we are able to have at least one, in most of the cases, are two phages, which are active in vitro against this bacteria strains. So that's really a very competitive advantage. And this bacteria phage -- sorry, this phagogram platform also will help us also to develop other phages in the near future. I think I have completed my presentation. And then I hand over to Eric. Thank you.

Eric Soyer: Thank you very much, Pascal. Good morning, everyone. A few words on the key financial results at the end of Q3 this year. And indeed, we're on slide number 12 of this presentation, and we're starting with key highlights on the P&L. My first comment is that in the context of the ERYTECH-Pherecydes merger of PHAXIAM's consolidated financial statements include ex-Pherecydes financial results as from the date of the merger, which was June 23 this year, and consequently, PHAXIAM's P&L information for the first nine months of this year includes nine months of ex-ERYTECH activities and approximately three months of ex-Pherecydes activities, i.e., since June 23 this year. With that in mind, P&L highlights are very much in line with the comments we already shared at the end of Q2, which are a strong reduction in operating expenses, which were €18.6 million in the first nine months of 2023 and 40% lower, this is a €12.6 million reduction, than in the previous year. The decrease is driven by a sharp reduction, minus 67%, of R&D expenses, mostly related to the closing of ex-ERYTECH Princeton operations and the termination of ex-ERYTECH clinical development activities. In the same time, PHAXIAM's G&A expenses increased by €1 million, plus 9%, versus the previous year. And that increase was related to the merger transaction and other merger-related costs. Finally, net loss for the first nine months of 2023 was €17.9 million, compared with a net loss of €6.2 million for the same period of 2022. But 2022 benefited from the exceptional €24.4 million net gain on the sale of the Princeton facility back in April '22. We are now moving to the next slide, number 13, for the presentation of the cash position. As of September 30, 2023, PHAXIAM had cash and cash equivalents totaling €15.6 million, which is approximately $16.5 million, compared with €38.8 million as of December 31, 2022. This is a €23.2 million decrease in net cash position during the first nine months of 2023, which was the result of a €20.5 million net cash utilization in operating and investing activities, €2.6 million used in financing activities, mostly related to the reimbursements on schedule of the previous COVID loans. And the variation of the U.S. dollar against the euro led to a small €0.1 million negative currency exchange impact. The company believes that its current cash position can fund its current programs and planned operating expenses into the second quarter of 2024, which is exactly in line with the previous cash guidance we've given already several months ago. Now and before we move to Q&A, a quick summary of our key strategic priorities for the coming months and of coming key milestones. This is slide number 14 of the presentation. I'm starting with the bottom part of the graph on regulatory milestones. Thibaut and Pascal have already commented the feedback from the FDA, which we received very recently. This is the first and very important regulatory step which clarifies and opens a regulatory path for PHAXIAM in the U.S. And as previously discussed, we're now expecting to have a scientific advice meeting with the European agency, the EMA, which we expect to have in January. And on that EMA plus FDA basis, we'll be able to finalize our global U.S. and EU clinical development strategy going forward in the PJI indication. And with that in mind, we plan to be able to start a global Phase 2 clinical development in PJI in the second half of next year, as mentioned in the upper part of this graph on clinical milestones. Staying on the clinical front and closer to us, we're launching imminently a Phase 1 PK study in severe endocarditis infections, and that was already mentioned by Pascal. We expect to have the first patient in that study around year-end, with results approximately six months after, i.e., mid-'24. So to summarize, quite a significant new source for PHAXIAM in key clinical and regulatory milestones planned over the coming months. So stay tuned. With that, I would like to thank you already for your attention. We'll now open the call for any questions you may have. And operator, Michelle, it's over to you.

Operator: Thank you. [Operator Instructions] I'm not showing any questions. I'd like to turn the call back over to Thibaut for any closing remarks.

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Thibaut Fayet: Okay, Michelle. Thank you very much. So I hope that we have convinced you of the ambition of this clinical plan that we have. As a major event as a European biotech, I would highlight the very recent FDA feedback that we got confirming all the value of our clinical developments in PJI, but also in the U.S., considering that we have now really an option as a European biotech to conduct clinical development in the U.S., and being -- and preparing in that context, the first global trial Europe, U.S. for phage therapy. And that's our ambition, and that's still waiting for EMA feedback. But in any case, we are now anticipating the preparation of this future trial. I would like to thank you all for your attendance. And maybe we are potentially organizing -- we will organize another meeting for the final results presentation, final '23 financial results end of March. Goodbye. Thank you very much.

Eric Soyer: Thank you all. Thank you. Bye-bye.

Operator: Thank you for your participation. This does conclude the program. You may now disconnect. Everyone, have a great day.