Autolus Therapeutics Plc (AUTL) Q3 2019 Earnings Call Transcript – The Motley Fool

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Autolus Therapeutics Plc(NASDAQ:AUTL)Q32019 Earnings CallNov 07, 2019, 8:30 a.m. ET

Operator

Hello, ladies and gentlemen, and welcome to the Autolus Therapeutics 3Q 2019 financial results conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Silvia Taylor, vice president, global corporate affairs and communications.

Ma'am, please go ahead.

Silvia Taylor -- Vice President, Global Corporate Affairs and Communications

Thank you, Joanna. Good morning or good afternoon, everyone, and thank you for taking part in today's call on the financial results and operational highlights for the third quarter of 2019. I am Sylvia Taylor, vice president of global corporate affairs and communications, as Joanna just introduced me. With me today are Dr.

Christian Itin, our chairman and chief executive officer; and Andrew Oakley, our chief financial officer. Before we begin, I would like to remind you that during this call, we will be making forward-looking statements. All statements other than statements of historical facts contained in this presentation are forward-looking statements. Our actual results, performance or achievements may be materially different from those expressed or implied by the forward-looking statements.

For a discussion of the risks and uncertainties relating to our business and other important factors, any of which could cause our actual results to differ from those contained in the forward-looking statements, please see the section titled Risk Factors in our annual report on Form 20-F filed on November 23, 2018, as well as discussions of potential risks, uncertainties and other important factors in our other periodic filings with the SEC. The forward-looking statements contained in this presentation reflect the company's views as of the date of this presentation regarding future events, and the company does not assume any obligation to update any forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing the company's views as of any date subsequent to the date of this presentation. On Slide 3, you will see the agenda for today, and it is as follows: Christian will provide a brief introduction, and that will be followed by our operational highlights for the third quarter of 2019.

Andrew will next discuss the company's financial results, and then Christian will conclude with upcoming milestones and other concluding comments. And of course, we will welcome your questions following our remarks. So with that, I'd now like to turn the call over to Christian.

Christian Itin -- Chairman and Chief Executive Officer

Thank you, Sylvia, and good morning to all of you, and thank you for joining us. I'm pleased to review our progress in the third quarter of 2019, as well as some recent company highlights. On Slide 5, and as reported yesterday, we will have four oral and two poster presentations at ASH in December in Orlando. We are pleased that we will be presenting data across the majority of our clinical programs.

The focus will be on AUTO1 with three oral presentations alone. This coming weekend also, we will have a poster presentation with preclinical data on our first solid tumor program, AUTO6NG, at SITC. Turning to Slide 6. Let's start the discussion of our Q3 operational highlights with our highest priority program, AUTO1 in adult ALL.

We're pleased that earlier this week, the U.S. FDA granted AUTO1 orphan drug designation for treatment of acute lymphoblastic leukemia. Relapse and refractory B-cell acute lymphoblastic leukemia represents a significant commercial opportunity both in terms of the potential market size, as well as the high level of unmet need in the management of the disease. Worldwide, approximately 8,400 patients are diagnosed every year with about 6,000 of those patients coming from the U.S.

and the EU5 European countries. While response to initial combination chemotherapy regimen is encouraging, only 30 to 40% of adult ALL patients will achieve long-term remissions, and the median survival for adult patients with relapsed/refractory ALL is less than one year. While Kymriah, a CD19-targeting CAR-T therapy was approved for pediatric ALL patients in 2017, no CAR-T therapy has been approved for adult ALL patients to date. The only redirected T-cell therapy approved for adult ALL is blinatumomab or BLINCYTO, a bispecific CD19-targeting T-cell engager.

Blinatumomab has a 42 response rate -- 42% response rate, yet the durability of the responses is limited and its event-free survival is 31% at six months. Slide 7 shows that data from ASH abstract on ALLCAR19, our AUTO1 study in adults with recurrent refractory ALL. As of the data cutoff, July 24, 83% of the 12 of adult patients achieved MRD-negative molecular complete response at one month. In April of this year at the AACR Annual Meeting reported that a median follow-up of five months, six out of 10 patients were alive and disease-free.

As of July 24th, 2019, data cutoff, that number remains consistent with seven of 12 patients or 58% remaining in MRD-negative remission at a median follow-up of nine months. This MRD response is measured by both flow cytometry, as well as PCR. As reported, AACR also -- and also summarized on Slide 8, none of the adult patients and none of the pediatric patients developed high-grade CRS, although in our adult patients, half of them had 50% or higher blast counts in the bone marrow at the start of therapy, which puts them at high risk for developing severe cytokine release syndrome. By ASH, we will have four additional months of follow-up and additional patients evaluable.

As reported at AACR, we only have patients -- only -- had only one patients transplanted post therapy and no further patient received transplant since. During our oral presentation at ASH next month, Dr. Claire Roddie will present additional follow-up data, including safety and efficacy. On Slide 8, I would like to provide some context on how this data fits into the landscape of adult ALL therapy.

As you can see in both adult and pediatric ALL, AUTO1 is differentiated and has the potential to be best in class. I'd like to highlight the consistency between the pediatric and adult data sets we've seen so far. Both show high molecular complete remission rate without inducing Grade 3 or higher cytokine release syndrome or requiring admission to the ICU for treatment of high-grade CRS. Also, the level of high-grade neurotoxicity is low.

While this is especially significant for the adult population who cannot tolerate high levels of toxicity, it is also significant in the pediatric population due to the high rates of severe CRS seen with Kymriah in these patients. With respect to efficacy in adult ALL, the complete response rate of 83% and the 58% rate of patients who remain in molecular remission at nine months for AUTO1 as detailed in the ASH abstract compared well to blinatumomab. This suggests a product profile that is emerging to be clearly differentiated from Blincyto and from other CD19 CAR-T approaches. If these findings are confirmed in our registration trial, AUTO1 has the potential to set a new standard of care in adult ALL.

On Slide 9, I'd like to summarize where we are with AUTO1 in adult ALL. This program will be the first Autolus program to move to pivotal stage. We have received feedback on our current study design from both the EMA and the FDA, and we will file a clinical trial authorization or CTA in the U.K. this month.

The IND is expected to be filed in the U.S. in the first quarter. The trial will be a single-arm study of approximately 100 patients in morphological relapse among sites in the U.S. and Europe.

The primary end point will the overall complete response rate, including complete response and complete response with incomplete hematologic recovery. Secondary end points will include MRD-negative complete response and event-free survival. And based on this design, we're targeting the second half of 2021 for a BLA filing. Moving on to pediatric ALL on Slide 10.

As a reminder, pediatric ALL is the most common cancer diagnosed in children with about 3,400 new cases diagnosed in the U.S. every year. While pediatric patients respond well to first-line treatment, 10 to 20% relapse or are refractory to treatment. Our development track in pediatric ALL will focus on AUTO1NG or next generation, and the pediatric investigational plan are paid for AUTO1.

The data from our AMELIA trial of AUTO3 in pediatric ALL has informed us on the encouraging role of dual-target antigen targeting. With AUTO3, as you recall, we have had robust clinical efficacy, yet the durability of such responses required further improvement. Thus, we will be moving forward in pediatric ALL using the AUTO1 construct through the development of AUTO1NG, which incorporates the CD19 CAR of AUTO1 and a novel CD22 CAR. The hypothesis for this next-generation version is to combine the favorable persistence properties observed in AUTO1 with the promising effect of dual targeting observed in AUTO3.

We will be presenting data from our trials of both AUTO1 and AUTO3 in the pediatric population next month at ASH. Additionally, we expect to initiate clinical evaluation of AUTO1NG in pediatric ALL in the first half of 2020. Moving to Slide 11 on our program in diffuse large B-cell lymphoma. We believe that DLBCL is a large commercial opportunity, given the market size and the aggressive nature of this disease.

DLBCL is the most common type of non-Hodgkin lymphoma. Approximately 24,000 patients are diagnosed every year in the U.S. alone. High-dose chemotherapy, combined with a monoclonal antibody led to remission in about 50% to 60% of patients.

Thus, we expect that addressable population to be approximately 10,000 patients in the U.S. and EU5 combined. DLBCL represents an aggressive -- and is an aggressive and rapidly progressing cancer. For patients who relapse or are refractory to first-line therapy, the current standard of care for second-line therapy consists of platinum-based chemotherapy regimen with rituximab.

Patients who respond to second-line therapy may go on to receive autologous hematopoietic stem cell transplantation or HSCT. Patients who are not candidates for HSCT or those who do not respond to second-line therapy or who relapse after HSCT are typically treated with a third-line salvage chemotherapy. These patients have a poor prognosis, and treatment is generally palliative to try to prevent further cancer growth without the intent to cure. On Slide 12, our DLBCL product candidate, AUTO3, is a dual-targeting CD19, CD22 CAR-T therapy.

The ASH abstract published this week shows that based on interim Phase 1 data, AUTO3 is active and well tolerated with no high-grade CRS observed. We plan to present additional interim Phase 1 data at ASH. The first U.S. patient has been enrolled in this study, and product has been delivered from our new manufacturing operation at the Cell and Gene Therapy Catapult at Stevenage to both U.S.

and U.K. clinical sites. Our AUTO3 program is on track for decision mid next year to advance the program to Phase 2. Slide 13 and our -- describes our multiple myeloma program.

As reported in Q2, we have stopped AUTO2 and will now move to a next-generation program. The Phase 1 experience will be presented in a poster. We aim to initiate clinical testing with a new program in the second half of 2020. On Slide 14, finally, I would like to conclude with a brief discussion of two other programs in our pipeline because they have the potential to bring additional value inflection in 2020.

Slide 14 talks about our T-cell lymphoma program. Patient enrollment in our Phase 1 study with AUTO4 will continue in the first quarter of next year with supply from the Catapult. As a result, we expect to present initial Phase 1 data in the second half of 2020. Finally, on Slide 15, to our lead program in solid tumors.

At our R&D Day in March, we focused on the heterogeneity of the solid tumor microenvironment and how the complexity and dynamic nature of these tumors pose particular challenges for effective therapies. T-cell therapies can be tailored to combat tumor complexity, and programming modules can be added to enhance activities in solid tumors. At SITC this Saturday, we will now present preclinical data on our AUTO6NG program designed to target GD2-positive tumors. This abstract is important because it shows the impact of advanced cell programming technologies in a solid tumor setting.

By adding IL-7 receptor chimeric protein, AUTO6NG demonstrated improved CAR persistence, and by adding dominant-negative TGF-beta receptor II protein and the truncated SHP2 protein, modified T cells were better able to combat the immunosuppressive tumor environment. The abstract also shows that in vivo delivery of AUTO6NG in a challenging mouse model exhibited potent antitumor activity and extended survival, whereas the clinical activity shown with -- while the clinically active AUTO6 could not do that. Based on these encouraging results which demonstrate the feasibility, safety and efficacy of AUTO6NG, we plan on initiating a clinical study in patients with refractory/relapsed neuroblastoma in the second half of next year. We're looking forward to discussing these results with those of you who will be at SITC this weekend.

On Slide 16, I want to share a few other updates before I turn the call over to Andrew to discuss our financials. On the manufacturing side, the Catapult site is fully operational and delivering all our clinical products for patients in both Europe and the U.S. In September, PPF Group announced that they had acquired mainly from Woodford Investment Management, an approximate 19% holding of Autolus. And control of all the remaining shares of Autolus by Woodford Investment Management are in the process of being transferred to Schroder UK Public Private Trust plc.

Finally, with regards to organizational changes, we announced last month that David Brochu has been named senior vice president, head of product delivery, to lead the transition of the company's manufacturing organization to deliver products for registration studies and ultimately commercial sale. Dave has 30 years of technology operations and engineering management expertise in the biopharmaceutical industry. He joined Autolus in March 2019 as vice president, technical operations. In addition, Vishal Mehta was named vice president and head of clinical operations throughout the transition of the company to move into the registration studies.

Vishal joined Autolus in January 2019 from Celgene, where he had the planning and execution of multiple clinical studies for CAR-T products. We're happy to be working with both of them in these expanded capacities. With that, I will turn the call over to Andrew for our third-quarter 2019 financial update. Andrew?

Andrew Oakley -- Chief Financial Officer

Thanks, Christian, and good morning or good afternoon to everyone. It's my pleasure to review our financial results for the three-month period, July through September of 2019. On Slide 18, net total operating expenses for the three months ended 30 September 2019 were $35.6 million. That was net of grant income of $0.3 million, and that compares to net operating expenses of $17.1 million, also net of grant income of $0.3 million, but that's the same period in 2018.

The increase was due, in general, to the increase in development activity, increased head count primarily in our development and manufacturing functions and the cost of being a public company. Research and development expenses increased to $27.3 million for the three months ended 30 September 2019 from $10.1 million for the three months ended 30 September 2018. Cash costs, which exclude depreciation, as well as share-based compensation, increased to $21.6 million from $9 million. The increase in research and development cash costs of $12.6 million consisted primarily of an increase of compensation-related costs of $5.2 million due to an increase in employee head count to support the advancement of our product candidates and clinical development, an increase of $3.6 million in research and development program.

Expenses related to the activities necessary to prepare, activate and monitor clinical trial programs, including the manufacturing and technical transfer activities required for AUTO1 to enable the commencement of the registration study in adult ALL and an increase of $2.6 million in facilities costs supporting the expansion of our research development, translational science capability and investment in manufacturing facilities and equipment, and lastly, an increase of $0.7 million in telecom software costs, as well as an increase of $0.5 million elsewhere. General and administrative expenses increased to $8.6 million for the three months ended 30 September 2019 from $7.3 million for the three months ended September 30, 2018. Cash costs, which again exclude the depreciation expense and share-based compensation, decreased to $5.6 million from $5.7 million. Compensation-related expenses decreased by $0.6 million.

IT, communication, general office expenses decreased by $0.7 million, and that was offset by legal and professional fees of 0.9 million and an increase of 0.3 million in very preliminary commercial expenses. Net loss attributable to ordinary shareholders was $27.2 million for the three-month period compared to $12.9 million for the same period in 2018. The basic and diluted net loss per ordinary share for the three months ended 30 September 2019 totaled $0.61 or 61 cents compared to a basic and diluted net loss per ordinary share of $0.33 for the three months ended 30 September 2018. Cash and cash equivalents at the end of the period totaled $229.4 million, and that compares with $247.1 million at the end of September in 2018.

And we anticipate that cash on hand provides us with the runway into the second half of 2021. With that, I will now hand the call back to Christian to give you a brief outlook on our expected upcoming milestones. Christian?

Christian Itin -- Chairman and Chief Executive Officer

Thank you, Andrew. Let me conclude this part of the management discussion with a review of the upcoming milestones and news flow through 2020. Let's move to Slide 20. The upcoming 15 months will be an eventful period for us with multiple clinical milestones and opportunities for value creation.

Our chief operational focus will be our moving AUTO1 in adult ALL into registration trial in the U.K. and U.S. We also expect to report data across various programs and to progress a number of our other clinical candidates, specifically updates on our ongoing clinical trials, initiation of a Phase 1 study of AUTO1NG in pediatric ALL in the first half of next year, a go/no-go decision on Phase 2 initiation of AUTO3 in DLBCL middle of 2020, initiation of a Phase 1 study of AUTO6NG in neuroblastoma in the second half of 2020 and initiation of a Phase 1 study in the next-generation program in multiple myeloma also in the second half of 2020. In conclusion, on Slide 23, I'd like to recap the major messages from today's call.

First, AUTO1 is our foundational program and the first Autolus program expected to move into pivotal stage. Given the positive safety and efficacy profile today, we believe that AUTO1 has the potential to be a best-in-class CD19 CAR T in ALL. Secondly, our next priority is on AUTO3 in DLBCL with AUTO3NG as a next-generation opportunity. We expect to report full Phase 1 data for AUTO3 in middle of 2020 to reach a decision point on Phase 2 trial initiation thereafter.

Third, in the pediatric ALL, we have transitioned our focus on AUTO1 and AUTO1NG. While AUTO3 data confirmed the dual-targeting hypothesis, we believe the excellent persistence with AUTO1 is likely to drive long-term remissions. Looking ahead to 2020, we see opportunity for additional value steps for multiple myeloma, T-cell lymphoma and the GD2-positive tumor programs. The company has a strong balance sheet with 230 million in cash, which provides a run rate to the second half of 2021.

And finally, we're looking forward to seeing many of you at the upcoming SITC and ASH Annual Meetings. We'd now like to take your questions. Operator, please open the line.

Operator

[Operator instructions] Your first question comes from the line of Gil Blum from Needham & Company. Your line is open.

Gil Blum -- Needham and Company -- Analyst

Thank you for taking my question. Just a quick one about -- so AUTO6NG data that's coming out at SITC, we know that this is kind of a mix of T cells that were transected with two different vectors. What kind of analysis would you have to do in a product that's this complex before using it in human? Like, how would the product be defined?

Christian Itin -- Chairman and Chief Executive Officer

Well, first of all, thanks for joining, and thanks for your question. Obviously, what we're doing with AUTO6 is we're introducing a substantial amount of genetic information into a single cell. And that is actually a level of genetic information that you cannot deliver with a single vector. So you have to use two vectors to do that.

And this is now actually an approach that's been used in a number of programs that have gone through regulatory review and are actually currently the clinic for other types of indications and obviously have gone through the normal regulatory process and are active in development. Ultimately, what you have to show is you have to demonstrate the activity of the product as is and you design your safety studies, etc, to really understand the activity of the product as a whole. We have to understand, obviously, also that even when you look at a product that is transduced to the single vector that we have multiple types of differentiation state of T cells in there, which gives you quite a wide range of properties of these cells, just based on the differentiation state. So the products are complex to begin with.

And the programming on itself, we don't believe will add a significant element on top by adding the two vectors in of themselves. Vectors are designed to -- all of them actually recognize the target antigen so that the basic activity is actually shared among all transduced cells.

Gil Blum -- Needham and Company -- Analyst

All right. Maybe a bit of an odd question, but if Kymriah or ever used off-label in adults ALL? Is that -- anyone does that?

Christian Itin -- Chairman and Chief Executive Officer

Well, what we do know is that the products, obviously, are not part of the normal payment process that you can actually get -- actually have them used in. If they're used off label or not, that's difficult for us to tell. There's certainly a possibility within oncology for products to be used off label, but it's something we can't judge. And I don't think there's any information out there on what it might be and how many patients might actually be impacted.

Gil Blum -- Needham and Company -- Analyst

Got you. And just the last one. I know we're getting an update on AUTO2, but when could we expect updates on the new program in multiple myeloma?

Christian Itin -- Chairman and Chief Executive Officer

Yes. So the next-gen version for the multiple myeloma program we expect to update when we're actually entering into clinical trials and obviously, during the course of next year have opportunity to provide an update on the design of the program, and we'll do it at that point in time.

Gil Blum -- Needham and Company -- Analyst

Thank you for taking my questions and congrats on the quarter.

Christian Itin -- Chairman and Chief Executive Officer

Thank you so much. Thanks for joining.

Operator

Your next question comes from the line of Jim Birchenough from Wells Fargo. Your line is open.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Hi guys, thanks for the call and congrats on the progress toward the AUTO1 pivotal. Just on that pivotal question, could you maybe speak to, No. 1, are there going to be any entry criteria whether it's tumor burden or other features that will reduce the risk of severe CRS or neurotoxicity? And then maybe if you could discuss what the efficacy hurdle is there, if there's some lower bound of the confidence interval you need to shoot for at some point estimate of response, just so we have a frame of reference. And then I've got a follow-up.

Christian Itin -- Chairman and Chief Executive Officer

Yes. First of all, thanks for joining, Jim. With regards to the pivotal study that we're planning to do here, obviously, when you look at the inclusion criteria, we're including patients that actually are in formal relapse. And in other words, these are patients that have more than 5% blasts in the marrow, which is kind of when you have a morphological relapse.

So all these patients have manifest disease, and obviously, given the speed at which the disease moves, can actually have quite a range. And as you see with the data that we have shown at AACR and we'll update at ASH, and approximately half the patients have a massive level of tumor burden, but all patients are in formal relapse.

Jim Birchenough -- Wells Fargo Securities -- Analyst

And just in terms of the efficacy hurdle?

Christian Itin -- Chairman and Chief Executive Officer

In terms of the efficacy hurdle, when we look at the current programs, you'd expect and you'd see kind of well from our own programs that we've shown today is that you want to show a robust molecular complete remission rate because that's your entry ticket for a transformational activity. And then, obviously, you want to have durability of effect. So, we would clearly want to improve substantially over and above the durability of effect that we've seen with blinatumomab in this patient population. Remember that was 31% at six months.

We believe that we want to see somewhere in the range of the double of that at that point in time.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Terrific. And then just on AUTO3 and the go/no-go decision in DLBCL in mid-2020, is durability of response going to be the key there? Or maybe you could speak to what the criteria are for go/no-go. And I guess if there was a durability that was adequate in ALL, is there something different about DLBCL where you might still get away with a win there? Just trying to understand the go/no-go.

Christian Itin -- Chairman and Chief Executive Officer

Yes. The disease settings are quite different between leukemia, acute leukemia and DLBCL. What we need to be able to do in leukemia is we need to be able to put pressure on the tumor for very long periods of time. We're talking 18 months, 24 months to get to transformational activity, and we're actually going to be showing kids that are now really long-term -- have long-term observation on the AUTO1 experience.

When you look at DLBCL, it is quite different. What you need to induce is you need to induce a complete remission. And typically, the complete remission that you can induce and observe at three months or at the latest at six months depending on the program is a very good measure for long-term benefit in that patient population. And the effect that it can induce is, obviously, one that happens relatively quickly, usually within three months' period of time.

Most of those patients have accomplished or have achieved their CR. And at that point, most of the patients, if you look at the Yescarta data, the JCAR-17 data, the Kymriah data, this can actually sustain that activity. And so what we want to see is, we want to see a robust CR rate, as well as, obviously, have a good sense for the durability of those CRs as well at that point in time.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Just a final question, Christian. Reimbursement -- inpatient reimbursement for Kymriah and Yescarta has been difficult from what we've heard, and we've heard from a number of consultants that the move to outpatient is going to be really important in advance of getting some CAR-T specific reimbursement code for the inpatient setting. And so how important is it to you to have features in your cell that lend themselves to outpatient delivery? And is there some way to incorporate that into a trial design?

Christian Itin -- Chairman and Chief Executive Officer

I think it is important when you think about the overall cost of therapy, obviously, there is the actual cost of the therapeutic itself, of the drug itself, but there's also a significant cost associated with managing the patients. And obviously, the more severe your adverse events are, the higher the costs are for the management of the patients. And what cause challenges, particularly in DLBCL reimbursement in the U.S. and elsewhere, is that that portion of patient management cost was initially not properly covered.

And that caused the major issue for the hospitals who were treating these patients. That is now actually being resolved. It's also in part resolved for the Medicare patient, but it remains a significant driver of the overall cost of therapy. So actually, having products that have no high-grade CRS, cytokine release syndrome, that have limited or minimal neurotoxicity is important because it allows you to actually consider giving the patient the therapy and then actually have the patient in an outpatient setting from there on forward.

And as you see with all the programs, it is a progression in terms of the information and the experience you have with the product. What you want to make sure is that it captures much information related to that intensity of patient management during the course of your pivotal study even if your patients are initially mostly treated as inpatients, and then obviously with increased experience of the products, will move more toward an outpatient setting. But it's absolutely crucial to collect that information also when you have conversations with payers because it is a key element of the value assessment as well.

Jim Birchenough -- Wells Fargo Securities -- Analyst

Well, thanks for taking the questions.

Christian Itin -- Chairman and Chief Executive Officer

Thank you very much.

Operator

Your next question comes from the line of Matt Phipps from William Blair. Your line is open.

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Autolus Therapeutics Plc (AUTL) Q3 2019 Earnings Call Transcript - The Motley Fool