Atara Biotherapeutics, Inc. Q3 FY2023 Earnings Call

Good morning, everyone, and welcome to Atara’s conference call to discuss our expanded tab-cel global partnership with Pierre Fabre Laboratories and our third quarter 2023 update. Earlier today, we issued a press release announcing this partnership and our third quarter financial results. This press release and an updated slide deck are available in the Investors & Media section at atarabio.com. Joining me on today’s call are Dr. Pascal Touchon, President and Chief Executive Officer; and Eric Hyllengren, Chief Financial Officer. We will begin with prepared remarks, then open the call for your questions. We would like to remind listeners that during the call, the company’s management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in today’s press release and the company’s SEC filings. These statements are made as of today’s date, and the company undertakes no obligation to update these statements. Now I’d like to turn the call over to Pascal.

Thank you, Alex, and thank you all for joining us this morning. Today, we announced the global expansion of our tab-cel partnership with Pierre Fabre Laboratories. We are already successfully launching this product across Europe. In parallel, we announced a strategic restructuring that together with the expanded tab-cel partnership will extend Atara’s planned cash runway into Q3 2025. This positions us well to continue building the value of our pipeline, including through anticipated clinical milestone for ATA188 with the EMBOLD readout in early November as well as initial data for the ATA3219 program in lymphoma. Now I’ll start by covering the details of the partnership and strategic restructuring, followed by upcoming clinical milestones. After a competitive process, with significant interest from across the spectrum of large pharma, midsize pharma and biotech companies, we are excited to announce an expanded partnership with Pierre Fabre to commercialize tab-cel in the U.S. and all remaining global markets. This moment signifies the pivotal transition in Atara’s evolution. We are now optimally positioned as a nimble allogeneic T cell immunotherapy company with near-term catalysts and the opportunity to advance a pipeline of differentiated therapies across a range of oncology and autoimmune indications from our proven EBV T cell platform. We sought a partner that is committed to deliver tab-cel, a product with life-saving potential, to U.S. and global patients. In parallel, we pursued a deal structure that meaningfully reduces our cash burn over the next 2 years and provides Atara and shareholders with significant value, both through short-term cash and potential milestone payments and long-term significant double-digit royalties. Pierre Fabre brings substantial and demonstrated capabilities, evidenced by the successful launch of tab-cel, branded as Ebvallo, in European markets. We have found them to be committed collaborators in expanding our partnership for tab-cel to reach as many patients as possible worldwide. Specific to the U.S., which is the largest commercial opportunity, Pierre Fabre is in a strong position to succeed, strengthening their U.S. presence with tab-cel as their flagship product and building on their marketing experience in Europe. Now for the specifics. Atara will receive up to $640 million in additional consideration, plus significant double-digit tiered royalties on net sales. As part of the deal, we will receive approximately $30 million at deal closing in upfront and inventory purchases and $100 million more in potential regulatory milestone payments through potential BLA approval. In addition, Pierre Fabre will reimburse Atara for expected tab-cel global development costs through BLA approval and will purchase existing and future tab-cel inventory on the BLA transfer date. Substantially, all tab-cel manufacturing, regulatory and development activities are targeted to transition from Atara to Pierre Fabre at the time of the BLA approval transfer. We remain confident that tab-cel represents a significant business opportunity with several hundred EBV+ PTLD addressable patients in the U.S. alone, who could benefit from this potentially life-saving therapy with a favorable safety profile. With significant pricing potential based on its value for patients and health care systems in such an ultra-rare disease, we believe that tab-cel has the potential to deliver U.S. peak sales of over $500 million per year following potential label expansion from the multi-cohort study. With future sales milestones and significant double-digit royalty through our agreement with Pierre Fabre, we believe U.S. tab-cel commercialization will progressively grow future revenues for Atara over the term of the agreement. As we continue to evolve as an organization focused on developing innovative allogeneic cell therapies for cancer and autoimmune disease, we are undertaking a strategic restructuring to reduce our current workforce by approximately 30%. The benefits of the expanded tab-cel partnership and the restructuring are anticipated to reduce our planned cash expenditures from 2023 levels by approximately 40% or $100 million by the end of ‘25. I would like to extend my sincere gratitude to all Atara staff both those who are continuing to the next phase of Atara and those departing for their unwavering commitment to the patients’ lives we seek to transform and their significant contributions in advancing truly innovative medicine for patients in need. Thank you for what you have done to get us where we are today. We believe these actions, when combined with cash of approximately $102 million on September 30, 2023, and certain anticipated payments from the expanded tab-cel commercial partnership will be sufficient to fund Atara's planned operations into Q3 2025. This will position Atara well to deliver multiple anticipated clinical milestones, including the early November EMBOLD data readout as well as key data readout for the ATA3219 program in lymphoma and potentially in autoimmune disease. On the regulatory front, we are encouraged by the recent positive FDA assessment of comparability that supports pulling the pivotal clinical data from different process versions of tab-cel in the BLA submission expected in Q2 2024. We now have a clear plan for the clinical data package, and the expected BLA submission timing aligns with our filing strategy to include the latest pivotal ALLELE study data for inclusion in and to support both the pre-BLA meeting and anticipated BLA filing package. We’re also excited to disclose initial data from our Phase II multi-cohort study with various EBV+ cancers in December at ESMO I-O. Now on to ATA188, a potentially transformative therapy for people living with progressive multiple sclerosis. The primary analysis readout for the Phase II double-blind, placebo-controlled EMBOLD study is on track for early November, which will include the primary outcome metric of confirmed disability improvement by EDSS and relevant imaging and free biomarkers for more than 90 patients. This includes a number of patients that enrolled earlier in the study and have been evaluated beyond the primary endpoint of 12 months at 15, 18, 21 and 24 months. The EDSS data from these later time points will be analyzed as part of the primary analysis and may give a sense of ATA188's impact on EDSS stability and progression, which usually requires longer follow-up time to assess the disability improvement. Our goal is to disclose sufficient study data to allow investors to estimate the potential value of ATA188 in non-active progressive MS. As a reminder, significant unmet need remains in progressive MS, especially in non-active progressive MS, which represents the vast majority of the progressive MS population and is a focus of the EMBOLD study. There are no approved therapies right now that have demonstrated disability improvement for non-active progressive MS. The currently approved therapies only demonstrate more the slowing of disability progression with an approximately 6% difference versus placebo that is primarily driven by patients with active disease. As a result, anything better than a range from more slowing of progression to stabilization of disability to trends for disability improvement to significant improvement is potentially transformative and sets up robust clinical development opportunities, including potential pivotal Phase III trials. Finally, we are progressing with our potential best-in-class allogeneic CAR-T assets, which could play a foundational role in our portfolio moving forward. We will focus resources in the near term on clinical development of ATA3219 following recent IND clearance and on preclinical activities for ATA3431, a CD19, CD20 targeted CAR-T. While these are the programs that have the highest potential for value creation over the next 2 years, we will also continue to strategically invest in other attractive targets and platform enhancements. With respect to ATA3219, our allogeneic CAR-T for B-cell malignancies expressing CD19, we are progressing towards activating study centers and starting to enroll patients in the coming months in the Phase I study in relapsed or refractory B-cell NHL. We expect preliminary clinical data in the second half of 2024. We are particularly excited to bring this allogeneic CD19 CAR-T asset to the clinic as it has been optimized to offer a potential best-in-class product profile, featuring off-the-shelf availability and clinically validated technologies like the 1XX signaling domain associated with favorable response rates and durability, enrichment for less differentiated T cell memory phenotype for improved clinical responses, and retention of the endogenous T cell receptor, which may serve as a crucial survival signal for T cells. We are also pleased that ATA3431, an allogeneic bispecific CAR directed against CD19 and CD20 built on the EBV T cell platform with the 1XX costimulatory domain is moving into IND-enabling studies with a competitive profile. Compared to an autologous CD19, CD20 CAR-T benchmark, technical data demonstrate potent antitumor activity, long-term persistence, and superior tumor growth inhibition. This has been accepted for poster presentation at the upcoming ASH meeting in December. Beyond oncology, there has been high interest recently in the potential of CAR-T cell therapies for autoimmune diseases, with remarkable results from early data in patients living with severe respiratory diseases such as lupus. At Atara, we have believed for a while in the important role cell therapy can play in addressing autoimmune conditions. With ATA188, Atara is pioneering the use of allogeneic T cell immunotherapy in neurological autoimmune conditions. Building on this experience, we are actively considering options best suited for allogeneic CAR-T therapies in autoimmune diseases. Our EBV T cells have compelling potential benefits like persistence and favorable safety with no requirement for complex genetic editing. Specifically, they possess a memory phenotype that can expand and traffic to sites of disease, providing a versatile platform with off-the-shelf accessibility that can address several potential shortcomings of other approaches. To that end, we are actively progressing efforts toward the potential IND to evaluate ATA3219 in autoimmune disease in parallel with NHL development. More to come on that soon. To close, we’re excited about the near-term opportunities for Atara to demonstrate the potential of our pipeline. We are approaching one of the most exciting milestones in Atara’s history with the primary analysis result of the EMBOLD study very soon, and we are now well capitalized with a planned cash runway into Q3 2025 to pursue our potential best-in-class portfolio of CAR-T assets in areas of great unmet need where we believe we can make the biggest difference.

Our first question is from Salim Syed with Mizuho.

Congrats on the deal. Just a couple for me, if I can. One on the process. Pascal, you mentioned that there were large pharma players involved here. Just curious, the rationale to go with Pierre Fabre, was it just more operational that you wanted just one partner globally? Was that just really important to you? Or was it also financially driven that Pierre Fabre actually offered greater economics? And then second, just on the $500 million number that you put out for U.S. peak sales, just curious if you could break that down for us, even ballpark-wise. How much of that is for the first indication EBV for PTLD? And just what portion of the $640 million in milestones could you get just on the first indication alone potentially? Ballpark would be helpful.

Thank you, Salim, for your questions. The first topic is the competitive process, which involved a combination of big pharma, mid pharma, and biotech. Our decision was influenced by three main factors. First, the financial aspect was crucial, not just the upfront payment, but significantly, the ability for our partner to progressively take over activities and immediately assume the costs associated with tab-cel. This was vital as it allows us to concentrate our funds on developing MS and allogeneic CAR-Ts. Second, the commitment level demonstrated by this particular partner during the process and due diligence was important. We have experience with Pierre Fabre and know they are dedicated to the success of Ebvallo in Europe. Lastly, working with a single partner simplifies management on our end as a biotech company. While it wasn't the primary decision factor, it remains a significant consideration, especially when the financial terms are favorable in terms of cost coverage and bolstering our balance sheet. Additionally, having a partner that is genuinely committed to making tab-cel their flagship product in the U.S. means they will invest all their efforts into it. Now, regarding your second question, the $500 million peak sales figure is associated with different indications. The first one is second-line PTLD - EBV+ PTLD, along with other indications from an upcoming multi-cohort study. We will have preliminary data presented at ESMO I-O in December. This illustrates how the $500 million peak sales potential is gradually built in the U.S. from our commercial perspective. Concerning sales milestones, they are not tied to any specific indication but are general sales milestones. While we won't go into specific details, we believe these milestones are achievable based on the product's potential and the means to reach that potential. Does that answer your question?

Got it. Sort of. I’m happy to rephrase it if that’s okay. But if you can’t answer, I understand that as well. I guess I just want...

We cannot disclose more on the milestone; that’s my point.

Okay. I guess just for the $500 million, though, how much of that is weighted on the first indication alone, I guess, is the question.

I think it’s a significant part because we always say it’s several hundred patients in the first indication. We also say that we have a significant pricing potential based not only on the expenses in Europe, where the listed price is about $640,000 or the equivalent of $640,000. Usually, the difference between the U.S. and Europe is about 30% to 40% for this type of product. It gives us an idea. We don’t know what Pierre Fabre will take as the price, but we’ve been discussing that with them, and we think they will try, like they are doing in Europe, to optimize the pricing potential in line with the value that the product is giving to patients and health care systems. We’ve had many discussions as Atara with payers in the U.S., and we know exactly what the price sensitivity is and what price will be considered acceptable to offer significant coverage of the patients. So we’re confident about the number of patients and the price, and we believe that by itself, this is going to create a significant part of that $500 million.

Our next question is from John Newman with Canaccord Genuity.

And congrats on a nice deal here. So my question is regarding the tab-cel regulatory process. I’m just curious, Pascal, if you could just give us an update on the new clinical data or the additional clinical data that will be included when you file the application in 2024.

Yes, certainly. So when we reached the alignment and agreement on comparability, we could then organize a new data cut for the ALLELE study, the pivotal study. That has been ongoing in October. Now we’re going to have all the typical time needed to get the data clean, to get the I-O array, the independent review of the scans, and so on. This will give us a new set of data compared to what we presented in December '22 at ASH on 43 patients. This new set of data will then be, in the typical way, put together, presented through the agency pre-BLA meeting, and then moved on to the BLA submission. The time needed is really the time to clean up the data. We’re very confident in this data for many reasons. One reason is about the fact that whatever the type of study, whatever the process versions we’ve used in the past, we’ve treated more than 400 patients with tab-cel across different diseases, and more than 260 patients in PTLD, EBV+ PTLD. We have a very significant data package and experience. But whatever the study, whatever the process versions, we always have found similar results from an efficacy and safety point of view. So very similarly, efficacy and long-term efficacy with good persistence of the response and, of course, favorable safety. That’s why we feel extremely confident about this new data that will be put together and discussed with the agency. Does it answer your question?

It does. I just had one additional question on ATA188. Just curious, obviously, the data will be coming here shortly, but wondered if you could discuss your thoughts on the commercial plans for that product; if you’re considering a partnership, if you’re planning on marketing the product on your own, if perhaps partnership is being considered for only Europe. Just curious there.

Thank you for your question. It depends on the next steps. If we move to Phase III, as previously disclosed, we've had discussions with the FDA regarding the type of Phase III studies they expect. They mentioned two Phase IIIs, one for non-active PPMS and one for non-active SPMS, primarily due to the differing medical needs in the U.S. There is currently no approved therapy in the U.S. for non-active SPMS, while there is one for non-active PPMS, which is OCREVUS. This difference influences the medical necessity based on our Fast Track designation and potential Breakthrough Therapy designation later on. We will consult with the agency on these two Phase III studies along with a Phase II program targeting earlier stages of MS and possibly other autoimmune conditions. We believe these significant clinical development efforts would benefit from a strategic partnership that can provide the necessary financial and operational support to conduct these studies simultaneously. Our intention is to seek a partnership that is not just a pure licensing agreement, but rather a strategic co-development arrangement, potentially including options for other activities, especially in the U.S. This approach aims to expedite the next stage of development while preserving significant value for Atara. We have previously mentioned that a partnership with profit-sharing, particularly in the U.S., which represents about 75% to 80% of the global market for MS, could be advantageous for the company and our shareholders. It's still early to define the type of partnership and its implementation, but it is something we have been actively exploring and discussing with numerous major pharmaceutical companies over the past couple of years.

Our next question is from Phil Nadeau with Cowen & Company.

Let us add our congratulations on the expanded partnership. A couple of questions from us. First, in terms of the royalty that you’re going to get from Pierre Fabre, can you give us any more information on the magnitude of that royalty? Is it a greater royalty in any sense of the royalty range? And then second, a follow-up on the EMBOLD trial. Could you talk us through your current thought process on how you would frame the go/no-go decision post-EMBOLD data? What do you need to see in EMBOLD to advance 188 into those two Phase III trials?

Thank you for your question. Unfortunately, we cannot provide more details than significant double-digit tiered royalties, and our partner, Pierre Fabre, is not willing to disclose the royalty level. We are very pleased with that deal. Regarding your second question about the different scenarios, as we have explained before, we believe that if we have significant statistical results alongside impactful clinical results showing a percentage of confirmed disability improvement in active versus placebo with a significant p-value, we would consider moving into Phase III. However, it could also be the case that even without a significant p-value but with a strong trend supported by additional data from other clinical measures or imaging biomarkers like MTR, we could also make a case for advancing to Phase III. A scenario where we would not proceed to Phase III in this specific indication would involve having evidence of effect but needing further study, such as continuing the 2-year study or gathering data on stability in a larger patient population. Even if we have evidence of stability and the potential to limit disability progression, we might want to include more patients reaching the 2-year mark. Additionally, if we observe strong signals in certain patient subgroups, that could necessitate further work for EMBOLD, whether it’s an expansion or continuation of EMBOLD or other studies. The best way to answer your question is that if we see statistical significance or a strong trend supported by biomarkers and other data, we have a clear path to Phase III after our end of Phase II meeting with the agency and receiving scientific advice in Europe. If we observe evidence of effect, which would already be a significant and transformational finding since no one has demonstrated such evidence in a large study, that could provide a significant signal to further explore or continue the study until its conclusion. That particular scenario will require additional work, but we are well positioned to undertake that.

Our next question is from Jonathan Miller with Evercore ISI.

Congrats on the tab-cel deal. We’re really looking forward to the MS data coming out, obviously. I would love to get a little bit deeper into the, I guess, the pipeline and the runway from here. So you mentioned there are certain anticipated payments included in the cash runway to 2025. Is BLA approval included in that runway? For instance, what are the certain anticipated payments that you’re counting explicitly? And what are you not counting? And secondly, how much of the CAR-T program, the oncology program trial initiations are counted in the runway? And how much of those trials are covered versus not covered with your current expectations?

Thank you for your question, Jon. Regarding the expected payment from the deal, this revolves around the regulatory milestone. It's not just about the milestone at approval; there are several steps that, if completed successfully, will be associated with payments. That's why we refer to the $100 million regulatory milestone associated with BLA approval. While it does include BLA approval, it's not the only milestone. There are various milestones before the BLA approval that could result in payments from Pierre Fabre, based on our regulatory progress. For your second question, our cash runway expectation incorporates the initiation of our lymphoma study with ATA3219. We're also beginning the study in autoimmune diseases, as we see significant potential for this product in conditions like lupus, and we are actively working on that. This expectation also encompasses the IND-enabling studies for 3431, which is an exciting, competitive allogeneic CAR-T targeting CD19 and CD20. Additionally, EMBOLD is ongoing; although we will soon present the 12-month results, the study will continue for up to two years. Several patients have already reached the two-year mark, but many others have not. We will be able to continue until next year. All of this is part of the expenses, and it's important to note that expenses related to tab-cel are mostly covered by Pierre Fabre. Does that address your question?

Our next question is from Salveen Richter with Goldman Sachs.

This is Tommie on for Salveen. And congrats on the deal. So with the closing in December and the workforce reduction, can you kind of walk us through what the financial impact will be into year-end, if any? And on the MS release, how much detail do you expect to provide here? Will it be more so just p-values? Or could we actually see the trends in more quantitative measures too?

Eric, do you want to take the first question? I’ll take the second one.

Yes, definitely. Tommie, we signed the deal, but we will go through the typical HSR review, which we do not anticipate being an issue. This leads us to the effective date in December. The advantages from the upfront payment and inventory purchases will materialize around the end of December or early January, depending on the payment terms. Regarding the 30% workforce reduction, while we will see the benefits of a lower headcount, this will be somewhat counterbalanced by severance for those affected. I expect the main benefits to start in 2024, followed by additional improvements in 2025 as we completely transition regulatory development and manufacturing operations to Pierre Fabre.

On to your second question, so what we said thus far is that we plan to disclose sufficient data for investors to better understand the value created by that study and for that particular asset. It's difficult to say exactly what we’ll disclose, but it depends on the data. You can expect more than just the primary analysis of the 12 months confirmed disability improvement active versus placebo. As you know, there will be data beyond 12 months because we have a number of patients that will have been evaluated at 15, 18, 21, 24 months, so not only confirmed disability improvement, but also confirmed disability progression to see what’s happening on the stability front. Then there will be imaging biomarkers, particularly the biomarker we presented from our Phase I a couple of years ago at ECTRIMS that shows a sign of myelination within the chronic lesions in the brains of patients that improved with treatment. You can expect that type of data as well. Ideally, we’d like to give enough information for investors to understand what value has been created by the study so far for this particular product and, of course, to disclose what we see as the next step for the program. Does that answer your question?

That concludes our question-and-answer session for today. Thank you for joining Atara Biotherapeutics’ Third Quarter 2023 Financial Results Conference Call. You may now disconnect.