Earnings Call Transcript - AUTL Q2 2021

Operator, Operator

Hello, ladies and gentlemen, and welcome to the Autolus Therapeutics Second Quarter 2021 Financial Results Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Dr. Lucinda Crabtree, Vice President, Business Strategy. Please go ahead.

Lucinda Crabtree, Vice President, Business Strategy

Thank you. 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 second quarter of 2021. I'm Lucinda Crabtree, Vice President of Business Planning and Strategy. With me today are Dr. Christian Itin, our Chief Executive Officer; and Andrew Oakley, our Chief Financial Officer. Before we begin, I would like to remind you that during today's call, our discussion will contain forward-looking statements. All statements other than statements of historical facts on this call are forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the section titled Risk Factors in our annual report on Form 20-F filed with the Securities and Exchange Commission on March 4, 2021, which can be accessed on the EDGAR database at www.sec.gov and in subsequent filings that we make with the SEC from time to time. The forward-looking statements on this call reflect the Company's views as of today, August 5, 2021, regarding future events and should not be relied upon as representing the speakers or the Company's views as of any subsequent date. While the Company may elect to update these forward-looking statements at some future point, the Company specifically disclaims any obligation to do so, even if the Company's views change. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to today. Please be advised that today's call is being recorded and webcast. So on Slide 3, you'll 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 second quarter of 2021. Andrew will discuss the Company's financial results, and then Christian will conclude with upcoming milestones and any other concluding comments. And of course, we will welcome your questions following our remarks. So with that, I'd like to turn the call over to Christian. Thank you.

Christian Itin, CEO

Thank you, Lucy, and welcome, everybody, to our second quarter call. First off, I'd like to briefly go back to kind of where we started also the Q1 call, which is to have a quick look at the state of the COVID epidemic that we're going through and the impact it will have or has on our business. As you may remember, we did guide in Q1 that we were hopeful that by the middle of the year, we should reach a level of stabilization due to increased levels of vaccination, but also a substantial number of people actually recovering from COVID infection. That we should get into an overall more stable environment so that the fluctuations that we see in terms of the cycles of COVID or the waves of COVID should actually start to just ebb and get us to a place where we have overall more stability and a more predictable environment for our patients who were obviously enrolling into our trials. And we also guided that we're expecting to be able to actually ramp up enrollment by the middle of this year. We are very pleased to say that indeed what we were hoping for actually is a reality today. I think we have now reached a level of about 70% in the U.S. as well as the UK, which gives us a base level of stability that, I think, is very helpful in terms of the conduct of the clinical studies. Now, we have obviously all seen the impact of the Delta variant, but we also see very nicely that indeed while there are surges in certain places that in fact, they seem to be curved much more quickly than what we had seen earlier in the year, and I think they are a nice reflection of the fact that the vaccines are doing a great job and that improving environment allowed us to increase and ramp up the enrollment rate into our trials. And obviously, this is very good news and should allow us to keep on track and on the timelines that we were giving with regards to our key studies. If we go to Slide number 5. A quick update on the key activities on the pipeline. First off, the activities on obe-cel. Our FELIX study is progressing well, and we're reiterating our guidance of pivotal data that we will deliver during the course of next year. Now, in this quarter, we have an opportunity to update additional experiences with obe-cel in patients, not only in ALL but also in non-Hodgkin's lymphoma. In ALL, we were able to look at now a quite extended observation time of the patients of now more than two years. And what we were able to see is that indeed, the inventory survival in this trial actually was stabilizing at 12 months, just above 50%, and actually that level was sustained over 24 months. This is very good news because it really gives us the first clear hint that indeed, we may have a transformational therapy for this patient population, and frankly, is suggestive of a durable effect in at least a subset of the patients that we've been treating. So that's obviously very good news. It's now the data starts to mature to a point where I think the data actually has a level of validity that really matters in terms of our own view as well of the program. In addition, we also looked at or presented data on patients with non-Hodgkin's lymphoma, particularly follicular lymphoma and mantle cell lymphoma, and we are able to show very high levels of metabolic CR rates. In fact, all patients achieved metabolic CRs combined with a very good safety profile. Now, in addition to that key data update at EHA, we also had a publication in Nature Cancer, looking at some of the product features that may be associated with this long durability of effect that we're starting to see in the ALL patients. Moving to the regulatory side, I think the two key events that happened in the second quarter included the so-called PRIME designation from the European Medicines Agency, which really gives us a preferred engagement with the key regulatory body in Europe, and which should be very helpful in the actual review process for the program, as we're moving this program through the pivotal stage and then further towards an approval. When we look into the second designation that we received which is the so-called ILAP designation from the UK Medicines and Healthcare Agency, MHRA, that allows us to engage with the National Health Service as well as with NICE, giving us an ability to really approach with innovative therapies the key players in the UK. Those developments, we believe, are very important because they provide us with a very good projection and the path that we can take with the program and are a reflection of the data that we have been able to generate so far. As I indicated initially, we are reiterating our guidance to have the pivotal data during the course of 2022 as we have guided before. The obe-cel data on relapsed/refractory is obviously very encouraging, and I think that provides us with an opportunity for additional data flow in the later part of the year. Finally, on AUTO4, we did also receive an ILAP designation from the MHRA, again giving us that preferred access that we believe will be helpful to the program going forward. Moving to Slide 6. Just a quick update on the corporate side. First off, we sold about 2 million ADSs under the Open Market Sales Agreement during the course of the quarter, which netted $14.3 million in additional capital into the company. We had a change in the Chairman role. Martin Murphy has taken over as non-executive Chairman during the course of the quarter. When we look at the post-period updates, we're excited to announce the appointment of Dr. Edgar Braendle, who has joined us as the new Chief Development Officer of the company. Edgar has a tremendous amount of development experience in a range of companies, including a significant tenure in Novartis' R&D organization. In addition, Wolfram Brugger joined us as our new Head of Clinical Development. Wolfram joined us from MorphoSys, where he was running the clinical programs focused on the Monjuvi program or tafasitamab that was recently approved in a subset of diffuse large B-cell lymphoma patients. Finally, we announced early in the week an Option and License Agreement with Moderna, which is a nice recognition of the technology base that we've developed at the company. This is particularly related to our capabilities of engineering binders with unique properties, which are types of binders considered for use in the context of the RNA platform approaches that Moderna is working on. With that, I think we're good to move to Slide 7. I'd like to just briefly reset Autolus' thoughts on ALL. Our key focus is on delivering the FELIX study in adult patients with relapsed/refractory ALL, including patients that are both post-blinatumomab as well as inotuzumab, but also patients that are just in a relapsed setting but have not yet experienced inotuzumab or blinatumomab. We're exploring the activity of the program of obe-cel beyond ALL in the context of the ALLCAR19 study with additional cohorts. We will also include patients with DLBCL and CLL, and we are planning for additional updates towards the end of the year. As part of the evolution of the obe-cel program, we're now treating children with AUTO1/22, which builds on the AUTO1 or obe-cel backbone with a novel CD22 chimeric antigen receptor, evaluating that product in pediatric patients with ALL. On Slide 8, some key features regarding ALL as an indication and the status of care that we currently see in this indication. In the adult population with ALL, only a smaller percentage of patients achieve long-term benefit. We're looking at about 30% to 40%. Most of the patients, about 90%, achieve complete remission for frontline therapy. However, this does not translate into a long-term remission. When patients relapse after undergoing intense high-dose chemotherapy, many go on additional cycles followed by stem cell transplant. However, the majority of patients who get to transplant will relapse again. This presents a very difficult situation for patients with limited time available. The standard of care, particularly in the U.S., is concentrating on blinatumomab. About 60% of the patients are receiving blinatumomab in the U.S. However, it does not convey long-term remissions in relapsed/refractory settings. When we turn to CAR-T, it has been a challenging endeavor managing adverse events induced by the therapies. We're starting to see programs moving forward with a strong profile with our product. We talked about receiving a set of regulatory designations. Slide 9 highlights the key update presented at EHA around event-free survival. We communicated high levels of responses and good safety profile. We're seeing stabilization over time in event-free survival, indicating a chance of achieving long-term remissions. Moving to Slide 10, I want to emphasize that the stabilization of event-free survival, which hasn't been shown before in this disease setting, is correlated with exceptional persistence of our product. We see about a tenfold increase in the maximum number of CAR-T cells compared to other programs, and we can maintain CAR-T levels over time. This is crucial for translating a molecular response into a long-term remission. The adverse event profile we've reported highlights that we haven't seen high-grade cytokine release syndrome. Importantly, no patients required vasopressors or needed to be managed in the ICU, which demonstrates an excellent safety profile. Slide 11 presents data from programs of blinatumomab and inotuzumab. The data from obe-cel stacks well against these programs, indicating a differentiated safety and long-term impact profile. Slide 12 summarizes the FELIX study, a 100-patient study focusing on relapsed/refractory patients, exploring subpopulations that are post-blinatumomab or inotuzumab and those inexperienced with those treatments. The primary endpoint is overall complete response rate, and secondary endpoints include molecular responses, event-free survival, and duration of response. A quick note on non-Hodgkin's lymphoma patients, as presented at EHA; all patients achieved metabolic complete remission, which was positive regarding safety. Unfortunately, we did have one patient who contracted COVID and passed away while being in metabolic complete remission, which was tragic. Slide 14 describes ongoing activities, including evaluations of non-Hodgkin's lymphoma patients and CLL patients as part of the ALLCAR19 study and collaborations on CAROUSEL for primary CNS lymphoma. Moving to Slide 15, we're actively dose-escalating the AUTO4 program, with expectations to provide the first data update in the first half of 2022, along with AUTO5 timing. On Slide 16, the strong technology base we have is one of the largest IP estates in the business. The collaboration with Moderna exemplifies the technology’s versatility. The unique binder technology contributes to our differentiated outcomes across efficacy, persistence, and safety. Moving to Slide 17, the broader program is advancing with AUTO1/22 and AUTO5, and AUTO6NG is set to enter the clinic in early 2022. Moving forward, AUTO8 is active in the clinics in H2 2021, and we are preparing for AUTO7 as well. With that, I'd like to hand over to Andrew, who will lead you through our financial results. Thank you.

Andrew Oakley, CFO

Thanks, Christian, and good morning or good afternoon, everyone. I think if we can move to Slide 19. It's my pleasure to review our financial results for the second quarter through June 30, 2021. Starting with our cash position, cash and cash equivalents at the 30th of June totaled $216.4 million compared to $239 million at the end of the first quarter. Notably, during the three months ending June 30, 2021, the company issued an aggregate of 2,069,466 ADSs under the ATM program for net proceeds of $14.3 million. Turning to the P&L, total net operating expenses for the three months period ending June 30, 2021, were $37.7 million, net of grant income and license revenues of $1.6 million, which you will see comes from the Moderna collaboration. This compared to net operating expenses of $39.5 million net of grant income of just $300,000 for the same period in 2020. Research and development expenses increased to $32.1 million this quarter compared to $31.3 million for the same period last year. It's worth noting that cash costs, which exclude depreciation and amortization as well as share-based compensation, increased to $29.2 million from $26.5 million. Overall, this increase in R&D cash costs of $2.7 million consisted primarily of an increase in compensation and employment-related costs of $0.7 million, which includes severance payments related to the reduction in workforce that we conducted in the first quarter of this year, offset by a reduction in employment costs due to decreased headcount from the program. Additionally, there was a $1 million increase in facilities costs related to scaling manufacturing operations, $0.9 million in consumable materials for the manufacturing process and labs, as well as $300,000 increases in cell logistics and IT infrastructure and support. Non-cash costs decreased to $2.9 million for the three months ending June 30, 2021, from $4.8 million for the same period last year, primarily due to decreased share-based compensation expense attributed to the lower value of stock options and forfeitures of options and unvested RSUs related to employees affected by the reduction in workforce, slightly offset by an increase in depreciation of $900,000. General and administrative expenses decreased to $7.2 million this quarter from $8.5 million for the same period last year. Cash costs, which again exclude depreciation as well as share-based compensation, decreased to $6.6 million from $6.7 million. Non-cash costs decreased to $0.6 million from $1.8 million for the same period last year, correlating with the decrease in non-cash costs attributed to share-based compensation. Other income and expense decreased by $2.3 million for the three months ending June 30, 2021, from other income of $0.5 million for the same period last year to an other expense of $1.8 million. This decrease was primarily due to the weakening of the dollar relative to the pound during these three months compared to the prior year. Income tax benefit decreased to $6.4 million for the three months ending June 30, 2021, from $7 million for the same period last year, due to a decrease in R&D qualifying expenses. The net loss attributable to ordinary shareholders was $33.2 million for the three months ending June 30, 2021, which compares to a loss of $32.1 million for the same period last year. The basic and diluted net loss per ordinary share totaled $0.47, compared to $0.62 for the corresponding period last year. Turning to guidance on cash runway, there is some concern about the continuing strength of the pound relative to the dollar. At current levels, it may slightly reduce the runway we estimated post the raise in February. However, we are still confident that the current cash on hand will provide us with a cash runway into the first half of 2023. With that, I'll now hand the call back to Christian to give you a brief outlook on expected milestones.

Christian Itin, CEO

All right. Well, thank you very much, Andrew. We're headed into an exciting second half for this year with significant activities, particularly towards the end of the year. Regarding obe-cel and AUTO1/22, our primary operational focus is the execution of the pivotal study. The FELIX study is among the few pivotal studies in adult ALL with a new agent. Importantly, it’s also one of the very few ongoing pivotal studies in the CAR-T space. We're reiterating our guidance to have the pivotal data available during the course of next year. For AUTO1/22 pediatric ALL activity, we expect to provide an update at the end of this year, as well as updates on non-Hodgkin's indications from the ALLCAR study. The primary CNS lymphoma data is expected early next year. This provides us with a comprehensive view of the profile of the product across ALL and other CD19 positive hematological malignancies. AUTO4 continues to dose escalate, with interim data expected in the first half of next year to be presented at an upcoming conference. AUTO6NG is scheduled to enter the clinic in the first half of next year, and we are well on track with improvements in development. Our cash balance, as noted by Andrew, is approximately $216 million with a runway into the first half of 2023. With that, we are ready to take your questions.

Operator, Operator

Thank you, sir. I show our first question comes from the line of Matt Phipps from William Blair. Please go ahead.

Matthew Phipps, Analyst

Good morning, everyone. Thanks for taking my questions. First on AUTO4 and AUTO5. Can you discuss what caused the delay to the first half of next year? It's been a program of interest for investors, yet it's been a while since we've seen data?

Christian Itin, CEO

Absolutely. Thanks for joining, Matt. We noticed the AUTO4 and AUTO5 programs faced impact due to COVID on the centers as we were going through the first half of the year. We're now past that, which is promising, and we expect to be enrolling at the predicted rate moving forward. However, that did take longer than we initially expected.

Matthew Phipps, Analyst

Thank you. And on the FELIX study, sounds like COVID impact has abated. Do you think later this year, you could provide guidance on narrowing the 2022 timeline?

Christian Itin, CEO

Let me be specific. The guidance hasn’t changed. We expect the primary endpoint to be available middle of next year, with time-dependent endpoints available at the end of next year. That guidance is consistent, and we have not seen any impact on the FELIX study.

Matthew Phipps, Analyst

Lastly, with Bristol's strong quarter with Breyanzi and discussions on its safety profile influencing utilization, does that give you confidence to expand AUTO1 development scope?

Christian Itin, CEO

First off, it's consistent with our insights as well. We're encouraged that the data for non-Hodgkin's and early Hodgkin's indicate a strong safety profile for obe-cel, which bodes well. We'll assess the competitive profile across indications to make the best decisions moving forward.

Andrew Oakley, CFO

Thank you.

Operator, Operator

Thank you. I show the next question comes from the line of Eric Joseph from JPMorgan. Please go ahead.

Unidentified Analyst, Analyst

Hi, good morning. This is Rahul on for Eric. Thanks for taking our questions. Could you share details on the economics of the Moderna collaboration and its implications in immuno-oncology? What timeline should we expect for more news?

Christian Itin, CEO

Thank you for your questions. The Moderna Option and License Agreement focuses on binders in the broader immuno-oncology field. We haven't narrowed points, but it's designed for potential outside CAR-T applications. The compensation structure includes option exercise fees and development milestones, though we haven’t disclosed specific amounts yet. As for expected updates, we will share information as it becomes available.

Unidentified Analyst, Analyst

That's very helpful. Thank you.

Andrew Oakley, CFO

Thank you.

Christian Itin, CEO

Thanks for joining.

Operator, Operator

Thank you. I show our next question comes from the line of Asthika Goonewardene from Truist. Please go ahead.

Asthika Goonewardene, Analyst

Hi, guys. Thanks for my questions. Regarding the Tecartus regulatory decision, could you share physician feedback comparing the profile to obe-cel?

Christian Itin, CEO

Thanks for your question, Asthika. During our communication around the EHA meeting, we compared and contrasted relevant data. The product profile indeed indicates clear improvements for ALL patients. However, the data indicates toxicity levels associated with the treatment that can be challenging to manage, with about 40% needing vasopressors and requiring ICU management. Our product, in contrast, has demonstrated a strong safety profile.

Asthika Goonewardene, Analyst

Thanks, Christian. Can you provide guidance on the number of patients expected for the AUTO4 update in early 2022?

Christian Itin, CEO

The AUTO4 study is a classical dose escalation. We expect to present data on approximately 10 patients at that time.

Asthika Goonewardene, Analyst

Lastly, could you comment on the PSMA directed CAR-T events and how that may impact AUTO7?

Christian Itin, CEO

We have limited information on the recent adverse events. We need to await publication for clarity. Our design includes an off switch mechanism to address emergencies. Two other PSMA targeting approaches are showing promise without similar adverse events – that's noteworthy.

Asthika Goonewardene, Analyst

Great. Thanks for my questions, guys.

Christian Itin, CEO

Thank you.

Operator, Operator

Thank you. Our last question comes from the line of Chad Messer from Needham & Company. Please go ahead.

Chad Messer, Analyst

Thanks for taking my questions. Can you discuss the ASH from ALLCAR extensions and high-grade NHLs to CLL?

Christian Itin, CEO

The ALLCAR extension includes exploratory cohorts for follicular lymphoma, mantle cell lymphoma, DLBCL, and CLL. We’ll provide updates as we assess activity across these indications.

Chad Messer, Analyst

Could you elaborate on the recent Nature publication discussing stem cell memory T cells as part of durability mechanisms?

Christian Itin, CEO

Certainly. The persistence observed in pediatric patients led to our analysis of CAR-T composition indicating a link between stem cell memory T cells and positive outcomes. Further investigation is required in larger datasets to substantiate this observation.

Chad Messer, Analyst

Thanks for the insights. I'd like to confirm the $1.5 million fee attributed to the recent license income comes from Moderna.

Andrew Oakley, CFO

Yes, that is correct. The license income for the quarter included upfront payments from Moderna.

Operator, Operator

That concludes our Q&A session. At this time, I'd like to turn the call back over to Mr. Christian Itin, CEO, for closing comments.

Christian Itin, CEO

Thank you for joining. We appreciate your questions and look forward to keeping you updated. Enjoy your summer break, and we'll reconvene in September. Have a great day, and we’ll speak soon.

Operator, Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Good day.