Cellectis S.A. Q3 FY2023 Earnings Call

Good morning, everyone, and welcome to the Cellectis Third Quarter 2023 Earnings Call. I would now like to introduce our first speaker, Arthur Stril, Chief Business Officer. You may begin.

Good morning, and welcome, everyone, to Cellectis third quarter 2023 corporate update and financial results conference call. Joining me on the call today with prepared remarks are Dr. Andre Choulika, our Chief Executive Officer; Dr. Bing Wang, our Chief Financial Officer; and Dr. Mark Frattini our Chief Medical Officer. Yesterday evening, Cellectis issued a press release reporting a corporate and business update for the third quarter 2023 and its financial results for the nine-month period ended September 30, 2023. As a reminder, we will make statements regarding Cellectis financial outlook, including the sufficiency of cash from operations in addition to its manufacturing, regulatory and product development status and plan, and product development of its license partners. These forward statements, which are based on management's current expectations and assumptions and on information currently available to management, including information provided or otherwise publicly reported by our license partners, are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 20-F filed with the Securities and Exchange Commission and the financial report including the management report for the period ended on December 31, 2022, and subsequent filings Cellectis makes with the SEC from time to time. I would now like to turn the call over to Andre.

Thank you, Arthur, and good morning, and thank you, everyone, for joining us today. Last week, we announced a strategic collaboration and investment agreement with AstraZeneca. We are very proud to initiate this partnership with one of the top leaders in the pharma space, pairing our strong commitment and ambition in cell and gene therapy with AstraZeneca, because we have been very impressed by their long-term strategy in this space. Backed by a strong commitment and development already made, this partnership is powered by top leadership in this arena. We strongly believe together with AstraZeneca, that the next generation of genomic medicine developed under our collaboration will revolutionize medicine across a number of therapeutic areas in the years to come. As part of our agreement, AstraZeneca has agreed to make an initial payment of $105 million to Cellectis, composed of an $80 million equity investment in exchange for $16 million ordinary shares at $5 per share, and a $25 million upfront payment under the research collaboration agreement. Cellectis is also eligible to receive an additional $140 million equity investment in exchange for $28 million convertible preferred shares at $5 per share, subject to Cellectis shareholders' approval and several other conditions of closing. Now, some words about the research collaboration. It's a very ambitious proposal to develop novel cell and gene therapies across oncology, immunology, and rare diseases. We have exclusively reserved 25 genetic targets for AstraZeneca from which up to 10 novel candidate products could be explored for development. The beauty of this agreement is that our clinical stage assets UCART22, UCART123, and UCART20x22 remain under our own ownership and control. You should expect regular updates in the advancement of this program for us. Within the collaboration, we will leverage our cutting-edge innovation and best-in-class manufacturing capability to develop new disruptive product candidates, and AstraZeneca will have an option for a worldwide exclusive license on 10 of the candidate products to be exercised before IND filings. Our research costs under the collaboration will be funded by AstraZeneca and we're eligible to receive IND option key and development, regulatory, and sales-related milestone payments ranging from $70 million to up to $220 million per each of the 10 candidate products, plus tiered royalties. We're very excited to work with AstraZeneca to leverage our capabilities and build the next generation of genomic medicines to address areas of high unmet patient need together. During this past third quarter, Cellectis' innovation key excelled in releasing disruptive preclinical data on gene editing of stem cell gene therapy for an immunological disease. Later, on our proprietary power base editing technology and multi-armored allogenic CAR-T cell targeting MUC1 for triple-negative breast cancer, demonstrating once again the strength and the power of our gene-editing platform to develop next-generation cell and gene therapies for patients with unmet medical need. In addition, our clinical team will be presenting updates of results for the Phase 1, BALLI-01 trial of UCART22 and preliminary results of the NATHALI-01 trial evaluating UCART20x22 in relapsed or refractory B-Cell Non-Hodgkin's Lymphoma at the American Association for Hematology Annual Meeting. But I will let Mark, in a couple of minutes, talk about these abstracts. However, one thing I would like to highlight in what Mark is going to present after is the importance of the know-how in manufacturing. In cell therapeutics, nothing is more important than the fitness of the cells that will be injected into patients. The quality and the reproducibility of manufacturing are game changers in the success of these therapies, which is why we have fully internalized manufacturing. Now this work is totally completed and this is why it's going to make a difference. So like this, we will continue to control cash burn strictly within this difficult market environment. We will continue to focus our efforts and expenses on advancing our core clinical trials, BALLI-01 evaluating UCART22, NATHALI-01 evaluating UCART20x22, and AMELI-01 evaluating UCART123. With that, I would like to turn the call over to Dr. Mark Frattini, our Chief Medical Officer, who will give an overview of these clinical trials. Mark, please go ahead.

Thank you, Andre. We will be presenting updated results of the Phase 1, BALLI-01 trial of UCART22 in relapsed or refractory acute leukemia, and preliminary results for the NATHALI-01 trial evaluating UCART20x22 in relapsed or refractory B-Cell Non-Hodgkin's Lymphoma at the American Association of Hematology's 65th annual meeting in December. As Andre just mentioned, regarding our clinical trial, BALLI-01, evaluating UCART22 in relapsed or refractory B-cell ALL, we have a comparison between a product manufactured at a CDMO, this is process 1, and the same product manufactured in-house here at Cellectis, this is process 2. In vitro comparability studies suggested that UCART22, process 2, manufactured by Cellectis biologics is more potent than UCART22 process 1 manufactured by an outside CDMO. In June at the EHA Congress, we showed you data of patients enrolled at dose level three with 5 million cells per kilogram with UCART22 using process 1. Since then and as of July 1, 2023, three patients were enrolled into the first UCART22, P2 cohort at dose level 2 at 1 million cells per kilogram. UCART22, P2 was administered after fludarabine, cyclophosphamide, and alemtuzumab (FCA) lymphodepletion and was well tolerated. No dose-limiting toxicities or immune effector cell associated neurotoxicity was observed, and CRS observed was Grade 1 or 2. There was a higher preliminary response rate of 67% at dose level 2 with 1 million cells per kilogram with UCART22 P2 compared to a 50% response rate with a dose five times higher at dose level 3 of UCART22, P1 that was manufactured by an outside CDMO. UCART22 expansion was observed in the responding patients and correlated with increases in serum cytokines and inflammatory markers. The study continues to enroll patients at dose level 2 at 2.5 million cells per kilogram with UCART22, P2. We will also be presenting preliminary results of the NATHALI-01 study, evaluating UCART20x22, the first in a dual CAR T-cell product in patients with relapsed refractory B-cell non-Hodgkin lymphoma at the ASH meeting in December. In this case, UCART20x22 has been fully manufactured in-house by Cellectis at our Raleigh manufacturing plants. As of July 1, 2023, three patients were enrolled and treated at dose level 1. Here, we are using a flat dose of 50 million cells for patients over 50 kilograms. Cytokine release syndrome, Grade 1 or 2, occurred in all patients, and all CRS resolved with treatment. No immune effector cell associated neurotoxicity or graft versus host disease was observed. There were no UCART20x22 dose limiting toxicities and there was one case of CLLS52 or alemtuzumab. All patients responded at day 28, with one partial metabolic response and two complete metabolic responses in patients who had failed prior autologous CD19 CAR T-cell therapies. UCART20x22 expansion correlated with increases in serum cytokine and inflammatory marker levels as well as with Cytokine release syndrome. These initial data with the 100% response rate at the initial dose of 50 million cells per patient support the continued study of UCART20x22 in relapsed refractory B-cell NHL and the study continues to enroll. Lastly, our AMELI-01 study evaluating UCART123 in patients with relapsed or refractory acute myeloid leukemia continues to progress and enroll patients in the FCA 2 dose regimen. With that, I would like to hand the call over to Dr. Bing Wang, Cellectis's Chief Financial Officer, for an overview of our financials for the third quarter of 2023. Bing, please go ahead.

Thank you, Mark. I would like to highlight that in our financials, the cash, cash equivalents, and restricted cash position of Cellectis, excluding Caelyx, as of September 30, 2023, was $72 million compared to $95 million as of December 31, 2022. This $23 million difference mainly reflects the $79 million of cash out, which includes $23 million for R&D, $12 million for SG&A, $32 million for staff cost, $8 million for rent and taxes, $4 million of reimbursement of the PGE loan, and $2 million unfavorable impact on foreign exchange, partially offset by a $23 million net cash inflow from the capital raise closed in February, and a $21 million net cash inflow from the European Investment Bank loan from $6 million of net cash received from the research tax credit refinancing, a $1 million cash outflow related to the grant, a refundable advance from BPI, $3 million of financial investments' capital gain and interests, a $1 million reimbursement of social charges paid on stock options, and a $2 million net cash inflow from licenses and other cash receipts. With cash and cash equivalents of $67.4 million as of September 30, 2023, and $105 million from the AstraZeneca agreement, the company believes that we have sufficient resources to continue operating for at least 12 months following the consolidated financial statements' publication. Additionally, the MOU contemplates that AstraZeneca will make a potential further equity investment in Cellectis of $140 million by subscribing for two newly created classes of convertible preferred shares of Cellectis. If confirmed, the closing of the additional investment will remain subject to Cellectis shareholder approval with a two-thirds majority of the votes cast by voting shareholders and a clearance of such investments from the French Ministry of Economy according to the foreign direct investment regulations and other customary closing conditions. With these additional $140 million in our anticipated borrowing of EUR 15 million under the Tranche B of the EUR 40 million finance contract with the European Investment Bank, the company believes that we would extend this cash runway into 2026. The closing of the proposed Calyxt Merger was finalized on May 31, 2023. Consequently, Calyxt was de-consolidated and presented as a discontinued operation in the financial statements only until May 31, 2023. The net loss attributable to shareholders of Cellectis was $58 million, or $1.7 per share, for the nine months of 2023, of which $53.2 million was attributed to Cellectis continuing operations compared to $79 million, or $1.74 per share, for the nine months ended September 30, 2022, of which $73 million was attributed to Cellectis continuing operations. The $21 million decrease in net loss between the first nine months of 2023 and 2022 was primarily driven by a $14 million decrease in R&D expenses and a $4 million decrease in SG&A expenses, and also an increased $4 million financial gain due to the de-consolidation of Caelyx compensated in part, but the decrease in fair value of Cytovia's note receivable and a decrease of $2.2 million loss from discontinued operations attributable to the shareholders of Cellectis. These downward impacts on the net loss were partially offset by a decrease of $1.2 million in revenues and other income. The adjusted net loss attributable to shareholders of Cellectis, which excludes non-cash stock-based compensation expenses, was $57 million, or $1.05 per share in the first nine-month period of 2023 compared to a loss of $72 million, or $1.58 per share in the first nine months of 2022. We are laser-focused on spending our cash on developing our clinical candidates and operating our state-of-the-art manufacturing facility in Paris and Raleigh. In addition, our focus on maintaining an efficient corporate infrastructure should also enable more limited growth in G&A expense. At this point, I'd like to hand it back to Andre for closing remarks.

Thank you, Bing. Post this call, I would like to reiterate how excited we are about our strategic collaboration with AstraZeneca and how confident we are about the continued progress of our three ongoing clinical trials as well as our continued development of our pre-clinical program. At Cellectis, we strongly believe that our product candidates, our technologies, and our in-house manufacturing capabilities will lead us and our partners to a paradigm shift for patients with hard-to-treat cancer, positioning us at the forefront of this promising medical and scientific field. With that, I would like to open the call for questions and answers.

Our first question is from Kelly Shi with Jefferies.

Hi, this is Dev Prasad on for Kelly Shi. Thank you for taking our question and congratulations on the updates. I have one question on UCART20x22 you showed great results at DL 1. So my question is, do you plan to increase the enrollment sites and how many dose levels do you anticipate to study before finalizing the RP2D?

Dev, thank you so much for this first question, which will go to Mark.

Hi, thanks for the question. Yes, we anticipate doing an escalation, and the data from the subsequent escalation will determine where we stop and call the RP2D. So right now, it's to be determined with the clinical data.

Thank you.

Our next question is from the line of Gena Wang with Barclays.

We have two questions regarding your clinical programs. First, you previously indicated that UCART123 would have updates by the end of 2023. What is the current timeline? Will it be presented as a late breaker at ASH? Secondly, regarding UCART22, you mentioned the possibility of moving to a pivotal study without additional dose escalation. Is that still the plan? Thank you.

Great. Thank you very much for both questions. That will be for Mark.

So for UCART123, we began at ASH last year. We announced how we were remodeling the treatment program to include the two-dose regimen, and we are continuing on with that two-dose regimen in dose escalation. So we anticipate that we will have clinical data at some point next year. And in terms of the UCART22 study, we pointed out in the abstract for ASH that we have dose escalated to 2.5 million cells per kilo with the product. We will see where that data bears this out as we move ahead.

Gena, do you have any questions?

Thank you so much for taking our questions. Maybe one last follow-up question on the AstraZeneca deal. Is there a timeline that they have to select certain lead targets? And would you only give it as hold like early hold if they turn it down?

Sorry, I'm not sure I understood the end of the question. But definitely, as part of the agreement, AstraZeneca will have to choose up to 10 candidate products from a pool of 25. Once the 10 products are selected, the remaining non-selective targets will come back to us.

Our next question is from the line of Yigal Nochomovitz with Citi.

I think this is Carly on for you guys. Thanks for taking our questions. I had two for us. First on your UCART22 and UCART20x22. Just wanted to clarify if we should expect data on additional patients at ASH relative to the abstract, or will the ASH data be focused on longer-term follow-up from the patients or just the patients included in the abstract? And then the second question is on that potential additional $140 million equity investment from AstraZeneca. Just wondering if you can clarify if there is a specific trigger for that from AstraZeneca's side and what the potential timing might be? Thank you.

Great. So I'll hand it over to Mark for the first business question, and I'll take the question on the AstraZeneca deal. Thank you. Yes, in terms of the two abstracts that we will be presenting, we will be presenting some follow-up on the patients described in the abstract.

Yes, on the $140 million. This is subject to a few closing conditions, including the approval of our shareholders that are to certain majority of the votes cast and clearance according to foreign direct investment French regulations and a couple of other customary closing conditions. We're working expeditiously to finalize these.

Our next question is from the line of Hartaj Singh with Oppenheimer.

Great. Thank you, and thanks for the update. I have two questions. One is you're starting to show some complete responses in BALLI-01 and NATHALI-01. I was wondering what you would view as sort of like a durability perspective? How many months of follow-up would you like to see before you could classify these as being very durable responses, especially on the CR side? And my second question is specific to UCART123. Have you switched over to the commercial product there also? And if not, what's the timing on that? Thank you.

Thanks for those questions. And Mark, over to you.

Thanks, Hartaj, for the questions. So I'll start with UCART123. We are still currently using the CDMO made product for UCART123, and that's where we are with that right now. In terms of your first question, yes, we are definitely seeing complete responses, as you pointed out, in the two studies. I think importantly, for the UCART20x22 studies, at the initial dose level, we did see two metabolic complete responses in patients that had failed prior CD19 CAR-T in addition to several other therapies. I think in terms of your question for durability, I think that remains to be seen given the line of therapy that we're in and given the extensive therapies that these patients have been relapsed and refractory from. I think at some point looking into a three to six month range is not unreasonable. It's interesting to look for good duration of response in these patients.

Great. Thank you, Mark. Thanks for all the questions.

Our next question is from the line of Jack Allen with Baird.

Thanks for taking the questions and congratulations to the team on the progress. My question is also as it relates to the ASH abstracts; really impressive results for the UCART20x22 program. As a first dose level here, I was wondering if the team had any comments about the need to escalate the dose or if you are satisfied with the early results you are seeing here? I'd love to hear about that.

Yeah, Jack, thanks for the question. Yes, as you point out, three out of three responders at the initial dose level. Also, you can see the safety quite good at this dose level as well. Given both of those facts, we will, in fact, be escalating dose study just to see where we can get at the next higher dose level. So stay tuned for that.

And then just one brief follow-up on as it relates to longer follow-up on these patients. Can you provide some context around when the data was taken for ASH and what you expect to present at the conference? And just to clarify, we should be primarily focused on additional data from the first three patients rather than a second dose cohort as well.

Yes. So we'll be focusing on the first three patients for the poster presentation.

Any thoughts on additional kind of follow-up there or what kind of data we could expect from those three patients at the conference?

So we'll give some further follow-up that we have on them. So please come by and visit us at the poster.

Our next question is from the line of Salveen Richter with Goldman Sachs.

Hi, this is Whitney on for Salveen. Thanks so much for taking your question. Could you just remind us of the strategy for UCART20x22 in terms of the targeted patient population, given the positive data at ASH?

Thank you very much for the question. That would be for Mark.

Hi. Yes, thank you for the question. So we are using patients in third-line or greater for this study, and this includes prior CD19 failures as well.

Our next question is from the line of Silvan Tuerkcan with JMP Securities.

Good morning and congrats, and thanks for taking my question. My first question is now that you have human data with UCART22 with product 1 and product 2. Do we know why product 2 is so much more potent? Do you have any metrics that reflect a two times or more difference? And then a second question is, are there any more near-term milestones associated with our anti-CD-70 programs that we could be getting? Thank you so much.

Great. Thank you very much for both questions. I'll hand it over to Andre for the first one.

Yes, hi, nice events, and thank you very much for the nice question, because I think that the manufacturing totally makes a huge difference. As Mark described in this presentation, there is process 1 - the process that was used at the CMO initially, and the one we've implemented after internally as process 2. So there are a few things that have changed. We know exactly why. One day someone asked me a question about how we do it, how we can do cells that have so much potency. Let me tell you, I'm going to share this quick review here online. We've done close to 10,000 batches internally in the process development. We've done and improved the methods significantly and refined hundreds of parameters. This is called experience. We are the ones that have invented the concept of allogenic CAR-T. It took a long time before we got to the point we are today. I think that we're among the best on the planet to develop allogenic CAR-T. As Mark said, come to our poster session at ASH, watch the expansion of the cells, even at super-low doses; you will see what it means to have such type of experience, which cannot be invented in a day. It can be transmitted, but we can't transfer 10 years of effort in optimizing batch after batch in GMP conditions. That's the answer. And for the Allogene question?

Thanks, Andre. Regarding the Allogene questions, we definitely have a significant vested interest in Allogene's success, just remembering that we stand to gain up to $410 million in development and sales milestones for CD-19 through our agreement, and up to $2.8 billion in development and sales milestones. We haven't disclosed the granularity of the milestones, but we'll invest in communicating that when Allogene hits those milestones and we receive the amounts.

Our next question is from the line of Yanan Zhu with Wells Fargo.

This is Kwan Kim for Yanan. So my question is on the new CAR-T 22. Can you give us more detail about the grade by AE now revealed in the abstract and how that may affect the further study context? Thank you.

Thank you for the question, and this will be for Mark.

As we revealed in the abstract, this Grade 5 event happened long after several weeks post the day 28 assessment in this patient who had a morphologic leukemia-free state. So it was a bacterial infection that the investigator related it to, which is why it was classified as such. It is really not affecting anything as we move ahead.

Got it. Is there a way to quantify how much of that was contributed by the UCART22 itself?

Yes. There is some data that we will show on the poster. There was a level of expansion that was seen with the cells at the time this event happened. We don't believe there were any UCART22 cells remaining. So we think that the likelihood it was less related to UCART22. This was a patient who had, as outlined in the abstract, been heavily pretreated; they failed alo transplant, multi-agent chemotherapy in addition to prior CAR-T therapies.

That's super helpful. Thank you so much.

Thank you. As there are no further questions, I would now hand the conference over to Andre Choulika, CEO for closing comments.

Well, first of all, I would like to thank the team for helping in doing the call here. It's been a pleasure to prepare this together, and I would like to warmly thank all the analysts that have been following the company, supporting, and watching what we're doing; it is very valuable. I would like to make a special mention to our long-term shareholders who have been continuously supporting the company over the past years. I hope that the company is going to have a very strong end of 2023 and strong performance through 2024, 2025, and 2026. We will come up very soon for an update on the progress. Thank you very much.

Thank you. The conference of Cellectis has now concluded. Thank you for your participation. You may now disconnect your lines.