Connect Biopharma Holdings Ltd Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to Connect Biopharma First Half 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please read the safe harbor statement contained in the press release we issued earlier today as well as those contained in Connect Biopharma's registration statement on Form F1 for a more complete discussion of the risks and uncertainties. Now, I'd like to turn the call over to your speaker for today, Ina McGuinness.

Thank you, operator. Today's call will be hosted by Connect Co-Founder and CEO, Dr. Zheng Wei; Chief Medical Officer, Dr. Chin Lee; and CFO, Steven Chan. Today's call is being webcast, and the replay will be available on the IR section of the Company's website for 12 months. Following our prepared remarks, we'll open up the call to Q&A. Before we begin, let me remind you that during today's call, management will make various forward-looking statements. Investors are cautioned that these forward-looking statements are based on current expectations, and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those indicated by our forward-looking statements. Now, I'd like to turn the call over to Wei.

Thank you, Ina, and good day to all of those joining us today on the call and webcast. I plan to talk about the clinical progress we have made over the last six months, starting with our lead clinical candidate, CBP-201. Turning to our trials to treat adult patients with moderate to severe atopic dermatitis, or AD. In the Phase 2b global CBP-201 trial, we reported 16-week data that met the primary and key secondary endpoints of the trial with favorable safety data. Additional analysis demonstrated a potentially competitive therapeutic profile for CBP-201 300 milligram administered every two weeks or every four weeks. In the ongoing pivotal China-only trial for CBP-201 in AD, we received feedback from China Center for Drug Evaluation, or CDE, that led us to review the data from the first 255 patients already enrolled in our Stage 1 16-week treatment period. And if positive, review this data in a pre-BLA meeting with the CDE. This is particularly good news as this would potentially accelerate the timeline to BLA submission of CBP-201 in China. As a result, we plan to report the top line data next month. In October, potentially eight months earlier than originally planned, if positive and having positive results from the Stage 2 36-week data readout, we could be in a position to file a new drug application in 2024 and a potential NDA approval in China as early as 2025. It's our goal to use this potentially positive result from this PRC specific trial to start partnering discussions. We also plan to enroll our first patient in the Company's global CBP-201 Phase 3 study in moderate to severe AD by the end of 2022. We also see great potential for CBP-201 in the treatment of patients with severe asthma with type 2 inflammation, and anticipate complete full enrollment in the first half of 2023. This is six months later than previously anticipated. We will also then plan to report the Phase 2 of line result of CBP-201 in asthma in the second half of 2023 versus the first half of 2023 as previously indicated. Turning to CBP-307. CBP-307 is a proprietary oral drug candidate under development to treat ulcerative colitis, a disease that onsets early in adulthood and lasts a lifetime. Despite the available treatment, UC patients continue to suffer from unmet need while new ones join the ranks in increasing numbers as the disease grow in incidence and regional prevalence. In May, we reported 12-week top line data in a global Phase 2 trial in moderate to severe UC. I think it's important to take some time recapping the status of CBP-307, outlining the partner opportunity and why 307 presents a compelling partnering opportunity. CBP-307 has a proven mechanism of action operating within a well-validated disease pathway demonstrated to be clinically effective against UC. Pharmacodynamics and pharmacokinetics show that CBP-307 hits its target and does so rapidly. In addition, CBP-307 has a higher affinity for binding to sphingosine 1 phosphate receptor 1 or S1P1, which is the targeted signaling pathway implicated in ulcerative colitis disease cascade. Then the other two drugs in S1P1 modulator class. Biomarker analysis also shows that CBP-307 reduces the level of circulating lymphocytes in the blood. The downstream and desired effect of hitting this target is to achieve meaningful disease mitigated levels of less than 800 cells per microliter. This level of lymphocyte reduction is stronger than etrasimod and the onset effect is faster than that observed for ozanimod. Moreover, CBP-307 significantly reduced the level of fecal calprotectin in patients, a reliable biomarker correlated with UC disease severity. This is why we think CBP-307 will interest partners. CBP-307 demonstrated a statistically significant clinical remission rate at a higher dose. And while this was a secondary endpoint in this trial, clinical remission based on the adapted Mayo score is currently the regulatory endpoint in UC registration files. And it was the primary endpoint for ozanimod, the only approved drug in this class. Given all of this, any potential CBP-307 partner will be able to enter the UC therapeutic space with a Phase 3-ready candidate that has the potential to provide a new and clinically attractive treatment option to patients. With that recap of highlights and a short review of the state of CBP-307, let me now turn the call over to Chin to discuss in more detail our lead candidate, CBP-201.

Thanks, Wei. I'm going to talk more about plans for our lead drug candidate, CBP-201 in AD and specifically the trial designs for our planned global Phase 3 program. And then, I'll recap the news we just reported about our earliest clinical drug candidate, CBP-174. We've made a lot of progress this year on our CBP-201 AD program. Notably, we had a successful end of Phase 2 meeting with the FDA, and our team has worked diligently on a robust Phase 3 program, and we are now looking forward to enrolling the first patient into our initial registrational trial before the end of this year. The first global Phase 3 study is part of a larger registrational program comprising four controlled clinical trials and a separate open-label extension study for patients with moderate to severe AD. Of the four controlled trials, three of them will evaluate patients through 52 weeks of treatment. In these trials, patients will receive 300 milligrams of CBP-201 every two weeks for the first 16 weeks of treatment. Thereafter, over the remaining 36 weeks, patients who are deemed to be responders will be rerandomized into one of three groups. Some will remain on the 300-milligram dose given every two weeks. Some will step down to the 300-milligram dose given every four weeks, and others will receive placebo. In two of these 52-week studies, we will compare CBP-201 to placebo during the first 16 weeks of each study. The fourth control trial will be 16 weeks in duration, and it's designed to assess the 300-milligram dose of CBP-201 given every two weeks as compared to placebo in patients using background topical agents such as corticosteroids. Our Phase 3 program is designed to clearly show how well our 300-milligram dose given every two weeks performs against placebo in the first 16 weeks of treatment. The Phase 3 data set will also provide evidence on CBP-201's ability to maintain clinical improvement in patients who stepped down to a more convenient treatment regimen of 300-milligram given every four weeks for long-term use, which is part of our overarching goal of demonstrating the potential differentiated therapeutic benefits of CBP-201 for patients with AD. Now I would like to turn your attention to our early-stage clinical drug candidate, CBP-174, which is being studied to treat chronic pruritus or itching associated with allergic and inflammatory skin conditions including AD. CBP-174 is a highly selective, perfectly acting H3R antagonist for oral administration. As you likely saw on August 30, we reported top line results from our Phase 1 trial designed to evaluate safety, tolerability and pharmacokinetics, or PK, in healthy adults. I'm pleased to report that CBP-174 administered orally was observed to be safe and well tolerated about eight dose escalation cohorts evaluated up to a maximum dose of 16 milligrams or placebo in this randomized, double-blind, placebo-controlled single ascending dose study. There were no serious adverse events and reported adverse events were predominantly mild in severity with no dose-limiting toxicities. The CBP-174 PK profile exhibited rapid absorption with dose proportional increases and exposure followed by linear elimination. This promising first-in-human data represents progress for the development of CBP-174 as a potential novel treatment for pruritus associated with allergic and inflammatory skin conditions, including atopic dermatitis, which affects millions of individuals worldwide. This is our first clinical trial for our third clinical stage drug candidate, and we look forward to continuing to evaluate CBP-174 as we work towards improving the quality of life for patients with debilitating dermatologic diseases. And with that, let me turn the call to Steve to cover the financial report.

Thanks, Chin. Today, we filed our Form 6-K for the six months ended June 30, 2022, which contains detailed financial results and is available on the SEC and Connect websites. I'll cover a few key financial metrics starting with our cash position. For all of my remarks, I'll be comparing the six months ended June 30, 2022, to the six months ended June 30, 2021, unless specified otherwise. As of June 30, 2022, cash, cash equivalents, short-term and long-term investments were $212.9 million or RMB1,429.1 million compared to RMB1,706.9 million at December 31, 2021. The decrease was mainly due to R&D and administrative costs associated with our three clinical drug programs. Our total cash and investments of $212.9 million are expected to fund our operations into at least 2024 based on our current operating plan. R&D expenses increased to $50.8 million or RMB340.8 million from RMB217.8 million. This increase was driven primarily by higher clinical trial-related expenses, including expenses related to advancing CBP-201 for AD in China, the ongoing global Phase 2 costs for CBP-201 in asthma, our global Phase 2 trial cost for CBP-307 in UC as well as higher personnel costs for additional R&D headcount. Administrative expenses totaled $10.7 million or RMB71.8 million compared with RMB48.0 million in the same period in 2021. Admin expenses rose primarily due to higher personnel costs, stock-based compensation expenses higher professional services and other costs associated with building out a public company infrastructure and supporting clinical trials. Net loss totaled $59.8 million or RMB401.3 million compared with a net loss of RMB942.5 million for the six months ended June 30, 2021. The net loss in the prior year period was higher due to the recognition of RMB674.3 million of fair value adjustments on our preferred stock, which were converted to common stock in last year's IPO. With that, I'll turn the call over to the operator for instructions on how to participate in the Q&A portion of today's call.

Our first question comes from the line of Louise Chen with Cantor Fitzgerald. Your line is open.

Thank you for taking my question and congratulations on the progress this quarter. I have a few questions for you. First, atopic dermatitis is a crowded development area, so I'm curious about how you plan to differentiate yourself. Secondly, regarding CBP-307, do you expect to announce a partnership before the end of the year, or is that more likely in 2023? Any timing details would be helpful. Additionally, has there been any interest from potential partners in your discussions? Finally, what is the opportunity for CBP-201 in asthma?

Thank you for the question. I believe that we have four questions here. Let me take a crack at the first question, and then Chin can address the 307 and the timeline for clinical reports. I can probably also optimize my answer to the first question, and provide some insight on interest of investors and partners on 307 and then, again, maybe back to Chin on the asthma potential. So with respect to the opportunity of CBP-201 in the AD space, you are absolutely correct that the AD space treatment has evolved quite a bit now since the launch of dupilumab. It is now becoming a more crowded space, but if you look at the market opportunity and the number of patients worldwide who can benefit from systemic treatments, the opportunity is very large, and that's validated by the performance of drugs like dupilumab in the marketplace. Now when we look at opportunities, obviously, we're looking at this time; we believe that biologics, especially those that have significant efficacy and excellent safety profiles, are going to continue to be critically important and will dominate this space as the market grows. Other modalities will have a significant role as well. Now, within the IL-4 alpha receptor antibody space represented here by dupilumab, we believe that blocking IL-4 and IL-13 continue to be the most effective way of treating AD as well as other diseases associated with type 2 inflammation. If you look at the IL-4 antagonist space, obviously so far, dupilumab is the only drug on the market. Connect is developing a potentially differentiated antibody as a second to the market in this specific class. As we have communicated in the past, dupilumab is a wonderful drug, but in terms of its efficacy, convenience of use, and dosing frequencies, there are opportunities to improve and allow other molecules to come in. When we look at CBP-201, it's an entirely different molecule with a different binding epitope. Our goal here is to have differentiation in several areas. We believe that CBP-307 does have a great opportunity if our clinical data support robust efficacy and potentially dose intervals. Let me go to the question on CBP-307. As in my opening remarks, we emphasized that CBP-307, by all the measures that we look at, looked at the totality of our Phase 2 data, we are quite comfortable that clearly the molecule is working the way it should, especially we emphasized the clinical remission rate. There has been continued interest in CBP-307, and we have had ongoing discussions. At this time, we don't have anything to update, but we will be happy to do so when we are ready to announce any updates on the discussions. Let me ask Chin to address the progress in terms of when our clinical report will come up and also the asthma opportunity for CBP-201.

Yes. Thanks, Wei. So I think as you heard on the first part of this call, for the AD program, we're well underway for the first study, looking forward to getting our first patient in the study before the end of this year. We'll continue to make positive steps towards the program as we move the AD indication forward. We're very excited about that. A quick update on asthma: we look forward to getting the results closer to the first half of next year and continuing to make progress on that. Your question around CBP-201 and asthma, certainly, the line of response that Wei gave regarding the AD space, asthma is not dissimilar. Obviously, there are many treatments for that, but we believe that we've got potentially a competitive molecule in CBP-201 that can be very competitive once we've generated the totality of data for approval across the different indications we are currently pursuing in AD as well as asthma. That represents an opportunity for us, not just in AD, but in asthma, allowing us to provide different treatment options for physicians.

Our next question comes from the line of Thomas Smith with SVB Securities. Your line is open.

I guess first on CBP-201. Can you give us any additional color on your regulatory interactions with China CDE? And maybe speak to your level of confidence that positive results from the ongoing stage could result in an approvable data set?

Thank you, Tom. Yes, I can provide an update here. We did talk about this in our press release. It really is an excellent development for the program, trying to get approval and make it available to patients in China. As you recall from our previous discussion, we had planned to enroll more patients in that study in order to satisfy the exposures. In our discussion with CDE, based on their replies to our questions, it certainly appeared to us that the CDE wants to see how the data set looks and because we already have a global Phase 2b trial, we built this China pivotal trial. The designs and purpose are entirely consistent with the pivotal trial. We can't provide additional detailed information as this was not an in-person meeting with the CDE. We believe that it will depend on whether or not we hit our endpoint in our pivotal trial in China. It's also worth mentioning our ability to very quickly follow up with the pre-BLA meeting, which is what we agreed on with the CDE immediately after the 16-week data. It's a very positive sign that allows us to better understand what else is needed for our package to be complete, which will depend on the pre-BLA meeting that we’re going to schedule as soon as we have our data.

Okay. Got it. That makes sense. And then you mentioned — it sounded like in the prepared remarks, potentially using the China pivotal data as the start of potential partnering discussions. Can you just talk about what you’d be looking for in terms of partnership? And I guess, latest thoughts on how you’re thinking about commercialization in China versus the U.S. versus Europe versus other regions?

On the partnership front, we are open to partnering CBP-201, both in regional deals, specifically in Greater China, as well as global deals. Our expectation is that the global deal or ex-China deal will take a little bit longer to conduct and complete. Our objective is to secure a reasonable deal first. In terms of commercialization, we are open to working with China-based pharmaceutical companies who may have stronger capabilities in marketing, especially in the immunology space. To be successful in the China market, we realize efficiencies are necessary, and building a sales force is a challenging task. If the deal is favorable and allows us to achieve our goal of securing drug approval in China as well as generating revenue in the form of royalties, we are completely open to that. Right now, we're not able to share any specifics on the progress, but we'll be happy to discuss when the time comes. Given that the pivotal trial data is now available much earlier than anticipated, this will certainly be part of our partnership discussions, and we see this as a very positive sign.

Yes. No, that's very helpful. And then just maybe last question. Just — when can we expect to hear more on your plans and next steps for future studies with CBP-174?

We just received the data and are able to present it. This first study is truly a typical first-in-human study to allow us to get an understanding of the drug characteristics, especially its safety profile, which is the most important part of the evaluation. By this study so far, we are pleased with the safety profile at the dose level achieved. The next step obviously requires further deliberation in terms of how we will leverage the next study. Most people think it will look more like a multiple ascending dose, but we're also considering building a biomarker study as well or even running the study in patients with skin inflammation. We need to analyze all the details surrounding what that next study will look like, and we'll be happy to update when the time comes.

Yes. And Wei, if I can just add one more point to Tom’s good question about CBP-174. One thing we did in the Phase 1 single ascending dose studies, we administered the drug in a solution. There may also be opportunities for us to optimize the formulation in the next study. This is another reason we want to consider the details around what that next study will look like.

Thank you, Chin. That's another excellent point. This first-in-human study is to find out information as quickly as possible. The correct way of hosting the drug, as Chin pointed out, is in solution. It's certainly not the format of the formulation we would like to take to the next study.

Our next question comes from the line of Kelly Shi with Jefferies. Your line is open.

Can you hear me fine?

Kelly, yes, we can hear you.

Okay. Thank you. So first of all, could you actually share some color regarding the payback of the end of Phase 2 meeting with the FDA? Do you still plan to enroll more severe AD patients? And how do you implement this strategy into the operation for the global Phase 3 trial?

Great. Thank you for the questions. This is a question for Chin. Would you like to take on this question?

Yes, great question, Kelly. As mentioned in the first part of the call, we did have what we believe to be a very successful interaction with FDA. During that meeting, most of the discussion centered around how our Phase 3 program will look. It was a fruitful conversation covering detailed aspects, from trial designs to the inclusion of different patient populations, including children and younger adolescents. We received positive feedback on those aspects. As for getting more severe patients, this is a primary focus as we move forward. Our current pivotal trial in China does appear to allow for the inclusion of more severe patients, which will guide us in replicating that in our global Phase 3 program. We will be balancing the need for timely patient enrollment with ensuring that we achieve sufficient disease severity at baseline. We may consider allowing higher baseline levels for a subgroup of patients until we enroll enough of the more severe patients.

Thank you for the color. I also have a follow-up. So, on the clinical trial dough-out, it was showing that the nasal polyp trial was terminated. Curious, do you plan to resume the program in the future? And what are your thoughts for CBP-201 in terms of indications beyond AD?

Yes. We made a very difficult decision to terminate that study. It was not due to any safety issues at all, but rather an operational issue in terms of enrolling the study during a challenging period, partly due to the ongoing pandemic and lockdowns in China, as well as the Ukraine conflict impacting enrollments. We believe our drug should work in the nasal polyp indication, given dupilumab's efficacy. Whether or not we will pursue nasal polyp in the future is somewhat contingent, and I can turn it back to Wei for further comments.

This ties into a broader question of potential indications for a drug like CBP-201. Our belief is that IL-4R-alpha antagonists can play a significant role in managing a multitude of type 2 diseases. We see the increased value of CBP-201 with potential additional indications, including asthma, nasal polyps, and other related conditions. Given the nature of type 2 diseases and their comorbidities, we see opportunities for CBP-201 in this time of treatment. However, pursuing nasal polyp will not happen in the immediate future.

Our next question comes from the line of Joe Catanzaro with Piper Sandler. Your line is open.

Thanks for the update. Just two quick ones for me. Maybe first one following up on the discussion earlier around the potential for partnership opportunities for CBP-201. Just want to confirm that it is your expectation to launch the global Phase 3 AD program before year-end, irrespective of whether you have any partnership in place by then?

Thank you for the question. Yes, regarding the launch of our Phase 3 global studies and whether we will have a global partner at that time, we currently believe we can proceed with our study without securing a partner by the launch. We are only a quarter away from launching, so we are making the necessary preparations, but our goal is to establish a solid partnership soon. As for your second question about the disclosure for the October readout, I would like to hand this over to Chin for further details.

Thanks, Wei. For the top line readout, we plan to provide the primary endpoint at week 16, which is the EC75 along with some key secondary endpoints, IGA, itch, etc., along with top line safety results. We understand that detailed information is valuable, and we aim to disclose as much of that information as possible to provide clarity rather than something that is more high-level.

Thank you all for your interest in Connect Biopharma. Looking forward, just in the next several months, we have a number of milestones that we anticipate will help advance our goal of developing T cell-driven therapies to treat inflammatory diseases to improve the lives of patients with chronic inflammation. For CBP-201 in AD, we are on track to report top line data from the Stage 1 16-week treatment period of the China-only pivotal trial in October. We plan to initiate a global Phase 3 trial before the end of 2022. For CBP-201 in asthma, we anticipate completing enrollment in a global Phase 2 trial in asthma patients with type 2 inflammation in the first half of 2023. We plan to report top line findings in the second half of 2023. Additionally, CBP-307 in UC will complete its Phase 2 maintenance phase in the second half of 2022. Thank you all for your interest in Connect Biopharma, and I look forward to reporting to you on the progress in the coming weeks and months.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.