DBV Technologies S.A. Q2 FY2021 Earnings Call

Good afternoon, and welcome to the DBV Technologies First Half 2021 Financial Results and Business Update Conference Call. My name is Reece, and I am the operator for the call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open up the call for your questions. Please be advised that this call is being recorded at the company's request. At this time, I'd like to turn it over to Anne Pollak, Head of Investor Relations. Anne, please proceed.

Thank you, Reece. This afternoon, DBV Technologies issued a press release that outlines our financial results for the six months ending June 30, 2021. This release is available on the Press Release section of the DBV Technologies website. Before we begin, please note that today's call may include a number of forward-looking statements, including, but not limited to, comments regarding our clinical and regulatory development plans, our anticipated future interactions with the regulatory agencies, our financial forecast and our expectations regarding our potential patient population, allergists and patient caregivers. These forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause the company's actual results to differ significantly from those suggested by these statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to the company's filings with the SEC for information concerning risk factors that could cause the company's actual results to differ materially from expectations, including any forward-looking statements made on this call. Except as required by law, the company disclaims any obligation to publicly update or revise any forward-looking statements to account for or reflect events or circumstances that occur after this call. Joining me on today's call are Daniel Tassé, Chief Executive Officer of DBV Technologies; and Sébastien Robitaille, Chief Financial Officer. It is now my pleasure to hand the call over to Daniel.

Thank you, Anne, and thank you all for joining us this afternoon. As you know, DBV's highest priority is advancing Viaskin Peanut in both the United States and European Union. We are committed to pursuing its approval in both regions as a treatment for children ages 4 to 11 with peanut allergy. I'd like to highlight the important progress we are making on both fronts. Let's start with the U.S. We have selected two modified Viaskin Peanut patches or MVP patches for further development after completing CHAMP, a trial in healthy adult volunteers to assess the adhesion of five modified patches versus the current patch. All five modified patches performed better than the current patch, which we referred to as cVP in CHAMP. We chose the lead patches based on CHAMP results augmented by feedback from advisory boards with allergists, as well as with patient caregivers. The difference between the two selected patches is their shape. One is circular, and the other one is rectangular with rounded corners. They are both approximately 50% larger than the current patch in total surface area but maintain the same structure of the occlusion chamber, which is comprised of the foam ring, the backing and the peanut protein dose of 250 micrograms. The decision to advance one or both patches to trials in children ages four to 11 will be determined by the feedback we received from the FDA on STAMP. STAMP, which stands for Safety, Tolerability and Adhesion of the Modified Patches, is a six-month safety and adhesion study of mVP in children ages four to 11 with peanut allergy that the FDA recommended we conduct. We submitted the protocol for STAMP to the FDA in the second quarter, and we are currently awaiting feedback from the agency. As you may remember, with the FDA provided guidance on a regulatory path forward for Viaskin Peanut in January of this year, the agency agreed that a modified Viaskin Peanut patch would not be considered a new product entity provided the occlusion chamber remains unchanged from that of the current Viaskin Peanut patch and that the occlusion chamber of mVP performs similarly to that of the current patch. The FDA's agreement is the foundation in utilizing data from the clinical development program of the current Viaskin Peanut patch to support the modified Viaskin Peanut patch. It means we could use Phase III efficacy from the study and, importantly, preclinical data like toxicity data in animal models to support APLA for a modified patch. The FDA requested we conduct an assessment comparing the uptake of allergen or peanut protein between the patches, between cVP and mVP in peanut allergic children ages four to 11 to confirm the consistency of efficacy data between the current and modified patches. We refer to this trial as EQUAL, and the acronym stands for EQuivalence in the Uptake of ALlergen. Earlier this quarter, we initiated PREQUAL, a Phase I study in healthy adult volunteers to optimize the allergen sample collection methodologies and validate the assays we intend to use in EQUAL. In parallel, we continue to work closely with the FDA on how to best demonstrate the protein transport comparability of the modified patch, the mVP, to the reference patch, cVP. We have said that we will provide timeline guidance on the modified Viaskin Peanut BLA submission once we have alignment with the FDA on the final STAMP and EQUAL protocols. We very much look forward to providing the update as soon as possible. I'd also like to provide an update on the EMA review, the Marketing Authorization Application for Viaskin Peanut. It is progressing according to established EMA processes and ongoing conversations with the EMA. We recently received the Day 180 letter of outstanding issues from EMA, which is an established part of the prescribed EMA review process. The letter we received indicated that many of their major objections and other objections from their Day 120 list of questions have been answered. One major objection remains at this time. Now, we have an ongoing and constructive dialogue with EMA and have additional opportunities to address their questions. As an extension of the productive nature of our relationship with EMA, we will not unilaterally bring details of our discussion into the public domain or provide further information until there is a final review decision. We will provide a response to the EMA on all outstanding issues. Based on the average length of EMA evaluation of an MAA, we estimate EMA could issue its decision on potential marketing authorization contentiously in the fourth quarter of 2021 or the first quarter of 2022. And now, I'll turn the call over to our CFO, Sébastien Robitaille, to review our financial results.

Thank you, Daniel, and good evening to everyone on the call. Earlier today, we issued a press release with our financial results for the six months ended June 30, 2021. Our cash and cash equivalents as of June 30 were $125.5 million, which we continue to expect will support our operations until the second half of 2022. In addition, our net cash flow used in operating activities, excluding restructuring, has decreased by 42% between Q1 2020 and Q2 2021. Significantly reducing our cash burn was an important goal of our global cost reduction plan initiated last year, and I'm pleased to report our progress. And now I will turn the call back to Daniel for some closing remarks.

Thank you, Sébastien. In summary, we are making good progress in advancing Viaskin Peanut towards potential approval in both the U.S. and the EU, and that is our top priority. Recently, as travel restrictions have started to ease in parts of the world, representatives from DBV attended key allergy conferences in both the EU and the U.S.A. We have conducted a series of virtual advisory boards with allergists and patient caregivers to understand if or how the COVID-19 pandemic or the introduction of FDA-approved peanut oral immunotherapy changed the desire for additional peanut allergy treatments. We were very encouraged to hear that allergists and patient caregivers still very much want and need additional treatments for peanut allergy so families can choose the treatment approach that is right for them. Furthermore, the fear of an allergic reaction from accidental peanut ingestion has not diminished during COVID. Although some families reported feeling more in control of their child’s environment during their stay-at-home phases of COVID, they recognize that their children will again engage in more in-person schooling and other activities where the risk of accidental peanut ingestion feels higher to them. At DBV, we all firmly believe that children with peanut allergy, their parents and loved ones, as well as the allergists who treat them, all deserve multiple treatment options. Everyone at DBV is highly committed to the potential of bringing Viaskin Peanut to market. With that, I would like to open the call for questions.

Thank you. We will now begin the question-and-answer session. Our first question is from Graig Suvannavejh with Goldman Sachs. Graig?

Yes. Can you hear me okay?

We can hear you, Graig very well. How are you?

Okay. Thanks for the update Daniel and Sébastien, and I've got a few questions, if I could. And maybe three that I can think of off the top of my head. One, is there any color you can provide on the update you provided on Europe and the one major concern in terms of what that major concern is, or if you can't discuss what that major concern is, your comfort level and being able to adequately address that major concern? My second question is in regards to the newly disclosed PREQUAL study; at least it was new to me. Just talk a little bit more about that study and importantly, how that may or may not impact how you have been thinking about potential BLA submission timelines? And then with a third question, Daniel, we had a chance to catch up in June at our health care conference, and you had a view that perhaps you’d hear back from the FDA. And in a relatively short time, it seems that at this point in time, you have not heard yet back from FDA. And so I wanted to get your thoughts on how you are feeling your dynamic is in terms of your relationship with the FDA? And with regards to do you feel that you have a good sense of where the agency is right now in light of the previous history with the program? Thanks.

Yes, Graig, thank you. Let me address your question in order. We are very confident we can respond to the EMA's inquiries. We chose not to comment publicly since it’s an ongoing process with the regulatory agency, and we want to maintain respect for that. The EMA process is quite constructive, with defined interactions between the sponsor and the agency. At this time, we prefer not to make any public comments. The questions pertain to the usual engagements that happen at this stage. We are quite confident—actually, we're very confident—that our product is not only approvable but that we can address those specific inquiries. Regarding pre-EQUAL, that is not a factor in our timeline. It is an important question, but it won’t impact our schedule. We needed to ensure that we have suitable assays to measure microgram quantities of peanut protein on both surfaces. We have to assess what remains on the patch and what is still on the skin, and the difference would be what is absorbed by the Langerhans cells. Those methods are critical, focusing on precision rather than just time and training. Thus, pre-EQUAL was essential before we commence EQUAL. We decided to begin the pre-EQUAL work alongside our discussions with the agency on other aspects of EQUAL to avoid delays. Yes, that was always part of our strategy. There’s nothing new regarding the timeline or any limiting factors. Finally, our communication with the FDA is proceeding as expected. We anticipate receiving feedback from them in a timely manner. As you know, the agency has a lot on their plate at the moment, including managing numerous products, particularly the COVID vaccine portfolio. However, we are pleased with our interactions with the FDA and are waiting patiently. We shouldn’t have to wait long for their response on the standard protocol.

Okay. Thanks a lot.

Our next question is from Jon Wolleben with JMP Securities. Jon, please begin.

Hey. Just here for JMP. Thanks for taking the question and thanks for all the color. I guess to Graig’s previous question, can you discuss a little bit if you've gotten feedback from FDA on the EQUAL study and then how to think about the sequence of EQUAL and STAMP? Do you have to finish EQUAL before STAMP, or are these going to be run in parallel? Can you just remind us of that timing?

Important question here, Jon. They will be run in parallel, which is why we first sent the STAMP protocol to the agency before the EQUAL protocol, because STAMP will be a six-month study. So, obviously, it will take a bit longer than six months to run it, given the logistics running a clinical trial. While EQUAL is a study can be done rather quickly, in a matter of a few days, and I think patients essentially be under observation by the investigators here. So the rate-limiting trial in time is STAMP which is why we filed that one in the first place here. The discussions with EQUAL with the agency are very much ongoing. We're exchanging ideas and approaches and pre-EQUAL as part of that dialogue here, because as part of the sign-off on the EQUAL protocol, we would like to have, obviously, full agreement and methodology, given the fact that what we're doing here is not technically extraordinarily complex, but not a study that typically done, as you know. I want to make sure that again we have all of our assays lined up, methodologies well defined and the FDA comfortable with them. So, again, it's important work, but it's not a rate-limiting work, which is why we filed stamps. Hopefully, that answers your question.

Yes, that's helpful. And can you give any color as far as your expectations? Are you still not planning on including a double-blind food challenge in STAMP, or has that been in discussion with FDA recently?

No, that is not in discussion with FDA. The FDA is not asking in either STAMP or EQUAL to measure the efficacy of the product. So there's no need for the double-blind, placebo-controlled food challenge here, which, as you know, is an intimidating element of clinical study in food allergy because it's uncomfortable for the parents for the clinicians, particularly obviously for the child. There's no need for double-blind, placebo-controlled food challenges, which is why, again, we believe that both EQUAL and STAMP will be relatively straightforward to recruit patients because you don't have that intimidation or difficulty factor that often complicates enrollment.

Got it. And one more, if I may?

Did that answer your question, yes?

Please, yes. You mentioned the feedback on the two patches from the advisory board, the caregivers and the KOLs. Can you provide any color on what they said, whether one patch was favored over the other, or any kind of feedback between the two?

It was important for us to undertake that work for several reasons. I want to explain why we did it. First, we want the medical and patient communities to feel ownership over the patches we select, especially since patients, advocates, and treating physicians are eagerly awaiting the patch. Additionally, we wanted to ensure that we understood all aspects related to the application of the patch and how we use it, particularly regarding treatment compliance, before making our choices. The feedback we received indicated that preferences between the two products were nearly even, with no significant difference between the top two options. Therefore, whichever patch we choose would likely be indifferent to the trading community, but we felt it was crucial to gather their input.

Got it. All right. Thanks again for all the color.

You're most welcome. Good questions, both you and Graig.

Looks like Graig has a follow-up, so we will go to him next.

Thanks. Daniel, if you could comment maybe on activities that go beyond the initial four to 11 indication for, I guess, Viaskin Peanut and the modified patch formulation? I guess more in particular, I'm asking about earlier ages for Viaskin Peanut, some of your other allergy programs? And maybe just a follow-up on maybe with Sébastien on the financials, just on some clarification around the revenue accounting for the Nestle collaboration in the quarter? Thanks.

Sure. Okay. Let me take the first two questions, and then I'll have Sébastien respond to them. So back to your first comment here, some do this in a proper sequence. It was around – the one- to three-year-old. That study has – the last patient first labs visit took place in the first quarter of this year. So the last patient labs visit will be in the first quarter of 2022. And then we will be obviously unblinding and sharing the data with the community and regulatory agencies once that's done. But that study is currently fully enrolled, and we are in the 12-month follow-up for the patients who enrolled fast. The work on the milk patch, as you know, is waiting closure with Viaskin Peanut by our choice here, given the fact it's the same technology and we had a number of CMC questions as we all know. We chose to get to the right spot with the FDA or in Peanut before filing or filing before having the end of Phase II, Phase III planning discussion with the agency. In parallel, as you know, the application of the milk patch to EOE is something that work was done at CHOP and that remains something that we're interested in pursuing also. So the milk patch actually may have two phases to it when it comes to clinical development to go in Phase IIb and Phase III, one application to the prevention of meal allergies and the other one to the treatment of EOE. Again, all of that will come once we have a clear regulatory pathway with the FDA on the peanut product. If that has satisfactorily answered your questions, I'll pass it on to Sébastien. If not, please ask so that your question is properly answered.

I'm good there. Would love to get some color from Sébastien.

Yes, sure. Yes. So as you may know, nonrespondent and milestone payments are deferred and recognized as operating income over the period of the collaboration agreement. And regarding delay we have on the Phase II space with Nestle under our collaboration, the revision of the Magic communal revenue due to the delay of the program has led us to the recognition of negative revenue for the quarter and the six months ended June 2021. Do you have a question?

Yes, thank you.

And I see no further questions at this time. Speakers, do you have any closing remarks before we conclude?

No, except, thank you, everybody for attending today. And as you know, Row is available as a phone call away for any follow-up or clarifications, wishing everybody a safe and restful rest of the summer.

Excellent. Thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.