Synlogic, Inc. Q3 FY2020 Earnings Call

Good morning. Welcome to Synlogic's Third Quarter 2020 Conference Call. Please be advised that this call is being recorded. I would now like to turn the call over to Daniel Rosan, Head of Corporate Finance and Investor Relations. Please proceed.

Thank you, Operator. Good morning, and thanks for joining us on today's conference call. This morning, we issued a press release, which outlines our third quarter 2020 financial results and several other topics that we plan to discuss today. The release is available on the Investors section of our website at synlogictx.com. Joining me on this call are Dr. Aoife Brennan, President and Chief Executive Officer; Gregg Beloff, Interim Chief Financial Officer; and Dr. Richard Riese, Chief Medical Officer. Also joining us is Dr. David Hava, newly appointed Chief Scientific Officer. During the call, Aoife will provide a brief outline of third quarter highlights and recent progress. Gregg will summarize our financial results for the quarter, and Richard will provide an update on our Metabolic portfolio. Following our prepared remarks, we will open the call for your questions. As we begin, I'd like to remind everyone that comments today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date hereof and are subject to numerous factors, assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those contained in any forward-looking statements as a result of various factors, including those described under the heading 'Forward-Looking' statements in our press release or under the heading 'Risk Factors' in our most recent 10-K filings or filings with the SEC. Synlogic cautions you not to place undue reliance on any forward-looking statements. And now I'd like to turn the call over to Aoife.

Thanks, Dan. Good morning everyone and thank you for joining us. I am thrilled today to share with you our third quarter 2020 financial results and to highlight recent achievements including our newest candidate Enteric Hyperoxaluria entering the clinic this week ahead of schedule, and the initiation of our PKU SynPheny-1 Phase 2 study. To me, awesome colors and back-to-school always feels like the real start of the New Year. And that has been especially true for us here at Synlogic. We’ve rapidly moved our clinical portfolio forward over the past nine months. And now we are gaining momentum as we head into one of the most data-rich periods in our history. Over the past few years, we have built a premier synthetic biology platform and today we are laser focused on establishing that platform as one that patients can rely on for life-changing treatments. I know that we have the team, technology, and portfolio to succeed. And I want to start today by discussing our team. Our recent research engine is one of the most productive among small biotech, bringing now 4 INDs into the clinic in short order. Each one of those INDs has come more rapidly than the one before. Yes, there is so much more we can do. Each day there is even more breaking science and the power of bacterial therapeutics to change the course of human disease, something that Synlogic has realized and worked towards since day one. We continue to execute strongly across the Metabolic and Immunomodulation program, bringing the transformative power of synthetic biology to medicine. That is why I am pleased to welcome Dr. Dave Hava to our leadership team as Chief Scientific Officer. Dave is an experienced drug hunter who has brought multiple programs from ideation into and through the clinic and has led numerous successful partnerships. He is a microbiologist who has been doing synthetic biology long before the field adopted that label. We look forward to Dave tuning our already prolific research engine. Dave, would you like to say a few words.

Thanks, Aoife. Let me just say thank you for the top-notch scientists who have welcomed me to Synlogic these past few weeks. The quality of the science and the rigor of the team here are second to none. This cannot be a better time to join Synlogic and advance synthetic biotic medicines as we launch our third clinical program this week. I am looking forward to deepening our work in metabolic diseases, advancing our immunology efforts, and partnering with the exceptional clinical research and process development teams. Thank you for the warm welcome.

Thanks, Dave. Let me turn now to an update on our business and portfolio progress over the past quarter. We are rapidly progressing our internal metabolic disease pipeline, which leverages the ability of our platform to safely deliver a synthetic biotic medicine into the human GI tract to consume toxic metabolites. Transforming toxic metabolites into benign substances is something that really no other platform can offer and would be clinically meaningful in a wide variety of disease states. The metabolic pipeline is entering a clinically exciting time with our Phase 2 study in PKU, which we call SynPheny, now initiated at multiple clinical sites across the U.S. Even amidst COVID, patient interest in the study has been robust, and we're pleased with the progress thus far. We will speak in depth about that study in a moment. Our newest metabolic program, SYNB8802 in enteric hyperoxaluria has entered the clinic this week earlier than expected, because of the power of our reproducible platform. Relying on the toxicology and CMC experience of our earlier products, we were able to follow an accelerated IND timeline and reduce the typical period from candidate declaration to first in-human by more than six months. Our immunomodulation portfolio also continued to expand. The clinical team has done an exceptional job of shepherding the SYNB1891 Phase 1 study through monotherapy dose escalation cohorts. The team remains on track to share an interim update on the monotherapy arm of the study by the end of the year. And we continue to expect initiation of the combination therapy arm with SYNB1891 and the anti-PD-1 agent to centric early in 2021. I want to emphasize across an extraordinary amount we will learn about the potential of synthetic biotic medicines over the next year. Our team has done a tremendous job executing in the clinic, setting the table for multiple meaningful readouts. Thanks to our careful cash stewardship, all of those milestones occur well within our cash window. By the end of 2021, we will have proof-of-concept opportunities into patient populations. As those PKU patients unserved by current treatments where we will assess the feel or potential of SYNB1618 and Roux-en-Y gastric bypass patients with impaired hyperoxaluria who have no options today for managing the dangerously high levels of urinary oxalate. We also continue to build our immunomodulation portfolio, which leverages our synthetic biotic platform to exploit the interaction between bacteria and the immune system in complex disease areas, including immunology and oncology. We're advancing our Phase 1 clinical trial of SYNB1891 in solid tumors. Despite the COVID-19 pandemic, enrollment in this study continues to track well. The monotherapy arm of the SYNB1891 study is intended to demonstrate feasibility, safety, and identify a maximum tolerated dose. SYNB1891 was designed to take advantage of the immunostimulatory properties of our bacterial chassis, as well as being specifically programmed to produce STING agonists. By delivering a STING agonist directly into antigen presenting cells in the tumor using a synthetic biotic, we hope to avoid T-cell apoptosis, which reduces the efficacy of traditional small molecules targeting the STING pathway. We continue to see data that supports the injection of SYNB1891 as feasible and that the strain is generally well tolerated. To date, there are no dose-limiting toxicities or infections seen with SYNB1891 administration. We will share an update on the variance gathered from the initial monotherapy dose cohorts closer to the end of the year. In summary, we feel that we have great potential to bring new therapeutic approaches to patients. We have made exciting progress in our pipeline and are in a solid position to execute on our key upcoming milestones. Now, let me turn the call over to Gregg to briefly run through the financial results.

Thank you, Aoife. And good morning, everyone. This morning, we released our financial results for the third quarter ended September 30, 2020. And I'm pleased to review those highlights with you now. Research and Development expenses were $10.5 million for the three months ended September 30, 2020, compared to $10.6 million for the corresponding period in 2019. These costs were driven by Synlogic’s collaboration with Ginkgo for the optimization of synthetic biotic medicines, as well as clinical study startup activities associated with SYNB1618 and SYNB8802 as well as the ongoing SYNB1891 Phase 1 study. General and Administration expenses were $3 million in the third quarter of 2020, compared to $3.9 million for the same period in 2019. For the third quarter of 2020, the company reported a net consolidated loss of $13.2 million or $0.36 per share, as compared to a net loss of $13.3 million or $0.39 per share for the corresponding period in 2019. We had no revenues in the third quarter of 2020 compared to $305,000 for the same period in 2019. Revenues associated with the services performed under Synlogic's collaboration agreement with AbbVie to develop a synthetic biotic medicine for the treatment of IBD, an agreement which has since been terminated. Now, turning to the balance sheet, Synlogic ended the third quarter of 2020 with $102 million in cash, cash equivalents, and other investments. Under our current operating plan, we expect that our cash will take us into 2022 and enable us to advance our clinical programs through important data readouts over the coming months. Thank you for your attention, and we look forward to keeping you updated on future calls. I'll now turn the call over to Richard to share progress with you on the metabolic portfolio.

Thank you, Gregg. I'd like to now walk you through our plans for the Phase 2 proof-of-concept study of SYNB1618, which we call SynPheny-1. This study will teach us a tremendous amount about the potential of our novel approach in PKU. PKU has attracted a wide range of new approaches, especially among drug developers advancing new modalities. This is a credit to the efforts of the PKU community. But as we talk with patients and caregivers, it is clear to us that both current and emerging treatment options continue to leave too many patients behind and a safe, tolerable, reversible, and oral therapy would be welcomed. That is why we are progressing SYNB1618 through clinical development. Our initial program on PKU has shown promising activity. We have demonstrated the ability to consume Phe in the GI tract, most recently in our solid oral bridging study in healthy volunteers. The next step is to understand how the consumption of Phe in the GI tract in PKU patients would impact plasma Phe levels. To answer that question, we have initiated the Phase 2 SynPheny-1 study at multiple sites across the U.S. Inbound patient interest is robust, and the patients have the option of conducting all trial procedures at home or in the clinic. We plan to have all sites open by the end of 2020. Synlogic’s approach to PKU is simple and intuitive. It is well understood that reducing dietary consumption of Phe significantly reduces plasma Phe levels in patients with non-responsive PKU. Our approach is to build on our biology to introduce a synthetic product medicine into the GI tract, which is specifically designed to consume Phe and produce measurable biomarkers TCA and HA. One of the benefits of this synthetic biotic platform is the ability to understand in healthy volunteers the way in which the strain behaves and whether it is performing as designed. In the recently completed Phase 1 solid oral study in healthy volunteers, we challenged healthy volunteers with labeled D5 Phe and saw that even in the context of endogenous Phe metabolism, we were able to generate a nice dose response of SYNB1618 on measures of D5 Phe consumption. This data gives us confidence as we move into Phase 2. The goals of the SynPheny-1 Phase 2 proof-of-concept study are to demonstrate the potential of SYNB1618 to lower blood Phe in adult PKU patients and to validate our PD model in order to better understand the relationship between the production of strain biomarkers and Phe lowering for SYNB1618. We have two opportunities to demonstrate blood Phe lowering; measurement of plasma Phe lowering in a fasted state and measurement of labeled D5 Phe after a meal challenge designed very similar to the Phase 1 healthy volunteer study I just reviewed. The benefit of measuring labeled D5 Phe is that this endpoint is not impacted by dietary variations and Phe intake. Remember, the patients in SynPheny have no therapeutic options. They are ineligible, inappropriate for, or unresponsive to existing therapies. As you know, only approximately 30% of the PKU population is Bh4 responsive. These patients are left behind by current therapies. Accordingly, we believe even relatively modest levels of Phe lowering would be clinically relevant for this population, especially if we show consistent levels of Phe lowering across enrollees. The study is powered to detect 20% reductions in Phe. PKU patients and investigators tell us that 20% Phe reductions from an oral, tolerable, and reversible therapeutic, which is effective for Bh4 non-responders would be a competitive product profile. To ensure we can effectively carry out such a study in the midst of COVID-19, we are using a flexible design in which patients can participate either in clinics or in their homes, a design directly informed by patient and investigative feedback. The response from the PKU community has been very welcoming, with significant inbound patient-driven interest and a terrific spirit of partnership with the advocacy community. The willingness of advocates, caregivers, and patients to engage with us and other sponsors is critical to advancing new treatment options for this devastating disease. We are looking forward to executing this study and sharing results in the middle of 2021. Now, let me update you on our newest program, SYNB8802 in enteric hyperoxaluria. We are enthusiastic about the potential of this program to help patients with dangerously high urinary oxalate levels. Often these patients are living with other serious chronic conditions, such as obesity, inflammatory bowel disease, or short bowel syndrome. Since oxalate is present in many healthy foods, enteric hyperoxaluria is almost impossible to control with diet alone. This means these patients are at risk for serious kidney complications, nephrocalcinosis, stones, and chronic kidney disease. There are currently no available treatments. We are pleased to announce that the Phase 1 clinical study has been initiated ahead of schedule, and our first cohort of healthy volunteers have been dosed. Our approach to enteric hyperoxaluria is informed by our learnings from PKU. The ability to consume a toxic metabolite in the GI tract is something which few modalities can accomplish. We are rationally designing our synthetic biotic medicines to do just that, building on validated biology in which dietary oxalate levels are correlated with urinary oxalate and kidney damage in enteric hyperoxaluria patients. SYNB8802 is moving into the clinic based on encouraging preclinical data, which we recently shared at Kidney Week. That data demonstrated a meaningful reduction in urinary oxalate in multiple animal models of hyperoxaluria, as well as predictive in silico simulations suggesting a meaningful reduction in urinary oxalate of 20% to 50% is possible in patients. Our clinical development plan will give us the opportunity for relatively rapid proof-of-concept readouts by focusing on capturing initial healthy volunteer MAD study on patients with enteric hyperoxaluria after Roux-en-Y gastric bypass surgery. Because the underlying bowel disease for hyperoxaluria patients can be quite heterogeneous, this post-gastric bypass population provides an optimal cohort to clearly assess the ability of SYNB8802 to lower urinary oxalate. The regulatory and critical path in this indication is relatively straightforward, with significant precedent set by sponsors in related diseases, such as primary hyperoxaluria. The importance of urinary oxalate is one critical endpoint. We will continue to work closely with regulatory authorities as we develop our clinical strategy. Our initial efficacy assessment will evaluate clinically relevant reductions in urinary oxalate levels. Feedback from our key investigators suggests greater than 20% lowering would be meaningful. As we move forward with our Phase 1 proof-of-concept study in enteric hyperoxaluria and our Phase 2 proof-of-concept study in PKU, I will come back to you with details as both of these studies unfold. But now, let me hand the call back to Aoife to wrap up.

Thank you, Richard. I'm encouraged by the rapid progress the team has made in advancing our clinical portfolio across the board, with high-quality execution leading to multiple opportunities for synthetic biotic medicine to make meaningful changes to key disease endpoints in multiple indications over the next year. Together, we have built the premier synthetic biology platform, and together, we are at our strongest. I want to end by once again thanking the Synlogic team, employees, and their families for their work and dedication in driving these programs forward through the challenges posed by COVID. The season is changing and with it brings abundant opportunities for success at Synlogic. It is energizing to be part of such a dedicated team, and we look forward to the data-rich period to come. We will now open the call for questions.

Our first question or comment comes from Tom Shrader from BTIG. Your line is open.

Good morning. Thank you for taking the question. I'm kind of digging in a little bit on the 1891 data. Clinical Trials says 70 total. How many patients will we see at the end of the year? And will it be a full dosing cohort for monotherapy? Just what can you tell us about what we're going to see?

Hi, Tom. This is Aoife. Thank you so much for your question. I think we haven't disclosed how many subjects have been enrolled in the study. But it will be data from multiple cohorts in the monotherapy arm. Obviously, when we write the protocol and put postings on clinicaltrials.gov, we want to make sure that we set the outside number that we may enroll over the course of the entire study. But we're making great progress, as I said in my prepared remarks, and we're very happy with how the study has been enrolling so far this year.

And just to set expectation, do you think monotherapy responses are on the table outside of melanoma for a STING agonists? Just your thoughts? And any hints? Does your preclinical data give you a sense of where the active doses are?

Yes. So I think, as we've said previously, to set expectations around the monotherapy group. First of all, it was a basket study. So we may enroll some melanomas. We may enroll different tumor types. So being able to parse our or guarantee a specific number of melanoma patients or non-melanoma patients is beyond how we designed the study. I think in terms of the objectives, and I'll get Richard to weigh in here afterwards, with our platform, our kind of philosophy has always been to evaluate initially in patients whether the bacteria is performing as designed. And I think that's what we're hoping to evaluate as part of the monotherapy cohorts. What we saw pre-clinically was some nice tumor shrinkage consistent with some of the biomarker changes observed in our animal models. We've published all that data, and it is available publicly on the website for those who want to dig in. So we do have some benchmarks in terms of what we saw for biomarkers and activity in our preclinical models, and we're looking at similar biomarkers in the clinic. As you know, you've been around this industry long enough to know that lots of things can change when going from mice to humans. But we've tried to design the study with an eye to be able to look back at what we saw for efficacy preclinically and have a very robust biomarker plan. Richard, anything you'd like to add?

Sure. Just to reinforce a couple of points. The primary endpoints in the Phase 1 study are safety and tolerability. So we would all be very interested in that. As Aoife mentioned, we're really interested in the monotherapy. We're looking for target engagement at doses that are relatively tolerated, understanding that we are going to have a heterogeneous patient population in these studies. So that's our overall goal for the monotherapy.

Great. Okay. Exciting stuff. Thank you very much.

Thanks, Tom.

Thank you. Our next question or comment comes from the line of Mark Breidenbach from Oppenheimer. Your line is open.

Hey guys, it's Matt from Mark. Thanks for the update on the SynPheny design, particularly the powering assumptions. I was wondering in those assumptions, if you could tell us, what's the degree of natural variability that you're assuming in patient Phe levels over time?

But I might pass that one over to Richard to answer. Matt, is that okay? Richard, do you want to take Matt through some of the powering assumptions?

Yes, sure. I mean, we know in our asset, there's about a 15% variability in just measuring Phe in and of itself. And there is also at least an equal amount of variability in patient variability from day to day. That variability is driven by changes in Phe levels over time and patient diet, and our ability to ask them to quantify Phe. So we have taken all those into account and came up with the appropriate size so that we could detect at least a 20% decrease in Phe in this patient population.

Yes. Quite a lot there as well, Matt, as we're not the first ones to do a study in PKU. So we have the benefit of being able to look back at those prior trials, and to evaluate what their variability was and to incorporate some of that into our powering assumptions. So we do have the benefit of some of that prior data from studies in patients with PKU.

Right. Yes. That sounds like a reasonable cushion. So maybe turning to the 1891 study. Can you just remind us if you're taking paired biopsies, maybe looking at things like tail induction? Or I guess, what are some of the other PD biomarkers that we should be expecting from this data set?

Richard, do you want to take Matt on that one?

Yes. So we are looking at paired biopsies. And as you mentioned, we’re looking at tails as well as interferon-beta, interferon-dependent gene expression, that’s the mRNA in paired biopsies, tumor biopsies. We’re also looking at the kinetics of SYNB1891 itself; our preclinical data suggests that the bacteria can stay alive in the tumor and be present for four to six days. So we think that would be very interesting. And then systemically, we're looking at serum cytokine levels as well, to see if we detect SYNB1891 in the pot. We think we have a pretty good complete set of PD biomarkers to really assess tumor engagement, which is our big goal here.

Cool. Thanks for the update.

Thank you. Our next question or comment comes from the line of Ted Tenthoff from Piper Sandler. Your line is open.

Great. Thank you. Thanks for the update. I wanted to get a sense of what your plans might be with the returned inflammatory bowel disease asset from AbbVie. Again, I know you have a lot going on with PKU. I know you have a lot going on with 8802, and also IO. But that seems like a pretty natural approach for this technology. And I'm wanting to get a sense for what you were thinking? Thank you.

Hi, Ted. It's Aoife here. I'll make a couple of general remarks and then maybe pass it over to Dave Hava, who is on the call as our new Chief Scientific Officer. I think, certainly he has plans to continue to evaluate IBD as an application for our platform, because you're absolutely right, it makes a lot of sense. I think it kind of expands on what would be able to do in the metabolic care therapeutic area. So what I say is that we got the assets returned, but we needed to regenerate some data from the collaboration. So we're now in the process of regenerating some of that data and evaluating which of those assets to take forward in terms of generating additional data packages around them. But I think we agree 100%, it's completely consistent with our company’s strategy to focus on metabolic diseases internally and to continue to leverage the breadth of the platform in immunomodulation in the context of partnerships and collaborations in the future. Dave, anything you want to add there as you started to dig in?

Yes. I mean, I can just reiterate some of those things. It's certainly a space that we remain committed to. I think we certainly see the potential of our platform to make an impact there. We think there's some biology that we can unlock using the platform and our learnings both from the previous work we've done in the space as well as the metabolic portfolio. So we’re working on some discovery stage programs and are excited about the potential there.

And then, one quick follow up to that. Is it something where maybe the Ginkgo Alliance could be applied to potentially seek advanced products?

Yes. So, how the collaboration with Ginkgo works is, we will come up with a concept for a strain that we'd like to design, and we'll build a prototype, and then we work with Ginkgo to optimize. I think you're exactly right. They do have access to a broad array of synthetic biology tools that really allow us to do new things from a synthetic biology perspective. I think one of the challenges for IBD is that it's a very competitive space, the studies are large and often complex. While we utilize Ginkgo at the very early end of our platform, certainly for mid and late-stage development in Crohn's and ulcerative colitis, which are the big chunks of the IBD market, we would be looking to collaborate with the right big pharma partner to bring these programs all the way through development. I think there's two ends of the spectrum, with Ginkgo being very involved early on. But then with IBD generally, kind of requiring that big pharma muscle to take it all the way through commercial. I think that would be the strategy as of today. Now, in the future, can we carve out a niche? Is there a sub-population maybe that we could see pursuing ourselves right to secure development path forward? Sure.

Yeah. Okay. Great. Thank you so much for the answer, and keep up the good work. Thanks.

Thanks, Ted.

Thank you. Our next question or comment comes from the line of Gbolahan Amusa from Chardan. Your line is open.

Hi, this is Sam in for Gbolahan. First, congrats on the progress. Just a couple of questions from me. For 8802, can you just provide us an update on the enrollment and dosing status for Part B of the Phase 1 study? That is the patients with the enteric hyperoxaluria?

Yes. Maybe I'll ask Richard to answer that question. Richard, do you mind providing an overview of plans for Part B to Sam?

Sure. Right now we just issued as mentioned in Part 1. Following the dose of the MAD in part one, we'll move on to part two, which is looking at patients with enteric hyperoxaluria. These are patients with hyperoxaluria secondary to Roux-en-Y. Our plan is just going to be a crossover design to enable rapid proof-of-concept. We plan to enroll approximately 20 patients with hyperoxaluria after Roux-en-Y gastric bypass surgery. We really want a cleaner signal of our proof-of-concept study from this patient population, where we are going to enroll patients with urinary oxalate levels above 70 milligrams a day. So we'll certainly start that as soon as we get data from the healthy volunteer MAD cohort, which is ongoing right now.

And just to add on to what Richard said there. We're able to start out the proprietary work while we're enrolling the healthy volunteers and getting the sites up and running. Right now we're on track to meet the guidance that we've provided, which is to have data in the diseased patients mid-year next year.

Got it. Great. And then one more question. So you have quite a few readouts in 2021 with 1618, 8802, and the immuno-oncology 1891. Assuming positive readouts across the board, do you expect to prioritize one asset over another for pivotal studies? And how do you see the best path moving forward?

Yes. A great question, Sam. I think here, we yet to reiterate our strategy, because I think everything that we've done and discussed today on this call is very consistent with our strategy, which is to focus on rare or niche metabolic diseases internally for our internal pipeline. We really like those diseases, because they're often very much informed by early development biomarkers. They have biomarker readouts that can be either the basis of full approval or the basis of critical endpoints in terms of regulatory approval. They tend to have very efficient kind of Phase 2, 3 development paths that are doable for a company of our size. From a commercialization perspective, there is a very defined subgroup of prescribers that we could see taking those programs all the way out through commercialization. For diseases that have potentially bigger opportunities but maybe more late-phase complexity, larger trials, requiring bigger commercial infrastructure than we would envision building ourselves, our intent has always been to partner those opportunities, and that will certainly be the case in a disease area like melanoma or oncology. I think for 1891, we've been consistent that, that's something that ideally we would love to partner at the right time once we have de-risked the safety and efficacy profile, similarly, IBD. I think we will continue to execute in line with our strategy, with the focus for our internal pipeline, being on these metabolic diseases, with the immunomodulation programs providing an opportunity to broaden the pipeline to seed potential collaborations and to continue to build value for the company to bring important therapeutics for patients. Does that make sense?

Got it. Thank you. It does. Thank you so much. And congrats again on the progress.

Thank you.

Thank you. I'm showing no additional questions in the queue. At this time, I'd like to turn the call back over to management for any closing remarks.

Great. I'd just like to thank everyone for joining us today. We're looking forward to keeping you updated regarding our progress going forward.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.