Earnings Call Transcript - SYBX Q4 2021

Operator, Operator

Good morning. Welcome to Synlogic's Fourth Quarter and Full-Year 2021 Conference Call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session at the end of this call. Please be advised that this call is being recorded. I would now like to turn the call over to Andrew Funderburk of Kendall Investor Relations. Please proceed.

Andrew Funderburk, Investor Relations

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 fourth quarter and full-year 2021 financial results and additional business updates. The release is available on the Investors section of our website. Joining me on this call are Dr. Aoife Brennan, President and Chief Executive Officer, Molly Harper, Chief Business Officer, Dave Hava, Chief Scientific Officer, and Michael Jensen, Chief Financial Officer. Other members of the management team will be available during the Q&A. During the call, Aoife will provide a review of fourth quarter highlights and recent progress, including an update on our lead program in PKU, and Molly will share her perspective on the opportunity to address the medical need and provide a meaningful additional therapeutic option to patients with PKU, Dave will discuss our earlier stage programs and collaborations, and Michael will provide a financial overview. Following our prepared remarks, we will open the call for questions. As we begin, I would like to remind everyone that comments made 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 statement as a result of various factors. Synlogic cautions you not to place undue reliance on any forward-looking statements. Now, I'd like to turn the call over to Aoife.

Aoife Brennan, CEO

Thanks, Andrew. Good morning, everyone and thank you for joining us. I'm thrilled to share with you today, updates on our recent progress, as well as our financial results from the fourth-quarter and full-year of 2021. In 2021 the Synlogic team achieved dramatic progress across the portfolio. Proof-of-concept with our lead program for Phenylketonuria or PKU. And commitment to advance to Phase III initiation this year. Proof of mechanism in Enteric hyperoxaluria with SYNB8802, a research collaboration with Roche inflammatory bowel disease. And our second drug candidate for a rare metabolic disease with SYNB1353 for homocystinuria or HCU. We are now advancing a pipeline of clinically differentiated, already administered drug candidates for metabolic and new diseases all based on the advantages of our reproducible proprietary product engine. We are continuing this momentum in 2022 with expected Phase III initiation of our PKU program in the second half of this year. SYNB1353 is expected to have healthy volunteer data by year-end. And we're also looking forward to proof-of-concept patient data from our Enteric hyperoxaluria program. Given our positive results in September 2021, we completed a successful random financing. We've had a strong balance sheet with $136.6 million in cash and equivalents sufficient to carry us into 2024 and well past this sequence of upcoming milestones. We strengthened the Synlogic team throughout 2021. Today, I'd like to welcome our new CFO, Michael Jensen. Michael brings an impressive financial and operational background from Biopharma and healthcare companies across therapeutic categories and through commercialization, an asset as we progress our programs into late-stage development and through registration. I'd also like to thank Greg Beloff, who has served as our interim CFO during a critical stage for the company. Let's ground ourselves in the vision and breakthrough science that's behind our recent progress. From our inception as Tim Lu and Jim Collins' Lab at MIT, Synlogic was founded on the premise of a new paradigm in biotherapeutics based on the application of competitive biology to medicine. In just six years, we have created a product engine producing potentially transformative drug candidates based on validated mechanisms for the treatment of metabolic and immune diseases. These Synthetic Biotics share similar safety profiles due to a lack of systemic absorption or colonization. The convenience of oral delivery and titration, along with reversibility by rapid GI clearance, and applications across rare and common diseases. I'd like to review our lead program in PKU as we advance into Phase 3 and towards commercialization. A majority of patients with PKU today remain untreated or under-treated due to limitations of current options in both safety and efficacy. With two FDA-approved drugs, PKU has a de-risked path to registration with Phe reduction used as an acceptable endpoint for full approval, as well as precedents for Phase 3 study design and its related considerations. People with PKU in the US and around the world are diagnosed at birth and treated by a small specialist community, presenting an accessible patient population. In September of last year, our Phase II proof-of-concept data showed a potential profile that could meet the PKU community's needs. Each for efficacious, safe option. One that could be both as monotherapy and adjunctive treatment. We are eager to continue to advance this program forward towards commercial pivotal studies. I'd like to now hand the call over to Molly to expand upon what makes our approach so potentially meaningful in PKU.

Molly Harper, CBO

Thank you, Aoife. In the U.S. alone, there are approximately 17,000 patients with PKU, making it a large rare disease population. Despite two approved treatments, a large majority of patients remain untreated. This is surprising but understandable given the limitations of today's treatment options. Sapropterin or Kuvan is a standard of care that is tried by all PKU patients at age 2. Its response rate is approximately 20% to 30% of the PKU population. Responders tend to have mild forms of PKU, which leaves the more severe majority untreated. For those who do respond and take Kuvan, their Phe levels often remain well above targets, presenting an opportunity for adjunctive treatment. Note that, with these limitations and 20% or less penetration globally, Kuvan was a $500 million business before it went generic in 2020. The large untreated patient population reflects the non-responders to Kuvan, for whom the other approved therapy Palynziq is also not a viable option, usually due to safety concerns. Palynziq is a self-administered injectable. The risk of life-threatening anaphylactic reactions at any time occurring in 10% of patients has limited uptake. The box warning and restrictive REMS program require patients to carry auto-injectable epinephrine at all times. This is challenging, given the neurocognitive and executive functioning deficits of PKU. In short, the vast majority of people with PKU need new treatment approaches, whether as monotherapy or an adjunctive option. Synlogic's approach for PKU fits with these needs. Synlogic designed its drug candidate to consume Phe in the GI tract without risk of colonization or systemic absorption and associated adverse events. In September 2021, we announced that the Phase 2 interim analysis for SYNB1618 achieved the targeted mean Phe reduction of 20% in an all-comers analysis, which was twice what Kuvan had achieved in its pivotal study. We also saw a strong 50% response rate as four of the eight patients met or exceeded the target for response. In parallel, we shared that the healthy volunteer head-to-head bridging study confirms that SYNB1934 has potential for greater efficacy. The product presentation being studied and expected for commercialization is an offline powder provided as a sachet and taken with meals three times a day. We are excited to be advancing a potentially effective, safe, convenient, and oral monotherapy and adjunctive option. In summary, this is an extremely exciting potential product profile for a patient population that has been waiting too long for new treatment options. I'd like to hand the call back to Aoife to discuss the PKU programs fast forward to Phase III.

Aoife Brennan, CEO

Thanks, Molly. Let's review forward this year with our PKU program, and how it reflects many of the specific advantages of the Synlogic approach. Last fall, after achieving proof-of-concept with SYNB1618 in an interim analysis of the Phase 2 study, we committed to advancing our program to Phase 3 this year. Having reviewed this data, we made two important changes to the study to ensure that we had all of the information we needed from the study to initiate a Phase 3 trial. Firstly, we added a second arm for SYNB1934 based on the data from healthy volunteers showing higher potency of that product candidate. Secondly, we amended the infusion criteria to allow patients who are on treatment with sapropterin, but continue to have uncontrolled blood Phe levels to participate, enabling evaluation of adjunctive use potential. We are set out to complete the first arm of SYNB1618, and to enroll the second arm, and are looking forward to sharing that Phase II data in the first half of this year. So what are we hoping to see from that data set? We've already determined that our activity in PKU meets our criteria to advance into late-phase development. But there are still a couple of questions to answer. Number one, candidate selection of which strain we will take forward. As we've seen in healthy volunteers, SYNB1934 had greater activity at a given dose compared to SYNB1618, confirming that higher activity in PKU patients will help clarify the choice of strain. Two, the potential for adjunctive use. How did patients who are on sapropterin, but continue to have high blood Phe levels respond to the addition of our therapeutic candidates? This will help us understand whether these patients could be included in the Phase III trial. Currently, is the likely effect size or efficacy profile ultimately for our product in PKU patients. As a reminder, we were thrilled with the results seen in the interim analysis. Just seeing the same or greater with the course is very positive. We have particularly focused as we shared earlier on the response rate or the proportion of patients who have a meaningful reduction in blood Phe levels and the mean reduction in that group. Data from both arms of SynPheny will help inform these expectations. Pending answers to these questions, we'll conduct an End-of-Phase two meeting with the FDA, which will allow us to confirm the specifics of study plans, including timing and other considerations for initiating Phase 3. It's important to note that the needed bridging studies have been completed and the experience of SYNB1934 in PKU patients represents the final step needed to advance to Phase 3. We expect our timelines to be the same for either candidate. With all these developments, great science and data are necessary but not sufficient to get new products to patients. A regulatory path to a licensed product is also critical. In addition to the collaborative relationship we have established with regulators, there are several other attributes in our favor including the precedent of two FDA-approved drugs that support the use of a single registrational study and Phe reduction as an endpoint for full approval. Secondly, our platform fits within the FDA's framework for live biotherapeutic products. The FDA is familiar with our chassis for our drug candidate. Given that it has over 100 years of safety use in humans. Currently, in addition, across our programs of manufacturing is based on fermentation and lyophilization, well-established manufacturing approaches unlike those of other new modalities. And finally, from a product perspective, both strains have been extensively studied in healthy volunteers with multiple strain-specific biomarkers. In the interim analysis of the SynPheny trials being biomarkers confirm the mechanism of action in PKU patients and resulted in a meaningful and significant reduction in blood Phe. In summary, the path ahead is both de-risked and exciting as we advance a PKU biotherapeutic for those who need it most. I'll now turn it over to Dave to discuss our other promising clinical and preclinical pipeline programs.

Dave Hava, CSO

Thanks, Aoife. I'd now like to talk about our program for homocystinuria, SYNB1353. SYNB1353 is Synlogic's second rare metabolic disease-targeted drug candidate entering the clinic this year for homocystinuria or HCU. HCU patients have a deficiency in the metabolism of another amino acid, homocysteine, and as a result, have elevated blood homocysteine levels. This can cause intellectual disability and also can result in thromboembolism, such as strokes in individuals in their teens and twenties. There is a need for new treatment options, for which our approach could be a strong fit. Our approach with SYNB1353 is to consume methionine, a precursor to homocysteine. We have promising preclinical data from non-human primates and mouse models showing that we are able to lower blood homocysteine levels. We expect to enter the clinic this year with results in healthy volunteers by the end of this year. That will be another important milestone for us as a company as we build a pipeline of assets in diseases caused by inborn errors of metabolism. SYNB1353 is highly synergistic with the PKU program. In addition to leveraging our platform, people with HCU are treated at the same sites by the same clinicians as PKU patients.

Aoife Brennan, CEO

We apply learnings from the PKU program and build upon the relationships that we have established through that work for HCU patients. Moving beyond the rare metabolic portfolio, our next program with milestones this year is SYNB8802 being developed for enteric hyperoxaluria. Enteric hyperoxaluria is a chronic progressive disease caused by an underlying GI disorder that causes patients to absorb too much oxalate from their diet. That buildup of oxalate crystallizes in the kidneys causing crystal and stone formation, which manifests as severe pain and may require intervention to pass the stone. There is an established and linear relationship between oxalate levels and stone formation. Over time, the oxalate crystals and stones damage the kidneys, leading to irreversible kidney damage with major implications for morbidity and mortality. There is no FDA approved treatment for this disease. The drug candidate SYNB8802 consumes oxalate and produces a harmless metabolite called formate in the GI tract lumen. Our specific approach enables oxalate to be consumed throughout the GI tract, extending the duration of activity in efficacy potential compared to other modalities addressing the same target.

Dave Hava, CSO

We presented data last year that we view as promising proof of mechanism, showing that we can reduce urinary and fecal oxalate levels in a dose-dependent manner in healthy volunteers fed a high oxalate diet to model enteric hyperoxaluria. Given the established relationship between oxalate levels and stone formation, we expect this to translate into clinically meaningful benefit. We are now moving forward with the portion of the study in patients with Roux-en-Y Gastric Bypass surgery, evaluated for whether SYNB8802 can lower urinary oxalate in those patients. Turning now to our early-stage in-house pipeline. The progress of both the PKU and HCU programs have de-risked our platform, especially when focused on consuming GI-based metabolites. This allows us to expand our focus to other areas, including metabolic diseases like gout, and also to larger diseases such as IBD. We look forward to sharing updates about these programs as they advance through development. We have two collaborators that reflect the strength of our product engine. The Ginkgo Bioworks collaboration resulted in the SYNB1353 clinical candidate. We also established a collaboration with Roche last year to develop products for inflammatory bowel disease. We've already achieved the first pre-specified research milestone within this collaboration. I will now turn things over to Michael to review our financial results.

Michael Jensen, CFO

Thanks, Dave. And good morning, everyone. Earlier this morning, we released our financial results for the fourth quarter and full-year ending December 31, 2021. I'm pleased to review the highlights of those results with you now. Revenue was $0.6 million for the fourth quarter of 2021; there was no revenue for the same period in 2020. Revenue for 2021 was due to the recently initiated collaboration with Roche for the discovery of a novel Synthetic Biotic for treatment of inflammatory bowel disease or IBD. For the fourth quarter of 2021, the company reported a consolidated net loss of $15.1 million or $0.21 per share compared to a consolidated net loss of $14.6 million or $0.39 per share for the corresponding period in 2020. Turning to the balance sheet, Synlogic ended the fourth quarter of 2021 with $136.6 million in cash, cash equivalents, and marketable securities compared to $100.4 million as of December 31, 2020. Under our recurring operating plan, we expect our cash will take us into 2024 and enable Synlogic to advance our clinical programs through the important data readouts across the metabolic portfolio. Thank you for your attention, and we look forward to keeping you updated on future calls. I will now turn the call back over to Aoife to wrap things up.

Aoife Brennan, CEO

Thanks, Michael. I'm extremely pleased with all the progress we've made across our programs. Our team is pushing forward with great urgency to advance the therapies with the goal of bringing meaningful new treatments to patients. 2022 will be a busy year for us with several important milestones across our expanding portfolio. We're looking forward to the readout of our SynPheny study in PKU in the first half of the year, which will help inform the final candidate selection for our Phase III study that we expect to initiate in the second half of this year. We also expect to have the first human data for our HCU program in the second half of this year as well. And we're anticipating patient proof-of-concept data for our enteric hyperoxaluria program. In addition, we're fortunate to be well funded to bring all these milestones to fruition with a strong balance sheet to support our work. We will now open the call for questions.

Operator, Operator

Our first question comes from Joseph Schwartz with SVB Leerink.

Unidentified Analyst, Analyst

Hi, I'm Juri Zylene for Joe. Thank you for taking our questions. In your opening remark, you mentioned that you're more focused on a responder analysis than the overall mean reduction for your PKU program. Unlike other approved drugs, it's reasonable to prioritize a responder analysis since the mechanism is likely to elicit a greater response among a subset of patients. However, your PKU program seems like it should operate more uniformly. I wanted to hear your thoughts on why you are emphasizing a responder analysis over the overall mean reduction.

Aoife Brennan, CEO

Thanks, Juri. I'll make some remarks and then hand it over to Molly because I think the response to your question is really looking forward to commercialization and the label on the product profile, which is really defined by the categories and what physicians and what information they use about a product to determine whether or not to prescribe that product for a given patient. Of course, we'll continue to report all data as we have. But as we look forward to commercialization and hopefully following a successful Phase III to launch, it's important that we start to talk and speak in language that's familiar to the prescriber and patient population, and I think this is very much ingrained in this category. That is really the percent responders and the percent reduction within those responders that define this class on these products. I'll hand it over to Molly to speak from the commercial perspective and why that's the case, and why we think it's important from a benchmarking perspective to use similar endpoints and language to outline the results of our trials. Molly.

Molly Harper, CBO

Thanks, Aoife. And thanks for the questions. It's a great question, and it's interesting because as Aoife outlined, we do have two approved drugs in this category, which is a real advantage from precedent setting but also in terms of looking to existing labeling. And to your point, it's really interesting that the two approved drugs, while completely different mechanisms, couldn’t be further apart. But they do share quite a similarity in terms of how their registrational or pivotal studies were done to set up for promotion, and then what's seen in the labels. So both of the approved drugs have been studied and are outlined in their USPIs in terms of responder analyses. So that's independent of mechanism and it's a precedent that was set. And I think it just speaks to the importance in this category, given the unmet need and given the individual needs of each patient, just to understand when a drug works for a given patient, how well does it work? So it's really about following that precedent from a regulatory standpoint and a promotional standpoint, which obviously had gone through a lot of consideration and deliberation.

Unidentified Analyst, Analyst

Okay. Great. Thank you. And then we noticed the change in the threshold for your responder analysis in your corporate deck. I think it now reads at least 20%, which is down from 30%, you referenced previously. We'll just love to get your thoughts on the change and a little further context you could just put it into.

Molly Harper, CBO

Yes. I don't recall that we ever defined a responder based on a 30% reduction, and I may be mistaken, so someone else on the call can correct me. We have always defined a responder as a 20% reduction in blood Phe levels. There is some variability in how responders are determined across different products in PKU, but the 20% figure was the one we pre-specified as clinically meaningful based on discussions with patients and prescribers, and to my knowledge, it has remained consistent. I apologize if we caused any confusion, but the 20% has always been what we considered clinically meaningful.

Unidentified Analyst, Analyst

Okay, great. And then, if I could just squeeze one more, based on what you've seen so far since SYNB1934 appears to be more active than 1618, I was just wondering if you could just elaborate on the trajectory of agents over time relative to each other. For example, did you see 1934 to be consistently more active than 1618 or did you see the reduction accelerate over time? Thank you very much.

Aoife Brennan, CEO

Yes. So how we determined the superiority from an activity perspective of 1934 versus 1618 is we defined it back in vitro preclinically, in vivo, there was a consistent 2x greater activity at a similar dose of 1934 compared to 1618. We then went one step further and evaluated it in a head-to-head study in healthy volunteers where the same patients received a dose of 1618 and then washed out and received the same dose of 1934. In every single patient and that healthy volunteer crossover, 1934 resulted in greater biomarker production. The mean, when we compared the ratio at each individual patient level, the mean of that ratio was 2x. So across every piece of data that we've collected, whether preclinical or clinical in healthy volunteers, we've observed a consistent finding of back to 2x greater activity based on biomarker production. We have absolutely no leads from a biological perspective to think that would change over time. We believe that it's based on the underlying changes that we've made to the PAL enzyme to make it more active and certainly it's been consistent. We expect to see consistent data in the PKU patients once we evaluate it later in the first half. Does that make sense?

Unidentified Analyst, Analyst

Yes. Thank you very much.

Operator, Operator

Our next question comes from Mitchell Kapoor with HC Wainwright.

Mitchell Kapoor, Analyst

Hi, everyone. Thank you for taking the questions today. The first one, just wanted to ask how much better you think 1934 could potentially look versus 1618 with respect to the reduction in blood Phe levels, and what would constitute a meaningful difference?

Aoife Brennan, CEO

We were really pleased with the results from 1618, particularly in the first eight patients with PKU, where we observed a mean 20% reduction, which is twice as effective as the standard of care according to our all-comers analysis. This demonstrates that our mechanism is functioning, and the strain is effective in significantly lowering blood Phe levels. At the same time, we received data from healthy volunteers indicating twice the activity, suggesting that 1934 is likely to outperform 1618 based on both activity and biomarker data. We believe we are well-positioned with two promising candidates for Phase 3, and our focus now is on determining which candidate to advance rather than deciding whether to proceed to Phase 3. We anticipate that 1934 will show increased activity similar to what was observed in healthy volunteers, and we expect that to be the strain we move forward with. However, until we have the biomarker data, making that decision will be challenging.

Mitchell Kapoor, Analyst

Okay. And then, have you received any formal feedback from the FDA that no additional development work would be necessary with the newer strength? And if not, when would you expect to get that formal confirmation?

Aoife Brennan, CEO

We have not had our End-of-Phase II meeting yet, but we have been working very collaboratively with the FDA throughout the development of both products. When we moved forward with 1934 into the clinic, and based on the fact that there's really only five base pair differences, it's 99.9% identical, we used the same chassis, the same enzyme, and it's producing the same product. We were able to move 1934 very rapidly without doing any preclinical toxicology work, for instance, based on the fact that it really has a very similar safety profile. Based on that, we were able to move forward into a healthy volunteer study and generate some head-to-head data very quickly. Once we have our End-of-Phase II meeting, that will obviously define what the Phase III study looks like but our expectation is that we've completed all toxicology work and have a very robust human data set once we've completed the second arm of SynPheny. Until we have that End-of-Phase II meeting, it's not 100% guaranteed, but we feel we're in a very good position based on our conversations to date.

Mitchell Kapoor, Analyst

Thank you very much. Appreciate it.

Operator, Operator

As a reminder, if you'd like to ask a question at this time, please do so. Our next question comes from Keay Nakae with Chardan.

Keay Nakae, Analyst

Yes. Thank you. For EH, are you experiencing any challenges in enrolling patients in that study?

Aoife Brennan, CEO

Thank you, Keay, for your question. The study is currently enrolling, and we are on track to meet our guidance, which is to establish proof-of-concept for that strain this year. It has been a challenging time for all clinical studies, and we have had to adapt. However, we are seeing good activity at the sites and are pleased with our progress. At this stage, we believe we are in a strong position to meet our guidance for the trials. I think it's a testament to the team that we have been able to navigate some of the external challenges related to COVID and other factors. It has indeed been a tough year for clinical research, as you can imagine.

Keay Nakae, Analyst

Okay. That's all I have.

Aoife Brennan, CEO

Okay. Thanks, Keay.

Operator, Operator

I'm showing no further questions in queue at this time. I'd like to turn the call back to Aoife for closing remarks.

Aoife Brennan, CEO

Great. Well, thanks so much everyone for joining us this morning on the call, and it would be remiss if I ended without wishing everyone a happy St. Patrick's day. Thank you all. Bye-bye. This concludes today's conference call. Thank you for participating. You may now disconnect.