Alaunos Therapeutics, Inc. Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to the Alaunos Therapeutics' Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference may be recorded. I would like to hand the conference over to your speaker today, Danielle Dudgeon, with Stern Investor Relations. Please go ahead.

Good morning, and welcome to Alaunos Therapeutics' second quarter 2022 financial results conference call and audio webcast. With me today are Kevin Boyle Senior, Chief Executive Officer; Drew Deniger, Vice President of Research and Development; Abhishek Srivastava, Vice President of Technical Operations; and Mike Wong, Vice President of Finance. Earlier this morning, Alaunos issued a press release announcing financial results for the three months ended June 30, 2022. We encourage everyone to read today's press release, as well as the Alaunos quarterly report on Form 10-Q for the quarter ended June 30, 2022, which is filed this morning with the SEC. The company's press release and quarterly report will also be available on the Alaunos' website at Alaunos.com. In addition, this conference call is being webcast through the Investor Relations section of the company's website, and will be archived there for future reference. Please note that certain information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Participants are cautioned that this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 15, 2022. Actual results could differ materially from those stated or implied by the forward-looking statements made today due to risks and uncertainties associated with the company's business. Information on potential risks and uncertainties are set forth in our most recent public filings with the SEC at sec.gov. The company undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this webcast, except as may be required by applicable securities law. With that said, I would like to turn the call over to Kevin Boyle.

Thanks, Danielle. Good morning, everyone. Welcome to the Alaunos second quarter 2022 earnings call. Apologies for the frog in my voice here; I think back to Mr. Rossi, my seventh and eighth-grade Latin teacher, and I remember the phrase, tempus fugit, time flies. And time flies when you're having fun. I approach the one-year anniversary of joining the company, and I'm so proud of the progress that's been made by our dedicated team. The rebuild team has formed a strong operational, manufacturing, and clinical foundation over the past year. Our TCR-T Library Phase 1/2 trial is continuing to actively enroll, and I'm pleased to say that we're moving ahead at the second dose level after consulting with our investigators and safety review board. At the same time, we're working to expand our manufacturing capacity to support future clinical expansion, and are very pleased to welcome Abhi, as Vice President of Technical Operations, to lead this effort. You will hear from Abhi in just a couple of minutes, but I wanted to say that we're very excited to have him on the team as we seek to expand and optimize our manufacturing capabilities. Small world that Drew and Abhi worked together at the NCI, and both are beneficiaries of the world-class training it offers. This quarter, we are very privileged to extend our CRADA into 2025, working with Dr. Rosenberg and the NCI to develop personalized cancer therapies using our novel TCR-T cell platform. In partnership with Dr. Rosenberg's team, we look forward to continuing our collaboration, generating proof of concept in this personalized approach. When combined with the Alaunos TCR-T Library Phase 1/2 trial and our R&D efforts, we believe that we have the right approach, the right expertise, and in my mind, most importantly, the right team for Alaunos to be successful in the long-term and improve the lives of cancer patients with solid tumors. And to provide an update on our TCR-T Library trial, as a reminder, it's a Phase 1/2 basket trial targeting hotspot mutations across six different solid tumor indications: non-small cell lung, colorectal, endometrium, pancreas, ovary, and bile duct cancers. We are currently enrolling patients down the street at MD Anderson Cancer Center, with one of these six cancers based on matching mutation HLA pairings that are available in our TCR-T library, which consists of 10 TCRs; we have four KRAS, five TP53, and one EGFR. As you may recall, we announced that we dosed the first patient in the trial, in May, at a dose level 1 or approximately five billion TCR-T cells. This patient has non-small cell lung and the KRAS G12D mutation. The patient was treated with TCR-T cells targeting this driver mutation, manufactured in our very own in-house cGMP facility. Following discussion with our investigators as well as a review of safety data at MD Anderson, we're very pleased to be moving ahead at the second dose level of approximately 40 billion TCR-T cells. We remain encouraged by the progress in the trial, and look forward to providing an early look at data in a medical meeting in the third quarter of this year. And we believe we're on the right track, but instilling even greater confidence in our approach using TCR-T cells to target hotspot mutations were two recent papers published by leading academic institutions. One was published in the New England Journal of Medicine, and the other in Cancer Immunology Research. I'll let Drew go into more detail about the clinical findings of these papers, but I'd like to highlight that these case studies with patients with KRAS and TP53 mutations treated with TCR-T cells resulted in durable responses using TCRs that we have in our library. Now, we believe that we have a better, more cost-effective, and commercially scalable approach using our proprietary Sleeping Beauty technology, and we're actively testing these TCRs in our clinical trial. Now, as much like the old scout motto, to be prepared, we're working diligently to execute on a multi-pronged strategy to expand our manufacturing capabilities. Now, while we believe we have sufficient capacity to support our Phase 1/2 study for at least the next year, this expansion will serve us well in the long-term as we continue our R&D effort with membrane-bound IL-15, and expand our future clinical pipeline. First, we're implementing new SOPs that will allow for simultaneous production of multiple products in our cGMP suite. And this also includes work to further optimize our manufacturing process by introducing cryopreserved cell products. Secondly, we are continuing to hire additional staff to support increased manufacturing capability. And lastly, having already successfully built one cGMP suite, we will investigate physically expanding our GMP footprint as the need arises. Now, before I turn the call over to Drew to touch upon our R&D efforts, I wanted to briefly highlight a collaboration agreement that we have with Solasia Pharma. This collaboration was initially formed way back in 2011 and granted Solasia an exclusive worldwide license to develop and commercialize darinaparsin, also known as Darvias. As part of this license agreement, we are eligible for sales-based cash milestones and a percentage of any sub-license revenue generated by Solasia. Now, Solasia will continue to be responsible for all costs related to manufacturing and commercialization. In June of 2022, Solasia announced that Darvias has been approved for relapsed or refractory peripheral T-cell lymphoma by the Ministry of Health, Labor, and Welfare, in Japan. And we're excited for their team at Solasia as this represents a significant milestone for them. Now, we do not expect to receive significant capital for the royalties on these sales, but the additional non-dilutive capital will certainly help to further support our own internal development program. I'm going to now hand the call over to Drew to highlight our continued partnership with Dr. Rosenberg and the NCI, and also expand on those supportive academic papers that were recently published.

Thank you, Kevin. I'd like to echo Kevin's sentiment. Our team has worked to transform our innovative research into meaningful clinical progress with great potential. The recent cancer immunology research and New England Journal of Medicine articles have further contributed to that confidence and help validate our approach targeting shared hotspot mutations. The cancer immunology research article highlighted the power of TCRs targeting TP53 mutations and their clear benefits compared to TIL therapy. This paper showed that TCR-T cells specific for one of the most common TP53 mutations, an HLA-A02, one of the most frequent HLAs in the United States, led to an objective clinical regression of advanced breast cancer including a 55% tumor reduction and resolution of significant skin tumors by 60 days post-infusion. The New England Journal article was a case study of pancreatic cancer, where a patient was treated with TCR-T cells targeting the KRAS G12D mutation. This publication showed that the patient achieved a partial response of greater than 70%, which is ongoing at six months of follow-up. Alaunos is the only company with these TCRs in its library in the clinic. Both publications validate our approach to target KRAS and TP53 hotspot mutations with TCR-T. I am also thrilled that we've extended our cooperative research and development agreement with the National Cancer Institute to 2025. We are honored to continue our work with Dr. Rosenberg, a pioneer in the development of effective immunotherapies for patients with advanced cancers. Under the amended CRADA, the NCI will work to generate proof-of-concept data for fully autologous personalized TCR-T cell therapies using our proprietary non-viral Sleeping Beauty technology. We strongly believe that Sleeping Beauty is ideal for this application and has clear fundamental advantages over competing gene transfer technologies. I was lucky enough to have the privilege to work under the mentorship of Dr. Rosenberg for many years. And I believe that we will be successful in developing personalized TCR-T cell therapies together. Both parties bring significant non-overlapping expertise to the CRADA. And we believe our work together will help bring the vision of personalized TCR-T cell therapy to the commercial setting. I would also like to briefly touch on our follow-on asset, the membrane-bound IL-15 program. In May, we presented new data at ASGCT that highlighted the potential ability of membrane-bound IL-15 TCR-T cells to specifically target and kill tumors while also establishing long-lived tumor-specific TCR-T cells. You can find these data on our website. We believe that this program has the potential to increase the persistence of TCR-T cells and deepen clinical responses. We are continuing to advance this program towards an IND filing in the second half of 2023. Lastly, we continue to make significant progress using our hunTR platform to discover TCRs. And we are further building on our infrastructure to increase throughput and decrease the cost of screening. We aim to increase the addressable market for our library TCR-T program using these proprietary TCRs. Our team has already demonstrated the ability to add TCRs to the clinical trial in parallel to existing TCRs with the amendment that occurred last year. Furthermore, hunTR has the potential to create licensing opportunities, generating non-dilutive capital. We anticipate sharing a more detailed update on the hunTR program in the fourth quarter. I would now like to turn the call over to Mike Wong to review the financial results for the second quarter.

Thank you, Drew. Let me review our financials for the three months ended June 30, 2022. For the second quarter of 2022, we reported a net loss of approximately $9.9 million or $0.05 net loss per share, compared to a net loss of approximately $22.7 million or $0.11 net loss per share for the second quarter of 2021. Research and development expenses were approximately $5.9 million for the second quarter of 2022 compared to approximately $13.6 million for the second quarter of 2021, a decrease of 56%. The decrease was primarily due to lower program-related costs of $2 million as the focus on the TCR-T platform, a $5.2 million decrease in employee-related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, and a $0.3 million decrease in consulting expenses. General and administrative expenses were approximately $3.4 million for the second quarter of 2022, compared to approximately $9.1 million for the same period in 2021, a decrease of 62%. The decrease was primarily due to lower employee-related expenses of $5.4 million due to our reduced headcount following our restructuring in the third quarter of 2021 and a $0.2 million decrease in consulting and professional services expenses. As of June 30, 2022, Alaunos had approximately $60 million in cash and cash equivalents. We anticipate our cash runway to be sufficient to fund operations into the second quarter of 2023. Our operating cash burn for the second quarter of 2022 was $8.2 million, compared to $21.5 million in the second quarter of 2021, a decrease of $13.3 million or 62%. That concludes our financial update. I would now like to turn the call to Kevin.

Thank you, Mike. Now in financial update, you heard that we remained good stewards of capital on behalf of our shareholders. We have made substantial progress advancing our TCR-T platform in this past year despite reducing our cash burn by over 60%. We were trimming expenses before it was the end-all thing to do. We were trimming expenses because it was the right thing to do. And we are focused on the activities that advance our programs through and into the clinic with a singular goal of improving the lives of cancer patients with solid tumors. Before we turn the call over to questions, I would like to introduce our newest member of the team, Abhishek Srivastava, our Vice President of Technical Operations. Abhi was most recently Vice President of Cell Therapy Development at Athenex. And previously, he was Assistant Professor at the University of Pittsburgh, where he led the process development and manufacturing of TILs. Abhi, would you like to say a few words?

Thanks, Kevin. I am very excited to join Alaunos. It really reminds me of my old days at NCI when I was working as a fellow associated with this technology. So, I truly believe in this science and truly believe in this technology. And I am so excited to really be part of this team that is really bringing this advanced technology to treat the patients who are really in need. With my manufacturing and product development background, I am really ready to support the team and really provide that manufacturing capability enhancement to drive this technology. With this, I would handover to Kevin.

Abhi, great to have you here. We are excited to have you as part of the team. So, with the appointment of Abhi, we are working diligently to execute against our multi-pronged manufacturing strategy to expand capacity. So, Abhi walked in on day one and he has plenty to do. And we have great confidence that he will be successful. So, I appreciate all of our dedicated Alaunos employees, our MD Anderson investigators, the patients, and shareholders for their support as we continue to make great strides across our entire business. As we prepare for the second half of the year, we are working to consent and enroll additional patients in our Phase 1/2 trial and plan to present early data from the trial in the third quarter at a scientific conference. On the R&D front, we are excited to advance a personalized TCR-T cell therapy approach with NCI as well as continue to move our membrane-bound IL-15 program towards an IND filling in the second half of 2023. We look forward to updating you again soon as we continue our mission to improve the lives of patients suffering from solid tumor cancers. We will now open the call to questions.

Thank you. Our first question comes from Prakhar Agrawal with Cantor Fitzgerald. Your line is open. Please go ahead.

Hi, good morning, everyone. Thanks for taking my questions, and congrats on all the progress. So, maybe first question, if you can clarify, has the second patient been dosed or identified? And maybe Kevin and team if you can comment on and set expectations on how many patients will be presented in Q3? What data should we expect at this update and what's the bar for you? Thank you.

Prakhar, good morning, and glad to hear you are as excited as we are to share some information about our trial. We hope it's been received with welcome news that, not just in the second half of this year that we'll be presenting a locator-only data, but, indeed, we'll be presenting in the third quarter, and that we'll be doing so at a scientific or medical meeting as well, so nice validation there too. Because of some of the restrictions of the conferences, I'm not able to share much in the way of what data will be presented, but stay tuned. Only, what, six more weeks left in the quarter here, so we promise you we'll get that information out. And with regards to whether or not we've treated a second patient, again, please stay tuned on that front. We do not want to be in a situation where we're kind of giving patient-by-patient updates, we want to be more considerate about that. But what I will say is we're excited and encouraged by the number of patients that we are seeing interested in our trial. We're very encouraged that the safety review board and the investigators have put forth and allowed us to progress at the second dose level. So, again, we look forward to sharing the information as much as you look forward to receiving it, but we'll do so at some point in the next six weeks and we'll answer the questions that you have there. Thank you.

Thanks, Kevin.

Good morning, and thanks for taking the questions. Kevin, I was wondering if you could give us an update on the total number of patients that have been screened and what the match rate has been to the TCRs in the library.

Good morning, Thomas. We have screened over 500 lung and colorectal patients, so in total, we have screened more than 500 prospective patients in these two categories. The match rate exceeds 5%, and we are very satisfied with the number of patients we are screening, our pipeline, and the ongoing developments. We have an effective and cost-efficient way of identifying patients, and we are continually increasing the number of patients we are tracking throughout their treatment journey. We are pleased with this progress. Additionally, with our Hunter platform, we expect to add TCRs to our library, which will expand the addressable market. With the information we are collecting from these 500 patients in colorectal and lung, we will be able to enroll new patients as we introduce TCRs that either feature new mutations or new HLAs. We are optimistic about maintaining a solid pace of enrollment in this trial.

Fantastic. And then just I was wondering if you might be able to characterize the types of patients that are coming that are being screened by the folks at MD Anderson, is it typically salvage patients or have you started seeing maybe some second-line and third-line patients, just curious if you have some qualitative information around that?

It's a great question. We encounter a variety of patients, including those who are visiting MD Anderson for the first time due to recent health concerns or those who have come from out of state after a new diagnosis. Consequently, we see patients across a wide spectrum. This can sometimes prolong a patient's journey, especially if they have been recently diagnosed. Ultimately, our goal is to ensure that patients receive the care they need. I hope that we don't see certain patients in our trial because that would indicate that frontline therapies are effective for them. However, if frontline therapies fail, we are optimistic about our science and technology and our capacity to enhance their treatment plans, extend their lives, and improve their quality of life. We encounter patients at various stages; some are prepared to join our trial right away, some may take longer, and others may never participate because existing therapies are effective for them. It's also important to note that this varies by indication, as we may be positioned earlier for some indications while others might have more available therapies.

Appreciate that. Yes, that's great, thanks so much for taking the questions.

Good morning, and thank you for answering the questions. My question follows up on the previous one. Based on the number of screened patients and those matched, it seems you might have around 25 patients if my calculations are accurate. I'm curious whether one of the limiting factors will be manufacturing capacity or other elements that determine how many patients you can begin processing for treatments.

Yale, good morning, and thanks for the question. The rate-limiting factor in the near-term is not manufacturing, and that's why, again, we're getting ahead of the curve. As I said, we're following the old scout motto of being prepared; that's, indeed, why we're investing and so excited to have Abhi come onboard; look forward to having him start to meet the broader investment community. But his background is about planning ahead for future manufacturing expansion, planning ahead for working on optimization. As we know right now, we have a manufacturing process that's a little shy of 30 days; that's fine for this early stage. But we certainly look forward to continuing to reduce that time, working in process development to find ways to optimize that and reduce the manufacturing. That by nature, in and of itself, will increase the throughput of our GMP suite. But, at this point, it is not manufacturing that is the rate-limiting step. And we are also working on cryopreservation, so I do want to highlight that too; that'll help as well with being able to produce cells for when the patient perhaps does progress and is ready for our treatment in our clinical trial.

That's very helpful. I have a follow-up question regarding the factors that allow you to move to the second doses so quickly. Can you provide more details on the measures that dictate this transition? Additionally, what is the anticipated total number of patients to be dosed in the Phase 1/2 study? Thank you.

Thanks, Yale. So, let me touch on a few things. We are encouraged but not surprised that we are moving to the second dose level. That's why we designed the trial as we did, with this patient design. So, as a reminder, our approach targeting these hotspot mutations, we believe, is superior to other TCR companies because these mutations only appear in the tumor cells, nowhere on healthy tissues, and that's an important reminder. And that's what allowed us, in part, to start at a higher dose level. So, dose level 1 already based on a very broad literature review that was done by the team; efficacious dose levels begin at 1 billion TCR-T cells. And so, the fact that we're starting at 5 billion TCR-T cells; we're not starting at a throwaway dose level. Absolutely, in a Phase 1 trial, safety is first and foremost the most important thing. And then we want to identify the recommended Phase 2 dose. But again, we're very encouraged because we are targeting things that these new antigens, these hotspot mutations only appear in the tumor; what's causing the tumor to survive, what's causing the tumor to thrive. And so, the fact that our TCRs can identify them and kill what is driving the cancer; we're going after the right target and we're doing so in a very safe manner because it's not honing to any kind of healthy tissue. And so, I just can't stress that enough. So, it is looking at the data from the patient or patients that were treated. And we did indicate on a prior call that the safety profile from the first patient looked very good, and that was going to be reviewed and assessed by the safety review board and by our investigators after the first patient. So, we did talk about that before and say that again, we are very pleased with the safety profile that we saw in the first patient. And it is safety and the responses in the first 30 days after infusion that is evaluated each and every time by our safety review board and the investigators as we determine the appropriate dose for the next patient to be treated.

And what will be the total number of patients you expect or plan for the Phase 1/2 study?

We're going to let the science tell us, Yale. So, we need to continually evaluate the patients as they get dosed and treated. And in part as well, it will depend because we have the ability with the various indications and the various TCRs to move different things to a Phase 2 while still having the Phase 1 trial open since this is a Phase 1/2 trial design. And because of the Bayesian design as well, we're not locked into a pre-defined formula. We're going to, again, let the science and statistics help us decide what the appropriate number of patients are to treat. So, we're very much scientifically guided and not artificially constrained by a poor trial design. We're very pleased with the forward-looking trial design that we have. And I think the fact that the FDA has worked very closely with us and is supportive and approved of this design is also very encouraging.

Thank you, this is RK from H.C. Wainwright. Good morning, Kevin.

Morning, RK.

And for the manufacturing of these doses, how long does it take at this point, from bed-to-bed? And, as you progress and as you get more experience, are you seeing the possibility of reducing that manufacturing time?

Thanks, RK. We have a clear path forward in our process development activities to shorten the manufacturing timeframe, currently around 30 days. Our goal is to potentially cut that time in half as we move toward commercial efforts. Abhi is aware of this challenge and is prepared to take it on, collaborating closely with Drew and the team. We have several process development initiatives that will support this goal incrementally. We will keep you updated as we enhance our manufacturing process and work to reduce the number of days required. This improvement will benefit us for several reasons; it will allow us to deliver treatments to patients more quickly and will naturally increase throughput in our manufacturing suite. We plan to share updates on the optimization of the process in the next quarter or two, and I expect Abhi will be proactive in this effort.

Thanks for that. And the second and last question for me is on the Solasia relationship. Do you have an idea when they could start commercialization? And could you remind us what the royalty terms are between you and the collaborator?

We will allow Solasia to discuss their program, as it is not our place to comment. I want to emphasize that we are referring to low single digits. This is not a game changer for our balance sheet from a capital standpoint, though it is beneficial. Any revenue we generate is additional income that we will strategically invest in our R&D and clinical initiatives. It is always positive to monetize assets we are not developing, but I want to communicate that we have been informed there will be a gradual increase whenever a new product launches. Given that our royalty terms are in the low single digits, this will not significantly ease the company’s ongoing capital requirements indefinitely.

Perfect. Thank you very much, and good luck.

Thank you.

Thank you. We have a follow-up question from Prakhar Agrawal with Cantor Fitzgerald. Your line is open. Please go ahead.

Hi, thanks for taking the follow-up as well. So, maybe Kevin, just a quick clarification. So, the safety review by MD Anderson and the decision to move to second dose, is it done at the 28 days follow-up for the first patient, or at a later time point? And I had one more question.

Sure. As a cook, I always appreciate when somebody wants seconds. So, that's a good sign to me, Prakhar. So, indeed you have to wait for at least the first 28 days safety window for the Safety Review Board to gather. Clearly, our investigators are following the patient on a daily basis and very much gathering information. But there are not any artificial constraints if that's what you mean, or structural constraints that we would have to wait X number of days to review the information. So, perhaps that's helpful.

Yes, that's very helpful, Kevin. And maybe a question for Drew, if you can comment on some of the recent publications or case reports in NEJM and Cancer Immunology Research which show TCR therapy had activity in KRASG12D and TP53 patients? So, maybe it would be helpful if you can highlight the similarities and differences between your approach versus those mentioned in these publications? And thanks again.

We are really excited about the two recent case reports from academic institutions that demonstrate the effectiveness of TCR-T cells targeting hotspot mutations. These reports provide initial evidence of our efforts in the clinic with our library TCR-T trial at MD Anderson. The case reports used retrovirally transduced TCR-T cells, whereas we are utilizing a non-viral Sleeping Beauty system, which we believe offers several advantages and aligns well with our long-term commercial goals. We look forward to testing this approach in our clinical trial. There are some minor variations in the lymphodepletion regimens, particularly with the pancreatic patient who did not receive certain drugs due to prior TIL therapy and a lack of positive response. Additionally, the pancreatic patient received high-dose IL-2, which is not part of our library trial protocol. These are the two primary differences we see. The papers provide thorough insights, and I would like to highlight that the Cancer Immunology Research paper emphasizes the advantages of TCR-T therapy over TIL therapy. I encourage everyone to take a look at that. Thank you.

You may be modest, but he is one of the authors on that paper. And again, we benefit greatly here at Alaunos from his expertise and many years working with TCRs and with Sleeping Beauty, and I think that's just a really important differentiator: the value that Sleeping Beauty brings to the ability to manufacture these TCRs quickly, cost-effectively, and in a library approach.

Thanks again, and looking forward to the next update.

Thanks, Prakhar.

Thank you. And I am showing no further questions. So, ladies and gentlemen, this does conclude today's question-and-answer session. And it also does conclude today's conference call. Thank you for participating. You may now disconnect.