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spk01: Good day, ladies and gentlemen, and welcome to your Salcuity second quarter financial results conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, you may press star zero to reach a live operator. At this time, it is my pleasure to turn the floor over to Robert Jewell with Westwick ICR. Sir, the floor is yours.
spk04: Thank you, operator. Good afternoon, everyone, and welcome to Selcuity's second quarter 2021 financial results and business update webcast and conference call. Thank you for joining us. Earlier today, Selcuity released financial results for the second quarter ended June 30th, 2021. The press release can be found on the investor relations section of the company website. Joining me on the call today are Brian Sullivan, Selcuity's chief executive officer and co-founder, and Vicki Hahn, Chief Financial Officer. Before we begin, I would like to remind listeners that our comments today will include some forward-looking statements. These statements involve a number of risks and uncertainties, which are outlined in today's press release and in our reports and filings with the SEC. Actual events or results may differ materially from those projected in the forward-looking statements. Such forward-looking statements and their implications involve known and unknown risks, uncertainties, and other factors that may cause actual results or performance to differ materially from those projected. On this call, we will also refer to non-GAAP financial measures. These non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful for investors' understanding and assessment of the company's ongoing core operations and prospects for the future. You can find the table reconciling the non-GAAP financial measures to GAAP measures in today's press release. With that, I'd like to turn the call over to Brian Sullivan, Salpuity's CEO.
spk07: Thank you, Robert. Good afternoon, everyone, and thank you for joining us today. As always, we appreciate your continued support of CellQuiti. On this call, we'll update you on our second quarter financial results, the status of our Gadatalysid program, some recently reported clinical trial results, and an update on our Celsignia companion diagnostic programs. Vicky will follow my comments with a discussion of our financial results, and then we'll open up the line for questions. I'm sure many of you are aware of the transformational step that CellQuiti took in April with the in-licensing from Pfizer of Gatala-Lisib, a pan-PI3K mTOR inhibitor. Gatala-Lisib is currently in clinical development to treat patients with ER-positive HER2-negative advanced or metastatic breast cancer. Under the terms of the licensing agreement, Pfizer provided Salcuity with a worldwide license to develop and commercialize Gatala-Lisib. Salcuity paid a license fee of $5 million cash, and $5 million of Salcuity's common stock is upfront payments. Pfizer is eligible to receive up to $330 million of back-end-loaded development and sales-based milestone payments and tiered royalties on potential sales. We estimate that the potential annual market available for Gadalilisib as a treatment for breast cancer is approximately $5 billion. We also believe there are additional opportunities for Gadalilisib to treat other tumor types that could further increase its market potential. Our interest in GETA was spurred by encouraging data obtained from the expansion portion of an ongoing Phase 1B clinical trial evaluating GETA plus the CDK4-6 inhibitor, IBRANS, and an endocrine therapy. As of a January 11, 2021 data cutoff, 53 of the 88 evaluable patients, or 60%, were reported to have had an objective response to the treatment regimen. Gattalo-Elizabeth was also generally well-tolerated, with the majority of treatment-related adverse events, or TRAEs, being grade 1 or 2. The most common grade 3 or grade 4 TRAE related to Gattalo-Elizabeth were stomatitis and rash and are considered to be manageable. A relatively low TRAE dropout rate of approximately 10% was reported. We expect to update this data in December in conjunction with the San Antonio Breast Cancer Symposium. We continue to plan and prepare for a Type C meeting with the FDA later this year to get feedback on the design of our Phase III clinical trial for Gattala illicit. Subject to FDA feedback, we would expect to initiate a Phase III clinical trial evaluating GEDA in combination with IBRANTS and an endocrine therapy in the first half of 2022. To support our GEDA development program, we closed two financings recently. In early April, Salcuity entered into a debt financing agreement that can provide up to $25 million in term loans. The first tranche of $15 million was funded at closing. And in early July, Salcuity closed the follow-on equity offering that raised gross proceeds of approximately $56.3 million. After the follow-on offering, Salcuity had approximately $94.4 million of cash on hand. As we've previously discussed, our assessment of different PI3K and mTOR inhibitors using our CellSignia platform led us initially to approach Pfizer about our interest in pursuing a collaboration to evaluate Geta-Alizib. Subsequent to that initial internal study, and as part of our due diligence on Geta's mechanism of action, we conducted additional studies to evaluate Geta-Innovalizib, a PI3K alpha inhibitor, and Navigoclax, a BCL inhibitor, in breast and ovarian patient tumors using our CellSignia platform. We presented the results of these studies at the AACR annual meeting in April. The results showed that GETA inhibited nine times more signaling test activity in tumors with hyperactive RAS network signaling on average than in a volisib when evaluated at equal concentrations with a cell-signia test. A cell-signia test also found that GETA inhibited five times more signaling activity when evaluated at one-fifth the concentration of in a volisib. This data supported our hypothesis that hyperactive RAS network signaling involves more than just the PI3K alpha isoform, and that inhibiting all four class I PI3K isoforms, as well as mTORC1 and mTORC2, is required to address it. Our study also detected the synergistic cooperation between the PI3K mTOR and BCL pathways, which suggests the potential patient benefit of combining GETA with a BCL inhibitor. We plan to conduct similar additional investigations using our CellSignia platform to identify classes of agents that may be appropriate to combine with Geta-Licit, Ketala-Licit. Since we last reported to you, results from a 17-patient phase one dose escalation study were published. This study evaluated the safety and preliminary activity of Geta combined with carboplatin, a platinum-based therapy, and Paclitaxel. The intention was to explore the hypothesis that inhibition of the PI3K mTOR pathway can promote sensitivity to platinum-based therapies. This is relevant because platinum therapies are the backbone of combination therapy for a wide range of tumors, including ovarian, lung, breast, and bladder cancers. Amongst the 17 patients evaluated, 11, or 65%, had an objective response. Of these 11 responsive patients, eight had a partial response and three had a complete response. Three additional patients, or 17%, reported stable disease. 11 of the 17 patients enrolled had advanced ovarian cancer, 10 with clear cell ovarian carcinoma, and one with low-grade serous ovarian cancer. Clear cell ovarian cancer is a tumor type with poor prognosis, generally considered to be chemoresistant. Of the 11 patients with ovarian cancer, 9, or 82%, reported an objective response. Among the 9 of 17 patients who had received prior platinum therapy, 4, or 45%, had a partial response. These four responders included three patients with ovarian cancer and one patient with non-small cell lung cancer. The drug combination was found to be tolerable with a manageable safety profile. While the sample size is very small, the data from the ovarian cancer patients is interesting nonetheless. Nine of the 11 ovarian cancer patients, or 82%, had an objective response. Of the seven patients with clear cell ovarian cancer who were platinum naive, six, or 86%, had an objective response. This compares to objective response rates of 25% to 50% reported in other studies evaluating platinum therapy in platinum-naive clear-cell ovarian cancer patients. It's premature for us to assess the priority of pursuing further development of an indication in ovarian cancer, but nonetheless, the study provides additional preliminary evidence for gadotilisib's anti-tumor activity. Now I'd like to move on to the diagnostic side of our business. Salcuity, or Salsignia, Salcuity's third-generation diagnostic platform identifies the underlying cellular activity, dysregulated pathway signaling, that may be driving a patient's tumor so that a matching targeted therapy can be identified. Since dysregulated signaling is too complex for molecular tests to characterize in most patients, our platform can identify new treatment options for patients who lack actionable molecular biomarkers. Our strategy is to develop companion diagnostics that enable a pharmaceutical company to expand the number of patients eligible to receive their targeted therapy. To achieve this, we're collaborating with pharmaceutical companies to evaluate the efficacy of their targeted therapies in patient populations selected by a cell-signia pathway activity test. If the clinical trial results are favorable, these collaborations may lead to advancement of a new indication that expands the market for the targeted therapy. As an example, we believe there is a significant unmet need for new therapeutic options for HER2-negative breast cancer patients. Our research suggests that many of these patients have an undiagnosed and untreated disease mechanism. Our self-signia test has the potential to identify the disease mechanism for roughly 25% to 35% of these patients and the targeted therapy most likely to benefit them. Earlier this year, we entered two new clinical trial collaborations. In January, as previously announced, we entered a collaboration with the Sarah Cannon Research Institute and Pfizer for a Phase II trial. The trial is evaluating the efficacy and safety of two Pfizer-targeted therapies, Vizimpro, a Panher inhibitor, and zelcurie, a CMET inhibitor, in patients with previously treated metastatic HER2-negative breast cancer selected with our cell sigmia test. Patient enrollment is expected to begin this quarter, and interim results are expected in the second half of 2022. In March, we entered into a clinical trial collaboration with MD Anderson, Novartis, and Puma Biotechnology to study a new drug regimen. Collaboration will evaluate the efficacy and safety of Novartis' CMET inhibitor, Tabracta, and PUMA's pan-HER inhibitor, NeurLynx, in patients with metastatic HER2-negative breast cancer selected by the Cell Signia platform. And this is the second clinical trial to treat patients diagnosed with hyperactive HER2 and CMET signaling breast cancers with matching targeted therapies. Patient enrollment is expected to begin in the third quarter of this year. Salcuity now has five clinical trial collaborations in place, and we expect to announce additional collaborations by the end of this year. The ongoing FACT-1 and FACT-2 trials that Salcuity is conducting are evaluating anti-HER2 therapies in early-stage HER2-negative breast cancer patients. The goal of each of these trials is to demonstrate that breast cancer patients identified by our Celsignia HER2 pathway test obtain a higher rate of pathological complete response to neoadjuvant anti-HER2 drug treatment than from current standard-of-care chemotherapies. Patients who receive a pathological complete response to neoadjuvant drug treatment are less likely to have their cancer recur So we believe our cell-signia test can play a significant role in extending the lives of many breast cancer patients. We continue to expect interim results from our FACT-1 and FACT-2 trials in late 2021 or early 2022. We are excited about these collaborations and the opportunity to work with some of the world's most prominent cancer research centers. We have additional collaboration discussions in progress, and our goal is to announce new agreements in the coming months. I'd like to turn the call over now to Vicki Hahn to review our financial results.
spk02: Thank you, Brian, and good afternoon, everyone. I'll provide a brief overview of our financial results for the second quarter of 2021, and I invite you to review our 10-Q filed in the next day or two for a more detailed discussion. Our second quarter net loss was $14 million, or $1.11 loss per share, compared to $2.2 million net loss or 21 cents loss per share for the second quarter of 2020. Because these quarterly net losses included significant non-cash items, stock-based compensation, the issuance of common stock, and interest, we also included in our press release non-GAAP adjusted net loss for the quarter ending June 30th, 2021. Our non-GAAP adjusted net loss was 8.3 million or 66 cents loss per share for the second quarter of 2021 compared to non-GAAP adjusted net loss of 1.8 million or 17 cents loss per share for the second quarter of 2020. R&D expenses increased approximately 11.3 million during the second quarter of 2021 compared to the second quarter of 2020. This was primarily the result of a $10 million upfront license fee related to the execution of the Pfizer agreement. The $10 million included $5 million of non-cash expense for the issuance of stock. The remaining increase in expenses related to compensation, clinical validation, and laboratory studies and legal expenses. The approximate $2 million increase in G&A during the second quarter of 2021 compared to the second quarter of 2020 arose primarily from higher professional fees associated with being a public company, director and officer insurance, and non-cash stock-based compensation. Net cash used in operating activities for the second quarter of 2021 was $7.6 million, compared to $1.6 million for the second quarter of 2020. This was the result of non-GAAP adjusted net loss of $8.3 million offset by $0.6 million of working capital changes. Of the $6 million increase in cash used for operating activities, $5 million was the cash portion of the upfront license fee paid to Pfizer. We ended the quarter with approximately $41.6 million of cash and cash equivalents compared to cash and cash equivalents of $11.6 million on December 31st, 2020. This included net proceeds of $14.4 million related to debt financing agreements. The follow-on equity offering we closed on July 1st, 2021 resulted in gross proceeds of approximately $56.3 million. After the follow-on offering, CellCuity had approximately $94.4 million of cash on hand.
spk07: Thank you, Vicki. I'm very excited about the progress we made this quarter. The opportunity to develop Godot Elicit significantly expands the markets we're addressing, the potential value we can create for our shareholders, and the impact we can have to extend the lives of cancer patients. The three new studies we expect to activate on the diagnostic side of our company further buttresses the opportunity our CellSignia platform offers. And our successful financing activities in 2021 provide us with the additional capital needed to fund our development programs as they advance in the clinic. Operator, I'd like now to open the call for questions.
spk01: Thank you. The floor is now open for questions. If you do have a question, please press star 1 on your telephone keypad at this time. If you're using a speakerphone, we ask that while posing your question, you pick up your handset to provide the best sound quality. Again, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. We'll take our first question from Chad Messer with Needham & Company. Please go ahead, sir.
spk05: Thank you. Good evening, and thanks for taking my questions. A couple from us. Hi. Maybe we could just start out with, You mentioned you expected data update at San Antonio Breast. Could you maybe set the stage a little bit for what we should be looking for there in terms of, I don't know, additional patients, follow-up, et cetera?
spk07: Sure. So the data that we presented in April that was based on the January cutoff was fairly mature from a follow-up standpoint. So we don't expect there to be significant movement in those metrics. The data that we'd be presenting, we hope to present at San Antonio, would cover kind of a wider range of metrics that are typically used to evaluate efficacy of drugs, duration of treatment, duration of response, further highlights of potential of different subgroups, depending on the way stratification was defined. So, you know, just I guess I would say we'll put further detail behind some of the numbers where the top line numbers don't change. We wouldn't expect to change significantly.
spk05: Okay. All right. That's helpful. It's always good to get more details. And then just on the CellSignia platform. So, you know, look, understandably a lot of the focus here has been on broadening the the patient base for existing drugs makes sense. Great commercial opportunity. You guys have some good data there. But it seems like the platform would also have a lot of applications a little bit earlier on. And you've got a bunch of partners. You've talked about potential new partnerships. Just wondering about your prioritization or thinking on Celsignia as a way during earlier development, your own drugs, obviously for good adolescent, you're kind of doing that already, but as a way to, I don't know, optimize drug development earlier on. Just your thoughts and maybe some color around discussions you may be having.
spk07: Sure. No, that's a great question. One of the factors we balance is likelihood of success of a drug. And our initial strategy was to focus on drugs either approved already, so there wasn't the risk of, you know, the drug not advancing, or drugs that had already presented very favorable data so that we could assess that the likelihood of the drug advancing would be high. So that we were taking drug risk, in a sense, off the table for our initial collaborations. Going forward, though, as we have now a fairly good range of studies in process, it allows us to be a little bit more flexible and potentially do work with pharma, as you suggested, where we can help evaluate drugs and drug combinations for a drug at an earlier stage. As you know, and I think what you're alluding to, one of the biggest challenges for many of these drugs is developing a reliable way of stratifying the patient population. We have had some of those conversations, and over time, I would expect that conversations like that would lead to some form of collaboration. It's difficult to project, but it is an area that could be helpful. We want to avoid, though, just the only downside of this activity, and this is why we haven't rushed into it, is that you can risk becoming essentially a contract research organization where you're doing important work, but you typically pay it as almost similar on the basis of a grant, and it may or may not necessarily result in commercial activity. That's a risk we could take, but we just have to balance being utilized as an extra lab by a pharmaceutical company. and would want to enter into agreements that, you know, would clearly be pointed in a bigger direction than just providing, you know, data for the translational team.
spk05: All right. Yeah. No, great. Understood. And I think, you know, the value of your data will have to speak for itself over time as you generate it. Thanks for your answer to those questions.
spk07: Oh, you're welcome.
spk01: We'll take our next question from Boris Peeker with Cohen. Please go ahead.
spk06: Great. My first question may be on get at the list of future development. I'm just curious, what are the key questions for the FDA on the study designed for pivotal trial? Is it just not going to be an add-on to Ibran's endocrine therapies? Is there kind of more moving pieces here?
spk07: So whenever you're advancing to a pivotal study, It's almost expected, in fact, I don't know if required is the right word, but certainly expected, that you'll meet with the FDA, review your clinical trial design, you engage in a discussion that covers other topics that are ones relevant to discuss prior to activation of a pivotal study. questions that every sponsor would ask an agency, which is to confirm that the endpoint is one that they will accept, confirm the patient population is one they accept, your assumption about benefit that you're baking into the statistical analysis plan, the acceptability of the controls assumptions, and other somewhat detailed considerations that would get reflected in either statistical analysis plan or in the protocol.
spk06: Got it. Okay. But it doesn't sound like there's any kind of significant controversy or anything. It's more routine than anything else.
spk07: Well, it's routine, but, again, I mean, there's always, again, I don't want to, you know, the traffic can fall into a sale, it's all routine, and then something comes up. I mean, you have these meetings for a reason to essentially have an open discussion with the agency and get feedback, and depending on what the feedback is, you respond accordingly. But we don't think there's anything in what we're proposing that is – controversial, but you just have to expect that you may get questions or requests, and you adjust accordingly. That's why you have the meeting.
spk06: Got it. And my last question, on the psilocycline test in breast cancer, what is the regulatory path for a test like this?
spk07: So for the first test that we would, let's say, pursue in parallel as a companion diagnostic with the matching therapeutic, we would seek a pre-market approval for the diagnostic. And that process is somewhat similar. It's certainly less cumbersome or burdensome than submitting a new drug application. But it requires you to provide data that supports the stability of the test and the repeatability and the controls that you have in place for performing the test. We've had a pre-submission meeting with the FDA already. We previewed the data that we've generated to date. We also got input on other data that they would like to see, which, again, we, for the most part, anticipated. And so that submission would occur when clinical data was available supporting the new indication and that we would go in parallel. We would go to the CDRH, the diagnostic or device side. The drug sponsor would go to the drug division and those groups have a guidance document that directs or at least recommends how they assess those two data sets in parallel so that the decision on the PMA on the CDX will coincide, if favorable, with the review of the new drug application, or in this case, let's say a label expansion.
spk06: Got it. Thanks for taking my question.
spk07: You're welcome.
spk01: As a reminder, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. Again, that's star 1 on your telephone keypad to queue up for a question. We'll take our next question from Alex Nowak with Craig Hallam Capital Group. Please go ahead.
spk03: Alex Nowak Great. Good afternoon, everyone. Brian, can you provide an update on how enrollment is tracking in the FACT I and II studies? Does it vary in changing enrollment rates at all or is everything pretty much moving along relatively well with prior targets?
spk07: So I think things have proceeded consistent with what we reported last time. We haven't gotten a report of disruptions due to hospital activity treating patients with the Delta variant. But I guess that's kind of an ongoing question. But so far we haven't gotten any signals that that could be disruptive to us.
spk03: Okay, understood. That's good. And then, can you expand on the new collaborations that you mentioned on the diagnostic side that could come later this year, or just any hints on the pathways, the targets there?
spk07: You know, our practice has been that we really don't get into details until we have something that we can announce. And so, you know, it would follow a similar hypothesis to what we're doing, which is to identify patients who could benefit from treatment. that they wouldn't otherwise be eligible for. And, you know, looking at different indications and different drugs to, you know, again, expand the potential opportunity or increase the odds of our overall success.
spk03: Understood. Makes sense. And then just last question on GETA. The press release mentions in the model subsection about conducting a life cycle development plan update on GETA next year. Can you maybe expand on this? And is this when you would consider moving into other targets like ovarian cancer? And if not, how are you assessing the ovarian cancer opportunity with the data you just talked about alongside breast cancer? And when would you consider running a study in ovarian cancer?
spk07: Well, so there are a couple questions there. I'll answer the last question first because it'll help support the question on the life cycle development plan. The data reported in this study was interesting. Ovarian cancer has been on our radar for a variety of reasons, and this data supports that. But there are a lot of factors that you consider when you're developing a lifecycle plan. You have to factor in the unmet need, size of the population, how actionable the population might be. the competitive environment, you know, what's on the horizon, you know, so that you're taking into account future developments so you don't get blindsided. And then, you know, the biological rationale and the support that you might have, both internally or externally, to, you know, justify taking that step. So all of that analysis essentially goes into, you know, identifying, you know, key criteria so that we can prioritize tumor types that we think are most likely to involve PI3K mTOR, and those patients could most likely benefit where, you know, there's an unmet need and a threshold that we think would be reasonably obtainable, reasonably beatable. You know, we talked in the past about the role of, or rather the evidence that suggests, you know, PI3K mTOR and endocrine pathways generally cooperate in, or have been found to cooperate in nonclinical models, preclinical models. So, you know, prostate cancer would certainly be one of the tumor types we will deeply investigate as a potential opportunity. Ovarian cancer would be on that list as well. But until we complete the analysis, it's premature to preview anything because there's, again, a lot of data to sort through and a lot of factors to balance and weigh before you decide which direction to go. But ultimately, you know, the end result of that analysis what would be a decision to proceed and evaluate in Phase 1B studies that would allow you to test the hypothesis in a reasonably efficient and cost-effective way. And that data then would provide further evidence or not of the potential opportunity to pursue the indication that we were evaluating in those studies.
spk03: All right. Understood. Makes sense. Thanks, Brian and Vicki. You're welcome.
spk01: That concludes our question and answer session. We'll turn the floor back to Mr. Sullivan for closing remarks.
spk07: Well, thank you all for attending. I appreciate your interest in our company. I look forward to reporting to you in the future and look forward to potentially speaking with some of you at the upcoming conferences. Take care.
spk01: Ladies and gentlemen, this does conclude today's teleconference. We thank you again for your participation. You may disconnect your lines at this time and have a great day.
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