Cellectis Inc.

Good morning, everyone, and welcome to the Selectix third quarter 2023 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. Please be aware that today's conference call is being recorded. I'd now like to introduce our first speaker, Arthur Strill, Chief Business Officer. You may begin.

Good morning, and welcome everyone to Selective Third Quarter 2023 Corporate Update and Financial Results Conference Call. Joining me on the call today with prepared remarks are Dr. André Choulika, our Chief Executive Officer, Dr. Bing Wang, our Chief Financial Officer, and Dr. Mark Frittini, our Chief Medical Officer. Yesterday evening, Selectus issued a press release reporting a corporate and business update for the third quarter 2023, and its financial results for the nine-month period ended September 30th, 2023. As a reminder, we will make statements regarding Selectus' financial outlook, including the sufficiency of cash-to-fund operations, in addition to its manufacturing, regulatory, and product development status and plans, and product development of its licensed partners. These forward statements, which are based on our management's current expectations and assumptions, and on information currently available to management, including information provided or otherwise publicly reported by our licensed partners, are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 20-F filed with the Security Exchange Commission, SEC, and the financial reports, including the management report, for the year ended on December 31st, 2022, and subsequent filing selective makes with the SEC from time to time.

I would now like to turn the call over to Andre.

Thank you, Arthur, and good morning, and thank you, everyone, for joining us today. Last week, we announced a strategic collaboration and investment agreement with AstraZeneca. We're very proud to initiate this partnership with one of the top leaders in the pharma space, bearing our strong commitment and ambition in cell and gene therapy. Why AstraZeneca? Because we have been very much impressed by the long-term strategy in this space, backed by a strong commitment and development already made, paving the way towards a top leadership in this arena. We strongly believe that together, with AstraZeneca, that next generation of genomic medicine will be developed under our collaboration to revolutionize medicine across a number of therapeutic areas in the years to come. As part of our agreement, AstraZeneca has agreed to make an initial payment $105 million to Selectus composed of $80 million equity investment in exchange of 16 million ordinary shares at $5 per share and a $25 million upfront payment under the research collaboration agreement. Selectus is also eligible to receive an additional $114 million equity investment in exchange for 28 million convertible preferred shares at $5 per share, subject to selected shareholders' approval and several other conditions of closing. Now some words about the research collaboration. It's a very ambitious proposal to develop novel cell and gene therapies across oncology, immunology, and rare diseases. We have exclusively reserved 25 genetic targets for AstraZeneca, from which up to 10 novel candidate products could be explored for development. The beauty of this agreement is that our clinical stage assets, UCRT22, UCRT123, and UCRT20x22, remain under our own ownership and control, and you should expect regular updates in the advancement of these programs for us. Within the collaboration, we will leverage our cutting-edge innovation and best-in-class manufacturing capabilities, develop new disruptive product candidates, and AstraZeneca will have an option for a worldwide exclusive license on 10 of the candidate products we exercise before IND filing. Our research costs under the collaboration will be funded by AstraZeneca and we're eligible to receive an IND option fee and development regulatory and sales-related milestone payment ranging from $70 million and up to $220 million for each of the 10 candidate products plus tiered quality. We're very excited to get to work with AstraZeneca to leverage our capabilities and build the next generation of genomic medicine to address area of high unmet patient needs together. During this past third quarter, Selectus innovation team excelled in releasing disruptive preclinical data on gene editing of hematopoietic stem cell gene therapy for an immunological disease. Data on our proprietary TAL-based editor technology and a multi-armored allogeneic CAR-T cell targeting MUC1 for triple negative breast cancer, demonstrating one more time the span and the power of our gene editing platform, and to develop next-generation cell and gene therapies for patients with unmet medical needs. In addition, our clinical team will be presenting updates of results for the phase one BALI-01 trial of UCAR-T22 and preliminary results of the NATALI-01 trial evaluating UCAR-T20 by 22 in refractory or relapsed B cell, not Hodgkin lymphoma, at the American Association of Rheumatology annual meeting. But I will let Mark, in a couple of minutes, talk about these abstracts. One thing I would like to highlight in what Mark is going to present after is the importance of the know-how in manufacturing. In cell therapies, nothing is more important than the thickness of the cell that will be injected to patients. The quality, the reproducibility of manufacturing is one of the game changers in the success of these therapies. This is why we have fully internalized manufacturing. Now this work is totally completed, and this is why it's going to make a difference. Selectives will continue to control strictly cash burn within this difficult market environment. And we will continue to focus our efforts and expenses on advancing our core clinical trial, BALI-01, evaluating UCRT22. NAPALI 01 is evaluating UCAR T20 by 22, and AMELY 01 is evaluating UCAR T123. With that, I would like to turn the call over to Dr. Mark Frittini, our chief medical officer, who will give an overview of these clinical trials. Mark, please go ahead.

Thank you, Andre. We will be presenting updated results of the Phase 1 VALI-01 trial of UCART22 in relapsed refractory B-cell acute lymphoblastic leukemia and preliminary results for the NAATLI-01 trial evaluating UCART20 by 22 in relapsed refractory B-cell non-Hodgkin lymphoma at the American Association of Hematology 65th Annual Meeting in December. As Andre just mentioned, regarding our clinical trial BALIO1 evaluating UCAR22 in relapsed or refractory B-cell ALL, we have a comparison between a product manufactured at a CDMO, this is process one, and the same product manufactured in-house here at Selective. This is process two. In vitro comparability studies suggested that UCART22 Process 2, manufactured by Selectus Biologics, is more potent than UCART22 Process 1, manufactured by an outside CDMO. In June, at the EHA Congress, we showed you data of patients enrolled at dose level 3 with 5 million cells per kilogram with UCART22 using Process 1. Since then, and as of July 1st, 2023, three patients were enrolled into the first UCART22 P2 cohort at dose level 2 at 1 million cells per kilogram. UCART22 P2 was administered after fludarabine, cyclophosphamide, and alumtuzumab, or FCA, lymphodepletion, and was well-tolerated. no dose-limiting toxicities or immune effector cell-associated neurotoxicity was observed. And the CRS observed was grade 1 or 2. There was a higher preliminary response rate, 67%, at dose level 2 with 1 million cells per kilogram with UCAR22P2 compared to a 50% response rate with a dose five times higher at dose level three of UCART22P1 that was manufactured by an outside CDMO. UCART22 expansion was observed in the responding patients and correlated with increases in serum cytokine and inflammatory markers. The study continues to enroll patients at dose level 2i, 2.5 million cells per kilogram, with UCART22-P2. We will also be presenting preliminary results of Nathalie 01's study evaluating UCART20x22, the first allergen-A dual CAR T-cell product in patients with relapsed refractory B-cell non-Hodgkin lymphoma at the ASH meeting in December. In this case, UCART 20 by 22 has been fully manufactured in-house by Selective at our Raleigh manufacturing plant. As of July 1, 2023, three patients were enrolled and treated at dose level 1. Here we are using a flat dose of 50 million cells for patients over 50 kilograms. Cytokine release syndrome grade 1 or 2 occurred in all patients, and all CRS resolved with treatment. No immune effector cell-associated neurotoxicity or graft-versus-host disease was observed. There were no UCAR 20 by 22 dose-limiting toxicities, and there was one CLLS52 or alumtuzumab DLT. All patients responded at day 28. with one partial metabolic response and two complete metabolic responses in patients who had failed prior autologous CD19 CART T-cell therapy. UCART 20 by 22 expansion correlated with increases in serum cytokine and inflammatory marker levels, as well as with cytokine release syndrome. These initial data with 100% responses at the initial dose of 50 million cells per patient supports the continued study of UCART 20 by 22 in relapsed refractory B-cell NHL, and the study continues to enroll. Lastly, our Amelie 01 study evaluating UCART 1, 2, 3 in patients with relapsed or refractory acute myelogenous leukemia continues to progress and enroll patients in the FCA two-dose regimen arm. With that, I would like to hand the call over to Dr. Bing Wang, Selectus' Chief Financial Officer, for an overview of our financials for the third quarter of 2023.

Bing, please go ahead. Thank you, Mark. I would like to highlight that in our financials,

The cash, cash equivalent, and restricted cash position of selectives, excluding K-League, as of September 30, 2023, was $72 million compared to $95 million as of December 31, 2022. This $23 million difference mainly reflects $79 million of cash out, which includes $23 million for R&D, $12 million for SG&A, $32 million for staff costs, $8 million for rent and taxes, $4 million of reimbursement of the PGE loan, and $2 million unfavorable impact on foreign exchange, partially offset by a $23 million net cash inflow from the capital raise closed in February, and a $21 million net cash inflow from the European Investment Bank loan, a $6 million of net cash received from the research tax credit pre-financing, a $1 million cash inflow related to the grant, and refundable advance from DPI, $3 million of financial investments, capital gain and interest, and $1 million reimbursement of social charges paid on stock options, and a $2 million net cash inflow from licenses and other cash receipts. With cash and cash equivalent of $67.4 million as of September 30, 2023, and the $105 million from the AstraZeneca agreement, the company believes that we have sufficient resources to continue operating for at least 12 months following the consolidated financial statements publication. Additionally, the MOU contemplates that AstraZeneca will make a potential further equity investment in Selected of $140 million by subscribing two newly created class of convertible preferred shares of Selected. If confirmed, the closing of the additional investment will remain subject to selected shareholder approval with a two-thirds majority of the votes cast by voting shareholders and a clearance of such investment from the French Ministry of Economy according to the Foreign Direct Investment Regulation and other customary closing conditions. Concurrent with these additional 140 million in our anticipated borrowing of 15 million euros under the tranche fee of the 40 million euro finance contract with a European investment bank, the company believed that we would extend this cash runway into 2026. The closing of the proposed Calix merger was finalized on May 31st of 2023. Consequently, Calix was deconsolidated and presented as discontinued operation in the financial statement only until May 31st of 2023. The net loss attributable to shareholders of Selectus was $58 million, or $1.07 per share, for the nine months of 2023, of which $53 million was attributed to Selective's continuing operation, compared to $79 million, or $1.74 per share, for the nine months ended September 30, 2022, of which $73 million was attributed to Selective's continuing operation. The $21 million decrease in net loss between the first nine months of 2023 and 2022 was primarily driven by a $14 million decrease of R&D expenses, a $4 million decrease of SG&A expenses, and also an increase of $4 million of the financial gain due to the deconsolidation of Calix compensated in part by the decrease of fair value of Cytovia's note receivable and a decrease of $2 million of loss from the discontinued operations attributable to the shareholders of Selectus. These downward impact on the net loss are partially offset by a decrease of $1 million revenue and other income. The adjusted net loss attributable to shareholders of Selectus, which excludes non-cash stock-based compensation expenses, was $57 million, or $1.05 per share, in the first nine-month period of 2023, compared to a loss of $72 million, or $1.58 per share in the first nine months of 2022. We are laser-focused on spending our cash on developing our clinical candidates and operating our state-of-the-art manufacturing facilities in Paris and in Raleigh. In addition, our focus on maintaining an efficient corporate infrastructure should also enable more limited growth in G&A spend. At this point, I'd like to hand it back to Andre for closing remarks.

Thank you, Bing. To close out this call, I would like to reiterate how excited we are about the strategic collaboration with AstraZeneca and how much confident we are about the continued progress of our three ongoing clinical trials in metallurgical malignancies, as well as our continued development of our preclinical programs. Let's select this. We strongly I believe that our product candidates, our technology, and our in-house manufacturing capabilities will lead us and our partners to a paradigm shift for patients with hard-to-treat cancers, positioning us at the forefront of this promising medical and scientific field.

With that, I would like to open the call for questions and answers. Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Kelly Shi with Jefferies.

Please go ahead.

Hi, this is Dave on for Kelly Shi. Thank you for taking our question and congratulations on the updates. I have one question on UCAR 20 by 22. great result at DL1. So my question is, do you plan to increase the enrollment sites? And how many dose level do you anticipate to study before finalizing the RP2D? Thank you.

Great. Thank you very much for this first question, which will go to Mark.

Hi. Thanks for the question. And yeah, we will, you know, we anticipate doing an escalation, obviously. The data from the subsequent escalation will obviously determine where we stop and call in our P2D. So right now it's to be determined with the clinical data.

Thank you. Thank you. Our next question is from the line of Gina Wong with Barclays. Please go ahead.

This is Yiangina. So we have two questions on your clinical programs. One is that you previously guided UCAR-T123, I believe by end of 2023. May I ask like the timeline for now, would it be a sleep breaker for ASH? And another question is the next step for UCAR-T22. You mentioned about potential to advance to pivotal study without further dose escalation. Is that still the plan? Thank you.

Great. Thank you very much for both questions. Definitely for Mark.

Thank you. So, for 123, as you know, we began at ASH last year. We announced how we were remodeling the treatment program to include a two-dose regimen. And we are continuing in that two-dose regimen in dose escalation. So, we anticipate that, you know, we will reveal clinical data at some point next year. And in terms of 22 study, yes, we, in fact, we even pointed out in the abstract for ASH that we have those escalated to 2.5 million cells per kilo with the 22P2 product.

So, we will see where that data bears us out and as we move ahead. Gina, do you have any questions?

Oh, thank you so much for taking our questions. Maybe one last follow-up question on the AstraZeneca deal. Is there a timeline that they have to select certain lead targets, and would you only get to keep it as your own, like only hold, if they turn it down, turn some targets down?

Sorry, I'm not sure I understood. This is Arthur. I'm not sure I understood the end of the question. But definitely, so as part of the agreement, AstraZeneca will have to choose up to 10 candidate products from a pool of 25. And then once the 10 products are selected, the remaining non-selected targets will come back to us.

Okay, got it. Thank you.

Thank you.

Our next question is from the line of Diego Notomowitz with Citi. Please go ahead.

Hi team, this is Carly on for you all thanks for taking our questions to from us first on you cart 22 and 20 by 22 just wanted to clarify if we should expect. Data on additional patients at ash relative to the abstract or will the ash data be focused on longer term follow up from the patients just the patients included in the abstract. And then the second question is on the potential additional $140 million equity investment from AstraZeneca. Just wondering if you can clarify if there's a specific trigger for that from AstraZeneca's side and what the potential timing might be. Thank you.

Great. So I'll hand it over to Mark for the first clinical question, and then I'll take the question on the AZ deal. Thank you. Yes.

In terms of the two abstracts, that we will be presenting. We will be presenting some follow-up on the patients described in the abstracts.

Yes, on the 140 million, so this is subject to a few closing conditions, including approval of our shareholders at a two-third majority of the vote cast, clearance according to foreign direct French, foreign direct investment French regulations, and a couple of other custom reclusing conditions. We're working expeditiously to finalize these.

Okay. Got it. Thank you. Thank you.

Our next question is from Hartaj Singh with Oppenheimer. Please go ahead.

Great. Thank you. Thanks for the update. I got two questions. One is you're starting to show some complete responses in Bally and Nathalie. I was wondering what would you view as sort of like a durability From a durability perspective, how many months of follow-up would you like to see when you could classify these as being very durable responses, especially on the CR side? And my second question is just specific to UCARP 1, 2, 3. Have you switched over to the commercial product there also? And if not, what's the timing on that? Thank you.

Thanks for those questions. And Mark, over to you.

Thanks, Artash, for the question. So I'll start with the 123 first. And for the 123, we are still currently using the CDMO-made product for 123, and that's where we are with that right now. In terms of your first question, yes, we are definitely seeing CRs, as you pointed out, in the two studies. I think importantly to stress for the 20 by 22 studies at the initial dose level, we did see two metabolic CRs, and these were in patients that failed prior CD19 CAR-T in addition to several other therapies. So I think in the setting of 19 failures, having two CRs is great news at this dose level. I think in terms of your question for durability, I think that remains to be seen given the line of therapy that we're in and given the extensive therapies that these patients have been relapsed and refractory from. You know, I think at some point looking in the three- to six-month range is not unreasonable to look for a good duration of response in these patients.

Great. Thank you, Mark. Thanks for all the questions. Thank you.

Our next question is from Jack Allen with BED. Please go ahead.

All right. Thanks for taking the questions, and congratulations to the team on the progress. My question is also as it relates to the ASH abstract. Really impressive results out of the UCART 20 by 22 program. At the first dose level here, I was wondering to see if the team had any comments about the need to escalate dose, or are you satisfied with the early results you're seeing here?

Love to hear about that.

Hi, Jack, thanks for the question and yeah, as you point out 3 out of 3 responders at the initial dose level and as also, you can see the safety was was quite good at this dose level as well. And I think, given given both of those facts, you know, we will be, we will, in fact, be dose escalating this study. just, you know, to see where we can get at the next higher dose level. So stay tuned for that.

Yeah, and then just one brief follow-up. As it relates to longer follow-up on these patients, can you provide some context around when the data cut was taken for ASH and what you expect to present at the conference? And then just to clarify, we should be primarily focused on additional data from the first three patients rather than a second dose cohort as well?

Yeah, so we'll be focusing on the first three patients for the poster presentation, yeah.

Any thoughts on additional kind of follow-up or what kind of follow-up we could expect from those three patients at the conference?

You know, so we'll give some further follow-up that we have on them, so please come by and visit us at the poster.

Great. Thanks so much. Thank you.

Our next question is from Salveen Richter with Goldman Sachs. Please go ahead.

Hi. This is Lydia on for Salveen. Thanks so much for taking our question. Could you just remind us of the strategy for UCART 20 by 22 in terms of the targeted patient population given the positive data at ASH?

Thank you very much for the question. That would be for Mark.

Hi. Yeah, thank you for the question. So, you know, we are, this is in third line or greater that we're using this, and this is prior CD19 failures are also included in this study.

So, that's where we're continuing. Thanks so much. Thank you.

Our next question is from the line of Sylvain Delcon. with JMP Securities. Please go ahead.

Good morning and congrats and thanks for taking my question. My first question is, now that you have human data with UCAR22 with product one and product two, do we know why product two is so much more potent? Do you have any measures of cytokines or extension peaks, etc.? ? And then, a second question is, are there any more near-term milestones associated with allogeneic anti-CD70 or anti-clotin 18.2 programs that you could be getting? Thank you so much.

Great. Thank you very much for both questions. I'll hand it over to Andre for the first one.

Yeah. Hi. Thank you very much for the nice question, because I think that the manufacturing definitely makes a huge difference. And as Mark described in his presentation, there is process one that was the process that was used at the CMO initially and the one we've implemented after internally that is process two. So there's like a few things that have changed. We know exactly why. One day someone asked me a question about how we do it, how we can do cells that have so much potency. And let me tell you, I'm going to share the secret with you here online. So I see all the faces around me. It's awkward. Oh, I'm excited. Andre, don't do this. I'm going to do it. Well, we've done close to 10,000 batches internally in process development. We've done and crushed and crushed and crushed cells and tweaked every parameter. And there are hundreds of parameters. This is cold experience. And we are the ones that have invented the concept of allergenic CAR T. I can tell you, the process didn't come out like this from the ground. It took a long time before we got to the point where we are. And today, I think that we're probably the best on the planet to do allergenic CAR T. As Mark said, come at our poster session at ASH. Watch the expansion of the cells, even at super low doses. You will see what it means to have such type of experience. And experience cannot be invented in a day. It can be transmitted, but we do not transmit these 10 years of crushing batch after batch, small, mid-sized, large-sized batch, in GMP conditions, et cetera, up to the time we have tweaked all parameters to perfection. That's the answer. And for the algae?

Thanks, André. And on the Allogene question, so we definitely have a significant vested interest in Allogene's success, just remembering up to $410 million in development and sales milestones for CD19 through our agreement with Servier, and up to $2.8 billion in development and sales milestones with Allogene. So we haven't disclosed the granularity of the milestones, but we'll definitely communicate as and when Allogene hits those milestones and we get the amounts in our bank.

Thanks for revealing the secret sauce.

Thank you. Our next question is from the line of Yanen Zhu with Wells Fargo. Please go ahead.

Hi, congrats on the progress. This is Kuan Ang for Yanen. So my question is on UCAR T22. So, can you give us more detail about the grade 5 AE that was revealed in the abstract, and how that may affect the further study conduct? Thank you.

Thank you for the question, and this will be for Mark.

Yeah, so as, you know, as revealed in the abstract, Grade 5 event happened after long after, you know, several couple of weeks after the day 28 assessment in this patient who had a morphologic leukemia-free state. So it was a bacterial infection that the investigator related, you know, related to everything, which is why it's there. So it's really not affecting, you know, anything as we move ahead.

Got it.

And is there a way to quantify how much of that was contributed by the UCAR T22 itself or the link for depletion?

Thank you. Yeah, so there's...

You know, as we'll show on the poster, there's a level of expansion that was seen with these cells by flow cytometry. At the time point of this event happened, we don't believe there were any UCAR22 cells remaining. So, we think that the likelihood it was less related to UCAR22. This was a patient who was, again, as outlined in the abstract, was super heavily pretreated. You know, they failed allotransplant, they failed prior autologous CAR-T times two infusions, they failed multi-agent chemo, and they also failed linitumab, inituzumab, and venetoclax. So the cumulative dosing of the prior chemo that they made and going into the study, very hypocellular, explains some of the issues that developed.

Probably that's super helpful. Thank you so much.

Thank you. As there are no further questions, I would now hand the conference over to Andre Cholika, CEO, for closing comments.

Well, first of all, I would like to thank the team for helping in doing the call here. It's been a pleasure to prepare this together, and I would like to very warmly thank all the analysts that have been following the company and supporting and watching what we're doing is very valuable. And I would like to make a special word also to our long-term shareholders that have been continuously supporting the company over the past years. And I hope that the company is going to have like a very strong end of 23 and 24 and 25 and 26. So we'll come up very soon for an update on the progress. Thank you very much.

Thank you. The conference of selectors has now concluded. Thank you for your participation. You may now disconnect your lines.