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spk06: of Strategy and Investor Relations. Chin, you may begin.
spk03: Thank you, Operator, and welcome everyone to Accenture's first quarter 2024 financial results and business update conference call. A press release and 6K were issued this morning with our first quarter 2024 financial results and business update. These documents can be found on our website at investors.accenture.ai. along with the presentation for today's webcast. Before we begin, I'd like to remind you that we may make forward-looking statements on our call. These may include statements about our projected growth, revenue, business models, preclinical and clinical progress and results, and business activities and performance, as well as our anticipated cash runway. Actual results may differ materially from those indicated by these statements. Unless required by law, Accenture does not undertake any obligation to update these statements regarding the future or to confirm these statements in relation to actual results. On today's call, I'm joined by Dr. Dave Hallett, Interim Chief Executive Officer and Chief Scientific Officer, and Ben Taylor, Chief Financial Officer and Chief Strategy Officer. And with that, I will now turn the call over to Dave. Thank you, Chin.
spk02: While the first quarter of 2024 has been my first officially leading Accenture. The turn of the year marked the beginning of my fifth year as a senior executive at the company. With this experience and perspective in mind, I firmly believe that 2024 will be a year of opportunity for Accenture to continue making substantial progress on our mission to shift the curve of the pharmaceutical industry. The tangible benefits of our investment in platform and infrastructure are gaining pace. When we at Accenture refer to shifting the curve, we are referring to reducing the cost and timelines of contemporary drug discovery, design and development, while also increasing the probability of success. We have already demonstrated a repeated ability to lower the cost and time in the discovery phase of drug design projects. Our clinical pipeline has multiple shots on goal this year. to start to improve upon the low probability of success historically seen by the wider industry. These include our most advanced program, GTA-EXF617, or 617 for short, a potential best-in-class CDK7 inhibitor. We expect to present top-line clinical data from the dose escalation phase of the elucidate phase 1-2 study in the second half of this year. EXS4318 or 4318, a selective PKC theta inhibitor designed by Accenture and licensed by Bristol Myers Squibb for immunology and inflammation indications. 4318 has shown positive early results in its phase one study and has the potential to be a first in class immunology drug. And two compounds designed for sumitomo pharma, which are currently in psychiatric disease that could read out this year. All these candidates were created by Accenture because traditional methods have resulted in compounds with major developmental issues. Initial data from several programs will begin to demonstrate that our design solutions can significantly improve probability of success in the clinic. Today, we are providing updates for our highly differentiated LSD1 inhibitor, EXS74539, or 539, which continues its progression towards a phase one clinical trial in acute myeloid leukemia patients. And for the first time, announcing our plans for our MORT1 inhibitor, EXS73565, or 565, as a potential treatment for B-cell lymphomas, including chronic lymphocytic leukemia. We have built a platform with a focus on the efficient discovery, design and development of highly differentiated small molecule compounds. Our first of its kind automation lab integrating our AI design capabilities with automated design make test loops launched towards the middle of last year. We have already transitioned three programs over to the facility and will continue to add more during 2024. Prior to the opening of the lab, Every compound we have designed has been synthesized at a CRO or by our partners. We have analyzed synthesis data from these legacy campaigns and believe that at least 75% of these multi-step compounds and 90% of the overall reaction types are automatable and could have been run through our facility. This is important as we aim to push through the logistical and time bottlenecks of working with third parties and reduce the CRO costs associated with these activities. We are already starting to see an initial positive impact from the studio with like for like biology resource requirements coming down by at least 75% and in many cases by more than 90%. We develop and optimize assays directly on the platform rather than through an intermediate step. We have started to run unattended overnight assays, are executing multiple assays on the same plate and providing the teams with great opportunity to collect data. The active learning-driven nature of our entire approach from AI-driven design through automation and across the entire experimentation cycle means we can accelerate the discovery process even further than before and in a more cost-effective manner for Accenture. We are seeing operational efficiencies from the multi-year investments into our integrated platform. With these developments in mind, we are continuing to shape our business. around the automation of the design, make, test, learn loop, and ramping up activity through the automation lab. Our laser focus on this process creates the necessity to scale back or discontinue legacy activities that are not directly aligned with our core transformative purpose, automation, advancing our design platform, pipeline development, and partnerships. As part of this process, we intend to anchor our precision matching capabilities on those aspects that directly influence our pipeline or contribute to our discovery and translational activities. As a result of the sharpened operational emphasis, we expect to make a total reduction in headcount of somewhere between 20 and 25% of global staff, including reduced activities at our Vienna site. These changes will result in at least $40 million of annualized savings beginning in 2025. These changes are the natural progression for a technologically driven company and reflect our deep-rooted commitment to efficiency, not only with respect to what we do, but critically, how we execute and deliver it. Importantly, this step reaffirms our commitment to the key value drivers of our business, meaning our pipeline, our partnerships, and our drug design and automation capabilities. As I have already mentioned, we will share a few key updates across our pipeline as we look to build long-term value for our business, starting with 539, our LSD1 inhibitor. As a reminder, we believe that in 539, we have designed the first LSD1 inhibitor that uniquely combines a reversible mechanism of action with an appropriate half-life and CNS penetration. CNS penetration is an important property. because it has the potential to address brain metastases, which are prevalent in advanced disease. We believe that having a reversible mechanism of action is important because irreversibly deactivating LSD1 can contribute to poor control of platelet levels. Having a long half-life has the potential to have the same effect, and so the pharmacokinetic properties of the compound are also important. We have previously demonstrated in rodent studies that platelet levels are able to recover even with super efficacious doses of 539, whereas they remain depleted even for intermittently dosed irreversible LSD1 inhibitors. This unique combination of properties offers 539 best-in-class potential. The stoplight chart on this slide is color coded to show how close a profile compound is to an optimized target product profile. Green represents no deviation from the ideal property range, amber, a minor deviation, and red, a major deviation. The column on the right-hand side represents 539, which is green for all profile properties. The first two columns represent two LSD1 inhibitors developed by other companies. Both compounds have major deviations, both have long human half-lives, and neither are CNS penetrant. the Phase I-II compound also irreversibly deactivates the enzyme, compounding along half-life and presenting a challenge to managing platelet levels. What is interesting is that despite these deviations, the Phase I-II compound has been able to achieve proof of concept in an AML study, achieving complete responses in 33% of patients. On the face of it, this is a good result. However, it should be noted that to achieve this, Patients had to be dosed intermittently, and even then, high rates of grade 3 and 4 platelet count decreases were seen. We have previously shown data that demonstrates 539's preclinical efficacy is comparable to this compound. If this activity translates into the clinic, 539 has the potential to be just as efficacious, but with a better safety profile. With this in mind, we plan to submit an IMD to support a phase 1-2 trial in AML in the third quarter of this year, with the aim of opening the first clinical trial site across the end of 2024. We retain an interest in the development of 539 for solid tumors, including small cell lung cancer. By entering AML first, we are de-risking our program where clinical proof of concept has already been established. We believe we can leverage what we learn from this regulatory process for future opportunities for 539 and other indications. This Phase 1-2 trial will initially have a monotherapy dose escalation phase to help us identify the appropriate dose for testing, followed by a seamless Phase 2 dose expansion to assess safety and efficacy at that dose. Throughout this, we will continue to pursue our precision medicine approach to help support with biomarker selection and patient response prediction. In addition to 539, I'm also going to provide updates about 565, our MALT1 inhibitor. 565 has been precision designed to be highly selective, including over the enzyme UGT1A1. UGT1A1 mediates bilirubin glucuronidation, and inhibition contributes to hyperbilirubinemia. Hies' law is an assessment of high fatality risk from drug-induced liver injury that is based on elevated levels of liver enzymes and total bilirubin in the absence of other factors, for example, viral hepatitis or alcohol abuse. Many of the current standard of care treatment options that could be used in rational combination with a mortal inhibitor, such as BTK inhibitors, are known to cause drug-induced liver injury with concomitant elevations of liver enzymes. This would make combination with BTK inhibitors difficult in practice for those malt water inhibitors that do not share 565 selectivity profile. We previously shared data at ESMO late last year showing in vivo activity of 565 as a monotherapy and in combination. The combinations with ibrutinib demonstrated tumor growth regression in animal models. We have also recently generated compelling data in-house for combinations with next-generation BTK inhibitors, which we look forward to sharing at a medical meeting later this year. 565 is currently progressing through IND-enabling studies, and we plan to launch a clinical trial for patients with B-cell lymphomas, including chronic lymphocytic leukemia, in early 2025. It has been demonstrated from preclinical data that there are synergies between MOT1 inhibition and current standard of care treatment options. It has even been demonstrated that malt 1 combinations have the potential to overcome standard of care treatment resistant for some B-cell lymphomas. As you can see from the slide, there are approximately 22,000 B-cell lymphoma patients who fall into the second line of treatment each year. Our clinical development strategy will lay the groundwork for our ultimate goal of using 565 in combination with current standard of care treatment options. We will take the first step towards this by submitting either an IND or CTA application before the end of this year. I will now hand over to Ben to walk us through the business and financial updates.
spk00: Thank you, Dave. Partnerships have been and will continue to be an important part of our business model. We have brought in almost $230 million from partnerships over the last few years. and expect to generate significant additional near-term cash inflows. Our Sanofi collaboration is showing strong progress across multiple programs, and the Merck KGAA collaboration now has all of the programs in early discovery. Drug discovery and early development are under pressure across the industry, and we believe Accentia has the ideal solution. One of the main industry problems is that approximately 50% of drugs fail in phase one. These failures are usually tied to safety and dosing. These are two areas where the Accentia platform excels beyond traditional methods. In addition, the integration of our AI-based design and our automation lab can enable a new level of speed and cost efficiency. The impact we create is being demonstrated by our PKC theta inhibitor that is partnered with BMS. It recently achieved positive early results in its phase one study and has the potential to be a first-in-class immunology drug. PKC theta is a target where over the last 15 years, more than a dozen biopharma companies have tried and failed to create a potent and selective inhibitor using traditional design methods. We were able to move from design initiation to identifying the development candidate in less than 12 months, delivering a better quality drug with balanced properties faster. I will now take a minute to close with highlights from our financial results. Full results are detailed in our press release in form 6K. I will review the results in U.S. dollars using the constant currency rate of 1.26 to the pound. We ended the quarter with $417 million in cash, providing us with a cash runway well into 2027 without additional business development. This enables us to deliver on a multitude of pipeline and platform milestones during that time. You can see the impact of our improving efficiencies in discipline spending through the 29% decrease in operating cash burn from 55 million in the first quarter of last year to 39 million in the first quarter of 2024. We did this while moving CDK7 forward in the clinic, bringing two new drugs into IND prep, executing on our partnerships, launching our automation lab, and setting the standard for small molecule design technology. Today, we have evolved our business again to recognize the benefits of technological efficiency And in doing so, expect to realize annual cash savings from 2025 onwards of more than $40 million. We have a strong track record of delivering business development, and that has supported us since our IPO. We are focused on achieving those pipeline and collaboration milestones that will validate the substantial leadership position we have built with our platform. And with that, I will turn it back over to Dave.
spk02: Thank you, Ben. Our foundational work leveraging AI-driven precision drug design has culminated in the development of a focused high-value oncology pipeline, which we believe has the potential to dramatically improve patient outcomes. We expect to be providing data this year from at least one program, namely CDK7. Our platform that drives both the pipeline and partnerships is working, and we believe with the integration of automation has the potential to drive extraordinary efficiencies through our business. The changes we announced today result in annualized savings of $40 million from 2025 and beyond. These changes will help us achieve our medium to long-term goals. These are delivering efficacy data for our current clinical programs, CDK7, LSD1, MALT1, and PKC Theta. delivering hundreds of millions of dollars in milestones from our partnerships, advancing the next generation of automation supported projects into the clinic, and quantifiably demonstrating the full use case of integrating generative AI with automated experimentation. We believe this will cement our position as the leader in technology driven drug design. And with that, we will open the call for questions and answers.
spk06: Thank you, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad. If you wish to withdraw your question, simply press star one again. Your first question comes from the line of Alex Dranahan with Bank of America. Your line is open.
spk04: Hey guys, thanks for taking our questions. Just a couple from us. First for CDK7, how should we be thinking about activity with mono? versus combos here and anything in terms of safety profiles you'd like to see in terms of gauging, um, combined ability and, you know, given the, the announced cost reductions, how are you balancing executing on your partnerships while driving your pipeline forward? Any, any color around the balance of efforts here would be great. Thanks.
spk02: Thank you for that question or questions. Um, I'll, I'll let Ben take the first question, which is about CDK seven. And then I'll follow on with that with your question around the balance of the pipeline and partnerships.
spk00: Hey, Alec. Thanks for the question. So CDK7, we would expect to see some level of monotherapy activity. This is both a cytostatic and a cytotoxic mechanism. However, in clinical use, it will almost certainly always be used in combination. And so What we're looking at right now, and we'll have more on this in the near future, is what's the right next step. So it's in a monotherapy dose escalation, and that'll be the data that is coming out later on this year. And then we'll look at the appropriate combination to put that into for probably a brief escalation and then an expansion into that area. We've seen some good track record of CDK7s, CDK4s, other CDKs that have been out in the clinic. And I think we feel really good about our profile. The critical issue that you really have to manage with CDK7 is toxicity. GI tox will definitely be a big part of it. You both lose patients as well as have variable absorption if you do have GI toxicities. And so that's something that I would definitely be focused on. But if you remember the profile of our inhibitor, it was specially designed to get around an issue that a number of the other competitive molecules have, which is being a transporter substrate. So we think we've got a really nice advantage in there, and hopefully you'll be able to see that in the data. because if we can get a nice, safe profile, this is a mechanism that clearly should work. And there's a number of different combination opportunities for it.
spk02: Thank you, Ben. Part two of your question. Partnerships will remain a cornerstone of our business. The reasons that Ben highlighted are one of those. They exist. They've brought substantial cash inflows into the organization. As I mentioned in my remarks, is that the potential for the current collaborations over the next two to three years is to bring in hundreds of millions of dollars of potential milestones. More importantly, or just as importantly, they allow us an opportunity for our platform to learn and to kind of leverage the capacity that we've created. The Snuffy partnership, for example, is also making kind of great progress In the last couple of quarters, we've not only announced the addition of a new program with enhanced economics that started out life with an Accenture, but more recently the first kind of discovery stage milestone from that collaboration. The new collaborations are also benefiting from utility of our automation platform. So whether it be BMS or Merck or Sanofi or Gates or RallyBio, all our partnerships are important to us.
spk04: Great. That's very helpful. Thank you.
spk06: Your next question comes from the line of Vikram Paroheap with Morgan Stanley. Your line is open.
spk01: Hi, good morning. Thanks for taking our question. We had two, one on partnerships and one on the pipeline. So revisiting the topic of partnerships, could you speak a bit about how you're kind of thinking about and parsing through opportunities or biopharma partnerships versus more tech-focused partnerships and kind of how your appetite for each of those could evolve throughout the year and what you'd be looking for from each different type of partnership? And secondly, on the pipeline, you mentioned in your prepared remarks that the PKC data, initial data has been promising. Just wondering if you could share a bit more about
spk02: you've learned with that compound and what the next public facing communications on that program could look like thank you hi Vikram let me start with your second part first if that's okay immensely kind of proud of the progress that PKC Theaters has made this this has been a very challenging project over Over the course of the last decade, I estimate that more than 10 companies have tried and failed to try and bring an already bioavailable, selective, potent inhibitor into the clinic. And they pretty much all failed to do that. So I think this is proof of the first evidence of what we've spoken about for over many quarters now. about the capabilities of our design platform to deliver where others have failed. PKC Theta remains within the BMS portfolio. It has progressed through phase one. We can't say any more at this stage, but we are working with BMS to be able to tell you more in the coming quarters. In terms of partnerships, is that we continue to look for both target based partnerships, whether they be the kinds of collaborations that we've done historically with Sanofi, for example. But I think what the automation platform is allowing us to do in terms of the efficiencies and the changing cost base is also to potentially attract early stage collaborators like biotechs or even startups. So that's one area that where business development kind of conversations are taking place at the moment. In terms of technology, the conversations that we have and continue to have with the major technology players are really about the excitement we're generating in terms of the investment we've made into our automation studio. I think a lot of people that have been fortunate enough to visit that site have recognized the potential and the value of actually bringing together the kind of the computational world with the real world of kind of engineering and that closed-loop test environment. So the kind of conversations that we're having with kind of technology partners are really around how best can they help us support that going forward. So we will update you, of course, kind of over the course of the next couple of quarters. But I'm confident that we'll see progress on both aspects of our business in that regard.
spk01: Understood. Thank you.
spk06: Your next question comes from the line of Peter Lawson with Barclays. Your line is open.
spk05: Great. Thanks so much. I guess initially it was just a question around CDK7, kind of the combination agent you're thinking of using and the data sets and what indications we should be thinking about.
spk02: Thank you, Peter. I'll pass that question over to Ben.
spk00: Sure. So we still have some flexibility, but I'll give you a few ideas of where we could go with it because I think there's some really interesting avenues. The most common path here would be to go after ER positive, HER2 negative, CDK4-6 refractory breast cancer patients. And that may seem like a tough patient population for CDK inhibitors, but actually we've seen some positive early data out of Pfizer's CDK4, showing that even if you're going after CDK4, after 4, 6, you can have good positive responses, as well as some early signs out of CDK7s. I think we just have a lot better overall balanced profile than the inhibitors that are out there on the market. And as we've talked about before, we think the CDK7 is a class could really have some advantages over some of the other CDKs. So I think we will be able to obviously explore that area if we wanted to. But because of our safety profile, that also opens up some other areas. There's a lot of great preclinical data showing that CDK7 can be beneficial with immunotherapies. And that is often not been pursued or the clinical trials haven't been very successful because of toxicity. And part of the reason there might be, they have very different toxicity profiles. And so you put them together, you can get an overwhelming tox burden. But if we're able to manage that CDK7 toxicity better, there should be very complimentary activity. So that's another example of how our profile and what we're able to do with our platform actually could open up markets that other drugs aren't able to reach. So there's a number of different places that you could go with CDK7 because it is a more fundamental mechanism, but that gives you an example of what we're thinking about.
spk05: Got you. Thank you. Combination agents for CDK7. So immunotherapy, I guess, is one potential.
spk00: Yeah, so it'll really depend on where you go. So if you went with that ER positive, HER2 negative, CDK4-6 resistant breast cancers, you'd probably be with a SIRD. Fulvestrin is obviously a pretty common standard of care there. If you went after something like a lung cancer indication, you may go with a PD-L1. There are obviously other indications you could go after, and it really depends on the standard of care. I think we would need to start around second line in most indications, but that could give you a good sense.
spk05: Thank you. And then any governance around cash burn expectations for Q2 and how that kind of measures out for financial year 24?
spk00: Sure. I'll keep going on that one. So obviously, you know, hopefully it was noticed we had a 29% decrease year over year, despite a lot of execution. in our first quarter results. I think we intend to continue that into the year. Our guidance had been the cash burn, the operational cash burn this year will be less than last year. And we're still holding to that. I think with what we announced today that puts our cash runway well into 2027, You may remember our previous guidance was well into 2026. That's actually a really important 12-month period, not only because it gives us a, you know, more control over our own destiny, which is always a good thing, but that also means that we have the ability without additional BD or financing to get through things like CDK 7 Phase 2 data and or initial phase one data on LSD one and or remote one. Plus there's a lot that should happen in our partnered pipeline over that time period. And obviously we'd get to see the automation really play out well. So there's a lot going on over the next couple of years and we wanted to make sure that we were in full control over that time period. Great. Thank you so much.
spk06: Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. There are no further questions at this time. I will turn the call to Dave Hallett for closing remarks.
spk02: Thank you, operator. And thank you to everyone on the call today for your continued support of Accenture. In closing, let me reiterate why we are in a strong position for the future. The positive results for our partner PKC Theta inhibitor program, the upcoming phase one data for CDK7, and the progression of our LSD1 and MALT1 inhibitor programs into the clinic all provide meaningful advancements of our pipeline. The integration of our AI-led drug design capabilities, now supercharged by experimental automation, will help us drive towards maximum speed, quality and ultimately autonomous drug design. We continue our journey to truly transform how drugs will be invented in the future. Finally, leveraging technology advancements and streamlining operations to realize annual savings of $40 million will extend our cash runway well into 2027 and help Accenture deliver on our mid- and long-term goals. Operator, you may now disconnect.
spk06: Thank you. This concludes today's conference call. Thank you for joining. You may now disconnect your lines.
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