Gracell Biotechnologies Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Grace Health Biotechnology's fourth quarter and full year 2021 conference call. At this time, all participants are in a listen-only mode. After opening remarks, we will open the call for your questions. Instructions for queuing up for questions will be given at that time. I will now turn the conference call over to Dr. Kevin Shea, CFO. Please go ahead.

Good morning, and welcome to Green Cell's fourth quarter and full year 2021 earnings conference call and webcast. With me today are Green Cell's founder and chief executive officer, Dr. William Tau, and our chief medical officer, Dr. Martina Serge. We're excited to discuss our innovative technologies and the breakthrough clinical pipeline of CAR T therapies on today's call. We also look forward to share with you our recent business development and upcoming targets for 2022. After our formal remarks, we'll conduct a question and answer session. This morning, Resell issued a press release announcing unaudited financial results for the quarter ended December 31st, 2021. We encourage everyone to read this press release and would like to remind you that this call is being recorded for replay. Please note that for certain information discussed on the call today, including financial data, clinical data, future plans of our programs, resource management will be making forward-looking statements. Actual results could differ materially from the stated or implied by this forward-looking statement as a result of various important factors. And please refer to Risk Factor section of our latest 20S filing is SEC for full disclosure of these risks and factors. The conference call contains time-sensitive information that's accurate only as of date of this live forecast, March 14, 2022. RISA undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. except as may be required by securities law. I will now turn the call over to GraceL's CEO, Dr. William Tsao. William?

Thank you, Kevin. And again, welcome everyone to our fourth quarter and full year 2021 earnings conference call. GraceL has made substantial progress over the last year, and it continues to deliver across corporate, clinical, and operational initiatives. I will elaborate on some of the key achievements and updates. Following this, I will turn the call over to our Chief Medical Officer, Dr. Martina Serge, to discuss our pipeline developments and regulatory advancements in the U.S., and then to our Chief Financial Officer, Dr. Kevin Shear, to discuss financial results. In the end, I will share our anticipated milestones for the year to come. Since our last corporate update call on August 27, 2021, we have continued to make progress across our innovative portfolio of autologous and allogeneic CAR-T cell therapies. Built upon our rich cell therapy and gene editing expertise and proprietary fast CAR, true CAR, and smart CAR-T technology platforms across multiple difficult-to-treat hematological malignancies and solid tumors. We are continuing to advance our fast autologous CAR T platform, which is designed to overcome challenges of conventional CAR T therapies by significantly shortening cell manufacture time from weeks down to next day. Importantly, this also contributes to enhanced T cell fitness. This is supported by the vast data from our preclinical studies. Because our process manages to preserve T cell fitness, our cells are very potent, and the therapy only needs a small number of cells in comparison to others, eliminating the need of ex vivo expansion, which could result in cell exhaustion. If you dose to other CAR T therapies, our dose ranges from one-third to 100 to other dose. And because our cells are more potent, and expansion happens in vivo, the optimal environment for T cell proliferation. So the peak of expansion of our CAR T cells reaches three times that of certain marketed CAR T cell products. And our AUC area under the curve is about 2.5 times of others. In November of 2021, our lead fast CAR T candidate, GC012F, was granted orphan drug designation by the U.S. FDA for the treatment of multiple myeloma. COFF-F is a novel dual-targeting product candidate specific for two different antigens, BCMA and CD19, which we believe has potential to be highly efficacious. COFF-F has demonstrated fast, deep, and durable responses in patients with relapsed refractory multiple myeloma. In an ongoing IIT study in China, with most patients on study being high risk, according to MSMAR 3.0 criteria, are difficult to treat the patient population. We're very excited about it being granted often drug designation for the treatment of multiple myeloma by the US FDA, as it qualifies Gracell as the sponsor of the therapy for certain development incentives. Dr. Sush? will share more about 12F and expand on its progress shortly. We have extended our timeline for R&D submission in the U.S. for GC012F for RRMM to the second half 2022. While we have made significant progress with our tech transfer from our Suzhou GMP manufacturing facility to the U.S. CDMO, this revised timeline reflects the impact to the industry-wide high demand of cell therapy manufacturing capacity. The verification runs are producing quality cells, and we continue to work closely with our CDMO to move forward. For the IND filing in the U.S., we are on track to submit by the end of the year. The IND filings and further clinical developments of 12F are a priority of gray cell. Our exciting advancement of 12F candidates is that we have dosed multiple patients in China, phase one IIT study, evaluating 12F in a new indication, relapsed endofractory B-cell non-Hodgkin-informer, NHL. 12F is the first BCMA-CD19 dual-targeting CAR-T in human trials for B-NHL. We have a strong rationale and preclinical data to support this novel design. This is consistent with Gracell's goal of innovation and a focus on pioneering best-in-class candidates. Turning to our allogenetic 2U CAR platform, we have an IIT study underway for CD19-CD7 dual-directed CC502 in adult patients with B-cell malignancies, including and a plan to present early first-in-human data from this study at AACR in April. We're very excited about this new candidate as it is the first of its kind as of CD19-CD7 dual-car allogenetic CAR-T and exemplify the TrueU car platform's broad applicability enabled by the novel dual-direct-to-the-car design. As a reminder, we share data from the preclinical studies of GC502 last year at ASH. GC502 displayed strong anti-tumor potency and suppression of host versus graft response. For example, GC502 showed superior CAR T-cell expansion and also cytotoxicity, including in very demanding tumor re-challenge model. It demonstrated robust activity in killing allogenetic T and NK cells to help suppress host versus graft rejection. We also compared it with CD19 CAR-T control. The results showed very strong potency in annual models. We look forward to sharing the exciting early first in human data next month. As 2022 unfolds, We will continue to build on our solid progress achieved so far. Towards the end of the prepared remarks, I will share our anticipated milestones for this year. Now, I will hand over the call to our Chief Medical Officer, Dr. Martina Serge, to discuss the pipeline and our clinical programs. Martina, please.

Thank you, William. Grace Bell is currently developing a rich pipeline of multiple autologous and allogeneic product candidates for the treatment of different types of cancer. Our lead program is GC012F. In 2021, we applied and were granted orphan drug designation for GC012F by the U.S. FDA for the treatment of multiple myeloma. We continue advancing our lead candidate, GC012F, in relapse and or refractory multiple myeloma, as well as into earlier lines of therapy. We have previously reported preliminary clinical data at ESCO 2020, ESCO 2021, and IHA in 2021 in 19 patients, demonstrating fast, deep, and durable responses in all dose levels in a very difficult-to-treat patient population. 95% being high-risk patients based on MSMART3 criteria. At data cutoff January 12, 2021, overall response rate among these 19 patients was 94.7%, with all responses being VGPR or better. 84.2% out of the total of 19 treated patients achieved stringent complete response, SCR, the deepest response possible. 100% of MRD-accessible patients achieved MRD negativity. The safety profile of PC012F was consistent with previous findings and predominantly lower-grade cytokine relief syndrome, mostly low-grade 1 or 2, with a median time to onset of 6 days, ranging from 2 to 10 days. No grade 4 or grade 5 CRS was observed. And also importantly, we did not observe any icons of any grade. To date, we believe this data is very promising and highly competitive, both for efficacy and safety. In addition to the excellent preliminary outcome, there are several key differentiators that highly distinguish GC012b from the current landscape. The first one being BCMA-CD19 dual targeting. The second very important part is the much shortened manufacturing time, 22 to 36 hours, which may lead to a much faster treatment of patients without the need of bridging therapy and ultimately may lead to reduced healthcare costs. In addition, we have extended the indication for GC012F to be NHL and are currently enrolling patients into an IIT study in China. GC012F is the first BCMA CD19 dual-targeting CAR-T in human trials for BNHL. Most BNHL cells express CD19, and data also suggests that 39% to 97% of clinical NHL cell samples also express BCMA. By simultaneously targeting BCMA and CD19, GC012F is designed to improve efficacy outcome in relapsed refractory BNHL patients. In the preclinical studies, GC012F has demonstrated varying collagen capabilities, including specific and dose-dependent killing of CD19 and or BCMA-positive tumor cell lines. Moving on to the true UCAR platform, our allogeneic UCAR-T derived from T-cells from healthy donors as an off-the-shelf CAR-T therapy. This novel design of a dual-directed CAR utilizes one CAR to be a CD7 CAR intended to suppress host versus graft. This CAR has been optimized for induction of appropriate immunosuppressants. With this construct, TrueUcar is designed to be administered without the need of additional immunosuppressive therapies after standard lymphodepletion and offers further benefits in cost savings potentially and potentially safety. The second car is intended to target cancer cells. The second car can be switched to target different cancer antigens, and this potentially gives the TrueUcar platform a broader applicability. GC027 is our true UCAR-enabled CD7-targeted CAR T-cell therapy for the treatment of T-cell acute lymphoblastic leukemia, TALL. We have previously reported the promising efficacy and safety data at AACR 2021 and have since added many more patients to the study. Currently, we are targeting regulatory interactions globally and in China during the next 12 months. As William mentioned, we are very excited about the new and second candidate on the TrueUcar platform, GC502, which is a CD19-CD7 dual-directed allogeneic CAR-T therapy for B-cell malignancies. While we have been very encouraged by the profile of GC027, GC502 is our first product candidate to truly demonstrate the potential and wide applicability of the TrueUcar platform to different types of cancers. We believe 502 is a promising off-the-shelf product platform enabling the CD7 car to suppress host versus graft rejection response, while we added the second car, a CD19 car, to target cancer cells. CD7-CAR will help create the environment for the CAR-T cells to expand without additional immunosuppressive drugs. We shared preclinical data of 502 at ASH 2021, which showed robust expansion and efficacy in patients. We will be presenting the first inhuman clinical data at AACR in April. Our most advanced program is GC007G. Currently, a registrational phase 1-2 clinical trial under a China IND is ongoing for the treatment of relapsed refractory BLL patients. We anticipate to soon be commencing the phase 2 part of the study. PC007G is a novel treatment option for patients that have relapsed after transplant and may not be eligible for autologous CAR-T therapy. GC007G represents a new approach and is manufactured using healthy donor-derived HLL-matched T-cells, offering an advantage over a patient's own T-cells. Beyond the programs discussed today, we have a rich, exciting early-stage pipeline of product candidates based on our FastCar, TrueUCar, and SmartCar technology platforms for several indications including solid tumors and hematological malignancies that we continue to evaluate to move forward into the clinic. We are on track to commence enrolling in a China IIT study for GC503 and mesothelin-positive solid tumors, including ovarian cancer, in 2022. With these additional indications, we are striving to complete our platform to include not only hematological malignancies, but also solid tumors, a hard-to-achieve goal for the industry today. In addition, we are expanding our teams, including regulatory and clinical operations in the United States to meet our demands. I will now pass it over to Kevin to discuss our R&D and manufacturing facilities and our financial results. Kevin?

Thank you, Martina. Our U.S. expansion is currently underway, with ongoing appointments being made to grow our research, clinical operations, regulatory, and operations teams. In China, we're expanding our manufacturing capability by rebuilding a new facility in Suzhou, in addition to our state-of-the-art 66,000 square feet GMP manufacturer facility, designed for fully closed production capabilities to reduce contamination risk and optimize cost efficiency. Our manufacturing and operational capabilities are designed to improve both the speed and availability of our cell therapies so that our treatment can be available widely and rapidly to the cancer patients who need them. Turning to our financials, I'd like to touch on a few financial trends. As of December 34th, 2021, we had RMB 1 billion and 829 million for US dollar 287 million in cash and the cash equivalents and short-term investments. We're very well funded with Cash Runway into 2024. we expect the cash use for this year to be approximately US dollar 100 million to 120 million, primarily to fund our R&D and the clinical programs in the US and China to support our R&D filings and to support expansion of our GMP manufacturer facility in Suzhou. And that loss attributable to ordinary shareholders for the three months ended December 31st, 2021, was RMB 128.6 million, for U.S. dollar, 20.2 million, compared to RMB 99.9 million for the same period in 2020. Net loss attributable to ordinary shareholders for the full year 2021 was RMB 453.7 million, for U.S. dollar, 71.2 million. compared to RMB 274.6 million for the same period in 2020. Research and development expenses for the fourth quarter were RMB 107.6 million for US dollar, 16.9 million, as compared to RMB 60.7 million for the same period in 2020. The full year ended December 31st, 2021, Research and development expenses for RMB $326.9 million, for U.S. dollar $51.3 million, compared to RMB $168.8 million for the same period in 2020. Increases were primarily due to increased spending to advance our early and the clinical pipelines, higher headcounts, and increased expenses in share-based compensation. Administrative expenses for the first quarter were RMB 32 million for U.S. dollar 5 million compared to RMB 24.8 million for the same period in 2020. For the full year, administrative expenses were RMB 137 million for U.S. dollar 21.5 million as compared to RMB 45.6 million in 2020. Increases were primarily driven by an increase in recognition of share-based compensation expenses, as well as expansion of administrative functions. With that, I'll turn the call back to William.

Thank you, Kevin. Again, we are very pleased with our progress across our pipeline. Looking forward this year, we expect to build on our record of achievements. We have an active year of milestones ahead. Key areas of focus this year encompass the following. Our priority is to continue advancing the tech transfer process for 12F with our U.S. CDMO, and now we expect to file the R&D in the U.S. and China for relapse and refractory multiple myeloma in the second half 2022. Concurrently, we are continuing to enroll patients in the phase one RIT studies in China for 12F in RRMM and BNHL. And also, not extending to early-line multiple myeloma. We plan to submit clinical updates on these studies to major medical conferences this year. For the true Yukati platform, we plan to present early first-in-human data from an IIT study underway for GC502 in adult patients with BALL at AACR in April. We are nearing the completion of enrollment study for GC027 in patients with T cell leukemia. We're also on track to commence the phase two portion in 2022 of the registration phase. One, two clinical trial for GC007G that is underway in China. Finally, under the smart car platform, we also anticipate to commence enrolling in the China IT study for GC5.03 in mesothelin-positive solid tumors, including ovarian cancer in 2022. In addition, we also plan to provide clinical data updates on current and new programs at the major medical conferences and all published in lead journals. With that, I'd like to turn it back to the operator to open the session for your questions. Operator?

If you'd like to ask a question, please press star then one. If your question hasn't answered and you'd like to remove yourself from the queue, press the pound key. Our first question comes from Joe Catanzaro with Piper Sandler. Your line is open.

Hey, guys, thanks so much for taking my questions here. Maybe the first one from me, I understand that your CDMO has had some capacity constraints. And, William, I think you may have alluded to this, but wondering if there have been any GMP runs and whether there's anything you could say around comparability at this point between the product being manufactured at the CDMO versus what was manufactured for the China IIT. Thanks, and I have a follow-up.

Okay, I'm going to take that question, and Martina, feel free to jump in. Well, the manufactured capacity right now is in the whole industry is in high demand, right? Adjustments were needed based on kind of competitive situation. So there is nothing to do with the technical aspect. The technical part, including, you know, the tech transfer, trial runs, the SOP, the trainings, it's all good, all smooth. So it's simply a logistic small issue. Yeah, that's all I can say. Martina, do you have anything to add? Or it's good?

No, complete picture. Thank you, William.

Okay, got it. That is helpful. And then another question, maybe something as well that William, you may have mentioned. But for GCO12F's ongoing China IIT study, can you remind us of the myeloma cohorts that are currently enrolling in terms of line of therapy and whether there are any expectations to report updated clinical data from that trial sometime this year? Thanks.

So that's certainly Martina's question.

Yeah, sure. Thank you. Great question. Yeah, we have been continuing enrolling patients in our relapsed refractory multiple myeloma study. And we certainly planning on showing the data this year. Once acceptance is clear at the conferences, we will also issue a press release for acceptance. So you can, you know, look forward to that data. And for lines of therapy, we already talked about that we are moving into earlier lines of therapies, and we're also planning on submitting that data once available to one of the major conferences this year.

Okay, got it. And I guess maybe if I could just squeeze one last one in, sort of more technical. For GC503, maybe can you elaborate a little bit on the approach and construct design that will allow you to take a tumor suppressive signal and translate that into a positive signal for T cell proliferation and persistence?

Thanks. I think you might mixed up with the smart CAR T and the true UCAR T platforms. In the true UCAR T platforms, we don't have a mechanism that can turn a suppressive molecule into positive. And now let me just elaborate how this 502, if you're referring, is based on True Yukati platform. True Yukati typically would have two cars, one targeting CD7, which is a PEN-T NK marker. So the purpose of this car is to suppress allogenetic T and NK cell. Allogenetic means from the patient. to reject the CAR T cells. So allorejection from patient T and NK could be detrimental to the CAR T cells persistence and proliferation. So the CD7 CAR is designed to prevent that. The second CAR is really the tumor antigen targeting CAR. In this case, the CD19, the GC502 is the best example to illustrate how this true CAR-T platform works. So the two CAR work in the way that I just described. Now this 502 is targeting CD19. And now this example really demonstrate the wide applicability by switching CD19 to other tumor antigens, for example, BCMA, you know, any that are known CAR-T tumor target. So there is also an enhancer embedded in this U-Cart platform to facilitate the U-Cart to proliferate and persist in the hostile environment. I hope I explained it well.

Yeah, no, that's helpful. I guess I was asking about GT503. Apologies if I misspoke, but we could maybe follow up.

Oh, okay.

We could follow up on that offline. Oh, okay. Thanks so much, William.

All right. Thank you.

Our next question comes from Kelly Shee with Jefferies. Your line is open.

Hi, good morning. This is Dave on for Kelly Shee. Just have a few questions. One is regarding 012F in BNHL. So should we expect any data this year?

Gina, you want to take that one? Yes, you should.

Okay, and... Another one is for your upcoming presentation at AACR. Any color on, like, number of patients' data on the, at AACR?

Should I, William?

Yes, yes, ma'am.

Yeah.

Yeah, so. If you have any clinical questions, please take it, yeah. Sounds good.

Yeah, so ASVS, you know, the abstract is still not out yet, so we can't give you any hint here, but it's not going to be very long, you know, April, beginning of April ASVS, so please hold on tight and you will see the data.

All right, sounds good. Thank you.

Thank you. Our next question comes from Nick Abbott with Wells Fargo. Your line is open.

Terrific, thanks. Good morning. In your prepared remarks, William, you indicated that BCMA expression on B cells ranges widely. I think the lower end was 39%. So my first question is, can you talk about where in the B cell developmental lineage BCMA is expressed, what controls it, and Are you able to modulate that? Would you be able to be, for example, pre-treat the patient with something that increases BCMA expression prior to CAR-T treatment?

Yeah, that's an interesting approach. I haven't thought about this, to induce BCMA expression on NHL. But this is our kind of philosophy we want. utilize the power of a cell, not to give additional, quote, quote, help to complicate the matter. As a representative of companies on the team, we strongly believe the T cell has enough power. All you need to do is to leash the power without causing trouble. Now, The 2UCOD design is exactly one of the key design or the feature is to not include combination therapy. So precondition, if it's easy and the drug is safe, it can be PK-wise, can really help expression of BCMA on NHL, that might be practical. And in our case, it's like any other potential tumor markers. The expression level doesn't have to be very high as long as it's there. Now, the data shows 39 to 90%, but the methodology behind this data might be classical IHC or flow cytometry, which are based on antibody bindings. And then we know the antibody binding assays are not as sensitive as CAR T. CAR T is 1,000 times higher. So we suspect in those patients with lower BCMA expression, it doesn't mean they are not there, but they're just very faintly expressed. It's like CD19 on multiple myeloma. They are there, but they are weakly expressed. But a CAR T can pick it up. So we don't have this. exclusion criteria saying, you know, if the NHL patient has no BCMA expression, we'll exclude them. No, we don't do that. So at this moment, the dual targeting is going to help for the CAR T to pick it up, the NH cells.

Terrific. Thanks. That makes a lot of sense. You know, as you think about going forward with the the VCMA franchise, how do you think about adding a third car, so a CD7 car? So combining the fast car and true U-car platforms, what are the considerations about expressing three cars?

That's a very deep question, Nick. You know, This is actually a very intriguing question. I have to say it's kind of in our consideration, but I cannot review any more. It is one of the interesting ideas, but I think the key question here is really the CMC. We have ample experience with dual-car and dual-car expressions, especially the CMC. I can't give a you know, clear answer at the moment, but I think that's an interesting thought.

Okay, thanks, Len. Just last one for me. You have the Claudine smart car listed. Is that expected to go into the clinic in China, or is the goal to get it in the clinic in China this year as well?

Yes, it's going to clinical in China this year, and it's our de-risk strategy.

Great. I look forward to seeing you at AACR, hopefully. Thank you.

Yep. Thank you.

Looking forward.

Our next question comes from Justin Zeal with BTIG. Your line is open.

Hi. Thanks for taking the question, team. Just a quick one. We recently saw approval for Legend J&J's Kervik D. Siltasel. I believe it was the the first FDA-approved China-developed CAR-T. Just wondering if you see any read-throughs to Graysal and your pipeline, your strategy. Thank you.

Yeah, I think it's Martina. I think it's a good question for you.

Sure. So it was expected that CAR-VICTi is going to get approval. We already consider that this is a part of a huge amount of BCMA only targeted products. There are many out there. So we differentiate not only by being dual targeting, but also the fast manufacturing. So at this point in time, this is our strategy and there is no need to adjust.

Great. Thank you for taking the question.

You're welcome. There are no further questions. I'd like to turn the call back over to Dr. William Chow for closing remarks.

Thank you again to everyone for joining us on the call. The Grayscale team is very proud of what we have accomplished over the last five years since our founding. We have rapidly expanded our teams in China and the U.S. with exceptional talent. We have advanced many clinical programs and de-risked others through clinical investigator-initiated trials in China, while also expanding our manufacturing facilities to support our extensive pipeline. To support our R&D efforts, we continue to form new external partnerships and expand our internal manufacturing capabilities. In conclusion, Gray Cell is well-positioned to advance clinical developments of breakthrough CAR-T cell therapies that have the potential to overcome key challenges by leveraging our proprietary fast CAR, true yield CAR, and smart CAR-T technology platforms. We look forward to further advancing our clinical programs, and it will keep everyone updated along the way. Thank you.

Ladies and gentlemen, this concludes today's presentation. Thank you once again for your participation.