Celyad Oncology SA

XBRU:CYAD

Earnings Call Transcript 2022-Q2

[Operator]

Greetings and welcome to the Celyad Oncology First Half 2022 Financial Results. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder this conference is being recorded.

I would now like to turn the conference over to your host, Sara Zelkovic, Director of Communications & Investor Relations for Celyad Oncology. Thank you. You may begin.

[Sara Zelkovic, Director, Communications and Investor Relations]

Thank you all for joining us today. Before we begin, I would like to remind everyone that today's event may contain forward-looking statements within the meaning of applicable securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks and uncertainties, which may cause actual results, financial condition, performance or achievements of the company to differ materially from those expressed or implied by such forward-looking statements.

A list and description of these risks, uncertainties, and other risks can be found in the company's U.S. Securities and Exchange Commission filings and reports, including in its annual report on 20-F filed with the SEC on March 24, 2022 and subsequent filings and reports by the company. These forward-looking statements speak only as of the date of this call and the company's actual results may differ materially from those expressed or implied by these forward-looking statements.

The company expressly disclaims any obligation to update any such forward-looking statements made on this call to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless required by law or regulations.

Let me now turn the call over to Michel Lussier, interim Chief Executive Officer of Celyad Oncology. Michel, the floor is yours.

[Michel Lussier, Interim Chief Executive Officer]

Thank you, Sara and thank you, everyone, for joining us today for our financial results and operational results update call for the first half of 2022. Joining me today from the executive committee team is our Chief Medical Officer, Dr. Charlie Morris; and our Vice President of Finance and Administration, David Georges. We will start today with an operational and clinical update, followed by an overview of the financials and outline, we expect key milestones of the company over the next several months. We will then open the line for your questions.

So, there has been many change to the company in terms of the clinical candidates and leadership in the first half of the year. Importantly, we say goodbye to our previous CEO, Filippo Petti, who stepped down in June to seek other opportunities. I must say we've had a very smooth transition over the past month and I've taken over as Interim CEO. And I want to thank dearly Filippo for his broad contributions to Celyad Oncology over the past years.

We have begun the search for a new CEO and are targeting a European-based person to helm our headquarters in Belgium. We're also happy to announce that the Board of Directors has named Hilde Windels. Hilde has been on our Board for a number of years and will now be the Chair of our Board of Directors because I stepped down as Chairman to take the CEO helm.

She is a prominent board member in the European biotech industry and we look forward to continuing our work under her guidance. In addition, Dr. David Gilham, our former Chief Scientific Officer also resigned to seek other opportunities. David has been with the company almost eight years and he felt this timing was a natural transition as the new Head of R&D Dr. Eytan Breman, takes over to continue our work on our shRNA platform and discovery CAR T programs.

I’ll also thank David for his significant reshaping of our R&D efforts as we shifted our approach in the field of CAR T towards allogeneic therapies underpinned by shRNA technology.

So, while we've had many changes in the past few months, we look forward to focusing our efforts on four major pillars of the business to maximize all potential value drivers of the company in the coming months and years. Our first pillar is our research and development efforts. Main focus will be on research that will utilize our shARC or shRNA armored CAR T franchise.

We introduced this platform last year and although we did make the decision in April to stop development of CYAD-203, our allogeneic shRNA-based IL-18 armored NKG2D CAR T candidates. I want to note that we're making promising progress in multiple discovery programs focused on the core expression of IL-18, including the expiration of backup allogeneic NKG2D receptor CAR T candidates, which leverage this platform.

Currently, our armored CAR Ts are engineered to release IL-18 providing the opportunity to drive increased potency of our cell therapy by impacting the CAR T and the local tumor microenvironment, especially important for the treatment of solid tumors. We think that this is an ideal platform for developing unique CAR T products for difficult to treat diseases and could overcome the challenges related to treating solid tumors.

Moving to our pipeline, our next pillar, we've had challenges and opportunities related to our allogeneic CAR T candidates this year and are happy to announce that our trials are getting back on track where they should be.

At the end of July, we received notification from the FDA that they are lifting the clinical hold put on our investigational candidate CYAD-101. This is a significant milestone for the company and we're very excited that the potential development of CYAD-101 and other product candidates using our TIM technology.

Patient safety continues to be our biggest priority and we're proud to have safely tested many people with cancer using our TIM technology and NKG2D targeting cars in clinical trials. I'd like to take this time to thank the team for their hard work and dedication to providing timely responses to the FDA in order to get this hold lifted, as quickly as possible.

In addition, enrollment for the dose escalation portion of immunity IMMUNICY Trial with CYAD-211 has been steady with one patient enrolled per month and we're excited about the data we're generating and we'll share this year. IMMUNICY-1 has been an invaluable way for us to showcase the benefits of our proprietary shRNA technology in a real world clinical setting.

We truly believe that this non-gene editing technology offers great opportunity to drive differentiated candidates for both solid tumors and hematological malignancies. The third pillar and a value driver has been our underutilized – that has been underutilized so far and the company relates to our unique intellectual property within the CAR T landscape.

Our U.S. patents around allogeneic CAR T therapy and NKG2D based therapies provides an avenue for the company to develop its own program and to partner with outside parties around the licensing of these patents. We are planning a renewed strategic focus to leverage additional potential licenses.

And finally, the last pillar of a renewed strategy as we see, a significant opportunity is for our in-house manufacturing expertise. This facility has been a great investment for us over the past decade and we are currently evaluating opportunities on how we can further leverage the [indiscernible] asset within the overall strategy of our business.

So, let me stop here and turn the call over to Dr. Charlie Morris, our Chief Medical Officer to provide more detail. Charlie?

[Charlie Morris, Chief Medical Officer]

Thank you, Michel and thank you everyone again for joining us today. As Michel just discussed, we have several updates related to our pipeline in the first part of 2022. Let's first turn to CYAD-101 Celyad’s first-in-class non-gene edited clinical candidate that co-expresses the NKG2D receptor and the novel TCR inhibitory molecule or TIM, which interferes with native CD3 zeta – reducing the signaling of the TCR complex.

Of note, CYAD-101 is the only investigational candidate from the company using the TIM technology. We completed our previous CYAD-101 trial called alloSHRINK last year. And in December 2021, began the CYAD-101-002, otherwise known as KEYNOTE-B79 clinical trial. This phase 1b trial is evaluating CYAD-101 followed by Merck's anti-PD-1 therapy KEYTRUDA in refractory mCRC patients with microsatellite-stable mismatch repair-proficient disease, a difficult indication for immunotherapies to date.

As Michel just mentioned, the FDA has lifted the clinical hold previously put on this trial. The amendments that we suggested that were accepted by the FDA states that we will exclude patients with bilateral lung metastases and prior history of anti-EGFR antibodies within nine months of recruitment to the trial.

We are continuing to evaluate the use of NKG2D receptors in our research along with our unique proprietary non-gene edited technologies. Our second Phase 1 trial evaluates CYAD-211, a potential first-in-class allogeneic CAR T candidate engineered to co-express a BCMA targeting CAR and a single shRNA, which interferes with the expression of the CD3ζ component of the TCR complex.

CYAD-211 is currently in the dose escalation portion of the Phase I IMMUNICY-1 trial, which is evaluating the tolerability and clinical activity of a single infusion of CYAD-211 following preconditioning with cyclophosphamide and fludarabine, that is CyFlu, in patients with relapsed and refractory multiple myeloma.

Initial data from IMMUNICY-1 showed all patients had detectable CYAD-211 cells in the peripheral blood, although engraftment to date has been short lasting. These findings suggest the deeper and more durable lymphodepletion may maximize engraftment and persistence of the cells.

Now, our current segment of IMMUNICY-1 follows an enhancement for the depletion regimen with the aim of improving cell expansion and persistence and to potentially maximize the clinical activity of CYAD-211. In addition, we are also evaluating increased dose of CYAD-211 within the IMMUNICY protocol, which might help drive additional clinical beneficial – clinically beneficial responses.

For this trial, we plan to share additional clinical data during the second half of 2022. We truly feel that our technology is also a potential benefit over other approaches in space and help us to lead the way in developing innovative allogeneic therapies for the treatment of cancer. We've made great progress, particularly with our shRNA technology in previous and current clinical candidates.

We have continued to expand our research efforts into how to best leverage the dynamic potential of the shRNA platform, including multiplexing and targeting immunoevasion and its potential to serve as a backbone for [indiscernible] using our proprietary shARC franchise.

With that, let me turn the call over to our VP of Finance, David Georges.

[David Georges, Vice President of Finance and Administration]

Thank you, Charlie. Turning to our financials, I would just like to remind you all that full financial details available on the Celyad Oncology website in both French and English languages. Our research and development expenses were €10.5 million for the first half of 2022, compared to €10 million for the first half of 2021. The €0.5 million increase was mainly driven by intellectual property filing and maintenance fees to strengthen intellectual property prosecution and also by the increase of employees expenses related to movement of employees through the year 2021 and 2022, to support the group's free clinical and clinical programs.

This increase has been partly compensated by the decrease of clinical activities, mainly due to the Phase 1b, CYAD-101-002 KEYNOTE trial, which was on clinical hold during the second quarter of 2022.

General and administrative expenses were €6.2 million for the first half of 2022, compared to €4.8 million for the first half of 2021. The increase was associated with an increase in insurance costs combined with the increase of employee expenses, mainly related to movements of employees with the six-months period ended June 30, 2022.

Net other income for the first half of 2022 was €1.6 million, compared to a net order income of €1.8 million for the first half of 2021. Our net order income for the first half of 2022 was associated with grant received from the Walloon Region [of] [ph] €1.4 million. Net loss for the first half of 2022 was €14.1 million or [€0.63] [ph] per share, compared to a net loss of €14.9 million or €1.02 per share for the same period in 2021.

Net cash used in the operations amounted to €16.3 million for the first half of 2022 as compared with €12.2 million for the first half of 2021. As of June 30, 2022, the company had a treasury position of approximately €14.4 million or $15 million. As of June 30, 2022, the total number of basic shares outstanding were 22.6 million, which is similar to the situation of 31 of December 2021.

With that, I will now turn the call back to Michel for closing statements.

[Michel Lussier, Interim Chief Executive Officer]

Thank you, David. So, in closing, we're looking forward to this renewed sense of focus and strategy for Celyad Oncology. As mentioned previously, we will be exploring four main pillars of strategy to further leverage all possible value drivers for the company. These include examining the way we're using our manufacturing expertise, our intellectual property portfolio, our clinical pipeline candidates, and our current R&D endeavors.

We hope to provide additional thoughts on these topics over the coming months and year as we execute on these strategies. We look forward to reporting additional data for the CYAD-211 IMMUNICY-1 Phase 1 trial by the end of the year and make additional announcements regarding our clinical program as a whole over the coming months.

And with that, I'll turn the call over for your questions. Operator?

[Operator]

Thank you. [Operator Instructions] Our first question comes from the line of Raju Prasad with William Blair. Please proceed with your question.

[Raju Prasad, William Blair]

Thanks for taking the question. Curious to know the reasoning behind the nine months lead in on EGFR therapies as an exclusion criteria for taking up the clinical hold? Thanks.

[Michel Lussier, Interim Chief Executive Officer]

Hi, Raj. Yes. So, one of the – both of the patients who had past – have a history of exposure to [anti-EGFR-1] [ph] around about six months away. So, we felt having seen that we should use six months if you like as a baseline because obviously we had other patients who have been treated within six months, who had not had severe adverse effects. But if we take six months of baseline and then a conservative, sort of washout time, five half-lives of [indiscernible], for example, takes you out to about 10 weeks. So, you're then out to about nine months.

[Raju Prasad, William Blair]

Okay, great. And you mentioned a little bit around business development strategy and IP. Can you give us a little more color on that? Would that be partnering out assets? Would that be licensing patents? How much of the IP is there or what products are you looking to potentially partner? Thanks.

[David Georges, Vice President of Finance and Administration]

So, thanks Raj and short answer is, all of the above. We're having a very broad portfolio ranging from allogeneic patents to NKG2D, shRNA, and a lot of patents also developed internally, organically at Celyad. And for those, our wish is to have patients to be treated and partners of the industry to be able to benefit from this IP through licensing or any other mutually beneficial situation that we will come up with.

[Raju Prasad, William Blair]

Great. Thank you.

[Operator]

Thank you. [Operator Instructions] Thank you. Our next question comes from the line of [Reid McCall] [ph] with Wells Fargo. Please proceed with your question.

[Unidentified Analyst]

Hi, thank you for taking my question. This is Reid on for Nick. Can you provide any more color on the manufacture sharing that you're trying to proceed with and help expand here in this space? Thank you.

[Michel Lussier, Interim Chief Executive Officer]

Yes, Reid. Good afternoon and I'd be happy to do that. Well, basically, if you could get back years ago when Celyad and even previously [indiscernible] got engaged in cell therapy, it was very difficult for early stage companies not to have a GMP facility because it was not available. So, we took the major endeavor at that point to be fully integrated with a GMP facility that has been very helpful both when we're in the cardiac field and more recently in the CAR T space.

And in the past, we've come through periods where because of timing of clinical studies our resources were underutilized and we have a history in the past of, for example, having other companies in the cell therapy to take [rent] [ph] some of our space. So, now we are entering in a phase where also we may have an overcapacity in our manufacturing capacity. And so, we have the chance to have other projects.

So, what is the exact modus operandi of making this capacity available to others is under development right now. But there are a number of ways that we can make this manufacturing unit, as well as the QA and all of our great trained personnel to benefit to other technologies as well.

[Unidentified Analyst]

Great. Thank you.

[Michel Lussier, Interim Chief Executive Officer]

My pleasure.

[Operator]

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Lussier for any final comments.

[Michel Lussier, Interim Chief Executive Officer]

Thank you, operator. And I'd like to thank everyone for joining us today and your interest in Celyad Oncology. We remain steadfast in our mission to bring novel and innovative CAR T therapies to cancer patients with unmet medical needs and we're looking forward to speaking to you all again soon. Thank you.

[Operator]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.