Vascular Biogenics Ltd (NASDAQ: VBLT) Q2 2020 Earnings Conference Call 13 August 2020 8:30 AM ET
Michael Wood – LifeSci Advisors
Dror Harats – CEO & Director
Amos Ron – CFO & Company Secretary
Conference Call Participants
Kevin DeGeeter – Oppenheimer
Jonathan Aschoff – ROTH Capital Partners
Swayampakula Ramakanth – HC Wainwright & Co.
Regards and welcome to the VBL Therapeutics Second Quarter 2020 Earnings Conference Call. [Operator Instructions].
As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Wood from LifeSci Advisors. Please move on, sir.
Thank you, operator. Good morning, and thank you all for participating in today's results for the second quarter of 2020 and the company update for VBL Therapeutics. Leading conversation today will be Professor Dror Harats, CEO of the company; and Amos Ron, the company's CFO. A press release with the financial results became available at 19:00 Eastern Time today and can be found on the Investors page on the company's website at vblrx.com.
Before we begin, I would like to remind everyone that various comments on future expectations, plans and prospects constitute forward-looking statements for the purposes of safe harbor provisions under the Private Securities Disputes Act of 1995. VBL warns that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those stated. Any forward-looking statements from today's conference call speak only from today's date, that is Thursday, August 13, 2020.
And the company does not intend to update any of these forward-looking statements to reflect events or circumstances that arise after today's date. As a reminder, the conference call will be recorded and will be available for audio broadcast on the company's webcast. [Operator Instructions].
So with that, I would like to transfer the conversation to Professor Harats, CEO of VBL. Dror, please, continue.
Thank you, Michael, and good morning, everyone. With me in today's conversation is Amos Ron, our CFO, who will discuss financial results for the second quarter of 2020. We are now just past the center of the year, and we are very pleased with the progress the company has made so far and the milestones we have achieved. Our clinical programs evaluating VB-111 continued to progress, and our work on MOSPD2 monoclonal antibodies continues toward the first IND archive. We also strengthened our balance sheet during the quarter with the successful completion of 2 equity financing.
Let me begin with an update of our Phase III OVAL study, which examines VB-111 in platinum-resistant ovarian cancer.
Ovarian cancer is a silent killer with high mortality. According to official NIH data, in 2017, more than 230,000 women with ovarian cancer lived in the United States. Ovarian cancer is often detected in advanced stages as patients are asymptomatic in the early stages. Treatment of advanced disease usually includes surgery and platinum-based chemotherapy. Unfortunately, most of the patients who achieved remission with first-line chemotherapy will eventually develop recurrent diseases, and each subsequent line of treatment is characterized by shorter disease-free intervals. The worst are reported for patients with platinum-resistant disease.
Despite investing significant resources, current treatments are insufficient and do not translate into survival gains in the vast majority of patients. There is a great unmet need for treatments that can prolong the patient's survival with a good quality of life, especially those with advanced disease. This is exactly the goal of our OVAL study. This controlled double-blind phase III potential registration study in recurrent platinum-resistant ovarian cancer has been designed to show overall survival gains as the primary endpoint. OVAL is carried out in collaboration with the GOG Foundation.
Earlier in March, the Independent Data Monitoring Committee, or DSMC, conducted an effective interim analysis of the OVAL study, the results of which were discussed in a presentation at the ASCO conference in June. The aim of this analysis was to see at an early stage of the study a positive signal that was seen in our phase II study with ovarian cancer that could be replicated in a double-blind, randomized, placebo-controlled study.
The analysis was successful. It demonstrated that the response rate in the treatment arm VB-111 was 58% or higher with an absolute percentage advantage of 10% or higher relative to the control arm. The patient with the most – with fever after treatment, which is often observed after treatment with VB-111, the response rate was even higher, 69%, which is very encouraging. This week, the independent DSMC that had control of this experiment completed a pre-planned second interim review. The analysis was initially estimated to take place in the fourth quarter of 2020, and we are pleased that it took place in advance. The analysis looked at an unblinded data from the first 100 patients, which was followed up for at least 3 months and assessed overall survival in the second – in the 2 treatment arms for uselessness.
As you may recall, survival is generally the primary endpoint of the OVAL study. The committee has recommended that the trial continue as planned. When the company blindly reduces RA data in all trial participants, it is combined in the treatment and control groups. We continue to observe a high response rate of over 50% of the total evaluable patients. This high response rate is of course encouraging as well.
Recruitment in the OVAL study is going well despite the COVID-19 pandemic. Overall, the recruitment rate is in line with our initial projection and even slightly better. Continuing to accelerate the development of VB-111, we are now preparing to expand the OVAL test to more geographies.
We should provide further updates on OVAL as the study progresses. The next periodic DSMC review in the OVAL study is expected as planned in the first quarter of 2021.
We are pleased to promote VB-111 for the potential benefit of ovarian cancer and would like to thank all patients and their families as well as investigators and health professionals participate in this important ongoing study.
Now to our MOSPD2 program. We are conducting two parallel drug development programs that investigate the potential of MOSPD2, a protein, which we identified as an important regulator of cell motility and as a therapeutic target for inflammatory diseases and cancer. Our proprietary antibodies directed against MOSPD2 have the potential to treat various inflammatory drugs, and we are promoting our elite candidate, VB-601 against IND.
In June, we submitted a pre-IND application to the FDA, which is currently being evaluated by the agency. We expect to start toxicology studies in the fourth quarter of 2020 and a first-to-man study is expected in 2021. An inflammatory disease – in inflammatory disease, we presented new data at the EULAR 2020 meeting on the use of our anti MOSPD2 antibodies as a potential treatment for rheumatoid arthritis.
We showed treatment with anti-MOSPD2 antibodies significantly inhibited the progression of arthritis in the collagen-induced model of arthritis. The treatment reduced the severity of the disease by more than 50% and further blocked disease progression. In the advanced phase of the disease, anti-MOSPD 2 demonstrated higher activity than anti-TNF alpha, the classic therapy on the market to date with a $ 17 billion market in America. In fact, our data goes beyond preclinical results as a MOSPD2 on the criminal scene of human disease.
We showed that biopsies taken from RA patients show strong staining for MOSPD2 in the inflamed joint, which is another supporting evidence for the clinical relevance of MOSPD2 in RA. Our data in RA add to several findings we presented in NASH and colitis such as a Digestive Disease Week, or DDW, 2020 meeting.
In a study that was ranked among the top 10% of all abstracts in this category and was chosen as the poster for distinction. Our data show the treatment with anti-MOSPD2 antibodies, reduce inflammation and fibrosis in a NASH model and significantly reduced disease activity in a colitis model. In our second program on MOSPD2 in oncology, we study biospecific antibodies that aim to kill tumor cells. Having established the MOSPD2 as a target whose expression is induced in several types of tumors. The latest data from this program was presented in the latest session of the AACR virtual meeting in June. The results were from a preclinical study where we administered the antibodies to animals that had established metastatic cancer of the cervix and breast. We showed that treatment with the bispecific antibodies resulted in a statistically significant improvement in survival. The data also show that our antibodies mediated killing of tumor cells by CD8 T cells in a dose-dependent manner and induced T cell activation in vivo.
To summarize, as you can see, significant progress has been made in both our VB-111 and MOSPD2 hotspots? We will keep you informed when more updates come up.
I will now transfer the call to Amos Ron, our CFO, to review the financial results for the quarter. Amos?
Thanks, Dror. Revenue for the second quarter of 2020 was $ 158,000 compared to $ 168,000 for the comparable period in 2019. Research and development expenses are shown net after IAA grants. Net research and development costs were approximately $ 4.9 million for the second quarter compared to approximately $ 3.7 million in the comparable period in 2019. The increase in net research and development costs is – in the second quarter was mainly related to the increase in MOSPD2- activity and a reduction in the IAA grant, offset mainly by salary-related costs for share-based compensation costs. General and administrative expenses for the second quarter were $ 1.1 million compared to $ 1.2 million for the second quarter of 2019.
Net financial income for the second quarter of 2020 was approximately $ 3,000 compared to approximately $ 132,000 for the second quarter of 2019. The decline was primarily due to unfavorable changes in exchange rates. Extensive losses for the second quarter were $ 5.8 million or $ 0.14 per share compared to $ 4.7 million or $ 0.13 per share for the second quarter of 2019.
From June 30, 2020, we had cash and cash equivalents , short-term bank deposits and limited bank deposits of $ 41.3 million and working capital of $ 36.1 million.
Our cash position improved during the second quarter of equity financing, which we completed in May. Net income was approximately $ 6.4 million. We expect that our cash and cash equivalents and short-term bank deposits on June 30 will be sufficient to finance us – our operating and investment needs into the third quarter of 2020. For further details on our finances, see Form 6 -K filed with the SEC.
We will now open the conversation to questions.
[Operator Instructions]. Our first question comes from the line of Kevin DeGeeter with Oppenheimer.
Congratulations on the truly encouraging update on OVAL. A few questions from me today. Dror, can you remind us what triggers the next partial assessment in the first quarter of 2021?
So actually, because it's a registration test and we're talking about 400 patients. And of course, this is not a short trial. So DSMC, unless it's urgent or for some reason for them to meet, we meet regularly every 6 months, so that means twice a year. Every time DSMC meets, they not only look at safety outcomes, which of course they want – get very detailed safety for the whole study, but they also look at each endpoint in an unblinded way. So if in the first interim analysis they looked at the response rate, mainly with CA-125. In this interim analysis, it was pre-planned, they looked at survival in general because the first was for efficiency, and this was for uselessness, for the safety of patients.
From now on, they will look at all the results, both for efficiency and safety, and they will get the result as if we are at the end of the trial every time. And of course they will guide us if we are to follow the plan, or if there are any alarms or any reasons this time for safety or if there is any important signal of efficiency. And then of course there is always an ethical question. If you see effects, you should continue to treat patients with placebo. And so they will meet, convene every six months and guide us as their sponsor and steering committee, which is mainly built by GOG people, if we were to go with the trial without any modification.
Terrific. And considering the efforts to expand the number of sites. And I think you mentioned geographies too. You can do two things. One, remind us how many sites are currently open? And then two, your general thought process when it comes to geographies and maybe target number of sites to open in the coming months?
So right now, we, I think, are opening 65 centers. Do not get me on the exact number. It may be 64 or 66, but we have almost all the centers we plan to have both in Israel and in the United States. And in fact, all the centers are open for recruitment. Although we have the COVID-19 patient traveling to pick up the VB-111 at the centers where they need it. So it's pretty encouraging. The geographical expansion is mainly to Europe and to Japan. There are two good reasons to do so. Firstly, to speed up the time that we are actually going to recruit patients. And the other thing, of course, is for regulatory issues, both in Europe and in Japan.
Due to – or due to COVID-19, we actually chose not to start in Europe earlier, as the pandemic was actually quite better. And right now we're working on that and the same thing in Japan. But I can tell you that too, we did not open it both Europe and Japan. We are actually ahead of a bit of our recruitment plan.
Perfect. And maybe just one last for me, if I can. As for 601, really positive to hear the way into potential clinical development 2021. Do you anticipate a Phase I program in healthy volunteers or in a patient population with active disease and what kind of patient populations might make sense of the latter?
So we're still discussing this issue. You all know that an alternative today is to go directly to patients. It's a little more complicated. And I think that's it – and I'm not committing right now. We will first go to healthy volunteers because we want to study in a much deeper way, as our monoclonal antibody works on the immune system. And the easiest thing is to actually take healthy volunteers where they have a normal and healthy immune system and see what our 601 antibody does, not only to migrate monocytes, but also for all the function, which we know so far in the ex vivo study, it does not affect the function of monocytes. It does not affect any T cells or B cells, but there will be a much better understanding of it in vivo, of course, in humans. And as I mentioned, we're starting to have some evidence of people from the studies we did on histology. And hopefully we will show more data on humans even before I start Phase I, but the idea is to start with a short study in healthy volunteering right now and then go to the indication that we will retrieve.
Our next question comes from the line of Jonathan Aschoff with ROTH Capital Partners.
Congratulations on your progress. And I was wondering, what is the minimum survival delta between the groups that was necessary for another partial success that continues without change?
This is an excellent question, Jonathan, and it is not in public. But you must all understand that we are talking very early in the study, even though we already recruited to this analysis 1/4 of the patients, 100 patients, but it is only 3 months follow-up. So it was mainly for security and uselessness. So I do not want anyone to do anything about the effect of survival at this time. It's too early to call. I think the next time DSMC will look at the data in 6 months from now, and they will already be looking at most likely around 200 patients or more, and some of them will have a very long follow-up that will be the first meaningful time to see on signals of effect.
And therefore we did not reveal it, and we do not want to mention the numbers. The only thing I can tell you is that they told us that we can move on with someone – without any minor or major change to the study.
Ok. And then the second interval, which was only triggered by more than or equal to 3 months for at least 100 patients and had no minimum death number requirement, right?
Can I assume you did not receive blinded information regarding survival in patients who had a fever, nothing like that, right?
Of course not. We do not intend to receive any blinded information from now on. This is an unblinded data for registration. We get blind data, of course. I misunderstand your question. Yes, we get blind data on survival. We get blinded data on response rate. We see the blinded data, because as you know, everything right now is on is CRF, and the blinded data is actually something we see. Shall we talk about the blind data? We wanted to separate it completely from the DSMB or DSMC recommendation. So it will be clear to everyone that DSMC did not disclose any blind data to us. So when I talked about the response rate to the blinded data, the only thing I mentioned today, we have more information about the other endpoints of the study. But of course it is always quite risky to talk about blinded data.
Ok. So when you referred to maintaining a high response rate "over 50%." You did not specify, but can I assume that you are still referring to CA-125 and do not meet criteria?
When I talked about over 50%, it was CA -125 because that's what we revealed before. But we also see the resistance rate as well. And we will take the opportunity to talk about it, I would say, in the near future.
Ok. Finally, the time for GBM and colon initiations is there – they are just still very difficult due to the IST nature, or do you have it?
So in fact we are really on track there in both studies, although you can imagine that starting the study in the middle of the pandemic, it is not easy. And many times it is even completely postponed, but that is not the case here. But I prefer to talk about it when we have the first patient team. And when we have the first patient team, we announce it. But we are really optimistic.
[Operator Instructions]. Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright.
I'm sorry. I have switched between calls, and if I have to ask something that has already been answered, I apologize as well. A couple of quick ones. In your comments, you mentioned whether to increase – or expand the study to certain additional geographies for the OVAL trial. Can you comment a bit on – if needed? Or what is the strategy behind expanding. Is it more for registration purposes in other geographies?
So in fact, when we decided to do it, it was for a very good reason, both to get a good recruitment for the trial and meet the timeline, and of course for registration. Right now the recruitment is going very well. But still, I think it will speed up recruitment, and it is very important for registration. So we have both reasons in mind.
And so regarding the MOSPD2 programs. At this point, what extra preclinical work do you need to do before you can start designing your Phase I programs or your clinical programs?
So in fact anyone who is familiar with the regulation of a monoclonal antibody development has always had 2 meetings with the agency. The first is a pre-IND meeting, where you actually have to submit to them already your synopsis for the clinical phase I test and outline, what type of development you want to have, and we have already sent it to the agency. So we already have a lot of details about what we want to do in phase I and what we want to do later.
Of course, the exact dosage – depending on the toxicology. And the other thing you need to submit to the agency at this point is what your toxicology plan is. You can actually skip this meeting, if you want, but then you come to an IND meeting, and it may be that the agency will not think or will not think that you had significant enough preclinical or toxicological studies. So we have already submitted the entire program to the agency. I said it is under consideration. We already know the mood, what they think about it. But I will reveal everything when we get an official response from them. But the plan is to start toxicology in the coming quarter, in the fourth quarter. So you can imagine that we are in line with what we planned. And when you get the toxicology report and everything done, that's when you can basically send IND to the agency. But it will not be the first time they see it all because they have already received most of the materials that they will see in IND, apart from the result of the toxicology.
Ok. The last question from me is 201 for veterinary use. What is the status there? How much of – how much can you reveal publicly about what's going on in that program with your European partner?
Ok. So you all remember that we have small molecules that we actually made an agreement with one of the big veterinary companies, and they already – we already met 2 of the milestones in the program. And because of COVID-19, and I said it before, one of the important trials, the clinical trials of veterinarians are on animals, it is not on humans. However, this trial was postponed due to COVID-19. It's going to be done at one of, I think, the universities in the United States. And I can tell you right now, that it's actually going to start or start pretty soon. So there was a slight delay, but hopefully things will develop very quickly now.
Our next question comes from the line of Jonathan Kreizman with Valore Research.
Jonathan Kreizman  Congratulations on the development of the OVAL trial. So I have a question or two about MOSPD2. You published a series of articles and presented significant preclinical advances achieved today. It would be helpful if you could share what are the next steps we can expect and whether these can include commercial options? And maybe some thoughts you have about the priorities of some of these programs? How do you plan to approach the clinic and some timelines that you think are realistic with regard to today's environment?
Ok. So Jonathan, thanks for the question. When it comes to upcoming milestones in MOSPD2, I think the first and most important one will be the discussion with the agency, which we expect to get soon. And it will be an important milestone because it will basically calm our program towards the market. The next very important thing will of course be the toxicology, where we also have two stages in this toxicology, and we may be able to reveal it. But if we continue with the toxicology, it will be a good sign for the market for what we see so far is very good. Otherwise, of course, if there are problems in toxicology, you must always rethink the program. If all goes well, we will present more data on multiple sclerosis soon. There will be a conference.
And hopefully we will present important data. But I think that relatively soon we will have some more evidence of the activity of MOSPD 2, not only in animal models, but also in things related to humans. And when we are going to have this, we are actually going to present it to the public, and hopefully also have a central leadership event, and talk about why this program is so unique in inflammation. And I think what I said today about RA. I just want to emphasize a little more about that. In all these models, in animal models, you give an anti-TNF alpha, and you see response. However, as the disease progresses, it is actually a blood vessel almost complete or a pathway with MOSPD2 monoclonal antibodies, it is actually the opposite. It actually works with the chronicity of all these diseases. And although the animal may begin to develop the disease, and may reach about up to 30%, 50% activity is the maximum disease you can get. But then it just flattened down or even decreased because monocytes play an important role in chronic inflammation. So I think next year we will come up with more results both in preclinical in some human ex vivo studies that we do with toxicology. And then, of course, with IND.
Rett. And just again, when it comes to prioritization – you have several of these programs out there. Any thoughts on what you expect would come into the clinic earlier next year?
I think that in VB-601, which is for inflammation, will be the first to go and not bishop specific. Bishop-specific, as we all know, it is more of a complicated program. And as for which indication we should look at first, it is an option that we will pick up multiple sclerosis as the first indication. But the whole toxicology program is actually aimed at phase I and phase IIa and IIb, and it is not very much different when it comes to agency regulation, which program we choose. So we're postponing this decision right now. As you can imagine, when we come up with more results, and this is a completely different program than other anti-inflammatory programs on the market. We get questions, interest, discussion and of course one of those, I would say, part of our decision where we are going. Of course, it's where it's needed, where's a sample that you can obtain actually proof-of-concept relatively easily? And what is needed by the market in terms of alternative to getting a strategic partner, is form here. Because if it really works in many different inflammation indications, this will be a huge program.
We have no further questions at this time. I will now return to the management to close comments.
So thank you all for participating in our conversation today, and stay safe in this very hectic time. Thank you.
Ladies and gentlemen, this concludes today's teleconference. You can disconnect your lines at this time. Thank you for participating and have a wonderful day.