Gracell Biotechnologies - Q1 2022

Transcript

Operator (participant)

Welcome to the Gracell Biotechnologies first quarter 2022 conference call. At this time, all participants are in listen-only mode. After opening remarks, we will open the call for your questions. Instructions for queuing up will be given at that time. I would now like to turn the conference over to Dr. Kevin Xie, CFO. Please go ahead.

Kevin Xie (CFO)

Good morning, and welcome to Gracell's first quarter 2022 corporate update conference call and webcast. With me today are Gracell founder and the Chief Executive Officer, Dr. William Cao, and our Chief Medical Officer, Dr. Martina Sersch. We're excited to discuss our innovative technologies and rich clinical pipelines of CAR T therapy on today's call. We also look forward to sharing with you our recent business developments and upcoming objectives for 2022. After our formal remarks, we will conduct a question and answer session. This morning, Gracell issued a press release announcing unaudited financial results for the quarter ending March 31st, 2022. 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 certain information discussed on the call today, including financial data, clinical data, and future plans of our programs. Gracell's management will be making forward-looking statements. Actual results could differ materially from those stated or implied by those forward-looking statements as a result of various important factors, and please refer to the risk factors section of our latest Form 20-F filing with the SEC for a full disclosure of these risks and factors. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 16th, 2022. Gracell undertakes no obligation to revise or update any forward-looking statements to reflect events and circumstances at the date of this conference call, except as may be required by securities law. I will now turn the call over to Gracell CEO, Dr. William Cao. William?

William Cao (Founder, Chairman, and CEO)

Thank you, Kevin. Welcome everyone to our first quarter 2022 corporate update conference call. Gracell has made substantial progress over the past quarter and continues to deliver across corporate, clinical, and operational initiatives. I will elaborate on some of the key achievements so far and anticipated milestones over the next few quarters. Following this, I will turn the call over to our CMO, Dr. Martina Sersch, to discuss our clinical developments, and then turn to our CFO, Dr. Kevin Xie, to discuss financial results. We are dedicated to developing our rich clinical pipeline with multiple clinical trials underway, including two IND-approved trials and several Investigator-Initiated Trials or IIT for short. We continue to advance the IITs for GC012F, our autologous CAR-T therapeutic candidates based on our FasTCAR next-day manufacturing platform.

As announced, we will be providing updates from two out of the IIT studies at the medical meetings in June. Concurrently, we plan to file INDs in the U.S. and China for GC012F for the treatment of Relapsed/Refractory Multiple Myeloma or RRMM for short, during the second half of 2022. We are pleased that updated data from ongoing IIT evaluating GC012F for the treatment of RRMM was selected as oral presentations next month at both conferences ASCO 2022 and EHA 2022. We look forward to sharing more details when the abstracts were posted on ASCO's and EHA's websites on May 26th. At EHA 2022, we also plan to present initial data from an ongoing IIT evaluating GC012F for the treatment of relapsed/refractory B-cell non-Hodgkin's lymphoma, r/r B-NHL.

We are very excited about this data as it is the first time that we'll be disclosing data for NHL. This is yet another demonstration of our unwavering commitment in developing breakthrough cell therapies. Turning to the off-the-shelf TruUCAR platform, GC502 is our TruUCAR-enabled CD19, CD7-dual-directed allogeneic CAR-T cell therapy candidate. Mid-April, at the AACR Annual Meeting, we presented early results of a first-in-human clinical study of GC502 for the treatment of relapsed/refractory B-cell acute lymphoblastic leukemia, r/r B-ALL. Dr. Sersch will expand upon GC502's progress shortly. In addition, we'll be presenting updated data from its IIT study in a poster presentation at EHA 2022 on June 10th. In the beginning of the year, I mentioned this will be an active and exciting year for Gracell as we expect multiple advancements across our pipeline.

Our lead asset, GC012F on the FasTCAR platform, has expanded into second indication, B-NHL. The second candidate utilizing our allogeneic TruUCAR platform, GC502, which is also our first dual CAR allogeneic candidate, has presented promising early data at AACR. We are very pleased with the progress so far and look forward to presenting these three data sets at ASCO and EHA in June. It is worth highlighting that we plan to host investor update call shortly after ASCO and EHA to share this data. On corporate side, we continue to invest in our R&D and manufacturing capabilities. In the first quarter, we expanded our U.S. presence with the opening of our San Diego Innovation Center. We are also continuing to actively expand our U.S. teams. Next, I will provide a few updates regarding our operations in China during the recent COVID-19 pandemic outbreak.

Starting in late February 2022, due to the spread of the highly contagious Omicron variant in China, the Chinese government imposed stricter restrictions, including lockdowns in certain cities and districts, which include Shanghai. As a result, we are experiencing disruptions to our operations in certain cities. For example, short-term logistical issues, as well as impacts on patient follow-up and treatment. We believe that the continued lockdown may temporarily impact our business. At this point, our clinical development targets and the timelines remain unchanged for the full year. Moreover, I would like to take a moment and sincerely thank our team and our primary investigators, those who continue to work relentlessly and help minimize the impact on patients. During the first five months of 2022, we demonstrated continued advancement of our clinical programs. As we head into the spring, we are focused on following initiatives.

We plan to file our INDs in the U.S. and China for GC012F for the treatment of Relapsed/Refractory Multiple Myeloma during the second half of 2022. We are seeking to establish partnership for one or more programs. This is a key priority for 2022. Currently, we have two R&D trials and three IIT studies ongoing, and also two recently completed IIT studies. We expect to present clinical data updates from IITs for two of our product candidates in three indications at both ASCO and EHA in June. We anticipate additional updates at the major medical conferences in the second half of 2022. Meanwhile, we are advancing our early pipeline candidates and are on track to bring our first SMART CART candidate for solid tumors into clinical stage this year.

We also plan to expand our manufacturing capacity by developing a second facility in Suzhou, China, in addition to our state-of-the-art 6,000 sq ft GMP manufacturing facility. The second facility will feature fully closed production capabilities to reduce contamination risks and optimize cost efficiency. These clinical and operational developments will bring Gracell closer to delivering accessible and highly efficacious treatments for patients across a wide range of malignancies. Now, I will hand over the call to our CMO, Dr. Martina Sersch, to discuss the pipeline and our clinical programs. Martina, please go ahead.

Martina Sersch (CMO)

Thank you, William. Gracell is developing a highly differentiated pipeline of multiple Autologous and Allogeneic product candidates for the treatment of different types of cancer. As William mentioned, we were able to expand clinical development of our lead candidate, GC012F, a dual targeting BCMA/CD19 autologous CAR-T into a second indication, B-NHL. Moreover, GC012F is the first BCMA/CD19 dual-targeting CAR-T in the clinic for this indication. GC012F is manufactured on our FasTCAR platform, which enables overnight manufacturing. We have applied for and received U.S. FDA orphan drug designation for Relapsed/Refractory Multiple Myeloma in 2021, and previously reported interim clinical data from the IIT in Relapsed/Refractory Multiple Myeloma at conferences in previous years, including ASH, ASCO, and EHA.

We are very excited that the updated data on our multicenter IIT study in RRMM was accepted as oral abstract presentation for both ASCO and EHA 2022. This data is subject to embargo, and we will be able to provide more details on May 26th after the embargo is lifted and the abstracts go online. As well as after the presentation take place on June 5th at ASCO and on June 12th at EHA. As William mentioned, we are also planning to hold update calls shortly thereafter to discuss the data.

We believe the preliminary data holds high promise and remains very competitive, both from an efficacy and safety standpoint in the landscape of autologous CAR-T therapies, as well as the key differentiator of next day manufacturing, which may lead to a faster availability of treatment to patients while also potentially avoiding or shortening the need and duration for bridging therapy. We are also currently enrolling patients into an IIT study in China to evaluate GC012F for the treatment of B-NHL. Early data from this trial will be presented at EHA next month. Most B-NHL cells express CD19, and there are several CD19-targeted CAR-T therapies already approved in the United States and currently moving into earlier lines of therapy. Literature suggests that 39%-97% of NHL cell samples also express BCMA in addition to CD19.

By simultaneously targeting BCMA and CD19, GC012F is designed to improve efficacy outcome in relapsed/refractory B-NHL patients while maintaining an acceptable and manageable safety profile. Moving on to the allogeneic TruUCAR platform, our CD19/CD7 dual-directed allogeneic CAR-T candidate, GC502, is the second candidate in clinical stage on our TruUCAR platform, and the first candidate was the dual-directed CAR design. We presented early results of the first-in-human clinical study of GC502 for the treatment of relapsed/refractory B-ALL on April 12 at AACR 2022. The early results demonstrated the potential of our allogeneic off-the-shelf CAR-T therapy for patients in B-ALL, including those who had previously received autologous CAR-T treatment. Our novel design of dual-directed CARs utilizes one CAR, a CD7 CAR, to suppress host versus graft rejection. This CAR has been optimized for induction of appropriate immunosuppression.

We are utilizing a second CAR to target a specific cancer antigen, which can be adjusted for different types of cancers. TruUCAR is designed to reduce risk of rejection of allogeneic CAR-T cells by patients' immune system without the need of additional immunosuppressive therapies after the lymphodepletion. In the preliminary data set presented at AACR last month, four relapsed/refractory B-ALL patients were enrolled and treated in an open-label, non-randomized prospective IIT study in China in two different dose levels between September 2021 and January 2022. All patients were heavily pretreated and had previously received either autologous or donor-derived CD19 or CD19/CD22-targeted CAR-T therapy.

As of January 28, all four patients had received a single dose of GC502, including one patient at a dose Level 1 × 10^7 cells per kilogram, and three patients at dose Level 2, 1.5 × 10^7 cells per kilogram. Patients received fludarabine with lymphodepletion prior to treatment with GC502. Three out of four patients achieved minimal residual disease-negative complete response, or complete response with incomplete count recovery. One patient achieved a partial response at one and subsequently received allogeneic HSCT on day 39. Cytokine release syndrome, CRS, presented as Grade 2 and Grade 3, and no Grade 4 or Grade 5 events were observed. CRS in all patients was manageable and resolved after treatment with ruxolitinib standard of care and supportive care. No Immune Effector Cell-Associated Neurotoxicity Syndrome, ICANS, or acute Graft-versus-Host Disease, GvHD, were observed.

We are very encouraged by these early results, which show the potential of GC502 and warrant further evaluation in the clinic. Being the second product candidate from our allogeneic TruUCAR platform, GC502 further validates TruUCAR's platform approach and potentially wide applicability. The other candidate from the TruUCAR platform is GC027, a CD7-targeted CAR-T cell therapy for the treatment of T-cell acute lymphoblastic leukemia, T-ALL. We have previously reported the promising efficacy and safety data at AACR 2021 and have since added more patients to the study. Currently, we are targeting regulatory interactions globally and in China during the next 12-month period. In addition to our IIT program in multiple indications, we have two IND studies open and enrolling patients in China, including GC019F, which is also manufactured on the FasTCAR platform. Our most advanced program is GC007G.

Currently, a registrational Phase 1/ Phase 2 clinical trial under a China IND is ongoing for the treatment of r/r B-ALL patients. We anticipate commencing the Phase 2 part of the study soon. GC007G is a novel treatment option for patients that have relapsed after transplant and may not be eligible for autologous CAR - therapy. GC007G represents a new approach and is manufactured using healthy donor-derived HLA-matched T-cells, offering an advantage over a patient's own T-cell. Beyond the programs discussed today, we have an exciting early-stage pipeline of product candidates based on our FasTCAR and TruUCAR technology platforms and SMART CART technology module 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 IND study for GC503 in mesothelin-positive solid tumors in 2022, and plan to commence a China IIT for GC506 in Claudin 18.2+ solid tumors. To support our pipeline development, we are actively expanding our team, including regulatory and clinical operations teams in the United States.

Kevin Xie (CFO)

Thank you, Martina. Turning to our financials, I'd like to touch on a few financial trends. As of March 31st, 2022, the company had RMB 1,694.7 million, or $267.3 million in cash and cash equivalents and short-term investments. We are very well funded with cash runway into 2024. We expect the cash use for this year to be approximately $100 million-$120 million, primarily to fund our R&D and the clinical programs in the U.S. and China, and to support expansion of our GMP manufacturing facilities in Suzhou.

Net loss attributable to ordinary shareholders for the three months ended March 31st, 2022 was RMB 168.6 million, or $25.0 million, compared to RMB 99.7 million for the corresponding period in the prior year. Research and development expenses for the three months ended March 31st, 2022 were RMB 121.8 million or $19.2 million, compared to RMB 65.4 million in the corresponding period in prior year. Increase was primarily due to the increase in spending on R&D and the clinical trials, as well as higher payroll and the personnel expenses attributable to increased headcount and the higher facility-related costs.

Administrative expenses for the three months ended March 31st, 2022 were RMB 37.9 million, or $19.2 million, compared to RMB 31.8 million for the corresponding period in the prior year. With that, I'd like to turn it back to the operator to open the session for your questions. Operator?

Operator (participant)

Thank you. To ask a question, you'll need to press star one on your telephone. To withdraw your question, press the pound key. Again, that's star one to ask a question. Our first question comes from Joe Catanzaro with Piper Sandler. Your line is open.

Joe Catanzaro (Equity Research Analyst)

Hey, everybody. Thanks so much for taking my questions here. Maybe one first on the GC012F planned U.S. IND, and whether you've had any recent discussions with the FDA and what would be the appropriate starting dose. Maybe along those lines, where you stand at potentially tying back the U.S.-generated product back to the data you've generated in the China IIT. Thanks, and I have a follow-up or two.

Kevin Xie (CFO)

Martina, maybe you should take this question.

Martina Sersch (CMO)

Yeah. I'm not sure. Can you clarify what you mean by that question? I'm not sure if I understand it correctly.

Joe Catanzaro (Equity Research Analyst)

Sure. The intention was not, correct me if I'm wrong, to be able to tie back the product manufactured out of Lonza in the U.S. site back to the China IIT data and then maybe build off of that what the appropriate starting dose would be within the plan, the U.S. study? Hopefully, that clarifies a little bit.

Martina Sersch (CMO)

I'm not 100% certain what you are asking, but let me give you a little bit of detail. Our strategy is based off of the data we have generated in China. The tech transfer and the manufacturing process from China is being transferred to the United States. Yes, we are intending on using the data generated in China.

Joe Catanzaro (Equity Research Analyst)

I guess I'm just wondering sort of where the process stands along those lines in terms of you know Lonza's sort of manufacturing runs and being able to demonstrate I guess comparability to the product you generated out of China.

Martina Sersch (CMO)

Yeah. This is moving slowly, as we had mentioned during the call. The tech transfer is going as planned.

Joe Catanzaro (Equity Research Analyst)

Okay, got it. Maybe on the GC012F myeloma update you guys expect in June, maybe you could just help frame up what we should expect to see there? Is it just going to be longer follow-up from the cohort of patients we've seen, or will there be new patients, more dose levels, anything along those lines?

Martina Sersch (CMO)

This data is still confidential as it is embargoed through ASCO. We unfortunately at this point in time cannot speak to any of the details. We will be able to as soon as the abstract has lifted the embargo, which will be on the ASCO website.

Joe Catanzaro (Equity Research Analyst)

Okay. Maybe last one from me. I think we've recently seen some CAR-T data targeting Claudin 18.2. Wondering what you see as the biggest takeaway from those data and where you see the clear opportunity for your program.

William Cao (Founder, Chairman, and CEO)

Martina, maybe I you know give a crack on this. It is always in our gray cells designing goal, if you will, and a philosophy. Cell therapy is not a simple product, and it's a pretty pricey product. What we hope to see is for any big indication, particularly for solid tumor, the response has to be deeper than you know temporarily shrinking down a tumor and 40%, 50% PR. You know, as trying to wear patient's shoes, you know, they have to going through a long process and you know pay very expensive, not just the CAR-T, also expensive related healthcare. You know, the response has to be good enough to convince the patients and doctors.

We hope our design can bring up the response in a way that is deeper and in a higher percentage. I can't describe, you know, what kind of detail the response we are designed for because you can't, right? It's a from preclinical to clinical is a big leap. At least that is our philosophy and then long-term goal.

Joe Catanzaro (Equity Research Analyst)

Okay. Got it. Thanks, for taking all my questions there.

William Cao (Founder, Chairman, and CEO)

Thank you. Good question.

Operator (participant)

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

Kelly Shi (Equity Research Analyst)

Thank you for taking my questions. For the U.S. IND filing of GC012F in the second half, will it for myeloma also potentially include NHL, or the NHL will just come later? Secondly, as Gracell continues growing pipeline, I'm wondering for which programs would you be focused on for the clinical development in the U.S. beyond the GC012F? For example, the SMART CART tech-enabled, the mesothelin, and the Claudin 18.2 targeted programs. Are you planning for tech transfer and the U.S. IND filing in near term? Thank you.

William Cao (Founder, Chairman, and CEO)

Yeah. Martina, I think it's better for you to take that first.

Martina Sersch (CMO)

Sure. Again, I'm not 100% certain, Kelly, what you are asking here? Are you asking if we submit B-NHL separately? Is that your question?

Kelly Shi (Equity Research Analyst)

Okay. Yeah. Let me clarify my first question. You are planning U.S. IND filing for GC012F in the second half for Relapsed/Refractory Multiple Myeloma. I'm just wondering, for the NHL indication, are you planning to do at the same time or later? That's my first question. I hope it helps or clarifies.

Martina Sersch (CMO)

Yeah. No. Yeah. Thank you. Very helpful. We are not discussing the B-NHL strategy at the moment, but we are definitely actively looking into all available options to shorten our development timelines for the totality of the program.

Operator (participant)

Thank you. Our next question comes from.

William Cao (Founder, Chairman, and CEO)

Yeah, I think Kelly had a second question about SMART CART. Are we gonna file tech transfer and file IND in the U.S. soon? I guess that's the question.

Kelly Shi (Equity Research Analyst)

Yeah. Thanks.

William Cao (Founder, Chairman, and CEO)

Yeah, Martina thinks there is a lag. Yeah, let me just take that one because we are, you know, it's still early, Kelly Shi, for the SMART CART. We haven't present any data yet. We don't have data yet. Traditionally, we do IITs to de-risk the product development. We have not reached that decision point yet. As soon as we have a certain clarity, then we can, you know, address your question in more detail.

Martina Sersch (CMO)

Thank you.

William Cao (Founder, Chairman, and CEO)

Sure.

Operator (participant)

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

Nick Abbott (Equity Research Analyst)

Hi. Good morning. Thanks for taking a question. Just a question on GC502, given that we saw data, the initial data at the AACR last month. I'm just wondering what we should expect at the update, perhaps in terms of follow-up on those original patients, but also new patients, different doses? Thank you.

William Cao (Founder, Chairman, and CEO)

Yeah, that's definitely Martina's question.

Martina Sersch (CMO)

Yeah, thank you. Nick, you know, AACR deadline and ASCO EHA deadlines are unfortunately very close together. The data is what was submitted basically at time point possible for data cut to have it submitted to the conferences. What you see online for EHA is what was, you know, what would be that data that we are going to be presenting at EHA.

Nick Abbott (Equity Research Analyst)

Okay. Thank you.

Operator (participant)

Thank you. I'm showing no further questions at this time. I'd like to turn the call back to Dr. William Cao for any closing remarks.

William Cao (Founder, Chairman, and CEO)

Thank you, everyone, again, for joining us on the call. Our clinical trials are progressing, and we look forward to presenting data from three ongoing IIT trials at ASCO and EHA in early June. Our R&D and the clinical teams in China continue to tirelessly advance our trials and to treat patients, given the backdrop of the lockdown restrictions that have been in place in Shanghai since late March. Over the next few quarters, we are focused on securing and developing partnerships as one of our key goals of this year and preparing the U.S. and China R&D filings anticipated later this year. In conclusion, Gracell is well-positioned to deliver breakthrough CAR-T cell therapies capable of overcoming major industry challenges by leveraging our proprietary FasTCAR and TruUCAR technology platform. We look forward to further advancing our clinical programs, and we'll keep everyone updated along the way.

Thank you.

Operator (participant)

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