2Seventy Bio - Q2 2023

Transcript

Chip Baird (CFO)

Good day, and thank you for standing by. Welcome to the 2seventy bio Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jenn Snyder, Head of Corporate Affairs. Please go ahead.

Jenn Snyder (Head of Corporate Affairs)

Thank you, operator. This morning, 2seventy bio issued a press release providing a business update in addition to second quarter 2023 financial results. The press release can be found in the Investors and Media section of the company's website at 2seventybio.com. Speaking on the call today are Nick Leschly, Chief Kairos Officer, Chip Baird, Chief Financial Officer, and Steve Bernstein, Chief Medical Officer. Philip Gregory, Chief Scientific Officer, is also on the line for the Q&A section. As a reminder, today's discussion will include forward-looking statements related to 2seventy bio's current plans and expectations, which are subject to certain risks and uncertainties. These forward-looking statements include statements regarding our strategic plans, timelines and expectations, and statements regarding our financial condition, expectations, and other future financial results, among others.

Actual results may differ materially due to various risks, uncertainties, and other factors, including those described in the Risk Factors section of our most recent Form 10-K and other SEC filings. These forward-looking statements represent our views as of this call and should not be relied upon as representing our views as of any subsequent date. You are cautioned not to place any undue reliance on these forward-looking statements, and except as required by law, we undertake no obligation to update or revise any forward-looking statements. At this time, I would like to turn the call over to Nick Leschly. Nick?

Nick Leschly (Chief Kairos Officer)

Thanks, Jenn. Good morning, everyone, thank you for joining us as we discuss our second quarter 2023 results and business updates. We are now well into our second full year as 2seventy bio, executing on our mission of giving more time to people living with cancer through the transformative power of cell therapy. Since the creation of 2seventy, our mission has always been dual-pronged: to deliver on the commercial potential of Abecma and to leverage our translational engine to develop an innovative cell therapy pipeline. In the first half of 2023, we've made important progress against these goals. With Abecma, we continue to successfully deliver in the commercial setting to an extensive and growing number of people living with multiple myeloma who are in need of better treatment options.

We recently hosted a myeloma patient and his wife at our all-hands meeting, reminding us the impact that Abecma is having on patients and families. It was humbling, inspiring, and a deep reflection of our why. At the same time, we recognize we are in the midst of a rapidly evolving competitive environment, which is expected to impact the second half of Abecma performance. Chip will comment more fully on Abecma market dynamics. I can say that we've spent a significant amount of time with the broader BMS team to hear not only their rationale for the long-term belief in the potential of Abecma, but also the month-to-month tactical in-line commercial strategy. It is both grounded in a strong understanding of the landscape and very well supported by internal resources, from the CEO to the sales rep, given their conviction to the cell therapy field.

Overall, we're making significant short and long-term investments with BMS to maximize the potential of this important therapy for patients. On the development side, we continue to apply our scientific knowledge and research engine to address some of the most pressing therapeutic challenges in oncology. We have a number of preclinical and clinical programs in liquid and solid tumors, and the common thread is that we're using layered cell therapy approaches to deliver potentially transformative impact for patients. One such program is DARIC 33. Since the Grade 5 AE in June, the 2seventy and Seattle Children's team have conducted the root cause investigation and have developed potential amendments to the PLAT-08 protocol. This past Friday, Seattle Children's received the official notice of the FDA clinical hold.

This was expected, we need to hear more from the FDA in terms of their specific concerns and how it will impact the potential path forward for the program. Steve will provide more details later in this call. Our pipeline programs are stacked with innovation and represent multiple opportunities for us to make unincremental steps forward for patients with cancer. That said, we will also be clear-eyed and disciplined about these programs, and if a program is not clearing a very high bar, we will terminate and allocate capital elsewhere. I look forward to your questions, but for now, I'll hand it over to Chip to talk more about Abecma and our Q2 results. Chip?

Chip Baird (CFO)

Thanks, Nick, thanks to everyone for joining the call. Abecma delivered solid results in the second quarter, with $115.1 million of revenue in the U.S. As a reminder, we are in a 50/50 co-co with BMS for the U.S. Abecma business, and we record collaborative arrangement revenue, which represents our 50% of the operating profit of the U.S. business. For the quarter ending June 30, we recorded $24.5 million of collaborative arrangement revenue related to the Abecma collaboration. This is better than we had expected and is driven by an improving gross margin, which in turn has been helped by a continuing improvement in manufacturing success rates, which remain north of 90%. As expected, the Abecma collaboration is delivering cash flow to Two Seventy.

As BMS reported in their 2Q earnings, they are forecasting lower revenues in the third quarter with a return to growth in the fourth quarter. Based on this, we have updated our Abecma U.S. revenue guidance for 2023 to the lower end of our original $470 million-$570 million range. We have three important points we want investors to hear on this updated forecast. First, the downward revision was not driven by the scheduled maintenance of the S12 manufacturing facility in June. This maintenance was planned and built into the original forecast and is a normal course for aseptic manufacturing processes. The shutdown was successful, and we're back online. Second, the downturn is due to a dynamic competitive landscape.

In the fifth line plus setting, the original patient bolus has been largely addressed, and we are now in an incidence-based market. With a December PDUFA date for a potential label expansion to third line plus, we believe there is a significant larger opportunity for Abecma coming soon. We are investing with BMS in manufacturing capacity for 2024 and beyond to address this larger market. Third, the BMS commercial team is increasing their sales and marketing efforts on Abecma. We spent the day with the BMS commercial leadership last week, and they are increasing their commercial footprint and intensity across the multiple across myeloma market. We continue to closely manage our expenses, and together with the improving contribution from the Abecma collaboration, you can see the impact on our bottom line.

For the second quarter of 2023, we recorded a net loss of $42.1 million, down significantly from a net loss of $77.4 million for the same period last year. We remain committed to maintaining our cash runway into at least 2026, and we continue to actively evaluate pipeline investments and our overall cost structure. With that, I'll hand it over to Steve to provide some additional detail on the update we've provided this morning regarding our AML program. Steve?

Steve Bernstein (CMO)

Thanks, Chip. Good morning, everyone. In June, we announced a pause of our PLAT-08 study in AML in response to a fatal Grade 5 serious adverse event. This event occurred in the first patient treated at the second dose level in the Phase 1 trial. It cannot be stated enough that the safety of every patient who participates in our studies or receives our therapies is of utmost priority to us, and we continue to keep the patient's family in our thoughts. Since that time, and in collaboration with Seattle Children's, both our partner and the regulatory study sponsor, we have been conducting a thorough investigation of the root cause of this event. This investigation has provided insights into the pathobiology of this toxicity, leading to several study protocol changes, which the team believes may mitigate this toxicity and allow for the continuation of the PLAT-08 study.

As a result, our collective team is actively amending the protocol. As Nick shared, we received formal notice of FDA clinical hold on Friday afternoon. We will continue to collaborate with Seattle Children's and the FDA to determine appropriate next steps and a potential path forward here. I'm happy to address any questions in the Q&A portion. For now, we'll pass it back to Nick.

Nick Leschly (Chief Kairos Officer)

Thanks, Steve. We appreciate everyone's time, and we'll close by saying that we remain committed to delivering for patients, to innovation, and to driving value for shareholders. There is no hiding that it has been hard, a hard and rapidly evolving period for the company and all stakeholders. We are focused on doing everything we can to adjust and improve our strategic focus and day-to-day execution to enable us to best deliver across all stakeholders, including hardworking, dedicated employees, committed shareholders, and of course, patients and families in need. With that, operator, you may now open the line for questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Salveen Richter with Goldman Sachs. Your line is now open.

Tommy Pinhas (Managing Director)

Hello. Thank you for taking our question. This is Tommy on for Salveen. Can we just get a little bit more detail about the drivers behind the updated revenue guidance? I believe that you mentioned that it was not due to the prescheduled shutdown, but more so the patient demographics. Just some more color on that would be helpful. Thank you.

Nick Leschly (Chief Kairos Officer)

Yeah, this is Nick. I'll I think Chip can jump into that. I think we've certainly been watching all the various moving parts, One thing that, you know, you know when these maintenances come. We had some confusion in the marketplace, so I think people are looking to that and saying: "Wasn't that a bit of a surprise?" "Why was that a surprise?" We just wanted to make clear that it wasn't, right. I think what is evolving is the dynamics in the marketplace, and as Chip said, and can elaborate a little bit more on, along with BMS, we feel confident as that as the marketplace continues to evolve and as the expansion of the lines evolves, so will be the use of Abecma in combination or not in combination, in partnership with these other treatments for myeloma.

Chip, you want to provide a little bit more detail on what we know?

Chip Baird (CFO)

Yeah. No, that was well said. I, I, I think what we have seen is a increase in the overall CAR T capacity, both our capacity, competitive capacity, as well as the utilization of T-cell engagers, and, and collectively, more patients in the fifth line- plus setting, getting innovative therapies, which is, which is great for patients. Again, we view that as a moment in time. The field is going to shift yet again towards the end of this year with our PDUFA date and again, with other regulatory approvals coming. Stepping back, myeloma is, is a huge market. It's a huge opportunity. The history has never been a winner take all, and so I think these therapies will all have important roles to play, and we, we certainly see that for Abecma as well.

Tommy Pinhas (Managing Director)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Daina Graybosch with Leerink Partners. Your line is now open.

Daina Graybosch (Senior Managing Director of Biotechnology Analyst and Immuno-Oncology)

Hi, thanks for the question. We've been doing some KOL interviews recently, and there's some skepticism, I'd say, in the market, that there'll be a lot of demand for CAR T in the earlier lines of myeloma, just given referral dynamics and maybe hesitancy for community docs to refer their patients earlier. I wonder what work you've done with BMS that gives you confidence in that demand will come, and how much more demand do you expect as you move into the earlier lines in KarMMa-3? Thank you.

Nick Leschly (Chief Kairos Officer)

Yes, Nick, I'll take a quick stab. I think you can call 100 doctors, you probably get 100 different answers. Our view and our conviction and our research in collaboration with BMS is pretty clear that we do think there's a very strong role for CAR T and a very strong role for that as it gets earlier. At the end of the day, cancer is about efficacy. It is about having a dramatic impact, and the sooner you can have that, the more impactful it'll be over the long term. We think that certainly has to be proven out through the data, but it is starting to be proven out by the data by us as well as other CAR Ts.

In that sense, we have very strong conviction that fifth line, fourth line, third line, second line, and certainly first line is gonna be an area where we'll have a very strong contribution in place in the marketplace. Convenience is certainly a factor, especially if you have no alternatives. For example, in the fifth line setting, if you can't get a hold of our CAR T, what are you gonna do? If you don't have time, you're going to take whatever is available. That is the dynamic that we've seen. We don't think that is a data-driven dynamic. That is an availability-driven dynamic. Over time, that will, we believe, evolve, especially as we get into third line and then as you go even further.

I think we've heard the same thing out of our J&J colleagues, as well as anyone else who has a CAR T. We're pretty confident, but again, that's something we'll have to play out quarter by quarter.

Operator (participant)

Thank you. Our next question comes from the line of Yaron Werber with TD Cowen. Your line is now open.

Yaron Werber (Managing Director and Senior Biotechnology Analyst)

Great, thanks for taking that. I have 2 questions. 1, when, when you're thinking dynamically, what's going on in the competitive market right now, was the issue in the quarter sort of just prioritizing the wait list or the list in general in clinics to make sure that they match up with supply? Because obviously, there's obviously plenty of demand out there. Secondly, it sounds to me like your, your Q3 is going to be sort of a downtick over Q2, and then Q4 is going to grow over Q3. Can you just explain a little bit? I know July is obviously mostly offline because the way it worked out. Are you totally back to your capacity back in May, or are you able to increase it at this point by the end of the year? How fast would that happen? Thank you.

Nick Leschly (Chief Kairos Officer)

Chip, you want to just... I know you had a few comments there.

Chip Baird (CFO)

Yes, thanks, Yaron. Yeah, I think you have it right. The third quarter is impacted by the June shutdown. Again, as we've talked about, the June slots become July revenue, so there's roughly a 1 month lag there. July is a light month, which contributes to the expectation that the third quarter is down. You know, we do expect a return to growth as we, as we move, you know, month to month and quarter to quarter here, driven by a couple of different factors.

We're with, with BMS expanding the number of sites and the, and the overall commercial footprint, we're expanding the number of reps and people in the field detailing about when talking to treaters, not just at academic centers, but in the community setting. Back to Daina's earlier question, I think that's an important dynamic here as well, is that community referral dynamic that's important in 5th line, will be important in the earlier lines as well. You know, again, I think it'll evolve over time, but we certainly from the top on down, this is a priority for us, this is a priority for BMS as well.

Nick Leschly (Chief Kairos Officer)

Jeroen, just to highlight a few things that Chip just said, because I think this was and is a very active and has been a very active, ongoing effort. I'm sure you've chatted with, with the equivalent folks over at, at BMS, and we certainly have, that there's a pretty dramatic full force investment going on across the capacity, which has been a lot of the focus, but also around sites, around sales, boots on the ground, etc., where now you're getting to a more traditional kind of share a voice situation where you want to make sure that people have access. It has still been settling, right? In my view, this, what happened in the last quarter or the last six months, is still very much a settling phenomenon.

It is not a, you know, kind of the, the situation is, is, is done and over. That is not the way we look at this. Very much a growth and continued settlement, and I think there's gonna be more than enough growth opportunity for both the Abecma and certainly the other assets in CAR T, as well as the TCEs that are sitting out there, or other drugs that are coming forth in myeloma. We've seen that again and again and again. We're just in that early ramp-up phase, and Abecma is one of them. This quarter, certainly, sort of the situation we're in right now is very much evolving and one that I don't think anyone has a clear understanding on.

We're getting one ourselves that is, is better and one that has led us to a lot of confidence, and we're happy to see that BMS shares that confidence and certainly have no waiver in their stance.

Operator (participant)

Thank you. As a reminder, to ask a question at this time, please press star 1 1 on your touch tone telephone. Our next question comes from the line of Kelsey Goodwin with Guggenheim. Your line is now open.

Kelsey Goodwin (VP)

Oh, hey, good morning. Thanks for taking my question. maybe shifting gears off of Abecma, maybe could you just provide some more color on the toxicity root cause analysis in the PLAT-08 study? maybe could you provide some color on what protocol changes were made, post-analysis? Thank you.

Nick Leschly (Chief Kairos Officer)

Hi, Kelsey, this is Nick. Great question, I'll save my colleague, Steve, here, Steve, from a painful, sort of non-answer. Right now, we're very much like you said, we have done the root cause analysis. We're confident that we have some proposals in collaboration with the FDA to get this study sort of back up and rolling. We can't get into the details of that right now because we wanna make sure we honor the relationship, not only with the study and the patients, but also with the FDA. That's about as far as we can go at this point in time. That was the, the wording that we chose there was pretty specific, that it's ongoing. We have a plan.

It's shared with SCRI, and the FDA engagement has begun, and so we're confident, but we're gonna share details at a subsequent date.

Operator (participant)

Thank you. Our next question comes from the line of Vikram Purohit with Morgan Stanley. Your line is now open.

Vikram Purohit (Research Biotechnology Analysts)

Hi, good morning. Thanks for taking our questions. Just two quick ones from our side. First, on the increased commercial presence you alluded to from BMS's side, could you talk a little bit more about kind of the size and scope of that increased commercial muscle that BMS plans to put into Abecma? What, what is the scale of that, and what are some of the key messages that you've discussed with BMS that they'll be putting forward to help Abecma compete further? Then secondly, could you remind us what's implied from, like, a pipeline development standpoint in your cash run rate guidance for 2026? Thanks.

Nick Leschly (Chief Kairos Officer)

Yeah, hi, it's Nick again. Thanks. Good question. You're also gonna be a little, probably, sort of not totally satiated with my answer. We're not gonna provide the details on that expansion there, but it is sizable, and it is significant, both along the sites and the intention there. That rollout, getting to more and more centers in a rapid fashion, still the leading in the field on that, but also people and boots on the ground across their cell therapy capabilities, 'cause the innovation-based sell on this is something that's really important and that is an exciting piece. That I feel a lot of confidence on, and Chris, the incoming CEO there, is very much convicted and behind cell therapy, always has been.

He's been our lead contact throughout our entire relationship, so we're very pleased to see that he got the opportunity to be the incoming CEO. In that sense, I'm confident around the commitment in, in that regard. As far as it relates to w- what the messages are, that'll become clear in the field, but we certainly stand behind the real-world evidence and how people are experiencing Abecma in a very consistent manner, not only from a manufacturing point of view, but from a safety point of view and efficacy point of view. There's lots and ample data out there that will continue to evolve, that leads us to believe that it's a, sort of, one of the drugs of choice for sure in the CAR T space.

As it expands, we feel that there's plenty of opportunity as it relates to that. Those are the types of messages people are going out there with, and that, that is, as you know, is gonna be a quarter by quarter now kind of battle, if you will, but one that BMS is certainly used to, and their experience in myeloma is, is, is probably exceeds just about any other player in the space, given their Celgene history.

Chip Baird (CFO)

Do you, do you want us to address the-

Nick Leschly (Chief Kairos Officer)

Oh, sorry.

Chip Baird (CFO)

Into 2026?

Nick Leschly (Chief Kairos Officer)

What was the second question again?

Vikram Purohit (Research Biotechnology Analysts)

The second question was just into 2026 and what's assumed there, and I think, you know, we assume a contribution from Abecma, which we've already seen, and that contribution from a cash flow perspective continues and starts to ramp as we move into the third line setting. Certainly, between the overall utilization and the margin pick up that we've seen there, that's something that we feel good about and we'll continue to closely monitor and drive towards. You know, from an investment perspective, we have a number of shots on goal in the clinical setting, and then moving into the clinical setting, our goal in the first 15-30 patients is to achieve human proof of concept in an on incremental way.

Either we see that or, or we move on, and we, as Nick said before, we allocate capital elsewhere. The other thing that, you know, we've been emphasizing, and we showed this slide on our R&D day, but just to say it again, a lot of that R&D is funded through collaborations, whether it's the solid tumor programs with Regeneron, whether it's our investment in, in Abecma with, with BMS, we actually have a good amount of subsidy that comes from the collaborations that we've put in place to enable us to prosecute a cell therapy pipeline across a number of programs.

Nick Leschly (Chief Kairos Officer)

Just one last thing I'll add to, to the question.

Chip Baird (CFO)

Of course.

Nick Leschly (Chief Kairos Officer)

Real quick on the backside of Abecma, just to go back to it, because I, I, I find this, entertaining is the wrong word, but I, I find it curious to see how everyone is so quick to draw conclusions on the performance of a drug and the future of a drug based on, sort of information that is happening real time. And I think if, if CAR T has shown us anything over the last couple of years, is that we don't know what the hell we're talking about half the time as it relates to what the opportunity is at that moment in time, because the field is digesting this, the FDA is digesting this, manufacturing specialists are digesting this, the sites are digesting all this, and that we're still very much in that space.

From our point of view, this quarter and the bounciness of this quarter has no reflection on the future of this opportunity as it relates to Abecma. The one thing we know about myeloma is it has, unfortunately, a tremendous number of patients that are in need, and that is gonna continue to expand, and Abecma is gonna have a very strong role in that. We feel very strongly about that, and it'll play out quarter by quarter, but the long-term aspects and potential of this medicine has never been in question, nor is it in question for BMS.

Vikram Purohit (Research Biotechnology Analysts)

Got it. Thank you.

Nick Leschly (Chief Kairos Officer)

You're welcome.

Operator (participant)

Thank you. Our next question is a follow-up from the line of Daina Graybosch with Leerink Partners. Your line is now open.

Daina Graybosch (Senior Managing Director of Biotechnology Analyst and Immuno-Oncology)

Hi. Thanks for a second question, from me. I'm gonna ask another Abecma one. I'm sorry, Nick, ask you to look at what's happening in the moment. You have really different sites, sites where there are big academic centers and... both the competitive CAR T and Abecma are offered. BMS has really already expanded the site to sites where the other competitive CAR Ts don't have available slides. I wonder what you're learning from in these two different types of sites competitively, those that have more options and those that have fewer options, if you have any insights that you've gained, as you have more slots available on the demand and the competitiveness and any implications of that going forward?

Nick Leschly (Chief Kairos Officer)

Yeah, I do, frankly, so does BMS, frankly, it's not one that we're gonna spend a lot of time talking about publicly, because it is exactly that dynamic that gives us actually quite a bit of confidence, which is there are some centers certainly that have both available. There are 1 that have, in some cases, just Abecma available, we're following that at a site-by-site level, that's something that gives us insight into utilization. In some cases, generically speaking, right? People have a good experience with 1 drug or the other, you're gonna move in 1 direction or the other for a period of time. As, as people get and want to use both medicines more frequently, we're not seeing that 1 light goes out and 1 light turns on, that's the end of the story.

Very much not the dynamic. BMS's footprint has expanded but has not expanded greatly in the last few months, and partly because we were going from a demand basis, right, where you're supply constrained, to now going to where you actually wanna drive more and more demand because supply is, is catching up. I continue to have that dynamic. I think Abecma performs very well in the real world. We saw that in the data and also in the dialogue as it relates to how a provider can have very clear expectations of the efficacy and safety profile, and clarity on the probability of being able to manufacture. Lots of those things, I think, puts Abecma in a very good position, and the analytics, that I won't go into detail on, very much support that, and that's something that will, will play out.

Does that mean we know everything? No, not at all. Does it mean we have confidence about the future and our place in that? I would go so far as to say yes on that, and I think BMS would agree on that. As you and I both know, BMS certainly is not, sort of prone to sharing a tremendous amount of detail at that level because it's sort of not necessarily relevant. It's also a competitive, field, so we're gonna continue to participate accordingly.

Operator (participant)

Thank you. Our next question comes from the line of John Newman with Canaccord Genuity. Your line is now open.

John Newman (Managing Director of Biotechnology)

Hey, guys, good morning, and thank you for taking my question. You've discussed in the past about the ongoing work to transition to suspension vector. I think you've actually investigated that in KarMMa-3. Curious, when that comes online, should we think about that suspension vector process as giving you more capacity or pushing the success rate even higher? You've always been a very high success rate, but wondering if it's one of those or perhaps both of those. Thanks.

Nick Leschly (Chief Kairos Officer)

Yeah, John, I'm happy to take that one. Yeah, it's the suspension, moving towards a commercial approval for that early next year. What that does for us is 2 things. It, it, it certainly will help on the gross margin. Suspension is a more cost-effective way of manufacturing vector, which is a key starting material for our manufacturing process. It also has greater capacity, so that de-risks the supply chain and our ability to continue to scale drug product. Ultimately, drug product is what we're gonna be focused on for several years to come in terms of increasing capacity there. Vector and suspension vector is an important component of that.

John Newman (Managing Director of Biotechnology)

Okay, great. Thank you.

Operator (participant)

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Nick Leschly for closing remarks.

Nick Leschly (Chief Kairos Officer)

Yeah, thank you, everybody, and thank you for joining, and thank you for the questions. I would encourage, if you wanna understand any of these in more detail, to reach out to us. We're more than happy to talk about any elements of this. For now, I'll just thank everyone for joining the call and hope everyone has a great day.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.