PLAN-LES-OUATES Nov 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Obseva SA earnings conference call or presentation Thursday, November 7, 2019 at 1:00:00pm GMT

* Timothy M. Adams

SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst

* Biren N. Amin

* Edward D. Marks

H.C. Wainwright & Co, LLC, Research Division - Research Analyst

* Kennen B. MacKay

Ladies and gentlemen, thank you for standing by, and welcome to the ObsEva Third Quarter 2019 Financial and Business Update and IMPLANT4 Trial Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker, Mr. Mario Corso. You may begin.

Thank you, operator. This is Mario Corso, Senior Director, Investor Relations at ObsEva. Good morning or afternoon to our listeners, and welcome to today's call.

ObsEva issued 2 press releases this morning, one disclosing Phase III results from the IMPLANT4 clinical trials of nolasiban in women undergoing embryo transfer following in-vitro fertilization and the other the disclosure of our third quarter 2019 financial results and business update. On today's call, I'm joined by Ernest Loumaye, our Co-Founder and Chief Executive Officer; Jean-Pierre Gotteland, our Chief Scientific Officer; Wim Souverijns, our Chief Commercial Officer; Tim Adams, our Chief Financial Officer; and Beth Garner, our Chief Medical Officer.

During today's call, ObsEva management will be making forward-looking statements, including, but not limited to, statements relating to financial results and trends; the process and timing of anticipated future development of ObsEva's product candidates; our oxytocin receptor antagonist, nolasiban; our gonadotropin-releasing hormone receptor antagonist, linzagolix; and our prostaglandin F2 alpha receptor antagonist, ObE022.

These forward-looking statements will include comments about expected clinical trial results and regulatory pathways in the U.S., Europe and Asia as well as the therapeutic and commercial potential of ObsEva's products.

These forward-looking statements are based on ObsEva's current expectations and the inherently involve risks and uncertainties. ObsEva's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. Risks and uncertainties include, without limitation, those related to ObsEva's development programs; clinical trial time lines and results; the uncertain clinical development process including adverse events; the success cost and timing of all development activities in clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses, capital requirements and the need for financing; and other risks detailed in the Risk Factors and elsewhere in ObsEva's filings with the U.S. Securities and Exchange Commission, including a 6-K report for the 3 months ended September 30, 2019, to be filed on or around November 11, 2019, as well as other reports filed on Form 6-K and 20-F.

ObsEva undertakes no obligation to update any forward-looking statements as a result of new information, future events or changes in expectations, except as required by law.

I will now turn the call over to Ernest Loumaye, our Chief Executive Officer.

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Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [3]

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Thank you, Mario. Today, we disclosed results of the Phase III IMPLANT4 trials of nolasiban in women undergoing embryo transfer following in-vitro fertilization. We are surprised and obviously, very disappointed that the trial did not meet its primary end point. The 10 weeks pregnancy rate for women receiving nolasiban was 40.5%. This is a rate of 39.1% for women on placebo with a p-value of 0.745.

As to safety, nolasiban was well tolerated. No difference between placebo and nolasiban were observed. As this result did not confirm the positive results observed in our first Phase III trials of nolasiban, we have decided to discontinue the current development program for nolasiban in IVF. However, we will assess whether there is potential for nolasiban in other indications.

We remain fully committed to continuing the development of our innovative pipeline, focused on addressing unmet needs in women's health and pregnancy. We are focusing our effort and resource on the 4 ongoing Phase III trials of linzagolix for uterine fibroids and endometriosis and our Phase II program for OBE022 for the treatment of acute preterm labor.

We have very important data results for both of this compound this quarter is a PRIMROSE 2 trials of linzagolix in heavy menstrual bleeding due to uterine fibroid and an interim update in 60 patients from the prolonged trial of OBE022 in preterm labor. We consider both of this compound to be potentially best-in-class and look forward to sharing prior results soon.

PRIMROSE 2 recruited approximately 500 women with heavy menstrual bleeding or HMB due to uterine fibroids. It is a standard primary end point of reduction in HMB, as measured by the alkaline hematin method. The trial includes a low dose of linzagolix, 100-milligram without add-back therapy and a high-dose 200 milligram, including add-back therapy. Importantly, we are the only company developing a dose without add-back therapy for the uterine fibroids indication, which we believe is a critical point of differentiation of targeting the large and diverse U.S. patient population.

The 100-milligram dose achieved a response rate in the range of 40% to 50% without clinically significant impact on BMD, bone mineral density. We believe this provides a differentiation needed to be competitive in the market as none of the other generation antagonist under development can offer a way to control symptoms without requiring exogenous hormone through add-back therapy to mitigate bone loss.

Therefore, this could be the de facto first-line dose with our highest dose option, 200-milligram with add-back would be available for patients not responding to the lower dose.

Additionally, we expect a readout of 6 months data for PRIMROSE 1, second Phase III trial in uterine fibroids in the second quarter of next year.

With approximately 5 -- 4 million women in the U.S. diagnosed and treated, we believe that the unmet needs in uterine fibroids is tremendous. Oral contraceptives are often an ineffective treatment option to reduce menstrual bleeding. Generation antagonist are primary used short term as [alternative to] surgery. And surgery is costly and invasive. In addition, as we mentioned in our previous call, the EDELWEISS 2 and 3, the 3 trials assessing the efficacy and safety of linzagolix in women with endometriosis-associated pain are well underway, both in the U.S. and Europe.

Similarly to uterine fibroids, we are developing both a partial suppression, first-line option without add-back therapy as well as a full suppression option with add-back therapy. For the Phase IIa PROLONG study of OBE022 in pregnant women from 24 to 34 weeks of gestation experience in preterm labor, we expect an interim update in 60 patients later this quarter.

Following the open-label Part A of the trial concludes earlier this year, we have seen an acceleration in the randomization [AbbVie] of the trial in recent months, which compared treatment with atosiban alone versus OBE022 added to atosiban. The trial IDMC is scheduled to conduct its second review soon now in 60 patients versus 30 earlier this year.

In addition to safety, we will receive information on any initial efficacy signal that OBE022 may be able to prolong pregnancy compared to atosiban alone, but are not conducting statistical or futility analysis at this interim time point as previously mentioned.

Importantly, the unmet medical needs is likely greater in preterm labor than any other area that we are pursuing with 500,000 annual case in both Europe and in the U.S. and exceedingly high-medical risk to the mother and baby as well as financial cost for neonatal intensive care unit and clinic care that amounts to billions of dollars annually.

In conclusion, we regret not being able to improve outcome with nolasiban for women undergoing IVF. Due to our multi-asset strategy, we have the opportunity to develop 2 potentially best-in-class innovative assets, one of which is in late-stage Phase III. We continue to believe we have the right strategy of building a portfolio of promising assets, addressing significant unmet need in the field of women health.

I will now turn the call over to our CFO, Tim Adams, for a brief financial review. Tim?

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Timothy M. Adams, ObsEva SA - CFO [4]

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Thank you, Ernest, and good morning, everyone. I would like to spend a few minutes outlining third quarter results and our updated financial outlook.

Our net loss for the third quarter 2019 was $27.6 million or $0.63 per share. This compares with a net loss of $18.6 million or $0.42 per share for the third quarter of 2018. The year-over-year increase in net loss was largely attributed to increased spending on the clinical development for nolasiban and linzagolix.

Research and development expenses were $21.9 million for the third quarter of 2019 versus $15.9 million for the third quarter of 2018. This increase resulted from the expansion and continued progress with the clinical trial development for nolasiban and linzagolix.

G&A expense in the third quarter of 2019 was $4.9 million as compared to $3.1 million for the third quarter of 2018. This increase is primarily attributed to higher staff costs and precommercial activities for nolasiban.

Our cash balance as of September 30, 2019, was $91 million as compared to $138.6 million at year-end 2018. Of note, the 9/30 cash balance includes the first $25 million loan from our credit facility with Oxford Finance.

Cash used in operations during the third quarter was $26.9 million, reflecting continued spending in support of our pipeline. We also made a $5 million milestone payment to our partner, Kissei, related to the start of the Phase III EDELWEISS trials in endometriosis. Based upon our year-to-date spend and preliminary revisions to our nolasiban and precommercial spend, we now estimate our full year 2019 cash investment to be between $96 million and $99 million. This is less than our previous estimate of $105 million to $110 million cash used for 2019.

And finally, a quick update on the revised cash runway. Based on the $91 million of cash at September 30, our preliminary revised spending plans and assuming we draw another $25 million on the Oxford loan, our updated cash runway can fund our operations into the first quarter of 2021. We remain committed to the continued development of our innovative pipeline, and we will continue to invest appropriately with 4 Phase III trials ongoing for linzagolix and a Phase II trial for OBE022.

With that, operator, we can now take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Kennen Mackay with RBC Capital Markets.

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Kennen B. MacKay, RBC Capital Markets, Research Division - Co-Head of Biotechnology Research [2]

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I was hoping, maybe this morning, you could help us understand a little bit around the potential to reduce R&D spend? And how much sort of the current run rate in R&D is coming from IMPLANT4 or spend on the IVF program? I think that would be incredibly helpful going forward. And then I was just wondering on any additional clarity in terms of how much of the -- you have remaining following the quarter or as of today? And again, share the disappointment in the IGF results -- IVF results.

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Timothy M. Adams, ObsEva SA - CFO [3]

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Kennen, it's Tim. Let me start with that. So we will not pursue the IMPLANT3 trial for nolasiban, which was scheduled for the U.S. market. I think we have shared with investors previously that, that trial was much more expensive than what we saw with IMPLANT4 over in Europe. So we will see a significant savings in nolasiban because we're not going forward within IMPLANT3. There are some additional CMC costs and some other things related to the program that we won't incur. So that will be the primary component.

When the financials come out back in the MD&A, you will see the detail of the R&D spend for this quarter was approximately $22 million. The lion's share of that goes to linzagolix. It was a little bit over $14 million. So roughly 2/3 plus, then our additional staff costs. So the run rate in the third quarter for nolasiban was approximately $3 million. But again, that was at the tail end of IMPLANT4 and before IMPLANT3 really got started. So again, our plans for revision are preliminary. This has all come at us very quickly. Certainly, the disappointment of the results.

And then I think your second question related to the Oxford loan. So it's a $75 million facility. And there were 3 tranches. The first tranche of $25 million was drawn back in August when we signed the deal with Oxford. The second tranche was subject to positive results from nolasiban that we will not be drawing. And then the third tranche is available to us mid next year upon the readout of the -- of both PRIMROSE 1 and 2. So we have to wait for that second PRIMROSE to read out before we control that third tranche of $25 million.

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Operator [4]

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And our next question comes from Ami Fadia with SVB Leerink.

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Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [5]

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Obviously, I share your disappointment on the nolasiban data. Can we -- can you help us sort of remind us on the linzagolix data that's expected before the year-end? Maybe remind us what we're looking for in the data? And how confident you are in this study being positive? And secondly, with the discontinuation of the nolasiban program, what are your thoughts around the OBE022 study and your development plans around that?

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Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [6]

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Yes, Fadia. For the linzagolix PRIMROSE trial, you are well aware that it's a responder rate analysis in terms of heavy menstrual bleeding. That means that -- but it's a proportion of patients achieving a bleeding below 80 milliliter over a period of 28 days at the end of the treatment. So the generation antagonists are usually leading to a responder rate around 70% of the subjects, and we expect with our high dose add-back therapy to be around 70% of responder. For the low dose, we are the only one to have. We have no figure in February, but indirect evidence. It goes in the endometriosis population, the 100-milligram dose led to an amenorrhea rate of 55%. But if you extrapolate that to the fibroid population and there a reason to do that, that means that it should be above 55% because, indeed, amenorrhea, I mean, no bleeding and patient between 80 milliliter and 0 bleeding will still be responder. However -- so I think we are comfortably waiting for this data. Now we are a little bit conservative, and we are setting it as an objective between 40% and 50% because -- and I will ask Wim to justify that, why is it even a 40% is important in this population?

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Wim Souverijns, ObsEva SA - Chief Commercial Officer [7]

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Yes, thanks, Ernest. So Ami, the reason why that number comes up is that we try to assess from what point on would a drug that has an option to control symptoms without the use of add-back become commercially relevant. And as soon as we hit the 40% to 50%, there will be a significant opportunity for us to capture market share because, first of all, there is a segment of women that physiologically is not able to take or should not take add-back therapy, with a high BMI, [vis-a-vis] diabetes, cardiovascular complications, you're supposed not to take hormone replacement therapy. So if you hit a 40% response rate, 40%, 50%, one in two, you would respond. Those women definitely would be a key target for us.

And then on top of that, in terms of market expansion, the second segment are those women that technically could take add-back therapy, but really have expressed a preference of not to take exogenous hormones. And so that is the -- I would say, in the second wave of a commercial launch with the second segment of patients that we could go after. If we are below 30%, it becomes much harder to justify a commercial opportunity there. But as of 40%, 50%, we think there is definitely a value for us.

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Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [8]

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And if I could just follow-up, what percent of the target patient population falls within that segment of high BMI, cardiovascular risk, et cetera?

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Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [9]

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We don't have a figure on that. But what is clear that, when we compare our EDELWEISS population, which is about 32, the endometriosis versus the fibroids, the fibroids is on average 42 years old, and that's a tranche of age where you have more hypertension, insulin -- glucose intolerance, obesity and so forth. So -- but we cannot give a precise figure. And maybe, Wim, you can help us with that...

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Wim Souverijns, ObsEva SA - Chief Commercial Officer [10]

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Yes, we're actually -- Ami, we're actually running currently research to assess that, to actually get a qualitative number behind that. But as Ernest said, there is definitely a population, significant population in that age group that will fall in that category.

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Elizabeth Ijeoma Onyemelukwe Garner, ObsEva SA - Chief Medical Officer [11]

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The prevalence of fibroid is also much higher in African-American women who are more likely to be having those conditions.

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Ernest Loumaye, ObsEva SA - Co-Founder, CEO & Director [12]

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Yes. Thank you, Elizabeth. Yes.

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Ami Fadia, SVB Leerink LLC, Research Division - MD of Biopharma & Generics and Senior Analyst [13]

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Edited Transcript of OBSV.O earnings conference call or presentation 7-Nov-19 1:00pm GMT - Yahoo Finance

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