Gracell Biotechnologies Inc. (GRCL) CEO Dr. William Cao on Q2 2022 Results – Earnings Call Transcript

Gracell Biotechnologies Inc. (NASDAQ:GRCL) Q2 2022 Earnings Conference Call August 15, 2022 8:00 AM ET

Company Participants

Dr. Kevin Xie – CFO

Dr. William Cao – Founder and CEO

Dr. Wendy Li – Chief Medical Officer

Conference Call Participants

Joe Catanzaro – Piper Sandler

Justin Zelin – BTIG

Kelly Shi – Jefferies

James Shin – Wells Fargo

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Gracell Biotechnologies Second 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 will now turn the conference call over to Dr. Kevin Xie, CFO. Please go ahead.

Dr. Kevin Xie

Good morning, and welcome to Gracell’s second quarter 2022 corporate update conference call and webcast. With me today are Gracell’s Founder and the Chief Executive Officer, Dr. William Cao; and our Chief Medical Officer, Dr. Wendy Li.

We’re excited to discuss our innovative technologies and a rich clinical pipeline of CAR-T therapies on today’s call. We’re also looking forward to sharing with you our recent business developments and upcoming objectives for 2022. After our formal remarks, we’ll conduct a question-and-answer session.

This morning, Gracell issued a press release announcing unaudited financial results for the quarter ended June 30, 2022. We encourage everyone to read this press release. And I would like to remind you that this call is being recorded for replay.

Please note that for certain information discussed on the call today, including financial data, clinical data and future plans of our programs, resource 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 20-F filings with SEC for a full disclosure of these risks and factors.

The conference call contains time sensitive information that is accurate only as of the date of this live broadcast, August 15, 2022. Gracell undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as may be required by security laws.

I will now turn the call over to Gracell’s CEO, Dr. William Cao. William?

Dr. William Cao

Welcome, everyone, to our second quarter 2022 corporate update conference call. I’m excited to begin today’s call by highlighting our strengthened leadership team and then introducing our new CMO, Dr. Wendy Li, to the first investor call as part of the Gracell leadership team. I will ask her to provide some background and perspective on her recent move. I will then continue with a clinical development update as we made significant progress across a handful of our programs in recent months. Then I will hand the call over to our CFO, Dr. Kevin Xie, to discuss the financial updates. After our prepared remarks, we will open the call to the questions.

Let me start with our two recent executive appointments. Dr. Samuel Zhang was appointed Chief Business Officer in mid-July and is based in the U.S. He is responsible for strategic leadership of our global business development initiatives. He brings in Gracell over 20 years of industry experience across drug development stages and has a long history of managing strategic alliances and collaborations in both large pharmaceutical and small biotech companies.

Dr. Wendy Li joined Gracell as the Chief Medical Officer on August 1, and she is based in the U.S. Dr. Li will oversee Gracell’s clinical development activities, including advancement of our rich pipeline of autologous and allogeneic product candidates across the FasTCAR and TruUCAR technology platforms. Before she joined us, she was the CMO at EXUMA Biotech, where she provided strategic medical and clinical leadership for the advancement of its cell therapy pipeline in the U.S. and Asia. Dr. Li brings in significant expertise on both clinical development and medical affairs and will be invaluable as we are on track to file the U.S. IND application for GC012F in relapsed/refractory multiple myeloma or RRMM later this year.

I will now turn the line over to Wendy.

Dr. Wendy Li

Thank you, William.

It is a tremendous honor to join Gracell as its Chief Medical Officer as the company continues to advance its pipeline on multiple fronts. I have several years of experience in the CAR-T field and also held oncology clinical development roles with increasing responsibilities over the past two decades, including leading early and late-stage clinical trials for several therapeutic candidates for the treatment of hematological, malignancy and solid tumors and overseeing more than 30 successful IND filings, new drug applications and biologics essence applications in both the U.S. and China.

I believe a successful oncology therapy needs to bring substantial clinical benefits to patients, especially those with high unmet medical needs. I recognize the significant differentiation and the vast potential of our pipeline based on the FasTCAR and the TruUCAR platforms to fulfill those unmet medical needs. In past two weeks, I have been impressed by the caliber of the passionate Gracell team both in China and in the U.S. I look forward to working closely with the entire clinical team as Gracell is on track to commence company-sponsored trials in relapsed/refractory multiple myeloma or RRMM for GC012F in both the U.S. and China, pending the outcome of the regulatory processes that are underway.

With that, I will turn the line back over to William. Thanks.

Dr. William Cao

Thank you, Wendy.

We had a successful quarter with multiple readouts from three clinical programs at AACR, ASCO and EHA, which give us additional confidence in the differentiation and the value of our FasTCAR and TruUCAR platforms. Just a refresher, the FasTCAR platform aims to revolutionize the CAR-T manufacturing and enables the next-day manufacturing, which also importantly preserve the youth and the fitness of T cells.

The allogeneic TruUCAR platform leveraged with novel proprietary design to optimize the persistence of allogeneic CAR-T cells in patient body, making possible a delicate balance of therapeutic facts and safety. Currently, under these two platforms, we continue to advance multiple clinical trials including two company-sponsored trials under China INDs and several investigator-initiated trials, or IIT for short.

First, let’s focus on our lead candidate, the BCMA CD19 dual-targeting CAR-T therapy, GC012F, based on our FasTCAR next day manufacturing platform. We continue to advance the three IITs on two indications for this candidate. We have completed enrollment in the IIT study for RRMM. We presented updated clinical update that showcased the deep response, favorable safety profile and a differentiated next-day manufacturing in June at both ASCO and EHA.

Specifically, the data underscored deep responses achieved, including a 100% MRD activity rate in all patients treated. Based on a June 8, 2022, cutoff date following enrollment completion of 29 patients, of which 90% were classified as high risk, it also demonstrated consistency, favorable safety profile and a promising median duration response of 15.7 months in mostly high-risk heavily pretreated patients.

We are continuing to follow up patients with deepening responses. Encouraged by the consistently positive data, we are on track to complete R&D submissions of 12F in RRMM in both the U.S. and China before year-end. We submitted a pre-IND meeting request to U.S. FDA in June 2022 and received confirmation that FDA intends to provide a written response in October 2022.

The tech transfer process with laws has been completed, and we are continuing to collaborate closely with Lonza as we anticipate commencing in the U.S. trials next year. In parallel, we submitted the pre-IND meeting request to China NMPA in July and anticipate the NMPA will provide a response in October.

We are pleased to report the enrollment has been well underway in an IIT evaluating GC012F in newly diagnosed multiple myeloma patients. We anticipate that data from the single-site open-label study will demonstrate the potential of 12F to move into frontline given its favorable safety profile, combined with potential for faster turnaround time, leveraging our next-day manufacturing and attractive efficacy profile given the younger T cells with enhanced fitness.

At EHA in June 2022, we also unveiled the first data of GC012F in relapsed/refractory non-Hodgkin lymphoma NHL from an ongoing IIT. This initial data that demonstrate potent and fast activity with 100% CR rate at one month observed in all three patients treated as of cutoff date of February 22, 2022.

To put this into perspective, all three patients have DLBCL, a fast-growing aggressive form of NHL. This is yet another demonstration of our unwavering commitment in developing innovative cell therapies to patients. Enrollment is continuing in its ongoing study.

Turning to the off-the-shelf TruUCAR platform. GC502 is our TruUCAR-based CD19 CD7 dual direct allogeneic CAR-T cell therapy candidates for the treatment of relapsed/refractory B-cell acute neublastin leukemia R/R B-ALL. At EHA 2022, we presented updated data from a single arm open-label IIT with longer follow-up compared to the data shared in April at AACR. As of a couple of days of February 22, 2022, three out of four patients achieved MRD-negative CR DI at their one month assessment.

The EHA data demonstrated a very promising response rate, manageable and reversible adverse events and the robust expansion of GC502 cells. We are very encouraged by these early results, which show the potential of GC502 and warrant further evaluation. Being the second product candidate from our allogeneic GC019F platform, GC502 further validates GC019F platform approach and a potential wide applicability.

Last but not least, I hope to provide update on our donor-derived allogeneic candidate, the CD19 targeted CAR-T therapy, GC007g. This is a unique product candidate for the treatment of R/R B-ALL patients who failed transplant and may not be eligible for autologous CAR-T therapy. We are pleased to announce that we have recently completed the Phase 1 portion of the registrational Phase 1/2 clinical trial underway under China R&D for the treatment of R/R B-ALL. We are on track to commence Phase 2 portion in the third quarter of 2022.

We are very proud of the work we have done to advance our pipeline, and we think we have an even more exciting second half ahead of us. We are on track to file R&D in the U.S. and China for 12F for the treatment of relapsed/refractory multiple myeloma during the second half of 2022. Currently, we have two R&D trials and three IIT studies ongoing and also recently completed enrollment in two IIT studies. We expect to present clinical data updates from a few of IITs at major medical conferences in the second half of 2022.

Simultaneously, 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. These clinical and operational developments advance Gracell’s objective to deliver accessible and highly efficacious treatments to patients across a wide range of malignancies.

Now I will hand over the call to our CFO, Dr. Kevin Xie, to discuss the second quarter 2022 financial results. Kevin, please go ahead.

Dr. Kevin Xie

Thank you, William.

Turning to our financials. I’d like to touch on our sales trends. As of June 30, 2022, the company had RMB1,707.3 million or US$254.9 million in cash and cash equivalents and short-term investments. In addition, the company had short-term borrowings under the current portion of long-term borrowings of RMB102.3 million or US$15.3 million and long-term borrowings of RMB53 million or US$7.9 million. We are very well funded with cash runway into 2024. We expect the cash usage for this year to be approximately US$100 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 this quarter was RMB146.3 million or US$21.8 million compared to RMB96.2 million for the corresponding prior year period. Research and development expenses were RMB117.1 million or US$17.5 million compared to RMB65.3 million in the corresponding prior year period. The increase was primarily due to the increased spending on R&D as well as higher payroll and personnel expenses and higher facility-related costs.

With that, I’d like to turn it back to the operator to open the session for your questions. Operator?

Question-and-Answer Session

Operator

Thank you all speakers. [Operator Instructions] And the first question today comes from the line of Joe Catanzaro from Piper Sandler. Your line is open.

JoeCatanzaro

Great. Thanks so much for taking my questions. Maybe the first one, great to hear that you filed a meeting — a pre-IND meeting request with the FDA. Just wondering at this point whether you have any comments or updated thoughts on where potentially the U.S. study for GC012 could initiate in terms of dose level relative to the doses you’ve explored in the China IIT. And if not, whether this was a sort of main focus or expected focus of your pre-IND questions. Thanks.

Dr. Wendy Li

Regarding our U.S. study about the RRMM, actually yes, we have some meeting request to FDA in June. And now FDA confirmed that it will provide the written response early in early October. Based on this, we were summing our pre-IND package in a few weeks.

JoeCatanzaro

Okay. Got it. I guess maybe just a follow-up, whether, again, any thoughts on sort of where dosing could initiate relative to the doses you explored in the China IIT, whether you would expect some degree of dose escalation or whether you could initiate right at a close to or near a recommended Phase 2 dose.

Dr. Wendy Li

Well, it is premature to discuss the design. Actually, this is a study design of the planned clinical program – in the U.S. We’re awaiting feedback from the FDA on our pre-IND submission, and they’re aligned after we filed the IND.

Joe Catanzaro

Okay got it, fair enough. And then maybe as a quick follow-up, I think you guided towards some clinical updates on current and new programs in the back half of the year, whether at a meeting or a journal publication. So wondering if you can maybe elaborate on the specific updates you might provide and whether that might include some initial frontline myeloma data? Thanks.

Dr. William Cao

Joe, I’m not sure what’s the specific question Joe, I think in the recording, all these updates kind of described, which specific program, is this RRMM or its newly diagnosed that you’re dive in?

Joe Catanzaro

Yes, yes, I guess I’m specifically asking about the newly diagnosed frontline myeloma trial that I think noted is open and enrolling and whether that’s an initial data set we could potentially see sometime later this year.

Dr. William Cao

Yes, I’ll leave this to Wendy.

Dr. Wendy Li

Yes, this is a newly diagnosed MM actually, it is a meaningful step forward, and we are encouraged by the trust pace and by the PI yes, and the hospital on us. The trial is on the way at a single center in Shanghai, China, yes. And this study is actually is an IIT study focusing on the high-risk, newly diagnosed patients.

Yes, and the [indiscernible] is well underway. So we expect to enter more patients, like 20 patients in total. And we have enrolled and treated more than half already. Yes, we’re hoping to provide the first data by the end of this year. I think that’s your question asking for yes.

Joe Catanzaro

That’s helpful.

Dr. Wendy Li

Sure thank you. Thank you.

Joe Catanzaro

Thanks for taking my questions.

Operator

Thank you. Your next question comes from the line of Justin Zelin from BTIG. Your line is open.

Justin Zelin

Thanks for taking my questions and welcome to Wendy?

Dr. Wendy Li

Thank you.

Justin Zelin

I wanted to ask how the tech transfer and manufacturing process for GC012F is going with Lonza and just the confidence around the IND filing later this year?

Dr. Wendy Li

The tech transfer has been completed successful and the Lonza has been manufacturing GC012F. We’ll continue to collaborate with Lonza to generate additional data and putting the R&D package together – that will help you.

Justin Zelin

Yes thank you.

Dr. Wendy Li

Okay, thanks.

Justin Zelin

And Wendy, maybe for the newly diagnosed multiple myeloma, the frontline study that you’re running, if you could just maybe for us just highlight how the treatment is current standard of care for these patients in China and how that might differ versus the United States, that would be helpful?

Dr. Wendy Li

Yes, this study actually is underway in China right now, yes. So right, interim is well underway. I’m just talking about that, yes. And we’re hoping to provide the first data by the end of this year, yes. And also, GC012F is now being studied for three indications RRMM, NDMM and NHL, yes. So that’s the current in China conducting this study.

Justin Zelin

Got it. And then maybe for these patients, I’m just curious if you have a sense of what kind of background therapies, so what prior lines they may have received before being eligible for GC012F in China?

Dr. Wendy Li

You mean the NDMM, newly?

Dr. William Cao

They are newly diagnosed.

Dr. Wendy Li

They are newly diagnosed and also we’re focusing on the high risk also.

Dr. William Cao

They are naive almost, right, correct me if I’m wrong, Wendy.

Dr. Wendy Li

Yes, you are right.

Dr. William Cao

This is naïve I think.

Justin Zelin

This is a frontline study okay. That’s perfect and then that’s great. Thank you so much for taking my questions.

Dr. William Cao

Sure.

Dr. Wendy Li

Sure thanks.

Dr. William Cao

Your question, thank you.

Operator

Thank you. Your next question comes from the line of Louise Chen from Cantor Fitzgerald. Your line is open.

Unidentified Analyst

Hi, this is Wayne on for Louise, so thank you for taking our questions, two from us. The first one is what’s your latest thinking on, the potential partner in the U.S. for GC012 and what type of partner would be ideal. And then second is, is the China COVID lockdown impact over now in the second half 2022 or could there still be some headwinds here? Thank you.

Dr. William Cao

Yes, this is a — partnership is one of our major goals of this year. We are looking for partners — potential partners with complementary then, of course, they need to be experienced in the start therapy space, and they’re interested in multiple myeloma. So this is what we — if you call it a criteria, that’s what we’re looking for, have to be, to have both interested in the capability in this field.

And that’s critical. As you have been seeing, we have been hearing and seeing that every step, including commercial capacity, is very critical for a successful product. So you can pretty much imagine who would be, suitable candidates that’s where we are.

Unidentified Analyst

Got it. And how about the COVID lockdown impact?

Dr. William Cao

Yes, it does impact – I wouldn’t say there is no impact, but the impact is pretty much on the follow-up evaluation of certain patients because a significant number of patients who were from outside of Shanghai and it’s difficult for them to travel to Shanghai because of lockdown.

And some of the patients who should have been evaluated at a certain time point, however, due to lockdown, they couldn’t travel to Shanghai. But now they’re all evaluated. After the lift-up in early June, the patients were pretty much all evaluated.

Unidentified Analyst

Got it, thank you.

Dr. William Cao

You’re welcome.

Operator

Thank you [Operator Instructions] Our next question comes from the line of Kelly Shi from Jefferies. Your line is open.

Kelly Shi

Thank you for taking my questions I have a couple, GC012F, and I apologize if you have already addressed these questions since I got on the call late. So for filing, I just want to confirm, this is for RRMM only or also including NHL? And if not, are you planning to get IND for NHL? Secondly, [indiscernible] recently reported positive top line data in earlier long settings from second line to first line. Does this have any impact on your trial design for the U.S. Phase 1 trial? Thank you.

Dr. Wendy Li

So currently, we’re working on RRMM for U.S. right now for R&D submission. Right now, we’re in the pre-IND submission with the meeting with the FDA, and we have the request and they actually confirmed that will provide the written response in early October. That’s for RRMM right now.

And the details of the design, I think that’s premature to discuss and for the planned connected program in the U.S., even others, yes, we’re awaiting feedback from FDA on our pre-IND submission and their alignment after we file the IND. And for NHL, NDML and others in that channel, so we’re still ongoing in the IIT study. And yes, this encouraged of the clinical initial data. So, we’re looking forward to see the follow-up data. Thank you.

Kelly Shi

Thanks.

Dr. William Cao

I think, Kelly, eventually, we’ll come to the point to evaluate and make a decision whether we’re going to file IND for both, particularly NHL. But right now, it is the number of patients too small, although we are very excited about the data. We have more data now, where we’ll — by the end of the year, we’re going to have more data to make decision.

Kelly Shi

Great. Thanks.

Operator

Thank you. Your next question comes from the line of James Shin from Wells Fargo. Your line is open.

James Shin

Hi, good morning, guys. Can you hear me?

Dr. William Cao

Yes.

James Shin

Great. Thanks for taking the questions. For GC012F, can you update us on how you’re thinking about MRD negativity as an endpoint, maybe possibly — I mean, looking at — just going back to the [indiscernible] study, they use PFS still. Just any updates on MRD negativity status? And then I have a second one on allogeneic — on the allogeneic side.

Dr. William Cao

All right.

Dr. Wendy Li

Okay.

Dr. William Cao

Wendy, do you want to take that one? Or do you want me to take this one?

Dr. Wendy Li

Yes, go ahead. You can do that or I can do that. Yes.

Dr. William Cao

Okay.

Dr. Wendy Li

Yes, you just mentioned about MRD. I think that’s very interesting and critical standard for the — for those like next tender, yes. So we have the striking 100% MRD in active rates in all the patients that we treated, yes. Most of our patients were assist with the EuroFlow, with a very high sensitive level MRD negative into the 10 minus. The community all agrees that MRD will be a key future decision maker for treatment choices.

Achieving MRD negative and maintain MRD negative will be a very critical part of success and even providing potentially functional cure in multiple myeloma. Sustaining MRD negative over 12 months and even longer is the predictor of our preferential outcome in regards to PFS and OS. Thank you.

James Shin

Okay. And then for the allogeneic side, is there going to be an update later this year for any of the allogeneic assets?

Dr. William Cao

Yes, we’ll have update later this year. Yes.

James Shin

Thank you, Wei. That’s it from my end.

Dr. William Cao

You’re welcome, James.

Operator

Thank you. This now concludes today’s Q&A session. I would like to turn the call back over to Dr. William Cao.

Dr. William Cao

Thank you again to everyone for joining us on the call. Gracell has strengthened its leadership team and is committed to advancing its clinical development pipeline. We are continuing to engage with regulatory agencies in the U.S. and China as we aim to file R&D submissions for GC012F in RRMM by the end of the year 2022. Concurrently, we have submitted multiple data sets upcoming medical conferences later this year. We continue to developing partnership for one of our programs.

In conclusion, Gracell is well positioned to deliver breakthrough CAR-T cell therapies capable of overcoming major industrial challenges by leveraging our proprietary FasTCAR and TruUCAR technology platform. We look forward to further advancing our clinical programs, and I will keep everyone updated along the way.

Operator

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

Be the first to comment

Leave a Reply

Your email address will not be published.


*