Ladies and gentlemen, thank you for standing by and welcome to the Sesen Bio Third Quarter 2020 Business Update 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 on your telephone. Please be advised that today’s conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Ms. Aaron Clark. Thank you. Please go ahead, madam.
Thank you and good morning, everyone. Welcome to our third quarter business update call. On today’s call, we will discuss our operating results for the third quarter ending September 30, 2020, as well as an update on the progress of studies related to assessing analytical compatibility between clinical batches of Vicinium and commercial material, which is a key component of completing Module 3 and finalizing the BLA submission.
Joining me on today’s call are Dr. Thomas Cannell, President and Chief Executive Officer; Dr. Chad Myskiw, Executive Director of Supply Chain; and Monica Forbes, our Chief Financial Officer. Earlier this morning, we issued a press release outlining some of the highlights that will be covered on the call today. The press release and the slides to which we will refer are available in the Investors section of the company’s website at sesenbio.com.
I would like to remind you that today’s session will include forward–looking statements related to the company’s current plans and expectations, which are subject to risks and uncertainties. Actual results may vary materially due to various factors, including those described in Sesen Bio’s most recent annual report on Form 10–K, quarterly report on Form 10–Q and other SEC filings. These statements represent Sesen Bio’s views as of this call and should not be relied upon as of any future date. Sesen Bio undertakes no obligation to publicly update these forward–looking statements.
And with that, I will hand the call over to Tom. Tom?
Thank you, Erin, and good morning, everyone. Thank you so much for calling in and participating in our business update today. Please turn to Slide 3, which is a summary of the three key takeaways for our call today. First, Vicinium has unique and compelling value proposition, especially when it comes to its potential to save and improve the lives of patients. Second, we believe we have a clear regulatory path forward in both the U.S and Europe. We are highly aligned with the regulatory agencies and we feel confident in our analytical comparability data. Finally, given the substantial unmet need in bladder cancer and the highly differentiated clinical profile of Vicinium, we project a significant global commercial opportunity.
Turning to Slide 4, we always start with the patient journey for bladder cancer and remind ourselves what a long, arduous, humbling journey patients face. It is important to see the unmet need through this lens in order to understand why prescribing physicians strongly prefer Vicinium versus other available agents.
Then looking at Slide 5, I want to thank the Sesen Bio team for their execution excellence even in the face of the pandemic and many other obstacles. I also want to remind you of our Investor Relations strategy, which is to tell you what we’re going to do, execute those plans flawlessly and then tell you what we did. If you’re signed up for email alerts, you received an email with an 8-K filing or press release each time one of the events on this slide occurred. And even though the last 2 years have been very exciting and productive, we expect an acceleration of news and progress in late 2020 and into 2021. It’s a very transformative time for the company.
Turning to Slide 6, I would remind you of the strong efficacy data for the primary endpoints of complete response and duration of response and remind you of our very strong safety profile on the right hand side of the slide. But we believe what really differentiates Vicinium is its potential to significantly delay the time to radical cystectomy along with the favorable overall survival data. In the end, those benefits make a huge difference to the lives of patients and lead to the strong advocacy of payers and physicians.
Please turn to Slide 7, and I want to remind you that since we started the Vicinium program, we have had frequent, high quality meetings with the FDA. Just last year, we had four face–to–face meetings, two Type B and two Type C. We’ve been working closely with the FDA and the EMA. We’re clear on their guidance and we’re clear on where the bar is for regulatory approval.
To give one example of that, please turn to Slide 8. One of the questions that we had last year was where the bar would be set to demonstrate clinically meaningful efficacy. There was a meeting of the ODAC, Oncologic Drugs Advisory Committee, in December of 2019 to address this question for Keytruda. As you can see on the slide, the FDA considers the 20% complete response threshold at 3 months to represent what can be expected from chemotherapeutic agents, including mitomycin, gemcitabine and VALSTAR. Therefore, for our new agent to demonstrate a clinically meaningful response, the lower bound of the 95% confidence interval would need to exclude the 20% success criterion.
You can see on the left hand side of the slide that Keytruda was able to demonstrate that for their overall data at the ODAC meeting, and they went on to gain approval in January 2020. Looking at the right hand side of the slide, you can see that we have very similar overall data and stronger data for the U.S cohort. So we feel confident in our ability to meet the FDA success criterion for complete response rate.
Please turn to Slide 9, which shows what we have already submitted to the FDA and what remains to be completed by the end of 2020. You can see that most of the work has been done and we’re very pleased with the remaining analytical comparability work with which Chad will review in a few minutes.
Turning to Slide 10. Just a reminder that in the U.S., we remain on track to complete the BLA by the end of the year. We’ll hear from the FDA in the first quarter of next year to learn if they had accepted the file. And we’re projecting potential FDA approval in mid 2021. In Europe, we have made a lot of progress in recent months. We plan to complete the MAA submission in early 2021. There will be important reviews with HTA groups later in the year and we’re projecting EMA approval by early 2022.
Please turn to Slide 11, which I think is a very interesting slide for those of you that have been asking about the probability of regulatory approval. As you can see, BIO, which is the Biology Innovation Organization, did a comprehensive analysis of FDA oncology product reviews over a 10–year period. In general, they found that products that complete Phase III have a 33% probability of approval, while products that have submitted their BLA have an 82% probability of approval. So just looking at the averages, you can see that completing our BLA submission next month is a significant milestone for Sesen Bio.
Please turn to Slide 12. As we continue to provide updates on the regulatory path forward, we’re getting more questions on the commercial opportunity and this slide summarizes our current view. As I mentioned, we believe the market opportunity is substantial with potential peak sales of $1 billion to $3 billion. In addition, we believe this may be one of those unique times in the marketplace where there is alignment between patients, payers and physicians in terms of their advocacy for a product. And when you see that dynamic, it can be a very good sign for launch uptake and product growth.
Earlier this year, we did some important market research on physician intent to prescribe Vicinium with a very positive outcome, which I’ll cover in a moment. And we believe that this is a highly concentrated market of roughly 1,500 physician targets, which allows for a very efficient commercial model. That efficient commercial models should translate into lower OpEx, stronger operating income growth and a shorter path to corporate profitability.
Finally, my last slide is Slide 13, which highlights the results of our market research versus Keytruda earlier in the year. When we show high prescribers of bladder cancer, the profile for Vicinium and for Keytruda, they say that they would choose Vicinium over 80% of the time because they view Vicinium to have an advantage in terms of safety, ease of integration into their clinical practice and physician interest in using the product.
Just a reminder that we set the bar high for ourselves and shows a very strong competitor for this market research, Keytruda is the number one product in oncology globally, and they sold roughly 3.7 billion in the third quarter of this year alone. Physicians have a very favorable brand image of Keytruda, and therefore, when physicians choose Vicinium over Keytruda 80% of the time, we believe those results to be very meaningful.
With that, I will have to hand the call over to Chad.
Thanks, Tom. Starting on Slide 14, the area of non–muscle invasive bladder cancer has suffered from significant manufacturing and CMC issues for well over a decade. And this has really impacted patient care in this disease setting. For this reason, we’ve taken a very thoughtful approach to our supply chain and the partnerships we’ve entered into.
Turning to Slide 15, we’ve brought on two world class manufacturers, FUJIFILM and Baxter, as well as cardinal health and industry leader and third party logistics and distribution. Our manufacturing partners have launched numerous commercial products from the same facility where Vicinium is made, and these include both biologics and oncology products. Because of this, our partners have very strong track records with the FDA and other regulatory agencies in terms of pre–license inspections and the CMC support they provide. So overall, we feel very confident that we have a robust and reliable supply chain.
Moving to Slide 16, our product is produced using an E. coli fermentation process. The general approach of using microbial fermentation to manufacture recombinant proteins was really pioneered by Genentech in the 1970s with insulin. So this is a very reliable and well understood system to utilize. The specific process that you see here is the proposed commercial process that was developed by Sesen Bio. And key employees who developed this process, who are listed in the paper referenced at the bottom of the slide, are still with the company and work carefully with FUJIFILM and Baxter to ensure that the technology transfer was completed successfully.
On Slide 17, we have a summary of the CMC feedback we received from both the FDA and the Committee for Medicinal Products for Human Use of the EMA. Our core CMC regulatory approach for both territories is to submit a very strong analytical comparability package with the intent of demonstrating comparability between clinical material manufactured by Sesen and commercial material manufactured by our CMOs. The feedback we received from the FDA and EMA has been incorporated into our comparability plan. Also, add that our plan is aligned with global ICH Q5E guidelines, and so we think our data package is very comprehensive.
Starting on Slide 18, I’ll provide some additional color on the comparability data we generated thus far. The analytical comparability plan we developed with the FDA and EMA has four key elements: namely release testing, biophysical characterization, force degradation studies and stability. Over the next few slides, I will address each of these.
So turning to Slide 19, our three drug substance, PPQ batches met all the required acceptance criteria for release testing. These tests assess the purity, biological activity and general characteristics of Vicinium and the test data is very similar to results from our clinical material.
On Slide 20, you’ll see some of our key biophysical characterization data. This category of test assesses the structural characteristics of the protein, including the primary, tertiary and — primary, secondary and tertiary structure, and for biologic structure tends to dictate function. So these are very critical data. As you can see, testing of the Sesen material head–to–head against the Fuji material produced highly similar values, which is very positive from a comparability perspective.
On Slide 21, we have the results from one of our Forced Degradation studies, which are really about taking the protein and subjecting it to stress condition that cause the protein to break down and then comparing the rate and the mechanism of that degradation. In one of our studies, we took Vicinium manufactured using both the clinical and commercial processes and held them at 25 degrees Celsius. Throughout the study, we tested the purity and biological activity of Vicinium, as you would expect that any degradation of the protein would affect these parameters.
In the graph shown from this study, we measured the ability of Vicinium to bind to EpCAM positive tumor cells. You can see from the data that after a few days at 25 degrees, the protein from the two processes begins to lose the ability to bind to the target cells of a very similar rate. What you would be concerned about here is if the binding capacity of the commercial material degraded more quickly than the clinical material, we clearly do not observe that.
Turning to Slide 22, on our stability studies. Vicinium is a cold chain [ph] product, and so stability of the long–term storage temperature of minus 20 degrees Celsius is very relevant. And you can see from the graph that the monomer purity of the product is essentially unchanged over the first 3 months in storage. For our clinical trial material, we have a shelf life of 48 months and we’ll be seeking the same for the commercial material.
As part of our strategy with the FDA, we’ll be submitting updated stability data throughout the BLA review period. And our comparability data will be very important, since the FDA stated that if they deem the clinical and commercial material comparable, we will be able to leverage the stability data of our clinical batches.
So that takes us to Slide 23 and a summary of the final activities that will take place with Module 3 prior to BLA submission. We’ve completed a tremendous amount of manufacturing and CMC work in the past 6 months and it’s simply a matter of translating that information into Module 3. We expect to complete those activities and finalize the BLA submission in December of this year.
And with that, I’ll turn the call over to Monica. Monica?
Thank you, Chad. Please turn to Slide 24. As we continue to strategically prepare for commercial launch, we’ve completed a Monte Carlo simulation exercise to understand the range of alternative futures for peak global sales. As you can see on the slide, we believe there are four key inputs for the U.S market, which are: eligible patients, peak market share, number of year one doses that a patient will receive and pricing.
For the regions outside of the U.S., we use a multiplier that accounts for prevalence and price relative to the United States. We believe these key variables provide a spectrum of possible outcomes and capture 80% of variance in terms of valuing the global market for Vicinium at $1 billion to $3 billion in peak sales.
It’s still too early to guide on point estimates, but the outputs of the Monte Carlo exercise can show a range of what we believe is possible for Vicinium. And this is an important tool for the demand based forecast we are finalizing as part of the manufacturing scale up work we are doing with our CMO partners.
Turning to Slide 25, you can see a breakdown of the range of estimated peak sales by region. We believe Europe, U.S., China and MENA to be the largest markets globally with sizable opportunities in all four other geographies as well. As we’ve shared previously, we continue to engage in negotiations, in support of OUS partnerships to realize the commercial opportunity in these key regions. As those deals are finalized, we will continue to provide updates.
Please turn to Slide 26 for a few financial highlights. The third quarter was very important for the company in terms of strengthening our balance sheet. We received $10 million in net proceeds related to the upfront payment from Qilu Pharmaceutical, our licensing partner in China, which is an important source of non–dilutive capital, as well as $8.2 million in net proceeds from our ATM facility.
Cash used in operations in the quarter was $14 million, which primarily represents spending on activities in support of finalizing the BLA submission, including CMC and regulatory support activities, as well as continued progress on the MAA submission in Europe. We ended the quarter with $42 million in cash and cash equivalents, which we believe is sufficient to fund operations into the second quarter of 2021.
Finally, we continue to be pleased with the ATM facility we have in place. ATM proceeds to date have been an efficient source of capital for the company, generating roughly $16 million on a year–to-date basis. As a reminder, we run our ATM at a low level and take down less than 10% of average trading volume, and on most days we sell above the average daily price. This allows us to use the ATM selectively when demand outweighs supply, which minimizes the market impact while strengthening our balance sheet. The ATM has been critical in helping us continue to invest in high priority work streams, including the BLA submission, MMA submission and preparing for U.S commercial launch.
Finally, turning to Slide 27. Q3 was a strong quarter for the company in terms of executing on key deliverables, including the Qilu deal and efficient use of the ATM, which enabled us to increase our cash balance from $38 million at the end of Q2 to $42 million at the end of Q3. We did so while attempting to minimize dilution and continuing to build value for our shareholders, which is represented by the changes in shares outstanding and market cap from quarter–to–quarter.
With that, I will turn the call back to Tom. Tom?
Thank you, Monica. So please turn to Slide 28, which is a summary of the three key takeaways for our call today. First, Vicinium has a unique and compelling value proposition, especially when it comes to its potential to save and improve lives. Second, we believe we have a clear regulatory path forward in both the U.S and Europe. And finally, given the substantial unmet need in bladder cancer and the highly differentiated clinical profile of Vicinium, we project a significant global commercial opportunity.
With that, we will open up the call for questions. Operator?
Your first question comes from John Newman from Canaccord.
Hi, guys. Thanks a lot for taking my question and congrats on all the progress here. So first question I have is regarding the final steps that are needed with Module 3 before the BLA is submitted. It seems like the only analytical step is just to finalize the statistical analysis of the end process and release testing? I just wanted to confirm that. And then the second question, I had different subject. Just curious if you could talk to us about your plans longer term in Europe, if you’d be contemplating a partnership there, it would be considering working on your own. Thanks.
Great. Thanks, John, and good morning, I’ll take the Europe question and I’ll hand it back to Chad to talk about the final steps for Module 3. So, yes, we’re making very good progress in terms of the European Regulatory process. As I mentioned, we will submit the MAA in early 2021. We’ll be working with HTA groups including NICE and MAN [ph]. We’re anticipating approval in early 2022 and we do plan like the other major markets outside the U.S to look for a partner. We’re looking for a 50-50 value share where they would be the marketing authorization holder and take over responsibility for regulatory, clinical, commercial and all other aspects of going to market. So those are the current plans and we’re moving forward in negotiations as we are in other parts of the world. And Chad, I’ll hand it to you to talk about the final step with Module 3.
Yes. Thanks. Hi, John. Yes, you’re correct about that. So all the testing is completed for release testing, bio physical characterization and forced degradation testing. Stability as you know, it’s ongoing. So really now it’s just, as you mentioned, finalizing that statistical analysis, getting all that documentation and paperwork into Module 3.
Okay, great. Thank you.
John, any other follow–up questions for you?
No, that’s all at the moment. Thank you.
Okay. Thanks, John.
Again, if you would like to ask a question, please press star one. At this time, there are no further questions. So I’ll turn the conference back over to Dr. Thomas Cannell.
Great. Thank you, Cindy, and thank you, everyone for calling in this morning. So we think our story is very clear. We have a highly differentiated product in a disease area with a significant unmet medical need. We have a clear regulatory path forward and there’s a sizable market opportunity for Vicinium. And we have a very talented team of employees with the laser focus on the important work of saving and improving lives. You’ll be hearing from us again soon. And until then, please stay safe and have a good week. That concludes our call for the — for today. Thank you very much. Operator, I’ll hand it back to you.
Thank you. Ladies and gentlemen, this does conclude today’s conference call. Thank you so much for participating. You may now disconnect.