Q4 2019 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to be Q4, 2019 on Tommy Inc. earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance during.

The conference. Please press Star then zero on your Touchtone phone.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host Mr., Robert Ooh with West week I see our.

Thank you operator, and good afternoon, and welcome to Otonomys fourth quarter and for your 2019 financial results and business update conference call. Joining me on the call from autonomy are Dr., David Weber, President and Chief Executive Officer, and poll care, Chief financial and business Officer.

Before I turn the call over to Dr. wherever I would like to remind you that today's call will include forward looking statements based on current expectations.

Statements represent managements judgment as of today and May involve risks and uncertainties that could cause actual results to differ material Lee from expected result.

Such statements include but are not limited to the timing of results.

Patient recruitment and enrollment plans and expectations for and design and conduct of the phase three clinical trial for Teva decks.

Phase one two clinical trial for OTO 313, and the phase one two clinical trial for OTO for 13.

Expectations regarding preclinical development, including but not limited to the potential benefits Oh and activities under the collaboration agreement between AGTC and autonomy.

Expectations regarding the benefits outcomes market opportunity and value potential of Otonomys clinical and preclinical programs expectations regarding funding of clinical development through our three clinical trial Readouts in 2025.

Preclinical program Advancement and company operations into 2021 and expectations regarding financial guidance, including operating expenses for 2020.

Please refer to Otonomys filings with the FCC, which are available from the FCC or on the autonomy website for information concerning the risk factors that could affect the company.

Well now turn the call over today today, if Weber president and CEO of autonomy.

Thank you Robert Good afternoon, everyone and thank you for joining us on this call to discuss Autonomies business update as well as financial results for the fourth quarter and for your 2019.

He takeaway message from its called instead, we have sufficient autonomy Ford transformational year in 2020 with three clinical trial readout, including the phase three trial about tip. It actually came in years to the.

The phase two trial of auto 313 antenna test.

The phase one two trollope auto for 13 and hearing loss.

In addition to these clinical stage programs and address significant patient population with high disease burden and no FDA approved drug treatments. We are also advancing multiple preclinical programs, including a gene therapy collaboration targeting a general tall hearing loss.

I'm proud of the progress we have made across our pipeline, which is a brought us in the emerging field of Neurotechnology and look forward to providing program updates throughout this catalyst rich year.

In our prepared remarks, I'll review the status of our clinical and preclinical development programs and Paul will review the financial results and spending guidance for 2020.

It's important to note that our existing capital fund the company through the three clinical read out this year and into 2021.

Ill then provide a brief update regarding our board of directors and were open up for any questions.

Beginning with your two minutes phase three trial them in years disease, we are continuing to enroll patients and expect that we will announce results by the end of the third quarter of 2020, our focus is on the recruitment of well characterized menear patients.

Who meet stringent entry criteria and the careful management of communication between Asia and study site investigator in staff to minimize patient expectation by it.

Approximately three fourths of the clinical site and the 60 clinical sites are in Europe, and we expect that these sites will account for some more proportion of patient enrollment.

This is important because a successful burns to trial was conducted in Europe.

We have recently provided you data regarding vertigo responder rates from the your Berg too and things to be trials that can be found on slide nine of our corporate presentation available on our website.

These results show good agreement between the trials with almost 75% of patients reporting at least to having a DEFINITY vertigo days from baseline to month three following a single treatment with whatever decks.

Also roughly 60% of patients have at least a 75% reduction from baseline.

Yeah, and approximately 40% of patients had no DEFINITY vertigo days in month three.

Furthermore activity that consistently demonstrated clear separation from placebo it was comparable across the two studies.

Just to put the response racing content, 60% of activity patient went from an average of nine DEFINITY birdie. Good days in the month before receiving a single treatment to less than three days in my three.

40% about timber next treated patients had no DEFINITY vertigo days.

We believe these impressive responder rates separation from placebo and comparability across two independent studies, where at least support the treatment benefit voted that act for many years disease.

And then give us confidence for positive outcome and the ongoing phase three trial.

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The next product candidate in our product developed in our clinical development pipeline and sort of 313.

Sustained exposure formulation of the in M.D.A. receptor antagonist cycling in development for the treatment of tenant test.

We successfully completed the initial safety cohort the phase one two trial and are now enrolling patients in the second cohort, which is the exploratory efficacy part of the study.

For this cohort, we expect to enroll up to 50 tentative patient.

Meet a narrow set of entry criteria, including that the tended to be persistent.

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I've come clear origin.

Within six months of onset and at least a moderate level of severity.

Well. These entry criteria are challenging for enrollment we believe that they are important in order to recruit I'm watching it set of patients who are likely to be responsive to treatment and provide an early assessment of the opportunity for this product.

A number of exploratory efficacy endpoints will be assessed in the phase two study, including the tentative functional index or tee up by which is a validated clinical instrument that measure tentative severity <unk> impact on patients.

Because this is a first efficacy assessment. So no 313, and there was limited experience in the use of do you have five for drug trial. This study is not powered for statistical significance.

However, we do expect to be able to demonstrated clinically relevant improvement NTS high score for patients treated with a 33 13 versus placebo and will be assessing the concordance of T.F.I. changes with other endpoints such as Tendonitis loudest cannabinoids.

Regarding timing, we expect to have topline results to announced by the end of this second quarter of 2020.

Our third clinical stage program in total for 13 sustained exposure formulation of brain derived neurotrophic factors are bdnf that we are developing for the repair cochlear snapped up.

Recent research and identify damage to synaptic connection as the underlying pathology in noise and age related hearing loss that manifests its beach and noise hearing difficulty.

Neurotrophic factors, including Bdnf have potential therapeutic effects in the coke Leah <unk> promoting the survival spiral gain we own a wrong.

Increasing neuro outgrowth, and reconnecting neurons with cochlear hair cells aptar damage.

In September 2019, we announced the initiation of a phase one two ascending dose safety and exploratory efficacy study a photo for 13 that will enroll up to 40 patients with speech and noise hearing difficulty.

Patients will receive a single intratympanic injection of auto for 13 or placebo and be followed for three months.

A number of efficacy endpoints will be evaluated including electrophysiological measurements of hearing function and speech and noise hearing test.

Given the design of the trial the timing to completion and data release is not only determined by enrollment rates and length of study, but also the number of dose escalations that will be evaluated.

Since we are continuing to escalate, we're not yet able to refine our previous timing guidance for results that are still expected in the second half of 2020.

In addition to our three clinical stage programs that have read outs in 2020, we continue to advance multiple preclinical development programs a draft addressing different pathology for hearing loss treatment and auto protection.

In October 2019, we announced a gene therapy collaboration with AGTC that target the most common cause some congenital hearing loss.

The goal of the program is to develop and Avi based gene therapy to restore hearing in patients with hearing loss caused by mutations in the gap junction beta to gene otherwise known as GGP too.

[noise] mutation tenants gene are the most common cause of congenital hearing loss accounting for approximately 30% of all genetic hearing loss cases.

Patients born with this mutation can have severe to profound deafness in both years that it has done in spite of screening test now performed routinely in newborn.

Collaboration Leverages, the expertise technology and capabilities and each partner, allowing each of us to do what we do best.

In January we made a joint presentation at the association for research and Otolaryngology or a our ROE meeting that provided initial demonstration at a genes of interest can be expressed in support cells of the coke Leah which are the relevant target cells for treating GGB to deficiency.

Furthermore, these studies identified several novel proprietary Avi Capsids with favorable tropism and gene expression level in support sales compared to previously reported capsids used in the field.

Importantly, none of this novel Avi Capsids evaluative for further development exhibited signs of cellular toxicity.

We look forward to sharing more information about this program in the future.

We also presented data at Arrow related to our auto 510 program targeting auto protection for risk for patients at risk for the flatten induced hearing loss our CIO HL.

Since flattening of the potent chemotherapeutic agent that is widely used to treat a variety of cancers in adults and children.

Unfortunately, it's also commonly associated with severe adverse effects, including THL that its progressive bilateral irreversible.

At Arrow, we presented preclinical results demonstrating varying degrees of voter protection against HL for several different classes of therapeutic agent.

In particular, we have identified a novel class of agent that potently buying stasis platinum.

Agents from this novel class demonstrated greater preclinical auto protection, then known anti oxidant and anti anti pop a pop tonic molecule.

An increase potency relative to others. This patent binding molecules currently in clinical development.

These results highlight the therapeutic potential of our now novel Overprotective approach as the basis for the auto 510 program for CHS.

Finally, we continue to we continue preclinical development for auto six ex FX, which is our hairstyle regeneration program to treat patients with severe hearing loss.

Your hair cells play a central role in hearing by converting soundwaves into our electrical signals that are then transmitted to the brain via auditory nerves.

It is well established that damage to hair cells through aging excessive noise or exposure to owner toxic chemicals leads to hearing loss.

Unfortunately for humans, we can not naturally regenerate hair cells like non mammalian species, such as birds and chicken.

However, it is possible to activate proliferation and trans differentiation pathways via drug intervention, thereby providing an approach to treat this pass all Angie.

We have demonstrated hair sell regeneration with a class of small molecules in a preclinical proof of concept and have identified a product candidate from further development.

We believe that the auto six Xx program is complementary to auto for 13 and together. These two programs address the key pathology underlying acquired hearing loss.

In summary, the successful completion of our three ongoing clinical trials is our highest priority and greatest focus.

In parallel we continue to advance our preclinical programs because they address important unmet needs in neurotechnology leverage our expertise, our technology and resources and have significant value potential.

Importantly, we are conducting all of these activities while carefully managing our spending.

With that I'll turn the call over to Paul care, our Chief financial and business Officer, who will provide a summary of our financial results and guidance.

Thank you, Dave and good afternoon, everyone.

Overall, our expenses for 2019 were below our financial guidance and we expect a decrease in spending for 2020 as we complete the three clinical trials Dave reviewed.

This will enable us to utilize the cash we have on hand to fund operations through the clinical readouts and into 2021.

Now, let me briefly recap the financial results from 2019 and guidance that are more fully described in today's earnings release and 10-K filing.

As of December 31st 2019, we held a cash balance, including cash cash equivalents and short term investments totaling 60.7 million.

This cash balance includes proceeds my 50 million dollar term loan that was completed in December 2018.

In the fourth quarter of 2019 reported total non-GAAP operating expenses of 10.2 million.

With GAAP operating expenses totaling 10.7 million.

The primary adjustment for non-GAAP expenses is exclusion of stock based compensation. So this is the financial metric the best approximates our spending level.

For the full year 2019, total non-GAAP operating expenses were 39.6 million.

GAAP operating expenses totaling 44.5 million.

Both of these expense levels were lower than our financial guidance.

Which we had actually reduced in the third quarter.

This demonstrates our commitment to carefully manage our spend.

Looking forward, we expect the non-GAAP operating expenses for 2020 will be in the range is 35 to 38 million.

While GAAP operating expenses are expected to total 45 to 48 million.

This spending plan will enable our current cash balance it's not only found operations through the clinical trial completions in 2020, but also extends our cash runway into 2021.

With that I'll turn the call back over to Dave.

Thank you Paul before closing I would like to briefly mentioned two other updates related to our board of directors.

First I'm pleased to announce the appointment of Dr. Chiara Kennedy to the for an effective March 1st 2020 Dr. Kennedy currently serves as President Chief Executive Officer, and director of Amplyx Pharmaceuticals, which is the clinical stage drug developer targeting life threatening diseases in patients with compromised immune systems.

Prior to impact she served as the Chief operating Officer Alumina Pharmaceuticals, and then continue to as a vice president at Shire following its acquisition of aluminum.

She previously helps several positions at Cypress bio five where she played a key role in the Companys FDA approval and launch of Sabella for fiber biology, and managed multiple development programs, while it Biogen idec.

Our experience in drug development operations patient advocacy and corporate development are all very relevant for autonomy and I look forward to working with her.

And second I would like to express my sincere gratitude and appreciation to Dr., Heather Preston with notified the company in prior intention to resign from the board effective February 28 2020.

Dr. Preston joined the board in 2010, with our first indicated venture financing when she was a partner and managing director at TPG.

And have continued to serve as a director even after joining pivotal bio venture partners in 2018.

There's active participation and thoughtful guidance to the company and his board throughout the past decade have been greatly appreciated.

In closing, we have positioned autonomy for breakout year in 2020.

Pivotal phase three trial OTO 313 phase two trial and auto for 13 phase one two trial provide multiple value creation catalyst for the company and we are focused on their successful completion.

Taken together, our clinical and preclinical programs comprise the broadest and most advanced product pipeline in the emerging field of Neurotechnology and we have the cash on hand to support their advancement.

I look forward to sharing updates with you throughout this exciting year.

Operator, we're now ready for questions.

Thank you ladies and gentlemen, if you have a question at this time. Please press Star then my number one on your telephone keypad.

If your question has been answered or you wish to remove your so from the Q. Please press the pound key please standby well, we compile the culinary roster.

And your first question comes from a line of Stacy.

With Cowen.

Hi, guys. Good afternoon, and thank you for taking my question Patrick.

So first thank you for shine the updated.

Responder analysis parts of it and do you think BC thoughts could be matched.

Potentially but am I have kept positioning and what are your thoughts regarding potential labeling Act you think that you received much [laughter] Andre.

So could you. Please frame how does that actually he is any commentary on [noise].

And finally on can you remind us like you're hoping to see do you want to proppant intensity.

Point.

Im just trying to Pakistan.

Looking at looking fighting this [laughter] alright, thank you.

Thank you Stacy.

First I think the.

They responder analysis isn't very strong for the program with hosting index.

We are quite delighted with the 40% of patients.

Following a single treatment with the Tibbett Act, having no vertigo definitive days in the third month, that's quite a a accomplishment we feel and demonstrates what has been already shown in the literature is favorable results with the steroid product.

Additionally, I think when we look overall the population of seeing 70 plus percent of the patients treated with a pivot X on a single administration, having at least to having a there are other episodes and we know from talking to patients that even a single day spared.

These devastating episodes of Vertigo are meaningful to them and we hear the same thing from their hearing physicians. So we think the responder analysis is very strong both in demonstrating the potential for the product in helping patients and clinicians with.

This.

A significant disease as well as for the opportunity for the product in the in the commercial area.

Clearly, we will be looking at responder analysis as one of the things that we think it's very informative to physicians as they look at the product.

Two too.

To guide their patients toward treatment. So we think that is very meaningful.

In terms of repeat use a this is part of a we've always known that many years is the chronic disorder. Many of these patients may have many years for decades and suffer ongoing bouts of Vertigo and as a result of that we've supported the product with repeat dose testing for safety in line with the.

The FDA requested that is that patients can be treated a up to every three months. So we have collected that safety data is part of our existing package and will be part of the submission for the end da upon success with the current phase three trial. This enrolling so I think that we view that patients could.

Have anywhere between one to up to four administrations over dividends per year, and we think there are a significant portion of the patient population that we'll do that just as a preventive.

To try to reduce any number of episodes they might otherwise have.

I think your third question is on exploratory endpoints for 313.

Her tentative. So here we are looking at the tier fireeye as a clinically validated instrument is that it is an.

Instrument that we have talked about with the FDA and our pre I, Indeed meeting with them, a and believe that given its validation or it could serve as a potential.

Primary outcome in registration trials for that reason, we're gathering information on the TS fine we will look at that as our primary read in looking at how patients improve a with the typify, but we also have a number of other exploratory endpoints that we're looking at both in terms of measure.

There's a benoit once and loudness.

Inpatient global impression of change in our expectation is to use will utilize all of those and look at how they correspond to one another in reflecting the patience improvement both in terms of reduction of the Tendonitis in terms of loudness, but also in terms of their daily function.

Thanks.

Your next question comes from a line of Terra then Cruyff with Piper Sandler.

Hi, guys. Thanks for taking my question.

Those bases questions are pretty comprehensive so of remaining question that I have is for the.

The 510 program.

At this point and then just hearing do you think that there'll be any risk for tumor protection and what are the next steps and developing a preclinical package for this drug and maybe a potential time to get to the kind of care.

Thanks.

Okay. Thank you Terra and.

Great to have a question on 510 for a sustained induced hearing losses. We feel this is a very important area of unmet need and one that still represents a tremendous opportunities for improvement.

We think that the current approach that that has been investigated by number of companies in terms of systemic administration.

Oh stood flattened binding agents as a form of OTA protection. It runs a number of of key risk. Obviously it is important that there'd be no tumor protection.

From any treatment in our view and so I think our view is that local administration really makes sense here and of course, that's where we are quite strong in and development of our formulations that provide a sustained exposure from a single administration and the opportunity to do that locally in a combined environment, where we're not exposed.

In the entire systemic system, and thereby potentially compromising the treatment efficacy of says flatten or other platinum based agents.

So we think that is the key in addition, we also look at the mechanism of the drug and its ability to to function in that environment.

And I apologize tour I missed your second question.

Oh, Yeah, I was just wondering more about.

The stuff that you're taking to develop your preclinical package.

And maybe.

Guidance on potential time to get to the clinic.

Okay, we have not at this point given any guidance on timing it'll be something in the future that we will as we.

Continue with our progress make note of and in terms of our preclinical package. We have as mentioned presented at a or Aero and one of our preclinical models. We are continuing in the development of this program we've done a lot of work in both.

Yes plants of Coakley is as well as working with animal models.

To look at the opportunity for this novel class that we've identified and comparing that extensively against other existing known anti apoptotic and anti oxidant molecules for a potential comparability and efficacy and that's where we're very delighted with this class of Molly.

I feel that we've identified.

And are looking forward to taking that forward.

So we'll be talking more about this as we continue on and and clearly one of the things I'll. Just point out is this is an area where we do have some clinical experience. We've already actually conducted a phase two trial in a pediatric population. So I think one of the things that we feel good about is once we are advancing into.

The clinic, we already have the experience of doing this kind of clinical work and and feel that will be a real advantage to us as well.

Your next question comes from the line of Charles Duncan with Cantor Fitzgerald.

Hi, This is Brian Coskey on for Charles Thank you for taking the question and I just had a question on a 313 program to that Internet is often associated with headaches. Your migraines would you say that this is true for the patient population that you're currently enrolling in your ongoing trial and do you think that long term that.

This treatment could be used in conjunction with migraine drug status ERP. Thank you.

Yeah, I think thanks for that question I think it's one of the keys here is that we are very much focused on tentative says associated with cochlear origin. So it's not to say that these patients could not have migraine headaches, but the the patient population is very specifically a.

A persistent tenants this population of coakley or have no unquote clear origin, which would be things like sensorineural hearing loss, some type of OTI trauma or even oneq infections, such as otitis media and as you all to that I think it's not something that we've really looked at in terms of the.

Migraine I think it really comes down to the nature of the origin that said, we're really in this study obviously focusing on a very narrow homogeneous population of patients to first established the potential for the activity of the drug and demonstrate that for OTO 313, I think the population you talk about.

The potential use for that is something that we'd be very interested in looking at.

As we continue to be advance the program.

But at this time, we're focusing on a very narrow subset of patients to really allow us to detect that activity for further clinical advancement.

Yeah that makes a lot of sense and just a follow up it seems like the mechanism of action for 313 is suggesting functional improvement that you have and planes that target emotional response in a such as a noisy ensign doesn't even components and the t. if I get it. So I guess why do you think that this candidate could also.

Proven and emotional response, and how likely is that thank you, yeah, I think well.

This is a lot of what these patients experience. So in addition to the actual trauma. If you will have the of the tenant to us it actually disrupt their daily life very much like Vertigo.

For the veneers patient so there they have anxiety they have an ability to sleep they have.

Packed in their daily lives as result of the tenant to some a level of that tended to us and that's been shown as I mentioned through this validated instrument that you can actually look at the corresponding relationship between the loudness and its impact on a noise.

Leap et cetera, why we think that is important is because this is the kind of thing that really helps both the FDA understand the opportunity and need for the product.

For example, the idea that you have both fees the symptoms of the disorder as well as the impact on the daily life and of course, it's a major piece of what insurers look at in terms of reimbursement of products that provide the benefit to those patient and not only treatment.

The seventh them, but also impacting.

The patient in terms of their performance daily life, and so we see that both for many years as being very important.

Because we've looked at things like number of days on bed rest are aurs are at home and not at work are functioning and we've shown that to be significant in our clinical work in many years as with the reduction of the Vertigo and I think we would expect the same thing with OTO 313 intended.

Thank you for taking the question.

And as a reminder to ask a question do you need to press star one on your telephone once again that star one on your telephone.

And do you have a question from the line of Esther Raj They Lu with Oppenheimer.

Hi, guys. Thank you for taking my question.

So one on a pivot ex where are you on enrollment and and how by the slight sites like between the U.S. and you.

Yeah. So thank you asked her for your questions. So we've not a as we've said we believe that.

Provided more clarity around the timing of to be the end of Q3 2020.

So we're providing clarity on data in terms of bar or timing to data, we do not actually get into enrollment numbers and as you can imagine there's we have both the screening period and then randomization and then through the study so in terms of.

The proportion of sites or roughly three quarters of the sites are in Europe.

With the remainder in the U.S. and we would expect the number of patients accordingly to follow a similar similar distribution to that.

Okay. Thank you and then lastly on you've guided to your your.

Cash taking you into 2021 should we take that can mean that.

You would be in a position to file with the cash you have on hand.

Yeah, Hi, asterisk.

It depends on really how the activities. This year play out we certainly if the only thing were doing is going from positive phase three results in the until the next trial, we certainly have the cash to be able to.

To the filing but I'm assuming.

Was it a signal from both the 313 and the 413 trials and interesting containing moved the preclinical programs along.

Then that will impact the cash needs as well so we'll have to.

Provide additional guidance as we get a further along in the year, but I think it is important for investors to be aware that.

We do we have the cash on hand to be able to get through these three clinical trial readouts want to make sure that investors are confident that we have the runway to be able to do that and then what happens after that we'll certainly a.

Work through and and provide additional guidance on.

Thank you very much.

Thank you.

As a reminder, if you let's ask a question you need to press star one on your telephone once again the star one on your telephone and we'll pause for just a moment to allow anyone who wishes to ask a question to answer the Q.

And there are currently no other questions I'll, let to hand, the call back to Dave weather.

Thank you. Thank you everyone for participating participating in our call today, we will be attending both the Cowen and the Oppenheimer healthcare conferences. During the next couple of weeks and hope to meet men with many of you there have a good evening. Thank you.

Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.

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