EQRx, Inc. (NASDAQ:EQRX) Q2 2022 Earnings Conference Call August 11, 2022 8:00 AM ET
Neil Swami – Head, IR
Melanie Nallicheri – President and CEO
Jami Rubin – CFO
Eric Hedrick – Chief Physician Executive
Conference Call Participants
Eric Percher – Nephron Research
Chris Shibutani – Goldman Sachs
Good day. And thank you for standing by. Welcome to the EQRx Q2 2022 Earnings Conference Call.
At this time, all participants in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator instructions] Please be advised that today’s conference is being recorded.
And I’d now like to hand the conference over to your speaker today, Mr. Neil Swami, Head of Investor Relations. Mr. Swami, please go ahead.
Thank you, operator and good morning, everyone. Earlier today, we issued a press release providing an overview of our second quarter 2022 financial results and our recent corporate progress. A copy of this release and presentation to accompany this call are available on the investor relations section of our website at investors.eqrx.com.
Joining me on the call this morning are Melanie Nallicheri, President and Chief Executive Officer; Jami Rubin, Chief Financial Officer, and Dr. Eric Hedrick, Chief Physician Executive.
Before we get started, I would like to remind everyone that, some of the statements that we make on this call and information presented in the slide deck include forward-looking statements as outlined on Slide 2. Actual events and results could differ materially from those expressed or implied by any forward-looking statements, as a result of various risks, uncertainties, and other factors, including those set forth in our most recent filings with the SEC and other future filings that we may make with the SEC. You are cautioned not to place any undue reliance on these forward-looking statements and EQRx disclaimed any obligation to update such statements.
I will now turn the call over to Melanie.
Thank you, Neil. Good morning, everyone. And thank you for joining us for our quarterly investor conference call. Slide 3 is a reminder of our mission; to improve health for all with great, innovative, affordable medicines. This is increasingly relevant as we’ve seen the US Senate debate and advance prescription drug pricing reform legislation this week.
EQRx is creating a market-based approach to bring down prices and address inequitable access for patients. We believe our approach will increase competition, foster biomedical innovation, create savings for healthcare systems, and most importantly, provide population level access to innovative therapies in the US and around the world.
Our progress in the second quarter reflects the urgency we all feel at EQRx to advance our mission. Our team remains hyper focused on execution, and as you’ll see from today’s updates, we are making progress toward our 2022 goals. We would like you to come away from our call today with three key takeaways, as outlined on Slide 4.
First, we continue to advance our lead oncology programs, Almonertinib and sugemalimab towards regulatory approvals and commercialization. We are delivering data to support the applicability of these programs to the US population while constructive conversations with the FDA continue. In fact, we just initiated our US-led comparative three-arm Phase 3B clinical trial of Almonertinib for the first line treatment of EGFR-mutated non-small cell lung cancer.
We are continuing to execute on our regulatory plans outside the US. Recently, EQRx’s first marketing authorization application was accepted for review by a major global regulatory agency. This is an important milestone for any company, and I’m incredibly proud that we have accomplished this in such a short period of time, since our founding. For sugemalimab, our anti PD-L1 antibody, we are anticipating our first global regulatory submission for Stage IV non-small cell lung cancer outside of the US during the second half of 2022.
We are generating and presenting clinical data for our lead programs alongside our partners that underscore the important role of Almonertinib and sugemalimab could play in the treatment of lung cancer and beyond. Presentations in this quarter included ASCO and this week’s late-breaking oral presentation at the World Conference on Lung Cancer.
Second, turning to our Global Buyers Club; we now have me Memoranda of Understanding or MOUs in place with payers and health systems that cover more than 210 million lives within the networks. We continue to engage with payers and health systems in their interest, in our business model and the quality of our pipeline remains strong.
Third; we ended the second quarter with just under $1.6 billion in cash and cash equivalent. You will hear more about this from Jamie who will tell you more about our disciplined use of capital and control of spent. We expect to end the year with a strong cash position and have cash runway at least into 2025.
Let me now turn the call over to Eric, who will discuss Almonertinib and sugemalimab in greater detail. Eric?
Thank you, Melanie. On Slide 5, I will begin with Almonertinib, intended for treatment of patients with advanced EGFR-mutated non-small cell lung cancer. As a reminder, Almonertinib is a third generation or mutant selective EGFR inhibitor, which we unlicensed from Hansoh Pharmaceuticals in 2020.
In the Phase 3 AENEAS trial, Almonertinib was shown to significantly improve progression-free survival, which is the endpoint of clinical and regulatory interest in this setting with a safety profile characterized by lower rates of rash and diarrhea, gefitinib, a finding, which is consistent with the mutant selectivity of Almonertinib and its metabolites. This risk benefit profile is potentially unique amongst EGFR inhibitors, and we will be evaluating this profile in the newly initiated Phase 3B trial that Melanie mentioned in the opening.
We continue to learn the specific aspects of the benefit Almonertinib from ongoing analysis of the Phase 3 AENEAS trial. At the ASCO Annual Meeting in June, our partner, Hansoh presented an analysis of the effective Almonertinib in patients with CNS metastasis showing a highway significant 68% reduction in the risk of central nervous system progression compared to gefitinib, a medium prolongation of freedom of CNS progression from approximately eight months with gefitinib to approximately 29 months without Almonertinib.
Given the frequency of brain metastasis and the significant morbidity and profound quality of life impact associated with brain metastasis in this type of lung cancer, robust CNS activity is paramount, but we believe that these data further differentiate Almonertinib node from other EGFR inhibitors.
The Phase 3 AENEAS trial is also served as the basis of our first regulatory submission in the UK. This application is currently under review by the Medicines and Healthcare Products Regulatory Agency, or MHRA. We look forward to working with the MHRA as they complete their review. As a reminder, we have received innovation passport designation for Almonertinib, which provides an opportunity for a coordinated review amongst agencies in the UK and an expedited review process.
We are continuing to pursue what we believe to be constructive conversations with the FDA regarding conditions under which Almonertinib may be filed for approval in the US. As Melanie mentioned, we’ve initiated a randomized US-led clinical trial evaluating the clinical comparability between Almonertinib and osimertinib with a third study arm assessing the potential clinical benefit of the addition of chemotherapy to Almonertinib in the first line metastatic treatment setting.
As outlined on Slide 6, this study is designed to enrol a patient population representative of EGFR mutated lung cancer in the US. We believe this will address the applicability of the results of the Phase 3 AENEAS trial to current US medical practice in the patient population.
As I previously noted, it will also assess the potential differences in the risk benefit profile between these two third generation EGFR inhibitors, particularly in regards tolerability differences related to different metabolic profiles of Almonertinib and osimertinib.
The primary endpoint of the study will be progression-free survival with secondary endpoints, including overall survival, surrogate survival measures such as tumor response, circulating tumor DNA clearance, objective response rate, duration of response and others. Each HR enrol approximately 140 patients for an anticipated total of 420 patients. Details of this study are posted on clinicaltrials.gov.
Other studies for Almonertinib also continue. Our partner Turning Point Therapeutics, recently initiated a Phase 1B2 clinical trial evaluating Almonertinib in combination with Lenvatinib [ph] in patients with EGFR mutant MET amplification advanced non-small cell lung cancer. In addition, our partner Hansoh is conducting a clinical trial in the adjuvant treatment setting of EGFR mutated lung cancer, ongoing in China and we are in discussions to expand this study to include multiregional enrolment.
I will now turn to Slide 7 to discuss sugemalimab, our anti-PD-L1 monoclonal antibody, which we in-licensed from CStone Pharmaceuticals in 2020. As a reminder, sugemalimab has met the primary endpoint of two large Phase 3 studies conducted by our partner CStone, one in Stage 4 disease and the other in Stage 3 disease. Note that sugemalimab has also been evaluated in an now completed pivotal study in relapsed or refractory extranodal NKT cell lymphoma or ENKTL, a rare and aggressive type of non-Hodgkin’s lymphoma.
At ASCO, our partner CStone presented Interim Overall Survival Data from the pivotal Phase 3 GEMSTONE-302 study, which assessed the addition of sugemalimab to chemotherapy in patients with Stage 4 non-small cell lung cancer, demonstrating that the addition of sugemalimab to chemotherapy led to an improvement of median and overall survival by 8.5 months with a median overall survival exceeding 25 months in the sugemalimab arm. The survival benefit was observed across tumor histologies and was independent of PDL1 expression status.
Of note, these overall survival findings were based on a pre-specified alpha controlled analysis, which is an important regulatory consideration. Also at ASCO, there was an oral presentation featuring the primary analysis of the Phase 3 GEMSTONE-201 study of sugemalimab in relapse or refractory ENKTL. This trial met its primary endpoints of detective response and response duration with responses in approximately half of patients, complete responses in third of patients and a one-year duration of response rate of 86%.
This particularly compelling is the prognosis of relapse through refractory ENKTL is historically for and there are currently no approved treatments for this disease. This week at the World Conference on lung cancer, there was a late-breaking oral presentation of updated data from the Phase 3 GEMSTONE-301 trial in which sugemalimab was evaluated as a consolidation agent after chemoradiotherapy for patients with Stage 3 non-small cell lung cancer.
As we’ve noted, this is the only Phase 3 trial that is evaluated PDL1 inhibitor following chemoradiotherapy given in either a concurrent or a sequential manner. The sequential method is of particular note as it represents the treatment given to approximately 25% of Stage 3 patients in the US, yet no checkpoint inhibitors have been approved for use in this setting.
The results of the final analysis of PFS demonstrated a significant improvement for sugemalimab with the medium PFS of 10.5 months for sugemalimab versus 6.2 months for placebo, a hazard ratio of 0.65. The PFS benefit was observed for sugemalimab regardless of whether patients receive prior concurrent or sequential chemoradiotherapy. We expect an interim analysis of overall survival from this study in 2023.
In total, these presentations add to the growing body of clinical evidence for sugemalimab in a number of different cancer treatment settings. We are also supporting in an expanded access program in relapse or refractory ENKTL that is open to patients in the US, reinforcing our commitment to addressing unmet need. We expect to submit for regulatory approval in the US in 2023 for relapse or refractory ENKTL and as a reminder, sugemalimab was granted breakthrough therapy designation by the FDA for ENKTL in 2020.
To further build sugemalimab’s body of evidence, we are planning to initiate a US-led randomized clinical trial, which will compare sugemalimab with other approved immune checkpoint inhibitors in a population of non-small cell lung cancer patients, reflecting the US demographic. This study is being designed to address the applicability of the results of GEMSTONE-302 to US — current US medical practice in patient population.
Regarding regulatory processes for sugemalimab, we are continuing to pursue what we believe to be constructive conversations with the FDA regarding conditions under which sugemalimab be filed for approval in the US. We’re also continuing to engage with various regulatory authorities around the globe regarding potential filings for approval in non-small cell lung cancer and we remain on track for filing our first submissions for sugemalimab outside the US in the second half of this year.
With that, I will turn the call back to Melanie, Melanie.
Thanks, Eric. Moving to Slide 8, as you can see, we are building a robust pipeline and generating data to support the applicability of our lead programs to the US population, while also advancing multiple clinical stage programs beyond Almonertinib and sugemalimab. We currently have more than 10 ongoing programs, five of which are in the clinic that address some of the highest cost areas in oncology and immune inflammatory diseases.
For the remainder of our pipeline, the multi-regional Phase 3 study for nivolumab in liver cancer has completed enrolment. Our multi-regional Phase 2 study for liver [ph] in metastatic breast cancer remains ongoing and as we start building our immunology and inflammation franchise, we plan to investigate our JAK1 inhibitor in atopic dermatitis.
Our approach enables us to work closely with our partners and get an early look at the clinical data they are generating. Our team then applies a rigorous and disciplined approach to determine if we should advance programs toward regulatory approvals in commercialization in our licensed territories. This optionality is a critical part of our business model, which provides cost-effective data generation and helps de-risk opportunities to advance our pipeline.
In addition to in-licensing, we continue to enter into early stage R&D collaborations with leading drug engineering companies, which we believe are a capital-efficient way to build our pipeline and will provide sources of revenue in the future. We now have collaborations with seven of the leading drug engineering platform companies across the globe. Most recently, we have signed an agreement with Origin.
Let me now turn to Slide 9. We continue to make progress in growing our global bias club. We’re working to enter into long-term, trusted, strategic partnerships with private and public payers and health systems so they, and the patients they serve can gain access to our future medicines when approved.
As I alluded to earlier, in Q2, we signed MOUs with payers and health systems that cover 30 million lives within their networks, growing our covered lives base to more than 210 million lives. We plan to sign additional MOUs and our team is also working towards converting existing MOUs to pre-commercialization agreements.
I will now turn the call over to Jamie to discuss our financial position.
Thanks Melanie. I am now on Slide 10, a summary of our second quarter 2022 financial results can be found in the press release that we issued this morning. More detail is included in our 10-Q filing, which we will file later today.
We ended the second quarter of 2022 with just under $1.6 billion in cash, cash equivalents and short-term investments. Total operating expenses were $79 million versus $34 million for the same period a year ago. For the first six months of the year, our total operating expenses were $165 million up from $62 million a year ago. R& D accounted for approximately 60% of our operating expenses this quarter, as we continue to advance our portfolio, ramp up clinical trials across all stages of development and build important infrastructure to support our operations.
Of note, our cash burn was $119 million for the first six months of the year. While we continue to expect $400 million or less in operating expenses in 2022, which includes non-cash comp expenses, our cash burn is trending even lower than we had anticipated as we continue to be highly disciplined and tightly managing our capital. With the initiation of our three arm study for Almonertinib, a major milestone. For the company, an additional trials to start in the second half of the year, including a comparative study for sugemalimab, we do anticipate our operating expenses will be back and loaded in the second half of the year, but we still expect to end the year with cash between $1.3 billion and $1.4 billion.
Given where we completed the first half of the year and our anticipated activities later in the year, we feel very good about ending the year with a very strong cash position and maintain cash runway at least into 2025. Against what has been a challenging capital markets backdrop, we are fortunate to be in a strong financial position, which will enable us to grow, thoughtfully shape our portfolio by selectively adding new programs and advancing our existing pipeline programs in complete significant development and commercial milestones.
Now moving to Slide 11, I would like to summarize the multiple milestones we are expecting for the remainder of the year. As you heard during the call, these include an additional regulatory submission outside the US for sugemalimab the planned initiation of our comparative study for sugemalimab continuing to add members to our Global Buyers Club and managing our spend towards $400 million or less in operating expenses for 2022.
Let me now turn the call back over to Melanie.
Thank you, Jami. In closing, I would like to thank all of our employees, partners, and stockholders for your support. I would also like to acknowledge and thank the patients and healthcare providers around the world who are participating in our clinical trials.
We can now go ahead and turn the call back over to the operator so we can take any questions. Operator?
[Operator instructions] Our first question will come from Eric Percher of Nephron Research. Your line is open.
Thank you. I’d like to start on the commercial side of the equation. Appreciate the commentary on expanding to $210 million as part of the Buyers Club. Could you speak to, as you are doing both MOUs and movement to pre-commercial at the same time, does that movement to pre-commercial take away at all from the MOU goal? I think it was $350 million by the end of the year. That’s still quite a jump and how that process is running in tandem, both MOU and commercial — pre-commercial
Eric. Thank you for the question. This is Melanie. Those two are indeed running in parallel, but they’re really not taking away. If you think about it, these partnerships are like really, relationships where we are working with our partners day in, day out. The teams are meeting all the time. And so it’s actually not that, one needs to give way to the other. They can work very well in parallel.
In terms of the 350 million lives goal for the end of the year, I would agree with you. It’s an ambitious target, but as you can see we are making really great progress and with being ahead of the 200 million line, I would say, we continue to work really diligent towards this very ambitious goal.
Thank you. And maybe one more on this topic, which is as we focus on UK medicines and that innovation and access passport, have you been able to gauge the pace of market authorization and the benefit risk assessment under that program? And the real question being once you’re approved, how quickly can you be on market?
Well first of all Eric, let me just clarify the innovation, innovative licensing and access pathway. The ILAC pathway really has a benefit for the regulatory approval timeline. And it has a number of different excuse me, a number of different options, including, an accelerated approval that including clock stops could be much faster. So that’s one benefit.
The other benefit is that the ILAC partner organizations include both the regulator, MHRA as well as the health technology assessment organization; NICE and the goal is that there is a much more coordinated is perhaps the best word approach here. So that timelines are more coordinated and that the two processes work in parallel, so that access to patients can be enabled as soon as possible.
So there’s really no benchmark as of today, but it’s a promise that they are actually inner working and get you to market sooner.
Well, we are amongst the first companies that have been granted the Innovation Passport designation. So there isn’t actually a lot of data around in terms of how it plays out. I will just simply say that so far it has been a real pleasure to be working with both of the partner organizations to advance our medicines through these processes, both Almonertinib and sugemalimab have the Innovation Passport designation. And as we just mentioned, Almonertinib has been accepted by the MHRA for review, and we are planning to submit sugemalimab for review later this year.
Thank you for the detail.
[Operator instructions] Our next question will come from Akash Tiwari of Jeffries. Your line is open.
Good morning. This is Clark [ph] on for Akash. Thanks for taking our questions. First, what are your thoughts on Hodgkin [ph] withdrawing sort of Afatinib MAA due to general generalizability concerns? And is there a read across your EU filings? Have you noticed any tone shifts with your discussions with ex-US regulators?
And secondly, when can we expect topline data from Almonertinib’s Phase 3B head study? We noticed that the primary completion date on clinicaltrials.gov noted I May 2027, is there any flexibility around statistics and the potential for earlier interim readout and filing? Thank you.
Yeah. Thanks. Thanks for the questions Clark. This is Eric Hedrick. Couple of things, regarding the decision on the HUTCHMED application, it’s a little bit difficult to, impossible to comment on other companies filings. So I can’t comment in specific. I will say that particularly if you’re talking about generalizability each potential medication and indication is unique in terms of its generalizability concerns. And so it is difficult to know for us, whether, concerns that were specific to the drug and disease that, brought about some concerns about generalizability for HUTCHMED will be applicable.
In our situation, we think we understand lung cancer and its generalizability concerns or lack thereof pretty well and so we can really only go off the direct discussions that we’re having with regulators and right now, those discussions outside the US have led us to our belief that we will be filing submissions, in the second part of this year. So it’s hard to comment in specific, but I think that we feel comfortable in the discussions we’re having that we’re on track.
I think the other question was around our Phase 3B study. Yeah, the details there endpoints with civilianclinicaltrials.gov like we’ve said, we’re in the process of a discussion with the US FDA regarding the nature and timing of data that would be available from that study that would be supportive of filing in the US and those discussions are ongoing.
Understood. Thank you so much.
Our next question will come from Chris Shibutani of Goldman Sachs. Your line is open.
Thank you. And good morning. Two questions, one somewhat more broadly strategic and then a second follow up relating to some of the financials. On the broader question, we’re very much involved with thinking about implications of drug pricing, reform and legislation. Plenty of uncertainties and yet perhaps, could you talk to where you think potential changes could be bullish for EQRX, areas that you think could present challenges and then perhaps how uncertainty is something that you may be able to capitalize on.
And I’m thinking about both your current assets, as well as how you’re looking at potential capital allocation and further build out of the portfolio. There’s a lot of talk about small molecules versus biologics, therapeutic categories, etcetera; if you could frame kind of bullish challenges and uncertainty. Thank you.
Thank you, Chris. This is Melanie. I’ll take your question or start with your questions and others may add. So first of all, I would say that I think we’re all recognized and certainly at EQXR, we recognize along with everybody in Washington, the drug prices are too high and we of course welcome the debate and any ideas about different ways to bring costs down, both for patients, for payers, for healthcare systems, to reduce patient out of pocket costs and to improve access.
Now, as you know, that’s core to our mission and there are lots of statistics that support that including data that has shown that for seniors in particular, there’s a large number of seniors that are not filling their prescriptions because of the significant out of pocket burden. So I would say we of course welcome all approaches.
We believe that a market based solution, like the one that we are putting forward is the most finely-tuned instrument, if you will, with the least undesired consequences. Having said that, I would say that there are certainly provisions and as you, Chris, you never know what exactly ends up really being law until it’s all done. And there always remains still a lot of negotiations happen, but anything that shifts more costs to payers.
So for instance, when you look at the increasing participation of Medicare advantage plans in the catastrophic coverage phase, that certainly will put a lot more burden on the same companies or organizations that we’re partnered with. And so I would imagine that that is an opportunity for EQXR to continue to relief that additional burden.
With regards to the challenges, I would say the challenges like probably in your number three, in some of the uncertainties right around what ultimately will be the drugs that will be negotiated. We know that there are a number of carve outs such as orphan drug status, which we have for instance for a couple of our drugs. And so the devil will be in the details, I would say, but I would say regardless, or perhaps just because of that, there will be, I believe there will be a lot of opportunity for EQXR.
And then the last thing I would say, while the negotiations, at least in the current draft are expected to start in ’24, they’re not starting to have impact really until ’26. That’s still a long time from where we are, and we are hoping that we are going to bring a lot of benefit both to our partners and to patients around the world long before that.
With regards to your question on capital allocation and portfolio decisions, absolutely, I would say any company in our industry is looking at this very closely and is asking questions, does the potentially different treatment of small molecule drugs versus biologics? What are the implications? We will certainly also ask ourselves those same questions and in some ways, greater clarity around what might end up being negotiated in the future will certainly also lead to us to make decisions on where those benefits will not come through and where we could make investments and bring benefits that the government regulation doesn’t.
Got it. That’s helpful. And then if I could follow up with just clarifying question about financials and modeling perhaps for Jami; you were quite specific in talking about the shape of the spending to the balance of this year and the trend relative to your prior comments and guidance. And there was vocabulary now, at least until 2025, help us a little bit. I think we’re all categorizing ’23. We’re thinking about a couple years ahead, any further reaffirming details would be great.
Yeah. Sure. Thank you, Chris. And thank you for your perception, in terms of what we’re saying. So as I said, for the first six months of this year, we are trending lower than we had anticipated with respect to our cash burn. And we expect to end the year between $1.3 billion to $1.4 billion.
So again, overall, we are continuing to managing our capital spend very, very tightly. We expect to continue to do so over the next several years. So the point of our comment in our language is just to reiterate our confidence, that we see multi years of strong cash. And we are going to continue to commit to managing our capital with a lot of discipline. And therefore we feel confident in our very long cash runway.
That’s helpful. Thank you.
Thank you. And that ends the Q&A portion of this conference. I will now like to conclude today’s conference call. Thank you all for participating. You may now disconnect and have a pleasant day.