Adaptimmune Therapeutics plc (NASDAQ:ADAP) Q4 2022 Earnings Call Transcript

Adaptimmune Therapeutics plc (NASDAQ:ADAP) Q4 2022 Earnings Call Transcript March 6, 2023

Operator: Welcome to Adaptimmune and TCR2 joint webcast to discuss their strategic combination announced earlier this morning. I will turn the call over to Juli Miller, VP of Investor Relations and Corporate Affairs at Adaptimmune. Juli?

Juli Miller: Thank you, operator. Hello. Good morning. We issued a joint press release with TCR2 Therapeutics, announcing entry into an agreement for the strategic combination of our two companies. In the second press release, we provided our Q4 and full-year 2022 financial and business updates. I would ask you to review the full text of the forward-looking statements. We anticipate making projections during this webcast, and actual results could differ materially due to several factors, including those outlined in our latest filings with the SEC, as well as our 10-K filing for the year ended 2022, which will be filed later today. Of note, we will share slides during this webcast, which are also available on the presentations tab of our Investor Relations website.

Adrian Rawcliffe, our Chief Executive Officer, and Garry Menzel, TCR2 Therapeutics President and Chief Executive Officer are here with me for the prepared portion of the call, as well as Q&A. With that, I’ll turn the call over to Adrian Rawcliffe. Ad?

Adrian Rawcliffe: Thanks, Juli. We’re delighted to welcome you to this webcast to discuss the strategic combination of our two companies, which creates a preeminent cell therapy company to treat solid tumors. The details of the transaction are set out on the next slide. This is a stock-for-stock transaction, by which Adaptimmune shareholders will own 75% and TCR2 Therapeutics shareholders will own 25% of the combined company on closing. This is anticipated to extend the runway for the combined company into 2026, following closing and enabling a series of catalysts, which we will come to later. I will be the continuing CEO, and we will have a strong Board with members from both Adaptimmune and TCR2, including Garry. We anticipate the transaction to close in Q2 2023, subject, of course, to shareholder approval.

That’s what we are doing. However, the purpose of today’s call is to tell you why we are doing it. And while we are excited about this combination, particularly at this time in the evolution of cell therapy, here are the five compelling reasons why this strategic combination is the right thing to do. First, we have two companies that have spent their entire history focused on solid tumors, the largest unaddressed opportunity for cell therapy. Second, we each have a strong clinical pipeline that has been highly focused on MAGE-A4 and mesothelin and have significant value creating near-term catalysts, including the filing and potential approval of the first engineered T-cell therapy for a solid tumor indication. We also have medium-term preclinical pipeline focused on PRAME and CD70.

Third, together, we have an innovative next-generation toolbox, designed to enhance the functionality of our products in the tumor microenvironment as we aim to develop cell therapies that are both curative and mainstream. Fourth, we have end-to-end capabilities because both companies have been entirely dedicated to discovering, developing and delivering T-cell therapies and both have knowledgeable and experienced teams who have successfully advanced these therapies into late-stage trials. Finally and critically, this combination enables us to continue the focused development of the strong pipeline with an extended cash runway of approximately 3 years into 2026 due to significant operational advantages. We’re now going to cover each of these five points in greater detail on the following slides.

Garry and I, along with our collective management teams share the conviction that cell and gene therapy are about to have an impact on the therapeutics landscape comparable to that of monoclonal antibodies 25 years ago. We believe these therapies will transform the treatment of cancer. But to do that, they clearly have to move out from the narrow confines of CAR-T and hematological malignancies, which nonetheless have realized nearly $3 billion in sales in 2022, because the significantly larger opportunity is in the solid tumor space. Treating solid tumors has been the life’s work of the exceptional employees at Adaptimmune and TCR2. And the programs we have in clinical development are amongst the leading cell therapies for solid tumors, where we have already seen robust response rates in multiple cancer indications.

These T-cell therapies in the clinic and others coming behind will enable cell therapy to complete the transformation of this landscape, providing hope to people living with cancer. At a macro level, treating solid tumors with cell therapies is the ultimate value creation thesis for this industry. This is why our companies exist and accessing this opportunity with a breadth of pipeline and a depth of runway is why this combination makes sense. Although hematological malignancies are only 10% of US cancer deaths, the majority of cell therapies and all approved CAR-Ts are focused on these diseases. 90% of cancer deaths are from solid tumors, and this space is largely untapped by cell therapies. And we assert that as living medicines able to respond to the tumor and this microenvironment, cell therapies have distinct advantages to treat solid tumors.

I believe that our combined company will have a strong leadership position in this rapidly growing and evolving field due to its complementary technology platforms, which Garry is going to talk about now.

Garry Menzel: Thanks, Ad. As Ad said, this is truly an exciting time for cell therapy focused on solid tumors with many cancer patients already benefiting from treatments in clinical trials. Together, we have complementary platforms that will allow us to address a broad universe of both intracellular and extracellular protein targets with our SPEAR and TRuC T-cell therapies. Adaptimmune’s proprietary SPEAR T-cell technology is based on the affinity enhancement and engineering of T-cell receptors or TCRs, to specifically target peptide HLA complexes that are uniquely expressed on solid tumors. TCR2’s proprietary truck TRuC T-cell technology uses an antibody-based binding domain fused to TCR subunits to reprogram an intact TCR complex to recognize tumor surface antigens. Both technologies can be further leveraged in the combined company’s allogeneic platform. With SPEAR T-cells and TRuC T-cells, we have an opportunity to increase patient access to cell therapy. Ad?

Photo by National Cancer Institute on Unsplash

Adrian Rawcliffe: Thanks, Garry. With these complementary platforms, we are prioritizing and focusing on key validated targets for cell therapy in the solid tumor space. Targeting on a wide range of tumors, targets that we know we can address with our T-cell therapies and targets that are expressed in cancer that between them kill more than 300,000 people a year. We have the opportunity to make cell therapy a mainstream option for people with cancer through our focused pipeline against these targets. And our technologies against these targets have enabled a deep pipeline across multiple cancer types. Our lead programs will target MAGE-A4 and mesothelin in the clinic, and our preclinical development will focus on PRAME and CD70.

As Juli described, this pipeline is available for you on the website, so I won’t go into it in great detail because I want to focus on the clinical data and the catalysts that we believe are going to create near and mid-term value. We have compelling clinical efficacy from our two lead franchises. With afami-cel, we’re on track to complete our BLA submission for the treatment of synovial sarcoma in mid-2023, which would been a possible approval in 2024, the first engineered TCR T-cell therapy for a solid tumor. Our next-generation cell therapy targeting MAGE-A4, ADP-A2M4CD8 is delivering an overall response rate of 37% in our Phase I signal finding SURPASS trial across a range of solid tumors. And in ovarian, bladder and head and neck cancer, we see a response rate of 52%, improving still further to 75% in patients with these tumor types who have received three or fewer prior lines of therapy.

Going forward, we are initiating new cohorts in first-line head and neck and second-line bladder cancer in combination with pembrolizumab, and the Phase II trial SURPASS-3, which we intend to become registrational for patients with platinum-resistant ovarian cancer. Gavo-cel and the next-generation therapy, TC-510 target mesothelin, which is also expressed in a broad range of cancers. In the Phase I dose-finding trial, there was tumor regression in nearly every heavily pre-treated patient and an overall response rate of 22%. And in patients with ovarian cancer, the response rate was almost 30%. Going forward, we have the potential to screen patients with ovarian cancer, both MAGE-A4 and mesothelin, which would significantly improve the screening success rate.

And this type of joint development is one of the distinct operational advantages of this strategic combination. The Phase II trial with gavo-cel is ongoing and includes options for multiple doses and combination with checkpoint inhibitors to potentially enhance response rates and persistence. The next-generation product targeting mesothelin is TC-510, which incorporates a PD-1 CD28 switch designed to increase potency. The Phase I trial is currently in dose escalation across a range of tumors. Touching on safety across our combined programs. Whilst more specifics are available in the materials, generally speaking, we see adverse events that are consistent with those associated with lymphodepletion and the administration of cell therapies, mainly CRS at various levels, which is typically manageable and reversible using existing approaches.

Overall, the benefit risk profile to date has been acceptable. On closing this transaction, the combined company would have anticipated front ending into 2026. We expect to deliver multiple value-creating catalysts from these programs within that financed window. Here’s a long list of what you can expect over the next 22 months. Of course, we will continue to optimize the combined portfolio, making data-driven resource allocation decisions and focusing on those programs that will deliver greater value. I’m going to touch on a number of these items. For afami-cel, it’s all about BLA submission and the potential for approval. For the CD8 next-generation program, we have trials ongoing or initiated with the potential for readouts this year and next.

Firstly, for the combination in late-line patients with a checkpoint inhibitor and then readouts from cohorts in front-line head and neck cancer and second-line bladder cancer. For gavo-cel, later this year, we anticipate the first readout from the Phase II portion of the trial in platinum-resistant or refractory ovarian cancer in combination with nivolumab. We will also have a midyear readout in mesothelioma patients who enrolled before the focus was narrowed to ovarian, which will include key translational data speaking to the impact of checkpoint inhibitors. In 2024, we can expect additional readouts in the gavo-cel trial of TC-510, the next-generation version of gavo-cel. The trial is dose-escalating and we anticipate initial safety and then potential efficacy along with dose finding results in 2024.

And for PRAME and TC520, which target CD70, we’ll be moving these to be IND ready in ’23 and ’24 as both companies have previously outlined. Now, I’d like to turn it over to Garry to explain some of our next-gen enhancements, some of which are already in use in our clinical trials.

Garry Menzel: Thanks, Ad. Not only do we have compelling clinical data and exciting preclinical programs, we also have a toolbox to further enhance our T-cell therapies. When we think about how best to treat solid tumors with a T-cell therapy, several factors come into play; trafficking of our T-cells to the solid tumor, persistence in the hostile tumor microenvironment and killing effectiveness once they are there. Our CD8 and PD-1 switch next-generation technologies have already made it into the clinic as autologous therapies. We also have many others such as IL-15 and IL-7, CCL19 that can be thrown into the fight. And one of the most exciting aspects of our complementary technology platforms is the ability to target multiple antigens.

Importantly, all of these approaches can also be used in our allogeneic platforms as well. Not only does it take a technology toolbox, it takes a unique set of capabilities to make cell therapies work. And with that, I turn it back over to Ad.

Adrian Rawcliffe: Thanks, Garry. One of the realizations that both companies have had is that cell therapies are a truly unique class of medicines and to convert complex technologies into actual products that benefit patients requires a highly specialized set of capabilities that need to be tightly integrated in ways that are particular to cell therapy. Our combined companies has been wholly focused on cell therapy for solid tumors since the beginning. We have experienced teams who have a proven track record in this field. Between us, we’ve taken seven programs into the clinic, five of those are ongoing, and the first BLA for an engineered TCR T-cell therapy will be submitted this year by us. The capabilities we’ve outlined in our US and UK facilities on the right hand side of this slide are not there by chance.

They are not optional. These are the capabilities that we have deliberately built from the ground up by each of the companies. And as we bring together complementary technologies, teams and infrastructure, there will be significant operational advantages as we aim to transform the cell therapy landscape for solid tumors. Now when this transaction closes, we will have cash into 2026. This will enable us to finance the catalysts on the slide I showed you earlier. The combined company will continue to focus on investing our balance sheet in a data-driven manner to create maximum value from the portfolio. I’d like to return to the key differentiators that make the strategic combination attractive. A shared focus on solid tumors by far the largest opportunity for cell therapy, compelling data and clinical progress in solid tumors with our existing clinical pipeline, a deep preclinical pipeline focused initially on PRAME and CD70, backed up by our expert teams, specialized end-to-end capabilities a decade in the making and all made possible by our extended cash runway.

We have the opportunity to deliver against our catalysts and against our ultimate goal of making transformative medicines for people with cancer. And with that, I’ll open up for questions. Operator?

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Q&A Session

Operator: Thank you. Our first question comes from Marc Frahm of Cowen. Please go ahead.

Ernie Rodriguez: Hi, good morning. This is Ernie Rodriguez for Marc. Thank you for taking our questions. Just two for us. One, if you can provide more color on the cash runway extension that you have once the transaction closes. Like how much cash – what’s the cash balance, I guess? And what are the assumptions that you have, think about all the catalysts that you went over, what assumptions would that have for the cash extension? And the second question is about the afami-cel BLA. Just wondering what are the gating factors right now? What needs to be done in order for you guys to be able to complete it by mid-’23? Thank you.

Adrian Rawcliffe: Thanks, Ernie. Okay. So on the cash runway, both companies pattern is to give cash runway guidance, but not obviously detailed cash flow guidance. And that’s compounded in this case b two things. One, integration planning is obviously only just starting on the back of this. And two, we just put out our Q4 results, but TCR2 have not done so. So it’s a bit early to be giving detailed forecasts on cash utilization, but you can anticipate more information in due course. I think the key thing is we are confident -we are confident that the cash runway can be extended into 2026 and can deliver on those catalysts. And it’s obviously a range of things that you could look for in terms of the advantages that has come from both the operational advantages that I’ve talked about during the scripted portion of the discussion, such as the ability to jointly screen with – for ovarian cancer, such as the obvious potential synergies over time associated with the manufacturing capabilities that Adaptimmune has created, as we think about putting multiple products on to the market in due course, and obviously, establishment costs.

We have just simplistically two D&O policies, for example, which we won’t have going forward. But I think we still need to go through the integration planning between now and the close of the transaction. Secondly, on the afami-cel BLA, we’ve laid out the pathway that we have agreed with the agency to submit the elements of the rolling BLA. And just to remind you, that was the preclinical module initially, which was submitted in December, the clinical module, which we anticipate going in shortly. And then the CMC module, which will be the final piece anticipated in the mid-2023. And the work to complete those is the gating item between now and getting that. So, we’re compiling all the information for the clinical pieces as we speak, and we will be doing the same for the CMC piece and finalizing the work required to submit that with the information that we agreed with the agency.

Ernie Rodriguez: Thank you. That’s very helpful.

Adrian Rawcliffe: Thanks.

Operator: Our next question comes from Mara Goldstein of Mizuho. Please go ahead.

Mara Goldstein: Hey. Thanks so much for taking the question. So, I’m just hoping that you can maybe review for us a bit or perhaps even confirm that as the deal comes together, the TCR2 pipeline and the expectations for that pipeline for this year that those will be consistent with what TCR2 has previously guided to? And then secondarily, I’m just curious about, once you put the two companies together and you have greater scale, what you think from a time perspective, I guess, where is the advantage, let’s say, with TCR2’s TC-510 program, which is in a Phase I at this point and where can you bring synergy to bear there?