Freeline Therapeutics Holdings plc (NASDAQ:FRLN) Q4 2022 Earnings Call Transcript

Freeline Therapeutics Holdings plc (NASDAQ:FRLN) Q4 2022 Earnings Call Transcript April 4, 2023

Operator: Good day, everyone. Welcome to the Freeline Therapeutics Business Update Conference Call. At this time, all participants are in listen-only mode. After the company’s prepared remarks, there will be a question-and-answer session. Please be advised that today’s conference call is being recorded. I would now like to turn the call over to Naomi Aoki, SVP of Investor Relations and Corporate Communications. Please go ahead.

Naomi Aoki: Thank you, operator, and thanks to everyone for joining us on the call. This morning, we issued a press release and filed our annual report on Form 20-F with our 2022 financial results and business updates. The release in the 20-F are both available on the Investors section of our website. We’ll begin the call with prepared remarks by Michael Parini, our Chief Executive Officer; Pam Foulds, our Chief Medical Officer; and Paul Schneider, our Chief Financial Officer. Henning Stennicke, our Chief Scientific Officer, is also on the call and will be available for Q&A. Before we begin, I would like to remind everyone that we will be making forward-looking statements, which may include our plans and expectations with respect to our research and development pipeline, clinical trials, and financial projections, all of which involves certain assumptions and risks beyond our control that could cause our actual developments and results to differ materially from those statements.

A description of these risks is in our most recent annual report on Form 20-F and other periodic reports filed with the SEC. Freeline does not undertake any obligation to update any forward-looking statements made during this call. We are hosting this morning’s call to provide additional context for today’s announcements. Going forward, we will not necessarily host quarterly calls. We will host calls when there are developments that would benefit from context. As always, we will continue to provide timely updates as appropriate on our progress and key milestones. I’d now like to turn the call over to Michael.

Michael Parini: Thank you, Naomi. Good morning everyone and thanks for joining us today. We announced several important updates this morning, including the further prioritization of our clinical programs, the corporate restructuring, and the extension of our cash runway. These actions are part of a concerted and focused effort to drive FLT201 and Gaucher disease to key data readouts. FLT201 is our greatest potential value driver and our greatest opportunity to provide a life changing gene therapy to patients. It is a highly differentiated gene therapy candidate that delivers a novel transgene developed by our scientists and has the potential to be both the first and best-in-class gene therapy for Gaucher disease type 1. Despite treatment with existing therapies, many people with Gaucher disease continue to experience serious symptoms, disease progression, and a shortened lifespan.

Patients need and deserve more effective and less burdensome therapies. We believe that FLT201 has the potential to stop disease progression and improve clinical outcomes for Gaucher disease with a one-time therapy. Advancing the program to key data readouts is our greatest near-term strategic imperative. To deliver on that imperative in the current reality, we had to make hard choices. Given the tough market conditions, our cash position and anticipated timing of data for our programs, we reassessed our priorities, the capital needs required to advance two clinical stage programs in parallel, and options for reducing our operating expenses to extend our cash runway. As a result of this assessment, we made the difficult decision to pause development of FLT190 in Fabry disease and further reduce our workforce.

These actions extend our runway into the second quarter of 2024 providing us time to advance FLT201 to key data readouts starting with initial data from the first cohort, which we now expect to report in the third quarter of this year. In assessing our two clinical programs, we believe that FLT201 represents a higher value opportunity. The novel transgene encoding a rationally designed longer acting variant of GCase, the enzyme lacking in people with Gaucher disease, combined with our highly potent AAVS3 capsid give us reason to believe that FLT201 can improve outcomes over existing therapies and sets it apart from any other gene therapies in development for Gaucher Type I. It also has a faster potential path to a Phase III trial than FLT190 and an opportunity to be the first product to market in its class.

Photo by National Cancer Institute on Unsplash

I want to be clear that the decision to pause FLT190 was a strategic prioritization decision. We continue to believe in its potential to address a substantial unmet need in Fabry disease. Our data showed durable increases in enzyme activity and FLT190 continues to be well-tolerated with no increased cardiac risk following a doubling of the dose in the second cohort. Turning to the workforce reduction, we’re reducing our headcount by nearly 30% to approximately 65 employees subject to consultation in the UK. In addition to reductions related to FLT190, we’re reducing headcount across the organization while preserving core capabilities and ensuring our ability to drive enrollment in our GALILEO-1 Phase 1/2 dose escalation study and advance FLT201 to key data readouts.

We are also rigorously reviewing operating costs on an ongoing basis to ensure all spending is focused on high priority activities aligned to our strategic focus. We believe we are making the right decisions for the near and long-term future of Freeline. By focusing on driving FLT201 to data readouts that can serve as potential catalysts, we are laying the foundation to build a strong and sustainable company over the long-term. With that, I would like to turn the call over to Pam to provide a detailed overview of FLT201.

Pam Foulds: Thanks, Michael. We see tremendous promise for FLT201 to be a life changing gene therapy for people with Gaucher disease. As you heard from Michael, FLT201 has the potential to deliver better efficacy over existing therapies, while freeing patients from the burden of lifelong treatment. It’s also highly differentiated from other investigational gene therapies for Gaucher disease type 1, which either require extensive conditioning prior to treatment, or deliver short half-life wild-type enzyme that may not be able to penetrate deeper disease affected tissues. Gaucher disease is a rare genetic disorder characterized by a deficiency of glucocerebrosidase or GCase. An enzyme needed to metabolize a certain type of lipid.

As a result, harmful substrates known as Gb1 and lyso-Gb1 fills up in multiple organs, including the spleen, liver, bone, and lung. Symptoms include pain and swelling of the abdomen from enlarged spleen and liver, exhaustion, bruising and bleeding issues from low blood counts, bone pain and fractures, and shortness of breath from reduced lung function. We are focused on Gaucher disease type 1, which is the most common form of the disease with approximately 18,000 patients in the U.S., UK, EU, and Israel. Currently approved therapies poorly address certain aspects of disease, especially in difficult to reach organs, including bone and lung. Despite treatment with enzyme replacement therapy or ERT, which is the current standard of care, many patients continue to experience serious symptoms and may have reduced life span.

Nearly half of patients who have bone pain prior treatment still have bone pain after 10 or more years of ERT. And lung dysfunction may be more prevalent than first thought, with one study suggesting that as many as 68% of patients are affected despite ongoing treatment. Existing therapies also carry a heavy lifelong treatment burden. ERT requires lengthy biweekly infusions, impacting decisions about work, where to live, ability to travel, and overall quality of life. Patients report feeling fatigued after the infusion. Then a period of relative health followed by a reemergence of symptoms as their enzyme levels weigh before the next infusion. Additionally, the trough and enzyme levels in between infusions mean harmful substrates have the opportunity to build back up potentially contributing to disease progression.

FLT201 has the potential to stop disease progression and deliver better efficacy with a one-time treatment. In contrast to ERT, FLT201 is designed to deliver a steady and continuous level of enzyme, potentially providing better enzyme coverage and uptake in disease affected organs. Importantly, FLT201 delivers a novel transgene for engineered GCase variant that has a substantially longer half-life than wild-type in both plasma and the cells of interest. In lysosomal PH, our variant has a 24 greater half-life than wild-type. We believe that together with this steady release of enzyme, this allows for greater likelihood that enzyme will penetrate the deeper tissues, which other therapies do not reach. In preclinical studies, FLT201 demonstrated high GCase expression at low doses, increased uptake of GCase, and disease affected organs, including bone and lung, compared to ERG; and importantly, greater clearance of pathologic substrate in disease affected organs, again, including bone and lungs, than ERG.

We are actively screening patients for dosing in our GALILEO-1 study of FLT201. This is a first-in-human open label international multicenter trial. Over the past year, we’ve laid a strong foundation for the trial. Building our relationships in the Gaucher investigator community and expanding the number of sites and geographies to position us to enroll not just the first patient, but subsequent patients and subsequent cohorts. While we have faced unexpected headwinds, we believe we are on the right track and well-positioned to enroll the first cohort to deliver meaningful data in the third quarter. We are working with approximately 15 sites across 7 countries with 7 sites now fully enabled to dose patients and another three sites expected to come online in the next month.

There’s strong investigator interest in this program and we’re working closely with sites to identify and screen multiple patients in parallel and to tightly manage timelines. As a reminder, the trial is designed to enroll two patients in the first cohort with a four-week stagger between patients. We expect initial data in the third quarter will focus on assessments of safety and enzyme activity in these first two patients, with later data readouts looking at substrate reduction and various clinical parameters. We believe in FLT201’s life changing potential and we’re committing to program, we are singularly focused on driving enrollment in the GALILEO-1 trial with the aim of delivering key data readouts. We look forward to keeping you updated on our progress.

I’ll now turn the call over to Paul to discuss the financial results.

Paul Schneider: Thank you, Pam. The actions we have announced today further sharpen the organization’s focus on executing on FLT201 for Gaucher disease and providing additional cash runway to generate meaningful clinical data from our GALILEO-1 study. As you’ll see reflected in the financial results reported today, we’ve made significant strides over the past year and a half to drive increased focus, financial discipline, and operational efficiency by prioritizing our highest value programs aligning resources with those priorities and reducing the size of our workforce. These decisions are always difficult, but as a management team, we are committed to focusing our resources where they will matter the most for our patients, for shareholders, and for Freeline.

With that, I’ll turn to an update on our cash position and our runway guidance. All figures are reported in U.S. dollars. For the year ended December 31, 2022, our cash and cash equivalents totaled 47.3 million, compared to 117.7 million at the end of 2021. Taking into account the proceeds from the closing of the sale of our German subsidiary received in February 2023, the pausing of the FLT190 program and our proposed reduction in force, we now expect our cash and cash equivalents to fund our planned operations into the second quarter of 2024. Our net loss was 89 million or $1.50 per basic and diluted share for 2022, compared to a net loss of 140.4 million or $3.93 per basic and diluted share for 2021. R&D expenses decreased approximately 30% to 66.2 million in 2022, from 95.4 million in 2021.

G&A expenses also decreased about 30% to 30.7 million in 2022 from 44.6 million in 2021. The decreases across R&D and G&A were driven by lower employee related expenses, due to workforce reductions and portfolio prioritization activities initiated in both 2021 and 2022. With that, I’ll now turn the call back to Michael.

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Q&A Session

Michael Parini: Thanks, Paul. Before opening up for Q&A, I wanted to say a few words about changes to our Board, starting with Paul’s appointment. Paul has been a tremendous asset to our management team. He has brought a level of strategic, financial, and operational leadership that is critical for Freeline at this juncture. With his track record of execution and financial stewardship and deep understanding of our business, his perspective will be instrumental on the Board as we focus in the near-term on delivering on the potential of FLT201 and longer-term on building a sustainable and successful company. We also announced this morning that Dr. Amit Nathwani is retiring from the Board, but will continue to stay closely involved with Freeline as a Clinical and Scientific Advisor.

A pioneer in the field of gene therapy, Amit co-Founded Freeline and has made countless contributions to the company over the years. On behalf of the entire Board, I want to thank him for his service and I look forward to his ongoing contributions as a clinical and scientific adviser to the company. With that, I’ll turn it over to the operator for Q&A.

Operator: Thank you. We will now take the first questions. It comes from the line of David Nierengarten from Wedbush. Please go ahead, your line is open.

David Nierengarten: Hi, thanks for taking the question. I have one, just a scientific question on the Gaucher construct, just if you could remind us or inform us on what does that construct do for the curve essentially in terms of exposure to the enzyme? I’m curious. And then as a quick follow-up, does that change the thoughts around dosing or the number of virus particles needed to affect a disease modifying therapy? Thank you.

Michael Parini: Thanks, David, for the question. We’re super excited about the innovation in our novel transgene maybe there’s two parts in there. I’ll start by turning the first one over to Henning to talk about the work that was done in our research labs in England to create the novel transgene and why we’re excited about the impact it has on half-life and other enzyme attributes? Henning?

Henning Stennicke: Yes. Thanks, Michael. Thanks for the question, David. Just briefly, so the construct is stabilized variant of TCAs, which means that it has about six-fold longer half live for stability in the plasma, but more importantly, more €“ about 20-fold increased duration of action on half-life inside the lysosomes or at lysosomal pH. And we believe that that will give us much greater exposure. It’s a little difficult to talk about area under the curve for a gene therapy, but definitely looking at the coverage we expect to have inside the cells, our preclinical data clearly shows that we will have a much greater effect at comparable vector doses than wildtype GCase. So, we do expect to have much more impact of the treatment and hence be able to reach more difficult to treat tissues and clearly that is what our preclinical data demonstrated.

Michael Parini: Thanks, Henning. And I think Henning touched on it a little bit, David, on the dose There’s no question based on the preclinical data and our preclinical modeling. We do anticipate that we could use lower doses for FLT201, particularly in-light of the potency of the AAVS3 capsid, which I think we’ve seen across our other two programs. And so, we have a starting dose of 4.5 , which we do think should show enzyme activity that again hopefully has a therapeutic benefit. That’s certainly our expectation. And obviously we’re excited to share the data when we dose the first couple of patients in the third quarter.

David Nierengarten: Thank you.

Operator: Thank you. We will now take the next question. It comes from the line of Patrick Trucchio from H.C. Wainwright. Please go ahead. Your line is open.

Joe Hashmall: Hi, everybody. Thanks for the clarity. This is Joe Hashmall on for Patrick. Just one question regarding the GALILEO data. What might we look to see in the first cohort in terms of enzyme activity to give confidence bringing the molecule forward? And additionally, kind of on top of that from a safety perspective, are there any with the increased half-life adverse events that you will be looking out for, especially going forward as a result of it?

Michael Parini: Thanks for the question. Maybe the first part, I’ll ask Pam to comment on what we expect to share in the data. And obviously, we have modeling on dose translation from the preclinical work into humans. Pam, you want to give us some thoughts on that before maybe I ask Henning to take the second part?

Pam Foulds: Sure. Happy to. So, as you know, we’ll be dosing into the first cohort within GALILEO as he mentioned and Michael mentioned that . What we plan to be sharing in this first cohort, which would be two patients, would be any safety data, of course, as well as enzyme activity. That’s what we anticipate to be demonstrating in these patients. Importantly, as I mentioned earlier too, as Michael mentioned, we do expect to see based on our modeling a nice robust enzyme level that’s based at our modeling. So, we will see that data and share that data as that comes out in Q3.

Michael Parini: And then on the second part of the question, we certainly have done thorough safety assessments pre-clinically on the novel enzyme. Henning, do you want to talk a bit about that and why we’re confident that we understand that they will behave like a wild-type enzyme?

Henning Stennicke: Yes. I think in all practical aspects and we’ve dosed quite high in the preclinical experiments and studies in without seeing any adverse events. And we do not expect there to be any concerns about higher doses or higher exposures of the TCAs as there’s really no upper limit for the dosing of wild-type VPRIV observed other. So, it seems to be a fairly safe concept and this is still a replacement therapy. And even though we will have higher levels, we do not foresee any safety concerns from the payload itself. Obviously, we will have potential elements that we have observed previously with the AAVS3, which is sort of a separate issue. But overall, with the 19 patients, we have treated far events of ALT has been fairly well-tolerated.

Joe Hashmall: Thank you so much.

Operator: Thank you. We will now take the next question. It comes from the line of Dae Gon Ha from Stifel. Please go ahead. Your line is open.

Dae Gon Ha: Hey, good morning. Thanks for taking our questions. I’ve got three. First one on FLT190, if you can just remind us, have you dosed any additional patients beyond the first two, particularly interested in what you might have seen on the myocarditis front and the troponin level increase? Whether your immunosuppression strategy has worked on those? Second is, Pam, in your prepared remarks, you talked about facing some headwinds and I believe you’re referring to the one-half 2023 prior guidance for the GALILEO-1. If you can talk to maybe what happened there and why the data are now expected in 3Q 2023 speak to the confidence that you have towards that particular catalyst? And then third is, as we look toward your cash runway, 2Q 2024, GALILEO-1 cohort 1 data in the third quarter of this year, but any additional catalyst that we can expect before the cash runway? Thanks so much.

Michael Parini: Thanks, Dae Gon. I think we’ll split up in three questions. Maybe I’ll take the first on 190. I mean, let me start by saying certainly a difficult decision to pause the program, but given where we are financially in the market conditions, we feel strongly that putting our full weight behind 201 is the right decision for Freeline and for patients. And so, it was nothing to do with what we observed in the third patient or ongoing surveillance of patients 1 and 2 in that study. 190, we’re not sharing data at this time on patient 3. We did dose the patient back in September of last year, but what I can say is, 190 was well tolerated. The profile was consistent with what we observed in patients wanting to and importantly on your question of troponin and myocarditis.

We did not observe an increased cardiovascular risk even with the doubling of the dose that we used in the second cohort. We will share data from that program at the right time, but right now, we’re really not sharing anything beyond that. And just singularly focused on 201. The second question I think is about GALILEO and I know Pam and I and the whole team have put a tremendous amount of work behind getting that program going and we’re really pleased with the progress we’ve made in the last few months. It certainly has had challenges just in the external market and challenges with using a disruptive technology in a relatively well-established physician practice paradigm. I know Pam, you want to talk a little bit about, sort of what we’ve heard from investigators in terms of interest, but also some of the steps that we’ve taken to really prepare that program for success.

Pam Foulds: Sure. Thank you. So, as Michael said, we are really pleased with the tremendous progress we’ve made in the Gaucher program in GALILEO-1. And we are in the midst of a big momentum wave, as I’d say. We’ve €“ not only have we met live with all of our investigators, both Michael and I and multiple members of the team. We’ve had a lot of good feedback from them on clear appreciation of the unmet need that remains. I think that’s important. We have heard a clear appreciation of the potential for gene therapy in Gaucher. We’ve also heard very clearly their interest and intrigued with our non-clinical data and their excitement into how that will translate into patients in our program. We’ve also spoken with a number of patient organizations as appropriate.

And they too have been very interested and excited and are partnering with us again as appropriate to share our €“ to share our trial, to share information and to give us feedback and that has been extremely positive. We have been focusing heavily on enrollment. We have made tremendous strides. We are working across 8 countries now, approval in 8 countries over 15 centers with 8 actively enrolling and working with us right now. We have another few over the next few months coming along as well. We are and continue to screen patients that has been going exceedingly well. We’re very excited about that. Also, we’ve been really focusing on execution. So, as I mentioned, getting sites up and running as well, but also in terms of looking across multiple patients screening, drug shipments, helping with scheduling of screening activities.

We have had a lot of great activity with that. And so, we are feeling very confident for our GALILEO endorsing.

Michael Parini: Thanks, Pam. And maybe, I think the third question had to do with our cash runway. We have taken a number of steps Dae Gon as you saw in our release to extend our cash runway into Q2 2024, and we absolutely are hyper focused on spend right now as you can imagine. And so, we are looking forward to dosing patients and really driving data in the third quarter of this year, which we think will be an important catalyst for the company. Beyond that, we continue to work on operational efficiency and certainly are open to business development and other opportunities, but nothing specific to say beyond that.

Dae Gon Ha: Thanks so much.

Operator: Thank you. We will now take the next question. It comes from the line of Yun Zhong from BTIG. Please go ahead. Your line is open.

Yun Zhong: Hi. Good morning. Thank you very much for taking the questions. I wanted to confirm that you are going to use the same immunosuppression regimen in the Gaucher study, and also I assume those patients will be allowed to discontinue ERT or SRT at some point once they have met certain criteria?

Michael Parini: Hey, Yun. Thanks for the question. Appreciate it. Maybe Pam, do you want to comment on the immune suppression regimen we’re using in 201 and GALILEO study and how ERT or SRT cessation works?

Pam Foulds: Great. Sure. So, the Gaucher trial has the same new management algorithm or recipe, if you will. And importantly, within all of our clinical trials it does allow for individualization with the physicians and in discussion with our medical monitors here at Freeline. So, importantly, patients, a number of weeks, about 3 weeks into their treatment, they have the ability to start prophylactic prednisolone, as well as tacrolimus. Importantly, as I said too, that all patients, including those in GALILEO, will have the ability with their physicians talking with their medical monitors determine what is the best path for each individual patient. And that could be slower tapering, faster tapering removal of the medication completely.

So, there’s a lot of variability that is going to be allowed and is allowed already in these clinical trials. As far as removal of their current therapies, the protocol does call for that to occur. What it does €“ what we have made the change a number of years ago was to allow for a short period of overlap to ensure that there is coverage during those early weeks. At about the 3-week time point, the physician then will be looking to understand based on the enzyme levels, the GK’s enzyme levels to withdraw ERT or SRT at that point.

Yun Zhong: Okay. A follow-up question then. Looks like it’s €“ at this point, it’s still an ex-U.S. study. So, do you have an IND open in the U.S. please? Thank you.

Michael Parini: Yes. Thank you. We do have an IND open in the U.S. And we have multiple sites coming online. I think we have one site that’s fully approved and screening patients and then we have I think three additional sites that we’re bringing online really later this month and next month. So, this is a truly global study.

Yun Zhong: Okay, great. Thank you very much.

Operator: Thank you. There are no further questions at this time. I would like to hand back over to the speakers for final remarks.

Michael Parini: Well, thank you everybody for participating in today’s call. Before we close, I would like to thank the Freeline team, as well as our study investigators and the patients who are participating in our trials, the IR team, and management team are standing by. If you have additional questions, just reach out to Naomi. Thanks, everybody.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.