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ObsEva SA Ordinary Shares (NASDAQ:OBSV)
Q1 2018 Earnings Conference Call
May. 16, 2018 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to the first-quarter 2018 ObsEva SA earnings conference call. [Operator instructions]. I would now like to turn the call over to Mario Corso, senior director, investor relations. Sir, you may begin.

Mario Corso -- Senior Director of Investor Relations

Thank you, operator. Good morning or afternoon, everyone, and welcome to today's call to review ObsEva's first-quarter 2018 results and business update. On this call, I'm joined by Ernest Loumaye, our co-founder and chief executive officer; Jean-Pierre Gotteland, our chief scientific officer; and Tim Adams, our chief financial officer. During the call today we will make forward-looking statements, and we remind you of our safe harbor language.

We will make forward-looking statements, including but not limited to statements related to financial results and trends; the process and timing of the anticipated future development of ObsEva's product candidates: our gonadotropin-releasing hormone, or GnRH, receptor antagonist, OBE2109; our oxytocin receptor antagonist, nolasiban; and our PGF2a receptor antagonist, OBE022, including clinical trial results and potential regulatory pathways toward gaining approval of our product candidates in the U.S., Europe, and Asian countries, as well as the therapeutic and commercial potential of ObsEva's product candidates. These forward-looking statements are based on ObsEva's current expectations and inherently involve significant risks and uncertainties. ObsEva's actual results and timing of events could differ materially from those anticipated in such forward-looking statements and as a result of these risks and uncertainties, which include, without limitation, risks related to ObsEva's development programs; clinical trial timelines and results; the uncertain clinical development process, including adverse events; the success cost and timing of all development activities and clinical trials; the market potential for ObsEva's product candidates; the accuracy of ObsEva's estimates regarding expenses; capital requirements; and the need for financing and other risks detailed in the Risk Factors and elsewhere in ObsEva's U.S. Securities and Exchange Commission filings and reports, including its 20-F report filed on March 9, 2018, and F-1 form filed on December 30, 2016.

ObsEva undertakes no duty or obligation to update any forward-looking statements contained in this presentation as a result of new information, future events, or changes in its expectations. I will now turn the call over to Ernest Loumaye, our chief executive officer.

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Thank you, Mario. Good morning, good afternoon, everybody. On today's call, we will provide business update, including clinical trial progress, first-quarter 2018 financial results, and our outlook for achieving key future clinical milestones. The first quarter of 2018 was another step forward in ObsEva evolution, as we announced the result of our first Phase 3 clinical trials of nolasiban in IVF, the IMPLANT2 trial.

We'll provide more details on that later. We also completed patient randomization in our Phase 2b EDELWEISS clinical trial for our oral generation antagonist OBE2109 in endometriosis. Top-line results are expected by the end of the second quarter of this year. This event and others make 2018 a year of important data readouts following on all the hard work that took place in 2017 to design and initiate our five ongoing Phase 2 and Phase 3 clinical trials in total for three compounds which are at clinical development stage.I would now like to take a few minutes to provide an update on all three of our compounds.

I will start by reviewing our announcement that took place in February. Positive top-line result of our double-blind, placebo-controlled Phase 3 IMPLANT2 clinical trial of nolasiban for improving the outcome of assisted reproduction, or IVF procedures. IMPLANT2 included 778 women across more than 40 fertility centers in Europe. Either a one-time 900-milligram dose of nolasiban or placebo was administered overly four hours prior to embryo transfer, which could occur either three days or five days after [Inaudible].

The primary endpoint of this clinical trial was ongoing pregnancy 10 weeks post-embryo transfer. The primary endpoint of IMPLANT2 was successfully achieved, with 10 weeks ongoing pregnancy rate of 35.6% for patients receiving nolasiban, as compared to a rate of 28.5% for patients who received placebo. This represents a 25% relative increase with a P value of 0.031. Of notable importance among the 50% of patient who underwent Day-5 embryo transfer, nolasiban treatment resulted in 10 weeks' ongoing pregnancy rate of 45.9% versus 34.7% for placebo, a 32% relative improvement with a P value of 0.034.

A few points of context to provide on these results. Key opinion leaders and prospective U.S. clinical trial center that we've spoken to, have expressed enthusiasm over the result and in particular the Day 5 result considering the 11% absolute and 32% relative improvement. This result really represents an impressive achievement with a potential to have a dramatic impact on clinical practice if replicated in future U.S.

clinical trial and ultimately commercially available. The importance of the IMPLANT2 clinical trials result within the setting of single embryo transfer should be fully appreciated by those who are not familiar with the current state of the art for IVF treatment. We believe that nolasiban has a potential to have a major impact on the field, as it will not only increase the efficacy of the IVF procedure but would also help to generalize a practice of single embryo transfer.Indeed up-to-date, double embryo transfer is still too often used to increase a pregnancy rate by an absolute 8% to 10%. This practice has some dramatic adverse consequence, which are to increase the rate of multiple births associated with double embryo transfer over single embryo transfer, i.e.

about 40% versus 2% according to CDC data. Two, the risk to both mother and infant from multiple pregnancies and associated premature birth such as preeclampsia, birth defect, and mortality. And third, the significant financial cost of twins, triplets birth that are estimated from U.S. $100,000 to U.S.

$400,000 or 5 to 20 times that of a singleton delivery. Thus, nolasiban has the potential of delivering an ongoing pregnancy rate similar to the one resulting from double embryo transfer but with a single embryo transfer, and thus largely avoiding the multiple pregnancies and their serious consequences.Now we look forward to receiving live birth rate data from this trial in the fourth quarter of 2018 as well as the 28 days neonatal follow-up later in that same quarter. Given that approximately 90% of pregnancy at Week 10 are expected to result in live births, we expect to see a level of improvement with nolasiban as compared to placebo that is similar to the 7% to 11% absolute benefit seen in the ongoing 10 weeks pregnancy rate from IMPLANT2.In summary, we're obviously very pleased with the IMPLANT2 result and enthusiastic about its global commercial potential given the relatively small required commercial infrastructure to address the concentrated clinics in major geographies such as U.S. and Europe.

We're presently seeking feedback from regulatory authorities in U.S. and Europe on any additional clinical trial requirement beyond IMPLANT1 and 2. We're proposing to conduct a U.S. clinical trial to be known as IMPLANT3 that we're planning to begin Q4 2018 and which could potentially satisfy all part of an additional requirement in both the U.S.

and Europe. We expect to be able to speak to more definitive plans with regulatory feedback in hand during Q3 '18.Now turning to OBE2109, our oral generation antagonist for the treatment of endometriosis and uterine fibroids. Patient randomization of approximately 330 patient in U.S. and Europe into our Phase 2b EDELWEISS clinical trial for the treatment of endometriosis is now complete.

Top-line results following three months of treatment remain on track for mid-2018 and today we're able to narrow that to the end of the second quarter of 2018. We're often asked what we believe would constitute success in this trial so we believe this is worthy of a few minutes of discussion.Broadly speaking, we're seeking to identify two therapeutic dosing option to serve the needs of this large and diverse endometriosis patient population: 1) one dosage with the potential for alleviating patient symptoms with moderate estrogen suppression that will not meaningfully decrease bone mineral density, thereby not necessitating hormonal add-back therapy, and 2) another dosage that fully or nearly fully suppresses estrogen which won't require adding back estrogen to counteract bone loss.More specifically, the trial has the power to show a 77% response rate for each individual active treatment arm, as compared to placebo response of 45%. For purpose of this trial, a responder is defined as a 30% reduction in pain score on a zero to three verbal rating scale, which combines both menstrual and non-menstrual pain measurement over the final 28 days of the treatment period. As a Phase 2b dose-ranging trial, we're interested in seeing the dose response from 50 to 200 milligram, and would be very pleased if one of the lower dose, 50 or 75, were to show the ability to alleviate symptoms in the majority of patients at an estrogen level around 20 to 60 picogram target range, that is believed to balance symptoms relief with bone mineral density safety.It is important to note that final dose selection of OBE2109 for the Phase 3 program will be made after bone mineral density data at the standard six-month time point.

This would be available by the fourth quarter of 2018. On our two ongoing Phase 3 clinical trial for uterine fibroid treatment, PRIMROSE 1 and PRIMROSE 2, please recall that these studies are two double-blind, placebo-controlled, Phase 3 international clinical trial in women with heavy menstrual bleeding associated with uterine fibroids. Planned enrollment is approximately 1,000 patients in total. The primary endpoint of reduction in heavy menstrual bleeding as measured by the standard alkaline hematin method.Since beginning PRIMROSE 1 and 2 in April 2017, we've been targeting completion of patient enrollment in both studies by the end of 2018.

The PRIMROSE 2 clinical trial remain on track to achieve our enrollment goal, noting that approximately 70% of sites are in Europe. However, our U.S. study, PRIMROSE 1, is expected to reach completion of enrollment in the first quarter of 2019. This change is largely influenced by a higher [Inaudible] rate that was initially anticipated in the U.S.

We believe this [Inaudible] is at least partially a consequence of current entry criteria regarding myoma size. While taking measure to improve the recruitment rate such as enhancement site management and revisiting the myoma size entry criteria and expect to see a positive impact over the coming months.Wrapping up now on OBE2109. We remain focused on providing a potential best-in-class therapy in two large and diverse patient population of women who we believe are likely to best serve by multiple treatment options, with multiple dosing strategies, including both with and without hormonal add-back therapy.Finally, on to our third pipeline program, the potential first-in-class oral and selective prostaglandin F2 alpha receptor antagonist OBE022, being developed to treat preterm labor. In late 2017, we began a Phase 2a proof-of-concept trial known as PROLONG.

This trial will measure PK safety and contraction inhibition, targeting delay of delivery by two to seven days in women who are in acute preterm labor between 24 and 34 weeks of gestation. PROLONG is being conducted in several countries outside of United States with OBE022 added into the standard of care, atosiban. This clinical trial is being conducted in two parts with an open-label Part A measuring PK and safety, followed by placebo-controlled, double-blind Part B subsequently and running up to 120 patients with follow-up extending for 14 days post-treatment to neonatal delivery and infant follow-up. We are very pleased to report there have been babies delivered close to term in the open-label portion of the study with nothing noteworthy to report on tolerability and safety.

We expect interim efficacy result from this trial in an [Inaudible] of the patient in the fourth quarter of 2018. Summing up, the first quarter of 2018 start the year strong with positive IMPLANT 2 results and we look forward to achieving additional clinical and regulatory milestone over the course of 2018.I will now turn the call over to our CFO, Tim Adams, for our financial overview. Tim?

Tim Adams -- Chief Financial Officer

Thank you, Ernest. Good morning or good afternoon, everyone and thank you for joining us on the call today. I will provide a brief update on our results for the first quarter of 2018 and our current financial position. Starting with our income statement, net loss for the first quarter of 2018 was $19.8 million, or $0.54 per diluted share, which compares to a net loss of $15.5 million, or $0.58 per diluted share, in the first quarter of 2017.

This increase in the net loss during the quarter was primarily driven by our investment in our research and development programs. Research and development expenses were $16.3 million for the first quarter of 2018, compared to the $13.1 million in the prior-year quarter. This increase in investment is attributed to the clinical trial progress outlined by Ernest for all three of our development compounds. G&A expense in the first quarter was $3.6 million, compared to $2.7 million in the prior-year quarter.

This increased expense level includes additions to our staff and the non-cash item of equity-based compensation of approximately $2.4 million for the first quarter of 2018. Our cash balance at March 31, 2018, was $95.4 million, reflecting a $14.8 million use of cash in the first quarter, which was similar to the run rate at which we exited fiscal 2017. This cash investment reflects spending in support of our three pipeline assets. Continued enrollment of our Phase 2b EDELWEISS study in Endometriosis.

Ongoing Phase 3 enrollment of the PRIMROSE 1 and 2 clinical trials in the treatment of uterine fibroids the data readout of our Phase 3 clinical trial of nolasiban and continued progress in the prolonged study of OBE022 in pre-term labor. We continue to believe that our existing cash is sufficient to fund our operations into the second half of 2019. Noting that our 2018 cash usage from operations is expected to be meaningfully higher than the $56 million investment from the full year of 2017. In summary, we continue to invest prudently in the development of our three new chemical entities as we endeavor to complete three ongoing Phase 3 clinical trials and two ongoing Phase 2 clinical trials and with that operator, we open the call for questions.

Questions and Answers:

Operator

[Operator instructions]. Thank you, and our first question comes from Kennen Mackay with RBC Capital Markets. Your line is open.

Analyst -- RBC Capital Markets

This is [Inaudible] on for Kennen, congrats on all the progress and thanks for taking the question. As we look toward the endometriosis update, just wanted to get a sense from you on what level of data you'd be looking for in terms of being competitive versus some of the other agents in the class, specifically elagolix. Just wanted to get your thoughts on that?

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Yes, Ernest speaking. So you remember that we're going to report on the 12-weeks data and the total duration of administration is six months or 24 weeks in this trial. So that's the primary endpoint at 12 weeks in term of pain reduction, and pain reduction is going to be translating to responder rate. Responder being defined as a reduction of 30% from baseline for each individual.

We're going to have a responder rate, therefore, on the different dose of the compound and we will have a dose for which we would consider that is viable to have no add-back therapy and that responder rate could be compared to some extent to the elagolix 150 milligram dose per day, which is not requiring add-back therapy. For the higher dose, we will have also an opportunity to see and report the responder rate. Keep in mind, however, that the final decision on what dose will be moved forward into the Phase 3 will need to review the bone mineral density, which will be available in Q4 to finalize the decision on dose and consult the FDA at the end of Phase 2 meeting. So we are intending also to report by end of this quarter, not only the pain reduction in the combined menstrual and non-menstrual pain but also in individual non-menstrual pain and menstrual pain, which are in our protocol secondary endpoints.

Does that answer your question, Kennen?

Analyst -- RBC Capital Markets

Great. Thanks so much, Ernest. That's perfect and if I could just ask a follow-up question. Given the delay that we saw announced by the FDA for elagolix's current NDA potentially relating to some liver issues.

Was wondering if you could just speak to any read-through's just as a class and the level of comfort you have with 2109's profile based on all the diligence you've done from licensing the compound.

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Sure, as you know adverse effect, an adverse event can be either on target effect, on/off-target effect. If you have on target effect, that means it's related to the mechanism faction of the drug, you may have a class effect. If it's off-target effect it's really peculiar and specific to a specific chemical structure of a given compound. It's obvious for us that this is not a class effect.

On top of that, we just through the mechanism of action, if the peptides not metabolized by the liver. I'm saying it's a small molecule and we don't see that the mechanism of action would target it differently. Now in terms of current safety database we have for 2109, we have more than 1,400 subjects exposed in Japanese and non-Caucasian subject and we've obviously a very close monitoring of all safety parameter, including liver enzyme with [Inaudible] process in case of any abnormal move and we can tell you now that we have no concern or no identified safety signal regarding liver toxicity on our 1,400 patients exposed to the drug.

Analyst -- RBC Capital Markets

Perfect. Thanks for all that color, Ernest. Congrats again and looking forward to the upcoming data.

Operator

Thank you. [Operator instructions]. Thank you. And our next question comes from Biren Amin with Jefferies.

Your line is open.

David Wong -- Jefferies -- Analyst

This is David Wong on for Biren. Thanks for taking the question. I guess two on nolasiban. The first is, and thinking about the registration requirements, have you zoned in on a Day 3 versus Day 5 requirement for the embryo transfer protocol.

Are you thinking both or maybe just one of those protocols would be on the label? And additionally, in terms of commercialization are you thinking that you would pursue commercialization solely with just your organization in the U.S. and here would you be looking for a partner in either?

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Yes, this on the IMPLANT 2 data. Based on literature with atosiban. Based on current practice or leading current practice in the United States for the initial and first registration, we're going to focus on Day 5 single embryo transfer. Further development on Day 3 embryo transfer it's still in discussion.

Especially because this Day 3 seems to be more used currently in Asia, China for example than in Europe, in the U.S. so that could make additional development but the current focus we have engaged both with the FDA and national authorities in Europe and we intend to report in Q3 about that feedback and the aim is to register Day 5 single embryo transfer. Regarding commercialization, will ask Tim maybe to comment on that, given that it looks very accessible for a company like both in Europe and U.S.

Tim Adams -- Chief Financial Officer

David, good morning. Thank you for the question. The commercial opportunity for nolasiban is actually very exciting. When you think of the number of IVF cycles across the globe, it's approximately 2 million cycles per year.

In the U.S. market, we see that number of 230,000 plus. Europe is a very exciting market, it's over 600,000. Japan over 400,000 and China just a huge market opportunity.

So when you think of the U.S. market for a second. This is in even Europe this is an opportunity for our company that we could go to market and commercialize directly ourselves because you don't need a huge sales force because you're calling on the number of IVF centers in these different geographies. So in the U.S.

market, we could ramp up sales force let's call it 20 to 25 reps that would go in and call on the IVF centers. And based on the recruitment level, the time of recruitment and readout for nolasiban for Phase 3 was within a 12-month period, we know there is a lot of excitement and a lot of demand for something like nolasiban in the market. So we don't think you need a large sales force to cover the geographies in Europe, maybe the sales force would be a little bit bigger because you're dealing with different countries and different languages but call it 25 to 40 reps over in Europe and again, we just think the patient and the physician excitement in a product like nolasiban would allow a company like ObsEva to take this drug to the market, once approved and commercialize ourselves.

David Wong -- Jefferies -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Julian Harrison -- H.C. Wainwright & Company -- Analyst

This is Julian on for Ram. First off, assuming positive data from a PROLONG trial later this year. What would be the developing path moving forward for 022?

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Yes, I'll remind you that what we have said, that we will have some initial interim data on the PROLONG by the end of the year. That means that the PROLONG will not be complete obviously NDA but it will take more time to complete.

Now having a positive final data on the PROLONG, the question will be, where to develop and how to develop it. We have different options. Currently, you would remember that in PROLONG, we -- in Europe, we recruiting patient who have premature labor and for which they start to receive atosiban, the registered product in Europe for preterm labor, which is an oxytocin antagonist administered IV, and we top the atosiban treatment with our drug. Why did we do that? It's because to have a pure placebo-controlled trial, in other words, to say to a patient at seven months with premature contraction, "You're going to have either a new drug which has never been administered to pregnant woman or a placebo" -- that's impossible. So we can say now, the physician can say, "You have the standard of care, and on top of that, we're giving you an additional chance or placebo to keep your baby in utero and prolong your pregnancy." And we see already that this is helping and the attraction of the protocol for the centers' clearly higher than it would have pure placebo trial.

Now atosiban can be the way to develop it in Europe by topping indeed the standard registered care, but that would not be applicable for the U.S. It will be applicable for Europe and for Asia. So a decision will have to be made, where we focus initially the development. Based on positive data, we can also consider doing some trial in the United States but the definition of the trial needs to be discussed with the authority. We believe that pure placebo trial is going to be very difficult, maybe not impossible, but very difficult.

So to summarize my answer, I would say that we have a clear path forward in Europe and Asia pending the results and we need to further assess whether how we can develop it outside of an addition to atosiban for Europe and for the rest of the world, including the United States.

Julian Harrison -- H.C. Wainwright & Company -- Analyst

Great. Thank you for the added color on that. Just one last quick question, we're going to Phase 2b EDELWEISS study. When you report top-line results later this quarter, do you plan on hosting a conference call?

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Tim, I guess so. Tim?

Tim Adams -- Chief Financial Officer

Yes, we will. We will be excited to share the news with the marketplace. Yes.

Julian Harrison -- H.C. Wainwright & Company -- Analyst

Excellent. Looking forward to it.

Tim Adams -- Chief Financial Officer

The end of this quarter. Thank you.

Operator

Thank you, and I'm showing no further questions at this time. I would now like to turn the call back to Ernest Loumaye, chief executive officer, for closing remarks.

[Operator signoff]

Duration: 34 minutes

Call Participants:

Mario Corso -- Senior Director of Investor Relations

Ernest Loumaye -- Co-Founder and Chief Executive Officer

Tim Adams -- Chief Financial Officer

Analyst -- RBC Capital Markets

David Wong -- Jefferies -- Analyst

Julian Harrison -- H.C. Wainwright & Company -- Analyst

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