Erytech Pharma SA (ERYP) Q1 2023 Earnings Call Transcript


Thank you for standing by, and welcome to the conference call on the proposed merger between ERYTECH Pharma and Pherecydes Pharma. [Operator Instructions]. As a reminder, today’s program is being recorded. And now, I’d like to introduce your host for today’s program, Gil Beyen, CEO of ERYTECH. Please go ahead, sir.

Gil Beyen

Thank you very much. Good afternoon, good morning, bonjour à tous. Thank you for joining us for this conference call and webinar to discuss the proposed merger between ERYTECH Pharma and Pherecydes Pharma. I’m here with Thibaut du Fayet, the CEO of Pherecydes Pharma; Eric Soyer, the COO and CFO of ERYTECH Pharma; and Didier Hoch, who’s the Chairman of Pherecydes Pharma. Thibaut and I will present the proposed merger; and the four of us will be available for Q&A afterwards.

We announced the intended merger yesterday evening; and the press release, the presentation, can be found on the Investors page of both companies’ websites and via the link provided in the press release.

Going to slide 2, before starting, as usual, I’d like to draw your attention to the disclaimer to remind you that this call includes forward-looking statements. And as you know, they all involve risks and uncertainties that could cause actual timings and results to differ materially.

Slide 3, a quick introduction of the presentation — of the speakers for the people new to the ERYTECH story. So I’m Gil Beyen, CEO of ERYTECH, almost 10 years now. Before that, I was CEO of another biotech, TiGenix. And just a small point — anecdote, I’m, by training, a bioengineer; industry, a microbiologist. So the field of what we will discuss is a strong interest to me.

I will let now Thibaut present himself.

Thibaut du Fayet

Thank you, Gil. I’m Thibaut du Fayet, Pherecydes’ CEO. And I’ve been working in the pharma industry for more than 20 years, mainly at Transgene Biotech, in oncology; and then BioMerieux, an IVD company.

Gil Beyen

So thank you. So I think we can go to slide 4, to the agenda, three items. Quick context and rationale for the proposed merger, then a deeper view on the strategic goals for the combined entity, and, finally, a presentation of the transaction terms and milestones.

So first, the context and rationale — and now, going to slide 6. Quick, for anyone new to the two companies and for completeness, a slide with, in short, an overview of both companies. Starting from the left, ERYTECH. ERYTECH is a company based in Lyon in France, has a US affiliate based in Boston, and is listed on Euronext Paris and Nasdaq in the US.

ERYTECH is focused on red blood cells. It’s focused on the development of red blood cell-based cancer therapeutics, and this since its founding in, already, 2005. ERYTECH is a clinical-stage company. We’ve performed more than 10 clinical trials in different oncology indications. And unfortunately, you know the story. Our ambitious Phase 3 trial in second-line pancreatic did not read out positively. This was towards the end of 2021.

We then immediately launched what we called our plan B, which consisted of launching a process to investigate strategic alternatives. This was with the support of the specialized advisor. This led, in April, to the sale of our US manufacturing facility.

We also performed a deep restructuring process, all in making sure that we keep the core R&D team and the core support functions that we thought could be attractive for a potential partner. Hence, content wise, we shifted the focus of our preclinical team to the development of red blood cell-derived extracellular vesicles, exosomes, a carrier technology that we thought had the most promise for the future of the early-stage development.

We have, since that announcement, evaluated a large number of potential partner options. It’s been a long process, and we are now very pleased that we can announce this proposed merger with Pherecydes. We believe there is a great complementarity and fit between the two companies. And so I will explain more. Before I do that, I’ll let Thibaut briefly introduce Pherecydes.

Thibaut du Fayet

Thank you, Gil. A few words regarding Pherecydes. Pherecydes is a company headquartered in Nantes in France and also located in Paris, Romainville. We are listed in Euronext Growth in Paris. Our company is a leading European player in phage therapy against resistant bacterial infections, considered a major public health issue.

We are currently developing three major phage families, Staph aureus, Pseudomonas aeruginosa, and E. coli, which are considered as of the occurring bacterial resistance infection. And with these three families, we have a robust and large IP portfolio.

We are at a clinical stage with an ambitious development strategy around these three programs. I would like to highlight the most advanced clinical trial, which is in Phase 2, targeting prosthesis joint infection patients, which is called PhagoDAIR, with enrollment that’s been initiated mid-previous year, which is on track and for which we expect clinical results in Q1 ’24.

Our treatments, it’s something that we had already been used in real life in the setting of compassionate treatment for more than 65 patients with a very strong support from regulatory agencies, and already demonstrating, first, the tolerance of the phage; and also a promising first clinical benefits, considering that around 75 of the patients have controlled infection at three months. For this clinical positioning around PJI, we have also received, from ANSM, which is the French regulatory agency, in June ’22, this AAC status, which stands for autorisations d’accès compassionnel, enabling us to get first level of indemnities for the treatment.

Gil Beyen

So that presents the two companies. Now, going to slide 7, where, in fact, you would see the heart of the rationale for this transaction. As I mentioned before, ERYTECH has been looking to strategically partner from some time. Because after the halt of our lead program, we were a late-stage company without a late-stage asset, still having cash, still having a core R&D team, still being listed on Euronext and NASDAQ. And we were indeed missing this late-stage clinical program.

And our strategic partnering was really to find a company that could be complementary to us, bring us again clinical-stage asset synergies in a promising area of medicine. And this is what we found in Pherecydes. Pherecydes is, as Thibaut mentioned, active in antibiotics resistance. It’s an area of critical medical need.

They are in Phase 2, and we see a very strong fit and compatibility and complementarity also between the two companies on several aspects. Thibault will go over them in more detail. But at the top level, in the middle — the four points in the middle of the slide, the four major areas where we think the proposed merger really can contribute to value creation is, one, the fact that this merger will allow to accelerate the already ambitious clinical plan of Pherecydes in the AMR fields.

The proposed merger is also intended to bring complementary technology platforms together and teams together to really reinforce the efforts for further developments in the phage technology and, potentially, also in AMR and, potentially, beyond. The third one is complementarity and synergies on the management, the team, and the infrastructure level. I will let — we’ll come to that in more detail.

And then last, but not least, obviously, the fact that the proposed merger is expected to enhance the financing capabilities, a more visible company listed both in Europe and in the US.

So to summarize, the whole idea is to create a true leadership position in an area of critical medical need by building on highly complementary capabilities and by exploiting potential synergies. We’ll now zoom in on the different areas, starting with Thibaut, who will explain the clinical plan and how this can be accelerated. That is on slide 8.

Thibaut du Fayet

Yes. If I move to slide 8 to illustrate this complementarity regarding our clinical strategy — Pherecydes is developing phage therapies to fight against resistant bacterial infection, as already said. Consider that this is major public health issue and mainly owing to generalized misuse of antibiotics. We are now, for a few years, facing this wall of the antibiotic resistance, which is an issue for two main reasons.

The first one is that very few innovative antibiotic have been developed over the last past years, as you see on the left part of the slide, to be able to cope with the surging anti-microbial resistance. On the other hand, the mortality rate is anticipated to boom over the upcoming years.

A recent report, a 2016 Jim O’Neil report, is forecasting global death to increase to up to 10 million deaths a year in 2050. As a benchmark, for instance, the COVID crisis induced around 7 million deaths. It means this amount of 10 million deaths per year is very significant. It’s the reason why there is this urgent need for effective treatment and response. And we consider that phage are among them.

If I move to slide number 9, that’s the illustration of why we consider that this transaction will accelerate our ambitious clinical plan. The first major value driver consists in extending the sites and the countries beyond France for PhagoDAIR trial, which is our ongoing Phase 2, the one targeting PJI patients. We intend, thanks to this transaction, to extend the enrollment in other countries, like Germany, Netherlands, and, potentially, other countries, in order to be clearly positioned as a bacteriophage major European player conducting clinical trials in the most important countries in Europe.

The second important value driver is to be in a position to initiate new trials and two additional company-sponsored Phase 2 trials — one in a patient with endocarditis infection due to Staph aureus expected to be initiated around mid-’23 and the second one in a patient with complex urinary tract infection due to E. coli expected to be initiated in Q1 ’24.

The company expects to open centers in Europe as a whole and, potentially, if possible, also in the US. You would understand that our strategy is clearly to have, in the short term, more and multiple clinical proof-of-concept option, potentially impacting the value of the company.

Gil Beyen

So thank you, Thibaut. Going to slide 10. And so now, from the clinical, Thibaut explained to how can we further build on the platforms. The title says complementary platforms and capabilities. If you look at first sight, it’s quite different — red cells on one hand and phages on the other hand. But if you zoom in more there is — indeed, we found quickly that there are synergies and complementarities to be exploited in this transaction.

I’ll zoom in briefly on the bottom-right corner, ERYTECH’s platform. ERYTECH has two platforms, in fact. One is the ERYCAPS. It’s loading drugs, typically proteins — can be antigens — into red cells. And then the second more recent is what we call ERYCEV. It is making vesicles from loaded red cells, exosome-like technology, where we’ve mainly worked with antigens and also a potential with working on RNA and other more gene type of delivery.

So our capabilities, our drug-delivery, clinical-assay developments — obviously, what we’ve mostly done is in oncology. And then in protein engineering, obviously, we’ve built a — our lead program was a protein encapsulated in the red cells. So that’s ERYTECH. I’ll let Thibaut explain the Pherecydes and how we think there are synergies between these two platforms.

Thibaut du Fayet

If you move to the left part of this slide, there is a short description of the phage technology. I mean, phage are natural viruses that we fish in hospital wastewaters. In terms of mechanism of action, they have a natural tropism for bacteria that they naturally target. They have this unique mode of action and then use bacterial lysis by self replication after they have introduced a genome in the bacterium.

Once the bacterium has been lysed, they systematically search for all the bacteria. Linked to phage, we have endolysin. And endolysin is a protein which is encoded in a gene of the phage genome. It’s why they are related to phage. It’s why we speak in a way of endolysin of phage.

When the phage is replicating into the bacteria, it produce locally an endolysin, which is lysing the wall of the bacterium, the way it works. But now, if we move to the slide 11, I will explain with a few words the complementarity of phage technology and ERYTECH capabilities.

Complementary to phage mechanism of action, it’s potentially, for us, really relevant to use endolysin technology not as a phage protein expression, as I’ve just explained, but as a recombinant protein in itself. This protein induce as well the lyses of bacteria wall, like the phage, but with a different mechanism of action to phage as not being replicative.

And one of the major advantage of endolysin as a recombinant protein is also that they are not generating any resistance, which is a potential limitation of the phage. And with this endolysin recombinant protein, we can target also, complementary to phage, the anti-effective field. And it may be also of our interest in AMR field, but also beyond, like a domain like cosmetics — so all the domain for which the replication of phage may be, regulatory wise, an issue.

In Pherecydes’ strategy, this technology is really important to develop complementary to phage. And it’s why we see here a major complementarity, as ERYTECH has a strong expertise in protein engineering in terms of characterization and also manufacturing. That’s why we could rely on ERYTECH expertise here to help us to generate endolysin candidate, complementary to our phage candidate.

On the top of this endolysin technology complementarity, we consider that ERYTECH will also bring to Pherecydes a very much high value in research, first, due to additional resources, enabling us, as you see on the top of the slide, new targets, new phage. And we are currently working in research, but we could also accelerate the research to identify and to generate these new pathogen to the one that we are currently developing.

Beyond these additional resources, ERYTECH will also bring high-value expertise in skills like immunology, enabling us to better understand mechanism of action of phage endolysin. And they have acquired these expertise as coming from oncology.

ERYTECH, as the last point, has also developed this platform that Gil just introduced, ERYCAPS and ERYCEV. And it’s an outstanding know-how and expertise in innovative drug delivery solution and formulation. And we could also leverage, for phage and endolysin, this platform for optimized delivery. And it’s an option also to use this platform as a wall to develop the carrier technology, including this platform, but also potentially considering phage as vectors, as carriers. And this aspect is also highly synergistic and of high value for our development.

I hand over to you, Gil.

Gil Beyen

So complementarities on the platforms and the technologies, if you now move to the slide 12, we also see strong complementarity and synergies on the management, the team level, and even the infrastructure level. Maybe starting with infrastructure on the right-hand side of this slide.

So the whole idea is that the combined company will be headquartered in Lyon. So teams from Romainville and from Nantes to move to Lyon, where the synergies can really materialize and where — indeed, Lyon is a major infectious diseases hub in Europe — so where we can capitalize on the presence of these institutes that you see here, like BIOASTER or HCL.

There is also an opportunity we have to our — we sold our GMP facility in Princeton, US, but we still kept our somewhat smaller facility in Lyon. Still investigating, but there is a potential here that, indeed, this can serve in the upscaling of the manufacturing of the phage technology.

Like always in biotech, US is important. So the fact that we have this established US presence adds to the combined company. So we will build from that footprint to really get access to these different stakeholders, both regulatory, clinical, and investors.

In terms of team, first of all, the Board’s on the left-hand side. So we are composing a Board with four people from each side. And indeed, you already see no final selection has been made, but we see a lot of synergies. And the Board — so it’s mentioned here — will be chaired by Didier Hoch, and I will have the honor to co-share with Didier. So we already see this working well together.

And even more striking, on the management team — so you see here a very balanced mix of people from the Pherecydes team and from the ERYTECH team. Thibaut will be the CEO of the combined company. Eric remains COO/CFO. And is delegated General Manager of the — delegated director of the company.

And so mixed from — in fact, we didn’t have to force anything. It was quite fluid. The combination of teams are very, very much a synergy on the different fronts. So that, in terms of the ladder — the management and the infrastructure.

Then on the financing capabilities, quickly. So the combined company will have a cash position of approximately EUR41 million. In fact, had a cash position, because this was at the end of December, unaudited figures, approximative. And obviously, we’ll be careful with the money. So that with this cash, there is a runway into the third quarter of ’24, enabling to develop the programs as were described.

And then, obviously, the dual listing effect — this is the ERYTECH listings, both in France, on Euronext; and Nasdaq — provides this access to a broad investor, both in Europe and in US, which obviously will be important as we have an ambitious further growth plan. So that’s about the main rationale for the deal.

Now, to the goal. What is the goal of the whole transaction? I will go to slide number 14 and let Didier explain the ambitious corporate strategy.

Didier Hoch

Yes. I’m on the slide 15.

Gil Beyen

That’s 15, sorry.

Didier Hoch

Yes. This transaction, as you see, is to position the combined company as a leading global player in phage therapy with an ambitious corporate strategy. And I would like here to highlight just five points to . The first one, the expansion of the clinical portfolio in AMR, as we have just said, around the PhagoDAIR acceleration and potential preparation of a Phase 3 initiation of two new anticipated Phase 2 this year and early next year to deliver high clinical value to our company.

The second point, clearly positioning the company as a main player through an intensified international development by opening new sites in Europe, potentially in the US, and also leveraging on ERYTECH’s presence in the US, which is a major asset for our company, in the upcoming months. The third point, as already explained, is really to boost R&D competencies and capabilities by leveraging on ERYTECH’s platform, resource, and capabilities on the top of the one that we have.

The fourth point, we have not that much spoken about this. But it’s implementation of a consistent global manufacturing strategy, consistent with our international development, but considering first, potentially, to leverage on ERYTECH’s Lyon facility but also consolidating our strategic industrial partnership that we have with specific CMOs. And the last point, which is not the least, is the intensification of the business development activities — and I will come back just afterwards on this point — through new research collaboration beyond AMR and also the acceleration of our market access strategy consisting just beyond the development of the asset strategies that I’ve presented.

We have the status. We are interested in considering other options, enabling early access market launch. Because this AAC status, which is the first regulatory registration, is also, for us, paving the way for early access pathway. And it’s really something that we want to push.

If we move to the slide number 16 — yes. I just would like to comment a bit on our business strategy. Our business strategy is really to create value in the clinically AMR core business. Because our core business remain to conduct clinical trials in AMR and leveraging, in this first , our now extensive phage portfolio to look for robust and comprehensive clinical proof-of-concept demonstration.

Beyond AMR, we also have a strategic objective to complement this core business strategy, leveraging on technology value proposition, as already explained, made of phage, endolysin, and carriers, that we can now — that we will, thanks to ERYTECH, propose in the context of a strategic combination between ERYTECH and Pherecydes.

As you’ll see on this slide, in human health, we could consider, potentially, microbiota. But in the non-human field, cosmetic, agro, veterinary — a different domain in which specific regulatory constraint of customer needs may push endolysin versus phage or in which specific carriers might be developed for phage or endolysin. And in this respect, red blood cells or vesicles developed by ERYTECH, or even phage, are very interesting carriers platforms to investigate.

In this area, the objective is to establish, in the upcoming years, ’23, ’24, strategic research collaboration with the industrial leader; valuing this technological asset portfolio made of phage, endolysin, and carriers; and valuing, in a way as well, all our developed capabilities.

Just another slide, I would like to comment. I’m not going too much in detail. With such a strategic combination, our objective as a company is really to create multiple value creation points in ’23, ’24. Number one, it’s, of course, in clinic with FPI in two new Phase 1/2 in the year ’23, ’24; and the completion, of course, of PhagoDAIR, which is our most strategic trial, again, expected for Q1 24.

Number two is research to be in a position to deliver, end of year ’23, a newly characterized target, new program, to be moved to preclinical developments in addition to the one that we are currently developing. Number three, in terms of business development, is establish strategic research collaboration beyond human health, as already explained, leveraging on our technology value proposition thanks to the newly acquired and developed capabilities. That’s the main catalyst that we could anticipate.

I’ll hand you over Gil.

Gil Beyen

Okay. Then going to the third and the last section of the presentation, a view on the transaction details on slide 19 — key terms. So it is a merger of equals. Although technically, it’s an acquisition. It’s a merger by absorption, fusion-absorption, to which ERYTECH will hold 50.5% of the shares of the combined company; Pherecydes, 49.5%. ERYTECH shareholders and Pherecydes shareholders, 50.5% versus 49.5%, on a fully diluted basis.

This ratio needs to be further validated by the merger appraiser that will be appointed soon and is also subject to the approval by the general assembly and, obviously, also subject to the works council consultation. We need the opinion of the works council. This is at the ERYTECH side. We expect that all can be done by the June timeframe, so there is work to be done in between.

Actions to be performed before the general assembly is, first of all, there will be a capital increase on the Pherecydes side. The Pherecydes investors will bring EUR1.5 million in capital increase, major historic shareholders. There will also be a capital increase at the ERYTECH side. 10% of our shares — we will increase by 10% of our shares through a contribution in kind from Pherecydes’ historic shareholders, which will then lead to approximately 10% — a holding of 10% of Pherecydes.

We will also start really preparing the future and doing as much as we can to really already start working on the synergies of the two companies and to hold that in good shape. And to manage that, we formed a joint strategic committee. The composition is the four of us Didier, , myself, and then Thibaut and Eric. The four of us will meet on a regular basis to really follow the whole process between now and the approval at the general assembly. So we’ll make sure that we do this operational integration of both companies.

It’s a merger, and we will also have a new future with a new name. So there’s also the work to be done on finding the new name for the combined company. So that’s on the key terms.

This will have impact on the shareholder structure. And there, we also see synergies in a way. ERYTECH, after the set back at the Phase 3, had become a very diluted shareholdership. No large shareholders after our large shareholder, BVF, sold their remaining shares. So 95% free float, that’s the positive side of it.

Pherecydes is almost opposite, so strong shareholdership of 20%-like blocks from different shareholders and only 20% free float. Now, the combined company will have close to 60% free float and good shareholder base, the core investors base that you see here on the third pie chart. So that’s, I think, another advantage of this merger.

And to summarize — and we think, as we said in the press release, that this is a transaction to benefit for all shareholders. And I can also say both stakeholders and for the employees. But for the shareholders, starting in the middle of the higher financial visibility, two companies with a new story, larger market cap, with increased share volume and liquidity, with value creation through the milestones that Thibaut mentioned, clinical R&D partnering. We think that also can lead that — we’ll do it in an ambitious way as we have with the Nasdaq listing, trying to get a growing interest from new investors from M&A. And then most obviously, this is all by accelerating value creation through the different plans that we mentioned.

So with this, we think it’s a unique opportunity for the shareholders and stakeholders of both companies. And with this, I think we’ve come to the end of the presentation. I’d like to open up for Q&A.

Question-and-Answer Session


[Operator Instructions]. Our first question comes from the line of Jacob Mekhael from Kempen.

Jacob Mekhael

Hi there, and thanks for taking my question. First of all, congrats on the deal. I just had a few questions on the phage technology. If I understood correctly, is this a therapy that will be personalized for each patient strain? And if so, how scalable is the process? And how long does it take — and how long does the end-to-end process take?

My second question was also, do you plan to commercialize the treatment internally? Or is there a plan to find a partner as the trials progress to later stages? And I had one more question on the ongoing Phase 2 trial in joint infections. Is there a plan to expand this trial to the US as well? Or would you then plan to do that if you the Phase 3?

Gil Beyen

Okay. Thank you, Jacob. Yes, that’s for Thibaut.

Thibaut du Fayet

Okay. Many questions. I will start with the first one. Is phage approach personalized? I mean, we are developing a different approach at Pherecydes. The first point — and it’s what we call this approach — not personalized, but precision phage therapy. First, in research, we select a few phages per family so that we can ensure maximized coverage of the patient incident. We did that for Staph aureus family. We have potentially three Staph aureus phage.

It comes to the second point. It enables us to have off-the-shelf product that are GMP manufactured. Because here, there is a main difference with other considering a personalized approach. We are making the Phago therapy enter the pharma industry with GMP manufacturing. And it’s why we have this off-the-shelf lots.

And the last point, the third point, is that we have developed an IVD solution, which is called Phagogram, for which we are confirming, in vitro, the efficacy of the phage that we have developed in that we are just administrating to the patient. The phage, that turned to be positive in vitro, in that with the kind of pre-confirmed efficacy of our phage.

It’s why in terms of lead time, it’s quite short. Because currently, we have a central lab in which we are operating this testing. It lasts not more than 48 hours. And then after that, we can administrate the relevant phage of the relevant combination of phage to the patient. That was the first question.

If we want to commercialize our product, this option, it’s not yet decided. It’s open for discussion. And it comes to your sub-question, will you find a partner?

Currently, we are biotech. I would say that the two strategies open: to find a potential pharma partner once we have demonstrated the proof of concept or vertical integration down to commercialization. As an example, our main competitor in the US, Adaptive Phage Therapeutics, they want to be vertical integrated. And they intend to commercialize their product.

I think it’s still a decision to be made. What we can tell you is that our early access pathway that we can leverage, it’s also, for us, a very key point to consider. Because it could enable us to commercialize our product in not such a long time frame. That’s why it’s work to be done.

And then your fourth question related to PhagoDAIR Phase 2 trial, currently, the Phase 2 trial is in Europe, mainly in the countries I’ve just spoken about. Our intent currently is to initiate a Phase 3, pivotal Phase 3, in Europe and in the US. That’s the current plan.

But for other trial, there is an objective also to consider the US for new sites. Is it answering your question?

Jacob Mekhael

Yes, it does. Yeah. I appreciate that. Thank you. And also, I just have one more question about the phages. So where do you obtain those phages from? Is there a library that you use? And is there some competitive advantage that you can gain from that versus other competitors?

Thibaut du Fayet

Yes, we have, internally, a library of phage. We are regularly fishing for phages. As I’ve said, we find them in the wastewater of hospital. And then, we have this library of phage that we are selecting and characterizing so that we select the most relevant one. But again, this library is large and regularly updated.


[Operator Instructions]. And I’m not showing any further questions from the phone lines at this time.

Gil Beyen

Okay. Then I thank everyone for your participation and attention today. You can imagine that we will be busy in the coming weeks and months. And obviously, we will keep you posted on our progress. In the meantime, we wish you all a good rest of the day, and speak soon.

Thibaut du Fayet

Thank you very much for your time.


Thank you. Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.