Compugen Ltd.
Q1 2018 Earnings Call Transcript

Published: 9 May 2018

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's First Quarter 2018 Results Conference Call. At this time, all participants are in a listen- only mode. An audio webcast of this call is available in the Investor section of Compugen's website at www.cgen.com. As a reminder, today’s call is being recorded. I would now like to introduce Elana Holzman, Compugen's Director of Investor Relations and Corporate Communications. Please go ahead.

[Elana Holzman:]

Thank you, operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO; and Ari Krashin, CFO and COO. Before I begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make projections or other forward-looking statements regarding future events or future business outlook, anticipated progress on Compugen's pipeline program and financing related matters. We wish to caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially. You are kindly referred to the risk factors and cautionary language contained in the documents filed by the company with the Securities and Exchange Commission including the company's most recent Annual Report on Form 20-F, filed March 27, 2018. The company undertakes no obligation to update any projections or forward-looking statements in the future. I will now turn the call over to Anat.

[Anat Cohen-Dayag:]

Thank you, Elana. Good morning and good afternoon everyone. I would like to welcome you to our first quarter 2018 corporate and financial update. In my prepared comments today, I will provide an overview of the key activities and achievements of the first quarter of the year. I would specifically address the status of our COM701 IND application. The preparations for our planned clinical trials and the compelling and differentiated opportunities presented by COM701. Ari Krashin, our CFO and COO, will follow my prepared comments today with a financial update before we open the call for the Q&A session. During the first quarter, we had three major achievements. First and foremost was the filing of our IND for COM701 in anticipation for our expected first-in-human clinical trials later this year. The second relates to the disclosure of ILDR2 as new immune checkpoint that we licensed to Bayer, including the publication of two peer-reviewed paper. These were followed by Bayer’s presentation of preclinical data at AACR and the announcement of their intention to advance an antibody targeting these checkpoints to the clinic later this year. Third, was the signing of license agreement with MedImmune, the global biologics research and development arm of AstraZeneca. This agreement provides with additional capital without impacting our current pipeline development spend. We the signings of our IND for the COM701 program, a first-in-class therapeutic antibody directed against PVRIG. We achieved a major milestone and took a significant step in becoming a clinical stage company. We rapidly advanced the COM701 program, which addresses a newly discovered T cell immune checkpoint moving on a very aggressive timeline from target discovering to identifying within 3.5 years. In parallel, we have put in place the corporate capabilities required to execute drug development, including the recent hiring of a Chief Medical Officer, who is now leading company’s clinical activities and strategy, to an established network of consultants, CROs and in-house capabilities. The IND application for COM701 was submitted following a thorough process that included inputs from key immunooncology advisors and various clinicians needing ongoing clinical time in the immunooncology space. However, during the review of our IND application, which as you know was submitted for a therapeutic antibody targeting a new immunooncology target. The FDA recommended that the dose escalation stage for the COM701 trial begins with a lower dose. We have accepted and are in alignment with the recommendation of the FDA. Accordingly, the FDA placed our IND application on clinical hold until we submit data addressing the evaluation of COM701 using a more tentative assay method as the new lower starting dose. We have already initiated activities to evaluate the new lower starting dose of COM701 with a more sensitive assay method. To be clear, we’re now developing a new assay method. There are several assays currently available to evaluate process at low concentrations and we intend to leverage one of these methods to provide a response to the FDA as quickly as possible. So, we can be cleared to proceed with patients enrollment to the study. While we cannot provide an exact or specific timeline for the resolution of this matter, our current expectation is that this clinical hold and the required changes in the clinical protocol will not impact in any significant way our planned assignment for the trial initiation and our overall clinical plan. Once the IND application is cleared we will provide an update regarding the anticipated timelines for the Phase I. Furthermore, to ensure that we are prepared to quickly start the trial following IND clearance. We are continuing as planned with activities for selection of clinical trials in the United States and with passive side engagement activity. Last month, during the annual AACR conference in Chicago, we held our second clinical advisory meeting. The meeting was well attended by leading clinical investigators from prominent medical centers in the United States, conducting clinical trials in the field of immunooncology. The objectives of the meeting was to share a new preclinical data, our proposed clinical development program in biomarker strategy and we expect feedback. A high level of interest was expressed by the FMDs [ph] in support of the proposed first-in-human study including the intended patient population and biomarker strategy. Our clinical and biomarkers strategy, are premised on a robust biological rational this clinical trial as a promising and differentiated approach in the competitive and crowded landscape of immunooncology trials. The new data we presented in various immunooncology conferences during the first quarter, suggested the PVRIG pathway maybe dominant in certain population including those not responsive to PD-L1 inhibitor. Our preclinical data for tumor that specifically express elevated PVRL2, related to PVRIG and with very low expression of PVR or PD-L1, later in TIGIT and PD-1, respectively. These include breast, endometrial, and ovarian cancer which are largely unresponsive to PD-1, PD-L1 or CTLA4 inhibitor. Therefore, although, our Phase I study is designed as an all-comers trial. Based on our recent preclinical expression data, we aim to enrich the trial with patients with advanced breast, ovarian, endometrial and also lung cancer. While there will be no pre-selection of patients based on biomarker expression, the study design includes a retrospective analysis to assess with a COM701 potential efficacy is correlated with PVRL2 expression relative to that of PVR and PD-L1. The outcome of this study will inform patient selection for subsequent clinical testing. We have also shown that PVR, the ligand of TIGIT is generally expressed in most tumors at low levels than PVRL2, the ligand of PVRIG. This leads us to believe that targeting TIGIT as monotherapy may not be sufficient to stimulate an anti-tumor immune response. In line with this our data suggests that combination of TIGIT inhibitor with COM701 may be required to generate a sufficient and robust anti-tumor immune responses. This is the reason we are developing our own TIGIT antibody COM902 which is expected to enter clinical testing in 2019. As COM701is the first clinical antibody candidate targeting PVRIG to be available for testing with various dual and triple combinations with PD-1 and TIGIT inhibitor. With this latest Compugen in a unique position and with an edge in the competitive immunooncology space. Our COM701 Phase I trial is one of the expected Phase I trial based on our discovery to beginning 2018. In February, we unveiled ILDR2 as a new immune checkpoint in two peer-reviewed paper published in the Journal of Immunooncology and also disclosed it as the basis of the assay immunotherapy collaboration between Compugen and Bayer. Bayer presented ILDR2 preclinical program data, some of which generated in collaboration with Compugen scientists for the first time at AACR is April. The data presented the potential of Bayer’s anti-ILDR2 antibody to serve as a monotherapy cancer treatment, but also in combination with a number of other cancer therapy approved it. In conjunction with this compelling data, Bayer also announced its intention to advance the program to the clinic in 2018. We are of course very excited by Bayer’s decision and look forward to updating you on their progress. This quarter we also entered into a licensed agreement with MedImmune the global biologics research and development arm of AstraZeneca. This agreement represents a clear win-win situation. With this deal, we licensed to MedImmune one of our programs to pursue their development plans for bispecific and multi-specific antibody products for cancer immunotherapy. This deal gave us access to additional capital, specifically in upfront cash payments of $10 million and potential future milestones in royalty without further investing our R&D resources and without impacting our pipeline development plans. The deal with MedImmune also provided us with a recognition of the quality of our programs and with further validation of our computational discovery capabilities and our monoclonal antibody development expertise. With respect to our other programs, we are working to advance our pipeline candidates across the entire development chain from discovery of additional novel targets focusing on myeloid biology as we previously disclosed to target validation and through preclinical activities towards the clinic. Our main objective remains to build a robust sustainable and growth pipeline of immunooncology product, both for internal development and partnering opportunities. On the partnering front, our goal remains to design collaborative arrangements, allowing us to keep, a diversified preclinical and clinical stage pipeline to further enhance corporate value. Before I turn the call over to Ari for a financial overview, I would like to say that advancing a program from computer prediction to IND filings is a tremendous accomplishment, one of which we are very proud of at Compugen. COM701 presents a remarkable program and opportunity. The biological pathway and rational matches the preclinical data and suggested this new pathway is important in patient circulations, whichever is not responsive to PD-1 inhibitor, which addresses and major gap in treatment of cancer patients. In addition, the data also suggests that in some tumor types, TIGIT blockade may require the addition of PVRIG blockade, to achieve sufficient anti-tumor immune response, further supporting the potential impact of these programs. The IND filing is the culmination of preclinical work done over the past 18 months and provide robust support for the potential of COM701 to serve as a key component of cancer immunotherapy and in addressing significant unmet need. There is two clinical trials expected to commence this year, ours and Bayer’s, serve as validation of our discovery capabilities and a clear indication of the potential value of each of these tracing class [ph] to our program. We have made tremendous progress over the last few years in generating our own pipeline, targeting unique drug target, discovered internally and we’re well positioned to execute on the future corporate growth of our company based on these advancements. And with that, I will turn the call over to Ari.

[Ari Krashin:]

Thank you Anat. Our financial results for the first quarter of 2018 released this morning. The drug revenues related to the non-refundable upfront payment from the license agreement with MedImmune signed at the end of this first quarter and the amount was $10 million. To date, this amount has been received by Compugen. Cost of revenues for the first quarter of 2018 of $0.4 million, reflect the royalty spend to the Israel Innovation Authority formally known as the Office of the Chief Scientist or 3.5% of our revenues. R&D expenses for the first quarter of 2018 increased by 5% and total $7.1 million compared with $6.7 million in the comparable period of 2017. Our R&D expenses continue to reflect our preclinical development activities, including those supporting the IND filing for COM701 that was submitted at the end of the first quarter, as well as, expenses associated with clinical-related activities in preparation for the Phase I trial which we expect to begin later this year. General and administrative expenses during the first quarter of 2018 were approximately $2.1 million compared with approximately $1.7 million in the comparable period of 2017. The increase was attributed in part to expenses associated with completing the license agreement with MedImmune. During the first quarter 2018, we had a net income of approximately $0.1 million or $0.0 per diluted share, compared with a net loss of $8.7 million or $0.17 per diluted share for the comparable quarter of 2017. As of March 31, 2018, we had approximately $20.5 million in cash and cash related accounts compared with $30.4 million at the beginning of 2018. The cash balance for the end of the quarter does not include the $10 million payments received from MedImmune after the quarter. The company has no debt. As we mentioned in our previous earning call, our quarter’s gross cash expenditures are expected to be in the range of $38 million to $40 million for the full year of 2018. We plan to start our Phase I trial for COM701 during 2018 as well as conduct IND enabling studies for COM902. Our current cash balances are sufficient to support our entire development plans for 2018 without taking into considerations, additional potential cash inflows from new collaborations or from future milestone from Bayer. [indiscernible] the balance sheet remains a top priority for the management and the Board. Together we continue to evaluate the company's cash status taking into account our development plans, business activities, financing opportunities and market conditions. Each is considered together with a long term interest of our shareholders. Any decisions regarding possible financing will take into consideration these factors as they exist at such time. As well as the capital need to ensure a clear path forward for the company's development or growth. Thank you and with that we will now open the call for questions.

[Operator:]

[Operator Instructions] The first question is from Mark Breidenbach of Oppenheimer. Please go ahead.

[Mark Breidenbach:]

Let me just start with a quick one on COM701, I was wondering if in requesting a new lower starting dose, did the FDA point to any specific reasons or preclinical toxicities to justify their request.

[Anat Cohen-Dayag:]

No, and as you know the FDA does not specify specifically such information. I think that the data that we already shared with investors is giving us and we should give you some comfort. We stated that we have knockout the mice. Where we actually knockout the gene and the mice, we’re doing a lot of studies with them and they are okay. We've done safety study, GLP toxicity study in monkeys and we didn't see adverse effect there. So, we do not anticipate to have any toxicities profile, but that's the information that we have up until now.

[Mark Breidenbach:]

Okay and the plan is still to conduct a combination of COM701 with an anti-PD-1 antibody and if so, how far into dose escalation with COM701 monotherapy would you wait before starting that combination?

[Anat Cohen-Dayag:]

So, the answer is yes. We do intend to in the first combo to start our trial to be with PD-1 inhibitor and how fast, the specific amount of doses, I think it will be good to answer after we have the finalized protocol, after the IND clearance, but I’m just saying, that in general we're looking to get to the physiological relevant dose which we believe our plans in general with effectively overall plans have not changed much. Then immediately to start this combo. So, our intention is to be able to generate the situation we're on the heels of the monotherapy dose escalation data. We will also have a combination data with PD-1.

[Mark Breidenbach:]

Okay. But that would most likely be a 2019 event, if I hearing correctly?

[Anat Cohen-Dayag:]

So, we did not share any guideline with respect to timing and I think that it will be one for us to wait for IND clearance and then we will give some guidance with respect to the overall planning and timelines of the trial.

[Mark Breidenbach:]

Fair enough. Any plans for sharing or presenting preclinical data on COM701 this year at a medical conference?

[Anat Cohen-Dayag:]

In general, we're always open to this and we have plans going forward, but we didn't disclose as of now in which conference that we’ll present. If you're asking me with respect to ask specifically, so we’re not going to present that. But later in the year we will share more information.

[Mark Breidenbach:]

Okay. We’ll keep our eyes open. Thanks for taking the questions.

[Anat Cohen-Dayag:]

Thank you, Mark.

[Operator:]

The next question is from Ted Tenthoff of Piper Jaffray. Please go ahead.

[Ted Tenthoff:]

Congrats on the progress, congrats on updates, especially on the collaborative front. A question quick on the Bayer compound on ILDR2. Can you tell us a little bit about where this could kind of fit in with respect to other combinations? For example, would this may be something where some of your proprietary efforts on PVRIG or TIGIT might actually compliment what Bayer is doing or is this really something that will be developed on its own?

[Anat Cohen-Dayag:]

Yes, okay, so I'll try to address that on the different front. First, the mechanism of action of ILDR2 as a result of the Bayer antibody is very unique. It is an immune checkpoint, but it is acting as Bayer presented. We believe that it is acting on patient timing and cross presentation. So, that's a specific mechanism of action that is very compelling. And with effective combination, two things; first, Bayer was developing this program of course in separate to us, the programs that we developed for targeting PVRIG and TIGIT and this is not playing at the same pathway. Not to say and we didn't check any potential combination, not to say that it may not be tested in the future, but at this point in time, the pathway – from the pathway perspective we don’t see the two pathways overlapping. In terms of combinations the data that we’re presented was actually supporting different type of combinations, both with PD-1 and with other agents. And in general I would say that there was some indication to a situation where more immunogenic tumors with high mutational burdens would be more relevant for their Bayer program, which is also compelling. So, we’ll need to say that as of now these are completely two different paths and each has its own combination and strategy.

[Ted Tenthoff:]

Excellent. That's really helpful to elucidate that a little bit more. Thanks so much Anat.

[Anat Cohen-Dayag:]

Thank you.

[Operator:]

The next question is from Konstantine Aprilakis of JMP Securities. Please go ahead.

[Konstantine Aprilakis:]

Thanks very much for taking my questions and congrats on the progress we've made towards the clinic. I was just looking for a bit more color regarding COM701 timeline. I know you mentioned you can't guide to an IND acceptance, but I wanted to gauge your level of confidence with respect to Phase I initiation later this year.

[Anat Cohen-Dayag:]

So in general as we stated we do not anticipate that the current situation will impact our timelines and the overall plans. Of course, we cannot give a guidance that is more tied that this. We will make sure did we update as soon as we get clearance. I think that one more piece of information that is important, we are proceeding according to plans. In any case we had to make sure that we are collecting the size and that we are taking care of the engagements with the site and all these activities and taking place now. With the anticipation that soon after we have the IND clearance we’ll be able to start the trial. I’ll say that its part of this site selection and engagement, I mentioned in my prepared comments that we had the second clinical advisory meeting and the response was very positive and activities are on track.

[Konstantine Aprilakis:]

Okay. Thanks for that. And if we can just switch gears a bit. Could you give your latest thoughts on CGEN-15001. What are your plans there, are you in partnering discussions, what’s the plan towards the clinic?

[Anat Cohen-Dayag:]

So, in general, we did not change our plans as there were discussed and CGEN-15001 we do not intend to take it alone to the clinic. But as we stated few months ago, we are not going to comment on business development activities and as a point of time when we will have something to share, an agreement that will be signed, investors will be the first to know.

[Konstantine Aprilakis:]

Thank you very much.

[Anat Cohen-Dayag:]

Thank you.

[Operator:]

The next question is from Peter Welford of Jefferies. Please go ahead.

[Peter Welford:]

Thanks. I’ve got three questions left please. Firstly, just on regards to the dosing FDAs requirements there. Was your original plan to start with a dose that you – was going to be below what you thought could be, if you look at the effect there. Therefore now it’s the current plan to just start with an even lower dose? Or I guess, what I’m sort of asking like, how many sort of titrations in the sort of difficult three to two regimen, do you think would now be needed to get to what would be your initial starting dose. Secondly, then just on the assay you regards going to now to commercially available assay. Is there likely to be any meaningful cost impact from this in terms of the Phase I study. And then also just on then the biomarker work. I think you mentioned you were going to assess PVRL2 and PD-1, are you planning to do anymore sort of comprehensive analysis biomarkers as well, indeed perhaps next generation sequencing and also looking at TMV [ph] and potentially any other measures. Thank you.

[Anat Cohen-Dayag:]

Okay. So, I’ll try to address each of your question. I hope that I captured them well. And with respect to the low dose and the lower dose, I think this won’t be right for us at this stage through disclosed what we submitted and what was the request because until the point of time, that the protocol is really, when the protocol is approved clear, this is the time that it will be the right thing for us to share. We don't know that this is – we don't want to commit to anything before the FDA approved. So, in general, we felt comfortable to say that we do not think that the changes in the protocol will impact our overall timelines. And the best thing in order to give some insights as we to the comfort that we have, but I think it won’t be right for us to mention doses at this stage. We will surely relate to it following the clearance of the IND. With respect to the assay itself, I think that it should be clear, it's not an assay that is part of the trial, so its not anything that relates to a cost, its actually an assay, an assay method to assess and more sensitive assays to assess the COM701 in the new lower starting dose. Its an analytical method and actually we're using -- we're not going to develop any method. We’re using a commercially available method. So, that's not -- I don't think that there should be any concern with respect to a cross impact. Now with respect to biomarker strategy and in general we -- and that of course, additional information will be shared after we have clearance and we discussed the trials. But in general, with the data that we generated mainly in the last year and that we published in Q1, in few different immunooncology conferences. It seems to us that PVRL2 as a biomarker actually guide well into indication where that pathway, the PVRIG pathway is maybe more dominant or promising. Mainly when we're comparing to the ligand of TIGIT, PVR, and also when we’re to PD-L1 expression. So, as you know, as the usage of PD-L1 to select patients and as much as it is a helpful to select patients for PD-1 treatment, we believe that it will be right for us to test PVRL2 as a biomarker to guide for or at least to test whether it could guide into patient selection. And the idea is to make sure that in the trial we do a retrospective analysis of the levels of PVRL2 expression and efficacy and safety. That's one thing, but of course, we actually illuminated actually a new light on this pathway of TIGIT, PVR, DNAM and added a completely new pathway there. And we look at the time to study all this assay; PVRL2, PVRIG, PVR, TIGIT, DNAM and PD-1, PD-L1 with a molecular interaction. And we are also going to take the advantage of this knowledge and their agents that we’re using in order to be able to test also the interaction between in this assay within the tumor biopsies. So, we're going to take tumor biopsies and testing a retrospective analysis and compare to efficacy, that’s one point. So, its only PVRL2 and PVRIG. On top of it, of course, we're going to check additional biomarkers that are now very frequently used in trials; mutational tumor burden and immune stereotyping and so on so forth, I think that is not reasonable for us to get now into too much details. But at least to give you the sense that of course, we’ll also use other biomarkers that are commonly used by the industry.

[Peter Welford:]

That’s right. Thank you.

[Anat Cohen-Dayag:]

Thank you.

[Ari Krashin:]

Thank you.

[Operator:]

This concludes our question-and-answer session. I will now turn the call back to Compugen’s President and CEO. Dr. Cohen-Dayag, would you like to make your concluding statement?

[Anat Cohen-Dayag:]

Thank you. In my overview today, I reviewed key events and achievements in the first quarter of the year, including the filing of our IND for COM701 in anticipation for our expected first-in-human clinical trials later this year. We have already initiated activities necessary to address the FDA's request for additional information. As I mentioned earlier in my prepared comments, we do not expect this delay impact our overall timeline. The second relates to the disclosure of ILDR2 as new immune checkpoints and as the target of our immunooncology collaboration with Bayer. Subsequently, Bayer presented compelling drug clinical data at AACR and announced their intention to advance these program to the clinic this year. Third, was the signing of a license agreement with MedImmune in which we monetized one of our program for an application, which we did not intend to develop and four which we received capital to support our internal development plan. Thank you for joining us today. We look forward to continue updating you on these and other developments. Thank you.

[Operator:]

Thank you. This concludes the Compugen Ltd. first quarter 2018 financial results conference call. Thank you for your participation. You may go ahead and disconnect.