Compugen Ltd.
Q4 2017 Earnings Call Transcript

Published: 21 Feb 2018

[Operator:]

Ladies and gentlemen, thank you for standing-by. Welcome to Compugen's Fourth Quarter and Full Year 2017 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 and Dr. John Hunter, Vice President, Antibody R&D and Head of our USA. Before we 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 February 16, 2017. 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. I would like to welcome everyone to our fourth quarter and full year 2017 earnings update. In my prepared comments today, I will provide an overview of our key achievements in 2017 mostly with respect to the various programs in our pipeline. I will also focus on our clinical and biomarker strategy for our lead program COM701, a first-in-class immunoncology anti-PVRIG candidate. John will provide additional detail on our IND enabling study and the upcoming IND filing for COM701 as well as on the preparation for our clinical trials. Ari will close our prepared comments today with the financial update before we open the call for the Q&A session. 2017 was a significant year for Compugen in which we made important progress in advancing our therapeutics pipeline and strengthening our core competencies, both in target discovery and validation and therapeutic antibody development. Today, there are four clinical programs originating from our discovery capabilities that have showed for clinical proof of concept. In addition to our preclinical pipeline, we also established an earlier stage pipeline focused on early target and newly arising and promising field in cancer [ph] immune therapy. This early stage pipeline is designed to feed our preclinical pipeline with additional program and to diversify our drug opportunities Our pipeline strategy is to leverage our computational discovery capability to address diverse mechanisms of action, that which the immune systems interacts with the cancer. Targeting new pathways of interactions between the immune system and the cancer may address the tremendous clinical gap in cancer immunotherapy, in which 70% to 80% of the patients do not respond to approved cancer immunotherapy drug or develop resistance to these treatments overtime. To enhance our exploration of new biological pathways in cancer, we augmented our in-house R&D infrastructure by entering into a research collaboration with Mount Sinai Hospital in addition to expanding our research agreements with John Hopkins. These two collaborations focused on enabling a deeper understanding of the targeting our pipeline, especially normal biological function and the role they play in promoting an immunosuppressive tumor microenvironment. In addition, during 2017, we expanded our drug development capabilities, bringing onboard a team of expert consultant and CROs to drive our therapeutic programs into clinical testing. As we advance COM701, our anti-PVRIG candidate into the clinic, we have gained a detailed understanding of the biology of PVRIG and its role in the DNAM CG [ph] immunomodulatory action. This includes insight into the potential importance of this pathway as compared to the CG's and the PD-1 pathways and the promise comes that no one may hold as a treatment option in immunoncology. A clear biological rationale is emerging from the recent clinical data which we published for this noble pathway and this data serves as the underlying basis for our clinical and biomarker strategy. Whereas many drug combinations in immunoncology has been randomly selected for testing which was referred to as throwing spaghetti at the wall, our clinical combination strategy is informed by the pathway biology and by mechanistic understanding of key checkpoint pathway interaction, with supporting data from relevant for clinical model. In previous calls and scientific conferences, we have presented data supporting the PVRIG, TGRL [ph] interaction as distinct negative costimulatory pathways having the ability to immediate immune response against the cancer as well as its interaction and synergy with the CDCVR pathways. The reported data showed that in cases where these two pathways are operating, there is a need to block both in order to sufficiently stimulate the immune system response against the cancer. Moreover, we also explored the intersection between PVRIG's 3D actions and the PD-1 actions and found that COM701 may work in synergy with PD-1 blocker either as dual combo or a triple combo with anti-CD blocker. During the last year, while pursuing IND enabling studies, we developed our biomarker strategy with the goal of identifying patients with tumors in which the PVRIG pathway maybe dominant in order to improve the likelihood of identifying the optimal target patient population for the COM701 Phase 1 trial. In our biomarker work, we tested the expression profiles of the PVRIG CG, CD-1 receptor and [indiscernible] in the tumor microenvironment of centers taken from cancer patients. These biomarker data which were recently presented in three immunoncology conferences and will be further discuss in John's remarks, suggest that COM701 may have potential clinical value in a broad variety of tumor type such as breast, endometrial, ovarian, lung, kidney and head and neck cancer. Many of which are non-responsive to PD-1 inhibitor. Moreover, the results indicate this tumor taken completion [indiscernible] with breast, endometrial and ovarian cancer expressed elevated PVRIG ligand level in comparison with TIGIT ligand level and therefore may have an increased likelihood of responding to COM701 as a monotherapy treatment. Furthermore, we have previously shown that PVRL2 is expressing both patients who are PDL-1 positive and PDL-1 negative, highlighting the potential for combination with PD-1 brokerage and there are potential mechanisms to overcome resistance to PD-1 treatment. As I indicated with these sites of the pathway, we planned our overall clinical strategy and our Phase 1 trial as well as how and at which stage in the trial, we will employee our biomarker insights and strategy. John will provide more details on the new data we presented, the clinical trial design and our overall clinical strategy. John will also share with you details on our -- IND-enabling studies and the upcoming IND filing for COM701. But all-in-all, we remain on track to file the IND application for COM701 towards the end of this quarter as planned and as it customary, we will inform our investor once the IND is cleared. In parallel, we are also advancing COM902, our anti-TIGIT antibody candidate. We are developing our own anti-TIGIT antibody as an integral part of our COM701 program to enable clinical combination. COM701 is a first-in-class drug opportunity clearly differentiate our own TIGIT inhibitor from anti-TIGIT access developed by others in the industry. The work with Bayer as our CMT [ph] manufacturer for COM902, which we reported in November is ongoing, behind the enabling activities, our plan this year in preparation for the IND application anticipated in 2019. We expect to continue updating on these activities and preclinical data throughout the year. Recently, we disclosed the identity of the third immune checkpoint target in our preclinical stage pipeline. The name of this protein is ILDR2 which is the basis for the development of two different first in class drug opportunity. The first is the subject of our collaboration with Bayer, Bayer developing a novel immune checkpoint inhibitor targeting ILDR2 designated by Compugen as CGEN-15012, Bayer is continuing to advance the program through late preclinical development for cancer immunotherapy at an upcoming scientific meeting, Bayer plans to publicly present for the first-time preclinical data supportive of the potential of ILDR2 to serve as a promising product for cancer immunotherapy. This further demonstrate the value and the relevance of Compugen’s computational discovery capabilities. The second sales interest drug opportunity for this pathway is CGEN-15001 and Fc fusion protein consisting of the extra cellular domain of ILDR2 for autoimmune application for which we retain commercial rights. Our development activities for CGEN-15001 continue to be limited with an objective to partner CGEN-15001 as our focus remains on developing in immunoncology product. The publication of two peer-reviewed paper in The Journal of Immunology on the discovery of ILDR2 as a novel immune checkpoint and its use for the treatment further immune diseases, serves as yet another proof for the value of our computational discovery capabilities, which is our unique competitive expense. Only in the field of immune checkpoint, we have already disclosed the names of three new Immune checkpoint we discovered with our computational capabilities. ILDR2, TIGIT, and PVRIG. In addition, to these diversified pipelines, we have our earlier stage pipeline that focuses on myeloid target program. This is a promising new and growing field in cancer immunotherapy, which may offer a complementary strategy to checkpoint in addition and consequently may provide treatment solutions for non-responsive or relapsing patients. Following our decision to enter this field over a year ago, we established versatile capabilities to address novel myeloid target biology. Furthermore, we established a research collaboration with Mount Sinai under the direction of Dr. Miriam Merad, a world class leader in the field of Myeloid biology for the development of novel cancer immunotherapy. We’re building a portfolio of novel Myeloid target which is currently at different stages of validation and therapeutic antibody discovery and we’ll continue to update on our progress in this area. Thank you. I will now turn the call over to John.

[John Hunter:]

Thanks Anat. As Anat mentioned, I’ll be updating you on our progress with COM701 IND enabling activity as well giving a high-level overview of our planned Phase 1 clinical trial and our preparations to that trial. Regarding the manufacturing of the drug itself, we have established a master sale bank that expresses COM701 as greater than six grams per liter in the bioreactors allowing us to produce an up-drug substance in our recent GMP manufacturing run who will meet our near term clinical needs. We have bio-sufficient drug substances that generate ample amount of drug product for Phase 1 clinical use. The drug product is released in January on schedule and recently passed the one-month stability testing required prior to IND filing. The only remaining step prior to clinical use of this drug product is the labeling of the drug vials is planned to be completed in March. On the IND labeling front, the GMP toxicology study has been completed and the reports from the study are being incorporated into our IND filing. Results from the study were unremarkable with no definitive drug related findings with doses up to 100 mgs per day. We were also able to use data from the non-GMP and the GMP toxic study, the model we expected pharmacokinetics, pharmacodynamics COM701 and [indiscernible] providing some insight into our target testing level and the schedules for the file. Based on PK modeling we plan to dose COM701 every three weeks in the clinic which is fairly typical for an antibody therapeutic. Having completed manufacturing and IND enabling activities, our current focus is on the writing and submission of the IND. In anticipation of this, we had a written response only pre-IND meeting with the FDA last October to align expectations and to get their feedback on the proposed clinical plan. So, to reiterate Anat's earlier point, we are on track for filing the IND towards the end of the quarter. Once the IND is filed, the FDA typically has 30 days to review the application and assuming they have no comments, the IND is considered here enabling us to move forward with our plans and start a clinical trial later this year. In parallel to the IND filing, we are evaluating clinical sites for the dose escalation arms of the trial with a goal of selecting three to four sites with a first infusion study later this year. As we have disclosed previously the Phase 1 trial will consist of three arms, the first two arms will be open label outcome of dose escalation studies of COM701 both as a monotherapy embedding combination with a fixed dose of a PD-1 inhibitor. These have been designed to allow a quick transition from monotherapy escalation arm through the combination of escalation arm, the primary goal for each of these arms is to evaluate safety and tolerability of COM701 as well as to establish a recommended Phase 2 dose in both monotherapy and combination therapy. The third arm will involve an expansion cohort in selected patient population with the recommended Phase 2 dose of COM701 with the license focused on combination with PD-1 inhibitors and [indiscernible] indication. Based on recent preclinical expression data, our current focus is on rest ovarian endometrial and lung cancers. the reasons that I’ll cover momentarily Recent expression profiling of PVRIG and exhausted [indiscernible] positive T-cells derived from fresh tumor samples as shown that PVRIG much like PD-1 and TIGIT is commonly expressed in T-cells from multiple solid tumor indication. Furthermore, it is most frequently co-expressed with PD-1 and TIGIT on exhausted T-cells in the tumor and micro environment, which is the target population for reactivation of immune response against the tumor. Since we do expect PVRIG to be present in most tumors, our focus to shifted to its ligand, PVRL2 and assessing candidate patient populations for COM701 treatment, similar to the current approach of using expression of PDL-1, or ligand for PD-1 and stratifying patients for treatment with PD-1 inhibitors. In newer studies that were presented publicly in the last month. We consistently observed high PVRL2 expression and endometrial ovarian breast and lung cancers together with frequent high expression in colon, kidney and head and neck cancers. In endometrial ovarian and breast cancers, PVRL2 which frequently expressed a much higher level than we see for the [indiscernible] ligand PVR and often in cells that were negative for PVR and PDL-1. so, adjusting the PVRIG checkpoint pathway maybe dominant in these tumor types. This differential expression between the two ligand higher levels of PVRL2 relative to PVR, of patients generate a compelling rationale that focused on COM701 monotherapy in patient. Rather than preselect patients in the early arms of the trial, we will be enrolling patients with solid tumors and may enrich for patients with ovarian, breast and endometrial cancers, who we think should have a higher probability of response to COM701. In addition, based on our initial biomarker data, and where possible we will obtain tumor biopsies and perform a retrospective analysis of relevant checkpoint ligand expression, specifically that of PVRL2, PVR and PDL-1 and look at their correlation with response to COM701. While our current plans for expansion cohorts focused on these indication, we well of course guided by the clinical results that patients approve, and we will consider expansion as other patient population as warranted by the data from the escalation study. Our longer-term clinical plans for COM701, involve combination use with our anti-TIGIT therapeutic candidate on 902 as preclinical studies indicate both in synergistic effects on tumor infiltrating with site activation, when PVRIG and TIGIT inhibitors are combined. Based on existing expression and functional data, we do expect to progress to triple combination trials with COM701, COM902 and PD-1 inhibition. As with our pending clinical studies, the rationale and selection of patient populations for the additional combination trial, are data driven and based on the understanding we have developed in the last two years of the pathways involved and their possible relevance in different tumor indications. And with that, I’ll turn it over to Ari.

[Ari Krashin:]

Thank you, John. Our financial results for the fourth quarter and full year 2017 [indiscernible] are in line with our expectation. In general, we continue to reflect the increase in preclinical development activities, including costs associated with manufacturing and IND-enabling studies of COM701 in preparation for the IND for the filing of an IND applications at the end of Q1 2018 as well as increased activities related to COM902 and top of the other programs in our pipeline. As previously forecasted, our total cash expenditures during 2017, amounted to approximately $34 million. For 2018, as we plan to start our Phase 1 trial of COM701 and the IND-enabling studies of COM902, we expect the total growth cash expenditures will be in the range of $38 million to $40 million. Our R&D expenses continue to represent approximately 80% of our overall budget in 2018 and the level of expenses for development activities represents about two-thirds of the total R&D expenses. This increase in our development expenses continue to reflect our strong commitment with this pipeline with the clinic and becoming a clinical stage company in 2018. Now turning to our 2017 financial results, R&D expenses during 2017 increased by 70% and total $28.6 million compared with $24.5 million in 2016. For the first quarter of 2017, R&D expenses was $7.2 million compared with $6.3 million in the comparable period in 2016. The increase in both cases, as mentioned earlier reflect activities around the COM701 and COM902. These activities include toxicology studies, manufacturing costs and other related expenses. General and administrative expenses during 2017 remains approximately at the same level in 2016 and total $7.6 million compared with $7.4 million for the full year and $1.9 million in the fourth quarter of 2017 compared with $2 million in the comparable period of 2016. Net loss of 2017 was $37.1 million or $0.72 per diluted share compared with a net loss of $31.5 million or $0.62 per diluted share for 2016. Net loss for the fourth quarter of 2017 was $9.3 million or $0.18 per diluted share compared with the net loss of $8.5 million, or $0.17 per diluted share for the comparable periods of 2016. As of December 31, 2017, we had approximately $30.4 million in cash and cash related accounts compared with $61.5 million at the beginning of 2017. The Company has no debt. I would like to remind you such as a policy, management and the board presently evaluate the company's cash status in light of its development plan, business activities, financing opportunities and market computation. Each has considered together with the long-term interest of our shareholders strengthening our balance sheet continues to be a top priority for management and the board. Enter against the new collaborative arrangement as well as [indiscernible] other existing on new collaboration which really impact on cash balance and fast forward. Any further decision regarding possible financing will take into consideration all of this factor as they exist at such time as well as the resources needed to ensure a clear path to becoming a clinical development stage company. Thank you all. And with that, we will now open the call for questions.

[Operator:]

Thank you. Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator Instructions] The first question is from Mike King of JMP Securities. Please go ahead.

[Mike King:]

Hi, good morning, and good afternoon guys. Thanks for taking the question. I wanted just to ask about patient samples that you referenced looking at PVRIG expression, PVRL2, I just wanted to know if you expect to and present the correlation studies there, can we expect to see those presented at whatever AACR or some other scientific conference this year because I think we've certainly love to see what the profile looks like. And also wanted to asking conjunction with that, if in addition to looking for immuno dominance as you did, whether you are able to ascertain whether tumor mutation burden played any role in its expression?

[John Hunter:]

Hey, Mike, this is John. The samples that we have looked at to-date, we get through a cooperative, so they are not from trails where we have a lot of data, they are available for fresh tumor samples. We actually presented some of that data publicly. We have a keystone poster that I would refer to you -- refer you to this on our website. And we are continuing to look at a broader sample set and we'll continue to roll that data out probably over the next couple of quarters as we accrue it. Just with regards to looking at tumor mutation burden, we have not really look deeply into that yet. Because again the samples that we're getting are kind of from different sources. We are looking at academic collaborations where we have more dedicated sourced samples. And that will be something we can view as we continue to get those collaborations up and running.

[Mike King:]

Okay, all right. Thanks for the color on that. I wanted to also ask about the financial situation. You guys are starting to run a bit low, $30 million at the end of the quarter. What types of steps do you anticipate taking in order to bolter your capital resources? Thank you.

[Ari Krashin:]

Hey Mike, it's Ari. So basically, just small repeating one, as I said earlier. One of the year with the possibility of $50 million. The cash expenditures for the year estimated to be between $38 million to $40 million. So clearly there is a gap to bridge. But any decision that we will take regarding our cash we'd just need to take into consideration. The various factors including our development plans, potential milestones, market rate condition, and we'll take it...

[Mike King:]

Ari, can you talk about so people got maybe perhaps a better understanding of are there any other upcoming milestones that might be available to you, let's say? To Bayer would they pay you let's say milestone upon commencement of clinical trials presuming that they eventually get to that point?

[Ari Krashin:]

So again, as we also mentioned in the press release, Bayer are planning to present additional data in upcoming conference. Unfortunately, as you know by now, we are not allowed to share the much information about them. But typically, it's industry stand out and for that, we cannot elaborate any further.

[Anat Cohen-Dayag:]

I think Michael, just to add that, of course we stated that Bayer is advancing. And of course, everyone is aware of the fact that we are eligible for additional milestone payments. Of course, we can pay but this is, we are eligible for additional milestones, so this is one source of potential cash inflow. And other source is our potential collaborations. And of course, we are weighing in and reviewing management and the board with the different possibilities, taking into consideration or the different aspects that Ari was relating to in order to make sure that we built this company a clear path to turn into a clinical safe company. So yes, that's the most information that we can share at this stage.

[Mike King:]

Okay. Thanks for taking my questions.

[Ari Krashin:]

Thanks, Mike.

[Operator:]

The next question is from Jordon Santucci of Piper Jaffray. Please go ahead.

[Jordan Santucci:]

Hi. Thanks for taking my questions. This is Jordon on for Ted. Progress updated on the call. I have a question on the triple combination study. I understand the clinical strategies reflects for certain tumors based on your PVRL2 expression for the COM701 study. But when you ultimately begin the triple combination risk any digit, how will this change the strategy and evaluation of certain tumors given the data that you discussed regarding the differential expression of PVRIG and across different cancers?

[John Hunter:]

Hi Jordon. This is John. So, in this discussion we focused on tumor types where we see high PVRL2 relative to the under ligand against PVR and PD-L1. But there are a number of tumors and different indications where we see fairly high expression of all the different ligands together with the receptors. And these would be the target population for doing the triple combinations with the rationale that if you are inhibiting any one of those checkpoint pathways in the context where all three are active you’re not going to get a sufficient anti-tumor response, so there are patient samples that we see where we think it would be justified to explore triple combinations because we do think that all of those pathways are active and all of them have to be inhibited in order to maximize the immune response.

[Jordan Santucci:]

Interesting. Thanks for the color. Do you think this will present on the data at upcoming conferences this year?

[John Hunter:]

Yeah, there’s sort of snippets in it and some of our existing presentations, but I think again as we move towards the triple combination trials in the clinic we’ll certainly be rolling out data that is really targeted at expanding on that rationale and showing those specific patient population.

[Jordan Santucci:]

Great, thank you. Looking forward to it.

[Operator:]

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

[Peter Welford:]

Hi. Thanks for taking my questions. I've got three. Firstly, just on the presentation publications on the ILDR2 with Bayer, I was just wondering that with regards to the autoimmune 15001 programs have the publications triggered any incoming requests I guess or intimation from potential partners or collaborators for that program and have the data I guess triggered in the scientific community and significant interest from potential KOLs? And second that I wondered if you could just give us quick update on 902 manufacturing as where you are with that? And then if I just quick one for Ari can you comment at all on anything about the phasing it’s all of the burn I appreciate you don’t want to give a quarterly guidance but anything at all about how you think the phasing could be during the year? thank you.

[Anat Cohen-Dayag:]

So, I’ll start with the ILDR2 questions, so of course being in the situation where we discover completely new immune checkpoints or better say we link new functions to proteins, we’re doing all the work in-house and with collaborations in order to validate them. Of course, it is different when there is some kind of an external validation from the outside here in this case it comes from a peer reviewed paper too often and thus give a different level of recognition and proof to what we’re doing. So that of course triggers an interest I will of course not share more than that on the business front but for sure this is a proof that get some additional validation at this stage. Needless to say, that these papers were actually showing not only the fact that we discovered the immune checkpoints, but it really has an interesting mechanism affection that could be translated well into first-in-class drug. So that’s on the idea front. I’ll let John respond to the COM902 and CMC with Bayer, John?

[John Hunter:]

Sure. As of now everything is proceeding according to timeline, I don’t think we disclosed to fine detail on this timeline, but we do plan to stay on track with our original 2019 IND filing.

[Ari Krashin:]

Okay. And just to address Peter your last question, generally we assume that the rates during the year will be roughly on an average between 9 to 10 each quarter I guess as we move further along the year without the actual trials. It might increase slightly but I would assume most of the effect of the clinical trial will start in 2019 so 2018 is roughly going to be I would say straight lined more or less.

[Peter Welford:]

That’s great. Thank you. Operator The next question is from Mark [ph] of Oppenheimer. Please go ahead.

[Unidentified Analyst:]

Hi, thanks for taking the question. This one’s probably geared a little bit toward John, I was hoping you could elaborate on your expectations for the safety profile of COM701 as an interest of clinic for instance have the animal studies hinted that substantially differentiated toxicity between PVRIG and TIGIT inhibitors. And also given that you can knock out PVRIG and [indiscernible] don't have a viable animal, I'm just wondering if you're - if where at all it might take a long time to establish an MTD or recommended to safety dose?

[John Hunter:]

Great. So just with regards to the tox profile. We can't really compare against each inhibitor because the data is not public, and we've done our tox studies with COM902 yet. The data that we have in hand I would say is in line with what we've seen in BLA's filings for other immune checkpoint inhibitors. Again, there was really nothing that remarkable in the studies. But to the second question about actually reaching an MTD. We are aware that we may get to a point in the clinic where we reach a dose that we think should be maximum and we don't want to go beyond it. So, it's not a given that we will get to an MTD in the Phase 1 trial, but we have set a cutoff point where we're confident that we'll have full saturation with the drug and where we don't think it make sense to escalate beyond.

[Unidentified Analyst:]

Okay, thanks. That's very helpful.

[Operator:]

This concludes the 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 a concluding statement?

[Anat Cohen-Dayag:]

Thank you. This is an exciting time for Compugen. Becoming a clinical stage company this year is an important milestone for the company. With the diversified portfolio based on our discoveries, we believe our pipeline hold a significant clinical and commercial value which will drive our future growth. I would like to thank you all for joining us today, and I look forward to sharing with you additional information as we progress. Thank you.

[Operator:]

Thank you. This concludes the Compugen Ltd.'s fourth quarter 2017 financial results conference call. Thank you for your participation. You may go ahead and disconnect.