Genocea Biosciences, Inc.
Q3 2017 Earnings Call Transcript

Published: 5 Nov 2017

[Operator:]

Good morning and welcome to the Genocea Third Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that the call is being recorded at the Company's request. At this time, I'd like to turn the call over to Rachel Frank of Stern Investor Relations. Please proceed.

[Rachel Frank:]

Thank you, Operator. Good morning and welcome to Genocea's Third Quarter 2017 Financial and Operating Results Conference Call. This morning we issued a press release that outlines the topics that we plan to discuss today. This release is available at genocea.com under the Investor Relations' tab. During the call today, Chip Clark, President and CEO, will discuss advances in Genocea's immuno-oncology programs, and then Jonathan Poole, CFO, will review the financial results. During the Q&A, Jessica Baker Flechtner, Genocea's Chief Scientific Officer, will be available as well. Before we begin, I would like to remind everyone that statements made during this conference call relating to Genocea's expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the Safe Harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from those forecast due to the impact of many factors beyond the control of Genocea. Genocea expressly disclaims any duty to provide updates to its forward-looking statements, whether as a result of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Genocea's 2016 annual report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. It is now my pleasure to pass the call over to Chip.

[Chip Clark:]

Thanks, Rachel. Good morning everyone. Thank you for joining us today as we discuss our third quarter results and update you on our advancing immuno-oncology programs and other corporate matters. Our new vision is clear, to help cure cancer through cancer vaccines, and we're focused on value creation specifically through both the development of our own neoantigen vaccines and through partnering our platform for cancer vaccine antigen discovery and development. We believe Genocea has an advantage in this exciting cancer vaccine field, which comes from our ability to identify the correct vaccine antigens, since having the right antigens is a critical determinant of a vaccine's ability to mount the optimal immune response against a patient's cancer. So, what makes us different? It's our core technology, ATLAS, which is our proprietary neoantigen identification platform. Identifying the right vaccine antigens is perhaps the greatest challenge in the neoantigen vaccine field and one we solve with a unique proposition. But let me highlight why neoantigen selection is so crucial to vaccine success before explaining our decisive advantage in selecting such antigens. Why is antigen selection so crucial? The answer is straightforward. If the vaccine includes the wrong neoantigens, the vaccine misses the target and works sub-optimally, if it works at all. Naturally, if it stimulates a response to the right target, the vaccine should work optimally. There were recently two papers published in Nature that highlight this issue. Two neoantigen vaccine companies, NEON and BioNTech, vaccinated patients against what they predicted to be the right neoantigens. But using rigorous immunological assays, they themselves showed that patients' immune systems barely registered an immune response to most of the predicted vaccine antigens. So it should come as no surprise that the vaccines, while proving the general neoantigen vaccine concept, leave much headroom for improvement in both immunological and clinical responses. So, why is identifying the right neoantigen such a challenge for the field? There are two interrelated answers. First, there are so many candidate neoantigens, and second, the predictive tools for shifting through these are so limited. On point one, many cancers have a high mutational burden, meaning each patient may have dozens, hundreds or even thousands of personalized mutations as candidate neoantigens. And the conventional tools for identifying neoantigens from those hundreds or thousands of candidate antigens are fundamentally flawed. These in-silico tools amount largely to educated guesswork based on assumptions about how the immune system will respond to different potential antigens. But the evidence is that these in-silico tools only have a 20% to 30% predictive power in certain populations for CD8, the so-called killer T cells, and do not even crack double-digits for the essential CD4 T cells that help CD8s. So there is limited predictive power for limited populations. The truth is, no one knows yet why a T cell chooses a specific antigen. And that fact that T cells choose antigens explains why Genocea is different and why we can set ourselves apart as leaders in this exciting new field, because with ATLAS we are not making educated guesses, we are letting patient's own T cells tell us what their own true neoantigens are, showing an individual's immune response to their cancer in the lab. With ATLAS, we find the right neoantigens to make better vaccines. How does ATLAS work? We take patient's own antigen-presenting cells or APCs and their own T cells. We feed every candidate neoantigen into the APCs and let the T cells through the measurement of cytokine responses tell us on a per antigen per T cell type basis which are the true neoantigens. So we can tell right away if any specific mutation is a true neoantigen, and further, whether it's a good or bad neoantigen, meaning does it stimulate the immune system or is it inhibitory. And the beauty of ATLAS is that it works faithfully for both CD4 and CD8 T cells in hot and cold tumors, and most importantly, for all patients. So, regardless of patient or cancer type, we have we believe the best means to choose neoantigens. Our ATLAS technology, invented by our scientific founder, Dr. Darren Higgins at Harvard, is protected by a family of patents and has been optimized here at Genocea for the past decade. We have continued to develop preclinical data, which we believe shows ATLAS' superiority over the in-silico predictive tools. For instance, in a head-to-head study, in a patient with non-small cell lung cancer, we isolated about 200 personalized mutations. While standard in-silico tools predicted a large number of false positives, that is antigens we showed the patient's own T cells do not recognize, ATLAS found many other neoantigens that were not predicted, and importantly, also showed that some antigens were inhibitory, potentially shutting off a patient's immune response. As we mentioned in today's press release, we'll be presenting some compelling new ATLAS data at next week's SITC Meeting, which will highlight ATLAS' differentiation in neoantigen identification and its promise in antigen identification for shared antigen vaccines as well. We are also using ATLAS in our lead cancer vaccine program, GEN-009, for which we expect to file an IND in early 2018. In our first trial on a per patient basis, we will collect tumor and blood samples, we will identify the unique mutations in each patient's tumor, and we'll then feed all of those potential candidate neoantigens into ATLAS to identify the true neoantigens to include in that patient's personalized vaccine. We will then manufacture and deliver each patient's vaccine by combining synthetic long peptides with an adjuvant. And on this point, we've built a network of supply-chain relationships which will enable efficient manufacture and release of GEN-009 for patients. With this first in-human study, we aim to initially demonstrate superior immunogenicity of our vaccine across a variety of cancer types in patients with no existing evidence of disease but high risk of relapse. We will also continue to follow the clinical outcomes of patients in the trial. As I mentioned, we anticipate an IND early next year and then expect the initial immunogenicity readout from the trial in the first half of 2019, and we are developing a neoantigen vaccine pipeline behind GEN-009 with a next-generation vaccine program with an optimized delivery mechanism aimed at stimulating an even greater immune response while reducing both needle-to-needle time and cost of goods. We anticipate an additional IND on this next program, GEN-010, later in 2018. So it's a very exciting time at Genocea, not just with GEN-009 and its potential for important milestones over the next 12 to 18 months, but also down the road with next-generation personalized vaccine programs. In ATLAS, we have also something that we can partner broadly. We have early-stage programs for tumor-associated antigens in a few major tumor types and for EBV-related cancers where we have identified novel T cell antigens in this widely studied virus. Finally, I will remind the audience, we recently announced we are seeking strategic alternatives for GEN-003, our Phase 3-ready immunotherapy candidate for the treatment of genital herpes. These discussions are ongoing and of course we will update the market as soon as we have material news to share. With that, why don't I turn it over to Jonathan to discuss the quarter's financials before we open up the call to questions.

[Jonathan Poole:]

Thanks Chip. As you know, we ended our third quarter announcing a restructuring of the Company to focus exclusively on immuno-oncology and cancer vaccines. This restructuring include the downsizing of approximately 40% of our workforce, resulting in a charge of approximately $1.1 million for employee severance benefits and related costs. A large majority of these amounts will be paid in the fourth quarter of 2017. In addition, we incurred approximately $0.5 million of expense due to contract termination clauses that we anticipate will result in future cash payments, and approximately $1 million in non-cash asset impairment charges. Today, we reported cash and cash equivalents as of September 30 of $22 million, compared to $35.2 million as of June 30. Our guidance hasn't changed from our announcement at the end of September, with those funds expected to meet our operating expenses and capital expenditure requirements into mid-2018. R&D expenses for the quarter increased $1.3 million to $10.2 million from the same period in 2016, and this increase was primarily driven by higher external manufacturing-related expenses and increases in compensation to support both the clinical drug supply and clinical trial planning activities in support of the previously planned GEN-003 Phase 3 program. Spending increases on our immuno-oncology and cancer vaccine programs were primarily driven by increased manufacturing, consulting and professional services fees in anticipation of the expected filing of an IND application for GEN-009 in early 2018. Increased spending on these programs was offset by lower costs on infectious disease programs previously discontinued in 2016. G&A expenses for the quarter were broadly flat at $3.8 million, compared to $3.6 million for the same period in 2016. Finally, net loss was $16.9 million for the quarter, compared to a net loss of $12.8 million for the same period in 2016. I'll now pass the call back to Chip to wrap up.

[Chip Clark:]

Thanks Jonathan. So, looking ahead, we believe we are well-positioned to be the leading next-generation cancer vaccine company. 2018 will be an important year towards achieving that goal as we expect to file our first cancer vaccine IND and start our first cancer vaccine clinical trial. We are also actively looking at technologies to advance GEN-010, which will combine novel delivery technology with ATLAS to potentially deliver the next wave of products into the clinic for Genocea. We are also looking at partnership opportunities both for ATLAS and for GEN-003. We have a great Scientific Advisory Board who are supportive of our strategy, and they and we are excited about our potential to develop effective, best-in-class neoantigen vaccines. We'll now open up the call for Q&A. Operator?

[Operator:]

[Operator Instructions] Your first question comes from the line of Phil Nadeau from Cowen and Co. Your line is open.

[Phil Nadeau:]

First, Chip, one on the trial that you are starting next year with GEN-009, could you talk a little bit about how you will establish proof of concept in that study, given that the patients won't have disease but it would be a high risk for progression, not all would eventually progress, so what mixture of kind of progression data as well as immunogenicity results in your mind would serve as proof of concept of the strategy?

[Chip Clark:]

It's an important point. Patient selection is crucial to successfully executing on the clinical trial and the basic idea is this; following the lead established by the companies I mentioned previously, first showing that a vaccine can stimulate an effective immune response to the antigens in the vaccine is the first crucial step to proving the concept for the vaccine. And so, that's why we are keyed specifically on looking at the immune readouts to the vaccine to GEN-009 in this clinical trial. Now specifically you said, what is our target? If we look at the results others have reported using rigorous immunological assays, we saw almost a zero CD8 T cell responses to the vaccine cargo and CD4 T cell responses that were less than 50%. So, our goal is to do substantially better that we would expect to see an immune response to the majority of the antigens that we put into the vaccine. And of course the bet we're making is that because we are actually recalling a patient's own response to their cancer, we'll be well-positioned to do so through ATLAS.

[Phil Nadeau:]

Got it, great. And then second question is just generally on partnerships. Are you actively pursuing other partnerships for the ATLAS technology that maybe could bring in upfront payments over the next year to help extend your cash runway?

[Chip Clark:]

Yes, you're making a couple of critical points, Phil. So, first of all, we believe that the ATLAS platform is differentiated, and on that basis we are in discussions with a variety of companies, which could position us to do exactly the kind of deal that you are speaking to. The notion that finding the right antigens to make the best possible vaccines is not something that we can fully exploit, the cancer field is big enough that we could make access to the platform available to others to optimize their vaccine platforms as well. And of course we continue to look, as we said, at GEN-003 partnership opportunities. We see a couple of different ways that we can be bringing in non-dilutive capital over the coming months and quarters to enable us to succeed in delivering on the vision we have outlined earlier.

[Phil Nadeau:]

And then the last question just is on those GEN-003 partnership opportunities. Could you give us some sense of how confident you are you'll be able to get one of those done or is that not possible because it's still early days in your process?

[Chip Clark:]

It's not early days in the process, but it is of course still ultimately impossible to predict. We are engaging with a wide range of potential partners, and the bet is that because there is significant unmet medical need, because we've demonstrated I think a consistent and we believe, based on a lot of market research, compelling clinical profile, and because through our clinical, regulatory, manufacturing, research work, we have a Phase 3-ready asset, that the combination of these factors will make GEN-003 an attractive package. And of course, as I said, we can't say anything until there is something to talk about specifically, but finding the right home for GEN-003 remains a high priority for us.

[Phil Nadeau:]

Great. Thanks for taking my questions.

[Operator:]

Your next question comes from the line of Ted Tenthoff from Piper Jaffray. Your line is open.

[Edward A. Tenthoff:]

Thanks for the update. Quick question if I may just on the longer-term view of neoantigen vaccines in oncology. It makes a lot of sense obviously to look at using these either with immune-stimulatory or immune checkpoint inhibitors. How do you ultimately plan on, what is your longer-term combination strategy?

[Chip Clark:]

I think the vision is broad because the opportunity is large, but of course we're going to follow the data and the science to get there. But the concept of a neoantigen vaccine we believe is compelling because a vaccine that is targeted to a patient's own neoantigens could be kind of a much broader application of personalized medicine than we are seeing in the very exciting CAR-T field. CAR-Ts are providing a tremendous clinical benefit to a narrow number of patients – of the most sick patients in a narrow type of cancers right now, largely hematologic cancers. The potential for cancer vaccines is that because they should be safe and because they should be effective, we could work across solid and hematologic tumors and in patients who are not as sick. So the opportunity is quite large. How the cancer vaccines will work in combination with checkpoint inhibitors remains to be proven, but it intuitively makes sense that they should complement each other, because it has been shown that the clinical response patients mount to disease while being treated with checkpoint inhibitors is largely a response to their neoantigens. So, if the checkpoint inhibitors are to use the very common car metaphor, are taking the brakes off of T cells to potentially create an immune response to neoantigens, the vaccine can provide the steering wheel to make that immune response that much more targeted and that much more effective. We expect complementarity, but we of course need to demonstrate that. And in our planned first in-human study, having first established the safety and immunogenicity of the vaccine, we have built into the protocol the ability to test combinations of GEN-009 with checkpoint inhibitors. So it's an early and important part of our program, Ted.

[Edward A. Tenthoff:]

Understood. Very cool.

[Operator:]

There are no further questions at this time. I turn the call back to the presenters.

[Chip Clark:]

Thank you very much. I will once again reiterate our excitement about the vision, our belief that we'll be in the clinic next year with a compelling and differentiated personalized vaccine based on our unique ATLAS platform, and that it's that platform plus GEN-009 and the products that we generate from that non-dilutive financing opportunities with which we can advance the Company. Thank you very much.

[Operator:]

This concludes today's conference call. You may now disconnect.