Genocea Biosciences, Inc.
Q4 2017 Earnings Call Transcript

Published: 15 Feb 2018

[Operator:]

Good morning and welcome to the Genocea Fourth Quarter and Full Year 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we'll open the call up for 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 fourth quarter and full year 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. Joining 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. Jessica Baker Flechtner, Genocea's Chief Scientific Officer, will be available for Q&A 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 quarterly report and Form 10-K for the fiscal quarter ended September 30, 2017 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. And let me extend a special welcome to any new investors and analysts who maybe on the call today to discuss our financial results and to hear an update on our advancing immuno-oncology programs. I want to start by saying, how pleased we are with the progress that Genocea team has made since our last fall decision to focus exclusively on immuno-oncology, developing next generation cancer vaccines and broadly applying our ATLAS antigen identification platform to cancer. As you know we recently completed a $55 million financing to support this exciting new strategy. This financing was led by top Lifescience’s investors, including NEA and Vivo Capital. We believe our ability to attract investors like these is a strong endorsement of our new strategy. The Genocea team and especially the ATLAS technology platform, which we believe is our key differentiator. We expect this raise will enable us to report our first clinical data from GEN-009, our lead cancer neo-antigen vaccine candidate in the first half of 2019 and to have begun enrolling the larger portion of our Phase 1/2a program. So, looking at the big picture, why is now the right time for us to be focusing on immuno-oncology, cancer vaccines and our ATLAS platform? There are a few reasons I’d like to highlight today. Over the past several years there has been a significant acceleration in our understanding of how T cells can kill cancer cells. We all know the advances in understanding the checkpoint blockade and how to remove the breaks from the T cell arm of the immune system to fight cancer. We also better understand the critical role that neoantigens play in the effective response, which 20% to 30% of cancer patients have to such checkpoint inhibitors. We focus on immuno-oncology because of the promise of neoantigen vaccines, specifically the promise of a neoantigen cancer vaccine is to direct and amplify an individual's T cell responses toward antigen targets in the cancer, which will lead to killing of the cancer cells and hopefully curing the patient of their cancer. One can envision using checkpoint inhibitors and neoantigen vaccines in combination to drive an effective and potentially curative outcome in a significantly larger proportion of patients than checkpoints can do by themselves. But the opportunity is not just in these neoantigen vaccines, but specifically in improving on the existing efforts. Early work using in-silico predictive methods to select neoantigen’s for such vaccines has shown enough promise to help validate the concept of neoantigen vaccines, but this early work shows these in-silico tools are at best, marginally effective and that there is much room for improvement. Remember the early work shows these in-silico tools are at best about 20% to 30% effective at predicting neoantigen's CD8 T cells and completely ineffective at predicting neoantigens for CD4 T cells, which are also critically important. This suggests that vaccines built with predicted neoantigens will carry mostly ineffective cargo, a potential wasted opportunity to provide patient benefits. We believe our approach of neoantigen identification using ATLAS is the best way to drive transformative efficacy in personal cancer vaccines. We’re all living a recent example of the importance of vaccine antigens. This year's flu vaccine is woefully ineffective, largely because we incorrectly predicted the right antigens for this year's vaccine. In other words, wrong antigens ineffective vaccine. As we say here at Genocea, targets matter. Our data presented at the SITC Meeting last November reinforced this notion that targets matter. The ATLAS data we presented reinforced my point about the limitations of in-silico methods. Our data strongly suggested that many of the targets identified using such in-silico methods and those being pursued in ongoing clinical studies could fact not be true neoantigens and therefore could be ineffective. So how does that solve this problem? As we've discussed previously, ATLAS uses the patient's own T Cells and antigen presenting cells to recall, not predict their actual neoantigens. In other words, ATLAS can uniquely and comprehensively identify true neoantigens; that is, specific antigens in each cancer patient to which they exhibit a pre-existing CD8 and/or CD4 T Cell response. And ATLAS does this independent of HLA type patient’s genetic makeup and across a broad range of cancers, including those with high or low mutational burden. Moreover ATLAS uniquely shows whether that pre-existing immune response is stimulatory, or good or inhibitory, which would we think be bad. ATLAS guides us to include those good neoantigens and exclude those bad neoantigens from each person's personalized vaccine. And also know how important it is to profile pre-existing responses. Neoantigens of pre-existing response appear to be particularly clinically compelling for therapeutic development as it should not only be easier to boost existing immune responses, but pre-existing immunity has previously been associated with effective vaccination in infectious disease and in cancer. So again, we believe with ATLAS we have the opportunity to develop more effective cancer vaccines. Our first vaccine cancer vaccine to be designed using the power of ATLAS is GEN-009 for which we expect to file an IND very soon. GEN-009 is an adjuvanted peptide-based vaccine that uses ATLAS to identify neoantigens for each patient. We will manufacture synthetic lung peptides for each of those neoantigens, and then formulate into drug product and combine with our adjuvant to create personalized cancer vaccines across a range of cancers. We recently entered into a license and supply agreement with Oncovir for the adjuvant component of GEN-009 called Hiltonol or poly-ICLC. When paired with synthetic lung peptides Hiltonol has shown the ability to induce T cell responses, which of course we believe will be important for driving clinical efficacy of GEN-009. Hiltonol is GMP manufactured has an existing drug master file and has an extensive tolerability record when used alone and in combination with vaccine antigens. Assuming a successful IND filing and FDA acceptance, we expect to start the Phase 1/2a trial for GEN-009 in the middle of this year and enroll patients in a variety of tumour types including melanoma, non-small cell lung cancer, head and neck and europhilo cancers. These patients will have been cleared of disease but have a high risk of relapse. In part A of the trial, we will enroll around six patients and we will make a personalized neoantigen vaccine for each patient and monitor safety and immunogenicity post dosing. We are expecting the first immunogenicity data from Part A of this trial in the first half of 2019. These data will be important as they represent the first opportunity to demonstrate prospectively and in humans ATLAS's potential superiority in antigen selection versus our peers in-silico based tools. The larger parts B and C of the trial, we expect to start around the middle of 2019 when we will be looking at the efficacy of GEN-009 in combination with checkpoint inhibitors and in patients with more severe disease. Alongside these efforts, we are also looking to expand our cancer pipeline, researching optimal delivery technologies to pair with ATLAS identified antigens to create a Next-Generation cancer vaccine that we call Gen 10. In addition, we continue to seek to maximize the value of ATLAS through the exploration of partnerships in cancer vaccines. For example, we presented data to support the use of ATLAS to identify tumor or associated antigens or TAAs as well as virus associated antigens. We have already identified TAAs of potential clinical interest. In fact, we presented two posters at SITC that highlight this research. The first showing novelty AAs identified in colorectal cancer patients for potential use in the vaccine, while also supporting potential development of a non-invasive blood-based assay for early detection and diagnosis of colorectal cancer. And the second, showing TAAs identified in patients with lung cancer for the potential inclusion in a common antigen immunotherapy. We are seeking collaboration to advance these opportunities. We are also looking to partner Epstein-Barr Virus or EBV program having already presented data where an ATLAS identified unexpected antigens of T Cell responses in this extensively studied virus, creating the prospect of development of vaccines against cancer is caused by EBV virus. With this gathering momentum behind our differentiated cancer strategy, we continue to evolve Genocea to meet future needs. With that, why don't I turn it over to Jonathan to discuss the financials before we open up the call to questions. Jonathan?

[Jonathan Poole:]

Thanks Chip. Today we reported cash and cash equivalents of $12.3 million as of December 31, 2017 compared to cash, cash equivalents and investments totaling $53.4 million at the end of 2016 and $22 million as of September 30th 2017. In January 2018 we completed the $55 million equity financing resulting in that proceeds of approximately $51.7 million. Shortly thereafter we entered into an amendment to our loan agreement with Hercules that provides no incremental cost to Genocea or deferred principle payment period of three months commencing on February 1, 2018 and during that time will continue to make monthly payments of interest. The intention of this amendment is to provide a window to restructure or refinance that facility to better line repayment of the debt with our new corporate strategy and clinical milestones. And if this process is successful, we expect to be able to defer significant debt principle payments in 2018 and 2019 relating to the current debt facility. I'll remind you we are approximately $30 million of debt principle outstanding and we'd be looking to defer the majority of those payments to drive an extension of our cash towards the end of 2019. Without assuming the expected benefit from the planned refinancing of the debt facility, we expect that our existing cash and cash equivalents including the recent active financing are sufficient to support our operating expenses and capital expenditure requirements into the second half of 2019. During this time, we expect to report any SITC data from our plan Phase 1/2a trial of GEN-009 and continue our ongoing initiatives to partner ATLAS more broadly in cancer. And we're also continue our discussions with potential partners with GEN-003, our Phase 3 ready immunotherapy for genital herpes. Moving now to R&D expenses for the quarter ended December 31, 2017 which decreases approximately $3.9 million to $7.9 million from $11.8 million in the same period in 2016. Decreases primarily driven by $6.5 million and reduce GEN-003 costs as a result of the strategic shift and restructuring announced in September 2017. Decreases in GEN-003 and our R&D costs were offset by $3.9 million and increased costs on our GEN-009 program as we continue to develop our supply chain and manufacturing capabilities to pass the planned R&D and initiation of single trials for GEN-009. For the full year 2017, R&D expenses increased approximately $4.6 million to $39.2 million from $34.6 million for the same period in 2016. On a program basis GEN-009 other immuno-oncology costs increased by $9.5 million, driven primarily by increased manufacturing costs in anticipation of our expected R&D following for GEN-009. GEN-003 cost increase $1.9 million driven mainly by increased manufacturing expenses in advance of the previously planned phase 3 trials, offset by decreased clinical and operating costs. And increase spending on these programs offset by lower costs on other infectious disease programs, previously de-prioritized in 2016. G&A expenses decreased approximately $1.4 million to $2.5 million for the quarter ended December 21, 2017 from $3.9 million for the same period in 2016. For the full year 2017, G&A expenses decreased $2 million to $13.4 million dollars from $15.4 million dollars in 2016. The drivers of the decrease in both areas were consulting professional services costs, physician related costs and depreciation. Restructuring charges of $2.6 million were incurred for the full year and December 31, 2017 connects to the strategic shift in immuno-oncology. These charges relates to employee severance, employee benefits, contract terminations and asset impairments, of these charges $1.1 million were paid through December 31, 2017. $0.05 million were recorded as equity expenses of December 31 and $1 million were non-cash charges recorded during the fiscal year 2017. And finally, net loss was $10.7 million for the quarter compared to a net loss of $16 million in the same period in 2016. And for the full year 2017 the net loss was $56.7 million compared to $49.6 million for the same period in 2016. I will now pass the call back to wrap up.

[Chip Clark:]

Thanks Jonathan. So, to sum up, we feel we're in a great place right now, well financed with a truly differentiated story. 2018 will be an important year for us, filing rather our first cancer vaccine, IND and starting clinical trials, expanding our pipeline and working to maximize our assets on the business development front. Stay tuned for more. We're definitely excited about the year ahead. We'll now open the call for Q&A. Operator?

[Operator:]

[Operator Instruction] Our first question comes from the line of Phil Nadeau with Cowen. Your line is open.

[Phil Nadeau:]

Good morning. Thanks for taking my questions. Just a couple, first on your choice of adjuvant, can you talk a bit more Chip about why you chose Hiltonol and kind of differentiated versus what else is up there or versus Matrix-M2 that was used in Gen-003?

[Chip Clark:]

Sure Phil. I'll speak to the high-level strategy and I'm also joined by Jessica Flechtner our CSO, who can go a little bit more into the details. But I understand Phil that this is the product of an extensive effort to if you will boil the ocean, drying on our vaccine development experience to really evaluate a wide range of technologies. And at a high level we felt that Hiltonol represented the right combination of sort of available proof in hand, clear mechanism of action and frankly availability. Have just give a little bit more color on what we know about how it works and why we have confidence in it.

[Jessica Flechtner:]

Thanks Chip. I think, its accurate what Chip has already related. We went through an exercise of evaluating multiple adjutants and delivery system internally to identify which would meet our needs and it came to bear that Hiltonol is the appropriate adjuvant for us to bring forward, and it’s because it has an extensive safety record. It has a drug master file that we can use in order to support our IND filing. It’s able to get the right kind of T cell responses, so called TH-1 immunity, to synthetic long peptide. And it was a very fast path for us to proceed into the clinic and with expected safety, which is most important of course and immunogenicity.

[Phil Nadeau:]

Got it. That's very helpful. So, the question is on, I guess the data that you suggest we might see next year at the first proof concert immunogenicity data from your first personalized vaccines. What would in your mind service proof of principle, what level immunogenicity?

[Chip Clark:]

Phil, what we benchmark ourselves in and frankly I think we all bench not just Genocea, but others that we'll be benchmarking ourselves is against the interesting data published in July by our peers BioNTech and NEON in which they showed that with their vaccine they were able to detect X-Vivo responses to the vaccines against approximately 20% of the peptides or the antigens in their vaccine, that's as defined by CD4 T cells responses in the case of NEON's and T Cell responses more broadly by in the case of BioNTech. They didn't specify CD8 versus CD4. So, to be general, we want to do much better than that. I think we would all agree that greater immunogenicity should suggest a greater likelihood of positive clinical response. It's difficult for us today to give a specific number to guide you. But the reasons for believing that we should be able to elicit better immune responses is because again we're using ATLAS to recall existing incidents of T Cell response and only seeking to boost those existing - those preexisting responses through our vaccine rather than taking the chance that as would be likely with in-silico methods that they're - they've chosen antigen that are either not ones for which there is a preexisting response or indeed there could be some sort of inhibitory response. So, as we get closer we may be able to provide more concrete guidance, but just more generally looking to do much better is certainly our goal.

[Phil Nadeau:]

And then last question for me just on GEN-003, you said that you are continuing to explore alternatives, is there anything beyond that you can say about the status of talks, negotiations or discussions?

[Chip Clark:]

Yeah Phil, I really wish I could say more, but I think you can appreciate that any such conversations are confidential. But I'm certainly comfortable in saying that we continue to have discussions with a wide range of potential partner types and it's still our hope given the significant patient need and given all of the work that we've done that, that we think validates the attractiveness of the GEN-003 profile to such patients and the healthcare providers who treat them that we will be able to find such a partner. But I wish I could be more specific than that.

[Phil Nadeau:]

Thanks again for taking the questions.

[Chip Clark:]

Thanks Phil.

[Operator:]

Our next question comes the line of Chad Messer with Needham & Company. Your line is open.

[Chad Messer:]

Great. Thanks for taking my questions and good morning. In the GEN-009 trial, you can start by enrolling patients without evidence of disease but with a high risk for progression. I'm just wondering how you are going to determine or define that?

[Chip Clark:]

Yeah. Chad, thanks for the question. The basic concept is that you know if our aim is to as quickly as possible demonstrate the potential superiority of ATLAS and antigen selection. We want to attempt a trial that looks similar to those run by our peers in the past. And so, what they did is similar to what we will do, specifically we’ll enroll patients who have just recently had their tumor removed and we previously spoke about the specific tumor types and which will focus. But patients who have been declared to be -- to have no evidence of disease or have had their tumors removed they may have received some sort of adjuvant therapy as well. But at some point, they will be declared free of disease and it's at that point that we would be vaccinating. These patients who will - in such patients we would measure initially the vaccine safety and immune response and then given that the tumour types previously mentioned are ones where there is an elevated risk of relapse in a foreseeable window, we would be continuing to monitor these patients for their potential response to sort of development of cancer versus historic control. So that's at a high level I think we would go about that Chad.

[Chad Messer:]

Okay. Helpful. So just to be clear that when you say high risk for progression, that’s basically being defined by you choosing tumor types with the high risk, not by some other factor?

[Chip Clark:]

Indeed?

[Chad Messer:]

Okay. And then finally maybe a potential sort of tougher one here for you, if 20% is the kind of benchmark that you want to do significantly better then how would you interpret them you know getting 20% or more or less of would this be a program still worth pursuing?

[Chip Clark:]

Well I've had my coffee Chad, so I'm happy to entertain tougher questions I guess. So of course, the core proposition of the company is that, we have a better way to identify neoantigens. And so, I want to give ourselves a little bit of wiggle room here but, but certainly we're looking to do better. If we didn't do better than the 20% as described then we'd certainly want to have good reasons for understanding why our trial may have, or our patients enrolled in the trial may have been different. But here, again I want to just re-emphasize why we believe that the chances of having such an outcome is comparatively low because instead of guessing, what is a neoantigen for a patient, we are recalling their actual neoantigens and vaccinating against the best of those. So, if we didn't have significant confidence in the power of the platform to guide us in this way, candidly we wouldn't have undertaken such a strategic pivot.

[Chad Messer:]

All right, understood. Thanks for answering my questions.

[Operator:]

[Operator Instruction] Our next question comes from the of the line of Mike Ulz with Robert W Baird. Your line is open.

[Mike Ulz:]

Hey guys, thanks for taking the question. Just curious in 2018, if we should anticipate any additional data readouts from the ATLAS platform?

[Chip Clark:]

Thanks for the question Mike. There are sort of a few different ways in which we might be able to unveil new data. I understand that there is an extensive effort underway to have a significant scientific presence at major cancer meetings, in other words were submitting or have submitted abstracts based on additional ATLAS insights to several upcoming conferences. So that's that is one. We also continue to do work now to further characterize ATLAS and what we find with ATLAS, and so such ongoing work could lead to additional publication or presentation in this year. So, I think actually those are probably the two that you can bank on. I think it's harder to predict say at trial enrolment. I wouldn't guide you to expect clinical data from that from the first in human GEN-009 trial this year. But in that it is an open label study. The sooner we have interesting data, the faster we can unveil it, potentially even on an individual patient basis. Again, I'm not going to need to expect that in 2018, but there is at least today hypothetically the possibility of having that on the early side of next year.

[Mike Ulz:]

Okay. Great. And then just maybe on GEN-010, if you can give us a sense of some of the technologies you might be considering and then how we should think about potential timelines there?

[Chip Clark:]

Maybe what I will do is Jess to give you the range of technology classes that we eviler have evaluated and/or continue to evaluate. As far as specific timing, this is something that we will be opportunistic about and thoughtful about at the same time. Our primary focus is on GEN-009 execution. Our second focus is on business development to expand the number of ways in which ATLAS is in use to design and develop better cancer vaccines. And so, GEN-010 while important, and important initiative for us this year is, certainly third behind those first two. So, I'm not going to give you a specific timeline for when we might sort of execute a deal to acquire such a technology. But I will ask Jess to tell you at a high level the kinds of things that we are considering. And perhaps, leave it there for a follow up question.

[Jessica Flechtner:]

Right. What we have been doing is extensive work internally and through know literature searches and sticking with partners and really three broad classes of technologies that can be used for our vaccine. The first as you already heard about is the concept of adjuvant and delivery systems. And there are several out there that we have been evaluating or still are currently evaluating. The second class is broadly nucleotide vaccines things like DNA plasmids or RNA which surely heard RNA in the press a lot lately. And so, there are these kinds of delivery modalities that are under consideration. And finally, we are looking at Vector delivery which is the third class. This would be for example using viral vectors using bacterial vectors or some other sort of nimble organism to deliver the antigens into the host, so that we can get an optimal immune response. So those are all work that are ongoing and we hope that within this year we can identify the one that we will choose to pursue and we can certainly give you more guidance as we come to this conclusion.

[Mike Ulz:]

Okay great. Thank you.

[Operator:]

There are no further questions at this time on the call back over to Mr. Clark.

[Chip Clark:]

Thank you all for your attention today. As I said we very much look forward to actually executing on this exciting new plan and additionally look forward to continuing to keep you updated on our progress. Thank you all.

[Operator:]

Thank you for joining us. You may now disconnect.