Genocea Biosciences, Inc.
Q1 2018 Earnings Call Transcript

Published: 10 May 2018

[Operator:]

Good morning and welcome to the Genocea First Quarter 2018 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 your questions. Please be advised, this call is being recorded at the company's request. At this time, I'd like to turn the call over to Courtney Turiano of Stern Investor Relations. Please proceed.

[Courtney Turiano:]

Thank you, operator, and good morning. 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 provide a corporate update and review the financial results, and Jessica Flechtner, Genocea's Chief Scientific Officer, will discuss the importance of some of the data recently presented at the AACR Meeting. Both Chip and Jess will be available for Q&A. 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 duties 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 2017 Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Chip.

[Chip Clark:]

Thanks Courtney, good morning everyone. Thank you for joining us today to discuss our first quarter activities and results. As I said in our press release this morning, 2018 has been an exciting year for Genocea. We completed an equity financing in January that netted the company almost $52 million. Following that deal we welcomed Dr. [ph], a partner at NEA to our Board of Directors. We also added to our leadership team welcoming Narender Singh as our senior VP of pharmaceutical sciences and manufacturing, a key position to ensure we advance our lead neoantigen cancer vaccine candidate GEN-009. Most importantly we've made strong progress with our GEN-009 program itself, securing our adjuvant from Oncovir and most recently filing the IND with the FDA. Following acceptance of the IND, we expect to begin a Phase 1/2a clinical trial later this year. As we've discussed previously, this program is designed in three parts. The first part will examine the GEN-009 safety and immunogenicity in patients with a variety of cancers, in which immune checkpoint blockade drugs have been approved. To receive GEN-009, these patients will have attained, no evidence of disease status through prior treatment. We expect to report top line immune response data from this part in the first half of 2019. If the immunogenicity data look good, we will proceed with the next two parts, with one, studying GEN-009 in combination with immune checkpoint blockade drugs in patients with advanced or metastatic solid tumors, and the other studying GEN-009 as monotherapy in patients who have failed treatment with such drugs. As a reminder, we use our Atlas platform to identify what we believe are the right neoantigens for inclusion in each patient's personalized version of the GEN-009 vaccine. Supporting the power of Atlas, our scientists presented hugely important data at the recent AACR meeting. Data that I will ask Jess to summarize. Jess?

[Jessica Flechtner:]

Thanks Chip. We had two poster presentations during the meeting this year. This first was standard research data from our Atlas platform, supposed to analyze neoantigens specific T cells on this from 23 individuals across multiple tumor types of varying mutational burden. In a nutshell, what these data continued to demonstrate is that Atlas is truly challenging the current dogma in the field and with Atlas, we can let patients on T cells choose the right vaccine neoantigens rather than letting software make educated guesses. So, lets run through a couple of the assumptions that were challenging. First, our data challenged the assumption that all antigens are good. What our data show is that this is just not true. We are able to identify both stimulatory which we considered to be good and inhibitory which we consider bad neoantigen; and we are finding that the bad neoantigens actually that outnumber the good. Given this, it’s likely that our peers are including many inhibitory antigens in their vaccine, which we believe could reduce the efficacy. The second assumption commonly made is that neoantigens to which CD4 and CD8 T cells respond are the same. Our data show that this is not the case. There are very little overlaps between the two and in fact, while still having relatively poor predictive accuracy, the algorithms designed to predict CD8 neoantigens were actually better at predicting the CD4 T cell responses that we measured. The implication of course is that the vaccines will not work as well as intended to the detriment of patients. And finally, the biggest challenge we see for our peers is that they are all trying to meaningfully improve their algorithms to more accurately identify neoantigen targets to include the new vaccines; but our research shows that the majority of the assumptions that are being used to further refine their software, namely stronger MHC bindings, greater mutational burden, and that novel mutations result in better antigens, have no correlation with the actual neoantigens we identify with Atlas, using the patient’s ONT cells in antigen presenting cells. So, what does this all mean? Well, it means that the biology is too complex to accurately model today. It also means that when our peers use positive predictive values to defend the strength of their algorithms, they are only telling you a tiny fraction of the story. In fact, for the CDA cytotoxic T cells for example, 70% of those that we find to be true neoantigens for the patient are not predicted by computer models at all, and this is what we see is the key differentiator for Genocea. For our personalized vaccines, we will use Atlas to identify each patient stimulatory neoantigens for both T cell subset and include only those in their GEN-009 vaccine formulations. By doing this, we hope to achieve maximum immune system stimulations and ultimately clinical benefit. The second poster we presented at AACR, focused on a new Atlas model that we have developed in mice that we are calling Atlas for Mouse Atlas. In this case, we profile mouse T cell responses to more than 1600 mutations that were sequenced from mouse skin cancer. The importance here is that we have achieved similar results with mouse Atlas as we have in human Atlas; namely the identification of both stimulatory and inhibitory neoantigens. As a result, we now have a model with which we can better study the inhibitory neoantigens we previously mentioned, including how they inhibit the immune responses, how they may interact with stimulatory neoantigens, and potentially what their clinical impact might be; both alone and in the presence of checkpoint inhibition. Both of our posters got a lot of attention at the meetings and were very excited to have developed these unique tools, and to be conducting this kind of research, which could provide some real breakthrough discoveries in the immuno-oncology and significantly further our understanding of T cell immunity to cancer. We are extraordinarily proud of our team for all of this revolutionary work, which we plan to continue and present at additional upcoming scientific meetings. With that I will hand it back to Chip to spent just a minute going over our top-line financials before we open the call to questions. Chip?

[Chip Clark:]

Thanks Jess, great work. As detailed in today's press release we ended the first quarter with cash and cash equivalent of $51.2 million and since then have added another $3 million or so through the sale of stocks through our existing at the market equity offering program. Also, since the close of the quarter, we refinanced our debt facility with Hercules Capital. As a result, we are updating our guidance and now expect our current funds to meet our operational needs into the fourth quarter of 2019. Our R&D expenses decreased for the first quarter of 2018 to $7.3 million from $9.7 million in the previous year. As you know this reflects decreased spending as a result of our restructuring and pivot to immuno-oncology last September. Our G&A expenses for the first quarter also decreased from 3.6 million a year ago to 3.1 million for the first quarter of 2018. And finally, our net loss was $15.3 million for the quarter ended March 31. We note that this loss does include an approximately $4 1/2 million non-cash expense related to the change in fair value of the warrants that resulted from our 2018 financing in January. So, in summary, we believe we're in a strong position. We are well-funded into 2019, we are excited to be initiating our GEN-009 clinical program later this year, we have become a leader in breakthrough immuno-oncology research, and we didn't talk about this today, but we are also continuing to explore partnership opportunities for GEN-003 of course and with Atlas to fully capture its value, and hope to have some news on the BD front as well. So, we will now open the call for questions. Operator?

[Operator:]

[Operator Instruction] Our first question comes from the line of Mark Pheron with Cowen and Company. Your line is open, please go ahead.

[MarkPheron:]

Hi guys, thanks for taking my question today. You can talk about manufacturing process and where you are today when you hopefully start in the second half of the trial on turnaround time is to actually get a vaccine back to patients and then in a year trying to bring that down over time. What are the lowest-hanging fruits to improve that timeline and what are this?

[Chip Clark:]

Thanks for the question, Mark. Manufacturing is, as you said, hugely important to be able to deliver the vaccine reliably, both in terms of quality and in terms of time to patients; and so, we have spent a huge amount of time focused on identifying the right vendors and knitting them together into a coherent and reliable supply chain. Based on that work, we believe that our turnaround time at least for this initial part of the clinical trial will be somewhere in the order of 18 weeks, needle-to-needle, meaning from the time we received the sequence tumor all the way to the point where we deliver the vaccine to patients. And to put that 18 weeks in context, the kind of landmark papers in the field published in July last year in nature in which a couple of our peer companies and/or their founders presented data from their first human studies. They reported turnaround times, needle-to-needle times of approximately 18 to 20 weeks as well. So, we feel comfortable that at the initial stages of this clinical trial that we are well within the established early-stage benchmarks. Now as you also said, “Our aim is to, like everyone's, is to reduce the needle-to-needle time substantially.” Without talking about specific targets, we do see substantial room for improvement. You asked specifically about the lowest-hanging fruit. One of them is actually shipping, as we move product from A to B to C, et cetera, we take time just with the materials and transit. And so, we would anticipate that if, for example, we were to bring all of the needle-to-needle efforts in-house, we would be able to see significant economies in terms of time. And secondly just more generally as we as sort of inherent in bringing these activities in-house is both investing in scale, sort of more than one peptide synthesizer at the same time for example, and in process efficiency are the other obvious low-hanging fruit. So, we are not going to discuss specific ultimate targets of turnaround time today, but we certainly don't feel as though the peptide plus – there is one peptide plus adjuvant formulation that we are taking with GEN-009, fundamentally disadvantages us relative to other potential approaches in terms of this critical dimension of needle-to-needle time.

[MarkPheron:]

Okay great, thanks. And then as we starting about hopefully getting the immunogenicity data early next year, how do you think about the relative importance of CD4 responses, CD8 responses, and then would you interpret as a good response to be encouraged to move forward?

[Chip Clark:]

Yes. Also, a very important question and one that only becomes relevant when you work with Atlas, because we think we uniquely have the ability to identify both the antigens of CD4 and CD8, but I am going to ask Jess to opine, A about the relative importance of CD4s versus CD8, and then I will answer the question about what is our goal for this clinical trial.

[Jessica Flechtner:]

Thanks Mark. I think we acknowledge that it’s critically important to address the T cell subset in our vaccine, and so we will purposely include neoantigens that are specifically targets of each T cell subset as part of the formulations. And in fact, there has been publications that really point out the importance of CD4 T cells in protection against cancers, particularly in the field of adaptive transfer of T cells where a CD4 clone alone transferred into a patient was able to protect them. And so, we feel very strongly that you cannot ignore the importance of capitalizing on these responses and so as I just said, when we identify the target of the CD4 and the CD8 T cells in these patients, we will include both and we will endeavor to have immune responses in each T cell subset to their specific target.

[Chip Clark:]

So, let me then, Mark, turn to the question of what our goal for the trial is, and the high-level nonquantitative objective of course is to demonstrate that by using Atlas thereby letting the patient's own T cells and antigen-presenting cells identify the right antigens, is to enable us to better select antigens for inclusion in the vaccine and therefore achieve better immunogenicity. Let's talk about what immunogenicity is and how you measure it. I know you personally know this Mark, but there are obviously a couple of different ways we can measure it. One is to simply take blood from the patient and measure X-Vivo the immune responses to the vaccine antigens. The other way is to take that blood and essentially mix with it growth factors and other things to grow out of there the responses to the frequency of the antigen’s responses to the T cells, so that we can sort of amplify the numbers. In other words, if the X-Vivo is just looking at the needle in a haystack, the in vitro stimulation is a way to kind of multiply the number of needles in the haystack to ensure you are measuring them. We are relying principally on the first, because the difference between the two is about the difference between detecting biologically relevant immune responses and detecting simply whether there are some immune responses at all in the blood. In other words, looking at X-Vivo is about measuring the actual effect, achieved by the vaccine or more specifically whether the vaccine by presenting the antigen the right antigens to the immune system lead to an effective immune response, versus the nonspecific way of measuring what would be an uninformative measure of the presence of a T cell response to an antigen that has not been stimulated by the vaccine. So, our goal is we will do both measures of course and what we want to do is to put our numbers in terms of absolute percent antigen responses achieved, we want to measure ours versus what has been reported by our peers, go back to those nature papers that I referenced, and achieve better numbers; numbers that you and I look would at and say unambiguity that this is a better result. That we think would be a huge step forward for the field and huge proof of concept for the Atlas platform.

[MarkPheron:]

Great, thanks a lot.

[Operator:]

Thank you, and our next question comes from the line of Gil Blum with Needham & Company. Your line is open, please go ahead.

[Chip Clark:]

Gill?

[Gil Blum:]

Hi guys, sorry. Yes, I was. So, just a core question about the poster in AACR. There seem to be better prediction for the MHC II complex prediction algorithms. Is there any like underlying reason for this, or any thoughts?

[Chip Clark:]

I will have Jess to answer that question.

[Jessica Flechtner:]

Thank Gil. It was an observation. I think that it feel poor predictive value from our perspective because I do not remember the exact number anymore, but it was in the 20% range. I think though it may be a product of small numbers. We have done fewer CD4 neoantigen screening in our research work, as we were focused on primarily the CD8 response for the first part of our study. And so, I think as we continue to add more patients and more screening of the CD4 T cell subset against the mutation libraries, we will find that frequency also begins to decrease.

[Gil Blum:]

Thank, I will keep following it.

[Chip Clark:]

Thank you.

[Operator:]

[Operator Instruction] Our next question comes from the line of Joseph Pantginis, from H.C. Wainwright. Your line is open, please go ahead.

[Joseph Pantginis:]

Hey good morning. Thanks for taking the question. First with regard to the upcoming study just discussed obviously the immunological parameters you will be assessing, so thanks for that. Will you be looking to rerun the neoantigens through Atlas to see if the responses have changed postvaccination?

[Chip Clark:]

Thanks Joe. I think ultimately the question you're getting at is, can we demonstrate antigen spread as a result of our vaccination? And I'll turn it over to Jess to answer that.

[Jessica Flechtner:]

Thank Joe. I think right now we can consider doing that. It will depend on how much sample we have available from the patients in those post-treatment time points in order to be able to answer the question accurately, but it is part of the plan that we are evaluating.

[Joseph Pantginis:]

Okay great. And then just a quick follow-up if you do not mind. With regard to the evolution of the platform, obviously there's been a lot of excitement lately about IL2 based therapies and other, you know with regard to expanding T cells. Has the company had any thoughts or can it envision a scenario where you could harness IL2 or derivative or some other agents to help drive T cell expansion like pills or what have you before tumor excision which could say enhance the level of the antigens and increase the specificity of the platform?

[Chip Clark:]

So, Joe one of the exciting things but also the challenge of the immuno-oncology revolutions are there are so many different things we can be trying in combination and where you're posing of course is a very logical potential combination to explore. I think just sort of step back and look at the big picture. The reason why we believe in the neoantigen vaccine opportunity more generally is that we see these vaccines as a natural complement to just about any therapeutic approach one could take with cancer that results in some ways of unleashing T cells. So certainly, that's one of the things that we would consider exploring, but it's not part of the initial clinical trial.

[Joseph Pantginis:]

Got it. Thanks a lot guys.

[Operator:]

Thank you, and our next question comes from the line of Mike Ulz from Robert W Baird. Your line is open, please go ahead.

[Colleen Hanley:]

Hi, this is Colleen Hanley on for Mike this morning. Thank for taking the question. So, can you talk about the gating factors to starting the sales going through to study later this year and at how many sites will we be enrolling patients for part A?

[Chip Clark:]

Thank Colleen. I can speak sort of generally gating factors. First having filed the IND we await FDA comments and questions which broadly speaking could relate to either the clinical protocol or the formulation or how generally we intend to deliver the vaccine. So, it's possible we may receive questions for speaking obviously hypotheticals here, and so we would respond to the FDA questions if you see them, and assuming we are cleared to go, then it's a matter of the sites working with us to get ready to initiate the studies. There is only so much that sites generally speaking will do before you have an accepted IND. The kinds of things that sites typically do once you have an IND include getting IRB review of the clinical protocol, approving material such as the pharmacy manual that they would use to prepare the vaccine on their site, the materials that would to patients et cetera. So, this is all very standard stuff that would be at a high level so that the customer facing gating items that we have to go through. And then all the while course we would be honing the, sort of, behind-the-scenes supply chain that we spoke about earlier in Mark's question in getting ready to deliver the vaccine. You asked the question, how many sites we expect to include in Part A of our clinical trial, I believe. And insofar as for Part A we are looking at single digit number of patients, somewhere in those sorts of 6-10 patient range. We don't need that many sites to achieve that, but there is not really necessarily a bright line between the sites that you work with for Part A and then subsequently for Part B as we expand the trial. And so, I would look for, sort of, on the order of that same 6-10 sites to be mentioned when we speak about the Part A results, and it’s likely that a smaller number of those sites will be contributing the majority of the patients that we actually report on for Part A.

[Colleen Hanley:]

Thank you.

[Chip Clark:]

Thank you, Colleen.

[Operator:]

Thank you, and I am showing no further questions, and I would like to turn the conference back over to Mr. Chip Clark for any closing remarks.

[Chip Clark:]

Thank you all again for your time today. We are absolutely delighted to be preparing to bring GEN-009 into the clinic and to patients. We look forward both to sharing our progress in that as well as to sharing new data and developments as they emerge all in service of our mantra that Targets Matter. Thank you very much.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day!