Genocea Biosciences, Inc.
Q3 2016 Earnings Call Transcript

Published: 6 Nov 2016

[Operator:]

Good morning and welcome to the Genocea Third Quarter 2016 Financial Results Conference Call. [Operator Instructions]. At this time, I would like to turn the call over to Maren Killackey of Stern Investor Relations. Please proceed.

[Maren Killackey:]

Thank you, Operator. Good morning. This is Maren Killackey with Stern Investor Relations and welcome to Genocea’s third quarter 2016 financial and operating results conference call. This morning we issued a press release, which outlines the topics that we plan to discuss today. This release is available at www.genocea.com under the Investor Relations tab. Today on our call, Chip Clark, President and CEO will review the company’s recent business and clinical highlights and then Jonathan Poole; CFO will review the financial results. Seth Hetherington, CMO and Jessica Flechtner, CSO will be with us today for the 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 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 2015 Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. With that, let me pass the call over to Chip.

[Chip Clark:]

Thanks, Maren and good morning everyone. The strong momentum for our lead products candidate GEN-003 for the treatment of genital herpes infections has continued in the past quarter. In September, we announced positive data from our ongoing Phase 2b trial, confirming the optimal of GEN-003 dose with our new Phase 3-ready formulation and positioning us strongly ahead of two big 2017 events. Our FDA end of Phase 2 meeting next quarter and our Phase 3 start in the second half of the year. The study achieved its primary endpoint with GEN-003 demonstrating a 40% reduction in the viral shedding rate for the 28 day monitoring period immediately after dosing with the 60 micrograms per protein, 50 micrograms of adjuvant dose. This result was statistically significant versus both placebo and baseline and crucially consistent with the efficacies in ATLAS dose and ATLAS time point in the prior Phase 2 trial. The reactogenicity profile of this does was also consistent in both trials. This Phase 2b study is the third consecutive clinical trial in which GEN-003 has demonstrated a statistically significant reduction in viral activity at this immediate post dosing time point. Now the 60 micrograms per protein, 75 micrograms of adjuvant dose group reduced the viral shedding rate by 27%, which was lower than that observed in the prior Phase 2 study. This does also showed a less acceptable reactogenicity profile and in that trial. We believe the increased reactogenicity indicates an overstimulation of the T cell immune system resulting in the decreased efficacy. As would be expected with the known bell shaped T cell dose response curve. And then let me elaborate on this point. Research has shown that therapies, which act via T cell immune responses have a sweet spot for efficacy too little immune response and you'll efficacy on the table too much immune response and the over stimulation of the immune system can lead to a drop off in efficacy as T cell shut down. We think the likely driver in our case is a more potent adjuvant formulation following customary manufacturing process changes to prepare for Phase 3 trials and commercialization. We expect to announce the first placebo-controlled clinical efficacy data from this trial in January against a variety of endpoints, looking at efficacy over the first six months after dosing. Remember that in our prior Phase 2 trial, GEN-003 at this 60 micrograms per protein, 50 micrograms of adjuvant dose demonstrated antiviral and clinical efficacy sustained out to at least one year after dosing. We anticipate the viral shedding and immunology data at six months post dosing from this trial will follow later in the first half of 2017 as we complete sample processing. We remain on track for our planned end of Phase 2 meeting with the FDA in the first quarter of 2017, where we will be discussing and finalizing our phase 3 program. We believe we can start the Phase 3 program in the second half of 2017. We now plan to conduct our antiviral combination study during the Phase 3 program for GEN-003. We think this study will be valuable for the overall profile of GEN-003 and as such we will be discussing the design of the study with the FDA in our end of Phase 2 meeting to maximize our chances of success. Finally on GEN-003, last week we presented the immunogenicity data from the prior Phase 2 trial at IDWeek 2016 demonstrating that GEN-003 immunization results in the development of polyfunctional CD4 T. cells, which indicates that GEN-003 is stimulating a multi-faceted T cell immune response to genital herpes. These data could have important implications for the understanding of how the immune system controls genital herpes infections. GEN-003 also elicits strong antigen specific immune responses for up to 12 months post-dosing consistent with its sustained effect on viral shedding and clinical disease at that same time point. These immunological data further support our confidence in GEN-003’s potential to become a cornerstone treatment for this serious disease. Let me take a moment to reinforce just how important we believe GEN-003 can be as a new treatment alternative for the millions of people seeking treatment for genital herpes infections. One category of treatment seekers call them episodic treaters because they only take an antiviral pills during outbreak episodes, could benefit from GEN-003 as a replacement for oral antivirals. The year round antiviral activity of GEN-003 affords them sustained protection, which they do not currently realize, while offering convenience akin to daily therapy, which they don't currently benefit from. And because GEN-003 could offer sustained production akin to daily therapy the next category of treatment seekers the next category of treatment seekers, so called daily treaters because they try to take pills daily for many years to maximize clinical medical benefits could also employ GEN-003 as a replacement for pills to escape a painful daily reminder of their infection or as a compliment to oral therapy for even greater efficacy. The third category of treatment seekers are not currently on therapy, potentially in part because the pills don't work for them or because they dislike the pills. These patients too could take GEN-003 as a new alternative. Regardless of patient category our market research confirms that GEN-003 could be the new cornerstone therapy for genital herpes infections based on the product profile we have established in our clinical trials to date. Given this, we continue to believe that GEN-003 has a revenue opportunity in the U.S. of greater than $1 billion, while being priced responsibly to help insure it can be made available broadly to genital herpes sufferers. With that let me now turn to our immunooncology effort where we are applying ATLAS to cancer vaccine target discovery and development. We are in fact now focusing all our research in preclinical resources on immunooncology program, which reflects our conviction that ATLAS can enable better cancer vaccine antigen selection. We believe that this unique capability paired with our proven vaccine development expertise will enable us to bring novel and valuable new cancer medicines to patients. We have continued to advance our collaborations with Memorial Sloan Kettering Cancer Center and Dana-Farber Cancer Institute. And we look forward to providing an update on our internal cancer vaccine development strategy in an R&D Day during the week of December 12. We are making good progress in our partnership with Memorial Sloan Kettering. And we will be presenting new data from this collaboration at the upcoming Society for Immunotherapy of Cancer or SITCs 31st annual meeting in our poster presentation scheduled for Saturday November 12. This collaboration uses our ATLAS T cell target discovery technology platform in conjunction with Memorial Sloan Kettering’s patient specific mutations and blood samples from the same cancer patients. With the goal of identifying protective T cell neoantigens without predictive algorithms. What we show in this poster is that ATLAS may have unique and differentiated neoantigen selection capabilities compared to the industry norm of in silico predictive algorithms. In fact we show that ATLAS may find unique neoantigens not predicted by algorithmic approaches and positive that many if not most predicted neoantigens lack biological activity. Let me now turn the call over to Jonathan to talk about our updated guidance and review our financials for the third quarter. After that we will open up the call for your questions.

[Jonathan Poole:]

Thanks Chip. First, on that updated guidance. We now believe that our existing resources provide runway into the first quarter of 2018. Contributing to this changing guidance is the decision to focus all of our research and preclinical resources on immunooncology and the shift in timing of our GEN-003 combination study. Our guidance still assumes initiation of Phase 3 trials of GEN-003 in the second half of 2017 and does not include any receipt of proceeds for potential business development partnerships, equity financings or debt drawdowns. Now moving on to the third quarter financials. In today's press release we reported cash, cash equipments in investments of $75.5 million as of the end of the third quarter compared to $86 million at the end of the second quarter. R&D expenses for the third quarter increased by $2.8 million to $8.8 million for the same period in 2015 with the increase in headcounts and related expenses to support the GEN-003 program and higher clinical costs for the ongoing and anticipated GEN-003 clinical trials. We also increased our spend on immunooncology related activities in the quarter. G&A expenses for the third quarter were largely unchanged to $3.6 million compared to the same period in 2015. Finally, net loss was $12.8 million this quarter compared to a net loss of $9.8 million to the same period in 2015. With that, let me hand the call back over to Chip to wrap up.

[Chip Clark:]

Thanks, Jonathan. On the back of our recent positive data for GEN-003 we are advancing this confidence towards six months placebo-controlled clinical data in January and at the start of Phase 3 in the second half of next year. We're also excited with our growing presence in immunooncology and we look forward to sharing more details later this quarter in a virtual R&D Day to be webcast the week of December 12th where will also provide a comprehensive overview of GEN-003. We hope you can join us for our upcoming presentations as well. Our CSO, Jessica Flechtner will be presenting at the Neoantigen Summit 2016 in Boston on November 15. And we will also be presenting at the Stifel Healthcare Conference on November 16 and the Piper Jaffray Health Care Conference on November 30. With that, we will now open up the call for your question. Operator?

[Operator:]

[Operator Instructions] Our first question comes from Mark Pheron [ph] from Cowen and Company. Your line is now open.

[Mark Pheron:]

Thanks for taking my questions. First, on the combination trial, so can you talk about what the rationale is for pushing that into the Phase 3 program rather than doing a Phase 2 first? And then kind of where your expectations are in terms of how you would power that.

[Chip Clark:]

Yeah, thanks Mark. I will turn that over to Seth to answer.

[Seth Hetherington:]

Yeah, first of all, let’s define, what Phase 2 and 3 are and still is a Phase 2 study, but more specifically it’s an adequately [ph] powered well controlled study, so I’m going to answer your second part of the question first. We believe that this study has sufficient powers, statistical power to differentiate between Valtrex alone and Valtrex plus get GEN-003 for reducing the proportion of patients with recurrences out to a year. It's being run in parallel with a pivotal trials for approval, which are planned to be placebo-controlled trials. And by moving it out, it actually gives us more time to have a discussion with the FDA; we want their feedback on the design of the overall endpoints et cetera, so it really does improve the output from that trial in the long run.

[Mark Pheron:]

Okay. And I guess, moving on to those placebo, what you would mentioned would be placebo-controlled for, I guess, the formal Phase 3s. Could you talk a little bit more about where your early thoughts are on that design, I recognize that you do need to still have to end of these Phase 3, so that could change.

[Seth Hetherington:]

Well, I think that's important to keep in mind we still have yet to have our discussion with the FDA but as we’ve said all along we anticipate that we will follow the usual guidance, which is two adequately powered well controlled studies to show efficacy, we anticipate that both of them will be placebo-controlled GEN-003 versus a placebo injection and that there are - the final endpoint is to be decided based on the data we’ll see coming in January, as well as on our discussions with the FDA that we’ve discussed the types of endpoints that might be considered to pass and those include portionally three recurrence rates, lesion rates et cetera. All of which are in the upcoming trial.

[Mark Pheron:]

And then I guess, maybe this is more for Chip or maybe still you, Seth. In the past you’ve kind of talked about how given the kind of improved compliance and use-of-use type of profile kind of 3 versus daily antivirals that you don’t think you necessarily even need to be quite as good as the daily oral antivirals. How big of a gap do you think you could have and still be a marketable jerk and that I would get real adoption?

[Chip Clark:]

Mark, so I’ll tee off this. I think the important thing to remember with GEN-003 is that the part of proposition is different than the oral antivirals and so the reason we're conducting this thorough Phase 2 program is really to identify the endpoint or endpoints that best capture the clinical benefits of GEN-003 relative to placebo, of course in the case of the trials. But wouldn’t allow us to make a case for the use of GEN-003 relative to the oral antivirals and it's probably going to be one of the endpoints that Seth has described, but one that both shows that we are providing meaningful clinical efficacy, but that there's durable protection in that kind of a convenient – wrapped up in a convenience bomarc [ph]. So I think trying to give an answer on a specific endpoint and the sort of the relative difference that we could tolerate versus what maybe on for example, the Valtrex label in a way missing the point. And so I think, but when we show the data in January we’ll of course ensure that we can put the results in the context of how antivirals are used today.

[Mark Pheron:]

Okay, thank you.

[Chip Clark:]

Thanks, Mark.

[Operator:]

And our next question comes from Stephen Willey, Stifel. Your line is now open.

[Philomena Kamya:]

Hi, this is Philomena Kamya in for Stephen Willy. Thanks for taking my question. We would like to get a little bit more clarity with respect the number of earlier stage anti effective programs that were at different stages of development have these been shelved, sort of to create room for this strategic move towards immunooncology exclusively?

[Chip Clark:]

This is Chip, Philomena, thanks for your question. We are pausing the early stage work on genital herpes; you'll recall that we have both HSV prophylaxis program and a sort of a next generation herpes therapeutic program. We have a Chlamydia program and we have a malaria program, which to date has been funded by the Gates Foundation for which we’ll of course wrap up our obligations there. So it’s those three programs that for today we are pausing as we said and as you’ve echoed to enable us to focus our resources where we think there is more likely in the near term to provide this data that drives shareholder value.

[Philomena Kamya:]

If I could just ask one more question. The poster that was presented at IDWeek showed some immunological T cell responsive with respect to polyfunctionality, but specifically pertaining to the 60, 50 antigen adjuvant dose combination for GEN-003. Will we see immunological data from the 60, 75 and supported the thesis of an over stimulated immune response. So like an exhaustive T cell genotype.

[Chip Clark:]

Well, so to be clear, the data presented at IDWeek pertain to the previous study. And I think your question – and yes it was focused on the 60, 50. But just to make sure, I’m understanding your question you want to see for the current study immunological data on 60, 50 and 60, 75 doses, correct.

[Philomena Kamya:]

That is correct.

[Chip Clark:]

Okay. Well, so the point is simply that we will be as we always do sharing the immunological data from our clinical trials at an appropriate scientific meeting in the future. We do not have the immunological data that lags behind the processing of the shed examples. But as I said, first of all, we will share those data, but the thesis behind the over stimulation is driven by the reactogenicity that we've seen in the 60, 75 dose, which was greater than what we've seen in previous doses.

[Philomena Kamya:]

Thank you so much.

[Chip Clark:]

Thank you.

[Operator:]

Our next question comes from Ted Tenthoff from Piper Jaffray. Your line is now open.

[Ted Tenthoff:]

I'm excited to see the upcoming data on ATLAS for non-small cell lung cancer activity and then also the presentation in Boston and R&D Day. Maybe you can give us sort of a path way forward as this is sort of starting to come into focus. You know what would next steps be, want to show that ATLAS is capable of generating new antigens in these disease states. Would we look for future partnerships with the past to use the existing University Medical Center relationships to kind of start to do some proof-of-concepts human clinical work. What’s your plan on advancing or next steps for IO?

[Chip Clark:]

Ted, at the risk of sounding too topical we’ll keep you in suspense. The point of the R&D Day is to address exactly the questions that you raise and frankly, we wouldn't want to have the R&D Day unless we could. So we very much appreciate your interest in the topic. It’s something we're excited to talk about and what six weeks or so we’ll be able to provide color.

[Ted Tenthoff:]

All right, so I'm going to consider that a pass, so that means I get one more questions. So and I will be expected to hear what you to say at the R&D Day. But I just want to confirm then with new data from Phase 2a showing this long-term immunogenicity. What's your current thinking, I mean it seems like the 60, 50 doses that go forward. How are we going to know how often you know that is going to be administered? And whether or not boosters will be required?

[Chip Clark:]

I will have Seth handle that question.

[Seth Hetherington:]

This is, in a nutshell in for finding because there is no way to predict durability without actually doing the studies. So from the 2a study. We are re-enrolling eligible subjects to long-term swabbing data in order to find out how long that suppression of the urology lasts. We'll be doing that also with the current clinical trial and with other future trials as well. So all we can do is wait for that data to come in, analyze it and make decisions as to what’s the appropriate time you give a maintenance dose, if once necessary.

[Ted Tenthoff:]

I appreciate it.

[Chip Clark:]

Thank you, Ted.

[Operator:]

Our next question comes from Alan Carr from Needham. Your line is now open.

[Alan Carr:]

Hi, thanks for taking my questions. A couple of them, so the cash runway is pushed out a bit, I wonder, could you comment on the contribution I assume it’s from pushing the antiviral trial out and maybe, less emphasis on some of these early stage infectious disease programs? And then also can you give us a sense of, maybe the scale of this Phase 3 program in terms of timing and expenses associated with that, the timing in terms of duration and then expenses that come with it? And then lastly, so we have symptoms data coming in January 6, the six months data. I wonder if you can comment on some of the differences in terms of how your assessing symptoms in this trial versus the previous trial keeping in mind that there was a placebo response in the previous one that right after the last administration of vaccine. Thanks.

[Chip Clark:]

Alan, I’ll have as you expect, Jonathan address the first two questions and then Seth, the third.

[Jonathan Poole:]

Hi, Alan, so you’re right, the two key drivers of the cash runway extension in the – our decision to focus resources on immunooncology and the timing of the antiviral combination study. In the first case, the focus on immunooncology, that does mean that we are reducing our planned external expenditure on the FX disease research programs that we previously were conducting. And linked to that is other expenses relating to hiring expansion which we will no longer incur as a result of the focus. And as you said on the combination study that is more on a timing question than a magnitude of cost question, but the timing does affect the cost run rate in 2017 beneficially as it relates to the runway. In relation to your second question, which was around the timing and costs of Phase 3. So as we continually said, we expect to start Phase 3 in second half of next year and we expect the Phase 3 program to last approximately two years. I'm not going to give a specific number for the cost of the full program, but suffice to say that as we look forward to - strategically how we're looking to finance that program, we think that there will be potential benefits from business going [ph] partnerships along with active financings, which will serve to help fund that program.

[Seth Hetherington:]

So, Al, related to the last question. This is Seth, about how we collect our data. We’ve learned a tremendous amount in the first three clinical trials that we've run. In this third trial, we're using electronic diary for the patients to report a number of things, their medication use, the symptoms that they're experiencing and the recurrence of general herpes. We think this is going to be much more accurate way, much more complete way to collect our data then what has been used in the past, which is retrospective patient memories at the time of the clinic visit.

[Alan Carr:]

Great. Thanks very much.

[Chip Clark:]

Thanks Alan.

[Operator:]

[Operator Instructions] Our next question comes from Christopher James from FBR and Company. Your line is now open.

[Christopher James:]

Hi, good morning and thanks for the question. Just getting back to the GEN-003 development program, the Phase 2b combination of study running in parallel with the Phase 3, which should start in the second half of next year. I guess, given that you’re potentially altering the treatment landscape. Do you expect the FDA's to require that combination data before approval. I asked that because I expect that real world use to be a you know combination approach with orals being used as rescue. Thanks.

[Seth Hetherington:]

Yeah, this is Seth. Very good question. First of all we all agree that the real world use where the desire to combine the two is going to be great among patients and that’s why we believe that combination study will provide important information. I'd have no reason to believe that data from that study will be your required prior to approval, you basically get approval based on what you study and the description of the study is within the label will be exactly that what you submitted to your PLA. The timing on that data, it depends on how that runs out and how the Phase 3 studies run, but it will ultimately provide important information on the use of the drug.

[Christopher James:]

Great. Thanks guys.

[Operator:]

Our next question comes from Ted Tenthoff from Piper Jaffray. Your line is now open.

[Ted Tenthoff:]

Great. Thank you, can you hear okay.

[Chip Clark:]

Yeah.

[Ted Tenthoff:]

Great. So Alan’s question kind of triggered a follow-up question for me with respect of financing the Phase 3s. Is the ability to do potential partnerships around some of those earlier stage programs? Or even looking at a general OUS partnership, that help pay for the Phase 3. What are sort of strategic options that you guys are looking at right now?

[Chip Clark:]

Well, I think, Ted, you’ve hit on the head, the business development will be at the center of our strategic and financing plans for the company. And so GEN-003 affords us a couple of different ways that we could do a deal. You said ex-U.S. you could also imagine sort of a you know global split the world type deal, but that’s something we’re actively evaluating. In addition, the ATLAS platform and the early stage program or programs are ones that could potentially be sources of both validation and also money and so these are things that we’re actively exploring.

[Ted Tenthoff:]

All right. Thanks.

[Operator:]

Thank you for joining us today. You may now disconnect.