Genocea Biosciences, Inc.
Q2 2015 Earnings Call Transcript

Published: 9 Aug 2015

[Operator:]

Good morning and welcome to the Genocea Second Quarter 2015 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 that the call is being recorded at the company's request. At this time, I'd like to turn the call over to Sarah McCabe of Stern Investor Relations. Please proceed.

[Sarah McCabe:]

Thank you, operator. Good morning. This is Sarah McCabe with Stern Investor Relations and welcome to Genocea's second quarter 2015 financial and operating results conference call. This morning, we issued a press release which outlines the topics we plan to discuss today. The release is available at www.genocea.com under the Investor Relations tab. Today, on our call, Chip Clark, President and Chief Executive Officer, will review the company's recent business and clinical highlights; then Jonathan Poole, the company's Chief Financial Officer, will review the financial results. Chip Clark will close by reviewing Genocea's anticipated upcoming milestones, and then we will open up the call for your questions. Seth Hetherington, Genocea's Chief Medical Officer is also 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 2014 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, Sarah. And good morning, everyone. 2015 continues to be a transformative year for us here at Genocea. In May, we reported positive top-line results from our Phase 2 dose optimization trial for our lead candidate GEN-003 for the treatment of genital herpes. This data improved upon the already attractive efficacy profile from our prior Phase 1/2a trial. I'll walk through the data in more detail shortly. We believe we have now optimized the dose of GEN-003 and have a clear clinical path forward. We expect to announce six-month's durability data from the ongoing trial in the fourth quarter. Our second lead candidate GEN-004, which aims to prevent infections caused by pneumococcus has a Phase 2 human challenge study proof-of-concept data readout also expected in the fourth quarter. Beyond the momentum of our two lead candidates, we're working to maximize the potential of our ATLAS platform, which gives us and potential partners a unique tool with which to identify targets of T-cell response. These targets or antigens then become the core of product candidates. We have demonstrated ATLAS's power and infectious disease already and believe that there is great potential to apply ATLAS's ability to identify the targets of T-cell response to other therapeutic areas, such as immuno-oncology and autoimmune diseases. And now, with our recent $50 million public offering we have strengthened the financial foundation on which to build Genocea over the coming years as we seek to maximize the value of our rich pipeline and our ATLAS platform. Let me now review GEN-003, our first-in-class candidate for the treatment of patients with genital herpes, an incurable sexually transmitted disease that affects more than 400 million people worldwide. We designed GEN-003 with our ATLAS T-cell antigen discovery platform to reduce viral activity and, thereby, limit viral shedding and consequent lesion outbreaks and transmission to others. Current genital herpes therapies are insufficient for millions and only reduce viral shedding when patients are taking medication. On May 20, we reported that we hit our primary endpoint in a Phase 2 dose optimization study. This study compared six different combinations of protein-in-adjuvant to select the best dose combination for future trials. The results for viral shedding, the primary endpoints were outstanding. We hosted a conference call with accompanying slides, which I urge you to review. You can find them on our website. Today, I will give you a summary of positive top-line data from the 28-day observation period immediately after completion of dosing. The best combination was 60 micrograms per protein and 75 micrograms of Matrix-M2 adjuvant, resulting in a highly statistically significant 55% reduction in the viral shedding rate from baseline, the primary endpoint. All dose combinations tested, including this does, showed a statistically significant viral shedding reduction versus placebo as well. In a planned secondary analysis to assess impact on patient-reported genital lesion rates, all dose groups, including the placebo group demonstrated a statistically significant reduction from baseline. The study showed that GEN-033 was generally safe and well-tolerated, with no serious adverse events related to the vaccine and no discontinuation -- differences rather, and discontinuations in patients due to adverse events across different treatment arms. These data are clear confirmation of what we believe to be GEN-003's clinically and commercially meaningful efficacy. We believe that GEN-003's profile offers a strong value proposition to patients, physicians and payers and we forecast greater than $1 billion peak sales in the U.S. alone. We are eager to report six month's data in the fourth quarter, which, if positive, will show the durability of reduction in viral shedding and genital lesion rates for the ongoing study. I will now turn to our second lead candidate GEN-004, which is designed to prevent infections by pneumococcus, a major cause of infectious disease related deaths worldwide. Existing vaccines for pneumococcus command a roughly $6 billion global market and are effective against only the small number of serotypes that have historically caused the majority of pneumococcal disease. Today, these serotypes are disappearing from the community being replaced by others not covered by the current vaccines. GEN-004 has been designed to be a universal vaccine against more than 90 serotypes of pneumococcus. GEN-004 has a unique mechanism of action design to generated Th17, T-cell mediated immune response, reducing pneumococcal colonization in the nasopharynx. This colonization is a necessary precursor to infection caused by pneumococcus. In April, we completed enrolment of 98 healthy adults in our Phase 2a human challenge study to evaluate the defect on the frequency, magnitude and duration of colonization by pneumococcus in the nasopharynx. We expect proof of efficacy results in the fourth quarter. The progress we are making clinically highlights that what we believe is the unique power of ATLAS to identify targets of protected T-cell responses. Furthermore, we believe that recent results from both Genocea and other companies in the genital herpes space to reinforce the notion that targets matter meaning that effective vaccines and immunotherapies required the selection of the right T-cell targets. We have a growing body of clinical and preclinical evidence that ATLAS has broad applicability in infectious disease. And we are beginning to understand more about the unique potential of ATLAS in immuno-oncology. Our ongoing collaboration with Dana-Farber is progressing very well. And there may be a great opportunity for ATLAS to significantly expand the understanding of T-cell responses to tumors and, in so doing, identify novel antigens, which may have applications in both personalized cancer therapies or broader cancer vaccine and immunotherapies. With that, I will now turn the call over to Jonathan to review our financials.

[Jonathan Poole:]

Thanks Chip. In today's press release, we reported the cash, cash equivalents and marketable securities as of June 30 were $74.6 million, compared to $84.5 million as of March 31 this year. Additionally, our recent public offering raised net proceeds approximately $47 million. We believe the financing will enable Genocea to complete the GEN-003 Phase 2 program and continue to advance GEN-004 through clinical developments, hence, progress ongoing and new research programs towards INDs. The strengthened balance sheet also provides greater flexibility in capital strategy and advance the important clinical milestones and a strong foundation for ongoing business development activities. Taken together with our cash resources of June 30, we now believe we are funded into the second half of 2017 when we expect the entering Phase 3 trials for GEN-003. In addition, we have further potential financing flexibility from undrawn capacity in our existing debt facility and opportunities to derive funding from business development transactions relating to our ATLAS T-cell target discovery platform, preclinical and clinical assets. Moving on to our expenses in the quarter, R&D expenses was $7 million compared to $4.6 million for the same period of 2014, reflecting higher personnel cost, increased clinical trial cost associated with the continued advancement of GEN-003, ongoing investment in GEN-004 and increased investment in Genocea's preclinical pipeline. G&A expenses were $3.2 million for the quarter compared to $2.4 million for the same period in 2014, reflecting higher personnel costs to support our expanding R&D operations and to meet demands of operations as a public company. Net loss for the quarter was $10.3 million compared to a net loss of $7.1 million for the same period in 2014. I'll now hand the call back over to Chip, who'll review our upcoming milestones.

[Chip Clark:]

Thanks, Jonathan. We are excited about the upcoming data readouts for both our lead compounds in the fourth quarter, including six-month's durability results for GEN-003 and proof of efficacy results for GEN-004. Additionally, we believe we have demonstrated the potential of ATLAS to generate novel vaccine and immunotherapy programs, including our early stage research programs in globally important infectious diseases such as malaria and Chlamydia. And we look forward to updating you on our progress as we advance our pipeline and extend its reach into other therapeutic areas. We would now like to open up the call for your questions. Operator?

[Operator:]

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

[Phil Nadeau:]

Good morning. Congratulations on the progress. And thanks for taking my question. First, a question on GEN-003 in the three month data. The reductions in shedding and lesions rates were impressive, although the lesion rate reduction in the placebo arm was really kind of confusing. Have you done any work or have any better understanding as to why the placebo showed such a reduction in lesion rate?

[Chip Clark:]

Phil, this is Chip. Thanks for the question. We do believe that this was an artifact, but I will turn it over to Seth to explain in a little bit more detail.

[Seth Hetherington:]

Sure. We had several conversations with our investigators about this and the overall consensus is that there are two factors in play. One was that this was a highly anticipated clinical trial. People knew that this is an active immunotherapy from the results in our first trial. There was a high demand for enrolment, we actually closed enrollment early. Sites had to turn patients away. And the second factor is -- so there is an expectation that went along with this trial. The second factor is that patients who got into the trail they had a six-to-one chance of getting active drug versus placebo. We think these two factors together had colored the way that they looked at their lesions and reported their lesions to their clinical investigator. In future trials, we expect that this can be managed by more balanced enrolment. Instead of the six-to-one ratio, we're going to be looking at one-to-one or two-to-one. We clearly have established dose response, optimal dose and replicated reductions in viral shedding. So this observation from placebo group in this one type of endpoint is just a fluke. And I do want to reiterate that in the six-month data readout we have a couple of other endpoints we're looking at. One is the time to the next recurrence analysis and the second will be the proportion of patients that remain recurrence free after six months. And both are collective little bit differently in that they require visits by the patient to the physician who then collects a swab sample to confirm that there is active herpes at the observed lesion. So we think this is manageable. We think there are lots of ways that we can look at the data to establish that the viral shedding reductions we are seeing are actually translate in to clinical benefit. We have no doubt that that's the case given the magnitude of the reduction in viral shedding.

[Phil Nadeau:]

Great. That's very helpful. And then second on the scheduled trail. Have you begun to decide upon the schedules that will be tested?

[Chip Clark:]

So you're asking which doses we'll be testing in the next study?

[Phil Nadeau:]

Well, doses, but more what pattern of injections or what kind of dose schedule?

[Chip Clark:]

Got it. Seth?

[Seth Hetherington:]

Yes. Well, we've have been using a three-dose upfront schedule, three doses 21 days apart. And what we want to know is, is there a need for all three or do you get the same effect from one or two doses. So in the middle of next year we'll be doing a dose regimen study looking at one versus two versus three doses upfront.

[Phil Nadeau:]

Got it. Okay. And then last on GEN-004 and the data we're going to get to the fourth quarter. Can you give us some idea of the goal posts for that trail, what quality of data will you consider proof-of-concept?

[Seth Hetherington:]

Yes. So we -- go ahead Chip.

[Chip Clark:]

No, just I was going to ask you to take it over there, Seth.

[Seth Hetherington:]

Okay. So we have said based on input from our Scientific Advisory Board, which consists of people who are experts in pneumococcal disease, epidemiology and the special role in colonization in the pathology of pneumococcus. We said based on their input that a 50% reduction in overall colonization would be a meaningful endpoint, because it would be a magnitude of reduction that replicate over series of several years, would end up in reduction of total colonization. And as you know, the current vaccines do a great job against current serotypes. They don’t impact total colonization, which is the real goal of a universal pneumococcal vaccines such as GEN-004.

[Phil Nadeau:]

That's very helpful. Thanks for taking my questions.

[Seth Hetherington:]

Thanks Phil.

[Operator:]

Thank you. Our next question comes from Ed Tenthoff of Piper. Your line is open.

[Ed Tenthoff:]

Thank you. Can you hear me ok?

[Chip Clark:]

Perfectly clearly, Ted.

[Ed Tenthoff:]

Okay. Excellent. So just I guess following up on the questions. With respect to the GEN-003, can you tell me a little bit more about the goal of the bridging study and sort of what that looks like and kind of how that leads you into the larger, what I'm kind of calling it, Phase 2b or the dose regimen study for 003?

[Chip Clark:]

Thanks Ted. This is just good drug development and a reflection of accelerated investment in manufacturing. We have -- this is the material for Phase 3, the scaled up material that is the precursor to what we would be launching with. And we want to make sure that as expected it works as well as the earlier material. And so the narrow objective of the bridging study is simply to prove that. But more broadly, it gives us an opportunity to test a couple of the best doses in the ongoing study to confirm their efficacy and finalize the dose to bring in to the bridging study.

[Ed Tenthoff:]

Okay. Excellent. And to bring in to the regimen study or?

[Chip Clark:]

Yes. I'm sorry. It's --

[Ed Tenthoff:]

Yes, in to the regimen. That makes sense.

[Chip Clark:]

Yes.

[Ed Tenthoff:]

Awesome. Thank you very much. And then the regimen study next year will kind of take that dose, but then explore multiple different schedules. Are you also looking at adjuvant dose in that as well or will that be pretty much locked down to from the ongoing data?

[Chip Clark:]

Well, the bridging study allows us to lock that down. And so in the regimen study it's likely, it's most likely that we would bring one combination of adjuvant and protein into that study. But remember, we would be really exploring a couple more things in the middle of next year. One is this bridging study. The other is the anti-viral combination study, another study of high interest. I would step back and remind you that all of this is in the context of -- and in the Phase 2 meeting that has held steady, consistent with our guidance over the past couple of years, which is to say later next year and gives us a substantial database to bring to the agency to set up the Phase 3 program to start in 2017.

[Operator:]

Thank you. Our next question comes from Stephen Willey of Stifel. Your line is open.

[Stephen Willey:]

Yes. Thanks for taking my questions. Let me just one on GEN-004. And I guess assuming some prospect I guess of initial efficacy in 4Q, how should we be thinking about what the subsequent development steps look like? And I guess I'm kind of specifically interested in maybe some of the trial designs that would be contemplated I guess in order to address the question of universal serotypes coverage. Thanks.

[Chip Clark:]

Yes. Thanks Steve. And so -- I mean the good news is that if we show efficacy in this study it sets us up for asking a few very important questions in subsequent studies. And to do so in a way that we think is comparatively capital efficient; these are fairly straightforward trials. I'll ask Seth to give you high level think on the next study that we're planning right now.

[Seth Hetherington:]

Right. The next study would be conducted in the ultimate population, which is pediatrics. And the endpoint of that will be to show the impacts on total pneumococcal nasopharynx colonization. As we stated earlier, the current vaccines are great against eliminating the colonization caused by the serotypes in those vaccines, but total colonization does early change, there's this phenomenon, as you know, called serotype replacement. So a study that we contemplate would be conducted in children who are in at an age where there is a high level colonization and demonstrating that GEN-004 can in fact reduce total colonization in that particular population. We also have the opportunity to look at some of the diseases caused by pneumococcus. This is not powered necessarily to be a Phase 3 study, but we could be starting to look at things like otitis media, which is a common infection in children that is highly dependent upon colonization rates.

[Chip Clark:]

And Steve, this would be an all comer study, if you will. And so we would -- it's a cover or range of serotypes. And as you know, given that GEN-004 is designed to work across serotypes, we would have confidence that efficacy in this first study would translate well into, as Seth says, one of the ultimate target populations.

[Operator:]

Thank you. [Operator Instructions]. Our next question comes from Alan Carr of Needham & Company. Your line is open.

[Alan Carr:]

Hi. Thanks for taking my questions. Wonder if you could go over the timelines here for the various GEN-003 Phase 2 trials. I know you mentioned that the regimen one would start mid-'16. But I'm wondering about the bridging and then the combination with an anti-viral. And then also, can you I guess talk a bit about the changes in the formulation from the existing to the one which you'll be using commercially, beginning with the bridging trial? And then lastly, your plans for presenting data from the GEN-003 trial, the initial analysis back in May. When you're going to be presenting data from that? Thanks.

[Chip Clark:]

Yes. Thanks Alan. So couple of -- let me make sure I cover all your questions. First, the GEN-003 timelines. Step back and understand that one of the objectives of this financing that we recently completed was to be able to deliver the entire Phase 2 program comfortably within sort of accepted balance sheet management practice. So within that context understand that in Q4, as you already know, we'll have the six-month data from the current study. In Q1 of next year, we'll have the 12-month data. These are answering crucial durability questions about GEN-003, as well -- meaning whether or not we will need a booster shot before the end of the year and if in fact we can do better than the already attractive six months durability that we have proven from the previous study. We'll have the initial readout from the bridging study also in Q1 of next year. And then in Q4 of next year, we will have both the early read on the anti-viral combination study, as well as the end of Phase 2 meeting. So a series of rich milestones that we will be delivering over the next five quarters and that set us up for entering Phase 3 in 2017 on plan. You asked about the changes in the formulation. And I -- what I would characterize these as, again, sort of just classic transition from research material to large scale clinical material on the way to commercial material. So that means basically removing impurities and knowing that your process is scalable. I mean, there is a an enormous market for GEN-003 and so we need to of course to know that we can be producing this at the scale required to supply millions of doses per year, and we're well on track there. And therefore, our view is that the changes in both the proteins and the adjuvant such as they are are sort of a typical types of changes that we or anyone would be contemplating as you scale up for commercialization. And therefore, we -- and we think it's important to do the study, but it doesn't affect the overall timelines with which we conduct the optimization study, the regimen study or the anti-viral combination study. Finally, you asked the question, Alan, about when we would present the initial results from the first GEN-003 trial. As you very well know, we've always made a practice of sharing our data widely and transparently. We are looking at conferences in the fall, such as ICAAC and IDSA and are hopeful that we'll have an opportunity to present at one of those. And of course, we will let you know when we know.

[Alan Carr:]

Thanks. A follow-up there, your plans for when you might start the bridging and the anti-viral combo dose that was helpful on when you expect the data from these. And do you have guidance on when you'll be starting on those?

[Chip Clark:]

Guidance for starting the bridging study will be this year. And for both the dose regimen study and the anti-viral combination study the middle of next year.

[Alan Carr:]

Okay.

[Chip Clark:]

And I think as we get closer, we'll be able to provide I think more precise guidance.

[Alan Carr:]

Thanks very much.

[Chip Clark:]

Thank you Alan.

[Operator:]

Thank you. And it looks like we have a follow-up from Stephen Willey of Stifel. Your line is open.

[Stephen Willey:]

Yes. Thanks for taking a follow-up. Just a question out of curiosity I guess. Would you need to have clarity on utilization of a booster when you go before FDA for your end of Phase 2 meeting? And I guess I just asked a question, because I know that we are going to be getting the 12-month follow-up in Q1 '16. And I guess there is may be an opportunity there for there to be kind of some conflicting 12-month data points and that looks to be durable. So I'm just kind of wondering if you need to have clarity on that when you go before FDA next year? Thanks.

[Chip Clark:]

I think the short answer, Steve, is no. We already know about the six-month durability as you know. And as Seth would say, you get your label for what you study. And given that we have already a strong belief that six months durability is compelling to patients and physicians and payers, if as I guess one considered the base case, our durability were only six months that would be -- we would be discussing trial design around that endpoint principally.

[Operator:]

Thank you. I am not showing any further questions in queue. I'd like to turn the call back over to management for any further remark.

[Chip Clark:]

I would simply say thank you very much for dialing in this morning. We appreciate your continued interest. And look forward to sharing results from a couple of big trials soon. Have a good day everyone.

[Operator:]

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