Genocea Biosciences, Inc.
Q4 2014 Earnings Call Transcript

Published: 12 Feb 2015

[Operator:]

Good day ladies and gentlemen. And welcome to the Genocea Biosciences Fourth Quarter and Full Year 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, today’s conference is being recorded. I’d now like to turn the call over to your host for today Ms. Deanne Tockey of Stern Investors. Ma’am, you may begin.

[Deanne Tockey:]

Thank you, operator. Good morning. This is Deanne Tockey with Stern Investor Relations and welcome to Genocea’s fourth quarter and full year 2014 financial and operating results conference call. This morning, we issued a press release which outlines the topics that 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’d like to remind everyone that statements made during this conference call related 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 2013 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 Deanne and good morning everyone. I’m happy to review our significant accomplishments from 2014 and preview major 2015 milestones as we continue to pursue our mission of creating life changing vaccines in immunotherapies. Let me first discuss GEN-003, our first in class immunotherapy candidate for the treatment of patients with genital herpes, an incurable sexually transmitted disease. For the approximately 10 million Americans diagnosed with genital herpes infections current treatments only partially controls symptoms and disease transmission risk. Our market research suggests that an efficacious therapy that provides continuous and durable protection against genital lesions and viral shedding would be a welcome treatment option for patients infected with genital herpes and for the physicians who treat them. We believe the GEN-003 clinical profile that emerged in 2014 would satisfy these unmet patient and physician needs. As we shared in our podium presentation at IDSA in October, the 143-patient Phase 1/2a trial showed that GEN-003 demonstrated a sustained statistically significant and clinically meaningful impact on genital lesion rates or days with visible lesions present and viral shedding rate or days with virus present on the genital surface. At the best dose composed of 30 micrograms per antigen and 50 micrograms of adjuvant, subjects experienced a 48% reduction in genital lesion rate compared to baseline at the 28-day post vaccination observation period. During that same period, those subjects also reported a 52% reduction in viral shedding rate compared to baseline. Both improvements were statistically significant. In the observation period beginning six months after the final dose, subjects experienced a 65% reduction in genital lesion rate and a 40% reduction in viral shedding rate. Again, these improvements were statistically significant. We believe that the unprecedented magnitude and durability of clinical responses seen in this study are firsts both in genital herpes immunotherapy and in the treatment of chronic infections with a vaccine more generally and thus represent a clinically and commercially attractive product profile. This January, we announced the completion months ahead of schedule of enrollment in a Phase 2 dose optimization trial for GEN-003. The goals of this study are to confirm the efficacy we showed in the Phase 1/2a study. We could also potentially identify a dose which is even better in which case, this would be clear upside over what is already a clinically and commercially attractive product profile. The study enrolled 310 subjects from 17 institutions in the U.S. and will evaluate six dosing groups of either 30 micrograms of 60 micrograms per antigen paired with one of three adjuvant doses 25 micrograms, 50 micrograms, or 75 micrograms. And there is a seventh group receiving placebo. Note that the best performing 30 micrograms per antigen and 50 micrograms adjuvant dose in our first study anchors the dosing in this trial as well. The primary endpoint for the study is a change from baseline in viral shedding rate, a measure of anti-viral activity and we will also evaluate the impact on genital lesion rates, immunogenicity and safety. Patient enrollment criteria, dosing schedule and measurement time points are the same as in the Phase 1/2a study. We believe that the pace of enrollment for this trial reflects not only the strength of the data that we presented from the Phase 1/2a trial but also the need from the patient and the physician community for a new therapy for genital herpes. We will look forward to reporting top-line data from the 28-day observation period after vaccination late in the second quarter of this year. I will now turn to GEN-004, which is our universal vaccine candidate designed to prevent infections by all serotypes of pneumococcus, a major cause of infectious disease related deaths worldwide. Current pneumococcal vaccines drive $5 billion global market, but are only effective against a small number of historically the most prevalent serotypes of pneumococcus. Their effectiveness against these serotypes is driving so called serotype replacement in which, types not covered by these vaccines are increasingly responsible for causing pneumococcal disease. GEN-004 is designed to be a universal vaccine covering all serotypes of pneumococcus thereby potentially providing significant benefits over current vaccines. Our novel approach with GEN-004 is aimed to prevent colonization by pneumococcus in the nasopharynx through stimulating T helper 17 or TH17 cells, a rare type of T-cell that clears pneumococcus from the nasopharynx. Colonization in the nasopharynx is the first and necessary step prior to the development of a pneumococcal infection. Therefore, GEN-004 is intended to work upstream and independently of the existing vaccines. We believe that GEN-004 is the only T-cell directed pneumococcus protein sub-unit vaccine currently in clinical development. In September 2014, we initiated a Phase 1/2a human challenge study for GEN-004 to evaluate its effect on the frequency, magnitude and duration of colonization by pneumococcus in the nasopharynx of healthy adults. We expect to enroll approximately 90 healthy adults in the trial randomized to placebo or GEN-004. Subjects randomized to GEN-004 will receive three doses at one month intervals of 100 micrograms per protein plus 350 micrograms alum, which is identified as the best dose from our successful Phase 1 trial. We now expect to report top line results from this trial in the fourth quarter of this year. In September 2014, we reported a further $1.2 million grant from the Bill & Melinda Gates Foundation, extending the funding of our Malaria Vaccine Discovery collaboration through 2015. This grant supports comprehensive screening of the malaria proteome to identify targets of protective T-cell responses. We also presented results at the 63rd Annual Meeting of the American Society of Tropical Medicine and Hygiene in New Orleans in November of 2014, identifying a cluster of antigens that may be a biomarker of disease. These findings generated using our proprietary ATLAS antigen discovery platform, revealed that malaria leaves a lasting imprint on the immune system, and that T cell memory responses can be detected many years after the previous clinical episode of malaria. 2014 was also a year when we significantly strengthened our corporate team. In December 2014, we welcomed Eric Hoffman as our Chief Business Officer. In September, we announced the addition of Ken Bate to our board. And in April 2014 Jonathan Poole joined us as Chief Financial Officer. 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 cash at the end of 2014 of $47.1 million compared to $12.2 million at the end of 2013. R&D expenses for the year were $23.7 million compared to $15.7 million for the same period of 2013, reflecting the continued advancement of both our clinical programs to Phase 2 trials and associated higher personnel costs. G&A expenses were $9.7 million for the year compared to $5 million for the same period in 2013, reflecting additional personnel costs and increased costs to support our public company operations. Net loss for the year was $35.3 million compared to a net loss of $20.8 million for the same period in 2013. In November 2014, we entered into a loan and security agreement with Hercules Technology Growth Capital for a term loan of up to $27 million, increasing our financial flexibility in advance of our expected and potentially significant data milestones in 2015. We drew down $12 million of that facility on closing and also repaid our former $10 million term loan at that time. Finally, we remain well capitalized and believe that our current cash balances along with the $5 million of additional borrowing capacity currently available under the Hercules term loan will be sufficient to fund our operating expenses and capital requirements into the first quarter of 2016. I’ll now hand the call back to Chip.

[Chip Clark:]

Thanks Jonathan. In closing, 2014 was a great year for the Genocea. And we’re particularly excited to have made significant progress, both in our lead clinical programs and across the pipeline. 2015 promises to be a better year for us as we look ahead to reporting top line Phase 2 data from both our lead clinical candidates, the Phase 2 dose optimization trial for GEN-003 late in the second quarter and the Phase 2a human challenge study for GEN-004 in the fourth quarter. We look forward to updating you further as we continue to execute on the milestones we’ve outlined here today and work towards harnessing the power of our transformational discovery platform to create life changing immunotherapies that directs T cell responses against serious diseases. We would now like to open up the call for your questions. Operator?

[Operator:]

[Operator Instructions]. And our first question comes from the line of Alan Carr of Needham & Company. Your line is open. Please go ahead.

[Alan Carr:]

Hi, good morning. Thanks for taking my questions. First on course is how things are going on with the pneumococcal challenge trial? Are you expecting data little bit later than what you’d guide for previously, I wonder can you comment on that? And then also, can you talk a bit about the cash debt? You mentioned that you might pull another $5 million there. Can you talk a bit about the term loan arrangement? Thanks.

[Chip Clark:]

Thanks Alan. Just briefly in regard to the pneumococcal trial, the enrollment has very slightly lagged expectations and we’re just being prudent and tampering the expectations for the timeline for reporting data, but we’re confident that the trial is going well. And we think Q4 is a very reasonable timeline to guide you to.

[Alan Carr:]

Can you remind me of the number of -- or the sites and that sort of thing, where to run that sort of thing?

[Chip Clark:]

One site, it’s Liverpool School of Tropical Medicine; it’s the only site that runs this challenge model, though it is a well understood challenge model. And we’re targeting 90 healthy adults for the enrollment.

[Alan Carr:]

Thanks.

[Chip Clark:]

Jonathan?

[Jonathan Poole:]

I’ll take the question on the debt. Hi, Alan. So, on the Hercules term loan, as you know that facility is for a total of $27 million. We drew down $12 on closing and have the ability at our option to draw down further $5 million before June this year and that’s unencumbered. And so, we have to achieve [ph] any point in time price update. The two further tranches are of $5 million each which are contingent on -- the first one being contingent on the success of the GEN-003 dose optimization study and then either the commencement of next GEN-003 trial or $40 million of funds received either through a fund raising or BD deal. And then the second tranche is associated with the successful completion of the GEN-004 clinical trial. So in sum, it’s an important piece of flexibility for us as the company. But we still believe that obviously equity is going to be the primarily source of our funding going forward.

[Alan Carr:]

Thanks very much.

[Chip Clark:]

Thank you, Alan.

[Operator:]

Thank you. Our next question comes from the line of Jonathan Eckard of Citigroup. Your line is open. Please go ahead.

[Unidentified Analyst:]

Hi, this is actually Jimmy dialing for Jon. And thanks for taking my question. The first question is what would be some of the immunological parameters from this Phase 2 GEN-003 trial that would give you confidence that it could be better than the Phase 1 trial.

[Chip Clark:]

So, we’re looking principally not on the immunology but on the actual clinical endpoints of viral shedding and genital lesion rates as the primary drivers. But Seth can speak to the immunology that we’re gathering.

[Seth Hetherington:]

Sure. We did some initial immunology work in our first trial. We have advanced our capabilities to look at other immunologic parameters. I think as Chip said, these should be viewed not as the primarily goal for selecting a dose but the primarily data for selecting dose is viral shedding which is a direct measure of any viral activity and lesion rates which are demonstration of an impact on clinical disease. The immunology is extremely interesting. We’ve said many times before we are in new territory and blazing new paths on the understanding of T cell vaccines. And so that data is important. But again, we want to emphasize that virology and the clinical data as guiding our dose selection.

[Chip Clark:]

And I would just add that that’s consistent with how vaccine development happens very typically. You’d sort of look at your -- whatever your efficacy measures are and then later perhaps search for correlates.

[Unidentified Analyst:]

Got you. And the second question is what are the most important things that we should look forward from the data into that GEN-004 trial?

[Chip Clark:]

Yes. So, I guess ultimately, you’re asking for maybe a definition of success from this GEN-004 trial. And I’ll ask Seth to address that.

[Seth Hetherington:]

Right, we’re looking for a proof concept, proof of mechanism here. What we’re looking at is the frequency magnitude and duration colonization in this challenge model. The definition of success in this trial is being able to demonstrate that we can cause a statistically significant reduction in any of those parameters, magnitude; duration; or frequency of colonization by pneumococcus and the nasopharynx. This is important because colonization is a necessary precursor to infection. So, if we’re able to impact colonization through TH17 mechanism, we’ve got a very powerful proof of concept.

[Chip Clark:]

Does that answer your question?

[Unidentified Analyst:]

Yes, thanks.

[Chip Clark:]

Very good. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Mark Phrom [ph] of Cowen and Company. Your line is open. Please go ahead.

[Unidentified Analyst:]

Hi, guys. Thanks for taking my question; I have two. One is kind of stepping back to the 003, which I think was kind of alluded to in the last question. Where is your cut off and what are you thinking of this dose optimization as to impact -- a change in the lesion or shedding reductions; how much away from 50% do you need to move to say that you’ve found a better dose? And then I’ll ask the second afterwards.

[Chip Clark:]

So, you asked a very important question. The trial is designed to compare across the six different dose combinations anchored on a dose combination we already know is impactful and is attractive to both physicians and patients; it’s something that’s meaningful and will be useful in the clinic in the future once it’s approved. How much better we have to be is going to be a combination of impact on shedding related with the impact on lesion rates. And how much of an improvement will also depend on the comparative safety profile. So, there is no specific number here but it’s going to be the total profile of that particular dose versus what we already know is a very important in response to the 30 microgram dose of vaccine.

[Unidentified Analyst:]

And then, I guess following up on that, do you need -- before you could move to kind of the next trial which I believe is the regimen in terms of the how many doses and the timing of it. Do we need to go all the way to one year out from these vaccines to kind of move to that trial or do you think you can do that earlier?

[Chip Clark:]

We can do that earlier. We believe that the earliest data will get out of the current trial which is 28 days following the last dose. The 28 days time period is what we’ll be looking at for shedding and lesion rates. We believe that that early impact reflects what will be durability at six months and 12 months as well. This is well established in other diseases that have used viral activity as an endpoint. So, we do not need to go out to the later time points. Although we are thoroughly going to collect that information because that information will be important in helping us decide when and if booster doses are needed. But we’ll start the planning on the subsequent dose regimen study; we’re even starting now on that planning. And we would initiate that study as soon as logistically feasible and based on the data from the early time point in the current trial.

[Unidentified Analyst:]

Okay, thanks. And then, you guys are going to be presenting some data coming up on cross protection into HSV-1. I just have a question on that. Would you have to run out entirely separate program or is there a way to kind of rapidly move HSV-1 and end up with kind of all HSV Phase 3?

[Chip Clark:]

You’re speaking about the abstract that we’re presenting in Europe in a few weeks on the immunological response in the presence of HSV-1. Seth, can you…?

[Seth Hetherington:]

Sure. There are plenty of reasons to believe that our vaccine is going to be effective against HSV-1. We know from the Herpevac trial that a HSV-2 design vaccine works against HSV-1. The two proteins we have in our vaccine are conserved across the types. And HSV-1 tends to be a milder disease than HSV-2. So, it maybe a lower target to hit. That said, I think it’s really a regulatory discussion as to how we get to an all encompass saying general herpes indication as opposed to a type specific indication. And we will give you guidance once we have better clarity on that. But our goal is at the time of the ELA, [ph] we’ll be going up to a general herpes indication, not restricted by serotype.

[Unidentified Analyst:]

Okay. Thank you very much.

[Chip Clark:]

Thank you, Mark.

[Operator:]

Thank you. [Operator Instructions]. Our next question comes from the line of Stephen Willey of Stifel. Your line is open. Please go ahead.

[Stephen Willey:]

Yes. Thanks for taking the question. Just wondering with the 003 study now fully enrolled; do you have any insight into just patient baseline characteristics and I guess how will they match up against the prior Phase 2a? And then if you also have insight into just the baseline shedding rates that occur, may be pre the initiation of dosing?

[Seth Hetherington:]

Yes. This is Seth, Steve. We have no specific data on either of those questions because it is a blinded trial. But I can just reiterate that the trial was designed to have the same patient population, it’s got the same inclusion and exclusion characteristics. We’re using the same sites we used in our prior study, plus in additional group of sites. So, we have no reason to think that patient characteristics will deviate from what we saw in the first study. All the shedding data will be analyzed at once. We have no insight into the baseline rates. However, this is a larger trial; it’s twice the size of our prior trial. And we no reason to think that there would be any aberration from what we saw before. We think that it will be a very representative patient population for both characteristics of patients and baseline shedding rates that you would expect for this characteristic group.

[Stephen Willey:]

Okay. And then I know, in response to a prior question, you have mentioned the 28-day post last dose shedding and lesion data is kind of indicative of the 6 and the 12-month. And I think there was a little bit of disconnect on the shedding front. So, I think as you think about what administration schedule needs to look like as you move into the next kind of pre-Phase 3 part of the study, do you then assume that a dosing schedule has to be minimally six months just based on the fact that’s kind of the data for which we have that established correlation between day 28 data and subsequent time points?

[Seth Hetherington:]

Steve, maybe before we answer the question, to make sure we understand it, can you speak to the disconnect you mentioned on the shedding side?

[Stephen Willey:]

Yes. So, if I remember correctly, the follow-up data, I think it was either at 6 or 12 months, didn’t recapitulate the shedding benefit that was demonstrated at…

[Seth Hetherington:]

You’re right.

[Stephen Willey:]

So for Seth, just in response where you said that the 28-day post last dose data is correlative to what’s observed at 6 and 12 months.

[Seth Hetherington:]

Got it. Yes. The data were very consistent after dose three and at six months. As we’ve said earlier, we had a smaller N at 12 months and therefore we do not know if the trend that you speak of whereby there was a little bit of divergence that was real or not.

[Chip Clark:]

I think we need to reiterate that there was statistical testing at 12 months because that data could not be fit into the model and we use the model everybody else uses. It’s a well-defined statistical analysis model. You can’t draw any conclusions from the 12-month data; it’s descriptive purposes only.

[Stephen Willey:]

So, and maybe just to re-ask the prior question then, do you wait to see that correlation that holds up this time or do you actually go ahead with the kind of larger Phase 2b and just assume that a dosing schedule needs to be kind of minimally on a six-month administration schedule?

[Chip Clark:]

Two parts to that question; first is yes, we do go ahead. We do have confidence that the immediate post dose data will dictate what happens for durability. And the second part of that question was -- I forgot already.

[Stephen Willey:]

Do you move ahead or do you wait?

[Seth Hetherington:]

We definitely move ahead.

[Chip Clark:]

You made the statement that the 2b would be bigger. In fact we actually think this dose regimen study will be a smaller study, given what we will already know going into that study.

[Seth Hetherington:]

Yes. And the other question was, are we assuming a booster dose of six months. That’s currently the profile we have. As you know there is opportunity in the current study to demonstrate greater durability, consequently with another dose and also dose regimen. So, consequently the final decision on when do we get a booster is going to be based on an analysis all the day that we will be accumulating in our Phase 2 program. We may start testing a booster in the next Phase 2 study but that’s yet to be determined.

[Stephen Willey:]

Okay. And then, is it safe to say that the 003 data would be ready for presentation at one of the infectious disease conferences in the third or fourth quarter.

[Chip Clark:]

We will always -- we’ve been very consistent in our approach and always looking to present our data at major medical meetings. And it’s really a function of deadlines as much as anything. But that is our intent to do.

[Stephen Willey:]

I appreciate the color. Thanks guys.

[Chip Clark:]

Thanks for the questions.

[Operator:]

Thank you. And ladies and gentlemen, that does conclude our question-and-answer session and our conference. Thank you for your participation. You may all disconnect. Have a great rest of your day.

[Chip Clark:]

Thank you.