Jounce Therapeutics, Inc.
Q4 2020 Earnings Call Transcript

Published: 28 Feb 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics Fourth Quarter and Full Year 2020 Earnings 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 follow at that time. As a reminder, this conference is being recorded at the company's request. I will now turn the call over to your host, Malin Deon with Jounce Therapeutics. Please go ahead.

[Malin Deon:]

Thank you, operator. Good morning and welcome to the Jounce Therapeutics fourth quarter and full year 2020 financial results conference call. This morning we issued a press release which outlines the topics that we plan to discuss today. The release is available in the Investors & Media section of our website at wwwjJouncetx.com speaking on today's call will be our CEO and President, Dr. Rich Murray, who will discuss our pipeline progress and key milestones for 2021 followed by our CMO, Dr. Beth Trehu who will provide an update on our clinical activities and lastly, our CFO. Kim Drapkin will review our full-year 2020 financial results and 2021 guidance. We will then open the call for your questions.

[Rich Murray:]

Thanks Marilyn and good morning everyone. As we reflect on 2020, I'd like to note the meaningful progress Jounce has made to advance our growing discovery and development IO pipeline to align directly with the needs of cancer patients. Our new potential first-in-class programs and biomarker approaches are aimed at both PD-1 inhibitor-naive patients, as well as the growing PD-1 inhibitor experienced population with two proof-of-concept studies actively enrolling patients a sustainable and robust discovery effort validated via an important out license to a partner and a strong balance sheet. We are entering 2021 with the potential to make significant positive impacts on the lives of cancer patients. 2020 saw the achievement of important clinical execution milestones for our highest priority program JTX-8064 LILRB2, also known as ILT4 inhibitor as well as for vopratelimab and ICOs agonist. In January, we announced that enrollment to commence INNATE our Phase 1 JTX8064 clinical trial. INNATE trial is designed to move quickly through the necessary dose escalation portion of the trial. Leading directly to the opening of multiple tumor specific expansion cohorts in the second half of the year. These expansion cohorts will include both JTX8064 monotherapy as well as combination therapy with our own PD-1 inhibitor JTX-4014. in October 2020, we began enrolling biomarker selected patients in SELECT our Phase II concept study of vopratelimab also in combination with our PD-1 inhibitor JTX-4014, not only able to SELECT trial test, the impact of vopra. We will also gain additional important single agent data for JTX-4014 in the new biomarker selection paradigm. We believe the test vopra biomarker we'll select more appropriate patients for both the CD8 mediated benefit of a PD-1 inhibitor as well as for the potential CD4 related benefit of vopra. In addition, in October 2020, we licensed to Gilead the worldwide rights to JTX-1811 a potential first-in-class antibody designed to selectively deplete immunosuppressive tumor infiltrating T regulatory cells. We continue to progress JTX-1811 to IND clearance and we are on track for IND filing in the first half of 2021. On clearance of the IND JTX-1811, we will transfer to Gilead the clinical development and potential commercialization. In addition to the $85 million upfront and 35 million equity investment, Jounce has the potential to earn up to $85 million in milestones, as well as royalties on worldwide sales although our primary goal is to retain and develop our wholly-owned jounce discovery programs. In this instance, we felt it out license was the right deal at the right time. It's given us the financial flexibility to fund our 2 proof-of-concept studies and further progress our translational discovery engine and bring new candidates forward.

[Elizabeth Trehu:]

Thanks, Rich, and good morning everyone. We made great progress at Jounce in 2020 and I'm very proud of the work our team has done to enable us to execute on our 2 ongoing proof-of-concept studies INNATE and SELECT these programs are key to our belief that novel mechanisms and biomarker strategies are necessary to bring clinical benefit to patients who do not optimally benefit from T-cell checkpoint inhibitors. As Rich mentioned, our pipeline is well poised to address the significant unmet medical need of patients with tumors that are either sensitive or resistant to PD-1 inhibitors. I would now like to provide more detail about our ongoing clinical trials beginning with our highest priority program JTX-8064, which is designed to reprogram immunosuppressive or M2 macrophages to immune stimulatory or M1 macrophages in order to enhance or restore anti-tumor immune activity. The mechanism of action is very different from other macrophage targeting therapies such as inhibition of CSF1R to deprives the myeloid lineage of the key growth factor and CD47 to improve macrophage mediated cycle cytosis of tumor cells. JTX-8064 is a LILRB2 antagonist antibody, which we view as a macrophage checkpoint inhibitor with the potential to reverse PD-1 inhibitor resistant. The primary ligand of LILRB2 our HLA molecules, which are critical in the recognition of cells by the immune system, preventing our immune cells from destroying our own normal tissues. When LILRB2 binds to its ligand, which include HLAG on tumor cells and HLA-A and B on immune cells, it induces an immunosuppressive state similar to the effect of PD-1 binding to PD-L1. In preclinical studies, JTX-8064 interferes with the binding of LILRB2 to its ligands resulting in an immune stimulatory state with production of pro-inflammatory cytokines improved antigen presentation and T-cell activation. LILRB2 is expressed on cells in the INNATE immune system, such as macrophages. We have evidence of the direct macrophages M2 to M1 conversion from in vitro studies, in which JTX-8064 reprogram, the cytokine production of macrophages from immunosuppressive cytokines such as IL-10 to immune stimulatory cytokines such as TNF-alpha. In addition, when JTX-8064 blocks for binding of LILRB2 to HLA-A and HLA-B on the macrophage itself. These critical parts of the antigen presenting machinery of the cell are now able to function again resulting in improved antigen presentation and T-cell activation. LILRB2 is not expressed on T-cells, which are members of the adaptive immune system. Importantly, we have shown that JTX-8064 treatment of cells derived from both peripheral blood and human tumors ex-vivo results in T-cell activation providing evidence of JTX-8064 ability to create a bridge between the INNATE and adaptive immune system. This biology along with recently reported initial clinical data on another LILRB2 inhibitor suggest the potential for JTX-8064 in combination with PD-1 inhibitors to reverse PD-1 inhibitor resistance as well as to further improve outcomes in PD-1 inhibitor sensitive tumors thereby having the potential to provide clinical benefit to a wide range of cancer patients.

[Kim Drapkin:]

Thanks, Beth, and good morning everyone and we reported in this morning's press release, we ended 2020 with cash, cash equivalents and investments totaling $213.2 million compared to $170.4 million for 2019. The increase was primarily due to the receival of 120 million in proceeds from the license and stock purchase agreements with Gilead and $14.5 million received during 2020 under our ATM program, offset by operating expenses incurred during the year. Turning to the P&L, our license and collaboration revenue was 62.3 million for full year 2020 compared to $147.9 million for 2019. Revenue recognized during 2020 was related to our license agreement with Gilead, revenue recognized during 2019 was related to a license fee and collaboration revenue under our former Celgene license and collaboration agreement. During 2020, we recorded $78.7 million in research and development expenses compared to $67.1 million for 2019. The increase in R&D expenses was primarily due to $7.9 million of increased clinical and regulatory expense primarily attributable to the SELECT clinical trial $3.2 million of increased manufacturing and IND enabling expenses and 2.9 million of increased employee compensation costs.

[Rich Murray:]

Thanks, Kim. On the heels of a strong 2020 of pipeline execution and Corporate Development, we are poised for an important year with the following key milestones. Established safety and recommended Phase 2 dose for JTX-8064 before and open tumor specific expansion cohorts in the second half of 2021, continue enrollment to enable reporting a preliminary efficacy and related biomarker data for vopra and JTX-4014 from the SELECT trial in 2022 continue IND enabling activities for JTX-1811 and anticipate an IND clearance in 2021 and continue to advance our discovery pipeline, a first-in-class programs with the goal of a new IND every 12 to 18 months. We look forward to updating you on our progress throughout the year. Before I close, I'd like to take this opportunity to thank the investigators and Jounce employees despite the challenges we all face during the COVID-19 pandemic remain dedicated to our mission of bringing new therapies and benefits to cancer patients and most importantly, we send our thanks to the patients who we have had the privilege to treat. With that, we'd now like to open the call for your questions.

[Operator:]

Thank you. Our first question comes from Boris Peaker with Cowen. You may proceed with your question.

[Boris Peaker:]

Good morning. So my first question is on 8064. I'm just curious, have you compared it to Merck's drug and preclinical development, and if yes, what are the differences that you've observed between yours and Merck's drug?

[Rich Murray:]

Hi, Boris. Good morning. Yes, I'll take that one. This is Rich. Yes. We have compared it in the following way. We posted data and various presentations that we've been at Merck has done that as well. So comparing those 2 different kind of releases of data from each company respectively. 8064 is very potent, very specific inhibitor of LILRB2. Based on the existing data that we can compare it in this way, we see similar properties. We believe that kind of leads to the potential of read through from the Merck data releases and importantly we view kind of the potential kind of differentiation as we move forward, there is something of course we will pay attention to. But like PD-1 approval landscape, we see many, many opportunities that are really dictated by clinical strategy and of course our biomarker implementation in the future as well.

[Boris Peaker:]

Great. And my second question is, obviously you're in dose escalation phase right now. I'm just curious, based on your preclinical work. When do you anticipate to get to therapeutically minimal effective dose at the current rate?

[Elizabeth Trehu:]

Hi Boris, this is Beth. I'll take that one. I think what we've said to date is the study is designed to move as quickly as possible to those to getting to a potentially therapeutic dose and expansion of the tumor specific cohorts, which are designed to demonstrate proof of concept and so if you think about a typical Phase 1 trial, sometimes it can take a year or even a year and a half to get to that point whereas we started enrollment and actually completed enrollment in the first dose cohort in January and we are expecting and on track to open the expansion cohorts in the second half of this year. So I think that would say within 6 months from now, we expect to be at a dose that we think is potentially therapeutic and that's when we would open expansion cohorts.

[Boris Peaker:]

Great, thank you very much for taking my questions. You're welcome.

[Operator:]

Thank you. Our next question comes from Mike Ulz with Baird. You may proceed with your question.

[Mike Ulz:]

Hi guys, thanks for taking the question. Maybe I could ask another one on 8064 and maybe a bit of a follow-up to Boris' question here, just for the dose escalation obviously you're through the first cohort. I don't know if you can comment, but how many cohorts are you anticipating testing?

[Kim Drapkin:]

I think rather than getting into the specifics of the number of cohorts. I'll just reiterate, we expect to be through dose escalation and into our expansion cohorts by the second half of the year.

[Mike Ulz:]

And then, will that just be for the monotherapy or will that be for both monotherapy and the combination expand?

[Kim Drapkin:]

Yes, we'll be initiating the cohorts for both monotherapy and combination in the second half of the year.

[Mike Ulz:]

Got you. And then maybe just a last quick question for me, you seem pretty confident that you'll be in that position in the second half and I guess just given what's happening with SELECT and COVID having some impact there and delaying things? Is there any risk to those timelines at this point or what you're seeing is gives you enough confidence that you can hit that timeline? Thanks.

[Kim Drapkin:]

Yes, that's a great question, Mike. We are not currently experiencing a covert related delays for INNATE, you're right though there's a lot of uncertainty. If we think, we will encounter delays, we'll let you know, but we believe with the number of sites, the enthusiasm of the investigators and the way that the trial is going so far. At this point, we felt comfortable saying that we'll be in those expansion cohorts the second part of the year.

[Mike Ulz:]

Great, thank you.

[Operator:]

Thank you. Our next question comes from Martin with HC Wainwright. You may proceed with your question.

[Unidentified Analyst:]

Good morning, everyone. Thanks for taking my question. Ike here for Martin . So I have two questions; one is regarding the 8064, I just wondering if you guys could give us more color on the tumor types selection for there is tumor specific cohorts or we kind of still waiting for the data from the dose escalation study? And the second question regarding the 1811, the IND filing; so what other preparing you guys require to before filing IND? Thanks.

[Elizabeth Trehu:]

Thanks. Okay. So this is Beth and the indications for INNATE. We will identify the tumor types that we've selected and the scientific rationale behind them mid-year this year at either a company-sponsored event such as in R&D Day or at a medical meeting.

[Unidentified Analyst:]

Yes, I can take. I can take the question for 1811. Yes. So we're in the kind of typical stretch of where we are in the IND enabling process for a monoclonal antibodies, where the focus really is on ensuring the supply is produced generated appropriately all the analytical data using shape and then compiling that ultimately into the IND, so as is typical for an antibody that's usually the rate-limiting factor. So yes, we're comfortable with where we are. That's going well and we are engaging with our colleagues at Gilead as we look to transfer that program.

[Elizabeth Trehu:]

Maybe I can just add that another important part of the IND is the clinical protocol and we're working very closely with Gilead on that and that's going very well.

[Unidentified Analyst:]

Thank you. Thank you very much.

[Operator:]

Thank you. Our next question comes from Steve Seedhouse with Raymond James. You may proceed with your question.

[Steve Seedhouse:]

Hi, good morning. Couple of questions were 8064 just on the biomarker strategy first, would this be something - would you anticipate this being something as simple as just looking at HLA expression like HLAG expression or even LILRB2 expression or are you thinking this will be like a TISvopra like RNA signature maybe if you could just talk about sort of what types of biomarkers you're exploring? And then relatedly do you know if HLAG or LILRB2 over-expressed in PD1 resistant patients? And then I have a quick follow-up. Thanks.

[Elizabeth Trehu:]

Sure. So in terms of the biomarkers that we're exploring its potential predictive biomarkers, many of those were in the poster that we presented at SITC 2020 and we were very pleased to see how well they correlated with the biology. So LILRB2 is 1, HLA-A and B were included, and also our proprietary tumor-associated macrophages signature. So for this first study, we will be exploring a broad panel of both gene signatures and also immunohistochemistry biomarkers and once we started to see how that plays out in terms of relationships with clinical data that will help us to narrow down onto the predictive biomarkers that we think will be the best for the program. So I think we're in great shape. We have a number of different ones to test and we'll be testing them retrospectively in this first study, but always with an eye to being able to identify something that we could test prospectively going forward. With respect to. - I'm sorry, I forgot your second question.

[Steve Seedhouse:]

Just you know if the IHC-based biomarkers that you're including that exploration, are they over-expressed in PD-1 resistant tumors.

[Elizabeth Trehu:]

Well, one thing we know is that one of the mechanisms of PD-1 inhibitor resistance is loss of HLA heterozygosity and loss of beta-2 microglobulin inability to present antigen. So we think that LILRB2 inhibitors such as JTX-8064 should help to address some of that. I'll let Rich add more on that.

[Rich Murray:]

Yes. Some of that, Steve. It's a good question. And we're really zeroing in on that, but some of the answers to that stay tuned to the presentations that Beth was alluding to the scientific presentations, we'll have a lot more on biomarker data, characterization of different, different patient populations that we hope you know land in upcoming meetings.

[Steve Seedhouse:]

Okay, great, thanks. Rich. And then the last question, I just had is can you remind us if as you think about your LILRB2 and other IoT family member inhibitors in sort of emerging competitive landscape. I was hoping you can remind us, so are there any modifications or engineering to your antibody that are necessary to diminish or eliminate ADCC and is that a feature of the difference between some of these competitive antibody is irrelevant as a necessary. If you could just comment on that will be great.

[Rich Murray:]

Sure, sure. So I think the general emergence of these programs, we think they're likely to kind of continue. Is that the FC's will be disabled or minimized because really the for solid tumors, because some of the biology is really heading towards straight up antagonism, we want to keep that receptor from binding from its ligand. Deferring strategies will really be a completely different routes travel where there is potential and some heme malignancies where you may want to invoke some tumor cells specific targeting. That's not the way our molecule is built. Our molecule is built in a way that's similar to the design of Merck as far as we know, which is an IgG4. So we've minimized the sector function and so the kind of engineering that we foresee in the future is additional amount of specific agents that are being brought forward that are highly selective to the different receptor families, the concept, the potential of BioSpecifics and of course the kind of the combination strategies that one would put into clinical trial design.

[Steve Seedhouse:]

Very helpful, thank you. Thank you.

[Operator:]

Our next question comes from Zegbeh Jallah with ROTH Capital Partners. You may proceed with your question.

[Zegbeh Jallah:]

Good morning, guys, thanks for the update. Just had a question on several different things you mentioned that this morning. The first is about vopra. I know you're not going to have to audit this year but GSK did mention that they should have data from their program by mid-year; so just kind of wanted to know how much read-through should investors, kind of, take from what's happening with GSK? Is there any difference between the constructs or anything like that that should be accounted for more?

[Elizabeth Trehu:]

I'll let Rich address the differences between the molecules and then I can say a few words about the clinical strategy.

[Rich Murray:]

Sure. Yes, I think there's a couple of levels of that if we just look at the antibodies itself with our preclinical data in terms of choosing our antibody to binding sites, EFC and we chose IgG-1 as RFC and that was explicitly chosen because that I think everyone recognizes gives you better signaling for an agonist antibody, so that IgG-1 backbone is in our opinion, the way to go for agonist activity, what we've subsequently proven of course and dearest from our clinical data is that that is associated with any cell depletion that just simply doesn't occur we published that many times. So that's the difference, IDD1 in ours versus IgG-4 in GSK's. We also believe just through kind of comparing datasets preclinical data that the binding sites may be a bit different as well. So our molecule we believe is a very highly potent engineered appropriately agonist to take forward. So just for a comparative standpoint, the molecules between GSK and Jounce for the ICOs agonist or have some differences anywhere from new answers to things that could be more meaningful. I'm going to let Beth, talk about the kind of the biomarkers and the clinical strategy, how we see that parts of what could be what could be regroup.

[Elizabeth Trehu:]

Sure. So the data that we would expect them to be presenting this year would be in PD-1 experience non-small cell lung cancer in combination with a PD-1 inhibitor. So very different from the trial that we did PD-1 experience non-small cell lung cancer and then they're also going to be we think announcing whether there Phase II, III trial in front-line head and neck cancer will reach it's scathing criterion to move forward. So, we look forward to seeing their data, but I think for us. We're using a biomarker selection strategy in our front-line I'm sorry, not front line - but PD-1 inhibitor naive non-small cell lung cancer study and we're currently not studying head and neck cancer. So I think there are some similarities. It's obviously targeting the same thing. It's and agonist, but we've also taken a different approach with a biomarker and potentially also different dosing strategy. So there are enough differences that it's a little hard, it's not like what we've talked about with Merck 4830 and JTX-8064 where we think there is more similarities than differences there may be some differences between our ICOs program and GSK's.

[Rich Murray:]

Yes, maybe I can just - one more point there that is a little bit of I think learnings along the way here across immunotherapy not just Jounce, is that as you go after those kind of T-cell and P-cell mechanism combos. We really think the IO naive, PD-1 naive, patient populations are the way to go and our biomarker strategy is really looking to pull together the patients that we think are most appropriate for both the PD-1 effect as well as the effect of vopra, which we can measure through its pharmacodynamic activity and relationship to benefit. So I think our kind of biomarker strategy as Beth alluded to, is also very kind of distinguishing for us. We think in that type of space you really, really want to find the right patients with the kind of multiple T-cell mechanisms.

[Zegbeh Jallah:]

Thanks, Rich. And then just a follow-up on 8064, any comments on why enrollment might be going so well and then are we likely to see any kind of data from those programs before the end of the year?

[Elizabeth Trehu:]

Sure. So we work with great investigators, we spend a lot of time talking about the science of the program and I think they really believe in this mechanism. So also patients are always looking forward to opportunities for novel IO therapy. So as I said, we're very pleased with our things are going to date. We've traditionally been able to enroll our Phase 1 clinical trials pretty quickly. I think for those reasons, we work very closely with the sites we have very hands-on approach in terms of data, so we will provide guidance in the second half of the year. Once we have opened the expansion cohorts and when you can expect to seek data.

[Zegbeh Jallah:]

Thank you. And then, I'm actually just going to merge the next two; the first one is about 1811. Just kind of wanted to know if you're going to get any kind of milestone payment once you to transfer along with the IND to Gilead? And then a follow-up to that is, just also - you know, how much levy you're going to have in terms of data updates on that program or it's just what we've done is being driven by Gilead at that point? And then lastly, Rich you talked extensively about pipeline which is someone to know - you know, are you going to nominate anything from the program - from the pipeline this year? And then, if you are, is it going to be one of the myeloid that stromal targeted agents? And then, I know this is quite long, but also you talked a lot about targeting different cell types. So I'm just wondering again, are you guys going to explore additional combinations beyond the PD-1 combos and things like that?

[Kim Drapkin:]

Sure, but thank you for your questions. This is Kim. I'll start on the Gilead and then I'll hand it over to Rich and he can give you some more information on your discovery related questions. So in terms of the Gilead milestones, we are not at liberty to disclose, when and if will achieve any milestones, but importantly, the 685 million in milestones that we have the opportunity to earn $510 million of those are development and regulatory. So we were happy with the negotiation of that and the opportunity to earn milestones in the more near term as opposed to being completely back loaded and just keep in mind also all of our financial projections like our cash going through Q2 2023, do not include the earning of any milestones that would extend our runway even further. And when and if we earned a milestone, we will announce it at that time. And I'll turn it over to Rich for your other questions.

[Rich Murray:]

Sure, yes. So I think I may have missed the question, but you asked about new candidates and we're very excited about how things are going in discovery. We are quite active in kind of the myeloid related space, macrophages, LILRB2, JTX8064 there are other family members of the well family that invoke more dendritic cell biology or NK cell biology. We really think that kind of optimizing the therapeutic benefit from these different myeloid cell types is something that - it's something that fits well with then combo with a PD-1 inhibitor. So kind of some of the lead discovery programs are kind of in and around that space. Stromal biology we think is kind of a next wave as well. So, I'd rather not pinpoint a specific molecule at this point, usually would we get to kind of a development candidate, which is meeting a certain criteria for us is when we announced that and you know where we are on track to - we're on track to do that. Okay. Thank you, sir. I may have missed it, - I may have missed the question.

[Zegbeh Jallah:]

I think I will ask we kind of hit on we should come those beyond PD-1 and maybe combining some of your other regions in your pipeline.

[Elizabeth Trehu:]

Yes, this is Beth, I can comment on that. So I think as you know, we're really driven by the biology and really focus on rationale combination. So this is definitely an area we're continuing to explore for JTX-8064 as we've spoken about macrophage-rich tumors are of interest for us and there are published data showing that macrophage infiltration may increase after some chemotherapies or radiation therapies. So we're continuing to explore a breadth of combo opportunities for JTX-8064 because we really think it's a program with a lot of potential to make a difference for patients.

[Zegbeh Jallah:]

Thanks for the update, guys.

[Operator:]

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may now disconnect. Have a good day.