Jounce Therapeutics, Inc.
Q2 2018 Earnings Call Transcript

Published: 9 Aug 2018

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics Second Quarter 2018 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded at the company's request. I will now turn the call over to your host, Komal Joshi, with Jounce Therapeutics. Please go ahead.

[Komal Joshi:]

Thank you, Operator. Good morning, and welcome to the Jounce Therapeutics Second Quarter 2018 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 and Media section of our website at www.jouncetx.com. Speaking on today's call will be our CEO and President, Dr. Rich Murray, who will discuss Jounce's second quarter 2018 clinical and preclinical development activities; followed by our CMO, Dr. Beth Trehu, who will discuss our pipeline progress with a focus on the recent data presented at the annual ASCO meeting; lastly, our CFO, Kim Drapkin, will review our updated cash guidance along with our second quarter financial and operational results. We will then open the call for your questions. Before we begin, I would like to remind everyone that today's discussion will include statements about our future expectations, plans and prospects that constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including the risk factors discussed in our SEC filings. In addition, any forward-looking statements represent our views only as of today, August 9, 2018, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. With that, I will now turn the call over to Rich.

[Richard Murray:]

Thanks, Komal, and good morning, everyone. As I laid out at the start of 2018, we're executing on four key value drivers for the year as part of our mission to discover and develop first in class immunotherapies. First, we reported safety and preliminary efficacy data from our ICONIC trial at ASCO in June. Second, we're pleased to announce that enrollment is under way in the dose escalation cohorts, evaluating the safety of JTX-2011 in combination with ipilimumab and in combination with pembrolizumab. Third, we're on track to file an IND for JTX-4014, our PD-1 inhibitor. And fourth, as previously announced, we advanced our first macrophage candidate into IND enabling studies. I continue to be proud of the team that we've built at Jounce. We've assembled a highly experienced and talented group that's focused on the collective goal of serving cancer patients. The team continues to execute well with the initiation of the dose escalation cohorts with ipilimumab and pembrolizumab. While the safety work is ongoing, we'll continue to evaluate the ICONIC, clinical, and biomarker data to inform the next steps after dose escalation. We remain firmly committed to our biomarker approach and the belief that interrogating tumor characteristics is important in the discovery and the development of first-in-class immunotherapies. Now, turning to the data presented at ASCO. JTX-2011 showed a favorable safety profile both alone and in combination with nivolumab in heavily pre-treated patients with advanced cancers. We were also encouraged by a signal of clinical activity with JTX-2011 monotherapy and in combination with nivolumab, accompanied by a potential pharmacodynamics biomarker, which links back to the fundamental science from two of our founders, Dr. Padmanee Sharma and Jim Allison. Beth will provide more context on the JTX-2011 data in her remarks, but before I hand it over to her, I'd like to turn your attention to the broader pipeline. We remain on track to file an IND for JTX-4014, our PD-1 inhibitor, later this year. We continue to believe that combination therapy will be necessary to achieve the full potential of cancer immunotherapy and we see JTX-4014 as an important asset in our pipeline, particularly for our wholly owned [indiscernible] tumor programs. As previously announced, we're in IND enabling studies for our first tumor-associated macrophage candidate. Immunosuppressive macrophages are prevalent in certain tumor types across indications and are believed to add an additional layer of immunosuppression within the tumor microenvironment. Our goal is to convert but not deplete immunosuppressive macrophages to an immunostimulatory state, thus engaging the innate immune system and the response to cancer. We're excited about the potential to modify the tumor microenvironment in this way. In addition to the macrophage programs, we're also enthusiastic about our discovery programs targeting other cell types, including T-regulatory cells, and also stromal cells. We believe it's important to target the more immunosuppressive and less inflamed tumor microenvironments, in which current T-cell directed immunotherapies are less promising. Using our translational science platform, we continue to build and broaden a diverse pipeline. Now, I'd like to turn the call over to Beth.

[Elizabeth Trehu:]

Thanks, Rich and good morning everyone. As Rich mentioned, Jounce is focused on utilizing our interrogation of the tumor microenvironment to inform and refine our clinical trials, and ultimately impact the lives of cancer patients. Before turning to the data presented at ASCO, I'd like to review the JTX-2100 mechanism of action. JTX-2011 is an agonist monoclonal antibody targeting ICOS. ICOS is expressed at very low levels on resting T-cells and requires engagement with antigens to be expressed. When JTX-2011 binds to ICOS and the surface of T-cells, it results in the activation and proliferation of CD4 T-effector cells and the selective reduction of intratumoral T-regulatory cells, thus shifting the balance in the tumor microenvironment towards anti-tumor activity. The Phase I/II ICONIC trial is an adaptive clinical trial evaluating JTX-2011 alone and in combination with nivolumab with Phase II doses of 0.3 milligrams per kilogram for JTX-2011 and 240 milligrams for nivolumab, both administered every three weeks. At ASCO, we reported safety data from the entire study and preliminary efficacy data from the gastric, triple negative breast, head and neck squamous cell, and non-small cell lung cancer cohorts. These tumor types were selected because they are more likely to have higher levels of ICOS expressing immune cells. In tumor types in which PD-1 inhibitors were approved, we required patients to have failed PD-1 inhibitor treatment. We enrolled heavily pre-treated patients who had failed all available therapies as a way to potentially identify the fastest path to registration. I would now like to review the data from the ICONIC trial that was presented at ASCO that we believe supports further development of JTX-2011, emphasizing three years, safety; signals of biological and clinical activity; and features of the patient population. With respect to safety, we are pleased to see that JTX-2011, both alone and in combination with nivolumab, continues to be safe and well tolerated, even in these advanced patients. Turning now to the signals of biological and clinical activity, the patients with resist PRs reported at ASCO remain on study with ongoing response. The resist PRs were seen in PD-1 inhibitor naive patients with gastric and triple negative breast cancers. In addition, tumor reductions and stable disease have occurred in other patients, including PD-1 inhibitor failures in non-small cell lung cancers. Importantly, signals of clinical activity appear to be associated with the peripheral blood ICOS biomarker. As presented at ASCO, all patients with resist PRs and additional patients with greater than 30% reduction of their target lesions have had emergence of this biomarker, which is an ICOS high CD4 T-cell population in the peripheral blood. We believe this is compelling because, one, it is directly linked to the mechanism of action of JTX-2011, and two, similar finding was previously reported in patients treated with ipilimumab in whom it correlated with improved survival. In the patients for whom we reported data for this biomarker, we did not see it emerge in any patients with primary progressive disease. In addition to the pharmacodynamics biomarkers in this study, we are also evaluating several potential predictive biomarkers. We are using our reverse translational approach to understand the emerging data from the study, which we believe may inform future patient selection strategies. Our data supports continued evaluation of the IHC biomarker as well as continued assessment of RNA signatures and additional potential predictive biomarkers. Turning to patient features beyond our biomarker strategy, I'd like to spend a few minutes on the observed discontinuation rate disclosed at ASCO and our rationale for moving into earlier lines of therapy. As presented at ASCO, the majority of the patients enrolled in ICONIC were fourth line or beyond. In these late-stage patients, we observed an early discontinuation rate of approximately 65%, which we believe is consistent with data from other immunotherapy agents in similarly heavily pretreated patient populations. First, I want to make sure it is clear that the discontinuation rate was not due to toxicity, as we had a very low rate of discontinuation for adverse events. Second, our data supports the interpretation that the early discontinuations were due to the advanced nature of the patient population. Third, we believe that the early discontinuation rate may confound the assessment of efficacy and that patients may need to stay on JTX-2011 longer to see a benefit. We believe that these data support moving JTX-2011 into earlier lines of therapy, in which patients may be able to stay on treatment longer. With that, I would like to wrap up my clinical remarks with a summary of our next steps. The safety, preliminary efficacy, and biomarker data from the Phase II portion of our ICONIC trial will help to inform future development of JTX-2011. We have identified a potential pharmacodynamic biomarker of response for JTX-2011 and we will continue to build on our understanding of this emergent cell population as we move into the next stage of the ICONIC study. As Rich mentioned, we have initiated enrollment in the dose escalation cohorts evaluating the safety of JTX-2011 in combination with ipilimumab and in combination with pembrolizumab. As these dose escalation cohorts progress, we are simultaneously continuing to analyze clinical and biomarker data to inform the next steps in the program. Based on the biological and clinical rationale for both combinations, we are excited to progress these new safety cohorts of the ICONIC trial. We look forward to providing updates in the future. Now, I'd like to turn the call over to Kim.

[Kimberlee Drapkin:]

Thanks, Beth, and good morning everyone. As we reported in this morning's press release, cash, cash equivalents and investments as of June 30, 2018, totaled $232.7 million compared to $257.9 million as of December 31, 2017. This decrease was driven by cash spent on ongoing operations offset by tax refunds received totaling approximately $17 million. Earlier in the year, we provided gross cash burn guidance for 2018 of $80 million to $100 million. This burn projection excluded any tax refund impact. During the second quarter, we received tax refunds of approximately $17 million relating to taxes previously paid on the Celgene upfront payment. These refunds resulted from a change in tax accounting method elected as a result of the Tax Cuts and Jobs Act. We more expect to be at the lower end of the gross cash burn guidance previously provided and to end the year with approximately $185 million to $195 million in cash and investments. We continue to operate from a position of financial strength and have sufficient cash to fund our operations for at least the next 24 months. Turning to the P&L. Our collaboration revenue was $19.4 million for the second quarter compared to $20.3 million for the same period in 2017. Recall that collaboration revenue, currently noncash, reflects the recognition of the Celgene upfront payment received in July 2016. As a reminder, the decrease in collaboration revenue was due to the adoption in the first quarter of new revenue recognition accounting guidance and not due to a change in our activities under our collaboration agreement. We are reiterating our collaboration revenue guidance of approximately $50 million to $60 million in 2018. During the second quarter, we incurred $18.5 million in research and development expenses compared to $17.2 million for the same period in 2017. The increase in R&D expenses was primarily driven by the increased employee compensation costs and development costs for JTX-4014. General and administrative expenses were $6.5 million for the second quarter of 2018 compared to $6.1 million for the same period in 2017. The increase in G&A expenses is primarily the result of increased stock-based compensation expense. Net loss for the second quarter 2018 was $4.7 million or a net loss per basic and diluted share of $0.14 as compared to a net loss of $3.4 million for the same period in 2017 or a net loss per basic and diluted share of $0.11. This increase is driven by a decrease in non-cash collaboration revenue and an increase in operating expenses. As we think about the remainder of 2018, we will continue to execute and build momentum as we focus on our key value drivers while establishing a broad and diversified portfolio focused on bringing the right therapies to the right patients. Lastly, we continue to maintain a productive collaboration with our global strategic partner, Celgene. With that, I will turn the call back over to Rich.

[Richard Murray:]

Thanks, Kim. Before opening the call to your questions, I'd like to take a moment to acknowledge and thank all of the patients and their families, the clinical trial teams, and the participating centers of the ICONIC trial. We remain committed to discovering and developing first-in-class immunotherapies to meaningfully improve the lives - extend the lives of cancer patients with high unmet need. Our goal of helping cancer patients remains at the forefront of our day-to-day work. With the initiation of our dose escalation cohorts of JTX-2011 in combination with ipilimumab and pembrolizumab respectively, we continue to analyze the ICONIC clinical and biomarker data to inform next steps after the dose escalation. Now, in the second half of 2018, we remain focused on advancing our pipeline, including the execution of JTX-2011 development plan, and finally, the IND for JTX-4014. With that, we'd now like to open the call for your questions. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from Steven Seedhouse with Raymond James.

[Steven Seedhouse:]

You highlighted obviously one of the advantages of the Keytruda cohort being the ability to enroll less refractory patients. I'm just curious, do you or will you have a sense from the dose escalation cohort if that's happening or if it's more likely we need to wait until the Phase II portion to know if we've been able to enroll earlier stage patients?

[Elizabeth Trehu:]

Yes, thanks. This is Beth. In dose escalation, we tend to not select patients and allow more heavily pretreated patients. So it really won't be until we embark on more Phase II like cohorts that we'll be really looking for efficacy.

[Steven Seedhouse:]

Just based on the biomarker and the discontinuation rates you presented at ASCO and you just re-highlighted obviously, have you changed anything with respect to how frequently you're assessing those in ICONIC in the new cohorts? Or are you allowing for dosing through initial rhesus progression, for example? And I just had one last quick question. I was wondering if you wanted to comment at all on - we noticed GSK highlighted its ICOS antibody in the R&D update. I was just curious, just quick, obviously, we'll be looking to that to judge if they've enrolled earlier stage patients in the Keytruda cohort and how the profile of response looks relative to ICONIC. Are there any differences between JTX-2011 and their antibody that you would highlight or are they fairly similar?

[Elizabeth Trehu:]

Okay, let me try to answer those in order. So we continue to learn from the study as we proceed and so we have learning from some of the features of the patients earlier on in the trial. We have made some adjustments to the eligibility criteria as we've gone along. I think the other thing you asked about, do we allow patients to continue through resist progression. Initially, we allowed patients to stay on until they had confirmed progression and actually, we, at actually the request of the investigators modified that as well. So yes, we do allow patients to stay on now, as long as the investigator and the patient believe that they're benefiting from the drug. But that's a very recent change. So for most of the trial patients, we're required to drop off after confirmed rhesus progression and we've modified that. And maybe I'll turn it over to Rich to answer the rest of your questions.

[Richard Murray:]

This is Rich. For the GSK, we certainly noticed and we look forward to seeing that data. In reference to the antibodies, we do know - we believe that there's a difference in the binding sites of the antibodies to the target, ICOS target, and that's based on just kind of understanding some species cross reactivities that may differ between the two. Additionally, the JTX-2011 is an IGG-1, which fits the preclinical pharmacology package that we developed. We believe GSK is not. And then lastly, I mean we look forward to seeing this data emerge. We believe in the ICOS mechanism and we think this is another step along that path.

[Operator:]

Our next question comes from Cory Kasimov of JPMorgan.

[Shawn Fu:]

This is Shawn on for Cory. Just one quick question from me. Though it's still a little bit early here, but can you guys maybe talk about the potential regulatory path forward for your internal PD-1 asset? Is the goal still to bring this forward in combinations or are there potentially - just wondering is it something that's sort of going to be following onto indications that are already well established, or do you potentially plan to take this forward in a novel, more niche tumor types?

[Elizabeth Trehu:]

Thanks, Shawn. So as we stated, the primary goal for developing JTX-4014 is to be able to combine it within our earlier stage programs, particularly the cold tumor programs, which we anticipate going into tumor types in which current PD-1 inhibitors are not approved, are not likely to be approved. However, we are aware of the competitive landscape. We try to be creative and thoughtful about the way we develop all of our programs. So we're always thinking about the best opportunities for all of our programs.

[Operator:]

Our next question comes from Boris Peaker of Cowen.

[Boris Peaker:]

First, I'd like to maybe focus on your JTX-4014. I'm just curious, what is the objective of developing your own anti-PD-1 when you're already looking at combos with existing [indiscernible]?

[Elizabeth Trehu:]

Sure. So with JTX-2011, for example, where we're in tumors where PD-1 inhibitors have rapidly become the standard of care and are moving into the frontline, there, we feel it makes a lot more sense to add on to standard of care. That's a very typical way to develop a drug. It allows you to move up into earlier lines of therapy as the other drugs, such as the PD-1 inhibitors move into those earlier lines of therapy. That's not to say that in PD-1 experienced patients, if you're going to do a PD-1 inhibitor combination that you couldn't use a different PD-1 inhibitor. But as I've said before, our primary goal for JTX-4014 is to be able to combine it with our earlier programs, particularly the cold tumors, in which we don't think there really is a path for PD-1 inhibitors by themselves because these tumors don't have T-cells in them. And so our strategy with the cold tumor programs is try to bring immune infiltrates into those tumors. Once you do that and you have that more inflamed tumor microenvironment, we believe you still may need a checkpoint inhibitor. Because you can be pressing on the gas as much as you want, but you still need to take your foot off the brakes, if you will. And so we believe that that's where JTX-4014 is going to be of greatest value because there won't be approved PD-1 inhibitors already in that space.

[Boris Peaker:]

Okay. And so then, your plan is to - you have plans to actually run monotherapy for 4014 or is it only going to be in combo with the ICOS drugs?

[Elizabeth Trehu:]

So we'll have to start with monotherapy dose escalation just to demonstrate the safety and we feel also it's important to demonstrate monotherapy efficacy to assure, most importantly, and any potential partners that it is acting like a PD-1 inhibitor and has a similar profile. So we will be starting with monotherapy and then, again, most likely combining it with our earlier pipeline programs.

[Boris Peaker:]

And my last question on the ICONIC trial. I'm just curious, when should we see or should expect an additional clinical update. Would ASCO 2019 be kind of the earliest theoretical timeline or what else do you see as a potential medical meeting?

[Elizabeth Trehu:]

So we'll provide more update as the program progresses. As we mentioned this morning, we're in the middle. We've initiated the dose escalation cohorts. We're really pleased by how quickly we were able to do that. The investigators in the study remain very engaged and involved in both the current dose escalation cohorts, but also in helping us think about next stages for the program. And while those dose escalation cohorts are enrolling, we are continuing to analyze all of the biomarker and remaining clinical data from the study. So all of that will inform the next steps going forward. We're really serious when we talk about our reverse translational approach. We're taking the data from the study and learning as we go. And so we will provide information on the next stages of the study at a later date.

[Operator:]

Our next question comes from Jim Birchenough of Wells Fargo.

[James Birchenough:]

A couple. First, when you think about the time course of emergence of ICOS positive CD4 cells, was it the case in ICONIC that the 65% of patients who discontinued before the point at which we would have seen an ICOS positive CD4 response?

[Elizabeth Trehu:]

Hi, Jim. That's a very astute question. So in our evaluation of those ICOS high CD4 T-cells, I think we've said that we don't have complete datasets on everyone and actually, it was pretty incredible. Our scientists developed that assay as the study was ongoing, as part of our reverse translational approach. And so we don't have baseline samples on everyone. But the data that we have suggests that cell type doesn't really appear until later. For example, in our monotherapy responder that the emergence of that cell population did not occur until Cycle 6. So yes, part of our hypothesis and rationale for moving into earlier lines of therapy and less heavily pretreated patients is that a lot of these very sick advanced patients may have come off too soon to allow for the activity of JTX-2011 to kick in. And so we're thinking about ways to be able to keep people on treatment longer because we think it may take longer for it to take effect. In addition, we had some patients who had stable disease in whom we started to see it emerge, but then they lost is when they progressed. So we're continuing to interrogate the cell population. But the short answer to your question is yes, we do think that the early discontinuation rate, which reflects the advanced nature of these patients, may have confounded the ability to really assess the efficacy of JTX-2011 and the late emergence of that cell population would support that.

[Richard Murray:]

Maybe I'll add to that, Jim. I think we more broadly look at the emergence of this cell population as really an important kind of component, an important tool as we really want to look at the activity of JTX-2011 in the context of other potential predictive biomarkers. And that really builds that holistic scientific package of understanding how the drug is working.

[James Birchenough:]

And then the second part of the question is, one approach is to move earlier. I guess the other approach, is there anything you can do that you think could broaden that cell response, or generate an earlier response, i.e. combining with certain cytokine? Or do you think the combination with ipilimumab will have greater potential for earlier or broader ICOS CD4 response?

[Elizabeth Trehu:]

Again, great questions, Jim. So with respect to ipilimumab, we feel the biology and the rationale for that combination is very strong. And yes, that could be a strategy for allowing - for getting that cell population to emerge earlier. We have other things that we're thinking about as well, not ready to disclose them yet. But yes, absolutely, we think anything we can do to try to help that cell population emerge sooner, or keep people on long enough for it to emerge. Because we do think that appears to be very important for the biology and the activity of the drug.

[James Birchenough:]

Maybe just one last question. Just on the macrophage program, in the ICONIC study, are you capturing data that might inform that program's development, i.e. are you looking for the presence or absence of tumor-associated macrophages in ICONIC to get a sense of whether combinations with an ICOS agonist and a TAM targeted drug might make sense down the road?

[Richard Murray:]

In terms of developing the pipeline, Jim, we have created these immune signatures per cell type that we believe to be important. And so as we learn from analysis that has patient outcomes associated with it, as we collect all that data, we're capturing that and that's certainly part of the ongoing and future evaluation.

[Operator:]

[Operator Instructions]. Our next question comes from Mike Ulz of Baird.

[Michael Ulz:]

Just with respect to the additional dose escalation cohorts for JTX-2011 that you're testing in combo with ipi and pembro, just wondering if you can comment on the dosage you're testing there and then remind us if that's different from your prior dose escalation in combo with nivo?

[Elizabeth Trehu:]

Thanks. Yes, so I think we have a recommended Phase II dose that we arrived at in combination with nivo and so in terms of why we're doing a dose escalation with pembro, it's really because we had this evidence that the trough levels we were achieving with nivo were somewhat lower than optimal. We wanted to be sure that when we combined with pembro, which is a Q3 week PD-1 inhibitor that we didn't see toxicity different than what we saw with the combination with nivo, which was extremely well tolerated. So there, we just dropped the JTX-2011 dose a little bit just to get some safety data before moving into the Phase II dose. And then with ipi, because ipi has been a little more challenge, had the higher rate of immune related AEs, we felt it prudent to drop down a little bit further before going up. But we're certainly not going back to the beginning of where we started dose escalation with nivolumab.

[Michael Ulz:]

And then just with respect to the macrophage program, your IND enabling studies, just trying to get a sense of maybe when you could get in the clinic. Should we be thinking more 2019?

[Richard Murray:]

Mike, we'll update that as we get closer, but we're proceeding forward with that program and moving earlier candidates along as well. So we haven't stated a date yet but we will as we get closer.

[Operator:]

That concludes our question and answer session for today. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.