Jounce Therapeutics, Inc.
Q3 2018 Earnings Call Transcript

Published: 13 Nov 2018

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics Third Quarter 2018 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, Komal Joshi, with Jounce Therapeutics. Please go ahead.

[Komal Joshi:]

Thank you, operator. Good morning, and welcome to the Jounce Therapeutics third 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 recent highlights followed by our CMO, Dr. Beth Trehu, who will discuss our pipeline progress, lastly, our CFO, Kim Drapkin, will review our third quarter 2018 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, November 13, 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. We continue to advance our pipeline the first-in-class immune therapies and are well on our way to becoming a company with multiple clinical candidates, with a continued focus on bringing long lasting benefits to cancer patients. More specifically, we're pleased to announce continued progress on our three most advanced programs, JTX-2011, our monoclonal antibody that binds to and activated ICOS; JTX-4014, our internal PD-1 inhibitor; and JTX-8064, our lead tumor associated macrophage program, which targets the cell surface receptor LILRB2 also known as ILT-4. While Beth will follow with more details, I'd like to spend a few minutes addressing our emerging development pipeline both in the clinic and progressing to the clinic. For JTX-2011, I'd like to make two important points. First, as you may recall we initiated safety and dose escalation PKPD studies combining JTX-2011 with a ipilimumab and pembrolizumab respectively in June of this year. While we simultaneously continue to analyze patient samples from the ICONIC study. These safety studies are progressing as planned. Second, I'd like to emphasize the critical importance of a thorough analysis of patient samples that have defined clinical outcomes, while every first in class molecule relies on preclinical science initially, the analysis of responder versus non-responder patients holds the promise to identify key attributes that may be unique to the mechanism, especially in the context of combination studies. In other words, this analysis helps us understand what is unique to JTX-2011 versus PD-1, and then how we may exploit those findings into a scientifically driven clinical study design, combination strategy, as well as the relationship to potential new biomarkers. We have built our translational and bioinformatics capabilities reach outs for this very reason. Our platform is engaged from target discovery, translation into the clinic and now in a reverse translational analysis of clinical samples with known outcomes. Given the industry wide challenges in developing immune therapies beyond the approved IO agents, we are firm believers that progress will need to rely on a scientific approach that includes reverse translational analysis. Over the weekend, Jounce presented two posters at SITC, from the ICOS program that begin to layout our learnings from our reverse translational analysis, that will enable new Phase 2 studies of JTX-2011. We will continue to communicate how these important findings are directing the next steps of the JTX-2011 program. And today, we're pleased to publicly identify our new clinical candidate JTX-8064, an antagonist monoclonal antibody that selectively binds to the cell surface target LILRB2 on macrophages also known as ILT-4. We believe LILRB2 sends a negative signal to macrophages and blocking that signal can reprogram tumor-associated macrophages from a suppressive state called M2 to immune active state called M1. Our new target discovery approaches are based on the scientific premise that different types of immune cells will contribute to an immune suppressive or an immune active state in the tumor. And we're pleased that our first macrophage program JTX-8064 is tracking to be our third IND. Recall, that one of our 2018 objectives was to file the IND for our PD-1 inhibitor JTX-4014. We filed that IND in September and received clearance to proceed from the FDA in October. We continue to believe that this internal PD-1 antibody compliments our emerging novel pipeline for flexibility and combinations and that PD-1 inhibitors will have an important role in future regimens. We were excited when this year's Nobel Prize in Physiology or Medicine was jointly awarded to one of our founders, Dr. Jim Allison. Jim's work on the discovery of cancer therapy by the inhibition of negative immune regulation has paved away for immune-oncology today and the current landscape of cancer therapy. Almost simultaneously, Dr. Pam Sharma, also one of our founders was awarded the William B. Coley Award for Distinguished Research in Basic and Tumor Immunology for innovative work understanding factor that enhance and hinder cancer immunotherapy. To be part of this revolutionary science and the team that continues to progress some of Jim and Pam's original work is extremely rewarding to me personally, as well as for all of us at Jounce. We believe it will be imperative to rely on critical mechanistic understandings of first-in-class immunotherapies, both preclinical science, as well as reverse translational studies, such as those in our posters from SITC. Now, I'd like to turn the call over to Beth to discuss our pipeline and science in more detail.

[Elizabeth Trehu:]

Thanks, Rich and good morning, everyone. I'm very excited to share with you the next chapter in clinical development of JTX-2011, as well as the progress we are making in advancing new programs towards the clinic. This is a big moment for us as the full power of our translational science platform applied to clinical samples from the ICONIC trial has resulted in an evolution of our understanding of ICOS biology and the mechanism of action of JTX-2011. So let me move to describing some of the new JTX-2011 data that provides the scientific foundation for our next stage of development. As Rich mentioned, at this year's SITC meeting this past weekend, we shared reverse translational and biomarker data from ICONIC that builds on the work of our founders, Drs. Jim Allison and Pam Sharma. And reaffirms our commitment to ICOS as the target. The data we presented enhances our understanding of the agonistic properties of JTX-2011 building on the subset analysis presented at ASCO 2018. This demonstrated that ICOS hi CD4 T cells emerged in the blood of all patients with at least a 30% target lesion tumor reduction, both in patients treated with JTX-2011 monotherapy and JTX-2011 in combination with nivolumab. Importantly, the ICOS hi CD4 T cells were not observed in patients with primary progressive disease. Through further investigation of this biology, Jounce established two key insights that provides the scientific foundation for the next stage of development of JTX-2011. First, the emergence of these ICOS hi CD4 T cells, which correlated with tumor reductions was related to JTX-2011 and not nivolumab. As a separate Jounce, study revealed that ICOS hi CD4 T cells were not detected in the blood of any patients treated with PD-1 or PD-L1 inhibitor monotherapy regardless of response. Second, in vitro experimental data, Jounce scientists showed that JTX-2011 activates CD4 T-effector cells only if they already express high levels of ICOS. Here's why, this is important. Our initial biomarker enrichment strategy was based on preclinical data that showed efficacy with JTX-2011 in mouse tumors with high numbers of ICOS expressing immune cells, by Immunohistochemistry or IHC. We typically refer to these as ICOS high tumors. Of note, the IHC assay does not measure the amount of ICOS per cell and does not distinguish between T-effector and T-regulatory cells. Our new data, which is derived from analysis of iconic clinical samples and builds on our founding science shows that quantification of the amount of ICOS per CD4 T-effector cells is critical. Importantly, we are now able to measure this in the blood and this would be an important component of JTX-2011 development going forward. Given that ICOS hi CD4 T cells can be attributed to JTX-2011 and not PD-1 inhibitors, we can use their occurrence to focus development down two paths. First, focus on combo agents that induce these cells such as anti-CTLA-4. And second, evaluate baseline samples from the individuals who had the emergence of these cells to identify potential predictive biomarkers. Preclinical data providing additional support for the combination approach was also presented at SITC. In the preclinical tumor model, radiation increased ICOS expression on CD4 and CD8 T cells in both blood and tumors. And the combination of radiation therapy and treatment with an ICOS agonist antibody lead to increased anti-tumor response in an immunogenic mouse tumor model. We are continuing to investigate other potential combination agents in this matter. Over the past month, we have conducted extensive analyses of our clinical and biomarker data with ongoing input from our founders, including some of the emerging data just discussed. As Rich mentioned, enrollment in the two dose escalation cohorts evaluating the safety of JTX-2011 in combination with ipilimumab and in combination with pembrolizumab has been running in parallel as planned, in order to position us to initiate additional Phase II clinical trials in 2019. I'm very excited about JTX-8064. Our next program tracking to our third IND, which is our first tumor associated macrophage candidate JTX-8064 targets LILRB2 and is a selective antagonist antibody designed to reprogram tumor associated macrophages from an immunosuppressive to an immunostimulatory state. We think of it as analogous to a macrophage checkpoint inhibitor. As our novel pipeline advances, we continue to believe it is important for us to develop JTX-4014, our internal PD-1 inhibitor. As Rich mentioned, we filed our IND in September and recently received clearance from FDA to proceed with a Phase 1 dose escalation trial. We believe that JTX-4014 is an important asset for other agents in our pipeline that may need combination with a PD-1 inhibitor for optimal efficacy. Additionally, we continue to advance our robust pipeline of discovery programs, which target other cell types such as T-regulatory cells and stromal cells. We believe that targeting multiple cell types in the immunosuppressive tumor micro-environment is the best way to realize the full potential of immunotherapy for patients with cancer. Our founding principle with an in depth understanding of the immune micro environment within solid tumors is key to the development of impactful immunotherapies for patients, which remains at the forefront of everything we do. I have great confidence in our team and our approach, and I look forward to updating you on the progress that we continue to achieve for the remainder of 2018 and beyond. Now, I would like to turn the call over to Kim Drapkin, our CFO for discussion of our third quarter 2018 financial results. 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 September 30, 2018 totaled $214.7 million compared to $257.9 million as of December 31, 2017. Cash was utilized for operating costs incurred during the period, offset by the receipt of state and federal income tax refunds. We reiterate the 2018 financial guidance, we provided in August. We continue to expect to be at the lower end of our growth cash burn guidance for 2018 of $80 million to $100 million and to end the year with approximately $185 million to $95 million in cash and investments. We continue to maintain a strong balance sheet, which allows us the flexibility to drive our innovative immunotherapy pipeline plus sufficiently execute against our strategic plans and goals. Based on our current operating plans, we continue to expect our existing cash, cash equivalents and investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for at least the next 24 months. Turning to the P&L, our collaboration revenue was $14.5 million for the third quarter compared to $18.1 million for the same period in 2017. Recall that collaboration revenue, currently non-cash reflects the recognition of the Celgene upfront payment received in July 2016. We are reiterating our collaboration revenue guidance of approximately $50 million to $60 million in 2018. During the third quarter we incurred $16.8 million in research and development expenses compared to $17.1 million for the same period in 2017. The decrease in R&D expenses was primarily driven by $1.5 million of decreased lab consumables, offset by $0.5 million of increased stock-based compensation expense, $0.3 million of increased external clinical and regulatory expenses related to the Phase 1/2 ICONIC trial, and $0.4 million of increased other research expenses, primarily due to license and milestone payments associated with preclinical programs. General and administrative expenses were $6.5 million for the third quarter of 2018, compared to $5.4 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 third quarter of 2018 was $7.6 million or a net loss per basic and diluted share of $0.23 as compared to a net loss of $4.1 million for the same period in 2017 or a net loss per basic and diluted share of $0.13. This increase is driven by a decrease in non-cash collaboration revenue and an increase in operating expenses. As we approach 2019, we will continue to execute and build momentum as we focus on our key value drivers, while establishing a broad and diversified portfolio. 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 for your questions, I want to reiterate that 2019 will be about clinical focus, pipeline progression and execution. Importantly we are well capitalized to drive our development candidates in additional new programs forward from our discovery efforts. I'm pleased to see our team energized by the new reverse translational data reaffirming our belief in JTX-2011 and the advancement of new pipeline programs. We've built a strong team of dedicated and talented professionals, who remain focused on discovering and developing innovative therapies for cancer patients. In the complex field of IO, we believe the right team and a high science approach are necessary for the advancement of therapies that will bring durable benefit to patients. With that, we would now like to open the call for your questions. Operator?

[Operator:]

[Operator instructions] Our first question comes from a line of Cory Kasimov with J.P. Morgan. Your line is now open.

[Shawn Fu:]

Hey, guys, this is Shawn, on for Cory. So couple of questions from us. The first, when do you think we might see the next set of material updates from your ongoing programs, especially the CTLA-4 cohorts? Maybe if you could give us some updates on how enrollment is progressing? And then the second question, with the understanding that the combination with pembro is still being explored, but in the event this pairing with the PD-1 doesn't produce the hoped for benefits, what would then be the regulatory plan for 4014, given that the original intent was to use this in internal combination.

[Richard Murray:]

Yes. Shawn, thanks, this is Rich. I'll take the first part of that and then maybe Beth could answer on 4014. So, as we continue the program, the biomarker, the safety PKPD work we're really going to help inform and discuss going forward plans on all of that data as we turn into the new year. As we've mentioned previously, we've spent the last few months ensuring that we step into safety studies and importantly really interrogate the translational work that we referred to today. So you could look towards early in the year for more clarity on the plans going forward.

[Elizabeth Trehu:]

Yes, and regarding JTX-4014, for a program like JTX-2011 where we're looking at tumor types where PD-1 inhibitors have some approvals, it may be more expeditious to combine with approved PD-1 inhibitors. We really see JTX-4014 as more something that we'll be using for our other pipeline programs where we're going to be looking at the colder tumors, where PD-1 inhibitors have not been as effective. So we still feel more than ever that JTX-4014 is a very important asset as we start moving beyond the T-cell inflamed tumors and looking at the colder tumor space.

[Shawn Fu:]

Okay, thanks guys.

[Operator:]

Thank you. Our next question comes from the line of Boris Peaker with Cowen. Your line is now open.

[Boris Peaker:]

Good morning. My first question is on 2011, I'm just curious what do you need to see in the ongoing study to advance this drug into future development? And what's your internal hurdle?

[Elizabeth Trehu:]

Sure. So the ongoing studies if you mean the ICONIC trial, we've presented most of the data from that and the really important findings from that study was the fact that this ICOS hi CD4 T cells were seen in all of the subjects who had at least a 30% target lesion tumor reduction. And then as we talked about with the reverse translational work has really given us a lot of insight into how to proceed going forward. Then the dose escalation studies that are ongoing right now will give us the information we need to know the best dose combination to go-forward with, with the CLTA-4 inhibitor and with pembrolizumab. So, it's I think, as Rick said, they're all converging. So we've been doing all of this analysis at the same time as we're doing the dose escalation so that we're positioned to start our new Phase 2 combination trials in 2019.

[Boris Peaker:]

Great. And my second question is, we can observe that there is significant synergy between chemo and checkpoint inhibitors in general. I'm just curious are you doing some of these preclinical work to investigate your compound in combo with chemo or perhaps radiation to see if that maybe a meaningful combination to take forward?

[Richard Murray:]

Yes. Thanks, Boris. One of our posters at SITC was in that in fact that we're looking at agents that we believe have that capacity to induce these mechanistic PD biomarker the ICOS hi CD4 cells in the blood stream of patients. So while we know if nivolumab does that that's kind of the history that came from Jim and Pam's work. We see the agents that are able to induce those ICOS hi cells as interesting candidates for mechanistic combination with JTX-2011. So we did have a poster at SITC that looked at the radiation induction of the ICOS hi cells in animal models. And that really kind of fell in line with the rest of our data, which is the induction of those cells and then JTX-2011 is active on those cells.

[Boris Peaker:]

Great, thank you for taking my questions.

[Operator:]

Thank you. Our next question comes from Jim Birchenough with Wells Fargo Securities. Your line is now open.

[Unidentified Analyst:]

Hi, thanks for taking the questions. This is Yan An [ph] in for Jim. So first I'm wondering if you could discern any ICOS hi population at the baseline before treatment or is it strictly treatment induced population.

[Elizabeth Trehu:]

Yes. Thanks, Yan An. Yes, believe and Pam's data has shown as well that these cells are induced upon certain types of therapy. So she showed it with ipilimumab, we have seen it with JTX-2011. And I think what I alluded to maybe briefly is one of the things we can use these cells to do is actually now we have the haves and have not. We have the patients who had some clinical benefit and had emergence of these cells and then we had the patients who did not. So by looking at those two different patient populations, we can now go back and look at their baseline samples to look for potential predictive biomarkers. So just to be clear, this is a pharmecodynamic biomarker emerges on-treatment. It's not present at baseline, but we believe it can lead us back to potential predictive biomarkers at baseline.

[Unidentified Analyst:]

Yes, thanks for the clarification. That's what I was getting at exactly. And also have you done any additional work to look at the patients who responded versus who don't, both of them with ICOS hi apparently only some of them responded, maybe half of them responded. Have you tried to look at additional biomarker indicators to discern that difference response versus not?

[Elizabeth Trehu:]

Yes. So first I want to clarify all of the responders have the ICOS hi CD4 T cells. None of the patients who had primary progressive disease have the ICOS hi CD4 T cells. And we know that PD-1 inhibitors do not induce these cells. If you're referring to some of the patients that we've shown who had stable disease and had emergence of these cells and then lost it when they progressed. We are doing intensive analysis of all the patients to really try to understand what we can learn to help predict, which patients are likely to benefit that includes RNA analysis, DNA sequencing, the gamut we're doing really thorough analysis of the baseline samples from these patients, both blood and tumor.

[Richard Murray:]

Yes, maybe I'll add to that, we continue to be encouraged as we look at the emergence of these cells mapping really to the patients that had discernible anti-tumor activity. So that kind of close relationship really allows us to interrogate that group versus the group that did not have that benefit nor the cells. And so we have an ability to contrast those to really look back at baseline, which we think will tell us - could tell us whether patients are pre-disposed to be able to generate these cells.

[Unidentified Analyst:]

Got it, thank you very much.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Debjit Chattopadhyay with H.C. Wainwright. Your line is now open.

[Unidentified Analyst:]

Good morning, everybody. This is Abe D'Souza [ph] in for Debjit. We just had a few questions, I know you mentioned earlier regarding the CTLA-4 update with JTX-2011 combination. Are you guys thinking about any starting dose for Ervoy [ph] and what your target dose might be?

[Elizabeth Trehu:]

Yes, so we're in the dose escalation phase now and that will inform the dose that we use going forward. We do have some data suggesting the dose range that we need for ipilimumab for optimal induction of the ICOS hi CD4 T cells. So we're working on the right combination with JTX-2011. And we'll provide more clarification about that when we talk about the new studies earlier next year.

[Unidentified Analyst:]

Great. And for the dose escalation once you hit NCD [ph] are you looking or planning to move into the frontline study?

[Elizabeth Trehu:]

So, again we'll provide more clarity about the next phase of development early next year. what we'll be doing is optimizing the biology. So following the science of the program, but we also try to keep ourselves very much up-to-date on the competitive landscape and understand where the unmet needs are and where we have the best opportunity to make a difference for patients and demonstrate the activity of JTX-2011. So we'll give more clarity at the beginning of the year.

[Richard Murray:]

Yes, and I think we've mentioned Debjit that we would - from ASCO onward we will be including moving up in lines of therapy and that still will be the case, but we'll roll out the details early next year.

[Unidentified Analyst:]

Great. One last question, so any specific indications that you're honing in on from a validation perspective?

[Elizabeth Trehu:]

Sure, so again the tumor types that we'll be moving forward in are based on both the scientific rational and also understanding of the competitive landscape and where we feel we have the best opportunity to both demonstrate the activity of JTX-2011 and make a difference for patients. So we'll give again more details about that early in the year.

[Unidentified Analyst:]

Appreciate it. Thank you, guys.

[Operator:]

Thank you. And our final question comes from the line of Steven Seedhouse with Raymond James. Your line is now open.

[Steven Seedhouse:]

Hi, good morning. Thanks for taking the questions. So it sounds like given the biomarker data that you guys highlighted and given data we recently saw from GSK obviously testing featured a combination with their ICOS, I guess, as well as data from ICONIC, it seems to be pointing to CTLA-4 combo maybe having a stronger rational than PD-1 is that the way you see it? I mean, is it fair at this point to assume that your combo might be more likely to move into future trials and be successful or is that not the right conclusion yet?

[Elizabeth Trehu:]

Yes. Thanks, Steve. It really it all comes back to those ICOS hi CD4 T cells and our belief that the best combination agents are those that induce those cells. A PD-1 inhibitor maybe - may need to be part of the mix that acts at a different point in the cancer immunity cycle, but we really are focused right now on combinations with agents that induce those ICOS hi CD4 T cells such as CTLA-4 inhibitors and others. As we mentioned, we're looking at other preclinical combinations to identify other agents that might do that.

[Richard Murray:]

Yes, and I think, just as Beth mentioned in her prepared remarks, part of our - one of our posters at SITC we were able to demonstrate that JTX-2011 is really in its most active moment when ICOS hi cells are already induced. So if you kind of test that directly what you find is all the activity comes with the cells that are already have been induced to that ICOS hi level. So then the logic going forward is the sequencing of combos where the agent that could induce ICOS then is - we subsequently treat with JTX-2011. So we're peaking that together from the preclinical and the reverse translational data and that's what we'll talk about early next year.

[Steven Seedhouse:]

Okay, thank you. And, I mean, obviously, - I mean, you generating a lot of biomarker data and we're finding the approach with JTX-2011 as you think about the new target announced macrophage target and sort of advancing that into the clinic, as well as future compounds in your pipeline, are there broadly applicable learnings from your biomarker approach that you can apply immediately irrespective sort of the cell type that you're targeting? Or do you really have to sort of start from the ground up when you move this new mechanism into the clinic to try and hatch out where the biomarkers are pointed for that mechanism?

[Elizabeth Trehu:]

Yes, that's a great question. I would say we definitely are applying everything we've learned from the ICONIC trials, from how to collect samples, how to process samples, how to analyze the data. So we're definitely applying those learnings to our other program. So both operational aspects and also data analytic aspects. I think we also - we've honed some of the parts of our translational science platform as we've been analyzing the ICONIC data. And so it just keeps get better and better. And so we use that to apply to our new programs. The mechanism of action is different obviously, but we still remain very true to trying to look for potential predictive biomarkers for all of our programs. And I think what we've learned from ICONIC will only make us better and stronger as we move towards our new programs.

[Steven Seedhouse:]

Okay, great. Congrats on the IND for your PD-1 inhibitor and thanks for taking my questions.

[Elizabeth Trehu:]

Thanks.

[Operator:]

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