Jounce Therapeutics, Inc.
Q2 2017 Earnings Call Transcript

Published: 13 Aug 2017

[Operator:]

Good morning, ladies and gentlemen, and welcome to Jounce Therapeutics Second Quarter 2017 earnings conference call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded at the company's request. The contents of this call are property of Jounce Therapeutics and other recordings or production, or transmission of this call without consent of Jounce Therapeutics is strictly prohibited. I will now turn the call over to your host, Beth DelGiacco with Stern Investor Relations. Please go ahead.

[Beth DelGiacco:]

Thank you, operator. Good morning, and welcome to the Jounce Therapeutics second quarter 2017 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 Web site at www.jouncetherapeutics.com. Before we begin, I would like to briefly remind everyone that we will be making certain forward-looking statements on today's call. These may include statements about our strategy business plans and focus, the potential success of our product candidates, clinical plans and development timelines, the scope or timing of clinical data, financial projections as well as other statements that relate to future events. These statements are based on the belief and expectations of management as of today, August 9, 2017. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our earnings release and in our reports filed with the SEC, including the risk factors section of our most recent quarterly report on Form 10-Q. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. Leading today's call is our CEO, Dr. Rich Murray, who will discuss Jounce's corporate highlights and lead clinical program, JTX-2011. Followed by our CFO, Kim Drapkin, who will review our second quarter 2017 financial results. Dr. Beth Trehu, our Chief Medical Officer will also be available to answer questions at the end of opening remarks. We will then open the call for your questions. With that it is my pleasure to turn the call over to Rich.

[Richard Murray:]

Thanks, Beth. Good morning, everyone and thank you for joining our second quarter earnings call. Jounce is a clinical stage immunotherapy company dedicated to transforming the treatment of cancer by developing therapies that stimulate the immune system to attack tumors and long-lasting benefit to patients. Our vision for our expanding pipeline takes on a precision immunotherapy approach to match the right therapy to the right patients. This work is facilitated by our translational science platform that interrogates immune cell-types within tumors, prioritizes targets and identifies potential predictive biomarkers so that we can select the right patients for our therapeutics. With a large number of agents entering clinical trials in immuno-oncology, we believe this approach will provide a more focused and differentiated way to treat the patients most likely to benefit from our therapies. This morning, we will provide a review of a few corporate highlights before discussing JTX-2011 and the Phase 1 portion of the ICONIC study presented at the annual ASCO meeting as well as details around the ongoing Phase 2 ICONIC study. On the latter, I am pleased to announce today that both the Phase 2 single and combination portions of the study are now enrolling. We are proud of the significant progress we have made in 2017, starting with our successful IPO in the first quarter. This was an important milestone for Jounce and has provided us with the continued financial flexibility to focus on the execution of our lead program, JTX-2011, as well as advance our pipeline of innovative immunotherapies. In May, we moved to our expanded facilities in Cambridge, Massachusetts, which allows us to continue building our great team, all of whom are dedicated to improving the lives of cancer patients. Last month, we also marked the one year anniversary of our global strategic collaboration with Celgene. As a reminder, under the terms of the agreement, we received an upfront payment of $225 million, a $36.1 million equity investment, and are eligible to receive up to $2.6 billion in development, regulatory and commercial milestones, option fees and research term extension fees. This collaboration provide us with the necessary funding to expand our efforts in cancer immuno-therapy, advance more programs simultaneously, and maintain important U.S. commercial rights. We are enthusiastic about the ongoing advancement of our lead program JTX-2011 and the progress of our earlier programs. We continue to feel that Celgene is the right strategic partner for us. And now we will shift to the clinical progress of our lead program, JTX-2011. JTX-2011 is an agonist, monoclonal antibody that targets ICOS, an inducible protein on the surface of T cells found in many tumors. It's the first clinical program to emerge from our translational science platform which couples target mechanism to potential predictive biomarkers of response. Jounce also prioritized ICOS, based on the pre-clinical and data from two of our founders. Dr. Pam Sharma, and Jim Allison, which suggests that ICOS plays an important role in the immune response to cancer. JTX-2011 was designed to shift the balance in the tumor microenvironment from immunosuppressive towards anti-tumor activity by stimulating T effector cells and reducing inter-tumoral T regulatory cells. The design of our clinical study was informed by two fundamental pieces of data from pre-clinical work. First, tumor efficacy in animals is dependent on a dose of JTX-2011 that engages the ICOS target at a certain level and for a certain duration of time. This can be measured in the clinic by a lab test called Target Engagement and is a key element of our dose selection approach. Second, tumor reduction only occurs in animals when a certain percentage of ICOS positive immune cells are resident within the tumor. A key aspect of our biomarker approach. With those elements of preclinical science in mind, we initiated the Phase 1, 2 ICONIC clinical trial last year. ICONIC is a four part adaptive design, open label study with a Phase 1 and Phase 2 portion. Both the Phase 1 and Phase 2 portions include JTX-2011 and in combination with a fixed dose of nivolumab in patients with advanced solid tumors. The primary objectives of the Phase 1 study which will establish safety and to identify the Phase 2 dose. In Phase 1, we identified a safe dose that met the pre-specified target engagement criteria based on pre-clinical tumor efficacy. Patients in Phase 1 were not enriched for high ICOS biomarker levels and most were heavily pretreated with an average of four to five prior lines of therapy. Our team did a great job and achieved the goal of establishing our safety profile and identifying the Phase 2 dose. For our guidance, we presented the Phase 1 safety, PK and PD data of the ICONIC study in a poster at the 2017 ASCO meeting. We determined the Phase 2 dose of 0.3 mg per kg, based on the safety and prospective PK, PD criteria, including target engagement for both single agent and in combination with nivolumab. Immune related dose-limiting toxicities were identified at the highest dose tested of 1 mg per kg in monotherapy. The highest dose tested in the combination setting was 0.3 mg per kg, which was well tolerated. The safety profile of JTX-2011 at 0.3 mg per kg and below, both alone and in combination was very encouraging, as most adverse events were grade one or two. We observed evidence of biological activity by the dose-dependent increase in immune related adverse events which were easily managed and consistent with those seen with PD1 inhibitors. We also observed a dose dependent increase in interferon gamma in the blood, which we believe is directly related to biological activity and the mechanism of action. In our Phase 2 study, at the 0.3 mg per kg dose, we are evaluating JTX-2011 alone and in combination for preliminary efficacy across six different solid tumor types. Each chosen based on the high prevalence of ICOS expression on immune cells within those tumors. In addition to the choice of tumor types and supported by our preclinical science, we are further enriching for individual patients with high ICOS biomarker scores. At least 50% of the patients in each tumor specific cohort, are expected to have a high ICOS biomarker score to enable co-relation with preliminary efficacy evaluation. We believe this approach applied early in development is a step towards a more precision medicine future for immunotherapy. As we previously announced, the enrollment for the Phase 2 part C monotherapy begin in April and today we are announcing that the enrollment of the Phase 2 part D combination portion began in mid-July. Given that part D only began recruiting a few weeks ago, we are pleased that we have already have patient's dose understudy from four of the six tumor type cohorts. Additionally, our biomarker analysis, an integral component of the Phase 2 patient enrichment strategy, has performed well to date. Particularly on the percentages of ICOS positive scores projected by our translational science platform for tumor type. While still early in that analysis, we are pleased with our investment in translations work, a fundamental thesis at Jounce. To better understand the individual characteristics of the patients we are treating in the phase 2 portion of ICONIC. While we are all enthusiastic that all portions of this study are now enrolling, we did face a specific onetime operational challenge with the target engagement assay from Phase 1, which was critical to our Phase 2 dose selection. We made a conscious decision to delay initiation of the Phase 2 until we rectify this situation, which we accomplished by enrolling additional patients and re-running the target engagement assay. Consequently, there was a delay in initiation of both the Phase 2 part C monotherapy and part D combination by approximately four months. We expect timing of data to be similarly delayed into the first half of 2018. This is now behind us as this particular assay was only required in the dose selection phase of the trial. We look forward to continuing to advance JTX-2011 and intend to present our preliminary efficacy evaluation from both Phase 1 and Phase 2 at a major medical meeting. In addition to JTX-2011, I would also like to comment on the rest of our pipeline. We continue to advance our earlier stage programs and are pleased with the progress we have made. In connection with the Celgene collaboration, we have active discovery programs, particularly from immuno-suppressive macrophages and have identified numerous additional targets using our translational science platform and continue to move them forward. We also continue to advance new cold tumor targets that are outside the collaboration and wholly owned by Jounce. These programs all have the potential to be novel, first in class approaches in addressing unmet medical need. At Jounce, our goal begins with helping cancer patients through the development of our innovative pipeline of immunotherapies. We believe our translation science platform continues to drive potential future value and growth. I have great confidence in our team and in our approach and I look forward to updating you on that progress as we continue to achieve throughout 2017 and beyond. Now, I would like to turn the call over to Kim Drapkin, our CFO, for a discussion of our second quarter financial results. Kim?

[Kim Drapkin:]

Thank you, Rich. Good morning, everyone. Please refer to our press release issued earlier today for the summary of our second quarter financial results. We reported cash, cash equivalents and investments as of June 30, 2017, totaling $309.9 million, compared to $257.4 million as of December 31, 2016. This increase was primarily due to the $106.4 million in net proceeds from our IPO offset by operating cost during the year. Collaboration revenues were $20.3 million for the second quarter of 2017. Jounce did not record any collaboration revenue during the same period in 2016. The increase in revenue was due to the Company’s global strategic collaboration with Celgene, which we entered into in July 2016. Collaboration revenue in the second quarter of 2017 reflected the amortization of the upfront payment of $225 million received from Celgene in 2016. Research and development expenditures were $17.2 million for the second quarter of 2017, compared to $6.5 million for the same period in 2016. The increase in R&D expenses was primarily due to the $3.7 million in increased clinical costs and $3 million in increased external R&D costs, primarily attributable to manufacturing cost for clinical trial material, both related to the Phase 1/2 ICONIC study of JTX-2011. We also recognized $1.8 million in increased employee compensation costs related to increased headcount and $1.2 million of increased facilities costs. General and administrative expenses were $6.1 million for the second quarter of 2017, compared to $5.9 million for the same period in 2016. The increase in G&A expenses was primarily due to increased costs associated with being a public company, increased facilities and headcount costs, offset of a write-off of IPO related legal and accounting cost. Net loss was $3.4 million for the second quarter of 2017 or $0.11, as compared to a net loss of $12.3 million, or $7.23 per share for the same period in 2016. The decrease in net loss per share attributable to common stockholders is primarily due to the completion of our IPO in February 2017, which resulted in the sale of 7.3 million shares of common stock and the automatic conversion of 22.3 million shares of convertible preferred stock into shares of common stock. We reiterate the financial guidance previously provided for the full year 2017. Based on our current operating plan, Jounce expects to use approximately $100 million to $120 million in cash for the full year 2017, including the projected expense of operating activities, build out and capital costs associated with the relocation of our lab and office space within Cambridge, and payment of federal and state income taxes related to the receipt of the Celgene upfront payment. We expect collaboration revenue for the full year 2017 of approximately $80 million, representing the amortization of the Celgene upfront payment of $225 million received in 2016. Jounce continues to maintain a very strong balance sheet which allows us to drive our innovative immunotherapy pipeline towards key value inflection points to sufficiently execute against our strategic plans and goals. Based on our current operating plans, we continue to expect our existing cash, cash equivalents and investment will be sufficient to enable us to fund our operating expenses and capital expenditure requirements for at least the next 24 months. With that, I would now like to turn the call back over to Rich to wrap up.

[Richard Murray:]

Thanks, Kim. Following a successful 2016, we continue to make significant progress in 2017 as highlighted throughout the call. Let me conclude by reiterating that our progress could not have been achieved without the hard work, passion and dedication of our employees, board, founders, ICONIC clinical trial investigators and especially the patients. We would now like to open the call for questions. Operator?

[Operator:]

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

[Cory Kasimov:]

First one is with regard to the delay in the efficacy data into the first half of 2018. I appreciate all the color into the target engagement assay issues that you had. But at this point do you see any other risk to timing or we now at a stage where this is really just accrual based and is a gating factor for data release based on sufficient follow up in the combination arm or could monotherapy data be separately. Then I have a follow up for you.

[Richard Murray:]

Sure. I will take that, Cory. Thanks. Yes, it very much was a delay in the initiation of the start. We made that conscious decision. We wanted the data to ensure that we made that important decision in the transition between Phase 1 and Phase 2. So that was a decision on our part but since that, that is now behind us and the study, as we have mentioned earlier on the call, is now enrolling and we are pleased with the start. Given the timing with the single agent and the combination agent, we see that as -- releasing that data together. That’s always been the plan and that will continue to be the plan with going forward.

[Cory Kasimov:]

Okay. And then with regard to the safety data presented at ASCO. I am curious what that told you about the therapeutic window of JTX-2011, and maybe it would be helpful if you can compare the tox signals that you have seen there in that ASCO poster with what we have seen with some IO combinations, both in terms of frequency and types of adverse events.

[Elizabeth Trehu:]

Sure. Hi, this is Beth Trehu. So overall, the drug is very well tolerated both as a single agent and in combination with very few grade 3, 4 adverse events. I think that’s very consistent with what we are seeing with other agonists in clinical development. As Rich mentioned, the nature and the severity of the immune related AEs is very consistent with what we see with PD1 inhibitors. So we did see a dose dependent increase in immune related AEs, and one of them -- or two of them, sorry, were considered dose limiting toxicities at 1 mg per kg. Both of those were actually very easily managed and so we don’t see the immune-related toxicities as being any kind of a problem. They are very easily managed. Conversely, we actually see them as evidence of biological activity. In terms of the therapeutic window, we had already selected 0.3 mg per kg based on the target engagement, PK, PD data, as Rich mentioned. And after we has actually selected the dose, we saw the dose limiting toxicities. So we don’t feel there is any need to go above 0.3 mg per kg at this time to achieve the biological effects that we were looking for and we will be continuing to follow safety data closely as we continue.

[Cory Kasimov:]

Okay. And then one final question for you, bigger picture. I am just curious as your overall view on the recent top line, [indiscernible] headlines and maybe the implications for the field or more importantly, do you see any read through to your programs at Jounce. Thanks.

[Richard Murray:]

That’s an interesting point. There has certainly been the occasional trial popping up that has changed or really shock people. I think we view that as, the importance of really understanding the patients that are enrolling in these trials. As we expect bound to be shifts in the types of immune infiltrate within tumors. So we believe that really speaks to the overall mission here at Jounce. Aligning to really understand -- trying to understand the patients that we are treating and recruiting into our trials. So many of the factors, of course, could come into play as we kind of look at those results. But I do think a piece of that puzzle is assuring that you understand as well as you can, the patients that are being recruited into the trials. And that’s really how we have set up our translational system is to do just that.

[Operator:]

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

[Boris Peaker:]

I just want to follow-up, maybe on terms of the efficacy, the efficacy discussion. Curious if you are seeing any co-relation between ICOS related biomarker, perhaps such you can compare in [indiscernible] or something else. And any kind of initial efficacy signals so far?

[Elizabeth Trehu:]

Thanks. So we had looked forward to presenting our preliminary efficacy in the first half of next year and we don’t intend to be providing any information, either on enrollment or emerging data from the study. As Rich mentioned, we are very pleased with the performance of the ICOS biomarker, particularly on the percentage of ICOS positive scores that we predicted by our translational science platform. As you know, we chose the Phase 2 tumor types based on their predicted levels of ICOS and so we are really looking forward to being able to analyze the data in aggregate when we have sufficient number of patients. However, we do see that dose-dependent increase in interferon gamma, again, adds an evidence of biological activity.

[Boris Peaker:]

Great. And I am just curious also from an enrollment perspective. Are there any kind of competing ICOS related studies that you may be competing with.

[Elizabeth Trehu:]

Yes. GSK has an ICOS agonist study that is enrolling. We are aware of that. We don’t have any insight into how well their enrollment is going. As far as we know, most of their sites are ex-U.S. and thus not directly competing with us.

[Boris Peaker:]

Great. And just maybe on your PD1 or the 4014 asset. Any updates on the strategy there. How would you like to develop it?

[Richard Murray:]

Sure. Well, certainly, let me start with the recognition of our partner's Celgene's deal with BeiGene. So just a starting point to that topic. There is a number of, kind of points to make. You know we have strong and very frequent communications with Celgene. So there were no surprises there after that deal was done. And then as Celgene has stated, their access to PD1 was done at least in part to enable their collaborators for use of PD1. So we are actually pleased and see that as a beneficial opportunity for access to a more advanced agent. In terms of JTX-4014, we are still pre-IND enabling work and our view really right now is that the field in IO is moving so rapidly and in such an incredible manner, that right now we think having all types of optionality for the PD1 inhibitors is critical.

[Boris Peaker:]

And so when do you anticipate it to be in the clinic?

[Richard Murray:]

Yes. We haven't announced that yet but it's fair to say that we are into R&D enabling pre-clinical development.

[Operator:]

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

[Unidentified Analyst:]

It's [Nick] [ph] in for Jim this morning and congratulations on getting the Phase 2 going. That must be very exciting. And can I just go back to some of the data that was presented at ASCO and at the risk of over-analyzing small numbers, I mean it did say there were no changes in levels of circulating T cells, including T regs. Is it intratumoral versus circulating nuance. Were any of these patients ICOS high and we were able to look at say new antigen-specific activity of CD4 or CD8 T cells. And then I have a follow up. Thanks.

[Elizabeth Trehu:]

Sure. Yes. This was peripheral data and we viewed it more from a safety perspective. Based on the mechanism of action of the drug and the fact that in all of our pre-clinical work with pharmacological activity has really been focused in the tumor. We did not expect to see any significant changes in peripheral T cells. If you recall, ICOS is really expressed at very low levels in resting T cells and it's only after that initial engagement with antigen which we think is going to be happening much more in the tumors where the T cells are in contact with the tumors and there correspondent antigens. That’s where you get the increase in ICOS and then JTX-2011 bind. So we really do expect most of the activity to be in the tumors and did not expect to see any significant changes in peripheral T cells. With respect to knowing what's going on in the tumors, I think you are aware that in our PK, PD expansion cohorts, we will be looking at biopsies, pre and post treatment. We did not share any data from that analysis in the ASCO poster but look forward to including that analysis when we present preliminary efficacy data from Phase 1 and Phase 2 next year.

[Unidentified Analyst:]

Great. Thank you. And in terms of the safety, there were some patients who had anti-drug antibodies. Did they correlate with [mediated] [ph] related toxicities as also a part of the same immune response?

[Elizabeth Trehu:]

Sure. There were so few patients with anti-drug antibody, it's really too soon to do any analysis of that. We do know that there was only one patients in whom the PK appeared to be impacted in anyway. But again, we will be updating on the full data set when we present our preliminary efficacy next year.

[Unidentified Analyst:]

Okay. Great. Thanks. And then can you just remind me in terms of the Phase 2, the proportion of ICOS high patients you expect in each of those [tumor] [ph].

[Elizabeth Trehu:]

Yes. So in the AACR presentation, which is on our Web site, we have the bar graph which represents the data that we generated in hundreds of human tumor samples, looking at the percentages of ICOS 0, 1 plus, 2 plus and 3 plus patients. And in head and neck cancer, our predications had been something around 40% of those patients having a 2 plus or at 3 plus. The 2 plus or 3 plus is what corresponded to a single agent efficacy in the animal models. Non-small cell lung cancer was next with about 30%, triple negative breast cancer also about 30%. But you can see the percentages as predicated, those were done on tissue microarrays or TMAs. As we mentioned, we are very pleased with the performance of the ICOS IHC assay in the clinic, and particularly with the percentage of high ICOS tumors that was predicted by the translational science platform. So we will be again including that when we present our preliminary efficacy data next year.

[Unidentified Analyst:]

So as you come to the end of enrolling patients in these cohorts, then you are going to be having screen failures. Presumably at the moment there are no screen failures because you can allow ICOS high and ICOS low patients. But if you stipulate more than 50% have to be ICOS high. Do you think as you get towards the end of enrollment, that causes challenges or are these patients being screened potentially for multiple studies.

[Elizabeth Trehu:]

Yes. That’s a good question. I think the key for us is regular communication with our investigators so that they know how many slots are open for ICOS low or ICOS high patients as we proceed. So we are managing it very closely and in regular communication with the investigators.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Michael Ulz of Robert Baird. Your line is now open.

[Michael Ulz:]

Just a quick question for the JTX-2011 data that’s expected in the first half of next year. Could you maybe comment on what potential medical meeting you might be targeting at this point.

[Elizabeth Trehu:]

Yes. We haven't disclosed which medial meeting at this point but we really do look forward to presenting comprehensive data package from Phase 1 and Phase 2 at a major medical meeting. As you know, we have to submit the abstract. We can't really say what meeting because we have to wait to see when we get accepted.

[Operator:]

Thank you. And I am showing no further questions at this time. I would like to hand the call back over to Mr. Rich Murray for any closing remarks.

[Richard Murray:]

Thanks, everybody for joining us and for your questions. We appreciate the continued interest and support, and we look forward to updating you on our progress in the future. So, thank you, again.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.