Jounce Therapeutics, Inc.
Q3 2017 Earnings Call Transcript

Published: 13 Nov 2017

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics Third Quarter 2017 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. The contents of this call are the property of Jounce Therapeutics and any other recordings, reproduction, or transmission of this call without consent of Jounce Therapeutics is strictly prohibited. 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 2017 financial and operating results conference call. This morning we issued a press release which outlines the topics that we plan to discuss today. The release is available in the Investors and Media section of our website at www.jouncetx.com. Before we begin, I would like to remind you 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 those discussed in the Risk Factors section of our most recent Quarterly Report on Form 10-Q filed with the SEC. In addition, any forward-looking statements represent our views only as of today November 13, 2017, 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. Leading today's call is our CEO and President, Dr. Rich Murray, who will discuss Jounce's corporate highlights, our lead clinical program with JTX-2011, and the translational science platform, followed by our CFO, Kim Drapkin, who will review our third quarter 2017 financial results. We will then open the call for your questions. Our Chief Medical Officer, Dr. Beth Trehu, will also be available during the Q&A portion. With that, it is my pleasure to turn the call over to Rich.

[Rich Murray:]

Thanks, Komal. Good morning, everyone and thank you for joining our third quarter earnings call. 2017 continues to be an exciting time for Jounce, as we operate and execute to our goals with an eye towards 2018 and beyond. As a clinical stage immunotherapy company, we're dedicated to transforming the treatment of cancer by developing therapies that enable the immune system to attack tumors and provide long-lasting benefit to patients. At Jounce, we envision a precision immunotherapy approach that matches the right immunotherapy to the right patients and our innovative pipeline reflects this mission. This work is facilitated by our translational science platform which focuses on immune cell types within the tumor microenvironment. We utilize the platform to both enable target prioritization for first-in-class mechanisms and to identify potential biomarkers in patient populations that may be most likely to benefit. To achieve this vision, we remain focused on executing across the four key value drivers of our company and will provide updates within each this morning. First, we're building a team and culture to support not only our R&D activities, but broadening our corporate development to be ready to forward integrate. Second, we continue to progress our ongoing Phase 2 portion of our ICONIC study and remain on track to share preliminary efficacy data in the first half of 2018, together with updated safety and biomarker data. Third, we continue to emphasize and build our earlier stage research efforts to expand our pipeline and maximize the value of our translational science platform, both with our partner Celgene and for wholly-owned programs. And fourth, we believe, we are well-positioned to deliver value from a strong financial vantage point. With those areas in mind, we will provide a review of several corporate highlights before discussing the ongoing Phase 2 portion of our ICONIC study. First, we're pleased to reiterate key appointments that were made recently to strengthen our leadership team and board of directors. In late October, we announced the appointment of Dr. Luis Diaz to our board of directors. Luis currently serves as the Head of the Division of Solid Tumor Oncology and as a faculty member at the Memorial Sloan-Kettering Cancer Center. In particular, his work on PD-1 inhibition and microsatellite instability high or MSI high selected cancer patients has truly pioneered the vision of a biomarker driven tumor type agnostic future for immuno-oncology. We believe this focus matches well with our approach to Jounce. In August, we announced the addition of Hugh Cole to our leadership team as Chief Business Officer and Head of Corporate Development. He brings over 25 years of industry experience in business, commercial, and strategic leadership. With these key appointments Jounce is well poised for success. The growth and development of an experienced team and a patient focused culture has always been a top priority for the company, and we feel we have done just that. Created an environment committed to building a differentiated immunotherapy company. With that, I want to now update you on the ongoing Phase 2 portion of the ICONIC study of our lead product candidate JTX-2011. As a reminder, JTX-2011 is a monoclonal antibody which binds to and activates ICOS a CO-stimulatory receptor on the surface of T-Cells which is commonly found in solid tumors. We begin enrollment in the Phase 2 monotherapy cohorts of ICONIC in April 2017 and the nivolumab combination cohorts in July 2017. In the Phase 2 portion of our ICONIC study, we are evaluating JTX-2011 alone and in combination for preliminary efficacy across six different tumor types, each chosen based on the high prevalence of ICOS expression on immune cells within those tumors. This includes PD-1 refractory patients from non-small cell lung cancer, head and neck squamous cell cancer, and melanoma. There are also patient cohorts of gastric, triple negative breast cancer, and additional tumor types based on emerging data from our translational science platform. Collectively all the patients currently in our studies are advanced cancer patients where the unmet medical need is very high. Focusing on these types of patients PD-1 failures or patients where PD-1 response rates are low we are evaluating the potential of JTX-2011 to add much needed benefit. Across all portions of the study we are then enriching for individual patients with high ICOS biomarker scores to allow for the testing of our predictive biomarker strategy. We expect to enroll at least 50% of the patients in each tumor specific cohort to have high ICOS biomarker scores to enable the correlation with pulmonary efficacy. We believe this type of approach applied early in development is a step towards a precision medicine future for immunotherapy. We continue to be pleased with the technical performance of the ICOS biomarker methodology in the study where we are seeing rates of ICOS high tumors consistent with those predicted by our early work with our translational science platform. We are also pleased with the continued study enrolment and remain on track to deliver preliminary efficacy data from the ICONIC study in the first half of 2018, together with updated safety and biomarker data. I'd like to make one additional remark regarding our investment in our translational science platform which was reflected in our poster just presented at the Citi meeting. We continue to add technologies to our capabilities that can impact our pipeline vision. In brief, we've established a histoculture system where live human tumors are treated with JTX-2011 then profiled. We've developed an RNA signature that we believe is linked to JTX-2011 activity and can then correlate those particular ex-vivo responding versus non-responding tumors to a pre-treatment profile, establishing potential response predictive signatures. In this way, we've been able to add to and refine our exploratory biomarker work in ICONIC, in addition to the primary biomarkers already employed. That continued commitment may point us to better identification of patients and the approach described at Citi is amendable to all of our programs. As our lead program continues to advance in the clinic, we've also made progress with our earlier stage programs. Our founding principle is adding in-depth understanding of the immune system within solid tumors is key to the development of impactful immunotherapies. As such, we can prioritize targets that go beyond T effector cell directed approaches that are current focus of checkpoint blockade. Our early discovery efforts include programs that target innate immune cells such as immunosuppressive macrophages. We believe this cell type which is highly prevalent in certain patients' tumors across indication can add additional layers of immuno-suppression to the tumor micro environment. Our goal is to convert, but not deplete immunosuppressive macrophages to an immuno activating stay thus engaging the innate immune system in the response to cancer. More recently and along with our Celgene colleagues, we've began to focus on potential new mechanisms for T-regulatory cells. Overall, we continue to believe that additional immunotherapies are needed to address the spectrum of tumors from immunologically hot to cold. The prioritization of macrophage targets is a good example of our initial foray into developing cancer therapies that address colder tumors which represent a significant area of unmet need. We look forward to providing you a helpful framework as we advance these programs in 2018. Now I would like to turn the call over to Kim Drapkin, our CFO, for a discussion of our third quarter 2017 financial results and our fourth area of focus our strong financial position. Kim?

[Kim Drapkin:]

Thank you, Rich. Good morning, everyone. Jounce continues to operate from a position of financial strength as we advance our lead program and discovery platform towards key value inflection point. In this morning's press release, we reported cash, cash equivalents, and investments as of September 30, 2017, totaling $283.4 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 costs throughout the year. Based on our current operating plan, Jounce has narrowed its financial guidance previously provided for the full-year 2017. Jounce now expects to use of approximately $100 million to $110 million in cash for the full-year of 2017 versus previous guidance of $100 million to $120 million. This includes the projected expense of operating activities; build-out in capital cost associated with the relocation of our lab and office space in Cambridge, and payment of federal and state income taxes related to the receipt of the Celgene upfront payment. Turning to the P&L, collaboration revenues were $18.1 million for the third quarter compared to $16.9 million for the same period in 2016. Collaboration revenue currently non-cash reflects the amortization of the Celgene upfront payment of $225 million received in July 2016. During the third quarter of 2017, management adjusted certain accounting estimates related to this amortization and therefore we are revising our non-cash revenue guidance for 2017 to be approximately $70 million to $75 million versus previous guidance of approximately $80 million. Research and development expenditures were $17.1 million for the third quarter compared to $9.5 million for the same period in 2016. The increase in R&D expenses was primarily due to $2.8 million in clinical costs and $1.9 million in increased external R&D costs primarily attributable to manufacturing costs for clinical trial materials both related to the Phase 1/2 ICONIC study of JTX-2011. We also recognized $2 million of increased lab consumable costs attributable to higher headcount and general R&D activities and $0.8 million of increased facilities costs. General and administrative expenses were $5.4 million for the third quarter compared to $3.6 million for the same period in 2016. The increase in G&A expenses is the result of $0.7 million in employee compensation costs related to higher headcount and recruiting costs, $0.7 million in facilities costs, and $0.4 million in other costs attributable to operating as a public company. Net loss was $4.1 million for the third quarter or basic and diluted net loss per share attributable to common stockholders of $0.13 per share as compared to a net income of $4.1 million or basic net income per share attributable to common stockholders of $0.07 per share and diluted net income per share attributable to common stockholders of $0.03 per share for the same period in 2016. Operating expenses increased from the third quarter of 2016 to the third quarter of 2017 as a result of higher headcount, R&D activities and typical costs attributable to operating as a public company, offset by increased collaboration revenues. 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. With that, I will now turn the call back over to Rich to wrap up.

[Rich Murray:]

Thanks, Kim. At Jounce, we're building a sustainable company. Our mission begins with helping cancer patients and our goal first and foremost is to deliver novel immunotherapies to these patients. I'm excited about what's to come from our team and our approach at Jounce and I look forward to sharing more with you as we near the remainder of 2017 and continue to position ourselves for 2018 and beyond. Now we would like to open the call for your questions. Operator?

[Operator:]

Thank you. [Operator Instructions]. Our first question is from Mike Ulz with Baird. Your line is now open.

[Mike Ulz:]

Hey guys and thanks for taking the question. Just with respect to the biomarker it sounds like you've done some fine-tuning there, improved things in ICONIC study but just curious what's your vision for the study in the commercial setting and then maybe where you are in development there and some of the next steps and timelines around that? Thanks.

[Beth Trehu:]

Sure, hi this is Beth Trehu, the Chief Medical Officer. So as you're aware, the biomarker that we're using initially for patients enrichment in the trial is an IHC biomarker that's clearly the easiest thing to do. But as Rich mentioned, and I think we've said earlier, we have a pre-defined ICOS RNA signature that's already incorporated into the trial and then there is a number of exploratory signatures that we're looking at as well. And at some point in the clinical development of the molecule, we will pick what we think is the best biomarker to develop further with the program that may happen in the first trial, that may happen in subsequent trials, but we believe it's a great idea to be looking for what's the best predictor, and then, we will do an assessment of what makes most sense commercially.

[Mike Ulz:]

Great, thanks.

[Operator:]

Our next question is from Cory Kasimov with J.P. Morgan. Your line is now open.

[Cory Kasimov:]

Hey good morning guys. Thanks for taking the questions. I have two open for you. I guess in the first one in terms of the ongoing Phase 2 ICONIC trial, what triggers the disclosure of data that a minimum amount of follow-up you're looking for, minimum number of patients in various cohorts or something else?

[Rich Murray:]

Yes, I'll take that one Cory, thanks for the question. I think we've said all along as we have started to aggregate the data for looking to presentation in first half not for now first half of next year, we're really looking towards kind of portions of that study and in what will be disclosed in the data we're thinking about that in the way of cohorts. We've also been consistent since our descriptions that we don't expect all of that data to be ready in the first half of 2018, but we're happy with the progress of the study and we're on track.

[Cory Kasimov:]

Okay. Are you able to say roughly how much follow-up we could expect to see when that data comes out?

[Beth Trehu:]

Hi, this is Beth. I think if you think about when the different parts of the study started enrolling but that will tell you I mean if the Phase 2 combo started enrolling in July, then, we'll have follow-up in some patients from that period but it all depends on when people come into the study.

[Cory Kasimov:]

Okay.

[Beth Trehu:]

But our aim is to present as robust a dataset as possible first half of 2018.

[Cory Kasimov:]

Okay. And then the follow-up question is are you applying the histoculture selection profiles to the initial enrollment in ICONIC or is that something that's going to come later?

[Beth Trehu:]

Great question. So, no, where using the IHC assay initially in ICONIC what the histoculture does as it gives us hypotheses to test and so we have a very, again robust biomarker assessment going on in the study where we can use new methodologies to test, new signatures, and then we can use some groups of the study to test them and then other groups to validate them. So right now IHC is what's used for patient enrichment but we have ongoing analysis of additional and potentially better signatures but that will remain to be determined with more clinical data.

[Operator:]

[Operator Instructions]. Our next question is from Boris Peaker with Cowen. Your line is now open.

[Boris Peaker:]

Great. Good morning. My first question is I was wondering if you give more details on the success of your ICOS enrichment specifically, what are you seeing its frequency of ICOS expression in meaning and what is it in the enrolled cohort, where do you have some kind of a quantitative enrichment target in the enrolled patients.

[Beth Trehu:]

Sure. So the first question I think is regarding we've had -- we've shown kind of what our expectations were for the percentage of patients would be ICOS high in the tumor types that we selected for ICONIC. And actually one of our scientists presented at the Biomarker Preconference Meeting at SITC and did provide some information. So we're very happy to report that in our preliminary results with the ICOS biomarker the prevalence of the percentage of patients with high ICOS scores in our selected tumor types is very consistent with what we've predicted, so in head, neck cancer, non-small cell lung cancer, triple negative breast cancer, gastric cancer, we're seeing rates as high ICOS scores very consistent with what our translational platform were predicted. So I think that gets to the first part of your question. We are seeing relative, the prevalence of patients with high ICOS scores is similar to what we expected. And then I think the second part of your question maybe you can repeat it again.

[Boris Peaker:]

Yes, I'm just curious, so you're -- Beth, you're talking about now the screened patients, and I'm curious what is it in the enrolled like, what is the factor of enrichment that you're using or what's the target for enrichment.

[Beth Trehu:]

Right, so as Rich mentioned at least 50% of each indication specific cohorts is required to have a high ICOS score and that's based on the archival score but then we actually keep enrolling until we have at least 10 patients with a high ICOS score on the fresh tumor biopsy.

[Boris Peaker:]

Right. And my second question I'm just curious on the competitive front, do you know when we will see data from GSK induced 1 study of their ICOS agonist.

[Rich Murray:]

Yes, hi Boris. I'll take one this is Rich. We don't know. We obviously are following that closely but it's not something we have necessarily an accurate read on at this point.

[Boris Peaker:]

Okay, great. And lastly, any other competitor data that you think will be presented before around your disclosure next year.

[Rich Murray:]

We have started to see additional ICOS program start to emerge, not surprising. I think as more as known about the biology and the target and the mechanism that's a natural for immunotherapy. But in terms of kind of where we are in the position of those programs, I -- we suspect will be certainly in a very competitive position as to releasing results first half of next year.

[Boris Peaker:]

Great. Thank you very much for taking my questions.

[Rich Murray:]

Thanks.

[Operator:]

Our next question is from Jim Birchenough with Wells Fargo. Your line is now open.

[Yanan Zhu:]

Hi, thanks for taking the questions. This is Yanan Zhu in for Jim. First question a follow-up of a previous question in terms of the one first half 2018 preliminary efficacy from Phase 2 would you be able to comment on what cohorts, what cancer tumor cohorts might have the data presented then.

[Beth Trehu:]

Hi, Yan. We're not disclosing that at this time. As Rich mentioned, we will be presenting the data in cohort fashion and we may provide additional guidance as the time draws closer.

[Yanan Zhu:]

Got it. And then two quick questions on the earlier stage programs. One on the macrophage, immunosuppressive macrophage program, would you be able to comment on potential differentiation from the ones targeting CSF1R that's in development by other companies. And also for the Treg program could you talk about the rationale for that program and also in light of the -- your observation that ICOS 2011 actually have some, activity depleting Tregs. Thanks.

[Rich Murray:]

Sure. I can -- this is Rich I'll take those -- take those on. I think a really important element of our immunosuppressive macrophage undertaking and this was kind of our biological hypothesis right from the start, was we really wanted to convert macrophages so kind of the M2, M1 conversion that we believe happens in the biology of immuno-suppressed tissues versus immune active tissues. So our programs are aimed at kind of slipping that switch between immune activation and immune suppression and we see that as different than a growth factor starvation which may lead to more of a depleting function of cell lineages. So I think there's an important to recognize the importance of the cell type and how you modulated then becomes how you choose targets, validate those, and go after re-molecules, so for us it's conversion not depletion. The second part of the question on Treg biology. We certainly have an element in the preclinical biological activity from JTX-2011 that we think impacts T-regulatory cells. However we do see as others have that there are different cancers with different levels of Tregs populating tumors. We think it's an important piece of the biology to try to kind of dampen down or remove the function of Tregs within the tumor microenvironment. And so the programs we have lining up now are really aimed much more at that directly through different mechanisms. That are in addition to what JTX-2011 and ICOS might provide.

[Operator:]

Ladies and gentlemen thank you for participating in today's conference. You may all disconnect. Have a good day everyone.