Jounce Therapeutics, Inc.
Q4 2019 Earnings Call Transcript

Published: 27 Feb 2020

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Jounce Therapeutics Fourth Quarter and Full year 2019 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 fourth quarter and full year 2019 financial results conference call. This morning, we issued a press release, which outlines the topics that we plan to discuss today. The release is available in the Investors & Media section of our website at www.jouncetx.com.Speaking on today's call will be our CEO and President, Dr. Rich Murray, who will discuss our pipeline progress and key milestones for 2020, followed by our CMO, Dr. Beth Trehu, who will provide an update on our clinical activities. And lastly our CFO, Kim Drapkin will review our full year 2019 financial results and 2020 guidance. 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 February 27, 2020 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.

[Rich Murray:]

Thanks, Komal, and good morning, everyone. As we reflect on 2019 I'd like to note the meaningful advancements Jounce has made to further progress our growing IO pipeline towards several key milestones that we set forth in early 2019. That progress stems from our translational science platform, driving new IO therapies to the client, as well as analyzing patient samples from our clinical trials to inform new science driven development apps. The latter is best illustrated by our lead Phase 2 program Vopratelimab or Vopra, which represents what we believe will be necessary to make a meaningful impact for patients who are not benefiting from today's IO therapies. For Vopra we made significant progress over the course of 2019. First, the introduction of our two vocal development paths. Based on the results of extensive reverse translational analysis, we identified important biomarker differences between responding and non-responding patients, enabling the EMERGE and SELECT trials. Next, the exciting data from ICONIC at AACR where we showed improved responses, progression free survival and overall survival, directly linked to the treatment emergent ICOS HI CD-4 T-cells. These cells are a Vopra associated pharmacodynamic biomarker, not seen with PD-1 inhibitors.Next, the identification of predictive biomarker test of Vopra to be used for patient selection in the upcoming SELECT trial, which we believe will allow us to select patients more likely to generate ICOS HI CD4 T cells in the presence of Vopra and potentially experience clinical benefit. And the work we've done with dosing and schedule, which may be an important feature of how to optimize activity of stimulatory rather than inhibitory based immunotherapies.As we look to 2020, the significant unmet needs faced by many cancer patients continues to be at the forefront of everything we do. Beth will take you through more details on both EMERGE and SELECT in a moment. But before turning the call over to her, I'd like to take this opportunity to reflect on the unmet need and why Vopra could have a major impact, starting in non-small cell lung cancer. The last decade's been very exciting with game changing treatment advances in oncology, made by approved checkpoint inhibitors. As PD-1 inhibitors expand further and further into frontline therapy, a growing number of patients who have progressed on these therapies need new treatment options.For example, we estimate approximately 90% of non-driver mutation. Frontline non-small cell lung cancer patients in the U.S. receive a PD-1 or PD-L1 inhibitor as part of their initial therapy. And the majority of those patients either relapse or do not respond, creating a new growing area of unmet need. Standard of care for this patient population is docetaxel, which has a low response rate and the challenging toxicities associated with chemotherapy.Part of the Vopra vision is to provide better treatment options for patients in this setting. And that market opportunity is substantial, with more than 40,000 patients in the U.S. each year in just this particular setting. We continue to believe that novel approaches that are independent of the PD-1 inhibitor CD-8 focused biology will be required to derive meaningful benefit in the growing population of patients who progress on PD-1 inhibitors. Fundamental immunology research over the decades, emphasized the importance of CD-4 T-cells and their central role in orchestrating a more complete overall immune response and speaks to the potential opportunity for Vopra.Our Vopra strategy is highly differentiated from the majority of other studies in this patient population, most of which employ retreatment of patients who have already progressed on a PD-1 inhibitor with a PD-1 inhibitor again, along with another agent. In the PD-1 inhibitor naive populations, the use of predictive biomarker may support improved outcomes in a chemo free immunotherapy combo regimen. As we recently presented, upcoming SELECT trial uses the TIS Vopra biomarker to select patients for treatment with Vopra plus our PD -1 inhibitor JTX-4014. We believe TIS Vopra positive patients at baseline have a higher likelihood of generating ICOS HI CD4 T cells in the presence of Vopra and that's a potentially greater chance of clinical benefit.Beyond our clinical programs we continue to make progress advancing our earlier stage pipeline using our translational size platform. We continue to believe that our strategy of discovery and developing IO therapies aimed at immune cell sites beyond the traditional CDH cell is an area of opportunity to bring more benefit to patients. Notably, we advanced our next development candidate to come from our platform JTX-1811 which is currently an IND enabling activities standard on track for first half 2021 IND filing. JTX-1811 is a monoclonal antibody engineered to deplete tumor resident T regulatory cells while sparing other types of T cells.We tried to present additional scientific data supporting the development of JTX-1811 at the upcoming AACR meeting in April. On the corporate development front, we've demonstrated external validation with the out licensing of our macrophage candidate JTX-8064 to Celgene that was part of a broader renegotiation with Celgene and we now have the full unencumbered global rights to Vopra, JTX-4014, JTX-1811 and our entire discovery pipeline.On the heels of a strong 2019 of pipeline execution in corporate development we are poised for an important year of new clinical data and key milestones in 2020, to reiterate, we plan to report preliminary efficacy and related biomarker data for Vopra from the EMERGE trial in the second half of 2020. Initiate the SELECT trial using TIS Vopra in mid 2020, present data on JTX-1811at the 2020 AACR meeting. Continue on the enabling activities for JTX-1811 with an expected IND filing in the first half of 2021 and continue to work on advancing multiple new targets from our discovery pipeline.With that, I'll now turn the call over to Beth to further discuss our clinical pipeline and science in more detail.

[Beth Trehu:]

Thanks, Rich and good morning, everyone. As Rich mentioned, 2020 is an important year of new clinical data and key milestones for Jounce, building on our key clinical learnings in 2019. Beginning with our Vopra program we continue to make significant progress and have introduced two different development paths based on our reverse translational analyses. The first approach is our induction strategy in the EMERGE trial and the second is our patient selection strategy in the SELECT trial using our predictive biomarker TIS Vopra. Both EMERGE and SELECT trials are based on three major learnings from Iconic.First, we identify treatment emergent ICOS HI CD-4 T effector cells in the peripheral blood of patients treated with Vopra alone or in combination with nivolumab that are associated with clinical benefit including response rate, progression free survival, and overall survival. We've shown that emergence of these cells does not occur with PD 1 inhibitor therapy and therefore we believe that they are Vopra specific cells. We have also demonstrated that ICOS HI CD-4 T cells expand and persist throughout durable responses some over two years. Second, we identified an RNA signature in baseline tumor biopsies, which we call TIS Vopra, which is optimized for prediction of emergence of ICOS hi CD4 T-cells and predictive clinical benefits in ICONIC. And third, we identified what we believe is a more optimal dosing regimen for Vopra.All of our Vopra trials are built upon the fundamental science of our founders, coupled with the reverse translational analyses from our ICONIC trial. Another key learning has been that Vopra activity requires the presence of primed ICOS hi CD4 T-cells. All of this work has culminated in our two Vopra development paths. First, the induction path in which ICOS hi CD4 T-cells are induced by another agent prior to administration of Vopra. The study for the induction path is the EMERGE trial, which is a Phase 2 open-label multicenter trial using IPIlimumab or IPI to induce ICOS hi CD4 T-cells prior to Vopra administration, The trial is underway in PD-1 experienced patients with non-small cell lung cancer.As Rich mentioned, this is an area of high unmet need as PD-1 inhibitors have moved into frontline settings. As we have detailed previously, we are implementing a new combination dosing strategy for the EMERGE and SELECT trials, which we believe is more appropriate for an agonist. Given our understanding of the kinetics of induction and expansion of ICOS hi CD4 T-cells by IPI and Vopra respectively. We believe that the unique combination dosing and sequencing strategy that we are using in EMERGE optimizes both ICOS hi CD4 T-cells and co-stimulatory biology.We believe Jounce has a compelling and differentiated approach to immuno-oncology combination therapy. We expect to report data from the EMERGE trial, including preliminary efficacy and biomarker relationships to clinical outcomes for up to 40 non-small cell lung cancer patients in the second half of 2020.The study investigating the predictive biomarker path, is the SELECT trial. Based on the evaluation of baseline tumor samples from patients in ICONIC, we identified the gene signature and threshold TIS Vopra which predicts Vopra associated ICOS hi CD4 T-cell emergence, as well as improved response rate, overall survival and six and nine months progression free survival in TIS Vopra positive patients. The SELECT style is designed to determine if patients with TIS Vopra positive tumors will have a higher likelihood of generating ICOS hi CD4 T-cells in the presence of Vopra, resulting in potentially greater clinical benefit. TIS is an 18-gene signature that was originally developed as a predictive biomarker for PD-1 inhibitors.However, TIS also includes genes associated with integral elements of CD-4 T-cell biology that may contribute to a more comprehensive immune response. In the upcoming Phase 2 SELECT trial, patients will be selected using TIS Vopra. SELECT is randomized ex-U.S. trial in non-small cell lung cancer comparing Vopra plus JTX-4014 our PD-1 inhibitor to JTX-4014 alone. We expect to enroll approximately 75 immunotherapy naïve second line non-small cell lung cancer patients who will be selected using the tis Vopra biomarker.We estimate that approximately 20% of second line non-small cell lung cancer patients will be above the TIS Vopra threshold and potentially eligible for the trial. We expect to initiate the SELECT trial in mid-2020 and report interim clinical data in 2021. Turning to JTX 4014 we presented Phase 1 safety and preliminary efficacy data at the 2019 city meeting in November, of note antitumor activity was observed with an overall response rate of 16.7% including one complete response and two partial responses. All confirmed resist responses and with an acceptable safety profile in a difficult to treat population with no therapeutic options. Using our own PD 1 inhibitor in combination with Vopra provides flexibility and cost savings.I'm proud of the accomplishments of our team in 2019 and look forward to continued progress in 2020 on clinical trial execution and readouts on clinical and biomarker data.Now, I would like to turn the call over to Kim for a discussion of our yearend financial results. Kim?

[Kim Drapkin:]

Thanks Beth. Good morning everyone. As we reported in this morning's press release, we ended 2019 with cash, cash equivalents and investments totalling 170.4 million compared to 195.9 million for 2018. The decrease was primarily due to operating costs incurred during the year offset by the $50 million license fee received in July, 2019 pursuant to our JTX 8064 license agreement with Celgene.Turning to the P&L, our license and collaboration revenue was 147.9 million for full year 2019 compared to 65.2 million for 2018. The year over year increase includes 50 million of cash received under the JTX 8064 license agreement with Celgene and 97.9 million of non-cash revenue recognition related to the Celgene upfront payment of 225 million that we received in 2016.During 2019 we incurred 67.1 million in research and development expenses compared to 70.1 million for 2018. The decrease in R&D expenses for the full year 2019 was due to 6 million of decreased manufacturing and IND enabling costs and 0.9 million a decrease lab consumable costs. The decrease was partially offset by 3.1 million of increased employee compensation costs. General and administrative expenses were 27.9 million for 2019 compared to 26.4 million for 2018.The increase in G&A expenses is primarily the result of increased employee compensation costs. Net income for 2019 was 56.8 million or basic net income per share of a $1.72 and diluted net income per share of a $1.66 as compared to a net loss of 27.4 million in 2018 or basic and diluted net loss per share of $0.84. This increase was driven by the 147.9 million of license and collaboration revenue recognized under our agreements with Celgene.We reiterate the 2020 financial guidance we provided in January. We continue to expect growth, cash burn on operating expenses and capital expenditures for the full year 2020 to be approximately 80 million to 95 million. We are no longer providing license and collaboration revenue guidance as potential future payments under our JTX 8064 license agreement with Celgene, our royalty and milestone based.Given the strength of our balance sheet, we expect our existing cash, cash equivalents and investments to be sufficient to enable the funding of our operating expenses and capital expenditure requirements through the end of 2021. Additionally, we continue to have the flexibility to drive our innovative immunotherapy pipeline, while officially executing against our strategic plans and goals.With that, I'll hand the call to Rich for final thoughts.

[Rich Murray:]

Thanks, Kim. Before we open the call for questions, I'd like to bring the conversation back to the patients that we're trying to help. The success of the initial checkpoints has created benefit for patients where none was thought possible less than a decade ago. But with that new challenges and therefore opportunities, have arisen to treat patients who progressed on PD-1 inhibitors and the broader topic of moving IO therapies closer to a precision medicine concept. I believe our new trials reflect the scientific advancements that will need to be made from data gleaned from the lab and the clinic so that we can continue to envision a future with longer and broader durable benefits for patients that do not have those options today as we look forward to updating you in the in the future.And with that, we now like to open the call for your questions. Operator?

[Operator:]

[Operator Instructions] Your first question comes from the line of Boris Peaker from Cowen. Your line is open.

[Boris Peaker:]

So question number one on the EMERGE trial. Are you selecting out patients that don't show ICOS hi CD cells from IPI induction? And maybe kind of a little more broadly, what is the dosing in the EMERGE trial and does it make sense to add an IPI booster in the middle of treatment

[Beth Trehu:]

Sure. So, I'll start with the second question. So the dosing is -- IPI is given every six weeks for up to four doses alternating with Vopra. So you get IPI on day one, and three weeks later, the patients get Vopra. And then three weeks later, they get another dose of IPI than Vopra. So we do that alternating sequence for up to 4 doses of IPI after which they received Vopra alone. So in terms of the ICOS hi CD4 cells, it's a really interesting question. So we are tracking those cells very closely. So we're watching what they do after IPI and then before Vopra and then after IPI again. Right now we're not doing any kind of selection. But we are following that very carefully. And it's certainly it's something to think about in the future. We also, although we're not using any selection in this study. We have -- we are testing a number of potential predictive biomarkers in baseline tumor samples that we'll be able to go back and look at. So, right now the strategy is to induce the ICOS hi CD4 cells with Vopra with IPI, sorry, and then to treat with Vopra which we expect to cause proliferation sustained activation of those cells over time, which in our ICONIC study was associated with long term clinical benefits.

[Boris Peaker:]

Got you. My last question on the TIS Vopra biomarker test, if the SELECT trial is successful it looks like a very useful biomarker. What would you have to do to make the test approvable by the FDA?

[Beth Trehu:]

Sure, so it's already a validated test. So it's running on the nano-string platforms. And there's just there's -- a series of steps you go through to create companion diagnostic and you know, we've already mapped out what that path would look like. We would work with a vendor that would actually be the one to develop the companion diagnostic in partnership with us and our clinical trial.

[Boris Peaker:]

So it wouldn't be limiting in terms of the regulatory strategy to do that's all I know.

[Beth Trehu:]

No, not at all.

[Operator:]

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

[Jim Birchenough:]

Hi guys. Thanks for all the details and taking the questions. A couple, so just on the EMERGE study, is there any early insights you have on the tolerability of the modified dosing protocol that you're pursuing and, and any early indication of success of induction of ICOS hi CD 4 cells with IPI. And maybe related to that, is there a predicted rate of IPI induction? How reliable is it? The induction of ICOS hi CD4 cells and then I've got a follow up.

[Beth Trehu:]

Okay, sure. So all I can really tell you right now is, enrollment is on track to support the interim analysis that we're planning to do later this year. And that's when we'll report data. So we don't typically provide any information on data from the ongoing trial. As I said, enrolments going well and we're on track to have data in the second half of the year and then your other question.

[Jim Birchenough:]

…on IPI induction for ICOS hi CD-4 status.

[Beth Trehu:]

Sure. So, it's a little hard to interpret sometimes. We've heard people say that, you know, all the cells get induced. ICOS gets induced on all the cells, but then it drops off very quickly. So it's a little bit hard to discern from the literature exactly what the expected rate of ICOS induction from just IPI would be. But of course our trial will answer that because we are measuring that in a prospective manner. Most of the studies in which that's been done, it's been more of a retrospective finding. So I think ours will be the first study, to my knowledge, that's prospectively looking at how the kinetics of ICOS induction after IPI. And then with Vopra added on.

[Rich Murray:]

We're ready to publish Jim and they tend to be a fairly decent number of small studies, but with kind of a common theme to that. And that tends to be done in PD1 naïve patients and of course we're looking in PD1 experience but from that kind of collection of small studies. The numbers are always north of 50%, some will claim, almost all the patients. But really what we think is extremely important is the maintenance and sustainability of these cells. And that's where we think our trial will be able to uniquely answer.

[Jim Birchenough:]

And then just one final question just on the SELECT study and what you learned from Iconic, were there other RNA signatures that you evaluated or was this the one that you, prospectively thought would make sense and, and really the only one you evaluated, just wondering if there were other RNA signatures that have a decent predictive value.

[Beth Trehu:]

Sure. So we actually, we had a, a long list of genes that we looked at and a number of pre determined signatures that we assessed, and this one came out as the one that looks the most predictive for clinical benefit. But then what we thought was really, really important was to see if it also tracked with the ICOS hi CD4 T-cells. And so, first it looked like it predicted clinical benefits. But since many of these patients were also treated with a PD-1 inhibitor, we then took this biomarker and applied it to see its predictive value for ICOS hi CD4 T-cell emergence, and then it clearly predicted for that. And then we selected the threshold based on the ability to predict ICOS hi CD4 T-cells. And then when we apply that to clinical data, it was clearly also predicted for clinical benefit. But yes, we looked at a number of different genes, isolated genes and gene signatures prospectively. And this was the one that appeared to be the best.

[Jim Birchenough:]

Great, thanks for taking questions.

[Beth Trehu:]

You're welcome.

[Operator:]

Your next question comes from the line of Mike Ulz from Baird. Your line is open.

[Mike Ulz:]

Hey, guys. Thanks for taking the question. Just another one on EMERGE and in terms of the interim update, expect in the second half of this year. Can you just give us a sense of what types of biomarker data you plan to provide?

[Beth Trehu:]

Sure. Definitely the ICOS hi CD4 T-cells target engagement, since we're doing a new dosing schedule other than what we've done before, so those are the two primary ones. We also as I said we plan to do some looking at some baseline biomarkers and some other aspects of biology.

[Mike Ulz:]

Got it. Maybe just in terms of the patient numbers, you've mentioned potentially up to 40 patients, but can you maybe give us a sense of sort of average follow up at that point in time. Just trying to get the sense of how meaningful.

[Beth Trehu:]

Yeah. Absolutely. So we've timed the interim analysis to be done after every subject has had at least two post treatment or on treatment CT scans. So we'll have at least 18 weeks of data on all of those patients before we report any data.

[Mike Ulz:]

Okay, great. Thank you.

[Beth Trehu:]

You're welcome.

[Operator:]

Your next question comes from the line of Debjit Chattopadhyay for H.C. Wainwright. Your line is open.

[Aaron Welch:]

Hi, this is Aaron on for Debjit. So I have some questions about how you plan on tackling the enrollment challenges for the SELECT trials like given covid-19 disruptions. And how do you expect enrollment to go in this SELECT study given that many of the non-small cell lung cancer patients are likely to have previously been treated with an anti-PD-1.

[Beth Trehu:]

Sure, so we're doing a study ex-U.S., because there actually are many countries in which there's very limited access to the PD-1 inhibitors that are approved in this country. So there are places where patients are anxious to enroll in a clinical trial to be able to get access to a PD-1 inhibitor. So we're really happy that we're providing them with that opportunity. Regarding the challenges of enrollment, that will be the biggest challenges posed by having a requirement for a selective biomarker. However, if you think about some selective biomarkers like Elk or [Ret] where you're talking about three to 7% of a population, we estimate that TIS Vopra will select about 20% of the second line non-small cell lung cancer patients. And in our conversations with investigators, 20% is they're very comfortable with screening. One in five of their patients is likely to be positive for the trial. So we have a number of different strategies in place to tackle this. You know, we have enough sites and we'll have a strategy to screen for patients in a way to enable us to enroll those 75 patients and have data preliminary data in 2021.

[Rich Murray:]

Sorry to interrupt Aaron, just to be clear, the study is in IO naïve patients not PD1 experience patients ex U.S.

[Aaron Welch:]

And just real quick, could we expect to see any TIS Vopra evaluations of patients coming out of the EMERGE study?

[Beth Trehu:]

Yes, we are looking at TIS Vopra and baseline samples in the EMERGE study as well as, as well as other predictive biomarkers, but that's obviously the one that we're the most interested in right now.

[Operator:]

[Operator Instructions] Your next question comes from the line of Steve Seedhouse from Raymond James. Your line is open.

[Unidentified Analyst:]

This is Daniel on for Steve. Thank you for taking our questions. So some checkpoint inhibitors are approved in PD1 expressing patients after showing greater benefits in those populations compared to those that did not express PD1 and it's now that you have a biomarker to select for ICOS hi, what are the thoughts on targeting patients that are both PD1 and also have biomarker for ICOS hi?

[Beth Trehu:]

Hi, sure. So if you recall that TIS was originally developed as a predictive biomarker for PD1 inhibitors. So we do actually expect the data with JTX 4014 in the SELECT study to be potentially better than an unselected PD1 naïve second line non small cell lung cancer patient group. We will be looking at PD-L1 scores at baseline as well in that study. And so that should give us a good sense of how much overlap there is. The TIS Vopra threshold that we've selected should allow us to demonstrate, the trials designed to demonstrate the superiority of Vopra plus 4014 versus 4014 alone. But you're, you're asking a very important question if the study is positive and we want to take this combination forward, it is very important for us to understand how it would compare to a PD-L1 selection criteria.And so we will generate that data from the study, which will be very important to inform development path forward. As we've said, we believe this study would position Vopra as really the combination partner of choice with a PD1 inhibitor in a selected patient population. Because we know that Vopra to date has not added any toxicity to the PD1 inhibitor alone, and therefore it would be a very nice IO combination, chemo free combination for patients in many different tumor types and Rich you want to add something.

[Rich Murray:]

Maybe just adding a comment to that. So the way to look at the biomarker TIS Vopra selection is we expect the enrichment for PD1 response that says we need to look at that and link that to PD-L1standing in terms of the magnitude of that. But we expect that but then on top of that, we kind of built in this threshold for the ICOS hi CD4 cells detection. So we're kind of tuning on top of that, just for the combo. And hence the randomized trial that we will be doing, which would be looking at just the PD-1, and then PD-1 for Vopra. So we think the nature of how the biomarker has been will be utilized fits perfectly with the concept of doing a randomized trial.

[Unidentified Analyst:]

Okay, got it, thank you, I understand. And one quick follow up question. You mentioned that approximately 20% of second line non-small cell lung cancer patients are estimated to be above the biomarker cut off. And just to confirm does that number only apply to second line patients or to the non-small cell lung cancer population as a whole.

[Beth Trehu:]

So that's the data that that we actually have from Nano String and it's specific to the second line PD-1 naive non-small cell lung cancer patients. So we're working with them to understand the frequency in other areas, but since that's the subject -- the patient population, we're doing the study and that was our first priority to understand the prevalence in that population.

[Operator:]

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