Adaptimmune Therapeutics PLC (ADAP) 2016 Q2 法說會逐字稿

Good day and welcome to the Adaptimmune full fiscal year financial conference call and other business update. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Will Roberts. Please go ahead, sir.

Thank you, Gail. Good morning and welcome to Adaptimmune's conference call to discuss our second-quarter 2016 financial results and other business updates.

As a reminder, today's conference call will contain forward-looking statements. These statements relate to future events or the Company's financial performance and the listener is cautioned not to rely solely on these forward-looking statements. Such statements are subject to risk and uncertainties which could cause actual results and events to differ materially from any future results or events expressed in or implied by such statements, especially those inherent in the process of discovering and developing our therapeutic candidates and those set out in our filings with the SEC.

With me on the call this morning and participating in the prepared section of the call are James Noble, our Chief Executive Officer; Rafael Amado, our Chief Medical Officer; and Adrian Rawcliffe, our Chief Financial Officer. Also available for Q&A after the prepared comments are Helen Tayton-Martin, our Chief Operating Officer, as well as Gwen Binder-Scholl, our Chief Technology Officer.

This call is expected to last approximately one hour. With that I will turn the call over to James Noble.

Thanks, Will, and good morning, everyone. Thank you for joining us on our second-quarter conference call.

Since our IPO last year, we have made good progress across the organization and this has continued on a number of fronts over second quarter of 2016. Some visible and public, many not. Among them, we continue to advance our NY-ESO SPEAR T cell therapy toward pivotal studies; progress our wholly-owned pipeline of targets and TCRs into clinical trials.

As the Company evolves, our wholly-owned pipeline is becoming increasingly important to us and our shareholders. We have open INDs for SPEAR T-cell therapies targeting AFP and MAGE-A10. In addition, our MAGE-A4 SPEAR therapy remains on target for an IND filing early in 2017. MAGE-A4 is of particular interest as this target is one of the most highly-expressed cancer-testis antigens across a wide variety of solid tumors.

We presented important data during the quarter, highlighting the impressive response rates we are seeing in sarcoma and multiple myeloma; the importance of preconditioning, including fludarabine, to response and persistence; and importantly thus far, that our SPEAR T-cell therapies are differentiated from other cell therapies in the field based on clinical outcomes, including tolerability.

We believe our SPEAR T-cell therapies hold great promise as single agents and in combination with other agents, potentially leading to enhanced and more durable responses. We expect the first of such studies to be in myeloma.

We have also executed well from a regulatory perspective, having in the last few months announced orphan drug designation in the USA and in the EU, as well as access to the EMA's PRIME regulatory support. Together with FDA breakthrough designation, these regulatory milestones reflect the recognition of two regulatory agencies of the potential therapeutic advance that our SPEAR T-cell therapy represents for patients with synovial sarcoma.

With respect to clinical and commercial manufacturing, we announced in June that we entered into a 10-year commercial development and supply agreement with Thermo Fisher Scientific for its CD3/CD28 DynaBeads for use in the manufacture of our SPEAR T-cell therapies for which we have the exclusive license. This is important as we believe that DynaBeads have unique properties that result in the generation of younger and healthier T-cell, leading to prolonged persistence of therapeutic cells in the blood.

During this period we have also experienced challenges that will impact the timing of initiation of our pivotal trials in soft-tissue sarcoma, as well as the timing of data released in non-small cell lung cancer. And we announced last week that we had received notice from the FDA that a partial clinical hold has been placed on our planned pivotal study of our NY-ESO SPEAR T-cell therapy in myxoid/round-cell liposarcoma, or MRCLS, which is not yet active at any investigational site and has not yet recruited any patients.

To put this partial clinical hold in the appropriate context, we want to emphasize that there was no safety concerns raised by the Agency in this trial that had yet to enroll any patients. We have changed the manufacturing method from the previous academically-derived process to one that is commercially viable and we believe that implementation of this commercial-ready manufacturing process is strategically important to us for late-stage development and commercialization of our SPEAR T-cells. Furthermore, this is the first TCR T-cell therapy to enter pivotal-stage trials.

Thus, the Agency has made a number of requests regarding both our commercial-ready manufacturing process, such as the need to demonstrate comparability with the earlier process, and our protocol design, asking that we clarify certain protocol design features such as patient monitoring. We are confident that we can address the Agency's requests and plan to provide a full response to the FDA within the next few days. The FDA will then have 30 days to get back to us.

If the FDA lifts the clinical hold during this review period, we anticipate opening this trial around the end of the year as originally planned. If it takes longer to resolve these items, trial initiation will be pushed into 2017.

With respect to the synovial sarcoma pivotal study, we are today announcing a delay of the initiation of this trial to mid-2017. There are a number of factors underlying this, including a request from the FDA for us to participate in a special protocol assessment. The previously-discussed transition to our commercial-ready manufacturing process, as well as the fact that we would like to see Cohort 4 data from the initial pilot studies, which Rafael will discuss in more detail.

In addition, we have also experienced some delays due to slower-than-expected site initiation timelines and higher-than-anticipated screening failure rates in our non-small cell lung cancer studies, and data for the NY-ESO and MAGE-A10 SPEAR T-cell trials are now expected in 2017.

With that I will now turn the call over to Rafael Amado for an update on our clinical programs and timelines, after which Adrian Rawcliffe will briefly describe our financial results. I will then return for some closing comments. Rafael?

Thank you, James, and good morning to everyone on the call. I want to spend a few minutes on our progress with our clinical and preclinical pipeline and discuss the milestones you can expect from us over the coming 18 months.

From a regulatory perspective, as James mentioned, following the breakthrough and orphan drug designations we received from FDA in the first quarter, we were glad to receive orphan medicinal drug designation for our NY-ESO SPEAR T-cell therapy in soft-tissue sarcoma in the European Union as well as access to the EMA's priority medicine, or PRIME, regulatory support. This process, like breakthrough status in the US, allows access to the Agency for early and frequent dialogue on clinical development plans and affords the potential to qualify for more rapid assessment on the application.

Overall, our conversations with both FDA and EMA continue to go well and have helped clarify the development plan for NY-ESO SPEAR T-cell therapy and the entry into the clinic of our proprietary products.

From a clinical perspective, we discussed a number of key data at the 2016 ASCO meeting and our analyst day, particularly in the areas of tolerability and incidence of cytokine-release syndrome and the importance of preconditioning to response. Regarding the former, we are accumulating data showing that our SPEAR T-cell therapies have a very different tolerability profile from the CAR Ts. We presented data at ASCO demonstrating that the incidence of CRS is lower in both frequency and severity reported with CD19 CAR T-cell therapy, and this may be a general differentiation between TCRs in solid tumors and CARs in hematologic malignancies.

Although the patient populations are different, we have seen CRS in only 15% of the patients we have reported on, only one of which was Grade 4. The episodes are generally manageable with supportive care measures and anti (inaudible) therapy. Importantly, we have seen no evidence in any of our patients of the type of neurotoxicity that was observed recently with CAR19 T-cell therapies.

Regarding the influence of preconditioning regimens on tumor response to our NY-ESO SPEAR T-cell therapy, we have seen robust clinical responses in solid and hematologic tumors when using preconditioning with fludarabine and cyclophosphamide in the case of sarcoma and high-dose melphalan in myeloma in the context of autologous stem cell transplants. Treatment with our NY-ESO SPEAR T-cells resulted in a response rate of 60% in synovial sarcoma at this target cell dose and 91% in multiple myeloma using this conditioning.

Importantly, as discussed at our analyst day, we have also observed preliminary evidence of antitumor activity in our sarcoma Cohort 2 with tumors that express low levels of NY-ESO. In this cohort, patients also receive a preconditioning regimen that includes fludarabine and cyclophosphamide.

By comparison, as we reported at our analyst day, we have seen no responses to date in our third sarcoma cohort, who received preconditioning without inclusion of fludarabine. If this finding is confirmed with additional patients, we will discontinue enrollment in this cohort and initiate enrollment in Cohort 4, which includes a preconditioning regimen with modified doses of cyclophosphamide and fludarabine. We expect to open this cohort in the second half of 2016.

Similarly, we believe that the lack of objective response seen to date in our ovarian and melanoma studies may be related to the absence of fludarabine in the preconditioning regimens. This is in contrast to what was observed by the NCI group in melanoma using our NY-ESO T-cell receptor therapy. We are adapting to this finding and revising the ovarian and melanoma protocols to include modified doses of fludarabine and, in the case of melanoma, considering a combination arm.

During the second quarter we made good progress in our NY-ESO SPEAR sarcoma program. I will spend a few minutes describing the current status of our pivotal registration studies.

As James mentioned, we are today announcing a delay to our synovial sarcoma pivotal study. There are several factors underpinning this. Firstly, FDA has asked us to participate in a special protocol assessment, or SPA, for this study. We believe that this process will result in a more robust clinical package and we look forward to continue productive interactions with the Agency.

In addition, we have made the decision to utilize our commercial-ready manufacturing process for all our pivotal studies, including this synovial sarcoma study, and we're refining this process and producing the necessary data to support it. This change from the process derived from an academic site that was used to manufacture material for our pilot studies for the commercially-viable one has resulted in a delay, but we believe that the use of this new process in our pivotal study is strategically important to support registration and commercialization of our SPEAR T-cells.

Lastly, we expect to gain more information from our pilot sarcoma trial regarding the relative efficacy and safety of the different conditioning regimens and the efficacy of the product across a broad level of NY-ESO expression, which we hope to incorporate into the final trial design. Thus, we project that the initiation of the synovial sarcoma pivotal trial will now be in mid-2017 from the originally projected Q1 2017.

With regard to myxoid/round-cell liposarcoma, we submitted our pivotal trial to the IND and the FDA issued a partial clinical hold prior to this trial being active at any investigational site. As James mentioned, we want to emphasize that there were no safety concerns from the Agency and that this trial has not yet enrolled any patients. Moreover, it does not affect any of our ongoing studies.

This partial hold relates to clarifications on the manufacturing process for materials to be used in our pivotal studies and the fact that this is the first SPEAR T-cell therapy to enter pivotal-stage trial. FDA has asked a number of questions around our commercial-ready manufacturing process as well as clarity regarding certain protocol design features such as patient monitoring. We believe that we can address the Agency's concern and plan to provide a full response to the FDA within the next few days, after which the Agency will have 30 days to respond.

If discussions with the FDA are concluded rapidly and the partial hold is lifted, we would expect to initiate the MRCLS pivotal study in the fourth quarter of this year or first quarter of 2017, as originally planned. If the issues are not resolved within this timeframe, then the MRCLS study will be on a similar time frame to the synovial sarcoma study.

Next, I will discuss our non-small cell lung cancer study with our NY-ESO and MAGE-A10 SPEAR T-cell therapies. Initiation of these trials have been challenging to date. First, opening these trials in many of our new sites has taken longer time than anticipated, primarily due to multiple sequential committee reviews and the need for some sites to organize cell therapy core groups for solid tumor indications. Second, the expression of both of these targets in non-small cell lung cancer is primarily in squamous cell carcinoma, a type of lung cancer with decreasing incidence in the United States owing to decreased tobacco use.

Therefore, we are instituting a number of measures to improve enrollment in these trials. First, we are expanding the number of clinical trial sites in the United States. Second, we are expanding these trials to Canada and Europe. We have received approval for our clinical trial application in Canada and we have submitted a CTA to the United Kingdom and applications to the relevant competent authorities to conduct clinical trials with genetically-modified organisms in France and Spain.

Third, we are screening a large number of samples in tumor banks to characterize the expression of cross-molecular subtypes of lung cancer to identify subsets with highest antigen expression. Of note, we are including MAGE-A4 in this screening to improve patient selection in our future trials.

Fourth, we are evaluating in vitro whether a lower level of NY-ESO expression may still result in antitumor cytotoxicity, but we may adjust the level of NY-ESO and MAGE-A10 expression required for inclusion in these trials accordingly. In the case of our NY-ESO SPEAR T-cell, we are developing an assay to screen for XAGE-1a as a peptide recognized by this TCR is shared between both NY-ESO and XAGE-1a antigens. By screening for both in non-small cell lung cancer, we expect to identify additional patients eligible to participate in the trial.

Lastly, for MAGE-A10 we have decided to accelerate the multi-tumor study in patients with bladder, melanoma, and ovarian cancer. We expect this study to open this year and to present results from both the lung cancer and these multi-tumor studies in 2017.

Regarding our AFP SPEAR T-cell therapy, our IND was accepted during the second quarter of this year and we expect to initiate enrollment in the first study under this IND in the first half of 2017. Our next IND for our MAGE-A4 SPEAR T-cell remains on track. The IND submission is planned for early 2017. As James mentioned, MAGE-A4 has the potential to be a good target for us as it is among the most highly-expressed cancer-testis antigens across the spectrum of solid tumor cancers and there is great excitement around our centers regarding this study.

We remain on track with our generation two and three SPEAR T-cell efforts. Our internal capabilities allow us to develop these next-generation SPEAR T-cell therapies incorporating new controls and functionalities designed to enhance activity in the presence of immunosuppressive tumor macro environment. We expect to file an IND as the first of several generations two and three SPEAR T-cell therapies in 2017.

So to summarize our milestones for the remainder of the year and 2017, we expect the following. We continue to progress enrollment in the pilot sarcoma study of our NY-ESO SPEAR and we will present updated data in patients with low NY-ESO expressing tumors and with preconditioning in the absence of fludarabine at ESMO this year. We are on track for opening Cohort 4 to study modify doses of conditioning this year after Cohort 3 concludes.

At (technical difficulty) we will present our MRCLS study design and provide an update on all sarcoma cohorts. And at SIPC we will present preclinical data from our MAGE-A4 and our first second-generation SPEAR T-cell therapy.

Our goal remains to initiate our NY-ESO SPEAR pivotal study in MRCLS in Q4 2016 or Q1 2017, assuming that our interactions with FDA on the protocol conclude rapidly. We will then begin dosing synovial sarcoma patients mid-year 2017.

We remain on track for a combination study with the PD-1 receptor inhibitor using cyclophosphamide and fludarabine conditioning in multiple myeloma patients this year and expect to initiate the study in the first half of next year. We have revised the ovarian protocol to include the addition of fludarabine in the preconditioning regimen and we plan to do the same in the melanoma trial, which will include combinations with checkpoint inhibitors.

We are making adjustments to accommodate the realities of low patient enrollment to date in our NY-ESO and MAGE-A10 SPEAR studies in lung cancer, including eyeing additional sites in the United States as well as adding sites in Canada and Europe. We are also actively developing research alliances with leading institutions as part of these efforts. We now expect data from both trials in 2017.

We are accelerating the triple-tumor study of MAGE-A10 SPEAR and we expect to initiate this study this year and now expect data in tumor types beyond lung cancer next year. Enrollment in a study of our ASP SPEAR in hepatocellular cancers should initiate in the first half of next year. We expect to file our IND for our MAGE-A4 SPEAR in early 2017 and we expect to file an IND for our first second-generation TCR also next year.

We have built and continue to augment our internal capability to not only deliver a first-to-market SPEAR T-cell therapy in sarcoma, but importantly, to create an industry-leading and sustainable pipeline of wholly-owned and internally-generated first-, second-, and third-generation SPEAR T-cell therapeutics. Over time we believe that this effort will provide a wealth of data across a suite of TCR cell therapies targeting different tumors and antigens.

And with that I will turn the call over to Adrian for his review of our second-quarter financial results. Adrian?

Thanks, Rafael. Good morning, everyone. As you saw from this morning's press release, I'm pleased to say that we've closed the 2016 second quarter with nearly $206 million in total liquidity, which is a non-GAAP measure comprised of cash, cash equivalents, and short-term investments. We are, therefore, well-capitalized and believe that at currently forecast spend levels this cash should last us approximately two more years.

Let's touch briefly on the financial highlights for the second quarter of 2016. As a reminder, our revenue is comprised up from payments and milestones under the collaboration and licensing agreement with our partner, GSK.

The milestone income is inherently lumpy and we saw that during the quarter. These milestones essentially pay for our expenditures on GSK programs and when we don't reach a milestone, we don't incur the associated expenditure. As such, the lower revenue in quarter two does not change our expectation of overall cash burn for 2016.

Regarding our research and development expenses, we have significantly increased our investments in people, in clinical activities to support our ongoing studies, and in preclinical activities to identify targets on solid tumors, to develop SPEAR T-cell therapies, and deliver INDs into the clinic. As such, our R&D expenses were $16.4 million for the second quarter of 2016, compared to $3.2 million for the same period in 2015.

Our general and administrative expenses relate to our expanding organization managing our R&D programs and the requirements of being a public company. These were $6.8 million for the second quarter of 2016, compared to $5.5 million for the 2015 second quarter.

Combined, we reported an operating loss for the period of $22.7 million, which, after other expenses and taxes, gets us to a net loss of $22.1 million. On a per ordinary share basis this translates to a loss of $0.05 per ordinary share for the second quarter of 2016. Given that there are six ordinary shares represented by each ADS, we show a net loss of $0.32 per ADS.

Finally, we are confirming and reiterating our previous guidance. Excluding the effect of any potential new business development activities, we expect our decrease in total liquidity position to be between $80 million and $100 million for the full-year 2016. We, therefore, expect our total liquidity position at December 31, 2016, to be at least $150 million and we believe we have funding today to take us to mid-2018.

In summary, we remain financially strong with a cash runway of approximately two years. We will continue our disciplined investments in platform and pipeline, and as Rafael described, we are in the midst of an exciting time of execution during which we will start multiple new studies of and present new data from a number of wholly-owned therapeutic assets. We will file new INDs for generation one and two TCRs and we will initiate pivotal testing of our NY-ESO SPEAR T-cell therapies in MRCLS and synovial sarcoma, all of which we believe will clarify the power and potential of our proprietary platform to make and optimize TCRs against a broad range of cancer targets.

With that I want to turn the call back over to James for some closing comments. James?

Thank you, Adrian. I will wrap up this call by expressing my thanks to our team for outstanding efforts during the second quarter. Together we have built an expertise in cell and protein science, target identification, TCR generation, affinity and specificity optimization, cell manufacturing, and clinical evaluation of SPEAR T-cell immunotherapies.

It is clear that we are in the midst of a revolution in immunotherapy immunotherapeutic intervention in oncology and we believe that thanks to our best-in-class SPEAR T-cell platform technology and experienced team of professionals and scientists, we are well-positioned not only to capitalize on this revolution, but to lead it.

Two years ago, we were a small company with one project, an engineered TCR T-cell targeting NY-ESO with the first hints of data in synovial sarcoma and multiple myeloma from three centers in the USA. Since then, we've expanded the Company and our clinical sites globally and next year we will be in the clinic with four SPEAR T-cell therapies, three of which are wholly-owned, in 10 different tumors and approaching 40 sites.

Further back behind that, we have a broad, industry-leading pipeline of TCRs in development and in targets. The promise of these SPEAR T-cell therapies is being recognized by regulatory authorities, as evidenced by breakthrough and PRIME status and orphan drug status in both the USA and Europe. I am privileged to lead a company with such a rich scientific heritage that has developed into a formidable leader in the T-cell therapy space.

We continue to make excellent progress towards delivering on our corporate goals: generating important new data in multiple tumor types, building clinical experience by initiating and conducting clinical studies with new constructs, aggressively bringing new INDs towards the clinic, identify new solid tumor targets, and exploring the possibility of enhancing the rate, [breadth], and durability of our affinity-enhanced SPEAR T-cell therapies utilizing combination and a second- and third-generation strategies. Although some of our timelines for delivery of data have changed, the potential of these data to transform the industry have not. The remainder of 2016 and 2017 will be important periods of execution for us and we thank you for your continued support.

With that, I would like to open the call up for questions. Operator?

(Operator Instructions) Peter Lawson, SunTrust Robinson Humphrey.

James, thanks for taking my questions. On the synovial sarcoma delay, I wonder if you could just add some color around the discussions with the FDA around the SPA, the reason for prompting that.

Rafael, why don't you have a go at that?

Peter, thanks for the question. They mentioned their reasons for the SPA as a way to ensure that the pivotal trial is designed in a way that would support registration. They were actually quite interested in us pursuing this venue and it is a regular venue that sponsors have followed for many years.

In general, the Agency -- although there's no full commitment, does ensure that if the trial is executed as designed it could support approval. And so this being an indication that's quite rare that the endpoint may be a surrogate endpoint and that the difficulties with conducting randomized trials, there are enough design features that I think they wish to ensure this alignment that they felt that the special protocol assessment is probably the best way to ensure that alignment.

Now the flipside of that is that SPAs take time. The review is only 45 days, but it may go back and forth. And SPAs require not just the protocol, but a lot of other documents. So there's an investment of time that we and they believe that it's a good investment, given that this is potentially the first TCR to be approved.

Perfect, thank you. Then just the reasons for the slow enrollment for the lung cancer trials.

So as I mentioned, I think we perhaps overestimated how quickly the studies could get up and running. One of the issues that we face is there is certainly a lot less history and expertise, if you will, of running gene therapy T-cell studies among solid tumor investigators. And so there's the need to bring in experts in cell therapy, bone marrow transplants that will work alongside solid tumor investigators. That requires an infrastructure and a coordination of sites that in many of our sites it wasn't present.

We are happy to say that that's already ongoing in many of our sites and that it's working pretty well, but it took some time. Also, these are -- particularly MAGE-A10 is our first-in-human studies, so there are multiple committee reviews and references to prior toxicity that has been seen with T-cell therapeutics. And so it has been a pretty intense, shall we say, review of all these documents.

In terms of the screening, we aim to look first for the highest possible screening with these antigens to be able to -- if there is a response, to see it. And so we don't want to miss one because the selection included patients that had insufficient expression. As such, we are finding that -- particularly among adenocarcinoma, which is really to date the majority of the patients that have been screened -- that high expression is very rare.

We are making changes with regards to the number of patients that we screen, skewing the screening towards squamous cell carcinoma, increasing sites, and some of the other measures that I mentioned in my comments. And we are confident that we're going to start to see positive screening and patients enroll in the upcoming months.

Then just finally on fludarabine. Have you seen any concerns with using that as a preconditioning?

We have not seen any concerns. If you are referring to the events that were recently described with regards to neurotoxicity, obviously fludarabine has side effects and we have used in our pilot trial high doses of fludarabine and cyclophosphamide.

Now we have tested in ways with SPEAR T-cells in younger population, because synovial sarcoma is a disease of young adults. So with that in mind we wanted to test lower doses of conditioning once we expand beyond the pediatric branch at the NCI into adult cases and particularly with an eye towards myxoid/round-cell liposarcoma, which is a disease of older patients. So that's why we studied cyclophosphamide alone.

As I mentioned in my comments, it looks like fludarabine is required so our next step, once we verify that Cytoxan alone is insufficient, is to try a modified dose of the original regimen which will be lower doses of cyclophosphamide and fludarabine. That amendment is already in place and we are just simply waiting now for outcomes on a few patients from the Cytoxan-alone cohort to make that decision.

Perfect, thank you so much.

Michael Schmidt, Leerink Partners.

Thanks for taking my questions. I had one regarding the partial clinical hold. Just wondering -- since that term isn't used too frequently, in my opinion, by the FDA I'm just wondering how confident you are that you can trust the issues of the [SAS] and whether there might be additional work necessary or not.

Rafael and Gwen, do you want to take a bit of that each?

I will make some comments and then ask Gwen to comment as well.

In the near-term partial clinical hold, you are right; normally clinical holds our due to safety events seen in ongoing studies, so it is an unusual situation. This study was added to the IND. Just akin to what happens when you have a first-in-human study and you submit it to the IND, the Agency has 30 days to review it. And if they have disagreements with the design or any other feature of the study, they can either ask you to correct it or put the study on hold.

By the way, they can do that with any study that is added to the IND, so that was the case here. We mentioned in our comments it was primarily having to do with a new process that we plan to implement in our pivotal studies and in our commercial endeavors. There were some clinical design features that they had either comments or requests, primarily having to do with long-term safety monitoring for gene therapy clinical trials.

So let me just ask Gwen to comment, give a bit more color on the CMC issues.

Michael, thanks for the question. Just a brief overview of the CMC issue. As we mentioned in our comments, we have recently modified our manufacturing process to make it more commercially viable and so that includes a free step-up front so that we can have more flexibility in manufacturing scheduling and also simplifying the T-cell purification and modifying the media. And that is the process we would like to use moving forward into the MRCL study.

That is an area of clarification we have to make with the FDA in our response, but we are very confident that we can respond to that question.

Are those same manufacturing changes -- are those the same reasons why the synovial sarcoma Phase 3 initiation is delayed until next year?

There's multiple reasons for the delay in the synovial sarcoma study. As Rafael mentioned in his comments, some of the reasons have to do with the invitation to submit a SPA from the FDA, which actually improves our chances of success with the synovial sarcoma study.

But we do also believe that we have to do a complete comparability assessment as well, in order to bridge between our pilot study data and the data, which used our earlier academically-derived process, and the pivotal, which will use our commercially-viable process. And so that data will be submitted to the FDA as well and so it's good to have that additional time to pull that together.

Okay. Then can you remind me what the goals are of the Cohort 4 preconditioning regimen and how it compares to the Cohort 1 dose?

Are you asking about the doses, Michael?

Yes, the preconditioning dose in Cohort 4 as compared to Cohort 1.

In Cohort 4, the fludarabine dose is 30 milligrams per meter squared daily for three days; before it was times 4. They are also pretty strict dose modifications for renal insufficiency and the Cytoxan doses have gone down actually quite significantly. So in the dosing per body surface area, the doses in Cohort 1 were 1.8 grams per meter squared and now we are essentially giving about half that dose, or 600 milligrams per meter squared, once a day times 3.

By the way, those doses for both fludarabine and cyclophosphamide are very similar to the majority of the CAR19 studies that are out there.

Okay. Then one last on the ASCO data in ovarian and in melanoma, just sort of the fact that you didn't see any responses in those first patients. I guess how confident are you that it's really due to the preconditioning and not any other factors that might be -- that might have been changed over time in these trial protocols?

Of course, we can't be certain until we do the study with the new conditioning and see the results. I guess I would say a couple of things.

In ovarian, we didn't see confirmed responses, but we did see evidence of cytokine release syndrome in what appears to be a couple of patients. I think one of the patients I think described at a congress. And so we believe that there is the potential for anti-tumor response and the question is why wasn't it sustained enough?

In the case of the first patient, the patient was treated with steroids, but -- and so it is, I guess, showing us that these T-cells can go to the tumor and react against the antigen. And the question is can we, by immunosuppressing the patient further, make those potential anti-tumor responses more durable. And so that is I think the hope with regards to ovarian.

With regards to melanoma, we have evidence that the TCR actually works and that's been published already by the surgical branch of the NCI. When we look at those patients, clearly two differences stand out. One is they use the same dosage of conditioning that we are using in Cohort 1 of sarcoma, that is pretty high doses of Cytoxan and fludarabine, whereas we just use cyclophosphamide.

And the second is these were all in the era of checkpoint inhibitor naive patients and now all our patients have progressed either to ipilimumab or PD-1s or both. We know that some of the mechanisms of resistance to checkpoint inhibitors overlap with what are potential mechanisms of resistance to T-cell therapy. And so, for those reasons, we believe that in addition to using fludarabine in melanoma, we probably should use combinations with checkpoints. And we are in discussions with other sponsors to build that in our trial design.

Okay, thanks for taking my questions.

Marc Frahm, Cowen and Company.

Thanks for taking my questions. First, now that you have been screening for a while for NY-ESO and MAGE in lung cancer, do you have kind of change --? What are your thoughts on the frequency of expression, especially if you are able to go to a lower cutoff in line with your Cohort 2 of synovial sarcoma?

That is a great question. What we are looking to do is both lower the threshold -- and in synovial sarcoma, by the way, we are allowing any level of expression provided that's more than one [plus] -- and also trying to screen with an RNA-based methodology. We know that this antigen is presented and is expressed, and I think what we don't know is how much of it is required for the T-cells to react.

So to answer that question, in addition to what we are seeing in these patients, we are screening databases from tumor banks. We are doing that together with GSK in the case of NY-ESO and with other institutions, as well as internally, and we are in vitro modeling expression against cytotoxicity and apply those results. We haven't finished those studies yet, but we think that it's really going to yield expression levels that are not as high as what we are requesting, if you will, in this trial.

The other thing is that we know that in squamous cell carcinoma this antigen can be expressed at pretty high levels in some cases. And I think that what has happened thus far is we just haven't screened enough patients with squamous cell carcinoma. Again, because patients with adenocarcinoma tend to be healthier and screening at the sites are being skewed towards this population. So I think the combination of those two would be a good as to whether lung cancer is a good indication for these two antigens.

Okay. Then turning to the myxoid trial, I think you mentioned earlier that you are particularly looking to use this lower dose of fludarabine and cyclophosphamide, these lower doses there because they are older patients. Do you need to see kind of Cohort 4 data in synovial that is similar to Cohort 1 to justify going forward in myxoid? How are your thoughts there?

That's a great question. The threshold for myxoid/round-cell in terms of what would be clinically significant it's probably similar to synovial because we are using trial patients -- we are enrolling patients that have failed the most active therapies. We do not yet obviously have data with modify doses of fludarabine and cyclophosphamide, but as I said, they are the doses that are used in CAR T-cell studies with great success.

And so we -- what we plan to do is continue to enroll in our pilot study and derive data from Cohort 4 as soon as possible. As I said, we have expanded our sites in sarcoma and we actually have now a pretty brisk enrollment in synovial sarcoma and so we think we are going to get data relatively quickly for Cohort 4.

For MRCLS, we are starting with a futility phase. We're not going to go to the high doses of Cohort 1 MRCLS, just because the tolerability we don't believe is going to be there for these patients. So because we think that the conditioning is going to have to be modify doses, we are starting the futility or feasibility portion of this trial with the kinds of fludarabine and cyclophosphamide conditioning that we will use in Cohort 4 and we hope that that will be sufficient to condition the patients enough to see responses.

It's a bit of a convoluted answer, but I think our approach combines a pragmatic sort of decision that this is as high with conditioning as we're going to go. Since we haven't treated a single patient yet in this indication, we want to start the feasibility phase. And if we see enough responses -- and that's well outlined in the design of the trial -- then we will continue towards the expanded phase of the study, which both of them will be used as pivotal evidence on a future BLA if that study is positive.

Then why exactly are you choosing to go for this SPA with synovial but now with myxoid?

Another great question. I think there are several reasons for this. One is we want to start treating patients with MRCLS. And for us to get into a special protocol assessment in an indication where we haven't treated patients yet and, therefore, we don't have any empirical evidence that the TCR will be active, it's I think a big effort. Normally you do SPAs in your sort of standard indication, pivotal indication.

Having said that, as I said before, if we see a response, we plan to continue on. The reason why we don't believe that an SPA is required is that the design of that trial is actually very similar to the synovial trial, with the exception that we don't have a futility phase in synovial because we already have data from the pilot study. But in terms of the design, the endpoint, the threshold to call the study positive, and a lot of eligibility criteria, etc., they are very similar.

So if we learn something unique that applies to MRCLS during the SPA for synovial, we believe we will have time to incorporate it while we are treating the initial patients in MRCLS in the futility phase.

Okay, thank you very much.

Tony Butler, Guggenheim Securities.

One brief question, if I may. Some of the manufacturing changes I wanted to ask was there any mix dimerization with NY-ESO as the target? I ask this because of what seems to be going on at U Penn and comments that were raised by the RAC committee some couple of months ago. Thanks.

Gwen, do you want to deal with that? The short answer is, no, Tony. But, Gwen, do you want to talk about that?

Sure. Hi, Tony; thanks for the question. We have actually looked in our patients and we have never seen evidence of mix dimerization. But there is very clear evidence from Chiari Bonini's lab showing that the endogenous TCR can compete for surface expression. It competes with CD3 data for expression on the surface and that if you knock out the endogenous TCR, you might be able to increase the level of expression of the exogenous TCR.

When you are using the wild type affinity TCR, that's more important to do that because the more you express the endogenous TCR, the greater the avidity of the T-cells of that TCR will be. In our case, our TCRs are affinity-optimized and they are affinity-optimized and tested in the context of T-cells, where the endogenous TCR is not knocked out. And so we do not feel a need to do that in our particular therapy.

The knocking out of the endogenous TCR significantly increases the complexity of the manufacturing process and the variability of the manufacturing process, so it's an advantage to not need to do that. So we don't have interest in incorporating that at this time.

Thanks, Gwen.

Ying Huang, Bank of America.

Good morning, thanks for taking my questions. I have a few. First, related to the SPA for sarcoma trial. What was going to be the primary endpoint of the pivotal trial and does FDA have any agreement or disagreement on that endpoint?

Then, secondly, related to the MAGE-A10, would you consider I guess decreasing the cutoff of the expression levels for A10 in non-small cell lung cancer? And are you seeing that a lot of competition from, for example, a PD-1 antibody trial so that you are not able to enroll many patients?

Then, lastly, I guess I have a housekeeping question. You decreased the revenue recognition from the GSK arm collaboration due to a change in the estimate of the period you amortized. Can you talk about that; exactly what is the change in the amortization period? Thank you.

Adrian, why don't you take the last question first and then Rafael will take the first two questions?

So as you said, Ying, the milestones that we received from GSK are amortized over the expected life of the deliverables. And we pushed back the expected life of the deliverables by a few months, which led to the catch-up in quarter two of the revenue, which is the reason for the reduction in revenue versus both the prior quarter and future quarter.

I will just point out, however, that milestones -- milestone revenue and revenue recognition of milestones is inherently lumpy and so you should obviously anticipate that our revenue is volatile from quarter to quarter and period to period in a normal sense anyway. Rafael?

Ying, so the two questions were trial design I think in the context of the SPA and MAGE-A10 an expression. I hesitate to comment on the final design that will be accepted by SPA, because we haven't finished the discussions yet. I think I guess I will just say that so far they have been quite productive and we believe there's alignment in doing a trial that will be feasible.

These are extremely rare cases, fortunately. Although, as I mentioned before, there is enough awareness of this therapy now that we do get referrals from all over the world to our centers, it's still very hard to conduct large randomized trials. So I think the Agency has been very accommodating in that regard and understands in the context of breakthrough and orphan therapy that we need to do a more sort of streamlined design to get the product available sooner. But I think we will be in a better position to comment once the SPA has finalized.

With regards to MAGE-A10 expression, you are absolutely right; as I said before, we are starting with a high stringent level of expression. We would like to go lower. I think the trouble is that how much expression is required for these T-cells to react and kill tumor cells vary from antigen to antigen, so we would like to understand in vitro how low we can go. And, as I said before, we are working on not just lowering the threshold by means of chemistry, but trying to use a parallel screening method using RT-PCR that would hopefully increase the catchment of patients that are eligible for the trial.

You also asked about competition with other studies. Well, there's a wealth of trials out there with checkpoint inhibitors and combinations of novel checkpoint inhibitors.

When I ask about that conflicting with our trial, it doesn't seem to be a major issue. All our patients are going to be patients that have failed PD-1 and there will be occasional patients that are PD-1 naive in Europe, but we don't expect them in the United States. We have heard from our investigators that they are happy to prioritize those that are (inaudible) positive and express the antigen.

Then, Rafael, as a follow-up, do we know that these patients who fail PD-1 naturally have higher expression levels of MAGE-A10?

We actually have no information on that. It may very well be that as the disease progresses, these antigens may be higher up-regulated, but we haven't actually looked.

Okay, thank you very much.

[Caitlin Sandor], Guggenheim.

I just had a quick question regarding the manufacturing process. I know you said you are going to (inaudible) upfront. Is the manufacturing now going to take place in your Philadelphia facilities as well?

Then just a further question on the fludarabine preconditioning. What regimens do you plan to use in the non-small cell ovarian and melanoma where you haven't seen responses? Do you plan on going ahead with Cohort 1 or waiting for the results of Cohort 4? Thanks.

Gwen, do you want to take the manufacturing and then Rafael (inaudible)?

Sure. Thanks, Caitlin, for the question. So we are working on opening our manufacturing plant at the Navy Yard in Philadelphia. It's being built now and we expect it to be opened in the second half of 2017, and at that point we will use it for manufacturing in our studies, yes.

With respect to the doses of fludarabine, we are starting with the Cohort 4 doses. The reason for that again is that Cohort 1 doses in some of these patients that received a lot of chemotherapy in the past may not be well-tolerated and we also know that the doses we are using in Cohort 4 have worked in CAR studies.

If we don't see activity in our Cohort 4 in sarcoma, we may need to consider whether or not we should go with the Cohort 1 doses in these solid tumors. But for now, we are moving forward with these modify doses of fludarabine Cytoxan that I mentioned before for our solid tumor studies.

Okay, thanks so much.

Robyn Karnauskas, Citi.

(technical difficulty)

Michael Schmidt, Leerink Partners.

Thanks for taking a follow-up. I just had a couple more on the non-small cell lung cancer studies.

Just thinking conceptually about your comments you made in melanoma that a lot of those patients are PD-1 refractory and may have PD-L1 expression, would you even expect responses in non-small cell lung cancer given that that is a tumor type where PD-1 antibodies work or you see that kind of dynamic?

First of all, it's difficult to know what is going to mediate resistance for each TCR and each tumor type. I do think that the mechanisms of resistance that are seen in melanoma in patients that have enjoyed a very good response for a long period of time are probably different than those that are seen de novo in non-small cell lung cancer.

First of all, the activity of these agents in lung cancer is lower than it is in melanoma. What I was referring to before with regards to the potential cross-resistance between TCR and PD-1 inhibitors pertain to the recent findings that have been shown that tumors can down-regulate [that are tumors of globulin] or knockout proteins that are involved in interferon signaling. All of those mechanisms could potentially also result in resistance to our TCR.

With regard to PD-L1 overexpression, that probably isn't a factor, at least early on, in response -- a second signaling is not thought to be required early on for activity for our TCRs. So we believe that even in the case of PD-L1 expression, if that is a mechanism of resistance to their PD-1 therapy, we should still be seeing responses.

Now, you are right; there may be a need to optimize treatment and we are definitely going to be looking for immediate response in resistance. In fact, as we announced when we modified the deal with GSK, we have a list of combination drugs that we want to do. We're starting with myeloma, but one of them is going to be potentially lung cancer.

We obviously want to see what happens with single agents first, but we are hopeful that we will see at least enough activity to then sort of built on that. And, whether it's a PD-1 inhibitor or some other agent, be able to tailor the next generation of therapy to be a second-generation TCR that we may want to use in the future. But I think we need some information on single agent first to build on.

Okay, thanks for that. Then one more follow-up. I guess how many trial sites are open at this point for the lung cancer studies and what are your targets there to get enrollment numbers up?

I think there are probably like seven or eight open sites and we are up to 13 total in the US and one in Canada and then two or three in the UK, a couple in Spain. So I think overall there would be 20-ish or so sites when all of them are open.

Okay, thanks for the follow-up.

That will conclude the Q&A session. I would now like to turn the call back to Mr. Noble for any additional or closing remarks.

Thanks very much, everybody; some very good and interesting questions. It's interesting; this is a company I feel incredibly confident about. That although we have a short delay here, I don't think the potential of the data to transform this whole industry going forward has changed at all. We still should have four different T-cell receptors addressing a very large number of tumors in 2017.

And, as Rafael just said, we are rapidly increasing the number of centers to more than 20 centers in the USA and some abroad. I think that we have every chance in 2017 in producing data in a number of different cancers, which will show you the potency and capacity of this pipeline. We have had a few delays, but I'm extremely confident and optimistic about 2016 and 2017 going forward. Thank you very much.

That really concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.