Compugen Ltd (CGEN) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's Third Quarter 2017 Results Conference Call. (Operator Instructions) An audio webcast of this call is available in the Investors section of Compugen's website, www.cgen.com. As a reminder, today's call is being recorded.

I would now like to introduce Elana Holzman, Compugen's Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO, and Ari Krashin, CFO and COO, who will provide the quarterly update. Dr. John Hunter, Vice President, Antibody R&D and Head of our U.S. Site, is also joining us from San Francisco and is available to answer questions.

Before we begin, I would like to read the following regarding forward-looking statements. During the course of this conference call, the company may make projections and other forward-looking statements regarding future events or future business outlook, anticipated progress on Compugen's pipeline program, as well as business development efforts and financing related matters. We wish to caution you that such statements reflect only the company's current expectations, and that actual events or results may differ materially. You are kindly referred to the risk factors and cautionary language contained in the documents that the company filed with the Securities and Exchange Commission, including the company's most recent annual report on Form 20-F filed February 16, 2017. The company takes no obligation to update any projections or forward-looking statements in the future.

I will now turn the call over to Anat.

Thank you, Elana. I would like to welcome everyone to our quarterly earnings update. I will focus in my prepared comments today on the progress we have made during the last quarter with respect to our pipeline programs, their development path and potential impact both on the company and the cancer immunotherapy field. Ari will follow with a review of key aspects of the financial results released earlier today. As Elana mentioned, Dr. John Hunter, our Vice President, Antibody R&D and Site Head of Compugen U.S.A., is also on the line and will be available for the Q&A session.

I would like to begin by saying how pleased we are that Paul Sekhri has joined Compugen as our new Chairman of the Board of Directors. Paul has spent over 30 years in the life sciences industry with both big pharma and smaller biotechs and brings exceptional experience both in the U.S. and abroad. We're confident that his leadership and experience will be invaluable for Compugen as we transition to a clinical stage company and Paul's perspective and guidance will help us enhance and extract the commercial value of our pipeline program and unique discovery capabilities.

Regarding our lead R&D programs, we are continuing to make key advancements, including for our first-in-class immuno-oncology anti-PVRIG candidate COM701. We remain on track for filing an IND for COM701 towards the end of Q1 2018. For this program, as well as for our earlier stage immuno-oncology programs and CGEN-1501 for autoimmune diseases, we continue to hold discussions with potential industry partners and we remain confident that we will achieve multiple collaborations.

Nonetheless, we cannot predict the exact timing of completing any such collaborations as most of our programs are novel and early stage, entailing a lengthy evaluation period by prospective partners and are therefore taking longer than we originally anticipated to complete. Going forward, we do not plan to provide updates of this nature on our quarterly calls as they are currently not serving the best interest of the company or its shareholders. In this respect, our communications policy from now on is to announce only when a material event such as the signing of an agreement has occurred.

Returning to COM701, IND-enabling activities are ongoing, including pivotal toxicology studies, regulatory activities and finalization of the clinical protocol for our planned Phase I trial. Before describing our Phase I trial, I would like to share a high-level overview about our pipeline and our overall clinical trial strategy and positioning. Our therapeutic pipeline, including COM701, is designed to address the immense clinical gap in cancer immunotherapy in which up to 70% to 80% of patients do not respond to approved cancer immunotherapy drugs and the large number of those who do respond develop resistance over time.

To meet this need, we're advancing a pipeline designed to address diverse mechanisms of action that may be beneficial for the refractory or relapsed patient population in various cancer indications. In line with this, in our clinical strategy for COM701, we combine the clinical goal of addressing the non-responders or relapsed patients with a biological rationale underlying the problem. We plan to start the Phase I trial with the objective of testing COM701 as monotherapy based on our in vitro and in vivo knockout model data that supports the rationale for single agent activity.

In parallel to the monotherapy dose escalation, we will initiate a second study that combines COM701 with PD-1 blockade. Our preclinical results suggest that this drug combination is beneficial in reducing tumor growth and known interactions between PD-1 and the TIGIT/PVRIG pathways further support the biological rationale of combining these 2 drugs. This design supports our belief that the potential data from both the monotherapy and the combination trial of COM701 are key to the company and are expected to serve as value drivers.

In addition, and as we already mentioned, COM701 targets the PVRIG pathway, which is different from, but also synergistic with, the TIGIT pathway. Such potential synergy between the 2 pathways supports a second drug combination approach, the combination of the PVRIG antibody and TIGIT antibody. This combination is not only designed to release the brakes from 2 parallel inhibitory pathways, but also to enable activation of DNAM, the stimulatory component of the signaling axis. Our data suggest that the dual blockade of PVRIG and TIGIT inhibits tumor growth and we believe this drug combination may maximize the simulation of the immune system against the cancer in patients with tumors where PVRIG and TIGIT are dominant. We plan to test this combination of COM701 together with COM902, our anti-TIGIT antibody, in the clinic following the initial Phase I study.

A third drug combination approach to be tested by us in the clinic involves the known intersection between PD-1 and the TIGIT/PVRIG/DNAM axis. A triple drug combination blocking PVRIG, TIGIT and PD-1, which is already supported by our preclinical data, will also be tested in subsequent studies that will allow us to explore the full therapeutic and commercial potential of the COM701 program.

So our overall clinical strategy for COM701 will involve the exploration of its multiple opportunities as monotherapy, in combination with PD-1 blockers, also a dual combo with COM902 and a triple combo with COM902 and PD-1 blockers. We aim to target specific combinations in different patient populations in which the complex PVRIG, TIGIT axis plays a key role in cancer immune suppression, including those that are partially responsive or non-responsive to PD-1 blockade, as well as those patients who initially respond to and then relapse on PD-1 inhibitors. Our goal is to establish the optimal combination for the right patient population.

While our Phase I study will generally be an all-comers trial, our preclinical expression studies currently point to COM701 potential in specific indications, such as lung, ovary, breast, endometrial, kidney, and head and neck cancer. Our preclinical data indicate the importance of the PVRIG, TIGIT axis in immuno-oncology together with the intersection of this axis with the PD-1 pathway and we are committed to establishing its relevance in the clinic. In addition, we believe that generating a clinical proof of concept for COM701 and the PVRIG, TIGIT axis in immuno-oncology will open the door not only for additional product opportunities in cancer immunotherapy, but also for products based on this axis in autoimmune, inflammatory, and viral diseases.

The discovery of novel drug targets generates real opportunities in developing first-in-class products, but also opens the door for validating new biological pathways that can generate opportunities for additional products within and/or outside of immuno-oncology. The data we are presenting this weekend at the annual meeting of the Society for Immunotherapy of Cancer provides scientific and biological support based on regulated pathway expression patterns to our clinical approach and the potential of COM701 to address PD-1 refractory patients and define the patient populations we anticipate to later target in the clinic.

We are now completing CMC and IND-enabling activities necessary for the anticipated filing of our IND towards the end of Q1 2018. Our Phase I study is expected to start in 2018 following potential FDA clearance of our IND application. The trial will be an open label study designed to test the safety of COM701, both alone and in combination with PD-1 inhibitors. During the trial, we will of course look for efficacy signals as we proceed through dose escalation and into the expansion cohorts.

For more information about the design of our COM701 Phase I study and a high level presentation of our clinical strategy, see our new corporate presentation on our website. As we prepare for the COM701 trial, we are also concurrently advancing COM902, our anti-TIGIT monoclonal antibody candidate with a goal of filing an IND for a combination trial with COM701 in 2019.

During the last 2 quarters, a high expression cell line for COM902 has been generated for establishment of a research cell bank. This cell line has already been transferred to our CMC service provider for the initiation of upstream process development. As we announced yesterday, we have engaged Bayer to provide process development and manufacturing services for COM902. As they stated, Bayer collaborates with a few select partners to develop and manufacture their own pipeline programs and we are delighted to enter this service agreement with them and benefit from Bayer's longstanding advanced biologics manufacturing experience for the manufacture of COM902.

Furthermore, we are presenting new data this week at the annual meeting of the Society of Immunotherapy of Cancer with respect to the functional and biophysical characteristics of COM902 together with data demonstrating that PVRIG and TIGIT are the dominant inhibitory molecules in this complex axis. We will continue to update on this program as it is advanced through preclinical development.

Our third major internal pipeline effort focuses on our myeloid target programs that we launched in 2016. This is a newly rising field in cancer immunotherapy that is receiving growing interest and investment from both established pharma and biotech companies. These myeloid target programs affect T cell immunity through various immunosuppressive mechanisms and therefore has the potential to serve as the basis for the next wave of cancer immunotherapies. These targets may offer a complementary strategy to that of checkpoint inhibitors and may provide treatment solutions for non-responsive or relapsing patients.

A limited number of known myeloid targets are currently pursued in clinical trials with only initial efficacy results presented to date. Following our decision to enter this field over a year ago, we already had a portfolio of novel myeliod targets at different stages of validation and therapeutic antibody discovery. We recently disclosed new data with respect to certain of our myeloid programs, presenting their potential as drug targets for cancer immunotherapy. You can find data on certain of our myeliod targets on our website and in our new corporate presentation, which is also available on our website.

In addition, we enhanced our capabilities in this area with the recent establishment of a new research collaboration agreement signed with Mount Sinai Hospital in New York under the direction of Dr. Miriam Merad, a world leader in myeloid biology and the most recent addition to our scientific advisory board.

Similar to our long-term collaboration with the Johns Hopkins University School of Medicine under the direction of Professor Drew Pardoll focused on immune checkpoints, our collaboration with Dr. Merad will focus on research and validation activities for selected myeloid target candidates discovered by Compugen for their potential to serve as a basis for cancer immunotherapy treatment. These 2 research collaborations with world leading experts in immuno-oncology provide us with an impressive, broad and integrated infrastructure for testing the potential of our diverse set of target programs and advancing them to serve as a basis for the development of cancer immunotherapy treatment.

In regard to our collaboration with Johns Hopkins University initiated in 2014, we recently extended this research collaboration to include additional targets. To date, the collaboration has been instrumental in expanding our knowledge around our lead checkpoint programs, particularly COM701, where data generated at Johns Hopkins University has been a major component of the preclinical package presented to clinicians in preparation for our planned clinical trials for COM701.

Thank you and I will now turn the call over to Ari. Ari?

Thank you, Anat. While you may find the full details of our financial results in the press release issued this morning, I will now provide a summary of the highlights. Net loss for the third quarter of 2017 was $9.9 million, or $0.19 per diluted share compared to a net loss of $7.8 million, or $0.15 per diluted share for the third quarter of 2016. As we develop our pipeline and move towards our first anticipated IND filing, research and development expenses continue to be our single largest category of expenses, totaling $7.6 million for the third quarter of 2017 compared to $6 million in the third quarter of 2016. These expenses continue to reflect an increase in preclinical development activities including manufacturing and IND-enabling costs related to the COM701 program as well as increased activities related to COM902.

Total cash expenditures for the full year of 2017 are expected to be approximately $34 million assuming approximately $9 million of cash expenditures for the fourth quarter of 2017 excluding potential cash inflows. As of September 30, 2017, we had approximately $38.5 million in cash and cash-weighted accounts with no debt. As a policy, management and the board periodically evaluate the company's cash status in light of its development plan, business activities, financing opportunities and market conditions. Each is considered together with the long-term best interest of our shareholders. Strengthening our balance sheet continues to be a top priority for management and the board.

Entering into new collaborative arrangements as well as milestone payments under existing or new collaborations would clearly impact our cash balance and path forward. Any future decisions regarding possible financing will take into consideration all of these factors as they exist at such time as well as the resources needed to ensure a clear path to becoming a development stage company.

Thank you. And with that I will now open the call for questions.

(Operator Instructions) The first question is from Mike King of JMP Securities.

I wanted to just ask you more of a high-level question about sort of the IO landscape as it is evolving right now and how that may impact your thinking about how you develop your clinical candidates. And it just -- it seems like the combination world, things that are going on top of checkpoints, are getting a lot more complicated. The read-throughs from animal studies are less reliable. The impact that combination therapies are having on the activity of checkpoints, mainly PD-1 inhibitors, is not as clear cut as some may have assumed. So I'm just wondering how this new evolving data has caused you to perhaps rethink or adjust your development strategies for things like 701, 902, et cetera.

Thank you, Mike. In general, you're relating to a few of the trends now that are occurring in the IO field, but I'll take it as a high-level question and relate to it. I can say that what's going on currently in the IO field is serving both as challenges but also opportunities for Compugen. And we follow up on this periodically and make sure that we are aligning the path forward. So just with respect to checkpoints, so yes, the checkpoints that were tested in the clinic, most of them did not show, at least with the initial data, did not show compelling data. There is a data for LAG-3 that is opening the door to maybe add on the PD-1 response rate and it's posing challenges.

We need to show that a PVRIG checkpoint and this pathway of PVRIG, TIGIT, as I explained, is going to make a difference and we are committed to test it in the clinic. But on the other hand, the fact that there is one that is showing a path forward, as I stated, the LAG-3, is encouraging. So that's with respect to the checkpoint.

Translating the data -- and by the way, with respect to other trends in the industry, innate immunity becomes more -- gets more recognition. I think that it has clearly also affected our decision to get into the myeloid biology field and to make sure that we diversify the pipeline with respect to different mechanism of actions to address the resistant patient population -- the drug resistant patient population.

With respect to animal studies, actually this is something that we were taking into consideration when -- in designing the clinical trial. We have certain data that are actually pointing to specific type of indications, as I commented in my remarks today. But it is not clear that these will be the indications going forward that will be validated clinically. And it could well be that other indications that are not popping up now at the preclinical stage will be seen as relevant. And just one way to incorporate this gap between preclinical data and clinical data was actually for us pointing to the fact that we should go ahead with an all-comers trial and not ignore what we see in the preclinical package and yet to have slight focus on specific indications, but actually go ahead with an all-comers trial. So we can see clearly the different type of indications as they are -- as the data is going to come out of the trial.

That's all. Since John is located in a different site, I am now in New York and John is in San Francisco, I'll just ask John whether he has anything to add on this. John?

Yes. I mean, the one thing I would add on top of that is that we are trying to do as much biomarker work as possible to really better understand which patients we want to target, both with COM701 and COM902, because we think that's going to be a critical component of the development strategy.

Okay, fair enough. And then perhaps related to that, I just wonder, not if the -- you guys are, I guess, less convinced that a corporate collaboration deal can get done this year. And I just wonder if -- do you feel that is reflective of sort of this -- I don't want to call it turmoil, but just sort of -- we're in a bit of a grey zone right at the moment in the world of IO. Do you find that potential corporate collaborators are more conservative at the moment? Maybe there is some fatigue, deal fatigue? Or is it perhaps something to do with sort of the state of development? Are they looking for assets that have more maturity perhaps, proof of concept in humans, rather than as you point out in your formal remarks, the preclinical evidence of activity?

It's a very good question. I wouldn't say that there is a fatigue out there. Of course, people are looking in the IO field now on different matters that they would probably look 3 or 4 years ago, because we know more and we also know that we, as much as we know, we don't know enough, in general, in this field. But for Compugen we have different aspects that are in discussions. It's different stages and -- of development, so it's not really about the specific stage. Everything that we have in the pipeline is still early on. Until it gets to the clinic and we'll have clinical data, it will still be considered as early. But, in general, it consists of a lengthy evaluation period. These are early-stage assets. These are novel assets. And evaluation periods are taking more time than we anticipated and that would more or less summarize the situation.

The next question is from Ted Tenthoff of Piper Jaffray.

Mike asked a lot of good questions. I just wanted to follow up with sort of the myeloid programs. And again, I think what you're doing with PVRIG and TIGIT is very interesting and novel, but there is some more competition there. Myeloid, it seems like you are closer to sort of where everybody is. So what should we be expecting from that? And are these novel targets or are these targets that may be known to other players?

These are novel targets and it could be that some of them are known to other partners. We don't exactly know what is in the pipeline of others before they publish it. But these were discovered through our computational discovery capabilities and novel targets, very early stage, in different stages of validation and antibody discovery. In general, the data packages as of this point are not -- as I said, these are in validation, so they are not complete data packages. But, yes, as we stated, this is an early field, in general, in the industry and we are more or less at the stage of the rest of the industry. One more point just to make, there are several clinical stage programs, myeloid programs, that are moving forward by others. And this is what's considered as the first wave of myeloid programs in the industry.

Excellent. Well, I look forward to updates and data this weekend down in Maryland.

The next question is from Peter Welford of Jefferies.

Just returning to COM701, I wonder if you could just outline whether or not the plan is there to look at in patients, you said who I think have failed or relapsed from standard of care. Does that include patients who have already received immunotherapy, I guess something in PD-1 specifically? Or is this only patients who have received prior standard of care that is a known immuno-oncology agent? And equally I wonder what the rationale for the anti-PDL-1 rather than PD-1 that you outlined in your slides. And then just a quick follow-up after that, if I can.

Okay, yes. John, would you like to take the first one with respect to the PD-1 treated patients?

Sure. Yes, so because this is going to be an all-comers trial in different indications, we do expect that some of the patients will have been treated with and have failed on other IO therapies. But it's really going to depend on which indications that we're treating and what the standard of care is within those indications. Regarding the choice for PD-1 antibodies versus PDL-1, right now our feeling is that the PD-1 antibodies have a slight edge in the clinic from the data that we've seen. So that's where our focus is for the combination.

And then if I could just follow up on the Bayer collaboration. I appreciate it's maybe difficult to comment, but do you have any sort of update on 15001T, I guess, as far as how that's progressing with Bayer and any sort of update from their side?

Sure. So just in general, under the collaboration we're very much restricted with sharing information. From time to time we conduct a process with Bayer in order to -- for them to approve specific information that we're going to share with the -- with investors. Of course, we are very much into the details of the programs internally at Compugen together with Bayer. But the information that we can share with investors, this is a process that we do with Bayer from time to time. So as of today, the information that we can share with respect to this program is that it is moving to the clinic by Bayer. And -- but we cannot share more information as to the exact timeline for IND filing or as such. So I am sorry for being short on this.

This concludes the question-and-answer session. I will now turn the call back to Compugen's President and CEO, Dr. Cohen-Dayag. Would you like to make your concluding statement?

Thank you, operator. Before ending, I would like to summarize the main highlights discussed on today's call. We continue to hold discussions with potential industry partners in connection with our programs and we remain confident that we will achieve multiple collaborations. Nonetheless, we cannot predict the exact timing of completing any such collaborations. Our pipeline programs continue to advance with COM701 being on track for an IND filing towards the end of Q1 2018. And we're working on finalizing the clinical protocol for our planned Phase I study. We expect to enter the clinic in 2018. COM902 is moving into process development and manufacturing with a goal of filing an IND for a combination trial with COM701 in 2019.

I would like to thank you all for joining us today and I look forward to sharing with you additional information as we progress. Thank you.

Thank you. This concludes the Compugen Ltd. Third Quarter 2017 Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.