Compugen Ltd (CGEN) 2017 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's Fourth Quarter and Full Year 2017 Results Conference Call. (Operator Instructions) An audio webcast of this call is available in the Investors section of Compugen's website at 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, operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO; Ari Krashin, CFO and COO; and Dr. John Hunter, Vice President, Antibody R&D and Head of our U.S. site.

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 or other forward-looking statements regarding future events or future business outlook, anticipated progress on Compugen's pipeline program 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 filed by the company with the Securities and Exchange Commission, including the company's most recent annual report on Form 20-F filed February 16, 2017. The company undertakes 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 fourth quarter and full year 2017 earnings update. In my prepared comments today, I will provide an overview of our key achievements in 2017, mostly with respect to the various programs in our pipeline. I will also focus on our clinical and biomarker strategy for our lead program COM701, a first-in-class immuno-oncology anti-PVRIG candidate. John will provide additional details on our IND-enabling studies and the upcoming IND filing for COM701 as well as on the preparation for our clinical trials. Ari will close our prepared comments today with a financial update before we open the call for the Q&A session.

2017 was a significant year for Compugen, in which we made important progress in advancing our therapeutic pipeline and strengthening our core competencies both in target discovery and validation and therapeutic antibody development. Today, there are 4 preclinical programs, originating from our discovery capabilities that have showed preclinical proof-of-concepts. In addition to our preclinical pipeline, we also established an earlier-stage pipeline focused on myeloid target, a newly rising and promising field in cancer immunotherapy. This early-stage pipeline is designed to feed our preclinical pipeline with additional program and to diversify our drug opportunity. Our pipeline strategy is to leverage our computational discovery capabilities to address diverse mechanisms of action, by which the immune system interacts with cancer. Targeting new pathways of interactions between the immune system and the cancer may address the tremendous clinical gap in cancer immunotherapy, in which 70% to 80% of the patients do not respond to approved cancer immunotherapy drugs or develop resistance to these treatments over time.

To enhance our exploration of new biological pathways in cancer, we augmented our in-house R&D infrastructure by entering into a research collaboration with Mount Sinai Hospital, in addition to expanding our research agreements with Johns Hopkins. These 2 collaborations focused on enabling a deeper understanding of the targets in our pipeline with respect to their normal biological function and the role they play in promoting an immunosuppressive tumor microenvironment. In addition, during 2017, we expanded our drug development capabilities, bringing on board a team of expert consultants and CROs to drive our therapeutic programs into clinical testing. As we advance COM701, our anti-PVRIG candidate into the clinic, we have gained a deeper understanding of the biology of PVRIG and its role in the DNAM/TIGIT immunomodulatory axis. This includes insight into the potential importance of this pathway as compared to the TIGIT and the PD-1 pathway and the promise COM701 may hold as a treatment option in immuno-oncology. A clear biological rational is emerging from the recent preclinical data, which we published for this novel pathway, and this data serves as the underlying basis for our clinical and biomarker strategy. Whereas many drug combinations in immuno-oncology have been randomly selected for testing, what was referred to as throwing spaghetti at the wall, our clinical combination strategy is informed by the pathway biology and by a mechanistic understanding of key checkpoint pathway interactions with supporting data from relevant preclinical models.

In previous calls and scientific conferences, we have presented data supporting the PVRIG/PVRL2 interaction as a distinct negative costimulatory pathway having the ability to inhibit immune response against the cancer as well as its interaction and synergy with a TIGIT/PVR pathway. The reported data showed that in case where the 2 pathways are operating, there is a need to block both in order to sufficiently stimulate the immune system response against the cancer. Moreover, we also explored the intersection between PVRIG/TIGIT axis and the PD-1 axis and found that COM701 may work in synergy with PD-1 blocker either as dual combo or a treatment combo with anti-TIGIT blocker.

During the last year, while pursuing IND-enabling studies, we developed our biomarker strategy with a goal of identifying patients with tumors, in which the PVRIG pathway may be dominant in order to improve the likelihood of identifying the optimal target patient population for the COM701 Phase I trial. In our biomarker work, we tested the expression profiles of the PVRIG, TIGIT, PD-1 receptors and their ligands in the tumor macro-environment of samples taken from cancer patients. These biomarker data, which were recently presented in 3 immuno-oncology conferences and will be further discussed in John's remarks suggests that COM701 may have potential clinical value in a broad variety of tumor types, such as breast, endometrial, ovarian, lung, kidney and head and neck cancer, many of which are non-responsive to PD-1 inhibitor. Moreover, the results indicate that tumors taken from patient population with breast, endometrial and ovarian cancer expressed elevated PVRIG ligand levels in comparison with TIGIT ligand levels, and therefore, may have an increased likelihood of responding to COM701 as a monotherapy treatment. Furthermore, we have previously shown that PVRL2 is expressed in both patients, who are PD-L1 positive and PD-L1 negative, highlighting the potential for combination with PD-1 blockade and there's potential mechanism to overcome resistance to PD-1 treatment. As I indicated, with these insights of the pathway, we planned our overall clinical strategy in our Phase I trial as well as how and at which stage in the trial we will employ our biomarker insights and strategies.

John will provide more details on the new data we presented, the clinical trial design and our overall clinical strategy. John will also share with you details on our IND-enabling studies and the upcoming IND filing for COM701. But all in all, we remain on track to file the IND application for COM701 towards the end of this quarter as planned, and as is customary, we will inform our investors once the IND is cleared. In parallel, we're also advancing COM902, our anti-TIGIT antibody candidate. We are developing our own anti-TIGIT antibody as an integral part of our COM701 program to enable clinical combination. COM701 is the first-in-class drug opportunity, clearly differentiates our own TIGIT inhibitor from anti-TIGIT axis developed by others in the industry. The work with Bayer as our CMC manufacturer for COM902, which we reported in November, is ongoing. The IND-enabling activities are planned this year in preparation for the IND application anticipated in 2019. We expect to continue updating on these activities in preclinical data throughout the year. Recently, we disclosed the identity of the third immune checkpoint target in our preclinical stage pipeline. The name of this protein is ILDR2, which is the basis for the development of 2 different first-in-class drug opportunity. The first is the subject of our collaboration with Bayer. Bayer is developing a novel immune checkpoint inhibitor targeting ILDR2, designated by Compugen, as CGEN-15001T. Bayer is continuing to advance the program through late preclinical development for cancer immunotherapy. At an upcoming scientific meeting, Bayer plans to publicly present, for the first time, preclinical data supporting of the potential of ILDR2 to serve as a promising target for cancer immunotherapy. This further demonstrates the value and the relevance of Compugen's computational discovery capability.

The second first-in-class drug opportunity for this pathway is CGEN-15001, an Fc fusion protein consisting of the extra cellular domain of ILDR2 for autoimmune application, for which we retain commercial rights. Our development activity for CGEN-15001 continued to be limited with an objective to partner CGEN-15001, as our focus remains on developing immuno-oncology product. The publication of 2 peer-reviewed paper in the Journal of Immunology on the discovery of ILDR2 as a novel immune checkpoint and it's used for the treatment of autoimmune diseases serves as yet another proof for the value of our computational discovery capabilities, which is our unique competitive advantage. Only in the field of immune checkpoint, we have already disclosed the names of 3 new immune checkpoints we've discovered with our computational capability: ILDR2, TIGIT and PVRIG. In addition to these diversified pipelines, we have our earlier-stage pipeline that focuses on myeloid targets program. This is a promising new and growing field in cancer immunotherapy, which may offer a complementary strategy to checkpoint inhibition, and consequently, may provide treatment solutions for non-responsive or relapsing patients. Following our decision to enter this field over a year ago, we established versatile capabilities to address novel myeloid target biology. Furthermore, we established a research collaboration with Mount Sinai under the direction of Dr. Miriam Merad, a world-class leader in the field of myeloid biology for the development of novel cancer immunotherapy. We're building a portfolio of novel myeloid targets, which is currently at different stages of validation and therapeutic antibody discovery and will continue to update on our progress in this area.

Thank you. I will now turn the call over to John.

Thanks, Anat. As Anat mentioned, I'll be updating you on our progress with COM701 IND-enabling activity as well as giving a high-level overview of our planned Phase I clinical trial and our preparations to that trial. Regarding the manufacturer of the drug itself, we have established a master cell bank that expresses COM701 at greater than 6 grams per liter in the bioreactors, allowing us to produce enough drug substance in our recent GMP manufacturing run fulfilling our near-term clinical needs. We have filed sufficient drug substances to generate ample amount of drug products for Phase I clinical use. The drug product is released in January on schedule and recently passed the 1-month stability testing required prior to IND filing. The only remaining step prior to clinical use of the drug product is the labeling of the drug vials, which is planned to be completed in March.

On the IND-enabling front, the GLP toxicology study has been completed and the reports from this study are being incorporated into our IND filing. Results from this study were unremarkable with no definitive drug-related findings at doses up to 100 mgs per day. We were also able to use data from the non-GLP and the GLP tox studies to model the expected pharmacokinetics and pharmacodynamics of COM701 in human, providing some insight into our target dosing level and the schedules for the clinic. Based on PK modeling, we plan to dose COM701 every 3 weeks in the clinic, which is fairly typical for an antibody therapeutic. Having completed manufacturing in IND-enabling activities, our current focus is on the writing and submission of the IND. In anticipation of this, we had a written response only pre-IND meeting with the FDA last October to align expectation and to get their feedback on the proposed clinical plan. To reiterate Anat's earlier point, we are on track for filing the IND towards the end of the quarter. Once the IND is filed, the FDA typically has 30 days to review the application, and assuming they have no comments, the IND is considered cleared, enabling us to move forward with our plan to start a clinical trial later this year. In parallel to the IND filing, we are evaluating clinical sites for the dose escalation arms of the trial with the goal of selecting 3 to 4 sites for the first-in-human studies later this year. As we have disclosed previously, the Phase I trial will consist of 3 arms. The first 2 arms will be open-label all-comers dose escalation studies of COM701, both as a monotherapy and then in combination with the fixed dose of a PD-1 inhibitor. These have been designed to allow a quick transition from monotherapy escalation arm through the combination escalation arm. The primary goal for each of these arms is to evaluate the safety and tolerability of COM701 as well as to establish a recommended Phase II dose in both monotherapy and combination setting. The third arm will involve expansion cohorts in selected patient populations with the recommended Phase II dose of COM701 with the license focused on combination with PD-1 inhibitors and selected indications. Based on recent preclinical expression data, our current focus is on breast, ovarian, endometrial and lung cancers for reasons that I'll cover momentarily. Recent expression profiling of PVRIG and exhausted CD8-positive T cells derived from fresh tumor samples has shown that PVRIG, much like PD-1 and TIGIT, is commonly expressed in T cells from multiple solid tumor indication. Furthermore, it is most frequently co-expressed with PD-1 and TIGIT on exhausted T cells in the tumor microenvironment, which are the targeted population for reactivation of immune response against the tumor. Since we do expect PVRIG to be present in most tumors, our focus has shifted to its ligand PVRL2 in assessing candidate patient populations for COM701 treatment, similar to the current approach of using expression of PD-L1, a ligand for PD-1 and stratifying patients for treatment with PD-1 inhibitors. In newer studies that were represented publicly in the last month, we consistently observed high PVRL2 expression in endometrial, ovarian, breast and lung cancers, together with frequent high expressions in colon, kidney and head and neck cancers. In endometrial, ovarian and breast cancers, PVRL2 which frequently expressed at much higher levels than we see for the TIGIT ligand, PVR, and often in cells that were negative for PVR and PD-L1, suggesting that PVRIG checkpoint pathway maybe dominant in these tumor types. This differential expression between the 2 ligands, higher levels of PVRL2 relative to PVR in specific indications generates a compelling rational to focused on COM701 monotherapy in these indications. Rather than preselect patients in the early arms of the trial, we will be enrolling patients with any solid tumors and may enrich for patients with ovarian, breast and endometrial cancers, who we think should have a higher probability of response to COM701. In addition, based on our initial biomarker data and, where possible, we will obtain tumor biopsies and perform a retrospective analysis of relevant checkpoint ligand expression, specifically that of PVRL2, PVR and PD-L1 and look at their correlation with response to COM701. While our current plans for expansion cohorts focused on these indications, we will, of course, be guided by the clinical results as patients accrue, and we will consider expansion in other patient population as warranted by the data from the escalation studies. Our longer-term clinical plans for COM701 involves combination studies with our anti-TIGIT therapeutic candidates, COM902, as preclinical studies indicate potent synergistic effects on tumor infiltrating lymphocyte activation when PVRIG and TIGIT inhibitors are combined. Based on existing expression and functional data, we do expect to progress to triple combination trials with COM701, COM902 and PD-1 inhibition. As with our pending clinical studies, the rational in selection of patient populations for the additional combination trials are data-driven and based on the understanding we've developed in the last 2 years of the pathways involved and their possible relevance in different tumor indications.

And with that, I'll turn it over to Ari.

Thank you, John. Our financial results for the fourth quarter and full year 2017 released today are in line with our expectation. In general, we continue to reflect the increased the entire preclinical development activities, including costs associated with manufacturing and IND-enabling targets of COM701 in preparation for the IND -- for the filing of an IND application towards the end of Q1 2018 as well as increased activities related to COM902 on top of the other programs in our pipeline. As previously forecasted, our total cash expenditures during 2017 amounted to approximately $34 million. For 2018, as we plan to start our Phase I trial for COM701 and the IND-enabling studies for COM902, we expect that the total gross cash expenditures will be in the range of $38 million to $40 million. Our R&D expenses continue to represent approximately 80% of our overall budget in 2018 and the level of expenses for our development activities represent about 2/3 of the total R&D expenses. This increase in our development expenses continues to reflect our strong commitment to advance our pipeline for the clinical -- for the clinic and becoming a clinical stage company in 2018.

Now turning to our 2017 commercial results. R&D expenses during 2017 increased by 17% and total $28.6 million compared with $24.5 million in 2016. For the fourth quarter of 2017, R&D expenses were $7.2 million compared with $6.3 million in the comparable period in 2016. The increase in both cases, as mentioned earlier, reflects the activities surrounding COM701 and COM902. These activities include toxicology studies, manufacturing costs and other related expenses. General and administrative expenses during 2017 remained approximately at the same level as in 2016 and totaled $7.6 million compared with $7.4 million for the full year and $1.9 million in the fourth quarter of 2017 compared with $2 million in the comparable period of 2016. Net loss for 2017 was $37.1 million or $0.72 per diluted share compared with a net loss of $31.5 million or $0.62 per diluted share for 2016. Net loss for the fourth quarter of 2017 was $9.3 million or $0.18 per diluted share compared with a net loss of $8.5 million or $0.17 per diluted share for the comparable period of 2016. As of December 31, 2017, we had approximately $30.4 million in cash and cash related accounts compared with $61.5 million at the beginning of 2017. The company has no debt.

I would like to remind you that as a policy, management and the board directly evaluate the company's cash status in light of its development plans, business activities, financing opportunities and market conditions. Each is considered together with the long-term 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, other existing or new collaboration would clearly impact our cash balance and path forward. Any further 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 clinical development stage company.

Thank you, all. And with that, we will now open the call for questions.

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

I wanted just to ask about the patient samples that you referenced looking at PVRIG expression or PVRL2. I just wanted to know if you expect to present the correlation studies there. Can we expect to see those presented at whatever AACR or some other scientific conference this year? Because I think we'd certainly love to see what the profile looks like. And also wanted to ask in conjunction with that, if in addition to looking for immuno dominance as you did, whether you were able to ascertain whether tumor mutation burden played any role in its expression?

Mike, this is John. The samples that we've looked at to date, we get through a tissue cooperative. So they're not from trials where we have a lot of data. They are available fresh tumor sample. We actually presented some of that data publicly. We have a keystone poster that I would refer to you -- refer you to this on our website. And we are continuing to look at a broader sample set and we'll continue to roll that data out probably over the next couple of quarters as we accrue it. Just with regards to looking at tumor mutation burden, we have not really looked deeply into that yet. Because, again, the samples that we're getting are kind of from different sources. We are looking at academic collaborations where we have a more dedicated source of samples and that will be something we can do as we continue to get those collaborations up and running.

Okay. All right. Thanks for the color on that. I wanted to also ask about the financial situation, you guys are starting to run a bit low, $30 million at the end of the quarter. What types of steps do you anticipate taking in order to bolster your capital resources?

Hey, Mike, it's Ari. So basically just, more or less, repeating what I said earlier, we ended the year with approximately $30 million. The cash expenditures for the year are estimated to be between $38 million to $40 million. So clearly, there is a gap to bridge. But any decision that we'll take regarding our cash, we just need to take into consideration the various factors, including our development plans, pension milestones, market recognition, and we'll take it step at a time.

Ari, can you talk about so people can get maybe perhaps a better understanding of other -- any other upcoming milestones that might be available to you, let's say, through Bayer. Would they pay you, let's say, a milestone upon commencement of clinical trials, presuming that they eventually get to that point?

So again, as we also mentioned in the press release, Bayer are planning to present additional data in an upcoming conference. Our point of view, as you know by now, we're not allowed to share so much information about them. But typically, it's industry standout, and for that we cannot elaborate any further.

I think, Mike, I'll just add that, of course, we stated that Bayer is advancing, and of course, everyone is aware of the fact that we are eligible for additional milestone payment. Of course, we can take, but this is -- we are eligible for additional milestone, so this is one source of potential cash. Inflow, another source, is -- are potential collaborations. And of course, we are weighing in and reviewing management and the board the different possibilities, taking into consideration all the different aspects that Ari was relating to in order to make sure that we built this company a clear path to turn into a clinical stage company. So, yes, that's the most information that we can share at this stage.

The next question is from Jordyn Fantuzzi of Piper Jaffray.

This is Jordyn on for Ted. Congrats on progress updated on the call, I have a question on the combination -- triple combination study. I understand the clinical strategy deflects for certain tumors based on PVRL2 expression for the COM701 study. But when you ultimately begin the triple combination with anti-TIGIT, how will this change the strategy and evaluation of certain tumors given the data that you discussed regarding the differential expression of PVRIG and TIGIT across different cancers?

Hi, Jordyn, this is John. So in this discussion, we've focused on tumor types where we see high PVRL2 relative to the other ligands, PVR and PD-L1. But there are a number of tumors and different indications where we see fairly high expression of all the different ligands together with the receptors and these would be the target population for doing the triple combinations. With the rational that if you are inhibiting any one of those checkpoint pathways in the context where all 3 are active, you're not going to get a sufficient antitumor response. So there are patient samples that we see where we think it would be justified to explore triple combinations because we do think that all of those pathways are active and all of them have to be inhibited in order to maximize the immune response.

Thanks for the color. Do you think you'll present some on this data at upcoming conferences this year?

Yes. I think -- there are sort of snippets in it, in some of our existing presentations. But I think, again, as we move towards the triple combination trials in the clinic, we'll certainly be rolling out data that is really targeted at expanding on that rational and showing those specific patient population.

The next question is from Peter Welford of Jefferies.

I've got 3. Firstly, just on the presentation or rather publications on the ILRD2 in with Bayer. Just wondering there with regards to the autoimmune 15001 program, have the publications triggered any incoming requests, I guess, or information from potential partners or collaborators for that program? And have the data, I guess, triggered in the scientific community significant interest from potential KOLs? And secondly then, I wondered if you could just quick -- give us a quick update on 902 manufacturing, as where you are with that? And then if I just a quick one for Ari. Can you comment at all on anything about the phasing at all of the burn? I appreciate you don't want to give a quarterly guidance, but anything at all about how you think the phasing could be during the year?

So I'll start with the ILRD2 question. So, of course, being in a situation where we discover completely new immune checkpoints or better say, we link these functions to proteins, we're doing all the work in-house and with collaborations in order to validate them. Of course, it is different when there is some kind of an external validation from the outside, here in this case, it comes from a peer-reviewed paper, 2 of them, and thus give a different level of recognition and proof to what we're doing. So that's, of course, triggers an interest. I will, of course, not share more than that on the business front. But for sure, this is a proof that gets some additional validation at this stage. Needless to say that these papers were actually showing not only the fact that we discovered an immune checkpoint, but it really has a very interesting mechanism of action that could be translated there well into first-in-class drug. So that's it on the ILDR front. I'll let John react -- respond to the COM902 and CMC with Bayer. John?

As of now, everything is proceeding according to time lines. I don't think we've disclosed fine detail on this time line. But we do plan to stay on track with our original 2019 IND filing.

Okay. And just to address, Peter, your last question. Generally, we assume that the rate during the year will be roughly on an average between 9 to 10 each quarter. I guess, that as we move further along the year without the actual trials, it might increase slightly, but I would assume the -- most of the effect of the clinical trial will start in 2019. For 2018, it's roughly going to be, I would say, straight line more or less.

The next question is from Mark Breidenbach of Oppenheimer.

This one's probably geared a little bit toward John. I was hoping you could elaborate on your expectations for the safety profile of COM701 as an interest to clinic. For instance, have animal studies hinted at substantially differentiated toxicity between PVRIG and TIGIT inhibitors. And also given that you can knock out PVRIG in mice and still have a viable animal. I'm just wondering if you're worried at all it might take a long time to establish an MTD or recommended a Phase III dose?

Great. So just with regards to the tox profile, we can't really compare against the TIGIT inhibitors because that data is not public and we've not done our own tox studies with COM902 yet. The data that we have in hand, I would say, is in line with what we've seen in BLA's filings for other immune checkpoint inhibitors. Again, there was really nothing that remarkable in the studies. But to the second question about actually reaching an MTD, we are aware that we may get to a point in the clinic where we reach a dose that we think should be maximal, and we don't like to go beyond it. So it's not a given that we will get to an MTD in the Phase I trial, but we have set a cutoff point where we're confident that we'll have full saturation with the drug and where we don't think it makes sense to escalate beyond.

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. This is an exciting time for Compugen. Becoming a clinical stage company this year is an important milestone for the company. With a diversified portfolio, based on our discoveries, we believe our pipeline holds a significant clinical and commercial value which will drive our future growth. 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. Fourth Quarter 2017 Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.