Compugen Ltd (CGEN) 2018 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Compugen's First Quarter 2018 Results Conference Call. (Operator Instructions) An audio webcast of this call is available in the Investor's 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, operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO; and Ari Krashin, CFO and COO. Before I 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 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 March 27, 2018. The company undertakes no obligation to update any projections or forward-looking statements in the future. I will now like to turn the call over to Anat.

Thank you, Elana. Good morning, and good afternoon, everyone. I would like to welcome you to our First Quarter 2018 Corporate and Financial Updates. In my prepared comments today, I will provide an overview of the key activities and achievements of the first quarter of the year. I will specifically address the status of our COM701 IND application, the preparation for our planned clinical trial, and the compelling and differentiated opportunity presented by COM701. Ari Krashin our CFO and COO will follow my prepared comments today with a financial update before we open the call for the Q&A session.

During the first quarter, we had 3 major achievements. First and foremost, was the signing of our IND for COM701 in anticipation for our expected first-in-human clinical trials later this year. The second relates to the disclosure of ILDR2 as a new immune checkpoint that licensed to Bayer including the publication of 2 peer-reviewed papers. These were followed by Bayer’s presentation of preclinical data at AACR and the announcement of their intentions to advance an antibody, targeting this checkpoint to the clinic later this year.

Third, was the signing of license agreement with MedImmune, the global biologics research and development arm of AstraZeneca. This agreement provided with additional capital without impacting our current pipeline development plan.

With the signing of our IND for the COM701 program, a first-in-class therapeutic antibody directed against PVRIG, we achieved a major milestone and took a significant step in becoming a clinical stage company. We rapidly advanced the COM701 program, which has [registered] a newly-discovered cancer immune checkpoint moving on a very aggressive time line from target discovery to IND filing within 3.5 years. In parallel, we've put in place the corporate capabilities required to execute drug development including the recent hiring of a Chief Medical Officer, who is now leading the company's clinical activities and strategy to an established network of consultants, CROs and in-house capabilities.

The IND application for COM701 was submitted following a thorough process that included input from [team] immuno-oncology [adviser] and various clinicians needing ongoing clinical trials in the immuno-oncology space. However, during the review of our IND application, which as you know was submitted for a catalytic anybody targeting a new immuno-oncology target, the FDA recommended that the dose-escalation stage for the COM701 trial began with a lower dose. We have accepted and are in alignment with the recommendation of the FDA.

Accordingly the FDA place our IND application on clinical hold and still we submit data addressing the evaluation of COM701 using a more sensitive assay method at a new lower starting dose. We've already initiated activities to evaluate the new lower starting dose of COM701 with a more sensitive assay method.

To be clear, we're now developing a new assay method, there are several assays currently available to evaluate proteins at low concentrations. And we intend to leverage one of these methods to provide a response to the FDA as quickly as possible so we can be cleared to proceed with patient enrollment to the study.

While we cannot provide an exact or specific time line for the resolution of these matter, our current expectation is that this clinical hold and the required changes in the clinical protocols will not impact in any significant way our planned timing for the trial initiation and our overall clinical plan. Once the IND application is cleared, we will provide an update regarding the anticipated time line for the Phase I trial. Furthermore, to ensure that we're prepared to quickly start the trial following IND clearance, we're continuing as planned with activities for selection of clinical sites in the United States and respective site engagement activity.

Last month, during the annual AACR conference in Chicago, we held our second clinical advisory meeting, the meeting was well attended by leading clinical investigators from prominent medical centers in the United States, conducting clinical trials in the field of immuno-oncology. The objectives of the meeting were to share a new preclinical data, our proposed clinical development program and biomarker strategy and solicit expert feedback.

A high level of interest was expressed by the SMBs in support of the proposed first-in-human study including the intended patient population and biomarker strategy. Our clinical and biomarker strategy are premised on a robust biological rationale and sufficient with clinical trials as a promising and differentiated approach in the competitive and crowded landscape of immuno-oncology trials.

The new data we presented in various immuno-oncology conferences during the first quarter suggests that the PVRIG pathway may be dominant in certain cancer subpopulations including those not responsive to PD-1, or PD-L1 inhibitors. Our preclinical data points to 2 more that specifically expressed elevated PVRL2 the ligand of PVRIG and with very low expression of PVR or PD-L1 the ligands of TIGIT and PD-1 respectively.

These include breast, endometrial and ovarian cancers, which are largely unresponsive to PD-1, PD-L1 or CTLA-4 inhibitors. Therefore, although our Phase I study is designed as an all-comers trial, based on our recent preclinical expression data, we aim to enrich the trial with patients with advanced breast, ovarian, endometrial and also lung cancer. While there will be no great selection of patients based on biomarker expression, the strategy design includes a retrospective analysis to assess whether COM701 potential efficacy is correlated with PVRL2 expression relative to that of PVR and PD-L1. The outcome of this study will inform patient selection for subsequent clinical testing. We've also shown this PVR the ligand of TIGIT is generally expressed in most tumors at low levels then PVRL2, the ligand of PVRIG. This leads us to believe the targeting TIGIT as a monotherapy may not be sufficient to stimulate an antitumor immune response.

In line with this, our data suggests that combinations of TIGIT inhibitor with COM701 may be required to generate the sufficient and robust antitumor immune responses. This is the reason, we are developing our own TIGIT antibody COM902, which is expected to enter clinical testing in 2019.

As COM701 is the first clinical antibody candidate, targeting PVRIG to be available for testing with various dual and triple combination with PD-1 and TIGIT inhibitor, we believe it places Compugen in a unique position and with an edge in the competitive immuno-oncology space.

Our COM701 Phase I trial is one of 2 expected Phase I trials based on our discoveries to begin in 2018. In February, we unveiled ILDR2 as a new immune checkpoint in 2 peer-reviewed paper, published in the Journal of Immunology and also disclosed it as the basis of the cancer immunotherapy collaboration between Compugen and Bayer.

Bayer presented an ILDR2 preclinical program data, some of which generated in collaboration with Compugen scientists for the first time at AACR in April. The data presented the potential of Bayer's anti-ILDR2 antibody to serve as monotherapy cancer treatment but also in combination with a number of other cancer therapy approaches.

In conjunction with these compelling data, Bayer also announced its intention to advance the program to the clinic in 2018. We are of course, very excited by Bayer's decision and look forward to updating you on their progress.

This quarter we also entered into a license agreement with MedImmune, the global biologics research and development arm of AstraZeneca. This agreement represents a clear win-win situation. With this deal we license to MedImmune, one of our program to pursue their development plans for bispecific and multispecific antibody product for cancer immunotherapy.

This bill gave us access to additional capital, specifically an upfront cash payment of $10 million and potential future milestones in royalty, without further investing our R&D resources and without impacting our pipeline development plan. The deal with MedImmune also provided us with the recognition of the quality of our program and with further validation of our competition and discovery capabilities and our monoclonal antibody development expertise. With respect to our other programs, we're working to advance our pipeline candidate for the entire development chain from discovery of additional novel targets focusing on myeloid biology as we previously disclosed to target validation and through preclinical activities towards the clinic.

Our main objective remains to build a robust, sustainable and broad pipeline of immuno-oncology products, both for internal development and partnering opportunity. On the partnering front, our goal remained to design collaborative arrangement allowing us to keep a diversified preclinical and clinical stage pipeline to further enhance corporate value.

Before I turn the call over to Ari for a financial overview, I would like to say, that advancing a program from computer prediction to IND filing is a tremendous accomplishment one of which we're very proud of at Compugen. COM701 presents a remarkable program and opportunity. The biological pathway and rationale matches the preclinical data and suggests that this new pathway is important in patient subpopulations, which were not responsive to PD-1 inhibitor, which addresses a major gap in treatment of cancer patients.

In addition, the data also suggest that in some tumor types TIGIT blockade may require the addition of PVRIG blockade to achieve sufficient antitumor immune response, further supporting the potential input of this program. The IND filing is the culmination preclinical work done over the past 18 months and provides robust support for the potential of COM701 to serve as a key component of cancer immunotherapy and in addressing significant unmet needs.

The 2 clinical trials expected to commence this year, ours and Bayer's, serve as validation of our discovery capabilities and a clear indication of the potential value of each of these first-in-class drug programs. We've made tremendous progress over the last few years in generating our own pipeline targeting unique drug target, discovered internally and we're well positioned to execute on the future corporate growth for our company based on these advancements. And with that, I'll turn the call over to Ari.

Thank you, Anat. Our financial results for the first quarter of 2018 released this morning. The group revenues related to the nonrefundable upfront payment in the license agreement with MedImmune signed at the end of this first quarter in the amount of $10 million. To date, this amount has been received by Compugen. Cost of revenues for the first quarter of 2018 of $0.4 million reflective royalties payable to the Israel Innovation Authority formerly known as the Office of the Chief Scientist of 3.5% of our revenue.

R&D expenses for the first quarter of 2018 increased by 5% and total $7.1 million, compared with $6.7 million in the comparable period of 2017. Our R&D expenses continue to reflect our preclinical development activities, including those supporting the IND filing for COM701 that was submitted at the end of the first quarter as well as expenses associated with the clinical-related activities in preparation for the Phase I trial which we expect to begin later this year.

General and administrative expenses during the first quarter of 2018 were approximately $2.1 million compared with approximately $1.7 million in the comparable period of 2017. The increase was attributed, in part, to expenses associated with completing the license agreement with MedImmune. During the first quarter of 2018, we had a net income of approximately $0.1 million or $0.00 per diluted share compared with a net loss of $8.7 million or $0.17 per diluted share with the comparable quarter of 2017. As of March 31, 2018, we had approximately $20.5 million in cash and cash-related accounts compared with $30.4 million at the beginning of 2018. The cash balance for the end of the quarter does not include the $10 million payments received from MedImmune after the quarter.

The company has no debt. As we mentioned in our previous earnings call, our total gross cash expenditures are expected to be in the range of $38 million to $40 million for the full year of 2018. We intend to start our Phase I trial for COM701 during 2018 as well as conduct IND-enabling studies for COM902.

Our current cash balances are sufficient to support our entire development plans for 2018, without taking into consideration additional potential cash inflows from new collaborations of Compugen milestone from Bayer.

Strengthening the balance sheet remains a top priority for the management and the board. Together, we continue to evaluate the company's cash status, taking into account our development plans, business activities, financing opportunities and market conditions. Each is considered together with a long-term interest of our shareholders.

Any decisions regarding possible financing will take into consideration these factors as they exist at such time as well as the capital needs to ensure a clear path forward for the company's development program. Thank you. And with that, we will now open the call for questions.

(Operator Instructions) The first question is from Mark Breidenbach of Oppenheimer.

Let me just start with a quick one on COM701. I was wondering -- if in requesting a new lower starting dose, did the FDA point any specific reasons? Or preclinical toxicities to justify their request?

No. And this is -- the FDA does not specify specifically such information. I think that the data that we already shared with investors is giving us and this should give you some comfort. We stated that we have knockout mice where we actually knocked out the gene and the mice, we're doing a lot of studies with them and they are okay. We've done a safety study and GLP toxicity study in monkeys. And we didn't adverse effects there. So we do not anticipate to have any toxicity profile. But that's the information that we have up until now.

Okay, and is the plan is still to conduct a combination of COM701 with an anti-PD-1 antibody. And if so, how far into dose escalations with COM701 monotherapy, would you wait before starting that combination?

So the answer is yes. We do intend to -- the first combo to start in our trial to be repeating 1 inhibitor. How fast I -- the specific amount of doses that I think that it would be good to answer after we have that finalized protocol after the IND clearance. But I'll just say, that in general, we're looking to get to the physiological development dose, which we believe our plans -- in general with respect to the overall plans are not changed much and then immediately to start the combo. So our intention is to be able to generate the situation where on the heels of the monotherapy dose escalation data, we will also have a combination data with PD-1.

Okay, but that would most likely be a 2019 event? If I'm hearing correctly.

So we did not share any guideline with respect to timing. And I think it would be wise for us to wait for IND clearance and then we will give some guidance with respect to the overall planning and timelines of the trial.

Okay, fair enough. Any plans for sharing or presenting preclinical data on COM701 this year at a medical conference?

Look in general we're always open to this, and we have plans to going forward, but we didn't disclose as of now in which conferences we will -- we'll present. If you're asking me with respect to ASCO, specifically, we're not going to present at ASCO. But later in the year, we'll share more information.

The next question is from Ted Tenthoff of Piper Jaffray.

Question quick one, the Bayer compound on ILDR2. Can you tell us a little bit about where this could kind of fit in with respect to other combinations, and for example, would this maybe, be something where some of your proprietary efforts on PVRIT or TIGIT might actually complement what Bayer is doing? Or is this really something that will be developed on its own?

Yes, okay. So I'll try to address on the different front. First, the mechanism of action of ILDR2 and as a result of the Bayer antibody is very unique. It is an immune checkpoint, but it is acting as Bayer presented, we believe that it is acting on T cell priming and cross-presentation so that's a specific mechanism of action that is very compelling. And with respect to combination, 2 things. First, Bayer was developing this program, of course, in separate to what the -- the program that we developed for targeting PVRIG and TIGIT, and this is not playing at the same pathway. Not to say, and we didn't check any potential combination, not to say that it may not be tested in the future. But at this point in time, the pathway -- from the pathway perspective we don't see the 2 pathways overlapping. In terms of combination, the data that was presented was actually supporting different type of combinations, both with PD-1 and with other agents. And in general, I would say, that there was some indication to a situation where more immunogenic tumors with high mutational burden would be more relevant for the Bayer program, which is also compelling. So we'll need to say but as of now these are completely 2 different paths and each has its own combination and strategy.

The next question is from Konstantinos Aprilakis of JMP Securities.

I was just looking for a bit more color regarding COM701 time line. And I know you've mentioned, you can't guide towards IND acceptance. But I wanted to gauge your level of confidence with respect to Phase I initiation later this year.

So in general as we stated, we do not anticipate that the current situation will impact our time lines and the overall plan. Of course, we cannot give a guidance that is more tied than this. And we will make sure that we update as soon as we get the clearance. I think that one more piece of information that is important, we are proceeding according to plan. In any case, we had to make sure that we're selecting the site and that we are taking care of the engagements with the sites and all these activities are taking place now with the anticipation that soon after we have the IND clearance we will be able to start the trial. I'll say that as the part of this site selection and engagement, I mentioned in my prepared comments, that we had the second clinical advisory meeting and the response was very positive. And activities are on track.

Okay. And if we could just switch gears a bit. I was looking for your latest thoughts on CGEN-15001. And what are your plans there? Are you in partnering discussions, what the plans towards the clinic?

So in general, we did not change our plans as they were discussed and CGEN-15001, we do not intend to take it alone to the clinic. But as we stated a few months ago, we are not going to comment on business development activities. And at the point of time when we will have something to share an agreement that will be signed, investors will be the first to know.

The next question is from Peter Welford of Jefferies.

I have got 3 questions left, please. Firstly, just on regards to the dosing on FDA's requirements there. Was your original plan to start with a dose that you felt was going to be below what you thought could be physiologically effective and therefore now is the current plan to just start with even a lower dose. Or I guess what I'm sort of asking, -- how many sort of titrations in sort of typical 3 for 2 regimen, do you think would now be needed to get to what would be your initial starting dose? Secondly then, just on the assay, you got it -- regards going to now to a commercially available assay. Is there likely to be any meaningful cost impact from this in terms of the Phase I study? And then also just on then the biomarker work, I think you mentioned you were going to assess the PVRL2 and PD-1. Are there any plans to do any most of the compressive analysis of biomarkers as well? I'm thinking perhaps next-generation sequencing and also looking at TMB and potentially any other measures?

Okay, so I'll try to address each of your questions. And I hope that I captured them well. With respect to the low dose and the lower dose, I think it won't be right for us at this stage to disclose what we submitted and what was the request. Because until the point of time that the protocol is really -- when the protocol is approved cleared, this is the time that it will be the right thing for us to share. We don't know that this is -- we don't want to commit to anything before the FDA approves. So in general, we felt comfortable to say that we do not think that the changes in the protocol will impact our overall time lines. And that's in order to give some insight as to the comfort that we have. But I think it won't be right for us to mention doses at this stage. And we will surely relate with following the clearance of the IND. With respect to the assay itself, I think that it should be clear, it's not an assay that is part of the trial, so it's not anything that relates to the cost, it's actually an assay, an assay method to assess -- a more sensitive method to assess COM701, the new lower starting dose, it's an analytical method. And actually we're using -- we're not going to develop any method. We're using a commercially-available method. So that's not -- I don't think that there should be any concern with respect to a cost impact. Now with respect to biomarkers strategy, I -- in general, we -- and that's, of course, additional information will be shared after we -- we have clearance and we discuss the trials. But in general, with the data that we generated mainly in the last year and that we published in Q1 in few different training oncology conferences, it seems to us that PVRL2 as the biomarker actually guide well into indications towards the pathway -- the PVRIG pathway is maybe more dominant or promising and mainly when we are comparing to the ligand of TIGIT, PVR. And also when we're comparing to PD-L1 expression. So as the usage of PD-L1 to select patients in -- as much as it is very helpful to select patients for PD-1 treatment, we believe that it will be right for us to test PVRL2 as a biomarker to guide for -- or at least test whether it could guide into patient selection. And the idea is to make sure that in the trial we do a retrospective analysis of the levels of PVRL2 expression and efficacy and safety. That's one thing, but of course, we actually illuminated -- actually a new light on this pathway of PG -- PVR DNAM and added a completely new pathway there. And we took the time to study all these assays: PVRL2, PVR -- sorry PVRL2, PVRIG, PVR TIGIT and DNAM, and PD-1, PD-L1 with a molecular interaction. And this -- we are also going to take the advantage of this knowledge and the reagents that we're using. This will be able to test also the interactions between in this assays within the tumor biopsies. So we're going to take 2 more biopsies and test in a retrospective analysis and compared to efficacy, that's 1 point. So it's not only PVRL2 and PVRIG. On top of it, of course we're going to test additional biomarkers that are now very frequently used in other trials. Tumor -- mutational tumor burden and immunophenotyping and so on and so forth. I think that it's not reasonable for us to get now into too much details but at least to give you the sense that, of course, we'll also use other biomarkers that are commonly used by the industry.

This concludes our 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. In my update today, I reviewed key events and achievements in the first quarter of the year, including the filing of our IND for COM701 in anticipation for our expected first-in-human clinical trials later this year. We've already initiated the activities necessary to address the FDA's requests for additional information. And as I mentioned earlier in my prepared comments, we do not expect this delay to impact our overall time line. The second relates to the disclosure of ILDR2 as a new immune checkpoint and as the target of our immuno-oncology collaboration with Bayer. Subsequently, Bayer presented compelling preclinical data at AACR and announced their intention to advance this program to the clinic later this year. Third was the signing of a license agreement with MedImmune in which we monetized one of our programs for an application, which we did not intend to develop and for which we received capital to support our internal development plan. Thank you for joining us today. We look forward to continue updating you on these and other developments. Thank you.

This concludes the Compugen Ltd.'s first quarter 2018 Financial Results Conference Call. Thank you for your participation. You may go ahead and disconnect.