Iovance Biotherapeutics Inc (IOVA) 2017 Q3 法說會逐字稿

Good afternoon, and welcome to the Iovance Biotherapeutics Third Quarter 2017 Financial Results Conference Call. (Operator Instructions) Please be advised that this call is being recorded at the company's request.

At this time, I would like to turn the conference over to Tim Morris, Chief Financial Officer at Iovance. Sir, please go ahead.

Thank you, Amanda. Good afternoon, everyone, and thank you for joining us today. As many of you know, I joined Iovance as CFO in August of this year. With me on the call are Dr. Maria Fardis, our President and Chief Executive Officer; and Dr. Igor Gorbatchevsky, our Vice President of Clinical Science.

This afternoon, we issued a press release which you can find on our website at iovance.com, which includes the financial results, our highlights for the quarter and the other topics we plan to discuss on today's call.

Before I turn the call over to Maria, I'd like to remind everyone that statements made during this conference call will include forward-looking statements regarding Iovance's goals, business focus and business plans, clinical trial plans and results, potential future applications of our technology, manufacturing capabilities, licensing and collaboration transactions, future updates and cash usage forecasts. Forward-looking statements are subject to numerous risks and uncertainties, many of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected during today's call. We undertake no obligation to publicly update any forward-looking statements.

With that, let me pass the call over to Maria.

Thank you, Tim. Good afternoon, everyone. As Tim mentioned, he joined Iovance team in August as CFO. Tim comes to Iovance with over two decades of experience in public biotech companies in executive finance and business development roles. He was instrumental in helping us complete the $50 million round of financing that we closed in September. I will let Tim expand on the details of that offering in a few moments when he reviews the financial results for the quarter.

Here in the third quarter, we continued our progress in the clinical development of our TIL therapy. For the metastatic melanoma study, as you may recall, we presented encouraging data from the first Cohort of the Phase 2 study of LN-144 in patients with metastatic melanoma at ASCO earlier this year.

Patients in this first Cohort received a non-cryopreserved TIL product using a first generation manufacturing process known as Gen 1 that requires approximately five to six weeks to procure the TIL product.

A second Cohort was added to this study to investigate a new manufacturing process developed entirely at Iovance. This new manufacturing process takes 22 days in duration, excluding shipment, and leads the production of the cryopreserved TIL product. We refer to this process as Generation 2 or Gen 2 for short. The cryopreserved product provides flexibility of patient dosing, while the shorter duration of manufacturing minimizes the time a patient has to wait to receive their TIL product.

The decreased manufacturing time line also results in a reduction of cost of goods. We started enrolling patients in this new Cohort in the second quarter this year. Early results from the second Cohort of this study will be presented as in late breaker at the Annual Society for Immunotherapy of Cancer or SITC meeting on November 9.

The second Phase 2 company-sponsored study, LN-145 in metastatic squamous cell carcinoma of the head and neck is also ongoing. Currently, six sites in the U.S. are still actively enrolling.

Also, during the third quarter, we initiated our planned phase two clinical trial for investigation of LN-145 in patients with recurrent metastatic or persistent cervical cancer, which will enroll up to 47 patients globally. Six clinical sites in U.S. are currently active on this study. We intend to expand this study into Europe and had initiated submission of clinical trial applications in EU in August of 2017.

To date, we have received approval from the competent authority in the Netherlands, U.K. and Hungary. We continue to work closely with other health authorities to receive approval to proceed with our clinical trials in additional countries. We anticipate that European sites could get activated in first half of 2018. Clinical trial applications were also submitted to EU for metastatic melanoma study C-144-01.

We have prior evidence of TIL therapy in cervical cancer. Professor Rosenberg at MCI has previously published data on his cervical cancer patients treated with TIL therapy. In his study, three of nine patients responded, yielding an overall response rate of 33%, including two complete responses, two of which continued in the duration of 54 and 46 months.

For upcoming data presentations, as previously announced, we will have a significant presence at the SITC 2017 meeting in Maryland next week with six abstracts including a late breaker. In addition to the Cohort 2 melanoma patient data, as previously mentioned, we will present preclinical data on the Gen 1 versus Gen 2 TIL manufacturing process as well as a sample of our ongoing efforts to increase potency of TIL manufactured using various TIL growth conditions.

Managing several clinical programs in cell therapy requires vigilance and chain of custody and identity of patient products. We have, therefore, partnered with TrakCel to implement an electronic platform for cell orchestration management. This software, once implemented, provides a scheduling and logistics tool that automates the supply chain for our adoptive cell therapy products through electronically linking Iovance with clinical sites, contract manufacturing organizations and careers to schedule and track T cells for each patient. The goal of each (inaudible) system is to ease patient scheduling for clinical sites and full transparency of our manufacturing organizations.

As a regulatory update, in addition to our -- to the EU CTA approvals previously mentioned, we received a fast-track designation for our LN-144 product for advanced melanoma. On the research side, we entered into a research collaboration agreement with Ohio State University. The collaboration will initially focus on hematologic malignancies in areas of poor prognostic cancers with high unmet medical need, which include acute myeloid leukemia, AML, and chronic lymphocytic leukemia, CLL. The research collaboration is focused on TIL, marrow infiltrating lymphocytes or MIL and peripheral blood-associated lymphocyte technologies.

Iovance has initiated investigation of hematologic malignancies, and some of the preliminary data associated with growth of TILs from such indications were presented at the European Society for Medical Oncology or ESMO. The data presented at ESMO demonstrated that TIL from lymphocyte -- from lymphoma have similar functionality as TIL generated from melanoma. In collaboration with OSU, we're allowed to further explore the generation of TIL from hematologic sources.

In summary, 2017 continues to be a very productive year for us. Before the end of the year, in our melanoma program, we intend to make a decision on selection of our manufacturing process, Gen 1 versus Gen 2 in order to initiate discussions with the FDA regarding our clinical development pathway for registration of LN-144.

I would now like to turn the call over to Tim for a discussion of our financials. Tim?

Thank you, Maria. The GAAP net loss attributable to common stockholders for the third quarter of 2017 was $22.1 million or $0.35 per share. This compares to $68.2 million or $1.15 per share reported in the third quarter of 2016. Last year, in the third quarter, the company reported a noncash charge of $49.5 million for a deemed dividend related to the beneficial conversion feature of the preferred stock issued in 2016.

Non-GAAP net loss attributable to common stockholders for the quarter ended September 30, 2017, was $19.5 million or $0.31 per share. This compares to non-GAAP net loss of $10.1 million or $0.17 per share for the quarter ended September 30, 2016.

For the nine months ended September 30, 2017, GAAP net loss was $66.2 million or $1.06 per share. This compares to $86.7 million or $1.64 per share for the same period in 2016. Non-GAAP net loss for the same period in 2017 was $57 million or $0.91 per share. This compares to non-GAAP net loss of $21.4 million or $0.40 per share for 2016.

In September, the company completed a public offering of approximately 8.8 million shares of its common stock. The shares of common stock issued and sold at the offering include 1.2 million shares issued upon the exercise, in full, by the underwriters of their option to purchase additional shares. The net proceeds from the offering, after deducting underwriter discounts, commissions and other estimated offering expenses payable to Iovance, are approximately $54 million.

For the third quarter of 2017, we had net cash usage of approximately $19.7 million. This cash usage was in line with our guidance of approximately $20 million to $22 million per quarter. We ended the quarter with cash, cash equivalents and short-term investments were approximately $163.4 million, including the proceeds from the financing.

For the fourth quarter 2017, we are projecting cash usage of approximately $20 million to $22 million. For the full year 2017, we expect cash usage to be approximately $78 million to $80 million. We anticipate the year-end cash balance to be in excess of $140 million.

Our Investor Relation activities in the fourth quarter include a tour of our manufacturing suites at the Wuxi AppTec facility in Philadelphia. Last week, a group of analyst and investors attended the event and were able to view one of our TIL manufacturing suites during production. Iovance management and Wuxi representatives were also on hand to answer any questions. The slides from this event were filed along with an 8-K last week.

We are scheduled to attend and present at the Jefferies Global Healthcare conference in London, November 16. And lastly, I would like to announce that we will be holding our inaugural Analyst Day on December 13 in New York City. Additional details will follow, but please save the date.

I'll now turn the call over to the operator for your questions and answers.

(Operator Instructions) And our first question comes from the line of Boris Peaker of Cowen & Company.

Great. So my first question is, you mentioned you wanted to compare the first and second gen TIL therapies to decide which one to advance forward. And I'm just curious, what specific parameters would you be comparing between the two different cohorts?

Thank you, Boris. So we would -- we have a couple of options. One is if the TIL product that we manufactured completely is ineffective when it enters human body, you would see progressive disease at the initial response for the patient. A second outcome would be that, that's not the case, and in fact, the response -- there is responses for this second generation product. This is the data we will be presenting at ASCO. And we certainly have an internal bar for minimum response that we would like to see in this Cohort before we are sure that we are proceeding with this cohort. This is part of the reason we are waiting for that decision by December of this year.

So this is specifically response -- is there any other immunologic parameters or anything else that you'll be comparing or is it just driven by their response?

We certainly evaluate a study based on end points, so safety and efficacy. So we will certainly be looking at safety, and to the degree, we have enough data, we certainly will be comparing them. But in terms of efficacy, that's the second parameter that we would be looking at and those numbers are a little bit easier to compare just because we know what the response for Cohort 1 is.

Got you. And my last question, outside of the studies that you guys are doing, there's a number of TIL trials ongoing by NIH and the Moffitt Cancer Center. I'm just curious, how do their approaches differ from what you're doing from the -- just the actual TIL cell process? And then also, do you have a sense of when we may see some of their data?

Yes, definitely. So the NIH process is what we licensed and it's fairly similar to what we call Gen 1, our Generation 1. Approximately five to six weeks long, there's other parameters in there that are fairly similar to our process. We did modify. Gen 1 is not identical to the NCI process, we modified it some in order to tech transfer it into our CMOs.

The process at Moffitt is fairly similar to the NCI process, but you're correct that some of the sites have their own individual changes that they have implemented. I think that's exactly why you -- we want to have a central procedure, where a sponsor provides harmonious process through all the CMOs and that's the product you provide to the patients. But each site can have their own different processes and the responses may or may not be comparable.

And the last part of my question, do you -- go ahead, sorry.

Yes, and then the second part of your question is, when do we expect to see some results maybe from some of the other studies. We know that Moffitt was putting a manuscript together for the TIL plus AP study. I'm not aware whether they proceeded to submission, will be a senior version of it. It is strictly their data, so they are at liberty of putting it out or not.

The data from NCI is particularly the KEYTRUDA combination study. It's fairly early, and we know Professor Rosenberg likes to provide sophisticated data. So I don't expect to see that in the remaining part of the year. But the TIL combination plus AP, it's a possibility. You can check with Moffitt and see if they are ready to submit it.

And our next question comes from the line of Jim Birchenough of Wells Fargo Securities.

Just following up on Boris' question. If it turns out that you need to advance into a pivotal study with Gen 1 manufacturing, is that a commercially viable manufacturing process? Or would you foresee starting a pivotal with that Gen 1 and then working on something like a Gen 3? Just trying to understand how to think about scenarios if you have to go forward with Gen 1.

Thanks for the question. We certainly have the capability of scaling up Gen 1 as well. I think one of the key messages we tried to convey as part of the Wuxi tour was that the process is reproducible, scalable. And from a scaling perspective, it requires additional modules, and we have them. We have additional suites and we can add them. So it is a process that could be scaled up. It's not that difficult.

Having said that, we continue working on process development. We certainly have a Gen 3 in our research pipeline that we are looking at. And we would absolutely be able to optimize, should that be necessary.

And then just to follow-up on some of the ongoing studies, Maria. Any detail on how many patients in Cohort 3, where you're rebiopsing and redosing, any indication of how many patients have been treated there? And when we might see that redosing data? For all (multiple speakers) --

Sure. So we haven't -- yes, thank you for the question. We certainly haven't disclosed how many patients we have per cohort. But my guess would be sometime around 2018, we can get clearer guidance as to when we can get put that data out.

And then just one final one just on LN-144 and the fast-track designation. Just wondering, is breakthrough therapy designation on the table here? Is that something you're looking into? And when might we hear about that?

A really good question, thank you. Absolutely, it's something we should certainly think about and follow up. I think the order of events for us has been, we should think about that type of a designation when we have our manufacturing method nailed down. That type of a designation typically helps in taking your product through review process and approval. And in an ideal world, you want to have that for a product that is manufactured with the method you're proceeding to BLA for. So that's been our next decision, to decide on which generation of manufacturing, and then we can think about what are the regulatory designation we can request for it.

Our next question is from the line of Joe Pantginis of H.C. Wainwright.

First, Maria, with regard to the potential path in melanoma, you obviously changed the protocol to include only the relapse refractory patients with regard to the checkpoints. Can you just remind us whether there really is any benchmark for this population? Are you really breaking new ground here?

Thanks for the question. You're correct. We changed the protocol to go post-checkpoints once the patients have progressed on anti-PD-1 checkpoints. There's nothing that is approved for this patient population, so it definitely is an unmet medical need.

No, perfect. And a quick -- well, not necessarily quick, I apologize. But since the CAR Ts are really what's driving news flow right now in the industry and they're welcome advance. Beyond your differentiated safety, I guess, can you discuss -- one of the questions that seems to come up a bit is the number of cells that's dosed to patients for TILs versus the CAR Ts? And why you think that's basically an apples-to-oranges comparison?

Right. Thank you for the question. I won't go into a lot of detail in terms of CAR T therapy. Obviously, that's not a product we work on at Iovance. But in terms of the number of cells where TILs are administered, we definitely dose in the billions. Typically professor Rosenberg has dosed somewhere as low as around 1 billion, sometimes sub-1 billion and as high as 200 billion. We are within that range in terms of our number of cells.

Just briefly, to touch on the question you're asking, my understanding of CAR T therapy is that it's dosing into millions. So there is definitely orders of magnitude in terms of the number of cells difference.

And the fact that the lower number of cells really has to do with the fact that these are more liquid tumors for the CAR Ts, obviously, and you need substantially more cells, presumably, to be able to attack the solid tumor environment, especially with all that's going on with the stroma and what have you, I assume.

That's a pretty good assumption. But I have to tell you that I don't know if I've seen any data that would support why there's a difference between them. I think Professor Rosenberg sort of tested into billions, that was his low number he started with. He found that there is responses, he tried to find a high dose. He's tried to find a maximum tolerated dose. There wasn't any dose-limiting toxicity seen, and he stayed in those numbers. I'm not sure if he ever tried to bring the dose down to multiple millions.

Frankly, if you think about replacing the T cells in human body, one might be able to do the math. But it requires to be in the billions. They are slightly different processes compared to CAR Ts.

And our next question is from the line of Biren Amin of Jefferies.

Just on Gen 2 for LN-144, Maria, do you expect patient baselines to be comparable in Cohort 2 compared to Cohort 1? I believe, all patients in Cohort 1 failed PD-1 and the vast majority failed on CTLA-4?

Yes, thank you for the question. I do. I mean, the way we have written the protocol, that's the patient population we are going to see. If you recall, earlier on, we had patients subsequent to one prior therapy, the patients we are enrolling, we have -- based on the feedback from FDA, we have defined it fairly clearly that these patients have progressed on anti-PD-1.

I'm going to ask our Head of Clinical to also speak to it in terms of whether the patients are mostly anti-CTLA-4 as well as anti-PD-1 experience. Igor?

Yes, thank you, Maria. Very similarly to Cohort 1 data presented at ASCO, you will see later this information on Cohort 2 data. But majority of patients, if not everybody, receives prior therapy with multiple lines of treatment, and all of them receive anti-PD-1 treatment.

And regarding anti-CTLA-4 antibodies, majority of those patients in Cohort 1 received anti-CTLA-4 as well, and similar situations in Cohort 2. So we don't see the difference in patient demographics or dispositions here.

And Maria, on the patient data from ASCO, should we expect at SITC that you'll update us on the Cohort 1 patient group as well?

So Biren, our focus currently is on Cohort 2 because we have an imminent decision before us, and we thought to share that data with the community. So likely, what you're going to see, the bulk of the data is going to be on Cohort 2. There may be some comparisons that we draw with Cohort 1. But really the bulk of the data is going to be on Cohort 2 because that's our focus on decisions right now.

Got it. And then so for the Gen 2 for Cohort 2, do you have a threshold to rule out a null hypothesis?

Really good question. Not too dissimilar to the question that was asked earlier today.

We don't really have -- at least I haven't disclosed the walkaway point, but I have disclosed that other sponsors had viewed something of the nature of 11% as a product that could be approved in this patient population and they're pursuing it. So while I'm not saying what our walkaway point is, I'm saying that other large pharma sponsors have looked at that type of a response as a product that can and should be developed.

Got it. And then just on the European sites that I think are about to start to come on, which process do you plan to use for those sites for LN-144?

So we have -- just to first clarify the question. Both LN-144 and 145 will be available in Europe, and we are prepared to take whichever product we make a decision on in Europe. Given patient dosing would be after our decision-making internally, we are able to take whichever process that we make a decision on into Europe. We are prepared for that decision and the process.

And that's for all tumor types?

It's for the two indications that we are going into Europe for. We are going into Europe for metastatic melanoma on the LN-144 product as well as cervical cancer, which is LN-145.

And our next question is from the line of Mark Breidenbach of Oppenheimer.

Maria, you had mentioned during the prepared remarks that the Gen 2 manufacturing process comes with reduced COGS relative to the Gen 1 process. Can you just give us some color on -- by how much is it? Is it a factor of two or is it just a slight reduction in COGS?

Sure. Thanks, Mark, for the question. Yes, indeed. It's fairly similar to the duration of time that we are reducing. As of now, approximately 35% or so of the COGS are reduced when we go to Gen 2. And this is not even optimized, so we are fairly confident that once -- if we decide that Gen 2 is the product, we could certainly go back and optimize the COGS further.

Okay, understood. And I noticed that the NCI process, which is similar to your Gen 1 process, actually implements or has implemented prior preservation in the past. I was just wondering, why in your Gen 1 process you didn't include that cryopreservation set, given that it appears to work in the hands of the NCI?

So I think some of it is historical, Mark. When I arrived at back then Lion, the company had tech transferred Gen 1 as professor Rosenberg had been using it with non-cryopreserved product. As we set our goal into changing the process and shortening the process, we also put in cryopreservation into that Gen 2 process. And instead of going back and redoing the Gen 1, we decided we are going to try and put our wish list at that point of time into Gen 2. So some of it is historical.

If we -- as Jim noted earlier, if we want to go back and go to Gen 1, we certainly can go back to Gen 1 cryopreserved product. I don't think that's a showstopper.

Got it. And a final question for me. You're currently relying on three different CMOs for manufacturing. Are you kind of looking down the road at a consolidation down to a single facility in the future? Or would you even consider investing in your own manufacturing facility?

As we go forward, we certainly will consolidate. In fact, we're in the process of doing that. I'm not sure if we ever will go down to one. My concern always will be to have contingency plans, should something happen. All sort of national disasters happen, we've seen this past year. So we need to have preparation on at least a second site. It could be co-located, but they have to be very nicely and physically separated.

In terms of making a decision regarding Iovance facility, there is certainly pros and cons, and we have taken that under strong consideration. It would have to be at a point where we are very clear what our regulatory path is. We want to know what our patient population would be and how far away from a BLA would be. So those two factors would be the driver of -- as to how to make that decision and how to position ourself.

And our next question is from the line of Madhu Kumar of FBR Capital Markets.

So first, if we were to assume a blue-sky scenario for the Gen 2 TILs in the SITC data set in melanoma, would you consider transitioning the head and neck and cervical cancer programs over to the Gen 2 process? And if so, what do you estimate would be the effect on demand and capacity among existing manufacturer?

Okay. Thank you for the question. In a blue-sky setting, I'd be fairly comfortable with taking cervical into Gen 2 because the similar process at Rosenberg lab gave a similar type of responses in cervical.

Head and neck, it would give us a little bit of time. We still have another month, month and a half to make that final decision. But in an ideal world, if you see responses, yes, I'd be fairly comfortable going into Gen 2 at that point in time.

From a manufacturing perspective and capacity, we are not concerned. We have an ample capacity in order to -- if we decided to move everybody over to Gen 2, we have ample capacity to be able to provide everybody with that product for all the ongoing studies.

Okay. And then you mentioned earlier that Gen 2 has around a 35% lower COGS compared to Gen 1. How much of that COGS reduction scales with the reduction in the length of manufacturing time? And with further reductions in length of manufacturing time, kind of scale with the effect on COGS?

If I understood your question correctly, the impact is in fact from duration being reduced. That the time and the suite being reduced, the staff being reduced for that shorter time. The material -- most of the material -- so anything that is variable cost is still the same between the two processes for the most part.

Thank you. And we have no more questions, so I thank everybody for attending today's call. We will now disconnect.