Allogene Therapeutics, Inc. (ALLO) Q1 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Allogene Therapeutic's first-quarter 2019 conference call. At this time all participants are in a listen mode. Later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] Please be aware that today's conference is being recorded. I would now like to turn the conference over to Ms. Christine Cassiano, Chief Communications Officer. Ms. Cassiano, please go ahead.

Thank you, operator, and good morning. Before market opened today, Allogene issued a press release to provide the corporate update and financial results for the quarter ending March 31, 2019. The press release is available on our website at www.allogene.com. We remind listeners that today's call is being webcast on our website and will be available for replay. Joining me on the call today are Dr. David Chang, president and chief executive officer; and Dr. Eric Schmidt, chief financial officer. During today's call, we will be making certain forward-looking statements. These may include statements regarding the success and timing of our ongoing and planned clinical trials, regulatory filings, future research and development efforts and manufacturing capabilities, among other things. These forward-looking statements are based on current information, assumptions and expectations that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the Securities and Exchange Commission, including our Form 10-K for the year ended December 31, 2018 as well as our upcoming Form 10-Q for the quarter ended March 31, 2019. You are cautioned not to place undue reliance on these forward-looking statements, and the Company disclaims any obligation to update such statements. I'll now turn the call over to Dr. David Chang.

Thank you, Christine. Good morning, and thank you all for joining us today. It's now officially one year since the launch of Allogene. On a personal note, this also marks my five years in the field of CAR T. It has been a distinct pleasure to play a role in advancing the exciting field of engineered cell therapy, first at Kite with oncologists, and now at Allogene with allogeneic approach. And yet, I believe we are still in early days of unlocking the full power and versatility of cell therapy. Our single focus from day one at Allogene was how we could accelerate the development of AlloCAR T therapy to enable an off-the-shelf CAR T therapy that could allow more timely treatment to patients in need. Our goal of revolutionizing the cell therapy landscape represents an ambitious challenge, but it is one that I'm very proud our team has vigorously embraced across every function. In May 2018, we started out with approximately 40 employees who joined us from Pfizer where they had been working diligently for years on this pursuit. We are now just over 150 people, all dedicated to the goal of making AlloCAR T therapy a reality. We have started to build our own state-of-the-art manufacturing facility to deliver cell therapy faster, more reliably and at greater scale. And today, we are very pleased to be hosting this call from our new headquarters in South San Francisco. While much of this progress isn't necessarily visible externally, the results are tangible in terms of advances we have made with our lead programs. The first program we looked to accelerate was ALLO-501 for patients with non-Hodgkin lymphoma, or NHL. Our IND for ALLO-501 was accepted in January, and we have been focused on clinical site initiation for the ALPHA study in relapsed/refractory diffuse large B-cell lymphoma, or follicular lymphoma. We are very excited to be working with some of the top cancer centers and experts in the CAR T field, including the lead investigators from the Yescarta pivotal trial. Their extensive experience in CAR T therapy will be invaluable as we advance ALLO-501 through Phase I development and set the stage for our potential pivotal Phase II trial. With multiple sites fully activated, we are very pleased with the progress of this program. The current version of ALLO-501, which shares the same gene engineering as UCART19, enclose a CD20 epitope as a safety off-switch. As most patients with NHL are treated with rituximab and rituximab can bind the CD20 epitopes, we are carefully screening for patients with low serum levels of rituximab to approximately assess eligibility. While ALLO-501 is being deployed to assess the initial safety, tolerability and potential antitumor effects of AlloCAR T therapy and NHL, the original construct was designed for acute lymphoblastic leukemia. As a result, when the Company was formed, we plan to accelerate a second generation of ALLO-501 into the clinic. The second-generation construct is devoid of this CD20 safety switch, eliminating the need for rituximab screening. We are happy to report that this second generation construct is rapidly advancing through preclinical development. And we intend to introduce this prior to the start of Phase II portion of the ALPHA study. The second program where we have applied methods to accelerate development is ALLO-715, which targets BCMA for the treatment of patients with multiple myeloma. We recently published in the journal Molecular Therapy preclinical study results which validates the potential for an AlloCAR T to treat multiple myeloma. These results demonstrate the ability of ALLO-715 to sustain potent antitumor responses in preclinical models. Multiple myeloma is a competitive field, but we believe an off-the-shelf CAR T therapy could be game changing for patients. And we are working hard to be among the first to introduce such a candidate into the clinic. As is typical with any new therapeutic modality, industry pioneers are encountering novel challenges including the evolving FDA specifications related to product characterization for allogeneic cell therapy. We expect manufacturing specifications will be a focus of IND reviews. We are fortunate that our efforts to accelerate this program coupled with a learning from the ALLO-501 IND submission have allowed us to be proactive in focusing on these topics. As a result, we have submitted the IND for ALLO-715. And we currently remain on track to initiate the Phase I study before the end of the year. While our initial focus has been on accelerating our lead programs targeting CD19 and BCMA, we recently began disclosing more information on our pipeline of 15 additional tumor targets. At the 2019 AACR Annual Meeting last month, we presented preclinical data demonstrating the therapeutic potential of an AlloCAR T therapy directed at CD70 in renal cell carcinoma. As many of you know, RCC is a highly T-cell infiltrated tumor type that is responsive to immunotherapy. In this preclinical study, a large panel of anti-CD70 CAR were generated from independently drive single-chained variable fragments. We then rank the anti-CD AlloCAR T therapy candidates based on tonic signaling and transduction efficiency as well as their effect on T cell phenotype type, activation status and expansion. In addition, as we consider the feasibility of anti-CD70 AlloCAR T therapy, we were very pleased to find that AlloCAR T cells could be successfully manufactured in a large-scale process without the need to inactivate or downregulate CD70, which is expressed in activated T cells. We believe that CD70, which is expressed on both hematological malignancies and solid tumors, may bridge the gap toward unlocking the potential of AlloCAR T therapy in solid tumors. Based on this encouraging early stage research, we look forward to selecting an anti-CD70 AlloCAR T candidate for IND enabling studies. I began this call talking about how pleased we are with our progress and our team's ability to accelerate our internal programs. This effort also applies to our broader vision where our success at Allogene will be fostered by our abilities to engage the best external minds. Earlier this month, we announced new addition to our Scientific Advisory Board. The four new members ar Dr. Robert Abraham, who is senior vice president and group head of Pfizer's oncology, research and development group; Dr. Malcolm Brenner, the Fayez Sarofim distinguished service professor and founding director of center for cell and gene therapy at Baylor college of medicine; Dr. Steven Forman, the Francis & Kathleen McNamara distinguished chair in hematology and hematopoietic cell transplantation at the City of Hope's comprehensive cancer center; and Dr. Wendell Lim, the chair of the department of cellular and molecular pharmacology and the director of center for systems and synthetic biology at University of California, San Francisco. All of our new SAB members join our existing SAB members: Chairman Dr. Ton Schumacher and Drs. Donald Kohn, Matthew Porteus and Owen Witte. While we continue to move our near-term strategy forward by capitalizing on validated targets, our intention across every function in Allogene will be to leverage opportunities that could further expand our leadership in allogeneic CAR T therapies for the long term. I will now pass the call over to Eric.

Thank you, David, and thanks to everyone for dialing in to this call. I will provide a brief overview of Allogene's financials. Additional detail on our first-quarter financial results can be found in our press release issued earlier today and in our 10-Q, which will be filed with the SEC. We are pleased to report that we remain in a strong financial position. As of March 31, 2019, Allogene had cash, cash equivalents and investments totaling $680.7 million. In the first quarter, our research and development expenses were $23.4 million, which includes $2.7 million of noncash stock-based compensation expense. General and administrative expenses were $13.1 million for the first quarter of 2019, which includes $5.1 million of noncash stock-based compensation expense. Our net loss for the first quarter of 2019 was $31.6 million, or $0.32 per share, including noncash stock-based compensation expense of $7.9 million. As we progress our clinical programs and invest in building our manufacturing operations, we continue to expect full-year 2019 net losses to be between $200 million and $210 million. This includes an estimated noncash stock-based compensation expense of $45 million to $50 million, excludes any impact from potential business development activities. With that brief review of our financials, we will now open the call to questions.

[Operator instructions] Our first question comes from Salveen Richter with Goldman Sachs. Your line is now open.

Good morning. Thanks for taking my questions. With regard to the BCMA program, can you just comment on which construct you're promoting to the clinic, whether it's BCMA 1-R2 or 5-R2? And then also the article that you discussed showed powerful impacts of IL-15 on T cell persistency. How would that be incorporated into human trials? And I have a follow-up.

With respect to BCMA CAR construct, we are advancing a construct that contains internally incorporated safety switch. So I cannot go into the details of exactly which construct in the paper that we have published, but this is the one that we are moving forward and as we have indicated at the INDs file, and we are looking forward to initiating that study as projected in the second half of this year. Can you just go back to the second question again?

Sure. Just with regard to the impact of IL-15 on T cell persistency. Would you be looking to incorporate that into trial?

Yes. So that's a great question. Certainly, it's a part of the -- our sort of second-generation and next-generation construct approach. We are investigating various different options, and incorporating cytokine is one of the priorities that we are focusing along with alternative approaches to make the cells more invisible to the human systems. So we are doing a lot of different things. And as we have said from the beginning, we are carrying on research that has been ongoing on at Pfizer for over four years, and there are many different avenues that we are looking forward to enhance the potency or the activity of the CAR T cells, including making the cells more fit during -- if the active cells are given to their patients.

And then, David, could you help us to understand how your ranking the CD70 CAR to avoid tonic signaling and fratricide?

Yes. So I think at this point, I mean much of that effort is empirical. I have been sort of observing how the CAR is being constructed over the years. And I have to say that as I review the Pfizer's program, it still keeps an -- it keeps me amazed about what we really know and don't know about the CAR constructs. So what has been done with the CD70 is instead of starting with one or two monoclonal antibodies, we started with a large panel of monoclonal antibodies, again CD70, from which we generated the single chain variable fragment and CAR construct. And we empirically look for different attributes that so far has been associated with some benefit either in preclinical or the clinical models, and that included absence of tonic signaling. It probably is a little bit premature to say if there is any construct that doesn't have tonic signaling. We are looking for a construct that has the minimum tonic signaling. And we are also learning that potentially affects the T-cell phenotype at the end of the manufacturing. And that could have alleged to T cell fitness when the cell products are given to the patients. Another factor that we are looking for is to express our construct, which can be variable depending on which construct product you're using, and we're learning that high level of CAR expression is not necessarily the best. We really have to choose the optimal expression that allows the cells to expand and also carry out their antitumor activities. So there were layers of different measures that we applied to choose the best construct. And we are finalizing that decision for the IND candidate. And hopefully, next quarter or the one after, we will be able to give you more details about time lines for the CD70 program.

Thank you.

And our next question comes from Marc Frahm with Cowen and Company. Your line is now open.

Hey. Thanks for taking my questions. David, maybe when you were discussing kind of the moving to second-generation, you brought up rituximab cut-offs. Can you give a little more detail about what the concentration is that people have to get below? And what does that mean in terms of how long does the patient -- does the typical patient have to wait from their last rituximab dose before they're eligible for ALLO-501?

Good morning. That's a great question. At this point, we are not disclosing those details. We have taken a very conservative approach in patient selection, making sure that any residual rituximab that maybe present that does not interfere with the expansion of our CAR T programs. And also, as we have said in the prerecorded comments, we have accelerated advancements of our second-generation, our 501 program, that is devoid of the switch. And that will be introduced into the clinic at which point this becomes an nonissue. And I would also say that enrollment to the clinical study is very much on track. And as we have said, we are very pleased about how we have progressed with the side initiation of ALLO-501 program.

OK. Great. And then when you do bring in the second generation without safety switch, the rituximab safety switch, do you expect to have to do an abbreviated dose escalation still? Or do -- can you just start at whatever dose you're at with ALLO -- with the first generation? How do you expect that to work?

So Mark, all great questions. Those are the options that we are entertaining. And at the end, the decision will be made on some of the bioanalytical comparability that we can establish on the products. So stay tuned about how we go forward on that.

And our next question comes from Biren Amin with Jefferies. Your line is now open.

Hey, guys. Thanks for taking my questions. Just a question on ALLO-647. Can you just provide an update if the IND has been filed for that program?

Good morning. Biren, so ALLO-647 is our own anti-CD52 monoclonal antibody. So the approach that we are taking with ALLO-647 is that we have filed essentially what is equivalent of IND. It is a process called drug master file. What that allows, the drug master file allows you to do is essentially giving us opportunity to reference that drug master file in any of our INDs and start using it as part of the lymphodepletion. Earlier, I guess it was at the ASH the last year, we talked about the importance of anti-CD52 antibody for the AlloCAR T expansion. We believe that this is going to be one of the key components of our strategy of advancing the allogeneic CAR T programs. And in terms of the use of 647, ALLO-647, that will be a part of our ALLO-501 clinical study.

And David, could you maybe just describe what the differences are between 647 and alemtuzumab? Is 647 less immunogenic, for example, than alemtuzumab? Are there any recorded clinical advantages to 647 versus alemtuzumab?

Yes. So with respect to ALLO-647 and the existing product, alemtuzumab, which is marketed as the LEMTRADA for the indication of multiple sclerosis, there is very little difference. The primary sequence of the antibody between those two are the same.

Got it. OK. And then on ALLO-715 with IND submitted, I guess is it fair to say that you were able to have three consistent batches to enable that IND filing? And is that, I think, would that be similar, I guess it would be a similar requirement to the 501 program in that manner?

Yes. With all respect, our baseline assumption is that the IND for ALLO-715 will be very similar to what we have done for ALLO-501. And in fact, in the experience that we have gathered through ALLO-501 is really helping us as we prepared and submitted the IND for the ALLO-715.

Thank you.

And our next question comes from Mark Breidenbach with Oppenheimer. Your line is now open.

Good morning and thanks for taking the questions. David, I was wondering with respect to ALLO-715, as you were designing the Phase I protocol, if you're taking into account CD52 expression of the plasma cells in these patients and if there is any evidence that an anti-CD52 antibody can have monotherapy activity against CD52 positive myeloma.

Mark, great question. I forgot to mention that with me today is Dr. Susie Jun, our chief development officer. So I'm going to ask Susie to answer your question.

So we have -- there have been studies of alemtuzumab against -- in myeloma against the plasma cells, and it really has never shown any activity of that -- any significance. So we're not concerned that our ALLO-647 will have sufficient levels of antitumor activity, especially since we're giving such a low dose.

And second a question with regard to the CD19 programs. Obviously, we've seen some data suggesting that CD19 binding kinetics and target interaction half-life really impact CRS incidence and severity. Can you just remind us how the CD19 binding kinetics of ALLO-501 and UCART19 compare to some of the approved products, Kymriah and Yescarta.

So Mark, you are asking very sophisticated question. In fact, we are aware that several other players in the CAR T space in the CD19 are really looking to improve the safety profile by manipulating the binding kinetics of the single chain variable fragment. At this point, we are closely monitoring the clinical data coming from those studies. And with respect to the ALLO-501, we haven't -- I'm not aware whether we have made any direct comparisons of so called the on-rate and off-rate of the -- between the 2 binders that's being used in our and our competitors' programs. And this is, as I've said, in one of the earlier questions. I think the field is learning so much about CD19 as well as other CAR T programs. And we're really looking forward being part of this advancement that's going on in the CAR T therapy.

Our next question comes from Tyler Van Buren with Piper Jaffray. Your line is now open.

Good morning, guys. Great to see all the progress between the ALPHA initiations, 715 IND submission and the tremendous SAB additions. I guess my first question would be -- based upon the existing kind of clinical experience and the preclinical data, what are your updated thoughts on the optimal window of CAR T cell persistence, particularly as we think about the 501 program and NHL indications?

Tyler, great question. That's a question that has been coming up in almost every encounter that we've had with analysts or investigators. I think we have made a very sort of concerted effort trying to explain the cell persistence, which has been discussed over the last several years. First, I think when we talk about persistence in 2019 and going forward, we also have to put that in the context of T cell fitness. Are we detecting these cells just because we are using highly sensitive techniques? Or are these cells really functional? And then I'm going to follow-up with a -- in a sort of existing data that really tells that the tumor killing really occurs very rapid after CART T infusion. And at this point, I'm taking a position that most of the tumor cell killing essentially is completed by the first month, maybe extending a little bit more, but it's probably no more than that. So essentially, within a month or two, you are having rapid and complete tumor cell killing. And with that regard, when we follow the self persistence using the existing methods -- so this is just really telling whether a cell we can detect by [Indiscernible] flow analysis. In the UCART19 program where the data's are coming from, we can detect the cells up to 90 days plus. So we feel very comfortable with respect to our approach, lymphodepleting, and advancing that with anti-CD52 antibody or ALLO-647. We will be able to create enough window for our AlloCAR T cells to expand and carry out antitumor activities.

Great. That's helpful. And obviously, you guys picked the 647 and Flu/Cy doses based upon preclinical PK modeling. But as you do the PCR and flow analysis in the first few patients, as you began treating them in the ALPHA trial, do you guys have the flexibility to move those doses up and down in terms of lymphodepletion? And how do you think about doing that with multiple variables?

Yes. So great question. And in fact, one of the reasons that we have really emphasized building up the -- our translational research and the biomarker group is -- was to be able to get almost the real time data back on the biomarkers. So I'm going to ask -- defer the question to Susie, who is leading our translational research group about how we plan to adjust based on the emerging clinical data.

So we will be monitoring the cells during the lymphodepletion period using both the flow as well PCR methods. And then based on the initial cohort or set of patients that we enrolled, we should be able to adjust the window of lymphodepletion to allow for the level of persistence that we need. So we can either adjust the CD52 antibody levels or -- and the doses as well as the Flu/Cy. I think our expectation is that we can better manage the window using small changes in the CD52 dosing regimen.

OK. That's really helpful. And my last question is can you just, I guess, compare and contrast some of the benefits of adding anti-CD52 to Flu/Cy relative to just using a very intense Flu/Cy lymphodepletion regimen?

So Tyler, this is David Chang. I'm going to take that question. So we are facing a very limited, but I would also say, very strong data coming from the UCART19 programs. In that study, as we have presented in the 2018 ASH, we treated altogether 23 patients. And there were four patients, for one reason or another, did not get anti-CD52 antibody. And that happened both in the CALM study, which is the adult ALL study, which uses low-dose chemotherapy lymphodepletion regimen as well as in the pediatric, or the PALL study, which uses high dose lymphodepletion regimen. So when I looked at that data, what was really striking was it was not really the dose or intensity of the lymphodepletion. It was simply whether the patient received anti-CD52 antibody or not. So that's really driving how we are moving forward with a lymphodepletion in our ALLO-501 study.

Our next question comes from Raju Prasad with William Blair. Your line is now open.

I'm actually going to question on -- for Phase I ALPHA trial, do you anticipate having one donor source for the treatment of all patients? Or multiple? Just kind of walk me through that thinking.

Yes. So Raju, that's a great question. When we manufacture the cells with AlloCAR T, we certainly get enough materials to treat. And probably in this case, complete our Phase I study from one manufacturing process. So internally, we are discussing whether we should complete the study with a one donor or one manufacturing lot or whether introduce a second manufacturing lot. So that's an ongoing discussion. And we'll have to sort of look into the rate of the enrollment and other things to make the decision. When it comes to the Phase II portion, our intention is definitely use more than one manufacturing lot to complete the Phase II portion of the ALPHA study.

Great. And then regarding that, the second generation ALLO-501, do you think that in-house manufacturing will align with kind of the introduction of that into trials? Or is it too early to say?

Yes. So the second generation 501, we are really excited how fast we could move on with that program. That program did not exist when Allogene was created a year ago. And already, we have completed all the preclinical work and advancing that in preparation of start of the Phase II. So that program is, time line is very much on track to when we project the Phase II start, study to start some time in 2020.

But Raju, as far as the manufacturing, we've done all the process development in-house and, as David said, that's been complete. We'll actually manufacture the product at the CRO for the initial trials. We won't have our own operational facility ready by then.

Great. And then one last one, if I may. I think there's been some interesting data on gamma-secretase inhibitors in multiple myeloma in increasing [indiscernible] expression. Is it something that you've looked into? Just wanted to get your thoughts on if that might be part of the paradigm moving forward?

Yes. So in a beta secretase phase, it's something that we have been tracking very closely. The whole concept is that BCMA, which is the target of many CAR T programs in multiple myeloma, it can be crisp and become soluble BCMA by Beta secretase phase. And the whole hypothesis, if you were to prevent that where the antigen presented on the multiple myeloma cells will allow you to be better targeted by CAR T, it's a great concept. And certainly, we are monitoring in this area. Having said that, the ALLO-715, preclinically, is insensitive to the levels of soluble BCMA. So certainly, all these things factor in. I mean, our whole intent is to design the clinical study that is streamlined and as simple as possible. And if we can do that, that will be the most ideal situation. If we have to use some level of combination approach, that's something we are more than willing to embark on to improve the efficacy.

Thanks for the questions.

Thank you. That concludes our question-and-answer session. I would like to turn the conference back over to management for any additional comments.

All right. Thank you. I have to say, we are immensely proud of the progress we continue to make, and we look forward to updating you on our efforts to advance AlloCAR T therapies. Thank you for your continued interest in Allogene. Operator you my now disconnect.

Thank you, ladies and gentlemen thank you for your participation in today's conference call. This ends the program. You may now disconnect.