Compugen Ltd. (CGEN) Q3 2018 Earnings Report, Transcript and Summary

Thank you for standing by. Welcome to Compugen's Third Quarter 2018 Results Conference Call. [Operator Instructions] An audio webcast of this call is available in the Investors section of Compugen's website, www.cgen.com. As a reminder, today's call is being recorded. I would now like to introduce Elana Holzman, Compugen's Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator. Thank you for joining us today. With me from Compugen are Dr. Anat Cohen-Dayag, President and CEO; Dr. Henry Adewoye, Chief Medical Officer; and Ari Krashin, CFO and COO. 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 that the company files 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 turn the call over to Anat.

Thank you, Elana. Good morning, and good afternoon, everyone. I would like to welcome you to our third quarter 2018 corporate and financial updates. As Elana mentioned, with me today are Dr. Henry Adewoye, our Chief Medical Officer, who will discuss certain aspects of our COM701 Phase I study; and Ari Krashin, our CFO and COO, who will provide a financial update. Thus far, 2018 has been a highly productive year for Compugen, marked by strong execution. We transitioned to a clinical-stage company and achieved multiple key accomplishments. In September, we dosed the first patient in our Phase I study for COM701, a new drug candidate targeting PVRIG. Soon after, we announced a clinical trial collaboration for COM701 with Bristol-Myers Squibb, which also became a strategic investor in Compugen. The collaboration agreement provides for the supply of Opdivo, Bristol's PD-1 inhibitor, for the combination of our Phase I trial as well as establishes a framework for conducting other drug combination studies, including a potential trial sponsored by Bristol evaluating PVRIG and TIGIT blocker. This establishes the opportunity to accelerate the overall time line for clinical evaluation of our COM701 program. The Bristol collaboration follows the license agreement with MedImmune signed earlier this year for bispecific and multispecific therapeutic antibodies, and our existing collaboration with Bayer on BAY 1905254. With Bayer initiating their Phase I study for BAY 1905254 targeting ILDR2 in late September, there are now 2 ongoing clinical trials evaluating first-in-class drug candidates addressing novel target we discovered through a computer prediction. This trial serves as a further evidence of the power and value of our computational discovery platform. With 2 programs that originated from computer prediction reaching the clinic and 2 additional programs with preclinical proof of concept, we're very proud of the capabilities and output of the computational discovery platform we have developed at Compugen. This platform serves not only as an engine to generate new promising programs to our pipeline, but also supports and guides our therapeutic development as the programs advance in our pipeline. While the field of computational discovery is beginning to receive wider recognition, our pioneering efforts and proven capabilities serve as a distinct and highly valuable asset for our company. The field of immuno-oncology is highly competitive in many respects with many companies addressing the same drug targets, various drug modalities and numerous ongoing drug combination trials, though many, we believe, lack a solid scientific rationale. With recent clinical failures of various immuno-oncology drug candidates, there is no doubt that the field is currently subject to some fatigue and cautiousness on the part of investors in pharma. However, in light of these and other emerging trends in the field, we have dedicated our efforts towards building the company's pipeline, using our core computational discovery competency and applying a differentiated approach, which is based on 3 pillars. We target novel pathways identified internally with strong potential to address the unmet needs of patients nonresponsive to cancer immunotherapy. We apply a science-driven approach to identify optimal drug combination through deep understanding of the biology of this novel pathways as opposed to a more random approach, which we believe resulted in some of the failures we have recently witnessed. And we use the same scientific understanding of the new pathways to design a robust biomarker strategy for patient selection. This differentiated approach has driven our preclinical development and clinical and biomarker strategy for our lead program COM701. Our preclinical data demonstrates that PVRIG and TIGIT are the primary inhibitory components of the foundational immuno-oncology DNAM axis. A recent publication in Science Immunology, in which tumor response to PD-1 inhibition has been directly tied to signalings in the DNAM axis, provides additional support for the view that this axis may serve as foundational in addressing the nonresponsive patient population. As we have stated ever since we have first presented the PVRIG pathway at the Society for Immunotherapy of Cancer annual meeting 3 years ago, we believe that the PVRIG pathway is a key missing piece for cancer immunotherapy approaches that involves solely targeting the TIGIT pathway in this axis. Our research demonstrates that targeting PVRIG will be necessary to maximize the antitumor activity of TIGIT inhibitors with or without PD-1 inhibitors in various cancer types and patient population. Our in-vitro, in vivo and expression profiling data involving the axis components highly support this notion. This is now also supported by initial clinical data published by others in anticipation of this week's Annual Meeting of the Society for Immunotherapy of Cancer that show encouraging but modest effect of anti-TIGIT antibody in Phase I clinical trials. Before turning the call over to Henry to speak about our COM701 Phase I study, I would like to discuss the next value drivers for our company. First and foremost, over the course of our Phase I study, we're expecting a number of data readouts relating to COM701 monotherapy safety data, COM701 and Opdivo combination data and data from monotherapy and combination expansion cohorts. We plan to share guidance regarding expected time lines for data readout as our study progresses. Second, our IND-enabling and CMC activities for COM902 are progressing, and we are on track to file an IND with the FDA for COM902 and begin our Phase I study in 2019. Third, as our partnered programs continue to advance through development, we should realize future milestone payments from both Bayer and MedImmune. Fourth, we have multiple early-stage programs mainly focused on myeloid targets, for which we expect to share more information as they reach preclinical development. These programs address new and exciting areas of opportunity for our own internal pipeline and for partnering opportunities. With 3 strategic collaboration with big pharma to drive value from our pipeline program and the promising and innovative immuno-oncology pipeline to drive future growth, we're well positioned in the competitive immuno-oncology landscape. This pipeline serves as a solid foundation in executing our long-term corporate goal of delivering meaningful therapies to patients in need to be developed internally or through additional collaboration. And with this, I would like to turn over the call to Henry. Henry?

Thank you, Anat, and good morning to everyone. As we you know, we achieved first patient dosing for the Phase I COM701 study in early September. The study is progressing according to plan. Patient enrollment and site engagement are on track in accordance with our plans and expectations. As a reminder, Phase Ia and a of the study includes COM701 monotherapy dose escalation in all comers, in other words, patients with advanced solid tumors who have exhausted all available standard therapy; and an expansion cohort with 4 target indications, lung, breast, ovarian and endometrial cancer, in patients refractory relapsed following checkpoint inhibitors. We selected these 4 indications based on findings on relative expression levels from the biomarkers PVRIG and PVRL2 in our non-clinical studies as compared to the other DNAM axis components. Analysis of the biomarkers of interest and correlation with data on the preliminary antitumor activity of COM701 monotherapy and in combination with Opdivo will provide valuable information to inform on inhibition of the DNAM axis. In arm B, we will evaluate escalating doses of COM701 in combination with Opdivo. The endpoints for this study includes safety, tolerability, preliminary antitumor activity and PK and PD. Phase Ib of the trial is a combination study of 6 doses of COM701 and Opdivo with administered IV 2, 3 weekly in patients with relapsed or refractory disease with the same select tumor types listed above. Our partner, Bristol-Myers Squibb, will supply Opdivo for these studies in accordance with our collaboration. As Anat mentioned, our preclinical data suggests that TIGIT and PVRIG are part of the foundational cancer immunotherapy axis, the DNAM axis, and that PVRIG is a key missing piece of character in immunotherapy approaches that involve either fully targeting TIGIT or targeting TIGIT in combination with Opdivo. In order to own the 2 products necessary to inhibit the DNAM axis, we are advancing COM902, our TIGIT antibody into the clinic next year. Ultimately, we plan on evaluating the combination of COM701 and COM902 with the objective of demonstrating that inhibition of the DNAM axis is necessary to be able to improve upon and deepen clinical responses in patient populations that have suffered a relapsed or a refractory to cancer immunotherapy agents. Two abstracts scheduled for presentation at the upcoming Annual Meeting of the Society of Immunotherapy of Cancer show encouraging but modest effects of anti-TIGIT antibodies in Phase I clinical trials. While we await the presentation of the full data at the meeting, importantly, the abstracts further highlights the redundancy in the DNAM axis, requiring the inhibition of multiple pathways including PVRIG as we have demonstrated in several publications. Additional combination studies, which may be conducted by Bristol-Myers Squibb under our clinical collaboration, will also present significant acceleration of our development time line for our COM701 program. And with this opportunity, Compugen supports to advance the field of immuno-oncology by evaluating a novel and first-in-class immune checkpoint inhibitor into clinical trials. Beginning next year, we plan to submit trials and progress abstracts to various scientific meetings. While study results will not be disclosed in these abstracts in keeping with the abstract submission guidelines of the conferences, we view this as a way to keep the medical community, our patients, their families and investors aware of the progress we are making. As Anat stated, Compugen has had several key accomplishments this year. The accomplishments on the clinical side are in large part due to our ability to execute on our overall strategy, including our biomarker-driven strategy that has informed the target population of patients in our ongoing clinical trial. Most importantly, successful execution of the clinical trial has been made possible by the high level of interest, demonstrated by the principal investigators, sub investigators, study staff and thought leaders involved in the clinical trial. Specifically, I also want to acknowledge and thank the patients participating in the ongoing trial. Thank you for listening. I will now turn the call over to Ari.

Thank you, Henry. While you may find the full details of our financial results in the press release issued this morning, I will provide you a summary of the highlights. Our financial results for the third quarter of 2018 includes revenues in the amount of $7.8 million attributed to the milestone achieved from Bayer upon first patient dosing under our cancer immunotherapy collaboration or BAY 1905254. Cost of revenue for the third quarter of 2018 in the amount of approximately $0.7 million reflects warranties and related expenses associated with the milestone achieved from Bayer. Research and development expenses for the third quarter of 2018 totaled $7.8 million compared with $7.6 million in the comparable period of 2017, and they continue to reflect clinical expenses associated with site engagement and other expenses associated with the COM701 program as well as preclinical expenses for the manufacturing of COM902 in preparation of this program for the IND filing anticipated in 2018. Net loss for the third quarter of 2018 was $3.1 million or $0.05 per diluted share compared to a net loss of $9.9 million or $0.19 per diluted share for the third quarter of 2017. As of September 30, 2018, we had approximately $34.9 million in cash and cash-related accounts with no debt. This balance does not include the $12 million investment made by Bristol-Myers Squibb in October or the $7.8 million from Bayer expected to be collected during the fourth quarter of this year. Our cash balance at the end of 2018 is expected to be in the range of $42 million to $44 million without taking into consideration any additional potential cash inflows into the company. We believe that our cash resources are sufficient to support our corporate objectives and development plans for 2019, including the ongoing and planned clinical trials of COM701 and COM902, respectively, as well as development activities for earlier stage programs in our pipeline. With that, I will now open the call for questions. Operator?

Thank you. [Operator Instructions] The first question is from Konstantinos Aprilakis of JMP Securities. Please go ahead.

Hi guys. Thanks very much for taking my questions. And congrats on all the recent progress. So earlier this week, the SITC abstracts were released and they featured new clinical data for targeting TIGIT. Just wondering what your thoughts are on those data, especially the Merck compound? And what will you be looking for during the presentations at the meeting? And I've got 2 follow-up questions.

So thank you. And yes, we're seeing this abstract as well, and we must say that this is in line with what we were saying in the last 3 years since we published our own data at SITC for the first time for PVRIG. We need to wait and see the full presentation at SITC, but looks like the results are encouraging but modest. We believe that, as I said in my prepared comments, that PVRIG is the missing piece in this pathway in order to maximize the effects of TIGIT antibodies. And it is supported by the biological rationale of the pathways we presented and the preclinical data that we presented in vitro, in vivo, expression profile. And also, recently, as I mentioned, the linkage, even in publications of the PD-1 -- the inhibition of the PD-1 pathway in DNAM axis, we think that this is a foundational axis and that PVRIG is needed. And we will test it. So we're happy to see the data. It looks encouraging, I have to say. Henry, do you have anything to add on this front?

Just a few things on that. Thank you, Konstantinos, for the question. I'd like to reference back to my prepared comments where we talked -- where I talked about redundancy in the system. The pathway has 2 parallel axes. If you'll see on our corporate presentation on Page 10 on our website, we have a diagram there that illustrates the parallel pathways that Anat was referring to. So essentially, if you block one pathway, which is the TIGIT pathway, it's a redundant system that then shows that you have not completely inhibited the system. So -- and that is right. And the data we've been publishing in the last several years now further validates what we've been saying that you completely need to block the foundational piece of PVRIG in this DNAM axis.

Thanks. That's very helpful. So I guess to that point, given our understanding of the biology and the synergistic effect that you're alluding to, what are your thoughts on a strategy maybe involving a bispecific compound targeting both PVRIG and TIGIT? What are your latest thoughts there?

So it's a very good question. In general, that could be targeted. We're in the belief that when you're moving ahead with a bispecific, instead of combining the 2 antibodies together, you would want to see some synergy or some -- any reason to go ahead with the bispecific. On the other hand, that's -- could be also for various other reasons than just increase efficacy. It's a valid approach.

Okay. And then one last one. I was just wondering if you might reiterate time lines. So are we still expecting initial clinical data for COM701 in 2019? And are we still on track to file an IND and initiate a Phase I for COM902? And if so, are you maybe prepared to narrow that guidance a bit? And I'm sorry if I missed it in the prepared remarks, but are those first half or second half '19 events?

Yes. So Konstantinos, thank you for the question. So let me first deal with COM902. The preparations for the filing of the IND are on track, so that, let me be clear there. With regards to the guidance on when data will be presented for COM701, we're still in the early stages of this clinical trial and probably premature to start projecting on when this time lines should be. What I will say is what was disclosed and Anat has mentioned that we want to keep the medical community and our investors and the family members aware of the progress we are making. I think, we all think that the trials-in-progress abstracts will probably highlight some of that progress, and we encourage everyone who's at SITC or other meetings to see these abstracts. The other thing I will say is that guidance on data availability, as Anat has mentioned, will be shared as we progress the study.

Our next question is from Mark Breidenbach of Oppenheimer. Please go ahead.

Thanks for giving us your reaction to the relatively modest activity we're seeing in the anti-TIGIT antibodies included in the SITC abstracts. I wanted to ask if you think there are any specific tumor types where you would predict TIGIT, but not PVRIG, to play a more dominant role in the DNAM signaling axis?

So we're working on this front now, also for our COM902 program, which is scheduled to start the Phase I next year. And we do not have firm statement on this front yet. We've done a lot of analysis before we publish our assessment as to the PVRIG and what we think would be dominant expression or relevance in specific tumors. So no, so we don't have any specific statements here. And we're also waiting to see the data that will be presented by others for PVRIG and understand more.

Sure. We might learn something from the Merck abstract, it sounds like, with TIGIT.

Right.

And maybe a quick one for Henry. I was just wondering if you could just remind us how long we have to wait between the single-patient cohorts in the accelerated dose escalation phase of the COM701 trial?

21 days, so the dose-limiting toxicity window is 21 days. And so the single-dose, single subject dose escalation, that's what we will do right now, what we'll discuss.

The next question is from Philippa Gardner of Jefferies.

I had 2 perhaps slightly broader questions. So firstly on your earlier stage pipeline. I was just wondering sort of how many programs we might learn more about in the next 12 months? And then on your partnered programs, can you say anything about how things are progressing with MedImmune? And can you also perhaps give us some color on what the next milestone-triggering event is with Bayer? Thank you.

Yes. Thank you for the question. So first for the early-stage pipeline, as we stated many times, we have multiple programs. Of course, none of them is disclosed at this stage. I did refer to it in my comments that we will disclose the programs or each of the program when it reached the preclinical stage. We are under the assumption, as you should all be, as it is in the initial discovery and validation processes that there is an attrition rate and, of course, not all of the programs that's in our earlier pipeline are going to mature. But in general, hopefully, we'll be able to say -- at least for 1 program, we'll be able to say something in 2019 with respect to preclinical stage information. On the partnered front, you were asking a question about MedImmune and Bayer. First, I'll address the Bayer collaboration. This program is completely at their full control. We cannot discuss -- and I'm sorry that I need to repeat it every time, but it's really -- that's the situation. We cannot discuss any additional information on this program, certainly, not eligibility for -- from my front. I think that you can know from knowing industry standards for such licensing arrangements, you could come up with how the milestones are built into the agreement. And with the MedImmune collaboration, that's -- again, that's a license agreement. MedImmune is moving ahead with the development of bispecifics, and that's again completely in their own control. So I can't commit to time lines for milestones on these 2.

And just to follow up, I just -- sort of on MedImmune, of course, I'm not looking for specifics. I mean, is it progressing as you had planned?

In general, yes. But remember that this is a license agreement, where we are not investing any resources in it, so it's really the control of MedImmune.

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

Thank you, operator. As I stated in my prepared comments, the past few months we recorded some important milestones, including first patient dosing in our COM701 study, first patient dosing in the Bayer study and a related milestone payment and the signing of the Bristol collaboration. And we have meaningful value drivers going forward, most important data readout on the COM701 study. We believe that our unique computational discovery capability and our differentiated approach to drug discovery and development, which I described in my comments, well positions us in the competitive landscape of the immuno-oncology field. We look forward to continue updating you on our progress in the future. Thank you, and have a great day.

Thank you. This concludes the Compugen Ltd. third quarter 2018 financial results conference call. Thank you for your participation. You may go ahead and disconnect.