Curis, Inc. (CRIS) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Curis Inc. Third Quarter 2015 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, today's conference may be recorded. I would like to introduce your host for today’s conference, Ms. Mani Mohindru. Ma'am, please go ahead.

Thank you, Michelle. Good morning everyone, and thank you for joining us. During today's call, we'll provide you with an update on corporate developments and plans and also discuss our third quarter 2015 and year-to-date financial results. Before we begin, I'd like to advise you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements relating to our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management; the potential therapeutic benefits and our drug development programs and our plans to advance the development of drug candidates within these programs, as well as our expectation about Genentech and Roche's continued development and commercialization of Erivedge. Actual results may differ materially from those indicated by forward-looking statements in this conference call as a result of various important factors, including those risk factors described in our quarterly report on Form 10-Q for the quarter ended June 30, 2015 and in other filings that make with the SEC, and we encourage you to review these risk factors carefully. We caution that forward-looking statements we make in this conference call speak only as of today and that we may not update any of these statements even if events and developments subsequent to the date of this call cause our estimates and expectations to change. I'd now like to introduce Ali Fattaey, our President and CEO, who will provide an update on the Company and our development programs. Following Ali's remarks, Mike Gray, our Chief Financial and Chief Business Officer, will review our financial results for the third quarter 2015, after which we will open the call for questions. Ali?

Thank you, Mani and thank you to the conference call and webcast participants for joining us this morning. We continue to focus our efforts on building Curis into an oncology company with strategic emphasis on our development capabilities as we expand our pipelines with the aim of eventual commercialization of innovative and effective drugs for the treatment of patients with cancer. In addition to the progress with our proprietary clinical drug candidate CUDC-907 we recently exercised two options under our collaboration with Aurigene. One of these involved the license to a pre-IND stage oral immunomodulatory small molecule that targets PD ligands and VISTA inhibitor checkpoint proteins and from now on this molecule is being referred to as CA-170. And the second was a license to a preclinical program of potent and selective inhibitors of the IRAK4 kinase. I will provide additional details regarding these three programs today. Let me begin with our most advanced molecule CUDC-907 which is an oral dual HDAC PI3 kinase inhibitor that we have been investigating in patients with relapse or refractory aggressive lymphomas and separately in patients with certain solid tumors. We are very pleased with the progress being made with CUDC-907, especially in the setting of relapsed refractory diffuse large B-cell lymphoma or DLBCL. Earlier this year we reported interim results from the Phase 1 trial of CUDC-907 in patients with relapsed refractory lymphoma and multiple myeloma at the ASCO Annual Meeting, the European Hematology Association Annual Meeting, as well as at the International Congress on Malignant Lymphoma at Lugano. In these meetings we reported that CUDC-907 monotherapy treatment was very safe and six out of the ten response evaluable, heavily pretreated patients with relapsed refractory DLBCL experienced objective responses, including two patients with complete responses and four patients with partial responses, while two out of the 10 patients had stable disease. Since then, we have continued to enroll patients with DLBCL in expansion cohorts where CUDC-907 is administered as monotherapy or in combination with rituximab. At the upcoming ASH Annual Meeting in Orlando in December the principal investigator for this file Dr. Anas Younes will provide an update on CUDC-907 in an oral presentation. We expect to present an update on all evaluable patients including those from the CUDC-907 plus rituximab combination treatment on the expansion phase of the trial. In addition we expect to present results that tumors from a number of patients with objective responses expressed MYC oncogene protein at high levels and that these correlative results are very consistent with our preclinical observations. This correlation between MYC alterations and clinical benefit is being translated into the design of a Phase 2 clinical trial with CUDC-907 in patients with relapsed refractory DLBCL and that we intend to initiate this trial before year end. We continue to remain very optimistic about CUDC-907's potential in patients with relapsed refractory DLBCL and plan to share details of the proposed Phase 2 trial around the ASH Conference as well. In addition to the ongoing study in hematologic malignancies we continue to enroll patients with advanced solid tumors in an independent Phase 1 trial for the treatment with CUDC-907. Based on CUDC-907 pharmacokinetic properties the molecule appears to readily distribute to various tissues including the tumor tissue with a high resident half life thus exposing the tumors to significant concentrations of CUDC-907 in this solid tumor trial. Additionally, based on insights from our lymphoma study we are planning to modify the solid tumor trial in order to examine the role of the MYC alterations and clinical benefit with CUDC-907 in patients with various solid tumors, including patients with not midline carcinoma. We look forward to providing further updates from the solid tumor study in the coming months. I'd now like to provide an update on our collaboration with Aurigene. Since the announcement of our agreement earlier this year, both Curis and Aurigene teams have been fully engaged with advancing molecules from our collaboration program towards IND filing and preparation for clinical testing. We have recently exercised two options to licensed programs under this collaboration. Within the immune-oncology field we licensed the first-in-class oral small molecule that targets and antagonizes two immune checkpoint regulators, PD ligands and VISTA. We have designated this molecule a CA-170 and are currently conducting IND enabling studies with this molecule. Based on the in vitro and in vivo data in multiple tumor models as well as pharmacokinetic and pharmacodynamic properties we selected CA-170 from a broad program that the two companies have focused on since the beginning of the collaboration. Last Friday, our colleagues at Aurigene presented more detailed preclinical data from this program at the AACR-NCI-EORTC International Meeting in Boston and the presentation is available on our website for your review. I would like to take this opportunity to highlight some aspects of CA-170 here. CA-170 is an orally available small molecule that targets the PD ligands and the VISTA checkpoint inhibitors, both of which are members of the B7 super family of immune regulators and have structural similarity in their extracellular domains. Within the tumor microenvironment, the PD ligands appear to be expressed predominantly on tumor cell, whereas VISTA expression is restricted mainly to cells of the myeloid origin such as the myeloid drive suppressor cells within the tumor microenvironment. Mechanistically PD ligands and VISTA inhibit T-cell activation leading to the generation of exhausted T-cells. Our colleagues at Aurigene were able to show that CA-170 can rescue T-cell proliferation and functional activity as measured by production of interferon gamma that have been specifically inhibited by PD ligands or by VISTA. Although if T-cells are inhibited by other checkpoint regulators such as M3 or CTLA-4 CA-170 is not able to rescue such T-cells therefore suggesting that CA-170 only and specifically antagonizes PD ligands and VISTA checkpoints. Additionally, we and our Aurigene colleagues have tested CA-170 in multiple syngeneic tumor models such as those for melanoma, colorectal cancer and breast cancers. CA-170 has demonstrated effective antitumor activity in these models including in settings that are not effectively addressed by anti-PD1 antibody-based treatments alone. This is in line with what has been reported pre-clinically by others that PD and VISTA pathways are non-redundant and inhibition of both may synergize in mediating antitumor effects. Based on these preclinical results, we expect that in addition to tumors that are responsive to PD pathway directed therapies CA-170 may potentially be used for the treatment of tumors that are nonresponsive or that become refractory to these types of treatments. CA-170 is currently undergoing evaluation in IND enabling studies including GLP toxicology assessment and we are pleased that thus far CA-170 appears safe with a very high therapeutic index in both rodents and nonhuman primate models. We expect to complete the IND enabling studies and file the IND application and initiate a Phase 1 trial of CA-170 within the first half of 2016. In addition to CA-170 we also selected the second preclinical program within the immuno-oncology collaboration with Aurigene. This program takes advantage of the novel chemistry that is developed by Aurigene and is focused on evaluating small molecule antagonist with dual PD-L1 and T-cell immunoglobulin and mucin domain containing protein-3 or TIM-3 targeting properties. TIM-3 is an independent inhibitory checkpoint molecule that plays an important role in immune suppression and is generally co-expressed with PD-1 receptors on highly exhaustive cytotoxic T-cells in the tumor tissues as well as being expressed on certain regulatory T-cells. The lead compounds within this program show potent and selective rescue of T-cell proliferation and function that is induced by PDL and TIM-3, but not by other checkpoint proteins. Outside of immuno-oncology we also exercised our option to license the IRAK4 inhibitor program, which was initiated at the beginning of our collaboration. Aurigene also presented preclinical data from this program during the weekend at the AACR-NCI-EORTC International Meeting and the poster for this presentation is available on our website for your review as well. IRAK4 is a serine/threonine kinase that is an important mediator of Toll-like receptor and interleukin-1 receptor signaling and thus plays an important role in innate immune signaling. Based on this function in this pathway IRAK4 has been of interest as a target to discover drug candidates for treatment of inflammatory diseases. In certain human cancers also such as a subset of DLBCL, CLL and Waldenström's macroglobulinemia oncogenic mutations in the MYD88 genes lead to constitutive activation of IRAK4 leading to the malignant phenotype. Preclinical data from the IRAK4 program showed that the lead compounds from this program are potent selective inhibitors of IRAK4 and have potent antitumor activity in in vivo tumor models with activating MYD88 mutation. In addition to the cancer models, some of these compounds also demonstrate activity in in vivo inflammatory disease models indicating the potential of targeting IRAK4 in both oncology and inflammatory diseases. We are continuing to develop lead molecules and assess their activity in both cancer and inflammatory disease models and have initiated IND enabling studies and expect to file and IND application during the first half of 2016 for clinical testing of these lead candidates. We are very pleased with the progress being made within our collaboration with Aurigene where the two companies are working with the mission of aligning our complementary expertise to expedite development of promising molecules in the field of cancer therapeutics. We continue to remain disciplined in building our development capabilities and advancing our drug candidates in the coming months. Our focus will remain on advancing CUDC-907 into Phase 2 clinical testing in a select group of patients with relapsed refractory DLBCL and also completing the IND enabling studies for CA-170 and IRAK4 inhibitors to advance these modules into the clinic. I will now turn to Erivedge which is being developed and commercialized globally by Genentech and Roche under our collaboration. Roche continues to concentrate on the global commercialization of Erivedge for the treatment of advanced basal cell carcinoma in key territories worldwide. In this regard we recorded royalty revenues of approximately $2.3 million for the third quarter of this year as compared to $1.8 million for the third quarter of 2014. Year-to-date royalty revenues were $6 million as compared to $4.9 million for the nine months period ending September 30, 2014. Recently our partner Roche disclosed its intent to initiate a clinical study to examine the effectiveness of Erivedge in patients with intermediate or high risk myelofibrosis in combination with ruxolitinib or Jakafi which is a JAK kinase inhibitor approved for the treatment of patients with this disease. Myelofibrosis is a serious bone marrow disorder that disrupts the body's normal production of blood cells resulting in extensive scarring in the bone marrow leading to anemia, weakness, fatigue and often an enlarged spleen and liver. Now our Phase 1B portion of this study will assess the safety of Erivedge plus ruxolitinib combined therapy. After the safety of the combination regimen is confirmed a randomized controlled portion of this study may begin. The primary endpoints of this study include reduction in spleen volume and overall response rate and details of this study can be found on clinicaltrials.gov. Outside of oncology, Roche continues to indicate an interest in investigating Erivedge in idiopathic pulmonary fibrosis or IPF. In June of 2014 Roche filed an IND application with the FDA to initiate a multicenter Phase 2 clinical study of Erivedge in patients with IPF. After the Phase 2 study opened but prior to patient enrollment Roche suspended the study in August of 2014 in order to amend the protocol to incorporate Esbriet or pirfenidone, the new standard of care for IPF into the trial design. We are very pleased that Roche continues to invest in Erivedge and look forward to providing further updates as they become available regarding all of these trials. Lastly, I would like to note that James Tobin has resigned as a Director of the Company effective November 04, 2015 after having served as a Director since the inception of the Company. We are grateful for the many significant contributions that Jim has made during his tenure as a Curis Board member and we wish him well in his future endeavors. The Company has benefited greatly from Jim's experience and insights and I join the rest of the Board and Management Team at Curis in thanking Jim for his many years of valuable service. I would now like to turn the call over to Mike Gray, our Chief Financial Officer and Chief Business Officer for his discussion of our financial results, after which we will open the call for Q and A.

Okay, thank you Ali. We reported a net loss of $5.5 million or $0.04 per share on both a basic and fully diluted basis for the third quarter of 2015 as compared to a net loss of $5.6 million or $0.06 per share on both a basic and fully diluted basis for the third quarter of 2014. We reported a net loss for $45.5 million or $0.30 per share again on both a basic and fully diluted basis for the nine months ended September 30 of 2015 as compared to a net loss of $13 million or $0.15 per share in the prior year period. The net loss for the first nine months of 2015 includes an in-process research and development charge of $24.3 million related to our collaboration agreement with Aurigene. Revenues for the third quarter of 2015 were $2 million dollars as compared to $1.8 million for the same period in 2014. The increase in revenues is primarily due to an increase in royalty revenues recorded on Genentech and Roche's net sales of Erivedge, which increased to $2.3 million during the third quarter of 2015 as compared to $1.8 million for the third quarter of 2014. Revenues for the nine months ended September 30, 2015 were $5.8 million as compared to $7.9 million for this same period in 2014. The decrease was primarily related to a $3 million milestone payment that we received in 2014 related to our Genentech collaboration offset in part by an increase in royalty revenues recorded on net sales of Erivedge. Operating expenses for the third quarter of 2015 were $6.9 million as compared to $6.5 million for the same period in 2014. Operating expenses for the nine months, ended September 30, 2015 where $49 million as compared to $18.9 million for the same period in 2014. Within operating expenses again we recorded a one-time charge for in-process research and development expenses of $24.3 million during the nine-month period ended September 30, 2015 associated with our issuance of 17.1 million shares of Curis common stock to Aurigene as partial consideration for the rights granted under the terms of our collaboration agreement. R&D expenses were $4 million for the third quarter of 2015 as compared to $3.7 million for the same period in 2014. The increase in third quarter 2015 R&D expense is primarily due to increased spending on CUDC-907 and preclinical programs under our collaboration with Aurigene offset in part by spending decreases on CUDC-427 and other programs. R&D expenses were $14.7 million for the nine months ended September 30, 2015 as compared to $10.2 million for the same period in 2014. G&A expenses were $2.8 million for the third quarter of 2015 as compared to $2.7 million for the same period in 2014, and were $9.7 million for the nine months ended September 30, 2015 as compared to $8.5 million for this same period in 2014. Other expenses approximately $700,000 for the third quarter of 2015 as compared to approximately $825,000 for this same period in 2014. Other expenses primarily consist of $825,000 and $925,000 in interest expense for the quarters ended September 30, 2015 and 2014 respectively, related to the loan made by BioPharma-II to Curis Royalty which is a wholly-owned subsidiary of Curis. Other expense was $2.3 million and $2 million for the nine-month periods ended September 30, 2015 and 2014 respectively. As of September 30, 2015 our cash, cash equivalents and marketable securities and investments totaled $93.5 million, and there were approximately 128.4 million shares of our common stock outstanding. With that, I'd like to open the call for questions. As a reminder, during the Q&A period as a courtesy to others asking seeking to ask questions we ask that participants limit themselves to one or two questions.

Thank you. [Operator Instructions] Our first question comes from the line of Brian Skorney with Robert Baird. Your line is open, please go ahead.

Hey good morning guys. Thanks for taking my question. Just one question on CUDC 907, just thoughts on your Phase 2 plans in relapsed refractory NHL, I know in the ASH abstract it discusses the planning has an emphasis on MYC [ph] aberrations. So I just want to kind of get your higher-level thoughts on enrichment for this Phase 2 study, would it be purely based on a specific biomarker or you're just looking to enroll overall a greater proportion and how exactly do we think about the partnering of this? Immunohistochemistry for making BCL2 is that standard practice at this point?

Yes, hi Brian, thank you for the question. I think that some of things that were discussed at ASH and as indicated in the abstract as well, some of the patients that have had responses with CUDC-907 these are relapsed refractory DLBCL patients, we’ve seen that they have had high expressions of MYC and we've been evaluating all of the patients so far that we have tissues available from with regards to their MIC alterations, both genetically and by immunohistochemistry for protein levels, both of these are relatively standard assays that can be tested for patients in that regards. Our study will incorporate this information including MYC gene aberrations as well as MYC protein expression levels into selection of patients for treatments; I think our expectation right now is that we would restrict it to those patients for the enrollment, rather than just an enrichment or predominantly those patients.

Great, thanks Ali.

Sure, thank you Brian.

Thank you. And our next question comes from the line of Boris Peaker here from Cowen. Your line is open. Please go ahead.

Good morning. So I just want to focus on CA-170, just curious how do the kinetics of the oral drug compare to the IV formulation of PD-1 drugs? And kind of part to that question is how do you plan to differentiate throughout development from the approved PD-1 agents, this is just going to be the route of administration or there is going to be some clinical strategy for getting differentiated data?

Thank you, Boris. With regards to the pharmacokinetics of CA-170 it is a small molecule and it has so far at least in preclinical models that we’ve tested including rodents and dogs and in non-human primates, it appears to have a PK or half life similar to what we find for other small molecules relatively short, less than a day half life in that regards. Therefore all of the studies that we so far conducted in animal studies has been using once daily administration of the drug and our expectation is that the drug will be used similarly in the clinic, once daily administration at least to start with until we learn more regarding the pharmacokinetics in humans. Based on the profile and the target profile of CA-170 that it targets both PDL ligands as well as VISTA, our expectation is that the drug can be used in patients that express PDL and therefore are currently being treated with PD pathway directed drugs. But it can also potentially go beyond that based on VISTA inhibition and treat patients that have either relapsed or don’t really respond to PD based treatments. As we indicated in the call this morning, we’ve tested the drug in number of different syngeneic animal model testings, some of those that are responsive to PD based therapies and some that are not. And the compound seems to address both of those and provide an anti-tumor effect in both types of animal model studies. We believe that that can result in a similar clinical benefit for patients, although of course we'd have to go into the clinic and test that. So the differentiation can come not only from the oral dosing of the drug in this regard, but also potentially expand beyond just PDL expressing and those patients that are treated with PD directed drug candidates at this point.

Got you and just a last quick question on Erivedge. In terms of the timeline if you think about myelofibrosis versus lung fibrosis, do you have a sense of which one is likely to be the lead indication?

We don’t, I think as we noted this morning, they definitely indicated their interest in testing the drug in combination for myelofibrosis, which is already a trial that shows up in clinicaltrials.gov, not recruiting yet. Secondly in IPF Roche based on their guidance that they’ve given they continue to be very interested in continuing to develop Erivedge in IPF. But with regards to priorities and their strategies in these different fibrotic disease indications, our assumption is that they’re interested in all of those.

Great, thank you for taking my questions.

Sure, thanks Boris.

Thank you. [Operator Instructions] Our next question comes from Assaf Vestin with Roth Capital Markets. Your line is open. Please go ahead.

Good morning, thanks for taking the question. There was some very interesting data presented at CITI [ph] this past week and by Dr. [indiscernible] about anti-VISTA and how it synergizes with anti-PD-1, so that I just wanted to know two things, one is how the CA-170 effectively [ph] targets both [indiscernible] 650 and how what do you see in your hands with regards to that? And another thing, she presented data about early versus late intervention that was specifically in colon carcinoma, but still I would like to know what is your thoughts about going early versus late-stage because it appears that late intervention actually achieves better effect with the combination rather than early effect?

So, with regards to - thank you for the question. With regards to CA-170, we have indicated actually on the presentation that we made, our colleagues at Aurigene made on Friday that so far the EC50 [ph] for the ability of CA-170 to rescue T-cells from either PDL inhibition or VISTA inhibition appears to be relatively the same. These are low double-digits nanomolar inhibitory activity for those molecules. In models that we test, most of these models – animal models that have been tested by us are with established tumor models. So this is difficult to determine whether going early versus late based on preclinical studies can determine that. So I think at this point, our assessment, our expectation is that at least in the Phase 1 testing we will be looking at fairly established late-stage tumors for CA-170. Recall that in the Phase 1 we’ll have to determine both the safety and tolerability of the drug which so far in animal studies appears to be very safe and obviously we will be looking at not only patients' responses, but the profiling of the patients with regards to their immune system and immune profile as well. So I don’t think I can comment on early versus late at this point based on the information that we have.

Got it, thank you, very helpful. Thanks.

Sure.

Thank you. And I’m showing no further questions at this time and I'd like to turn the conference back over to management for any closing remarks.

So, thank you again for participating in our call and potentially later on the webcast as well, I want to take this opportunity to thank all of Curis' employees for all their efforts regarding our programs as well as our partners and collaborators Aurigene and Roche, but most importantly, I'd like to thank the patients and their families for participating in our clinical trials and allowing us to advance our drugs for the treatment of patients with cancer. Thanks everyone.