Curis, Inc. (CRIS) Q2 2016 Earnings Report, Transcript and Summary

Good day ladies and gentlemen, and welcome to the Q2 2016 Curis, Inc. Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would to introduce your host for today's conference, Mr. James Dentzer, Chief Financial and Chief Administrative Office. Sir, you may begin.

Thank you, operator and welcome to Curis' second quarter 2016 earnings call. Before we begin, I would like to encourage everyone to go to the Investors Section of curis.com to find our earnings press release and related financial tables. I would also like to remind everyone that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties and our actual results may differ materially. I encourage you to consult our SEC filings for additional detail. Now I will turn the call over to our President and CEO, Dr. Ali Fattaey.

Thank you, Jim and good morning everyone, and thank you for joining us today. It is a pleasure to provide an update on Curis and our progress in developing multiple innovative drug candidates for patients with cancer, including our two clinical programs; CA170 and CUDC-907. First I would like to update you on CA170. CA170 is the first orally administered small molecule immune checkpoint antagonist to enter the clinic. Recall that CA170 was discovered in our collaboration with Aurigene it targets PD ligands and VISTA immune checkpoint. The PD ligands such as PDL-1 and PDL-2 and VISTA are members of the same family, the B7 immunoglobulin super-family of immune-regulators that share structural similarity in their extra-cellular domain. And this extra-cellular domain of these proteins is where CA170 is designed to bind. We have shown that CA170 selectively rescues T-cell proliferation and function that are specifically inhibited by the PD ligands or VISTA. Our goal is to develop CA170 as a cancer immunotherapy and in this regard developed as the first orally early administered anti-checkpoint therapy for cancer patients. As now multiple anti-checkpoint immunotherapies are either approved for in development, but so far all of these are antibodies that need to be administered intravenously in an infusion clinic setting. We believe CA170 can establish a new class of immunooncology anti-immune checkpoint therapy that is administered as an oral pill. As a small molecule rather than an antibody we expect that the pharmacokinetic properties of CA170 will likely provide an advantage in the dosing flexibility as a monotherapy. And perhaps even more importantly, when used in combination with other anti-cancer treatment regimens. We believe that a successful CA170 can provide a compelling treatment alternative for patients and physicians. We are pleased to note that in June the FDA accepted our IND application for CA170 and shortly thereafter the first patient with cancer was dosed in the phase 1 trial of CA170. In this phase 1 study, CA170 is administered as an oral capsule once daily in a continuous manner. Our main objective during the dose escalation stage of the trial is to establish CA170's safety, to characterize its pharmacokinetic profile, to demonstrate potential markers of immunomodulation and to assess any clinical activity in patients with solid tumors and lymphoma. To accelerate the dose escalations stage, we are enrolling patients with any type of cancer and are not requiring specific biomarkers such as the expression of specific checkpoint targets on patient tumor biopsies as criteria for enrollment. The dose escalation stage will enroll patients who may have been previously treated, as well as patients that are naïve to anti-checkpoint immunotherapy. The dose escalation enrolls patients in the U.S. Centers only, currently. Our goal with the dose escalation stage of this phase 1 trial is to establish the recommended dose and schedule for CA170 administration which will be used in the expansion stage of the study and future studies of CA170. Now in the expansion stage of the trial we expect to narrow patient enrollment to specific cancer types. We also expect to employ potential patient selection strategies such as the expression of CA170's molecular targets on patient tumor samples. In the expansion stage, although we intend to primarily focus enrollments to patients who are naïve to anti-checkpoint immunotherapy treatment, we also expect to continue exploring CA170 in previously treated patients because CA170 targets both, the PD ligands, as well as the VISTA checkpoint. For enrollment checkpoint immunotherapy naïve patients in the expansion stage of the trial, we expect to enroll patients in the U.S. as well as in multiple centers outside of the U.S., predominantly in Europe and in Asia. Our aim with the expansion stage is to identify the initial indication and the regulatory path to potential approval for this highly differentiated drug candidate. Now I'd like to turn the discussion to CUDC-907 which is being investigated in a phase 2 trial in patients with relapsed refractory diffuse large B-cell lymphoma or DLBCL. As you know CUDC-907 was discovered by Curis scientists and is an oral small molecule drug candidate designed to target the HDOC NPI-3 kinase enzymes. In its phase 1 trial CUDC-907 treatment has resulted in multiple objective responses including complete responses in patients with DLBCL. The objective of our ongoing phase 2 study is to assess CUDC-907 efficacy and specifically in the patient population with DLBCL whose tumors have mixed alterations. Should they be positive, we intend to use the results of this ongoing phase 2 trial for potential accelerated approval of CUDC-907 in this cancer indication. In the open label phase 2 trial, we expect to enroll upto 60% patients with relapse refractory DLBCL who will be treated with CUDC-907 monotherapy at the recommended phase 2 dose. The recommended phase 2 dose was established to be 60 milligram once daily using its schedule of five days on and two days off treatment in a continuous manner. Multiple centers in the U.S. are actively enrolling patients in this trial and we expect to initiate enrollment of patients at centers in Europe later this year. The primary endpoint of the study is objective response rate with secondary endpoints as durable of benefits including duration of response, progression fee survival, and overall survival. Pending the outcome of this study, we believe that the study designed can permit us to discuss the results with the FDA as a potential path for accelerated approval of CUDC-907 monotherapy in this patient population. Also in June 2016, updated data from the phase 1 trial of CUDC-907 were presented at the European Hematology Associations Annual Meeting held in Copenhagen, Denmark. The updated assessment from a total of 31 patients with relapsed refractory DLBCL showed that among the 21 response valuable patient's objectives responses were reported in 9 patients including three patients with complete responses. A retrospective post-hoc analysis showed that among six of these response valuable DLBCL patients whose tumors had make alterations five experienced objective responses including the three patients with complete response. Importantly, all five of these responding patients' tumors also had BCL-2 alterations. We are also continuing with the enrollment of patients with solid tumors in the separate phase 1 trial of CUDC-907 in order to assess its safety and preliminary anti-cancer activity. Thus far no additional safety signals have been observed in this study beyond what has been noted previously in patients with the hematologic malignancy. We have recently limited enrollment in the trial to patients whose tumor have alterations. The objective of this study is to explore the potential to expand the use of CUDC-907 for treatment of patients with MYC altered solid tumors. Finally, I'll turn it to Erivedge which is commercialized globally by our collaboration partners Genentech and Roche for the treatment of advanced basal cell carcinoma. We are pleased to note that in June 2016 Roche presented data from two trials of Erivedge at the ASCO Annual Meeting. One of these studies showed that the safety profile of Erivedge continues to be consistent with the previously reported safety profile. And a second presentation risk reported results of a trial demonstrating that intermittent dosing schedules of Erivedge may be an option for patients with multiple basal cell carcinoma to drive long-term benefit. With that I will now turn the call over to Jim Dentzer for discussion of our financial results. Jim? James Dentzer Thank you, Ali. For the quarter ended June 30, 2016, we reported a net loss of $11.3 million or $0.09 per basic and diluted share as compared to a net loss of $8.1 million or $0.06 for basic and diluted share for the same prior year period. Revenues were $1.7 million and $2.1 million for the second quarter of 2016 and 2015 respectively. Revenues for both periods comprised primarily royalty revenues recorded on Genentech and Roche's net sales of Erivedge. Operating expenses were $12.4 million for the second quarter of 2016 as compared to $9.5 million for the same period in 2015. Research and development expenses were $8.8 million for the second quarter of 2016 as compared to $5.9 million for the same period in 2015. The increase in research and development expense was primarily due to increased direct spending over the prior year period related to outside services supporting the ongoing clinical activities of CUDC-907 including initial costs for the Phase II trial that was initiated in January 2016 and direct costs for programs under the Aurigene collaboration including initial costs for the CA170 Phase I trial and initiated June 2016 and a $3 million milestone payment upon the FDA acceptance of our CA170 IND. Finally, employee-related expenses increased over the prior year primarily due to additional headcount. General and administrative expenses remained unchanged at $3.4 million for the second quarter of 2016 as compared to the same period in 2015. Other expense was $0.6 million for the second quarter of 2016 as compared to $0.8 million for the same period in 2015. Other expense for both periods primarily consisted of interest expense related to the loan made by BioPharma II to Curis Royalty, a wholly owned subsidiary of Curis. As of June 30, 2016, Curis' cash, cash equivalents, marketable securities and investments totaled $61.7 million and there were approximately 129.5 million shares of common stock outstanding. With that, we'll open the call for questions.

[Operator Instructions] And our first question comes from Peter Lawson from SunTrust Robinson Humphrey. Your line is now open.

Thanks for taking my question. These response rates you're seeing. Are those still ongoing since, I guess, what, [indiscernible] 2015?

Hi Peter. And yes, thank you for your question. Multiple of our responders including complete responders are still ongoing.

And these three new valuable patients. They don't seem to be MYC positive. Is that right?

Actually, whether I think they're MYC positive or not, the only way we determine whether they're positive or negative if they're positive by any of the three criteria that we use, which includes either translocation, gene copy number change or even if the chemistry is staining, But if they're not positive, then we don't know all three status we cannot determine whether they are negative at this point.

Right. Got you. And then, just R&D expense, a minor point to this one, the $3 million payment went in that. That seems low R&D expense for the quarter. Is that kind of the new base or do you think that you'll be going back to the normal run rate it's been?

You know, that $3 million payment was the payment or Aurigene that was a milestone payment in the agreement based on the FDA acceptance of our I N D. That was not the R&D expense for the quarter.

Got you. And what should we think about the R&D expense for, say, 3Q and 4Q?

So we haven't given specific guidance on R&D expense on a quarter by quarter basis. I think it's fair to say that as we progress through the trials and get more patients in both -907 and -170 that you should expect that there's a clinical trial expense increase.

But your -- that 8.8 for R&D, that included the $3 million milestone. That's baked in.

Correct.

Okay, great. Thanks so much.

Thank you. And our next question comes from Chris Chibutony [ph] from Cowen. Your line is now open.

Thank you. Good morning. And we appreciate the update. A couple of questions. First on CUDC-907. Can you give us a sense for as you approach the interim look I believe in 2017, what kind of response rate threshold should we be thinking about from that monotherapy arm as far as your being able to think about advancing that into expansion into an accelerated approval type trial.

Thank you Chris. For that. Let me refer maybe to some of the data that we've seen so far in the Phase I trial of CUDC-907 in the last refractory population of the DLBCL patients. As you'll note that with roughly nine responses from the 31 total patients if you will in the intent to treat if you will population we are closer to the one-third or 30% of patients responding. If we look at response evaluable patients, obviously that number higher, it's in the 40s, closer to the 50% response rate population. Our expectation is that in the Phase II trial, for us it would have to be from somewhere in that range of the -- what we've seen either for the intent to treat or the response evaluable. But that's the range that we would be looking for the response rate. And in the population that we're treating.

With CUDC-907 still, can you give us a sense for development in solid tumor trials? Can you help us with potential timelines and when we might see initial data in the MYC altered patients?

Yes -- that's obviously an independent Phase I trial that we actually started initially not focused on MYC altered patients and so multiple patients were treated for us to get a safety signal from CUDC-907 in a non-key malignancy study. It's really been more much more recently where we've been able to generate the criteria and begin to involve patients. With MYC amplifications predominantly, but MYC alterations in this study. So allow us to be able to get more data entered into that so realistically we're not looking at a significant number of patients in data until 2017 for the solid tumor study as well.

And lastly, if I could ask about CA170. Can you talk about how you plan on selecting the recommended Phase II dose and as you continue to develop CA170, do you have a sense for maybe how you can improve the efficiency of advancing development further as an optimized path that you can foresee?

Yes. Obviously this is just getting into the study with initial patients being treated and I'll give another [ph] there that this is obviously the first small molecule to go into the clinic. And it is going through what I would consider to be a true dose escalation. Meaning, it is with a small molecule with expected pharmacokinetic profile similar to what a small molecule would be. And as we would expect and have seen in preclinical setting, a continued exposure increase in animals as we increase the dose. So we're sort of expecting the same thing in the dose escalation. The question that you're asking in terms of what parameters would we use to determine the recommended dose or the dose for going forward: as you know traditionally with small molecule agents or maybe the anti-cancer agents we would have been continuing dose escalation until safety parameters allow -- determine that, meaning the maximum tolerated dose. That can certainly be one of the criteria that may get used here as well. We would intend to continue dose escalation as high as is practical or until maximum tolerated dose is reached. We are obviously looking at the exposure in patients as we would dose escalate as well. That's one of the drivers that we can use for assessment of how much exposure we are getting. There are various biomarkers that we also look at both in vivo and ex vivo from treated patients. We've developed some of those assays to monitor immune modulation and correlation of potential exposure with that immune modulation and correlate that with our preclinical studies. That's a separate assessment that we're doing. And of course any clinical markers that can show in the trial can also be used for assessment of recommended dose. So in summary, I would say it's really a triangulation of all three of those parameters: the safety profile that may be observed, the exposure and some of the biomarkers that we look at as well as clinical activity that will help us determine what the right dose and potentially schedule will be for going forward. I don't think it's going to be as simple as one specific parameter only driving the dose escalation, if that makes sense, Chris. In terms of -- and then the second part of your question, which was you how do we identify the regulatory path. Obviously this drug candidate targets two different checkpoint pathways, the PD ligands and PD-L1, PD-L2 antagonism as well as the VISTA. We are looking at possible indications for certainly PD-L1 can have certain indications that we can go into that we can follow a certain path that have been already established for us to look at that. But we're also paying close attention to the possibility of being able to take advantage of the VISTA inhibitory activity of CA170 as an independent mechanism to identify either cancer indications for specific populations of patients in a given cancer indication for us to go after. Being it early and our analyses are still being ongoing it's more difficult for us to give you any more color on that at this stage.

Thanks for the responses. Congrats on the continued progress.

Thank you very much.

Thank you. And our next question comes Adnan Butt with RBC Capital Markets. Your line is now open.

Good morning. This is Arshad [ph] for Adnan. To start, could you give us some color on the timing for how you're thinking about the timing for taking CUDC-907 data to the FDA to decide if it's favorable [ph]?

Thank you, Arshad please give our regards to Adnan as well. With regards to CUDC-907, the best estimates that we can give right now is that we would have data in 2017. Our expectation is to look at the end point that we've determined for the phase 2 trial including the response rates, as well as the durability of the clinical benefit and take that information potentially with an interim look at the study into a discussion with the FDA. Our expectation would be in 2017 our preference is obviously for that to be as early in 2017 as possible. But right now, our best estimate is in 2017.

Okay, thank you. And then for the CA170, is it possible for you to enroll in ARM with patients who are only PD-1 or PDL-1 failures?

So for the -- both for the dose escalation, as well as for the expansion. Well, certainly for those dose escalation right now which is enrolling patients; we do expect to enroll patients that are naïve to checkpoint immunotherapy but we are also open for enrollment and in fact do look for patients that have been prior treated with checkpoint immunotherapy. And this is really to take advantage and address the possibility of CA170 ability to inhibit the VISTA checkpoint to see whether it has a activity in that population. That's really the goal and we are open to both of those populations in the dose escalation. In the expansion cohort, also at the moment we envision enrolling patients that have been prior treated with PD pathway checkpoint immunotherapy.

Okay, thank you very much. That's it for me.

Thank you, Arshad.

Thank you. [Operator Instructions] And our next question comes from Brian Skorney with Robert Baird. Your line is now open.

Good morning guys, thanks for taking my question. I guess my question -- I'm kind of interested in the state of preclinical development for the PD-L-1, 10, 3 molecule. Are you through lead selection at this point and into IND-enabling studies and when can we anticipate that moving into the clinic? And also just in terms of the landscape for 10 [ph]. With several that are in clinical development, what should we be looking for -- what are you guys looking for in terms of proof-of-concept for this as a target? And maybe just how do you think about the various antibodies that are in development from whether it would be Ticaro, Novartis or somewhere -- who do you think is in the lead there?

Okay, maybe I'll address your first part of the question in terms of the status of the program. And as you know last October we brought that program into the collaboration as a program of interest. This is obviously their collaboration Aurigene and their scientists are working really heavily on generation of compounds and assessing those. The next step that we would be taking is to actually license the program into -- as part of the collaboration, so we would exercise our option where we expect to exercise our option to license that. That's done for us at a time when we know we have a development candidate that we want to begin enabling studies with; which would include obviously the formulation work, manufacturing work, safety studies and the completion of the pre-clinical pharmacology studies that go on as part of the IND enabling study. So next step for us is Brian to exercise the license and then begin the -- what we would consider to be the IND enabling stages on the development candidate itself or for that. Our expectation, I think the guidance we've given is that this would be in the second half of this year, our expectation is to do that. Some of the data around those compounds were presented at the ACR Conference, we have multiple compounds and we do have multiple compounds that have had very nice activity and selectivity for PD-L and TIM3. Those compounds were shown to be active in invivo tumor models and multiple different invivo tumor models. Those are the types of things that we are looking at in terms of both, the potency selectivity, pharmacokinetic properties, as well as invivo activity of these compounds to select the one that we would be using as the development candidate. That has gone fairly nicely over the course of release into October that the program came into the collaboration and our expectation at the moment is that we are close to potential exercise of our option to license the program. In terms of its developments, I should say that our compound targets PD-L and TIM3, the ones that we have mostly characterize that this point and expect to potentially nominate one of them as our development candidate. That takes us again into the path of the potential inhibition antagonism of the PD pathway in conjunction with the TIM3 pathway in certain areas. In terms of TIM3 itself and the antibodies that are currently being developed, I do want to caution, I don't think -- personally I don't think that all of the antibodies against TIM3 should be looked at as in one group in a sense, so they are all anti-TIM3. TIM3 has different functions and different partners that it binds to; at least two to three different binding partners and mechanism. I think it's important to see what is actually being antagonized or inhibited with any agent including the different antibodies that have either entered the clinic or are being contemplated. And we're doing that similar type of work with RS to understand exactly which of these interactions of TIM3 is being addressed by our compound in order to then really flush out and decide which type of cancer indications and where could potentially be best used as an agent. But I wouldn't necessarily say Brian that all the antibodies should be just considered in one class of anti-TIM3 because TIM3 does have different binding partners and potentially different functions. And I think that should be considered and characterize when you look at antibodies which is also what we look at with our compound at this point. I think we'll try and clarify and/or give more data as we generate them in various conferences coming up, at least with our compound.

Great, thanks.

Thank you. And we have a follow-up question from Peter Lawson with SunTrust Robinson Humphrey. Your line is now open.

Just a quick clarification. Just around cash, you didn't -- I don't think I've heard any cash guidance. I think previously you said it kind of last into 2017, is that still the same kind of outlook you have around cash?

That's right. We haven't specifically given guidance on that. I think obviously with over $60 million in the bank, it's going to last a good way through 2017 but we haven't given specific guidance yet as you can imagine a lot of that will depend on the costs coming over the next couple of quarters.

Perfect. Okay, thank you so much.

And I'm showing no further questions at this time. I'd like to turn the call back over to Ali Fattaey for closing remarks.

Thank you everyone for joining the call. First, I would like to thank all of Curis's employees for their hard work in both bringing our drug candidates to a stage of less testing and into clinic, and also the fantastic job that they do in conducting the clinical studies that we discussed today. Second, I'd like to thank our partners, and particular Aurigene and their scientists and their leadership for all of the work that's going on in collaboration in a short period of time to get the first small molecule immuno-oncology checkpoint inhibitor into the clinic and the various other programs that very fruitfully have been advanced in their collaboration. As well as thanking our partners Genentech and Roche for the continued commercialization and development of Erivedge. And lastly, and most importantly, I'd like to thank all of the patients and their families for participating in the studies and enabling us to test these potential drug candidates for the treatment of cancer patients. With that I thank everyone for joining this call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a good day.