Curis, Inc. (CRIS) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q1 2017 Curis 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] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference James Dentzer, Chief Financial and Chief Administrative Officer. You may begin.

Thank you, operator, and welcome to Curis’s first quarter 2017 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. Good morning, everyone and thank you for joining us today. Before we begin, I would like to announce that Jim McNab, the Chairman of the Board will retire from the Company’s Board of Directors effective May 16th. I also want to note that Martyn Greenacre who has been a member of our Board of Directors since 2000 is nominated by the Board to begin the Chairman at that time. I’d now like to start by reminding everyone that our business plan is to have multiple oncology drug candidates that we develop and that we expect to commercialize in certain territories should they succeed in clinical trials and be approved. Our pipeline currently includes four drug candidates, two of which are in clinical development including CUDC-907 and CA-170 and two that are completing IND-enabling studies including CA-4948 and CA-327. This year, we expect initial readouts from the clinical trials of CUDC-907 and CA-170, and also expect to file IND for CA-4948 and CA-327 to examine their effects in patients with advanced cancers. With our existing capital, our estimated cash runway will be beyond the initial data readouts from the CUDC-907 and CA-170 clinical trials and into the first half of 2018. I would now like to provide an update on our programs and begin with CA-170, the first orally administered small molecule checkpoint antagonist in our collaboration with our partner Aurigene. CA-170 targets the PD ligands and the VISTA inhibitory immune checkpoints. Dosing in the Phase 1 trial of CA-170 began last year in June in patients with advanced solid tumors or patients with lymphomas. We’ve conducted dose escalation from 50-milligram starting dose to 800 milligrams using a continuous once daily dosing schedule and have observed no adverse events that limit dose escalation. We’ve also expanded the 400-milligram, 600-milligram and 800-milligram dose levels in order to further assess tumor and plasma biomarker in patient samples at these doses. These analyses are ongoing. Our current efforts for the CA-170 trails are focused on enrollment of immunotherapy treatment naïve patients with cancers that are eligible for treatment with approved anti-PD1 or anti-PDL1 antibody drugs. In this regard, we’re opening multiple centers worldwide with trial centers in Korea and Spain now open and patient enrollments ongoing. Our primary focus is enrollment of immunotherapy treatment naïve patients with melanoma, non-small cell lung cancer, renal, bladder, or head and neck cancers. Additional clinical trial centers in other European countries are expected to open for patient enrollment throughout the year. We expect to assess the primarily clinical profile of CA-170 from early parts of the Phase 1 trial in the second half of 2017, based on data from approximately 30 to 40 patients with respect to pharmacokinetics, pharmacodynamics, safety and clinical activity. I would now like to provide an update on CUDC-907. CUDC-907 is being investigated to assess its efficacy as a monotherapy treatment in an ongoing Phase 2 trial in up to 60 patients with relapsed/refractory MYC-altered diffuse large B cell or DLBCL. Multiple studies have shown that approximately 35% of patients with DLBCL have MYC alterations which is associated with a significantly poor prognosis. The Phase 2 trial of CUDC-907 is continuing to enroll patients in the U.S. and in Europe, and we expect to complete enrollment within the first half of this year. The primary endpoint of the of the Phase 2 study is objective response rate in up to 60 patients with MYC-altered relapsed/refractory DLBCL. Secondary endpoint of durability of benefits and safety will also be evaluated. We expect to analyze sufficient clinical data from this study by mid to early second half of this year. I would now like to update on our IRAK4 inhibitor drug candidate, CA-4948. As a brief background, IRAK4 kinase is the transducer of toll-like receptor or TLR signals and is activated upon engagements of these receptors by their specific ligands. Toll-like receptors play a significant role in innate immune responses. Within the TLR signaling pathway, a key adapter protein M Y D 88 or MYD88 acts to connect TLRs to IRAK4 and in a number of different hematologic malignancies MYD88 is mutated, leading to disregulated activation of the pathway which is thought to contribute to oncogenesis. We recently presented non-clinical data at the AACR annual conference at the beginning of April. The presentation showed that CA-4948 is a potent inhibitor of IRAK4 in biochemical assays and potently inhibits TLR signaling in cell based assays. In, in vivo animal models, CA-4948 resulted in significant down regulations of levels of cytokines that are associated with TLR signaling. In tumor bearing animals, CA-4948 treatment resulted in significant inhibition of growth of human DLBCL xenograft tumors that harbor activating MYD88 gene mutations. In patient drives or PDX tumor bearing animal models, CA-4948 treatment also results in significant inhibition of DLBCL tumor growth in MYD88 mutated tumors. CA-4948 is currently completing IND-enabling studies and the drug product has been manufactured for clinical testing. We expect to file an IND application by mid to early second half of 2017 in order to test CA-4948 in a Phase 1 trial in patients with hematologic malignancies. The initial Phase 1 trial will focus on patients with lymphomas including those with MYD88 gene mutations. In addition to establishing safety and recommended Phase 2 dose of CA-4948, we intend to evaluate potential correlations between clinical benefit and MYD88 gene alterations as well as assess other markers of IRAK4 pathway signaling in this trial. We expect these studies to assist in identifying a selected population of patients that may benefit significantly from CA-4948 treatments. We have also continued to explore the effects of CA-4948 in other hematologic malignancies including models of acute myeloid leukemia or AML and in collaboration in models of myelodysplastic syndromes or MDS. Initial data from our and our collaborators work show encouraging effect of CA-4948 in these model systems, both in cell-based assays and in animal studies. Should these non-clinical studies continue to demonstrate a mechanism based effect of CA-4948 in AML and MDS, we would expect to initiate clinical testing of this drug candidate in a separate Phase 1 trial for treatment of patients with these malignancies. Now with regard to our drug candidate CA-327 that is also in partnership with Aurigene. CA-327 is an orally bio-available small molecule that targets PDL-1 and TIM-3 inhibitory immune checkpoints. Data from the initial characterization and preclinical profile of CA-327 were presented by our Aurigene colleague at scientific conferences in 2016. CA-327 is currently completing IND-enabling studies and we expect to file an IND for this drug candidate in the second half of 2017 to begin its clinical development soon after. Lastly, we are pleased to note Roche and Genentech’s continued commitments to commercialize Erivedge globally for the treatment of patients with advanced basal cell carcinoma, as well as their efforts to explore Erivedge income combination therapy trials for treatment of patients with idiopathic pulmonary fibrosis and myelofibrosis. With that I will turn the call over to Jim for a discussion of our financial results as well as providing further details on -- any other details as needed. Thank you.

Thank you, Ali. For the first quarter of 2017, we reported a net loss of $15.7 million or $0.11 per basic and diluted share as compared to a net loss of $9.4 million or $0.7 per basic and diluted share for the prior year period. Revenues were $2.2 million and $1.7 million for the first quarter of 2017 and 2016, respectively. Revenues for both periods comprised primarily royalty revenues recorded on Genentech and Roche’s net sales of Erivedge. Operating expenses were $17.2 million for the year for the first quarter of 2017 as compared to $10.5 million for the same period in 2016. Research and development expenses were $13.5 million for the for the first quarter of 2017 as compared to $6.8 million for the same period in 2016. The increase in research and development expense was primarily due to a $3.75 million exclusivity option payment made under our collaboration agreement with Aurigene in January 2017 and also an increase to direct spending over the prior year period, related to outside services supporting the ongoing clinical activities of CUDC-907 and direct costs for programs under the Aurigene collaboration. Finally, employee-related expenses increased over the prior year primarily due to additional headcount. General and administrative expenses were $3.5 million for the first quarter of 2017, as compared to $3.6 million for the same period in 2016. The decrease in general and administrative expenses was driven primarily by lower legal, professional and consulting services for the period. Other expense was $0.7 million for the first quarter of 2017, as compared to $0.6 million for the same period in 2016. Other expense primarily consisted of interest expense related to the loan obligations of Curis Royalty, a wholly-owned subsidiary of Curis. As of March 31, 2017, Curis’ cash, cash equivalents, marketable securities and investments totaled $60.8 million and there were approximately 143.7 million shares of common stock outstanding. On a fully diluted basis, which includes 18.7 million options, there were 162.4 million shares outstanding. With that we’ll open up the call to questions.

Thank you. [Operator Instructions] And our first question comes from the line of Chris Shibutani from Cowen. Your line is now open.

Good morning and thank you for the questions. On CUDC-907, it sounds like there’s good progress and we appreciate the updates there. In particular, you will complete enrollment in the first half of the year in US and Europe you stated. So, this mid to early second half data analysis, would that be an interim analysis? And of the sites that you will have enrolled up to 60, will you continue to enroll more patients there? And can you help us understand kind of how you’re thinking about coordinating that discussion with the FDA amidst all of that second half progress? Thank you.

Thank you, Chris. You are correct that our analysis will be interim analysis of the data based on the number of patients that we’re able to evaluate. Our primary and initial goal is to look at the primary endpoints which is response rates, and durability of clinical benefits would come later in terms of the analysis and availability of data. So, that’s with regards to the analysis. With regards to the enrollment and continued enrollments of patients, as you may be aware from an operational perspective, it’s difficult to stop enrollment and start. So, we are looking at how to best manage that. And we want to make sure that we do it in a seamless manner. As we’ve indicated, should the trial results be positive and we have a positive discussion with the FDA with regards to their clinical data, we would actually need to expand and extend this study to roughly 100 or more patients for the Phase 2 trial. So, we’ll make sure that it’s done in a logistically efficient manner in that regard. With regard to communication for the FDA, based on their primary endpoints of response rates depending on the data, we would request a meeting with the FDA to discuss that data at the time that it’s available.

Great. If I could ask a quick follow-up on CA-170, I appreciate the additional information about the indications that you’re targeting and we’ll certainly look forward to updates on that 30 or 40 patients in the second half of the year. Could you just help us understand a sense or what portion of those patients might be I/O naïve versus INCOME/ previously experienced patients? Thank you.

Sure. And I can give you little bit more with our current and also the expected patients that would continue to enroll outside of the U.S. As we discussed probably on the last earnings call, at that time, majority of our patients, I should say, all of our patients had been enrolled in the U.S. In the U.S. there’s not really a possibility for enrolling immunotherapy naïve patients, treatment naïve patients in the indications that have approvals for PD1 or PDL1 antibodies. That does not necessary mean that the patients that we treated were all prior treated; some of those patients were prior treated, some were immunotherapy treatment naïve but some other cancer types, if that makes sense. The focus that I indicated for us outside of the U.S. including Korea and Spain that are open now, has been to get immunotherapy treatment naïve patients from those specific indications that have approvals at least in the U.S. and perhaps in some of the other countries as well. So, I would say rather than just -- I think a good fraction or a proportion of the patients overall will be immunotherapy treatment naïve. The question will become -- the things that you should look to and the way we look at it is how many are immunotherapy naïve patients from approved indications, how many are immunotherapy treatment naïve from other indications and how many are prior treated patients. We would like that balance to be fairly healthy between those three populations.

Thank you. And our next question comes from the line of Brian Skorney from Robert Baird. Your line is now open.

Just two, digging a little more on the CA-170 indications that are being targeted. Do you guys have an internal threshold by tumor type that you’re thinking about the class 5 is conforming proof of concept? And, how are you kind of setting up what think would be considered confirmation of the thesis or not based on tumor type?

It’s a good question. Thank you, Brian. So, let me maybe elaborate just a little bit and see if I help answer your question as well. I think you’re putting it correctly. We have two goals really with the CA-170 Phase 1 trial. In addition to safety and dose selection, we also view the -- at least the initial parts of the Phase 1 as providing us with a proof of concepts. For us proof of concepts can be generation and generating clinical benefit in the form of objective responses in patients. I think that’s a proof of concept that demonstrated that a small molecule that targets in inventory immune checkpoints can provide objective responses as a means of clinical benefit. That’s the first in a sense objective and proof of concept for that. With respect to types of cancers, we also fairly heavily evaluate the patient samples including blood and including tumor samples prior to treatment and after treatment, predominantly for two reasons, as you can very much appreciate. One is to demonstrate the activity of the drug. So, as a biomarker of activity; the second and predominantly from the pre-treatment profile, for us to be able to see whether there are colorations between the patients, tumors or the immune profile, whether there are correlations with clinical benefits. That may then help us select populations of patients that may benefit with CA-170 treatment. Because our drug CA-170 targets two difference immune checkpoints PDL-1 as well as VISTA, we believe that the clinical benefits for CA-170 could be quite unique and therefore can be provided in perhaps patient populations or patients from cancer types that we don’t necessary normally think about with anti-PD1 or anti-PDL1 treatment. For that reason, we want both the clinical benefit as well as the biomarker correlation activities that we want to look at to drive our selection of paths for continued development of CA-170 and how we place it potentially on a -- in a sense registration path. We want those things to guide that selection. I hope that answered it in a matter that’s helped you recognize what we’re trying to do with the trial as well.

Great. And then just on 907, you said that if you got a qualifying OR that you think meets the specific threshold that you would expand to upto 100 patients before potentially utilizing as a registrational package. I was just wondering is that new, is that based on a conversation that you had with the FDA? I thought the original protocol was for 60 MYC-altered, and 100 non-MYC-altered, just overall relapsed/refractory DLBCL; is there a protocol change in there.

No, I think our guidance -- so, it’s not based on communication, any new communication with the FDA. This was our expectations based on the statistical analysis that we need up to 60 patients to see a significant positive result that would then still require us to get up to a 100 patients to fill in both the safety database in a sense for CUDC-907 as well as have additional confirmatory data associated with it. So, no change in that context for us from what we estimate to be required for a discussion.

Okay. So, just to be clear, is the 100 patients -- would the 100 patients be all MYC-altered or the 60 MYC-altered and up to 100 would be just the general relapsed/refractory DLBCL?

I think our estimates of -- in the end what would be required for possible use of the Phase 2 trial would be 100 MYC-altered patients with the filing. Our view and our assessment is that the up to 60 MYC-altered patients allow us to see the clinical benefit rate in the -- with CUDC-907 in this population for us to have a conversation with the FDA.

Thank you. [Operator Instructions] And our next question comes from the line of Peter Lawson from Suntrust Robinson Humphrey. Your line is now open.

Hi, Ali and Jim. Just on the retirement of Jim McNab, what expertise are you kind of looking for to complement the rest of the Board? And should we expect Jim’s holdings to kind of go to zero over the near-term?

I can certainly answer the first question for you and maybe I’ll ask you to repeat your second question, so that I understand it. With respect to the Board itself, first, I would say that -- reiterate, that Martyn Greenacre will become the new Chairperson of Curis as of the time that Jim McNab retires on May 16th. Secondly, I think we have a very experienced Board for Curis with fairly diverse backgrounds in terms of both technical from the field of -- our field in biotech and health care in general and drug development. So certainly I think we have a very seasoned and experienced Board. We will continue to add to the Board, as you noted last year with Lori Kunkel joining the Board of Directors. And we will continue to look for expertise in particular with respect to the transition that Curis wants to do and continues to do in terms of both drug development and expectation to commercialize some of these drugs ourselves. Those are the types of expertise that we continue to strive for and we have those on the Board and we’ll continue to build in that direction as well. I apologize maybe if you can repeat your second question for me so I understand it.

Jim McNab had been selling stock over the last I guess a couple of weeks or so. And I just wondered if that was going to go to zero, like his holdings are going to go to zero? If you’ve got any insight there.

No insight. Obviously that’s part of his personal, Jim McNab’s personal decision in terms of his stock sale. So, r I think that’s the part of a plan that had been put in place in the past and these are automatic sales. So, no insights into that from our side.

Got you. And then, just on the 907 combos, where do they stand as regards to enrolling or have they been -- you prioritize until we get an interim look?

I would say -- I think, our primary focus is really demonstrating CUDC-907’s clinical benefit as a monotherapy in this population of patients. We certainly did test in the Phase 1 trial as a separate cohort CUDC-907 in combination with rituximab. Those two drugs combined very well without any adverse events or any additional adverse events in a sense. Non-clinically, obviously, we have tested CUDC-907 in combination with other drug candidates. Some of that we have published, and probably the more recent one has been the combinations that we presented at the ASH conference at the end of the year. We think CUDC-907 in addition to its monotherapy activity, can be combined with other drugs for further benefit or for other -- benefit of other patients besides the current population that we target. So, I think much of that we think is best addressed after demonstration of the clinical activity in this population as a monotherapy.

Thank you. And I’m showing no further questions at this time. I would now like to turn the call back over to Ali Fattaey, CEO, for any closing remarks.

Thank you. First of all, thanks everyone for joining the call this morning. I want to first acknowledge Jim McNab who was a founder of Curis and has provided leadership and guidance throughout his Chairmanship for the Company. We also wish him very well on behalf of the Board, the employees of the Company and the management in all of his endeavors. Next, I would like to thank our Curis team for the amazing work that they do and generating and progressing our drug candidates, which are really the focus and main focus for the Company. I would also like to thank our partners, in particular Aurigene, which we work very closely with in the development of our now three drug candidates, one in the clinic and two to come into the clinic this year as well as our partner Genentech and Roche with commercialization of Erivedge. But most of all, I would like to thank the patients and their families for participating in our trials and making the potential for our drug candidates to become a reality. Thank you with that and I’ll end the call at this point.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program and you may now disconnect. Everyone, have a great day.